00:20:27 · Ty Morse, Soren Monroe-Anderson
[00:20:27] S1: One of the things that you talked about with me right before we started was this idea of there's part of it, which is you want to be able to have, you know, there's building a million drones a year, and then there's also the capability to build a million drones. And right now, we just don't have the capability. So how are you thinking about basically making sure as quickly as possible we have that capability even if you're not necessarily producing a million? [00:20:51] S0: That's why we're focusing really hard on the factory and and also thinking about if we are building a factory that's capable of peaking at a million drones per year, what rate can it run at that is sustainable, which is much lower than a million per year? And also, you know, what what are the effective ways of of financing and selling capacity versus just drones? So those are some of the questions that that exist for for that, right, like the... We can't control the demand side, and there is no program for a million drones per year yet. And so we have to think about what is the most existential thing, which is the capacity, and then and then build around that. And we're very very willing to invest our own capital into that vision well before the government is is paying for a million drones. [00:21:50] S1: Just like you did on the first factory.
00:21:50 · Ty Morse, Soren Monroe-Anderson
[00:21:50] S1: Just like you did on the first factory. [00:21:52] S0: Yeah. But the, you know, the CapEx investment in the first factory is not that significant. The... Really, like the team and the engineering costs are... And the inventory, the working capital costs have been the biggest have been the biggest factors so far. The investment into component manufacturing and automated assembly and test at millions per year scale, like that's where the that's where it becomes a serious financial question, but we're willing to take a good amount of that risk ourselves because we're fundamentally a mission driven company, we know this thing needs to exist, so it would be somewhat silly in my opinion to wait around for for the government to to say, okay, yeah, we're gonna buy all those drones. You have to operate on some level of uncertainty. [00:22:49] S1: Yeah. This is a little bit more like the SpaceX situation with just figuring out launch cost to orbit and, like, mass to orbit and how do we just scale that as quickly as possible. And it turns out, you know, at least in their case, the best customer was just themselves for that mass to orbit. Right. And if you just listen to the government, you wouldn't scale it.
00:23:08 · Soren Monroe-Anderson
[00:23:08] S0: Yeah. Absolutely. And and, you know, the government doesn't need to be our only customer for, forever. It it shouldn't be, actually. But we have to start... If we're trying to fix the drone industrial base, we have to start in defense because right now... Or, you know, in defense is where the regulatory environment and the customer exists that that just totally excludes the Chinese competitors because it's not possible to go head to head with the Chinese competitors in the, you know, consumer enterprise market right now, but that's shifting, and it's shifting in America, especially with the new ruling by the FCC on DJI and just the the direction that we are... The country is pushing in. It's clear that we're gonna have to have a... Or really should have a domestic drone industrial base that supports all of the applications, not just defense. And that's where the, you know, millions per year volume is also just extremely reasonable. You know, if if we're talking about millions per year just for defense, you know, that means we're probably doing some significant stockpiling, we're using a lot in training. I think we should be doing both of those things, but if you look at the number of drones that DJI sells in America every year, you know, millions makes a ton of sense. So we just have to build a, you know, competitor to that, and and the government seems to be pushing in the direction of just not allowing DJI to operate here long term, which is the right decision. So that that creates opportunity for actually fixing an industrial base, not just building sort of a, you know, a one off factory that then just sits unutilized.
00:24:59 · Ty Morse, Soren Monroe-Anderson
[00:24:59] S1: If you had to like look at what the state of the current drone environment is, I think China produces something on the order of, like, 70,000,000 drones a year, whereas The US produces less than, like, a couple 100,000. How do we actually bridge that gap to a point where we're even semi on parity? [00:25:16] S0: I mean, I I think, you know, everything we've been talking about so far is somewhat the answer to that. It's it's, you know, I believe it's a very vertically integrated factory and then many of them. It's basically our roadmap like that that's what that's what the that's what my answer should be because that's what the goal of the company is. So we'll start talking about some of this stuff even more publicly in in the coming months, But I think it's it's... Yeah. The investment into the factory capability and and finding the use cases over time that consume at high volume. [00:25:53] S1: Going through the the first like production ramp in your old factory, what was kind of the biggest moments of production hell? And then, you know, in this new one, what are you kind of predicting the biggest hurdles are gonna be? [00:26:05] S0: The biggest moments of production hell so far have actually been supply chain hell, where you, you know, we we order 98% of the parts you need to build the drone, and then you realize, hey, somehow the $5 part didn't get ordered, and it has a six week lead time, so you're sitting there with, you know, basically the entire bomb cost of the drone for thousands of drones, and you can't build them because you don't have a $5 part.
00:26:05 · Soren Monroe-Anderson, Ty Morse
[00:26:05] S0: The biggest moments of production hell so far have actually been supply chain hell, where you, you know, we we order 98% of the parts you need to build the drone, and then you realize, hey, somehow the $5 part didn't get ordered, and it has a six week lead time, so you're sitting there with, you know, basically the entire bomb cost of the drone for thousands of drones, and you can't build them because you don't have a $5 part. [00:26:33] S1: And you have limited space in your factory, so it's just piling up.
00:26:36 · Soren Monroe-Anderson
[00:26:36] S0: It's piling up, but it's just like you can't operate a factory that's not... Or you you can't sustain a factory that's not producing. You can't... It's just like that's how you that's how you ruin your your ramp. So those have been some of the hardest moments that we dealt with in 2025. We we... That didn't happen to us a lot, but there were certain times where supply chain really limited the amount of drones that could go out the door, and drones that could be built and go out the door. We've tried to spread out sort of the ramp of assembly capacity reasonably, so it's not like these huge jumps. It's like a pretty even build up, and that helps a lot. You know, we can sort of can, like, staff more and more over time. We are consistently driving tact times down across the line, and and having a smooth ramp is just just makes everything so much easier. This is also why we do wanna be sort of ahead in capacity from where we think the contracts are gonna be, because the worst... The the way you really get into trouble is by signing up for a contract that you don't already have the capacity for on a timeline that is too quick. Like impossible to meet. Yeah. And that sounds obvious, but there's a lot of companies that do this. Actually, I'd say the majority of defense companies do this or like new defense startups do this is is like, kind of speak in the manner, like, say you have the capacity, but have not actually proven it, get a contract, have a delivery window, try to go through the production ramp, realize that it's actually really hard, and then fail to deliver on time. That's like the classic story, and I just wish that people would speak a little bit more honestly about the the production capacity they hold today, like what they've actually proven because, you know, the point I was making here is like, yeah, we've got a big empty box that have, you know, in a few years can hopefully produce a million drones per year, but the the, you know, the space isn't everything, the equipment isn't everything, the team isn't everything, it's it's the whole combined thing working together correctly, actually producing the stuff, that's how you measure capacity, and a lot of people don't don't understand that and get themselves into trouble. And then that leaves a bad taste in the mouth of the customer.