Why did DPRO's Q4 earnings fall short of forecasts?

Draganfly Inc. (DPRO) experienced a significant revenue increase in Q4 2024, with a reported 76% year-over-year growth, reaching $1.61 million. However, the company's Q4 earnings fell short of forecasts due to several factors: 1. **Capacity Constraints**: Despite the strong Q4 performance, the overall annual revenue remained flat due to capacity constraints earlier in the year, particularly in the Military and Public Safety sectors. This indicates that while DPRO showed strong performance late in the year, earlier delays in meeting demand from certain sectors affected the full-year revenue. 2. **Gross Profit Decrease**: Draganfly's gross profit decreased year-over-year, with adjusted gross margin dropping from 36.5% in 2023 to 30.9% in 2024. This decline in gross margin suggests that increased production costs or operational inefficiencies could have impacted profitability, even with revenue growth. 3. **Non-Cash Inventory Write-Down**: The company experienced a significant non-cash inventory write-down, which likely contributed to the decrease in gross profit and overall profitability. This accounting practice can make earnings appear lower than they might otherwise be, as it reduces the net realizable value of inventory. 4. **Strategic Focus and Investments**: Draganfly's strategic focus on enhancing production and investing in drone applications, such as medical drone delivery and the FlexForce FPV drone system, might have temporarily impacted financial metrics like gross profit and overall profitability. These investments are crucial for long-term growth but can be costly in the short term. In summary, DPRO's Q4 earnings fell short of forecasts due to capacity constraints, a decrease in gross profit, non-cash inventory write-downs, and strategic investments that temporarily affected profitability. Despite these challenges, the company demonstrated strong revenue growth and operational improvements, such as reducing cash used in operating activities by 37% year-over-year.