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Hylio CEO and co-founder Arthur Erickson joins contributing editor Dan Crummett on this edition of the Precision Farming Dealer podcast, brought to you by Ag Express Electronics. 

The FAA recently granted the Texas-based drone manufacturer a regulatory exemption that allows 1 operator to simultaneously pilot 3 heavy-lift drones instead of requiring both an operator and observer per 1 drone over 55 pounds.

Erickson discusses what the exemption means not just for Hylio, but for the entire drone industry. He also explains how the evolution of drone usage led to the exemption, how it will affect precision technology users across the U.S., and the ripple effect it could have on more dealers getting involved with drones.

The Precision Farming Dealer podcast series is brought to you by Ag Express.

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Full Transcript

Noah Newman:

Hello and welcome to the Precision Farming Dealer Podcast, brought to you by Ag Express Electronics. I'm Technology Editor Noah Newman. On today's episode, Contributing Editor Dan Crummett sits down with Hylio CEO and Co-Founder Arthur Erickson. As we've covered recently, the FAA granted the Texas-based drone manufacturer a regulatory exemption that allows one operator to pilot three heavy lift drones, instead of requiring both an operator and observer per one drone over 55 pounds. So Erickson will discuss what the exemption means, not just for Hylio, but for the entire drone industry. He also explains how the evolution of drone usage led to this exemption and the ripple effect it could have on more dealers getting involved with drones. Dan Crummett, take it away.

Dan Crummett:

Very good. Yeah, we visited a year ago about your heavy lift drones and what they could do for farm productivity, and this recent development seems to accelerate the adoption of use of those vehicles. Tell us about the exemption you received and what it means for the industry.

Arthur Erickson:

Yeah, so basically this is one of those things where regulation was finally catching up to where the state of the art was. So Hylio as a company, and in fact, some other companies as well, already had swarming technology available. It just wasn't legally permissible, at least not here in the United States. So in other countries like Brazil and Asian countries where they're a little more forward with the regulatory environment, they were allowed to swarm large drones. We just couldn't do it here yet. And I love the FAA to death, they do really good work, they've got their hands full with a lot of stuff. I think they do top-notch work, and they're moving relatively very quickly in this drone space. And it's new, it's changing, it's relatively complicated. So we were patiently waiting for it. It came, the FAA did a great job, now it's here.

So technically speaking, we could always control multiple drones from one ground station, so meaning one controller or computer ground station device. Hylio could do up to four drones, technically speaking. Now, what the law says is that now we are permitted to swarm up to three drones. So even though we can even swarm four drones, we're only allowed to do three, which is still a huge boost up from one. So it used to be that only one drone could be flown per pilot. And in fact, if the drone... There's a little bit of nuance here. If the drone was over 55 pounds, which most of these crop input drones are, they're in the three, four, or 500 pound range at this point. If the drone was over 55 pounds, you would need not only just a pilot per drone, but also a second person, which was called the visual observer.

So it's kind of ludicrous. If you had three drones out in an operation, you would need six people, which is counter to the entire logic of drones. They're called drones for a reason, meaning they can go fly autonomously. You would want to force multiply what a single operator could do and have them use multiple drones. So the law has finally caught up to the logic of the technology. And so it's one operator now able to command three drones. So one person, three drones. Instead of one drone doing 50 acres per hour, now you have 50 acres per hour times three, 150 acres per hour, per operator, is legally possible. It's a huge jump. I mean, the math is simple, right? It's a 3x boost in productivity.

Dan Crummett:

Not only legally possible, but it's technically very possible. And you're doing it or can do it.

Arthur Erickson:

That's right.

Dan Crummett:

Yeah. Okay. Well, is this exemption specific to Hylio or is it to anyone flying a heavy lift drone?

Arthur Erickson:

So it's both. It's specific... The way the FAA does it, it's been explained to us by the FAA because we're not lawyers, so they've got to dumb it down for us, but they give it to one company first. That's just how it works in terms of their processes. And so it is technically only for Hylio right now. But then they do what's called a summer grant, which basically takes what they gave to Hylio and generalizes it somewhat. And it is citable, it's precedent setting for other companies or operators to utilize it as long as they fall within the same framework that they outline. The rules that we have to follow, they have to follow. If they can do that, then they also get access to those permissions.

Dan Crummett:

Okay, very good. How did you go about initiating this exemption? Was this something that was on your radar? I'm sure it was, a year ago when we were talking about this. What are the steps that had to go through to apply for an exemption, and what hurdles did you have to jump?

Arthur Erickson:

Yeah, it's not Hylio's first rodeo in terms of applications or applying for exemptions. So the exemption system is just traditionally how drone operators, drone companies have been able to gain permission for things beyond the typical. So there's the 107 rule framework, which governs a lot of the small camera drones, the private consumer drones that you see flying around, just taking videos for fun and whatnot. So the 107 rule set is fairly limited. It's for drones under 55 pounds and you have to fly within line of sight, et cetera, et cetera. So if you want to go beyond that at all, you have to file for these exemptions. And so Hylio has already done that. We've had to do it for stuff like beyond visual line of sight in farm settings. We've had to do it even just to fly drones over 55 pounds, that's technically an exemption.

So we already had that skill set. We've been doing it since 2017, 2018, pretty regularly. And so it was a lot of the same thing for us. Just this one happened to be more monumental in terms of its precedent setting. So what you do is, you just outline... I mean, the FAA is a bureaucracy, so there's forms for everything. So they give you a template to follow if you want to apply for certain permissions. So in this case, if you want to swarm multiple drones over 55 pounds, you have to outline how you plan to do it from a technical perspective. So that's including your operating manuals, that's including language about if there's an emergency, can the pilot stop all the drones at once? How can the pilot effectively monitor three drones at once?

We have to prove this stuff that our technology and our operating procedures allowed for the safe application of this. And then once the FAA was convinced, they granted it to us. So it's that process where you're saying, "Hey, here's my proposal for how to do it safely." They check it, they give you feedback, you go back and forth, and eventually they say, "Okay, if you had this feature, then that would be safe enough." You add that in, and then you're good to go.

Dan Crummett:

How quickly do you see this affecting the development of operations on farms across the US?

Arthur Erickson:

This is going to happen really quickly. So within a matter of months, we have season already gearing up here. I mean, there's been some storms that have been delaying people a little bit by a few weeks, but as early as next month or June when people start getting drones into the field, we will hopefully already have that summer grant I talked about earlier in place. So people can cite that and have permission that Hylio has to swarm their drones. So I think first you're going to see it... And we're one company, we have a fair amount of the market space, but there's other companies out there. So you're first going to see it with our customers because their drones are exactly the drones we use. So of course, that's just a faster path.

So the Hylio customers out there, several hundred of them across the country, are going to be able to access this first. But I think even towards summertime, you're going to see the other ag drone companies, like DJI for example, those operators are also going to be able to access it with a few tweaks to their operations and stuff like that. But they do have to, it's-

Dan Crummett:

Will they have to make changes to their equipment?

Arthur Erickson:

Possibly. I mean, there's stuff because Hylio is the precedent setter here. So there's stuff that's unique to our company right now at least that is written in there somewhat, it's nothing that these other companies can't do. It just happens in this time and place right now. There's stuff that Hylio is doing that they're not, that they'll have to do in order to also get this permission. But it's somewhat easy changes.

Noah Newman:

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Dan Crummett:

We've got to improved productivity as far as flying the drones and using them. Combine that with the productivity of farms in reduced inputs, reduced water use, that sort of thing. How do you see your leadership in this area affecting agribusiness dealers, co-ops that may want to invest in these and become your customers and farm service organizations, that sort of thing? What's on the future there on the horizon?

Arthur Erickson:

Well, I think the big change is for the longest time, so you've had early adopters of course, who are our main customers have been thus far. These people that understand, they've seen the benefits of drones, they're buying into them because they want to, they're believers. But you have this huge chunk, the middle market of farmers, operators that have been doing things a certain way for a long time that are harder to move, harder to commit. So I think finally with something like this, you're breaking the 100-acre per hour productivity limit. And so what you're doing is you're actually getting drones into the same conversation as self-propelled ground rigs, or even helicopters to a certain extent when it comes to how many acres per day, per hour are you able to spray.

So now that the drones have entered that conversation, it's not just like, "Oh, those tiny little toys, they're great for spot spray work, but they can't do serious acreage." Now that they can do serious acreage, with this swarm deployment, you're going to see a lot of these co-ops, equipment manufacturers and whatnot, paying a lot more attention to them as a tool in the arsenal. So I don't think anyone's still going to be like, "Oh, they're going to replace tractors entirely." But they got to start paying attention.

Dan Crummett:

You've read the same reports I have. People who do not understand exactly how a tractor is used and the difference between a tractor and a sprayer. What does this do for your manufacturer of drones, the market for those? What do you see there?

Arthur Erickson:

Drones are still going to get bigger, but I think the FAA's shown their willingness to allow swarms, them showing that indicates to us manufacturers that you don't have to make 1000-gallon drone, because it's overkill. It's a very expensive machine, if it goes down for whatever reason, you can imagine that's a very expensive repair process. It's difficult to transport such a large drone. So the FAA has given us permission, so to speak, to now pursue still larger drones than today, but they're going to be capped at a certain size. And we probably talked about this even a year ago because it's been my mindset the whole time, but I think drones are going to get up to, let's say 30, 40, 50 gallons, maybe 50 gallons as the peak, and then you're going to have multiple of those. You're not going to have bigger drones than that. You're going to have two or three 50-gallon drones, and that's what's being deployed. So I think we're going to see that capping out that ceiling of size here.

Dan Crummett:

Well, with the developments we have regulatory-wise that we've been discussing and current drone size, who are your new customers?

Arthur Erickson:

It's a lot of the bigger players like we just talked about. So you'll even have some companies, I guess maybe I shouldn't name them specifically, but these large, let's call them service companies that are nationwide, are paying a lot more attention to this now, because like we talked about, it used to be like okay, yeah, you could make some good profit margin because they're cheap and whatnot, but it wasn't enough to move the needle. For these large companies that are making hundreds of millions of revenue a year, you need to see some actual productivity. And so we caught their attention a lot more than just your small-medium farmers, which has been our traditional market, and we're still going to service them, obviously, and sell the small, medium, large family farms. But now you're seeing this corporate enterprise element come in as well.

Dan Crummett:

Do you see OEM farm equipment dealers getting involved in this?

Arthur Erickson:

Yes. Yeah, absolutely. And that's complicated right now. I should say it's a nuanced marketplace because there are... So there's Hylio drones, there's a bunch of foreign-made drones. There's a lot of dust-up right now because everybody and their mom wants to be a spray drone dealer right now. And some companies are more willing to sign on dealers than others. Actually, Hylio, I would say just comparatively, we're fairly selective with who we bring on as dealers. We only have a handful that we signed on last year because we want to just make sure that they're certified and trained up to a really high standard of service.

But there's other companies, especially some of these foreign ones, where they'll just like, anybody who raises their hand can be a dealer. So what you're seeing is, what I'm trying to get at is, we're going to have to see some consolidation because you can't have a dealer on every single corner of every county. There's just not enough margin there, and it's just a weird cannibalistic race to the bottom. So over the next two, three, four years, you're going to see a lot of consolidation there where they're probably swallowing each other up. And so in five years time, we might be left with just a handful of big nationwide distributors for these drones. But right now it's like Wild West, just everybody on every street corner is slinging these drones.

Dan Crummett:

I was talking mainly about a crossover into say your John Deere dealer, or a Case IH dealer. Do you see them as potential customers?

Arthur Erickson:

Yeah. Even then, so a lot of that is somewhat like a franchise model where or the individual John Deere, Case dealers can decide to pick these products up as long as it's not explicitly precluded in their contract with these big corporations. So yeah, you already see that. And we are in fact working with some C&H dealers and John Deere dealers and whatnot to resell our drones. So yeah, it's already happening. There's a ton of interest, I think, to I guess drive into your question even more, there is definitely interest, which I'll speak to generally from the tippity top, these big companies. There's explicit interest there in facilitating more of a nationwide rollout of the drones instead of just like these individual franchises picking them up. So we are seeing that movement in the marketplace as well.

Dan Crummett:

Okay. Describe for us right now the drones that you build that would be affected. What models and what sizes and capabilities do they have?

Arthur Erickson:

All of our drones, so we offer four models right now ranging from about two and a half gallons up to 18 gallons, the three bigger ones, so everything but the smallest one, are over 55 pounds, meaning they're directly influenced by this ruling. So all those drones are now able to be swarmed. It's going to be a huge boost to anybody utilizing them. And all of our future drones are absolutely going to be over this 55-pound limit. So they will all be affected by this permission as well. All crop input drones going forward are going to be at least a few hundred pounds.

Dan Crummett:

Yeah. Okay.

Arthur Erickson:

Just bigger is better to a certain extent, right?

Dan Crummett:

Yeah. And then diminishing returns get there. You can rent a Hooey for that. Looking forward, what's on the drawing boards from Hylio that you can talk about?

Arthur Erickson:

Well, a few things. I don't want to reveal too much, but, okay. So traditionally Hylio has been focused on producing the actual input application drones, meaning these large multi-rotors, several hundred pounds, they put down liquid or solid payloads. We've been leaning or relying on some of the great third-party scout drone options out there, these drones that go out with the camera or the multispectral sensor, and they can do the mapping or ID the crop health issues. So we are introducing Hylio in-house manufactured scout drone. So it's a lot smaller than we're used to making. It's about a foot by a foot or so and just weighs six or seven pounds. And this drone is going to be able to go out with a lidar, multispectral, RGB, high-resolution camera, and do that mapping and scouting so you don't have to leave the Hylio ecosystem. Keep it all vertically integrated. So you can do your scouting with that. We don't have a fancy name for it, we're just calling it the scout drone for now internally. But we do plan on launching that sometime this summer.

This is on our website already, but we have a awesome new in-house manufactured control device. So it's basically a big Windows tablet, 13-inch screen, thousand-nit screen so you could read it out in the sunlight, but it's got joysticks on it. So this is something we designed, manufactured in-house with contract manufacturers as well for some of the components of course, but it's an NDA-compliant, so it's safe to use for government work as well. But it's just a big laptop tablet with joysticks on it, so you can do your autonomous control, your mission planning, and your manual control, all from one platform. So that's been really cool for us because it used to be that we would always have the customer have a separate Windows device, a laptop or tablet, and this other RC controller. So manual control and autonomous control were on two separate physical platforms, which was just a little inconvenient. It was definitely doable. Of course, people have been doing that with our drones for years, but this just puts it all into one package. So we've got that coming out. It's already on our website. It's coming out May 15th officially.

And then finally we are building a new lineup of actual drones themselves, and there's just so many needles we're moving in terms of just how many acres per hour you can squeeze out, how low can get the cost, how ergonomic can it be, how tight can the form factor be when you fold it up for transportation. All of that is going into this new line of models that we have. We're already building and testing them now, but they probably won't hit the market till '25, or maybe even early 2026.

But we're also, I can tease that we're exploring not just pure electric for power, but also hybrid power systems. So that's getting you a lot more endurance. So instead of just 10 minutes of flight time with a heavy payload, you can go an hour, or even more. And that's with the hybrid power, you also get the benefit of eliminating battery swapping. So instead of having 10 batteries with you and you're pulling them off every single time you fly, you're just filling up gas maybe once an hour like you would with a typical piece of farm equipment that runs on fossil fuels. So it's hybrid, so it's still sustainable from that perspective. It's not like a ton of gas energy, but it's enough to give you that performance and really cut down on the amount of batteries that you need for the operation.

Dan Crummett:

Are these roughly the same size as what you're building now as far as capacity?

Arthur Erickson:

Yeah, and in fact, we have one coming out, doesn't have a name yet, it's just internally named. But it's going to be roughly 20 gallons of capacity. But you can either have it as a hybrid configuration, it's like how Toyota or Ford offers both pure electric, or hybrid, or gas cars. So you can do the same airframe as a hybrid or a pure electric. And actually with the pure electric, you're going to get a little more payload out of it. So it'd be 20 gallons or so in the hybrid configuration. But if you take that genset off, that heavy motor off, then you can squeeze five or eight more gallons out of it. So it'd be closer to 30 gallons of payload in the pure electric modality. But then you have the complication of the batteries and stuff.

Dan Crummett:

Shorter operation time.

Arthur Erickson:

Yes.

Dan Crummett:

Okay. All right. Well, we're looking forward to seeing what you go with in the future and eagerly watching this facet of the industry. I appreciate your time.

Arthur Erickson:

Yeah, thank you, likewise.

Noah Newman:

And that'll do it for this week's edition of the Precision Farming Dealer Podcast. Great stuff there from Dan Crummett and Arthur Erickson. And thanks once again to our sponsor, Ag Express Electronics for making this podcast series possible. Until next time, for all things Precision Farming Dealer related, you know where to go, precisionfarmingdealer.com. Have a great day.