Q4 2021 Ondas Holdings Inc Earnings Call
Welcome to the on those holdings fourth quarter and full year 2021 conference call.
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Roth Chairman and CEO .
Go ahead, Sir good morning, it's a pleasure to welcome you to our conference call I am pleased to be joined today by our President and CFO , Derek Rice field Stewart cancer Depression around Das networks at American Robotics, CEO Reese Moser.
Today, we plan to review last year's financial performance and strategic accomplishments and discuss our outlook for 2022.
Similar to our last call I want to set the stage by starting with an overview of bond holdings in order to provide some important context on our market opportunity in business strategy before we outline our plan to deliver on the growth opportunities ahead.
<unk> Holdings has two complementary lines of business I'd ask networks in America robotics, both companies provide platform technologies for high value industrial markets. These are full end to end integrated mission critical Iot data solutions.
It works provides mission critical private wireless networks offer unmatched data capacity and operating flexibility for industrial and government markets Americans.
American Robotics offers the scout system, the first and only fully autonomous drone platform approved by the FAA to fly beyond visual line of sight without human operation onsite. We do this in the industrial agriculture in government settings.
Best networks processes in transfers mission critical industrial data.
Software based format connectivity platform and American robotics via the Scout system provides automated data collection and edge processing. We believe both companies have attractive high margin capital light and high return on investment business models. We offer these platform technologies under the holdings umbrella providing.
Leading us with a unique opportunity to build the ecosystem around our technology platforms. We believe this allows on dust networks and American robotics to invest in and develop even more valuable Fuller stack solutions for our customers via partnerships like we have with Siemens or be it investment as we have done with artificial intelligence and machine learning specialist.
In AI or via strategic acquisitions like the definitive agreement, we announced yesterday to acquire our denim.
A leading rail track inspection analytics provider.
We believe our technology platform and business platform strategy is poised to deliver incredible value to our customers. We have argued I think successfully now we are at the foothills of an industrial technology investment cycle driven by next generation data solutions. We call. This mission critical Iot data collection wireless broadband communications in data.
Analytics are at the core of these Mci OTT solutions and customers need companies like Amdocs holdings to bring these complex technologies together into a complete integrated end to end data solutions. We believe there are outsized rewards available for companies and their investors who are able to define the full stack solution for these high.
Oh why the exploration data services. We also believe that Amdocs has a business strategy and the talent and experience to bring this value to customers for the benefit of our shareholders.
I want to share a few words on yesterday's announcement of our definitive agreement to acquire the identity assets from industrial technology developer barrel applied research. The identity deal is a perfect example of how on Earth in a R can bring substantial value to customers.
Bottlenecks holding back growth in industrial Iot.
Iot data markets. We believe our denim is widely regarded as one of the most sophisticated providers of drone driven rail, especially analytics across the global rail industry.
We are pioneers in the business and began developing these systems back in 2014, when they partner with BNS That's railway as part of the FAA sponsored Pathfinder UAS program.
While our journey analytics software and services are extremely valuable market growth has been held back by a data collection bottleneck if you're in the business of offering data analytics services, you need data to analyze and as we know collecting the data has been the conundrum for industrial markets of course, we built.
Leave the data clocks and problem is one that America robotics in our scout system installed.
Similar to other industrial sectors, the railroads need to scale their data collection abilities, they need automation and BV lost drone operating capability to reduce the cost and complexity of data collection related to human pilot and FAA regulation.
This transaction has solved the problem for rail customers by combining the leading automated industrial data collection platform in our scale system with our dentists World class analytics capabilities. This is a powerful solution for our rail customers and accelerates our ability to penetrate the rail sector, providing end to end data services.
We expect the deal to close in the second quarter I want to highlight that the bulk of consideration for identity will be on <unk> shares of common stock, suggesting that barrel or Dennis owners find this transaction to be value, creating we believe this deal is a homerun for our rail customers and <unk> shareholders.
With that introduction, let's shift towards outlining the agenda for today's call.
First I will highlight the progress we're making on key business priorities that networks and American robotics, Denny I'll ask Derek to share our Q4 and full year 2021 financial results.
Stuart and I will provide an update on on dust networks business development progress and growth plan of course, focusing on our progress with the railroads is Siemens Reese will then provide a similar update for American robotics as we execute the go to market strategy for the Scout system.
And I will then summarize the outlook before we open the floor for Q&A.
Let's now bring you up to speed and how we are executing on our key priorities as you will learn on this call. We are on a roll executing the growth plays with both on dust networks in America robotics in 2020 . One we saw our substantial investments in technology platforms and business development pay off at both networks in a R.
Networks after working with the class one rails for several years, we received our initial launch order for 900 megahertz platform in December .
This marked the transition for on Das from investment in technology and business development to platform delivery as full Max our patented <unk> 16 wireless technology begins to be adopted across the class one rail networks.
In addition to that initial order we're announcing today that we received a second commercial launch order in January from a second class. One rail. We also highlight that a third class one railroad has begun work in the field they.
Preparation for a significant launch order, which we expect to receive in the second quarter.
The early ordering activity from Siemens on behalf of the class one rail signals the platform adoption of our format technology. The establishment of a Federated Mci L. T rail that is further so still further evidence that our format technology is positioned at the core of railroad mission critical network.
Stuart will share later, the rail lab as a critical development, which we believe is cementing <unk> as Doc 16, as the railroad connectivity platform of the future across multiple mission critical networks in parallel with the increase in order activity and deeper engagement on our platform by the class ones our relationship with Siemens continues.
Flores and expand with.
We successfully completed the initial joint development of the next generation advanced train control system or a tcs platform for Siemens in the fall of 2021.
We call that program calls for the development of a base station, we referred to that as the BCP. It an edge remote at the system at the wax wayside referred to as the WC P. Seamless next generation Hfcs comes embedded with onto us format software and edge computing capabilities inside.
At Siemens Siemens has introduced <unk> sits in the market is now receiving orders, which under us as delivering against.
In addition to selling the exploration ATCA systems team is also formally launched marketing programs for onto US full Max catalog products under the brand name Airlink.
We also expanded with Siemens be the launch of additional product development programs, including the next generation head of train or H O T program and the 450 megahertz network for the class ones again in additional network. The 450 megahertz as an additional in addition to the 900 megahertz network.
That on locomotive H O T program was expanded to include development for version of H O T tailored towards the requirements of the large Siemens customer in Asia.
We will provide more details on the Siemens product development roadmap on this call.
On the marketing side Siemens has identified additional customer opportunities beyond our initial focus on the class one rails in North America. This increases our addressable market.
Those opportunities include transit markets in the U S where investment is expected to grow substantially with rail transportation infrastructure being a significant beneficiary of the recently announced federal infrastructure investment and jobs Act.
Legislated by Congress. The takeaway here is that <unk> is executing for Siemens. It's team is executing surround us exactly the way we envisioned when we entered the partnership in May of 2020.
Lastly, our work with Aura was successfully advanced last year as we completed the development work connected to the command and control or seek to aviation network targeted towards the navigation of unproved aircraft systems or UAS from here or is working with regulatory authorities and aviation customers to determine the next steps for development.
As they work towards designing an FAA approved situ wireless network in the meantime, we will continue to support or in their customers as needed with service and equipment related to the demonstration network that was deployed using on das full Max technology and for which we secured FCC certification for our Mercury edge remotes.
Let's transition to American robotics, it's been quite a year for a R 2021 kicked off with the receipt of a best in class FAA approval for operating the Scout system D V loss with no on ground human intervention.
Our acquisition that they are closed in August and we have been entirely focused on building the infrastructure and team to service large blue chip customers, who we call franchise customers reached we'll be sharing details on the progress to date, what I want to highlight is the level of talent, we are attracting to help scale the business I E. Our American robotics recruiting.
Efforts have been very successful, which is further evidence that our team the market opportunity and of course, our market leading scout platform is special in addition to scaling the team we have substantially increased production capability and begun to accelerate scout deliberate customer activity has expanded beginning with installations for stockpile reports Conoco Phillips and now.
Chevrons, which had its initial installation a few weeks ago.
Dominion for scale systems remains high and we have the enviable position of being able to work with select customers. The design grown driven automated data solutions that are scalable as fleets of drones, we could sell scout systems and many many locations today at a faster pace. We believe the demand is there however, the better strategy is to.
Work hand in hand with franchise customers to design. These scalable data solutions, which will allow for fleet deployments at scouts in the hundreds or even thousands of installations.
On the customer side, we are focusing on high value markets, including oil and gas mining and now rail which of course is a Honda says home turf. These markets are all large in size and offer multiple use cases for the scout system. These markets also received tremendous value from the drone driven automated data solutions. We provide you have seen us make bold moves to partner.
In invest to extend our moat and accelerated business development in our key markets again oil and gas mining and rail the relationships with stockpile reports diner may I and now our denim are great examples of us advancing our strategy and driving more comprehensive customer solutions in short we've accomplished a lot in 2021.
This year, we've successfully set up behind us for growth in 2022 and beyond.
I will now hand, the call to Derek who will share information regarding our financial performance for him.
Great. Thank you Eric.
As I share our financial results per day for the fourth quarter and for the full year 2021.
Please note that we have been.
We include our financial statements in the press release and Form 10-K filings. This morning.
The numbers. We are reporting include financial results for American robotics, beginning in August .
Six 2021.
Moving to our fourth quarter results revenue increased by 194% to approximately <unk> six.
6 million for the three months ended December 31.
As compared to approximately 200000 for the three months ended December 31 2020.
The increase in revenue was primarily a result of higher development revenue and that's three months ended December 31, 2021 as compared to the three months ended December 31, 2020 as we achieve milestones in our development contract with Siemens.
Gross profit increased by 264% to approximately 166000 for the three months ended December 31st 2021.
As compared to approximately 46000 for the three months ended December 31, 2020, as a result of higher Robyn.
Gross profit on a percentage basis was approximately 29% for the three months ended December 31, 2021 compared to 23% for the three months ended December 31 2020.
Operating expenses increased by $3 5 million for the three months ended December 31, 2021 as compared to the three months ended December 31 2020.
The increase in operating expenses was primarily due to the expenses associated with the American robotics acquisition.
The company realized an operating loss of approximately $7 million for the three months ended December 31, 2021, as compared to $3 7 million for the three months ended December 31 2020.
Operating loss increased primarily as a result of the increased operating expenses of approximately $3 5 million.
Primarily associated with the American Robotics acquisition.
Please note that the operating expenses and our operating loss included noncash expenses related to the amortization of intangibles and stock based compensation equal to $2 1 million for the three months ended December 31 2021.
As compared to 1.7 million for the three months ended December 31 2020.
Net loss was relatively flat.
$4 1 million for the three months ended December 31, 2021 as compared to the three months ended December 31 2020.
Boss was favorably impacted by the release of $2 9 million of valuation allowance against the company's deferred tax assets.
Moving on to the next slide I'll now transition to <unk> full year financial results for 2021.
Revenues increased by over 34% to approximately $2 9 million for the year ended December 31, 2021, compared to approximately $2 2 million for the year ended December 31 2020.
The increase in revenue was primarily due to larger amounts of development revenue from Siemens and our networks during 2021 offset by lower amounts of product revenue.
Gross profit increased by approximately 18% to $1 1 million as a result of higher revenue for the full year 2021 as compared to 927000 for 2020.
Gross profit on a percentage basis was approximately 38% for 2021 as compared to 43% for 2020.
The lower gross margin was the result of a lower share of revenue coming from higher margin product sales.
Operating expenses increased approximately 53% to $19 1 million during 2021 as compared to $12 5 million during 2020.
The increase in operating expenses was primarily due to an increase of approximately $1 6 million in professional fees related to the American robotics acquisition.
An increase of approximately $1 3 million and depreciation and amortization expense.
Due largely to the amortization of Roma American robotics intangible assets and an increase in research and development expenses during 2021.
The company realized an operating loss of approximately $18 million for the full year 2021, as compared to an operating loss of approximately $11 5 million for 2020.
Operating loss increased primarily as a result of an increase of approximately $1 9 million in professional fees.
Due largely to the American robotics acquisition increase of approximately $1 5 million and depreciation and amortization expense due to the amortization of the American robotics intangible assets largely.
And an increase in research development expenses for 2021.
No noncash expenses amounted to approximately $4 8 million.
This is comprised of the aforementioned depreciation and amortization charges of approximately one point.
$5 million as well as approximately $3 3 million in stock based compensation.
Net loss was approximately $15 million for the full year 2021.
As compared to a net loss result of $13 5 million for 2020.
And lastly, the company exited 2021 with a strong balance sheet, we held cash and cash equivalents of approximately $40 8 million as of December 31, 2021, as compared to approximately $26 1 million as of December 31, 2020.
Now I'll turn the call back over to Eric.
Well, thank you Derek.
Stuart recent I will share a more detailed look into the 2022 outlook starting first with our Das networks, and then American robotics.
As we have highlighted on dust networks networks entered 2022 with momentum. We believe is well positioned to deliver growth in bookings and revenue, we expect growth to be driven by the class one rails, where we now see platform adoption of our full Max wireless technology, beginning in the Greenfield 900 megahertz network.
The initial launch order for Adcs, we announced in December 2021 was followed by another order in January from a second rail purchase we announced for the first time today.
We expect orders to ramp with more rail customers and a larger sizes as we move through 2022 and Stuart will provide more details regarding the rail ordering Pat part process as we move through the presentation.
In addition at the beginning of the 900 megahertz rollout, we secured the Federated Mci L. T lab, which we believe is yet another validation of the strong engagement from the E. R. In its class one rail members our success with moving to the class one rails into growth mode has been supported by a strong and broadening partnership with Siemens we have completed the <unk>.
Generation Adcs development program at Siemens is providing orders for this product. In addition, Siemens has engaged us for additional development programs for new products that we expect to see still more activity beyond what has already been announced on the marketing side. Siemens has expanded to new markets, we were being introduced to new business opportunities with <unk>.
Rail in both North America, It in international markets, which we believe will lead to additional product development programs and as we previously mentioned we have completed the demonstration network for Ora will continue to support the network in Orange customers as clarity emerges on the next development phase of an FAA certified Bull system.
As we update the outlook for rail I want to reframe and quantify the opportunity that we see with class one freight operators in North America.
Last one rails performed train operations over four critical networks, we have them in the top left of the screen, a tcs or advanced train control systems run on our legacy 900 megahertz network. The $4 50 megahertz band is where we call on locomotive telemetry, that's the H O T and iOS applications head of trade it into train.
The critical voice, our land mobile radio push to talk system runs on 160, and the positive train control or PTC system runs on 220 megahertz. All of these are legacy narrow band communications platforms. All work the rails leads us to believe that our full Max 816 platform can be deployed across all of these networks.
To provide increased data capacity and flexibility so that the rails can adopt new <unk> technologies to increase train velocity improves safety. These new technologies supported by a full Max wireless networks served to increase freight capacity for the transportation of goods, leading to higher revenue and improved profitability for our.
Railroad customers as we highlight the legacy 900 megahertz network will be retired in full over the next several years as the a our needs to return this spectrum to the FCC in its entirety by 2025. So the legacy 900 network is going away. Fortunately the FCC has provided the AAR with a new improved.
Spectrum position and this is what provides on das in our partners' schemas with our initial greenfield opportunity to deploy our full Max technology.
Based on <unk> internal management calculations and estimates we believe this is a market opportunity of at least $300 million the.
The deployment across our new 900 megahertz spectrum band will be a multiyear effort and as new data intensive technologies are introduced the network will be densify with more than 16 enabled base stations in Agri moats.
Of course, as we described we believe our <unk> technology will be adopted more broadly across the class one rail networks beyond the initial 900 megahertz network and the other frequency bands.
In aggregate, we internally estimate a tam of over $800 million for all four networks and as we highlight we believe new voice sensor and other Iot applications to be developed by the rail and the vendor community will create hundreds of millions of dollars of upsides to these market size estimates leading to a total potential tam of over.
We're $1 billion.
I'm going to hand, the call. The Stewart now so he can share more details on the M. C O T lab or Siemens partnership and what we have learned regarding the ordering process and likely ramp of railroad customer deployment in the 900 megahertz network.
Thank you Eric on the last earnings call. We told you that on this and Siemens we're negotiating with the association of American railroads for the implementation of the Mci O T rail lab to be hosted at our offices headquarters in Sunnyvale, California.
Then in December we announced that we had received an order for the lab since that time, we've been in high gear organizing and staffing the lab effort.
We referred to lab as the North American Federated lab, and Federated means in terms of there will be a series of independent networks for the class ones that need to be interoperable.
The lab exists to enable the optimization of different network configurations to ensure interoperability and coexistence all while using shared license spectrum as the class one standardized on <unk> 16 enabled technology.
The initial focus of the lab will be on use cases develop for the Greenfield 900 megahertz spectrum, but.
But we expect to quickly evolve to the testing of other rail spectrum bands, including 160 megahertz 220 megahertz and 450 Megabits. This is all great news for <unk> and Siemens as the rails converge on the eight O 2016 standard as the path forward for their future communications needs.
Now, let's move on to our evolving strategic partner with Siemens mobility, which continues to broaden.
We feel it's worthwhile to highlight where we started with Siemens.
Far we've come and some of our expectations for the future.
The timeline on the slide highlights these key milestones.
As most of you recall in May 2020, we announced our strategic partnership which included a joint development program to integrate Siemens is a tcs technology with <unk> Iot platform for the 900 megahertz band.
At the same time, we announced the branding agreement where it <unk>.
Siemens obtained the exclusive rights to market and sell on this is empty Iot products under the Siemens early brand in the North American rail markets.
In September of 2021. These programs were formally launched at our Ssi the major U S rail show.
And since then Siemens has already secured orders from two class one railroads for these products in the critical 900 megahertz band.
First order was secured in Q4 and delivered by <unk> and Siemens in December and for the New order and the New order was just obtained in January of this year.
Now going back a bit here on the development side in January of 2021, we told you about our new joint development program with Siemens to build our first onboard locomotive radio for the 450 megahertz band in North America.
This program was initially focused on bringing our next generation head of trained locomotive application to North America.
Then in October of 2021, Siemens greatly expanded the H O T program to include a version of a product for a major Asian Railroad, which has now become the new priority with the expectation of deliveries beginning in Q2 of this year.
We will be providing more details on this program as it evolves both in Asia and North America.
Then in December of last year, Siemens placed the order with us for the railroad.
Rail lab, which was obtained from the AAR and is based on <unk> technology.
We believe Siemens like on the Skus the rail law real lab has the defining step in securing the next generation communications networks for the North American rail.
To summarize.
We've come a tremendous way from April 2020 to now having completed a major joint development program in North America secured multiple class one orders for that product began a new development program for a war worldwide locomotive radio program.
And obtained the North American rail lab.
And right now on this and Siemens are working with a third class one which has already begun field work in preparation for an expected significant order for 900 megahertz.
That's three active class ones, but the 900 megahertz networks.
As we go forward with Siemens we will continue to focus on the all important volume orders and deliveries for the 900 megahertz network. While we continued to advance the new development programs for new networks and new frequency bands.
You can see our relationship which started with North America has now evolved to Asia with a plan for a European program in the works.
Siemens partnership has truly evolved to a global one.
We continuously stress the importance of the flexibility of the <unk> communications platform, along with the Siemens partnership and the rail industry support for the eight O two <unk> 16 standards.
By incorporating today's industry specific protocols for Siemens from Siemens, including eight Tcs in H O T.
With the ability to support newer advanced IP based applications. We believe we are enabling the smooth transition to the adoption of the digital railroad.
This includes moving from the current state of fixed blocked operations to moving block to eventually autonomous train operations the.
The key to a substantially more efficient industry.
We highlight the key steps involved in the involved in the rollout of the 900 megahertz on this slide which we believe will follow previous large scale deployment rail.
<unk> deployments.
As mentioned previously the <unk>.
Technology choice for <unk> 16 has been led by the E R, which represents the class one rails collectively.
This centralized approach and control has been given.
It's been critical given the need for both interoperability and peaceful coexistence among the rails.
Furthermore, the rail lab is under a a ars direction and control to ensure ongoing seamless operation.
Each class one controls its own rollout plans, but on this and Siemens providing backup support.
Heavy lifting for the network installation and operation is almost entirely in the hands of each individual railroads.
On this slide you can see various components involved in the rollout plans ranging from acceptance testing to engineering design and training all the way through the ongoing customer support and maintenance.
Launch orders tend to be smaller in size.
Blow by larger more substantial orders six months to 12 months later these larger orders typically come with a precise delivery schedules that support the rail rollout plan.
To reiterate reiterate we have received 900 megahertz orders from two class ones with a third having begun field work in advance of significant.
Orders.
We also now have visibility into new applications. These rails plan to implement beyond a tcs. We've listed some of these applications on the slide including interlocking and remote crossing control.
In other words, we are already seeing the evolution away from the single purpose legacy networks like a T C S.
To multi use all Max enabled networks.
Now I'll turn the presentation back to Eric to discuss 2022 targets.
Alright, Thanks Stuart.
Now, we transitioned to providing some specific kpis targets and objectives Brandes networks. In 2022, we are increasing but still limited insight into both customer budgets in ordering plans while visibility is improving we don't have the backlog secured to constantly provide a specific revenue outlook. However, we do want to offer.
Some color on what we are looking to achieve and the market potential we see with the class one rails for 2022 and beyond.
As we highlighted earlier the potential growth for on dust networks with the class one rails alone is significant starting with the 900 megahertz network. We estimate the Tam for 900 at several hundred million dollars in size, we expect the ordering activity, which has begun will ramp over 2022, and even more so in 'twenty three and beyond at a.
High level, we expect to receive orders from at least five rails in 2022, we expect bookings of $20 million or more with 900 megahertz being the biggest component. In addition, we expect to secure an order from an international customer for the on locomotive product, we are developing with Siemens.
Bookings and deliveries are critical and ramping of the 900 megahertz network and class one orders remains the clear focus for on dust networks, and it's part of our compensation programs. Unfortunately, we see scope to continue to execute on an increasingly broadening market opportunity.
We expect our relationship with Siemens to grow in 2022 as we expand the product portfolio, we expect to complete the head of train or H O T $4 50 megahertz products for both the Asia and North American market. We also expect to launch a new development program for a track to train radio system for European markets, which we will update you on <unk>.
We hope.
Over the course of the year, we will be updating you on the M. C. Iot lab activity. The lab will open the andaz platform to a broader ecosystem of rail vendors, which will help create further value and accelerate the development of new applications broadening the use case of Augustus technology. In addition, we expect the rails to ultimately expand.
Lab activity to other network frequency bands, including the 160 megahertz critical voice or LMR network and look forward to sharing more details later in the year. So to summarize the outlook of what we aim to deliver in 2022, we expect orders to ramp with new customers and with larger deals. Our objective is at least $20 million in orders for <unk>.
Dust networks, we believe our relationship with Siemens will expand even more in the lab will help lock in a bigger opportunity for more rail vendor relationships and 900 and across other frequency bands.
I will now hand, the presentation to reach.
Yeah.
Thank you Eric.
Since the merger was on Das was completed last August American Robotics has moved quickly to lay the groundwork for long term growth and success.
Firstly on your agenda was expanding our team at all levels. We've accomplished this on target and on schedule Onboarding some of the top talent in our fields.
We've ramped up our supply chain and manufacturing capabilities to meet the existing demand of our customer pipeline this year and beyond.
We began the maturing of nationwide operations infrastructure with a focus on safety reliability and efficiency.
And we were acknowledged for these efforts and others through two additional patent grants and five industry Awards.
On the sales front, we have secured our first wave of blue chip customers within our target markets. These are chevron conocophillips two of the largest oil and gas companies in the world and stockpile reports, who serves over 300 customers in the bulk materials industry in 48 countries.
Additionally, we have many more customers in our pipeline and we are excited to share. These announcements once the deals are finalized.
And finally through careful analysis and close collaboration with our customers. We believe we have identified clear paths to dominance in each of our target markets and we have already taken key steps to execute these plans.
In oil and gas, we have partnered with and invested in dining they are to.
To build a portfolio of industry specific analytics capabilities for Chevron Conocophillips and others.
In rail we have entered into a definitive agreement to acquire antenna the leading developer of drone based rail analytics with access to the largest database of high resolution imagery in existence.
And bulk materials and mining we are partnering with stockpile reports to integrate their leading analytic software into the <unk> system.
Diving deeper into each of these.
Our head count in American Robotics has expanded 450% year over year.
We've on boarded key personnel and industry, leading talent at all levels of the organization, including VP of sales VP of operations VP of engineering director of talent director of product and director of flight operations.
Honored to have some of the brightest and most experienced minds in our industry join us with.
We're training from it my Chi Stanford Carnegie Mellon and West point and backgrounds from GE Irobot, Amazon Robotics, Aerovironment M I T Lincoln Labs for.
IBM in the U S armed forces to name a few.
This expanded staff allows us to support the significant inbound interest for our products and prepare the organization for expanded commercial sales.
It takes the best to build the best in our Swift and consistent success in hiring top talent is a testament to our company's vision technology and opportunity.
Critical to our ability to capitalize on our unique positions in the market is the capabilities are to produce and deliver our hardware in commercial quantities.
Over the past year, we have significantly matured, our supply chain and manufacturing capabilities by establishing critical relationships and partnerships with vendors and manufacturing partners.
Well as Onboarding internal and contract base manufacturing support.
System is currently capable of being produced by our industry, leading contract manufacturing partners and systems from these partners have been delivered and installed at our customer sites.
Currently finalizing orders for 30 or more systems as well as working with our manufacturing partners team and continue optimizing this process with the goal of increased manufacturing speed and decreased bring up time for each system.
We expect to place additional orders as we move through 2022 and look ahead to 2023.
This is a multiyear process of continued improvements on the road to producing thousands of these automated drilling systems, while still maintaining industrial grade quality standards.
Yeah.
The American robotics customer pipeline is defined almost entirely by inbound interest.
Industrial customers in our target markets know the difference between vaporware and real solutions and it is clear American robotics and demonstrated the ladder.
Through our industry, leading thrown in a box platform.
And our groundbreaking FAA approval.
Within the oil and gas market American robotics customer pipeline is currently at capacity and continuous growing with many of the world's largest oil and gas producers.
Names currently include Chevron and Conoco Phillips, and we anticipate more announcements in the coming quarters.
In coordination with these customers we have identified the top use cases, each of which can be described as a killer app for this market.
Combining that with American robotics industry, leading autonomy NFA approval, our confidence level is high and we will be able to execute a past contaminants.
As noted in previous updates. We've also partnered with stockpile reports, the leading provider of image based software analytics for bulk materials and mining industry.
Stockpile reports existing business American robotics has access to over 300 customers in 40 countries, including some of the nation's largest producers on construction aggregates, we are working with.
Closely with stockpile reports to pair both organizations for the deployment of hundreds of sketch systems.
As mentioned previously.
We've taken a number of steps to extend and solidify our moats in our target markets. One example of this is our investment in and partnership with dine them AI, a leading software developer for complex artificial intelligence and machine learning products.
Each industry applicable to the drone market requires industry specific analytics and.
In dining may I help to accelerate and expand our offerings with tier one talent and technology.
Currently our joint work with Dino is focused on delivering the capabilities discussed above for the oil and gas market and we see a number of other opportunities to continue to expand our work for us.
For the rail market, we're very excited to announce a definitive agreement to acquire a leading provider of drone based rail analytics software.
We estimate the total addressable market for drawing a box solutions within the rail market to be $6 85 billion.
And we believe the addition of our dinner will immediately place American robotics as a leading provider.
Our dental has spent the last seven plus years researching and developing AI based analytics, specifically for this market and specifically in partnership with the largest class one rail in North America of BNS.
Through these efforts our denim has amassed over 28000 miles of rail track images, resulting in a massive data lake of over 30 terabytes and high resolution imagery.
This data and the AI focused team at our at our dinner provide immediate access to this valuable sector.
There are over 200000 miles of track and hundreds of rail yards in North America alone and we believe this technology has the potential to eliminate 90% of train derailments before they occur.
We intend to both innovate our Venezuelan spectrum product within the <unk> system as well as market. This is a standalone SaaS product to others in the industry.
Looking ahead to the remainder of 'twenty to 'twenty two.
Our focus now is on providing top surface service to our blue chip industrial customers. These corporations, requiring demand high levels of quality reliability and safety and we intend to provide that.
By year end, we anticipate 30 scouts systems installed and operating.
At the conclusion of this P. O sees we expect to start transitioning to freak orders with these customers. As a reminder, we are targeting customers that have the capacity for hundreds or thousands of scout systems across the United States and the world.
We estimate the potential for over 10 million of asset sites worldwide to eventually employ automated drone or box technology on a daily basis. Thus we believe this is just the beginning.
We're going to continue ramping our operations and manufacturing capacity to support this plan focusing not only on the industry, leading technologies, but also industry, leading operations processes and culture are.
Our customers demand at our regulators demand it and we intend to deliver.
Additionally, since the there since the close of our merger with on Us.
A mere seven months ago, we have already demonstrated the power and flexibility of the scouts system platform to expand our moat in our target markets.
Partnership and a bulk materials and mining market would be a stockpile reports and acquisition in the rail market via our antenna and.
And internal development in the oil and gas market via an investment in dine in my eye and in the IR team.
This is a signal of what's to come and evidence of American robotics business plan being put into action.
I look forward to sharing more updates with you all as our investments accelerate into revenue growth and profitability.
I'll now hand, it back to Eric for some closing remarks.
So thank you rice as we've outlined in the past made the case today, we see a generational opportunity to define scale lead a create massive value for customers and shareholders by virtue of our marketing market, leading industrial technology platforms.
We have the systems talent and experience in the mandate from customers in our investors to do this we have a healthy balance sheet to support our ongoing investment in technical solutions and business development, we expect cash opex to be about six $5 million to $7 million in Q1 with modest working capital requirements as we build inventory for expected.
Growth over the course of 2022 cash Opex will trend a bit higher the we expect it to be increasingly offset by revenue and gross profit, particularly as on dust networks grows with the rails.
In addition to filing our 10-K this morning, we announced a public at the market or ATM offering with Oppenheimer. The purpose of the ATM is to provide additional balance sheet flexibility for the company.
We believe we may have opportunities to accelerate certain technology investments within das networks at American robotics to respond to customer demands sumit.
We're really the ecosystem around our platforms may offer opportunities for partnerships <unk> acquisitions, we have recently seen some dislocation in public and private equity markets within our M. C. Iot ecosystem. This too could create investment opportunities for Andaz in short <unk> intends to stay on offense and pursue opportunities to cement.
And extend our leadership positions.
Let's take a minute to summarize the call and wrap our prepared remarks before we move to Q&A as we outlined on dust networks is transitioning from investment mode. The platform delivery 2022. The adoption cycle is beginning in that class. One 900 megahertz network. In addition to Siemens partnership is broadening across new products additional networks and with new.
<unk> segments.
Preparing internally for a ramp up in sales by building capacity and inventory to support expected demand from Siemens in the class one rails in 2022, and American Robotics will continue to scale operations and moats in its key target markets oil and gas mining and rail as we transition franchise customers to fleet orders are continued to invest in <unk>.
Knowledge, particularly expanding its payload and data analytics capabilities and we will do this hand in hand with our customers I am excited about 2022 and the momentum we have in our businesses.
Our team has worked hard our shareholders have supported this difficult work and we firmly believe the fruits of our labor will begin to bloom and very visible ways in the quarters ahead.
Operator, I'd like to open the call for Q&A.
Thank you well now begin the question and answer session.
Would you like to ask a question. Please press Star then one on your Touchtone phone.
And for US It was bigger Potently asks can you. Please pick up your handset before pressing the keys.
The majority of your question. Please press Star then two.
So the first question comes from something around at Oppenheimer. Please go ahead.
Thanks, guys.
Just a few questions one on <unk>.
I think next August the rails have to vacate some of the spectrum has to be turned over to <unk> I guess how.
How much of the network needs to be built out by by next August to enable that and and how much of the spectrum are they really going to hand over to Ken.
Can they get some relief gets extended out and then they had a few follow ups. Thanks.
Sure Hi, Tim and thanks for the question.
So the legacy 900 megahertz network will be retired.
Or is due to be retired.
And two periods.
August of 2023 is the first period, there's about half the railroads that have to vacate the spectrum that and then the other half has to do with over 2025. So.
The railroads tell us they're confident that they can meet those deadlines you see on the rollout with US is between now and 2023.
That hfcs.
Uh huh.
The migration is happening right. So we've talked about that and we've given some outlook on what we think that ramp looks like.
And then you're also going to see between now and 2023 and increasingly through 2025 that single purpose legacy 900 megahertz network.
Turning into a new flexible full Max platform and you're going to see as Stuart outlined new applications. In addition to a tcs being built so we see that build happening over into this 2023 deadline for half the railroads and then the rest.
That deadline.
Through August 25.
Yeah.
Okay. So just to be clear they need to spend between 100 and $200 million between now and next August to vacate that spectrum with you guys.
So that implies a serious ramp up in bookings.
And revenues at some point I, just want to be clear on it.
Yes, we do expect a serious ramp as you as you just called it out.
And again, it's initially going to be a tcs building the base station infrastructure and then building the edge devices for these new applications over the coming years.
Okay, Great and then on the on the drone side can you give us an update.
You've obviously had a lot of interest I mean, what's the total demand for these drones thousands hundreds for sitting here five years from now I mean, just any more color on that would be great.
Yeah sure I'll ask Rita to take that.
Sorry, Tim can you repeat the question.
Yeah, I apologize can you just give us an update on what you think the total demand for the scout drones is as you look at the market. I mean are we talking thousands tens of thousands hundreds because I'm just trying to understand how you're thinking about to ramp up the assembly line or the production facilities for these or are we thinking about building hundreds of these a year.
Tens just you know just to get a sense of what are you designing your manufacturing facilities for now.
Yeah, roughly speaking if we look you.
You know far out we believe that there's over $10 million asset sites around the world that will eventually deploy a ton.
One of our strong in a box systems.
So I think ultimately we're talking about millions of these systems.
That's obviously going to be a ramp over time.
That's not something that we have the capacity to do today, but that's what that's what our goal is so.
You know I think in the next several years, it's gonna be discussions around hundreds of thousands.
But again eventually trending towards towards tens of thousands and then eventually millions.
So what are you designing the manufacturing facilities to build per year now.
Because it seems so.
A couple of year process of buying and get these facilities manufacturing up and running.
We see we see the manufacturing is a multi phase process. So the manufacturing partners that we're working with right now.
The capacity to do hundreds soon probably up to thousands I think once we get to that point, we will have to.
Graduate to larger manufacturing partners just to clarify we're not we're not building in house manufacturing facilities, we work with third party contract manufacturers them train them how to how to build these systems and so there are you know.
There are groups of contract manufacturers that are ideal for certain quantities, you know low to medium medium to high and very high and so I think we see graduating to to various levels of those contractors over time.
No I understand that but it seems like it takes a very long time to ramp these contract yourself because isn't manufacturing the gating factor for deploying these are you know at this stage I mean, it seems like you could sell thousands that he's immediately.
And I guess I'm not I'm, just trying to understand how do you bring the whole business model together, you're definitely a demand for thousands. So you know why not set up the manufacturing that basically to be able to manufacture 1000 per year now yeah.
Yeah. That's a good question manufacturing as a factor its not the only factor there are other elements that would stop us today from deploying thousands of systems I mean.
Simply speaking, even you know the customers and worked with Chevron and Conocophillips for though they know that they eventually want thousands of systems. We're talking about very large fortune 100 companies that have you know.
Budget cycles that better measure than you know six months to year end, it's not yet at the point, where it's a flip of a switch and we're going to deploy thousands to chevron, we need to prove ourselves out on a number of aspects. There are some logistical things that aren't taking place right now to give some some examples on that you know cyber security.
Audits, a safety analysis, we need to be integrated more tightly into there.
Their operation systems, you know people need to be trained on how to use these things so.
So I think the the manufacturing ramp up goes in parallel to these other activities that have to be scaled as well, so installation and operations maintenance et cetera.
It's going to be growing again in parallel to the manufacturer.
Very helpful and then lastly, the acquisition today.
He was can you give us any financials, how much revenue was associated with it and maybe.
Yeah, how much stock did you give for the acquisition. Thanks.
Yeah sure I'll take that so the <unk> purchase was for most of the equity we provided 870000 shares and $900000 in cash a little context for the cost and value we're spending.
<unk>, what they have invested capital to build this.
This analytics software suite of software.
Applications.
Of course that took them many years and a lot of sweat equity on top of it.
And it comes also with a seasoned customer pipeline and getting back to the cost and value for Identa. The B NSF and other railroad partners spend multiples of that their cost to build the data Lake which of course is really strong.
The source of value for US you need the data to build the analytics programs using the AI machine learning techniques that work that are available. So we think this deal is a home run not only does it give.
Give us great value on a standalone basis monetizing our dentist software packages.
It's very attractive, but it's also as we integrate it with the.
And our capabilities with the scout system, that's going to really accelerate probably are in a meaningful way of.
Our ability to service and penetrate in scale in the field with our with the railroad, which is obviously a very attractive market.
So our data has has had some some revenue with customers and we're at the point with our data where that'll be transitioning to a.
More commercial activity.
Got there their pipeline and in the addressable market with them is virtually every railroad that's gonna have a drone program and of course that I'd be interested on drones across the rail sector is growing.
Yeah.
A couple of them.
I'm sorry, just to be clear. So can you give us any revenue color for this year on that.
And that acquisition sorry.
So response, you talk about what we expect for lending customers this year.
Yes.
So first you know I think our demos are really Fantastic example.
Full stack philosophy in this market.
No you really need a complete end to end solution for this could make sense with industrial customers and so our dinner in there.
Last one rail partners over the last seven years have spent millions of dollars Craig that's really great analytics software.
But it needs to be attached to.
And automated drone system to make sense.
It's a really great deal for both sides that we're excited about and then they've spent.
Parallel to that R&D development over the past seven years building up this customer pipeline.
To include the class one rails that we all know they're at a point this year where are.
Initial initial.
Initial deployments of that SaaS software or are possible and likely so I think we're going to continue with that pass offer them as well as our integrated into the SCADA system.
And we just.
We will close the acquisition fairly quickly early in.
In the second quarter, and when we get our hands on it and control, we'll be able to share more information about the revenue opportunities.
Thank you.
Thank you next question today comes from Mike Latimore of Northland Capital markets. Please go ahead.
No.
Great. Thanks.
So Eric did you say that within our bookings outlook. There is hot you expect orders from five class one railroads.
Yes, we do yes, we did.
Okay and.
Can you talk a little bit about the use cases, there I guess these orders are coming in before the lab work is done so maybe just.
Whats the opportunity kind of with these individual orders prior to the lab work being done.
I'll ask Stewart to take that and talk about these new applications.
Sure thing thanks, Mike So theres a number of applications that.
Individual rails have been looking at for quite a long time and when we mentioned specifically on the call was interlocking.
And the interesting thing about that application.
More of a distributed network versus centralized.
Where we're connecting our if.
If you look at how trains approach.
Crossings.
And it allows for Red light Green light.
Coordination and so one of the customers is looking at a wide deployment of interlocking you have to recall too that these networks are large portions of.
The rail networks R. R.
Focused on a single rail and then as they interconnect with other rails, that's where the coexistence and.
Interoperability occurs so we've got it.
A number of applications interlocking.
Some bridge.
Bridge drops a number of things that the rails are looking to do in the short term and then as we mentioned on one of the slides that are the.
Focus is moving block applications, where you're looking at trends.
Not working.
Working in our fixed block, where they're waiting for one train.
And stopped while another train is.
It's moving forward so.
If you look at that one slide we discussed were looking at moving from fixed block to moving block to eventually time to MS. Trained. So this is a whole series of applications that have to occur.
For the rails to achieve that and they've decided to go ahead and get started on these use cases now.
Okay and then on the.
Bookings, so should we assume that Rev. Rec on those bookings as you know I don't know six months after they occur for deployment purposes.
It's hard to have visibility at the moment on that I think I think when we get orders, we should be able to turn them around much more quickly than that.
We are getting.
Inventory kind of and production ramping and in advance or in anticipation. So so I don't think it's six months, but I can't tell you with precision sort of you know when when the order hits and when we turn that into deliveries.
Got it.
And then Mike on the also on the slide we talked about the launching and Theres a lot of processes that go in place each each real pursues their own methodology.
In terms of the design so.
It depends on the individual rail to and how they are whether the how much pre work. So we have to really coordinate one on one with with the rails as they go through it but.
But.
That's why we're there.
We've mentioned that some rails are doing smaller launch order summer preparing for larger so we.
We and Siemens are working together on that.
And then should we still think about the <unk>.
On the drones is about 50000 here alright.
Bruce.
Yes, I think for modeling purposes, right now that is appropriate so it may end up being conservative.
Hopefully, we'll be able to share more on that later this year.
Got it and as you get more involved with Blue chip customers here are they asking for.
Additional functionality that require some R&D this year or anything like that.
Yeah in some certain some circumstances, yes, so in the stockpile market for example, no.
That's a mature analytics.
Package that we have in our partnership with stockpile reports.
With rail.
It comes with a fairly mature software package in oil and gas I think that would be the largest area of R&D.
So we've identified a number of high value use cases, and we'd like to integrate some new payloads on associate that with some analytics for chevron and Conocophillips and others.
Okay. Thanks.
Our next question today comes from William Morrison of National Securities. Please go ahead.
Hi, guys.
It would be great.
That's across the board a bunch of good things happening.
Just a question on.
Some of the rails the class ones one of them just came out with our budget.
About 30% year over year at about $3 5 billion.
And they mentioned that some of that was.
Were earmarked for them.
The modernization of their network, so how much would that.
How would that flow down through.
And what would be the components and how much it would just be pure.
Infrastructure like towers and other.
Other other common equipment versus radios.
Well thanks for the question Bill and as you said the ability to spend here is substantial one of the benefits with.
With our technology is the flexibility to operate in all of these frequency bands.
Which means when when the railroads are upgrading their networks for more capacity and more flexibility Ah theres still what they're really trying to do is get more utilization out of their existing spectrum assets.
So they already have the infrastructure in the field they have base stations. They even have antennas that are very often we can reuse.
Because where we're basically deploying new base stations at the same tower.
And then of course, the edge devices are in the field, they're either going to be.
Essentially connected to the equipment that they wanted to monitor and control or embedded in the examples you seeing increasingly with Siemens where our formats technologies inside so.
So the bulk of the network upgrade is on.
And spending is related to the equipment and solution, we're providing and of course they'll have to have their own internal budgeted labor.
It was maturing earlier most of the heavy lifting will be done.
By the rails themselves and they have substantial capacity to do that they operate essentially many telecom operations.
Okay. So that's good so if most of us towards radios.
Other than the order book they must have some kind of schedule for you to ramp your manufacturing or just to kind of.
And.
Oh, I know your sourcing and everything I mean, what does that look like because that to me that looks like a couple of hundred million for one rail.
Yes, I can't speak exactly to that budget, you're talking about but but we are.
Preparing for for increased volumes as you would expect and of course, we're spending a lot of time with Siemens and now increasingly the customers on issues like supply chain and that is a real issue of course, that's something that's not I'm familiar to everyone on this call now.
But you know we're trying to do our best.
To get in front of that so what that means is the railroads and as we referred to it we are getting increasing visibility, we will be expecting to get more visibility on their ordering plans.
You know that we'll need to work closely with them and Siemens to make sure the supply chain and our ability to produce and deliver.
Is there and you know there's a lot of energy being put into just that.
And what's the early.
Expectations for meeting the rising to the occasion.
Jim.
Siemens.
Supply chain.
No infrastructure help you where are you on your own.
Siemens is going to be very helpful. Obviously, they what they do and their manufacturing prowess and supply chain teams are big and they're going to be very motivated and are motivated to help us procure components.
Do you see any showstoppers or any you know critics.
Critical point Yeah. It was just it's hard to talk specifically I mean, we do see a supply chain tightness and it's.
You know certainly a it can be components specific at some points.
But we've got you know its here in March and we're doing that we're identifying where those.
Points can be and we're going to try to manage them as well as we can.
Alright, great guys I appreciate it thanks.
Thank you.
And our next question comes from Ophir Gottlieb with Sabra.
We're marching along before and Cisco.
Hey, guys. Thanks.
Thanks for taking my questions, Eric I would just.
Just a point of clarification and then two questions first of all.
It looks like I said as expected growth in revenue and gross profits.
We will offset cash burn for.
For 2022, and 2023 for rail, but does that mean, a rail at least for 'twenty, two and 'twenty three is going to be running operating cash flow breakeven.
I wouldn't say, it's breakeven for 2022.
I think about it on a quarterly basis as we see the ramp in orders and we start delivering and recognizing revenue and receiving payment and by the way. We do think the payment terms will be favorable.
We get to what I would describe it on a quarterly basis.
At modest levels of revenue, we become self funding AD networks and profitable so.
You've heard us in the past talk about our Opex, where today guiding to the first quarter around six $5 million.
Or so in cash Opex, a little less than half of that is on dust networks. The rest as they are and of course, we have holding company expenses. So so given our margin profile of 50% or greater on a platform sale. This does not include the recurring software and system maintenance revenue, but just given the margin profile on our.
Our.
On the system sales from dust networks.
Your your your your that you know seven or $8 million of quarterly revenue and your cash flow positive on an.
Operating basis. So that's the way I think about it and we'll see how we can ramp orders and turn that into cash receipts as we move through the year, but I think 2023 and it should be on dust networks based on what we understand and believe the growth to be we should be self funding it honest networks for by 2023.
Okay. So you don't necessarily have to tug on that $50 million ATM.
Exactly yes, there's a as we as we described in the call.
This is all about balance sheet flexibility and optionality.
It was also referred to in this to be the case as well as for onto US. The customers are looking for us to to innovate and and actually provide solutions.
And if we've got the right mousetrap, given the ROI on what we do.
They might ask us to move faster and we want to be ready to do it.
Okay, so you'd move on the ATM if.
There are revenue opportunities to accelerate but not for.
Just for funding the entities since rail it sounds like it's going to be self funding.
That's a good way to put it.
Exactly that's that's our expectation.
So I have two questions.
Another one that has secured two class one rail that sounds like a third is coming shortly and I think there was guidance to have two five by year end.
This is a transition for class one rails to come off of legacy networks and enterprises don't go backwards once they come off of a legacy network.
What does this look like in say 2024, I know that you've given the total addressable markets, but let me ask it. This way is this is this is this a $300 million to $800 million.
A potential revenue available through 2024, and 25 or how should I look at that and then I have one follow up on robotics.
No I think we will.
The focus of the Buildout for the railroads.
Over the next several years will be on that new 900, megahertz network and all in when including <unk>.
The deployments at crossings at high rails high rails, or our maintenance vehicles that run along the track.
At the wayside so for applications that Stuart was describing earlier.
That's several hundred million dollars.
And then of course, there's the other networks for 50, where we're already bill.
Building a product that's the on locomotive radio systems for H O T O T.
You'll start to see that kind of a play out probably starting in 2023 expects seasons to.
Have orders for upgrading H O T a.
So it's kind of going to be a sequence, but the vast bulk of the focus and the spend will be on that 900 network with the rails.
$450 $60 wouldn't come in kind of behind and I would ask you to want to watch what we're doing on the development side. There are obviously again $4 50, we started a product with a with Siemens and we do.
Do it.
Can you talk about this in the past we do think 160 is.
Place the rails will be active with some development work you know kind of in the coming.
Quarters, we'll call it.
Okay. It sounds like 2024, if things go according to plan should deliver at least.
$100 million in rail revenue.
And American robotics sounds quite on track to hit its stride.
To $60 million in.
Annual recurring revenue, that's how I read it is that mhm.
Does that sound reasonable.
I think those are those numbers in the ballpark.
Okay Alright.
A question on American Robotics, as you know I spoke with one of your major oil and gas customers.
Hum.
And I understood from them the time to a fleet order is actually a lot faster than I thought it was lets say 1000 to 2000 drugs could actually happen in nine to 12 months from the first deployment of the parent for the sort of testing per.
And that's of course, assuming Scott can deliver what they hope of Kansas No guarantees, but these companies can be scale, let's say within a year.
It occurred to me it seems like it's one of these Mega campus is going to get into the final step function with American robotics for a fleet order.
They know that it would be accompanied defining moment for us and it seems to me that they would take some sort of stake in the firm not just to benefit from their own capex right, but also logistically to essentially guaranteed that the manufacturing that are jealous goes to the front of the line. If you get a deepwater then theyre going to want all too often drones is that a reasonable way to think about the relationship between American robotics and <unk>.
Orders are these conversations happening either internally or externally that I am not potential portion of 100 company that has tested and it moves into the step function may actually take a stake in the company I don't know what you can say about that thank you.
Well I can't I can't talk specifically to that but I think broadly what you're discussing is true.
Companies when they if there's mission critical technologies.
And you know theyre going to make a big investment.
And particularly if it's an emerging technology with a company like onto us.
Yeah. This is gonna be partnership and what that means in terms of financial arrangements.
I guess, we'll have to see.
But we do think there is scope for partnerships and at the same time, we think we control our own destiny.
We're well capitalized and well continue to be and we've built we've got a very deliberate strategy to build the team and the infrastructure the services companies.
And.
There's all sorts of relationships, we can have the buttress that so so we'll have to see what what happened. So you know.
Obviously excited to do the work and deliver and think it will take care of themselves.
You know and we're.
Yeah, Yeah, where we're approaching these conversations with companies like Chevron and Conocophillips very much from a partnership perspective.
You know this isn't at the point where.
It's you know pure sales and we're just trying to pump as many units to them. We know that this is a long term relationship and that's assuming we succeed in integrating thousands of drone systems, we've become a very important part of their infrastructure.
It's critical to their day to day operations and the safety of their own.
Assets et cetera, and so I think both sides recognize that and you know were working are working closely with them on a weekly basis too.
Really establish that kind of partnership mindset. So I think all sorts of things to come out of that and you know where we're leaving the door open for all sorts of.
Conversations are going to be on just just a pure kind of a sales relationship.
Okay.
I saw the guidance for American Robotics I was in that presentation in September of last year.
So this methodical going forward, but given that American robotics continues to add these fortune, one hundreds, which they really do have to scale for one or 2000 recession anymore.
Does that could accelerate that guidance that was given but does American robotics I know its contract manufacturing does American robotics have the ability if I don't know.
December 31 2022.
Filling the blank Mega cap oil and gas is yeah, we actually will take one to 2000.
Scouts this even though I know that's ahead of the schedule that you planned which should be great news, but could that be delivered with your current manufacturing it sounds like it could be but it would be at the end of the top end of what you can do.
I mean, it's it's theoretical I think when when.
Love the gentleman from Thursday hasn't been Chevron, but I think.
I I I don't even think I'm, there and that they would install that money systems all at once.
I I interpret it in the order of 1000 or 2000 drone systems as being attached to a rollout strategy over say the following year.
You know each one of those sites needs to be determined. There's you know power requirements that you need to build a cement pad for each thing you need to.
Sure that you'll have data connectivity, which can vary between say a niche thing has to be set up with.
You know quite plan boundaries et cetera. So there's you know regardless of if it's American robotics or any other company. There. There's just some steps that have to occur.
Think stretched out over time, a little bit.
Which is fine so so so yes, but but it would be again I think our ramp opex that's scaled out over the following year.
Yes, they wouldn't expect 1000 drilling for next day and just to close the loop is each of these scouts still forecast to have a payback period of less than a year and a free cash flow margin of a little over 70% of that still as you're scaling on this is that how you.
Just sort of things are still as presented.
Yeah, generally, yes, certainly when we get to quantities like that.
You know supply chain.
Constraints raised component prices a little bit.
So we're right on the border of that right now and low quantities, but certainly when you get to a hundreds of thousands to absolutely.
Okay excellent thanks, guys I appreciate it.
Thank you.
Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to the management team for any final remarks.
Okay, well thanks for attending the call. We're looking forward to this year as we've as we outlined today, we're very excited we've got some momentum.
And.
Well, we'll be in touch we're going to keep you posted on business development as we move through this quarter and we'll talk soon thank.
Thank you.
Ladies and gentlemen. This concludes today's conference call. Thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.