Q1 2022 Ondas Holdings Inc Earnings Call
Welcome to the Andras Holdings, Inc. First quarter 2022 conference call all participants will be in listen only mode.
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<unk> periodic SEC filings and in the earnings press release issued today, which are both available on.
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<unk> undertakes no obligation to revise or update any forward looking statements to reflect future events or circumstances, except as required by law.
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I'd now like to turn the presentation over to Eric Brown, Chairman and CEO . Please go ahead.
Good morning, it's a pleasure to welcome you to our conference call I'm happy to be joined today by our President and CFO , Derek Rice field Stuart Kantor President of on Das networks at American Robotics, CEO Reese Moser today, we plan to review, our financial performance and strategic progress for the first quarter and year to date.
And discuss our outlook for the rest of 2022.
I want to start the call by highlighting that business momentum remained strong at on Das with both on Das networks at American robotics, leveraging their respective technology platforms to drive market adoption and deployment, which we believe will result in substantial growth.
Networks to work with customers remains focused on the large rail networks. We have previously announced initial launch orders to the 900 megahertz network and as you will learn we expect expanded orders with these and additional customers over the course of the year.
Execute on the 900 megahertz network on dust networks, and our partner Siemens are actively marketing our full Max wireless platform into additional class one rail networks beyond 900 in North America. This includes Europe in Asia in both freight and transit markets.
At American Robotics, we remain very focused on executing the business plan, we call. Our strategy is to partner with franchise customers such as Chevron Conoco Phillips stockpile pilot reports in others on initial scout system installations as we will describe our early work with customers in the scout system has been positive.
When you are introducing new game changing mission critical technology, and industrial markets, such as oil and gas rail and mining doing it the right way is critical in a R is on Paas.
It's a miracle robotics field work with customers along with the ongoing regulatory work with the FAA is positioning us to define the market for automated drone driven data solutions in terms of how they're architected in delivered to large sophisticated blue chip companies in critical sectors of our economy in the Bottomline is on Dash continues.
That's two when we're investing on behalf of our customers who need our next generation data solutions to run their businesses more efficiently safely and profitably.
With that introduction, let's shift towards outlining the agenda for today's call.
First I plan to highlight the progress we're making on our key business priorities at both on dust networks In America Robotics, then I will ask Derek to share our Q1 financial results. Stuart will then provide an update on das networks business activity of course, focusing on our work with the railroads and Siemens and then Reese will provide a similar update for a miracle robot.
As we execute the go to market strategy with the scout system.
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. We continue to have deep engagement with the railroads in Siemens in preparation for volume deployment, starting with the 900 megahertz network. The initial launch orders for 900 from two rails have now both been delivered these launch orders were firstly for the.
Yes products, we have jointly developed with Siemens and.
In addition, we have been working closely with the third class one railroad and began field work in preparation for securing a significant launch order from that customer.
To highlight that this third order is for a railway signaling an interlocking use case with protocols that differ from the <unk> application. We expect this customer to initially focus their deployment on our venous platform.
This is particularly significant as it validates the fact that honest as full Max I Tripoli 816 compliant platform with its greater data capacity and flexibility allows the railroads to expand the utilization of the new 900 megahertz network beyond the legacy Accs application in other words, we are already seeing the evolution away from.
I'm single purpose legacy networks to multi purpose for Maxim people networks quite clearly this is very positive as the railroads. It has additional use cases or establish the value of our formats that 16 platform to the rail customers only increases and we expect this to ultimately drive wider deploy systems across all of the class one rails.
The establishment of the Federated Mci L. G rail lab is still further evidence that our full maxed out 16 technologies positioned at the core of railroad mission critical networking during the quarter, we constructed and delivered the rail at the M. A X V rail.
Call that NXP rail was formerly known as T. T. C. III is a division of the association of America railroads or AA or.
In parallel our relationship with Siemens continuous support and expand beyond your initial 900 megahertz network.
Jointly developed a tcs products, our head of train or H O T program with Siemens for the class ones for 50 megahertz network in or a customer in Asia is progressing well and we expect to announce more joint product development programs with Siemens in 2022.
Lastly, I wanted to highlight that our operations team at <unk> has been working diligently to prepare her for the volume orders, we expect from the class one rails and Siemens we have now qualified and secured contract manufacturers in component vendors and this is important work as we navigate supply chain issues like those reported by many technology and industrial companies.
Let's turn now to America robotics, as I mentioned at the outset, our field work with customers, including stockpile Conocophillips Chevron has been positive to date at least will share more details on this activity in the important work we are doing to transition these customers to <unk> the customer pipeline remains robust and this week's announcement of an order from Scotts Miracle Gro.
As evidence of that Scott's becomes just the latest blue chip customer, we will onboard with our scout system, we expect additional franchise customer announcements in the coming months our pipeline. The AAR was further supported with the addition of <unk>, a leading provider of rail infrastructure inspection analytics, we believe our denim provides a significant.
Labor for Merck robotics to introduce our scout system to the class one rail it in other global rail markets.
I would also like to highlight that American robotics continues to demonstrate leadership with customers and regulators and this was further evidenced by our recent announcement that the FAA had provided additional BBB last approvals covering existing unexpected customer sites are engaged with the FAA remains very positive and we expect further state approvals over the course of the year.
I also want to note that our work with franchise customers as identified several additional scalable use cases for our scout system, which are highly valued by our customers, particularly in oil and gas markets. Some of these use cases will require expanded UAV payload in sensor integration as well as data analytics advances we have begun to plan.
This product development effort in certain places, we expect to accelerate.
Elegant work to satisfy what we believe is immediate demand for these data services. We look forward to sharing more details of this effort with you soon.
In short we continue to make progress on our key initiatives to start the year and have successfully set up behind us for growth in 2022 and beyond.
I'll now hand, the call the Derrick so he can share information regarding our financial performance with you Derek.
Great. Thank you Eric as I share our financial results today for the first quarter of 2022. Please note that we've included our financial statements in the press release and the Form 10-Q filed this morning.
Also note that we're now.
The numbers we are reporting.
Like the performance of American robotics in 2020, one as the acquisition of American robotic quite loose on August six 2021.
Moving to our first quarter results starting with the P&L.
Please note that our revenues and expenses reflect the business development activity in preparation for larger commercial Rollouts, we expect in the future.
Revenues for the three months ended March 31, 2022, or approximately $400000 as compared with approximately $1 2 million for the three months ended March 31, 2021.
The decline in revenue was primarily a result of lower product development activity with Siemens in aura in the current period as compared with the prior year.
Gross profit was approximately 100000 for the three months ended March 31, 2022, as compared with approximately 600000 for the three months ended March 31 2021.
Operating expenses increased to $10 1 million for the first three months ended March 31, 2022 as.
As compared with $3 5 million for the three months ended March 31, 2021.
The increase in operating expenses was primarily due to operating expenses associated with American robotics.
Which we acquired in August 2021, and whose expenses were not included in the first quarter of 2021.
The company realized an operating loss of approximately $10 million for the three months ended March 31, 2022, as compared with $2 9 million for the three months ended March 31, 2021.
The operating loss increased primarily as a result of the increase in operating expenses associated with the American Robotics post acquisition.
Acquisition and the decline in Robin.
Note that operating expenses and our operating loss included noncash expenses related to depreciation and amortization and stock based compensation equal to $2 4 million for the three months ended March 31 2022.
As compared to $1 5 million for the three months ended March 31 2021.
A majority of the increase in depreciation and amortization costs in 2022 is related to the amortization of intangible assets related to the American robotics acquisition.
Now, let's turn to our cash in investing activity.
<unk> maintains a strong balance sheet with cash and cash equivalents of approximately $32 1 million as of March 31, 2022, as compared to approximately 48 million as of December 31 2021.
We utilized $8 8 million in cash during the quarter.
Which included $7 1 million of cash used in operations, reflecting primarily operating expenses related to serving customers for networks and American robotics.
We used $1 6 million in investing activities, primarily related to one time capital expenditures associated with the build out of the new Waltham headquarters for American Robotics and on Dash Holdings. In addition to spending related to building out Scout systems.
As we will discuss we anticipate moving into these offices in June and do not expect to see this level of ongoing capital expenditures in the coming quarters.
We are well positioned to continue to invest in customer pipeline development and support.
And Eric will share those details later in the call.
Now I'll turn the call back over to Eric.
Well. Thank you Derek now I'll ask Stewart and reach to share a more detailed update on business activity in Q1, and early Q2, starting first with on dust networks, and then American Robotics Stuart.
Great. Thank you Eric let's begin by discussing the 900 megahertz network status in North America.
As Eric mentioned previously we have now received multiple launch orders from Siemens The 900 megahertz network.
This includes launch orders from two class one rails for the ATC, Yes application, we jointly developed with Siemens.
Onshore order for the first class one was received and delivered in Q4 of 2021. The second launch order was received in January 2022 for a second class one and we are pleased to announce on today's call that we have now delivered data worker.
We also informed you in the last call that a third class one have begun field work in the 900 megahertz in advance of a significant launch order.
We're making excellent progress with this customer as they plan for a new non <unk> application in the 900 megahertz band.
This activity is critical as it reinforces that the class one rails are now transitioning away from single purpose single application networks to multipurpose multi application IP based networks.
All of this activity is reinforced and supported by the critical M. C. I O T rail labs, <unk> and Siemens secured from the rail industry.
And we're pleased to announce on today's call also the lab has now been constructed and delivered to Amex. The rail the non technical standards. The technical standard body for the association of American railroads.
Siemens Nx via rail and on deaths and jointly begun to develop and implement use cases for multi rail interoperability and coexistence and the 900 megahertz frequencies.
Now moving to the joint the status of the joint development programs with Siemens.
As most of you know hfcs, because our first joint development program with Siemens.
This program has now been successfully launched and is actively being marketed and sold by Siemens to the class one rails in North America.
Recently, Siemens requested that we obtain Canadian certification for the <unk> radios to meet new demand identified from freight and transit customers in Canada.
And we're pleased to announce we're in the final stages of obtaining that certification.
We also informed you that we have multiple other joint development programs in process. The Siemens centered around the head of training application, both in Asia and North America. We're.
We're making excellent progress on these development programs and have now qualified and selected contract manufacturers both in Asia and in the U S to support volume production of these new radio boards.
Also in the last call we outlined multiple other programs that we're targeting with Siemens, including a new radio for European locomotives.
We intend to keep you updated on these new initiatives as they come to fruition.
Important to note that we continue to identify global opportunities for the full Max technology in rail.
In terms of growing our organization, we continue to bring on team members to support production and manufacturing.
We are pleased to announce today, a strategic new hire industry veteran Kevin Nichter, who will serve as our VP of product marketing.
Kevin has deep industry relationships with the major rail customers in both freight and transit serves on several key industry Advisory committees and has prior experience working with the Siemens team.
Kevin will help accelerate the deployment of full Max across the class one railroads and also open new opportunities and transit markets.
We're very pleased to have him onboard now.
And lastly, we would like to highlight the Siemens and we will be jointly attending the upcoming RSA site rail showing Kansas City. During the week of May 16th, whereas the entire airlink product line will be highlighted and we will be engaging directly with major class one rails on implementation goals.
As we shared on our last call. We believe the Greenfield 900 megahertz network deployment will follow previous large scale technology rail deployments and we are again sharing the key steps, which are integral for wide scale rollout of the 900 megahertz network.
The technology choice for eye Tripoli eight O. Two <unk> 16 has been led by the AAR, which represents all of the class ones.
This centralized approach in control as being critical.
Critical given the need for both interoperability and peaceful coexistence among the rails.
Furthermore, the rail lab is under Aar's direction and control to ensure ongoing seamless operation.
Each class one controls its own rollout plans with honors from Siemens providing backup support.
Lifting for the network installation and operations almost entirely in the hands of each individual railroads.
There are many activities at the rail customers, along with Siemens and hondas need to coordinate and complete in connection with rollout plans.
This work ranges from acceptance testing to engineering design and training all the way through the ongoing customer support and maintenance.
The launch orders tend to be smaller in size, followed by larger more substantial orders six to 12 months later these.
These larger orders typically come with precise delivery schedules that support the rails rollout plan.
Our primary goal at networks is to obtain and deliver on scaled orders to multiple class months, we believe that our launch work with the class ones. The Mci O T lab, and our partnership with Siemens will deliver that success.
Our initial launch customers have begun discussions with Congress and Siemens regarding their initial volume orders to begin the wider 900 megahertz deployment.
In addition to the 900 megahertz activity, we expect Siemens to place orders for equipment for the H O T edge remotes currently under development.
With that let me hand, this back to Eric So he can go into greater detail.
Thank you Stuart before I hand, the call. The reason I want to remind our investors that Siemens <unk> and a host of other technology providers are working with the rail customers to drive intelligence into their field operations and ultimately that leads to more and more automation and quite clearly we are in the early innings of the digital.
Railroad investment cycle in the broader M. C O T investment cycle across not just rail, but other critical infrastructure markets, which we believe will be enabled by next generation mission critical private wireless networks.
I'll hand, the presentation to <unk> for a detailed update on American robotics progress.
Thank you Eric American robotics, as an exciting period of growth as we are well on our way to scaling up operations on route to fleet deployments across the United States.
Additionally, we've taken several important steps to ensure long term leadership in our markets some of which I can share today.
As you all know we are currently engaged with Chevron Conocophillips and stockpile reports as well as a backlog of customers in the pipeline.
Yesterday morning, we announced a new customer Scotts Miracle Gro one of the largest lawn and garden companies in the world.
It's worth noting that the majority of our customer engagements have been the result of inbound inquiries as American robotics still stands alone as the only drone manufacturer approved by the FAA to offer a fully automated drone systems.
It's been a year since our historic FAA approval and as predicted American robotics remains in a unique position of leadership within our industry.
We're taking full advantage of this first mover position.
Building long term relationships with customers in our target markets and investing in the platform.
In support of our plan to deploy hundreds and eventually thousands of these systems, we continue to make strides in both maturing our operations and manufacturing capacity both of which we see as additional differentiators for the company.
Finally in support of this we are honored to continue to attract some of the world's brightest minds to join the American robotics team.
I'd like to share updates on the engagements with our initial franchise customer base.
We are currently in an important period, but we're working closely with these fortune 500 companies to prove out that demonstrated the safety of the system in the field deployed in places like North Dakota, Louisiana, Ohio, and South Carolina, New technology, particularly robotic hardware systems that operate amongst safety critical assets like oil and gas.
Structure must go through proper betting processes before adopting on a large scale.
We see this process is yet another opportunity to separate American robotics from the pack and believe our position as both developer and operator of these systems puts us in an ideal position to do so.
It is also worth noting that the safety analysis performed by our customers are very similar to those performed by the FAA again, placing us in an ideal position to be the leader in this regard.
Examples of this include job safety analysis reliability testing cyber security audits and integration into existing company software systems. Once complete we believe these engagements will become a blueprint for which we can duplicate with other customers.
As a result, we anticipate significantly reduced sales cycles in 2023 and beyond.
As a result of the technology.
Regulatory and customer milestones over the past year, our industry leadership and influence are accelerating.
Last month, we announced the receipt of seven additional sites approved by the FAA to operate the scout system in a fully automated manner, bringing the total portfolio to 10 sites are spread across eight states.
As predicted our waiver portfolio is growing whereas the rest of the industry remains stuck.
And though we do not anticipate the singular position to last forever. We do believe this head start is valuable enough to snowball into position of sustained market leadership.
This recent regulatory milestone proves a very important point, our current waiver an exemption package are scalable and will permit us to pursue the commercial targets. We've shared with you for 2022 and beyond.
I've said before that it takes the best to build the best I think it's also true that the best minds wants to join the best teams.
And I'm very proud of our team growth at all levels of the organization.
In leader leadership positions over the past quarter, we have added Tracy land aviation safety expert 25 years as senior adviser of regulatory Affairs and safety we all.
So I had a direction west former president and CEO of Schiebel aircrafts, and 20 year veteran of the drone industry as senior adviser of business development.
In other roles, we have added talent from MIT Lincoln Labs, GE Aviation, Boston dynamics, VA system software Biotics, Amazon Robotics, Google Irobot, Textron and others.
Summing all this up we are on track in executing the growth plan. We laid out previously hiring is on target with the <unk> team now up to roughly 60 people and growing we're scheduled to move into our new headquarters on June 5th.
The manufacturing ramp up is on target with 30 plus systems on order for delivery in 2022.
The final topic I'd like to discuss this morning is our product roadmap.
True autonomy and FAA approval are the baseline for scalable drone operations and what we estimate to be 90% of all commercial drone applications.
As a reminder, this represents an annual and mostly untapped tam of $100 billion or more.
The number of data solution opportunities as a result of this is truly massive.
We estimate over 10 million or more asset sites globally have the use for automated drone and a box technology and as the uniquely enabled extractor of this data that puts American robotics in a position for a number of valuable leadership opportunities.
To this end, we havent working closely with our initial customer base to structure partnerships with both near and long term goals for the products.
Some of these you already know some I can announce today and others will be announced later this year.
You are already aware of our acquisition of the assets of Argenta and.
The leader in AI powered image analytics for the rail industry and our investment in Diana AI, a leader in AI model generation for physics based scenarios.
For new announcements, we have partnered with cloud factory, providing American robotics with a dedicated data labeling team for training AI models.
Also expanding our partnership with Dynamite Hill.
Who is now providing us with a dedicated team of data scientists physicists and AI software engineers.
For announcements expected later this year.
We've been working closely with our customers at both the corporate and operations levels to structure. Your technology roadmap centered around new payload integrations and AI software offerings, where we plan to announce these new product offerings as they become available this year for peak into some of those announcements I would focus your attention on the oil.
<unk> gas market and in particular oil and gas leak detection.
Again, the number of future opportunities within each of these markets is truly massive.
Our current target markets, we have worked with customers to prioritize these opportunities based on customer value and the speed of integration and we believe these investments will further accelerate fleet adoption throughout our customer organizations and different departments environments and use cases.
First suffocation of capabilities and use cases, well not only cements, our stickiness with industrial customers, but we believe will also present the opportunity for additional revenue generation potentially beyond our current financial models I look forward to sharing more of these details with you all in the coming months.
Ill now hand, the call back to Eric for some closing remarks.
Well. Thank you read now lets turn to summarize some of our key business objectives for 2022.
We continue to expect on Das networks will generate orders this year from at least five railroads and we are maintaining our goal of at least $20 million in bookings.
Light that this bookings target is a significant component of our bonus plans at on dust networks. In addition to platform product sales, we plan to secure at least one new joint product development program from Siemens in 2022.
For American Robotics. The key targets include securing orders from at least 10 customers Ian for at least 30 Scout systems by the end of the year.
In addition, we are also targeting at least one customer reorder for fleet deployment by the end of the year.
And lastly for our success with customers comes down to partner and partner with customers to develop solutions that are valuable yet complex, we expect to secure at least one form a partnership with a customer in 2022.
Yeah.
Now, let's turn to the balance sheet and cash outlook, which remains healthy and supportive of our ongoing investment in technical solutions in business development, we expect cash opex to be about 7% to seven $5 million in Q2 with modest working capital requirements as we build inventory for expected orders and revenue growth as discussed.
On our last call, we put in place a public aftermarket or ATM offering in March the purpose of the ATM is to provide additional balance sheet flexibility to the company. We believe we may have opportunities to accelerate certain technology investments with on dust networks, and American robotics to respond to customer demand.
We raised about two and a half million dollars in April and that helped offset some of the cash used in the <unk> acquisition.
We've recently seen some dislocation in public and private equity markets within our M. C. Iot ecosystem. This too could create investment opportunities for us in short <unk> intends to stay on offense and invest and pursue opportunities to cement and.
Extend our leadership position and we will do this when and where we feel we can create incremental shareholder value.
Let's take a minute to summarize the call and wrap our prepared remarks business development is on track with both on dust networks in America Robotics, we expect to build momentum with customer purchase orders throughout the year as we have outlined the class one rails are beginning to launch the 900 megahertz network, we have a plan in place to transition law.
<unk> orders to volume deployments over the course of the year into 2023.
<unk> mentioned, we expect a good turnout and quite a bit of attention at the Rsi rail show next week at.
Siemens partnership remains strong in this broadening across new products additional networks and with new customer segments and transit in international markets.
Honest is preparing internally for a ramp in sales by building capacity and inventory to support expected demand from Siemens in the class one rails during the year.
We expect American robotics to continue to extend its industry leadership by driving value for customers and demonstrating the value of its automated data solution in the field.
A miracle robotics will continue to scale operations and its key target markets oil and gas mining and rail as we expand the number of customers with scout installations and do the work to transition. These franchise customers to fleet orders and they are we'll continue to invest in technology, particularly in expanding its payload and data analytics capabilities and we will do this hand in hand and partner.
Shipped with our customers.
Before we open the call to questions I want to make a few comments regarding the economy and market volatility we have seen in 2022 clearly we are all operating at a new business environment. One that is characterized by changes related to the pandemic. It also public policy, we've seen supply chain disruption war and geopolitical conflicts.
Increased inflation and a host of other headlines that seem to show an increasingly complex business world today. It may be in the future this impacts how and where people live and work and of course, how businesses operate well.
While I don't have a unique take on what this all means for economic growth or how this impacts financial markets and other important factors that could impact our business on das I do want to shed light on how we plan to run the business and build value for customers and shareholders in this new environment first.
We see absolutely no indication that the critical infrastructure markets. We serve are structurally hobbled in this environment in fact as globalization trends change the services production and labor size of the economy with Dallas is supply chain adjust across the world. We believe that it is likely that investment in infrastructure will accelerate in the years ahead.
And of course that will be terrific for on dust networks and American Robotics. Secondly, we also believe our critical infrastructure customers and partners need more than ever our next generation data platforms to operate their businesses more efficiently safely and profitably. We're in the early innings of an NCI with the investment cycle and the solutions, we architect will be <unk>.
These markets, we will continue to do this work is strengthen our ecosystem.
So with that said I'm excited about 2022 and the momentum we have in the businesses. Our team has worked extremely hard and our shareholders have supported this difficult work, which we are grateful for we firmly believe we are well positioned to deliver for you in the quarters ahead.
Operator, I'd like to open the call to Q&A.
We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
And our first question will come from Timothy Horan of Oppenheimer. Please go ahead.
Thanks, guys and thanks, a lot for all the information on the call.
Eric can you maybe go into some detail on the 900 megahertz.
Build out what do you your guests now and maybe what the Tam is in that market in total and more maybe boiling down into breaking it down between what's needed for the FCC requirements. They keep spectrum and then.
And then maybe other value added services and some other products kind of on top of it and then related to that when do you think of equipment has some really start shipping for them to meet the FCC requirements.
Okay, Yeah. Thanks, Tim.
So we've outlined the Tam for the 900 megahertz network that $300 million and we think that will grow over a third of that should be related to the accs upgrades.
What was the second part of that much not yet.
Yeah.
So.
The timing of that 100 million like one do they really have to get the network up and running and so you know to meet that requirement. When did you really have to start shipping.
Okay. So by the second half of next year. Some of these deadlines are starting to kick in.
And then for over the next two years the rest do so so the answer to question is they need to start working now and we are engaged in those conversations I wanted to just step back and maybe look at it a little bit more broadly.
So kind of where we've been but where we are today, where we're gonna be a it's great to be able to say that visibility is improving and getting getting the launch orders has started to allow us to see more of the rest of that deployment process and as Stuart mentioned, we are talking to more and more folks inside the rails need to be brought into the process and of course, Siemens as part of that is.
The railroads are massive organizations and there's all these departments that have to come together to first acquire do the purchasing.
That's our plan.
Implement the deployments and operate the network so that work's happening now and we expect that.
As Stuart said we were in.
Discussions now around those volume orders, which of course is very.
So we think they're going to get started.
Oh, great Tim It sounds like maybe I can jump in real quickly, Tim and just mentioned that.
The use case applications that where we're developing with Amex me rail.
Are there broadening too which is a good good thing reinforcing the network. So it started with Tcs.
Eric has mentioned the interlocking application and theirs.
I think we've gone through some of these there is a whole host of applications.
That are being tested for.
For the 900 megahertz network so.
I think we're making excellent progress in bringing all of this together for.
The macro network.
Great. So I guess when do you think equipment will start shipping in size orders for them to meet this.
Deadline is it third quarter of this year fourth quarter first quarter of next year any any color on that would be helpful. I mean, I know you don't know exactly but when do you think they really have to start buying equipment and in size Order then and I guess do you have the equipment do you have the yes.
Inventory to kind of shifting equipment or can you get the inventory.
Well, we were in conversations now for the volume purchases.
And we expect deliveries to begin in the second half.
Some of that will be in Q3, a bunch will go will be four to 423 is going to be even bigger with with even more of a railroad.
And in terms of weight in terms of inventory building for that that process is well underway, we began ordering components in there.
Contract manufacturing.
Partners, Yes.
We have seen longer lead times. So you haven't seen the inventory build just yet but that will start this quarter into Q3, but I do believe we're going to be able to do to deliver.
Great. So just on the cash front do you have enough cash to meet your business model now or do you have to raise more.
Because if you don't really know the timing at this point the revenues and then secondly can you talk about maybe some of the sources for cash I mean can you tap into some some credit credit markets or other markets besides of the public market.
Yeah, So I feel good about where we're at on the on the balance sheet and of course, the rail orders are going to become meaningful. This is not a small network, it's not a small market.
In the margins and gross profit we can generate there will increasingly offset the cash opex and again the visibility on on on those orders is now improving so.
And I also add that the cash use relative to our technology platforms that we're developing in the market opportunity or Tam is very modest.
A lot of banks in the investment book, So so I feel good about where we're at and I'm not going to predict the stock price, but I believe our institutional investor base will expand dramatically this year interact with the capital to expand the business. Even further as we have success will be there. So.
So answer you specifically, if we did want to.
Export credit opportunity fund some of the <unk>.
I'll activity I do believe they're there, but that's not our plan I believe we are well capitalized and our ongoing access to capital is very strong.
Thank you.
Yep.
The next question comes from Mike Latimore of N. C. M. Please go ahead.
Great. Thanks, a lot yeah I guess.
First question just on the rails. So you mentioned that second order I think was delivered is that gonna be a second quarter revenue event.
No that was a first quarter revenue event, the launch orders or are modest in size and that sort of starts the whole internal process will work with the railroads.
Red dead specific railroads and Siemens.
On the larger volume purchases and I'll add as.
As we and Siemens get more experienced that here.
Here the time between launch two volume purchases on the the next you know.
The railroad and the rail road after that is likely to shrink.
So it will be able to currently.
These launch processes around more quickly over time.
And then on the third.
Third quarter.
Quarter Thats you know on the larger size is that still kind of a second quarter event or are second half there.
Yeah, where we're trying to get it in the second quarter, it's hard to say.
We put a stake in the ground to say, we will do that.
We are active with the customer. This is it for a use case that they need and the work is to date with that customer in the field for this new application has been very positive.
Okay.
And the <unk>.
Interesting and logical service what what is the next step here in terms of go to market with that.
So I'll ask Luis to expand on this but our Denis has got a really significant pipeline of potential customers actually not just here in North America with a big class ones, but globally. So there's a lot of interest we're getting to know those customers now and trying to.
It was sort of see how and where their timelines are.
Like many of these customers historically, they've been challenged in being able to gather the data at scale and of course, that's something that we believe we can and will help with the scout system. So getting slotted into their timelines are what we're exploring now but there is significant.
Customer pipeline, which we're gonna grow reached would you add anything.
Yes, the plan with our data.
Is to sell both as a stand alone product as well as integrated with the scout system.
The two big customers that are done at work with prior to the acquisition our beat Us FMC effects.
Obviously, the biggest rails in this space so.
So yeah, we see a lot of opportunity there, where we're getting to know those customers through our business development team and we're working to.
Map out some deployment plans for this year.
And it would be logical that customer.
Customers would want to buy that packaged solution with scout I'd imagine.
Yeah, absolutely you know ultimately that's been kind of the issue with <unk>.
John analytics.
In the past as you need that source for high quality data for high resolution high frequency.
What the scout system provides.
So ultimately we see that packages to more.
The valuable choice, but folks want to.
Ah trial for software independently.
To start out with that's fine as well.
And then you talked about I think 10 customer accounts by year end for American Robotics, I think you mentioned one repeat order for fleet I guess.
When you mentioned when you how would you define fleet at this point in terms of number of units.
Yes, it's a good question I think I mean, if we did I would say is at least 10 would you know visibility towards.
100 or more.
We see we see this business really being a step function would these customers.
Especially at this point it's.
One or two units pilots with these guys and once we prove out a number of aspects what if they're interested in.
The plan for both sides is to scale that across all of those like asset. So if we're if we're dealing with a well pads in the Bakken for example.
Obviously the goal is not to just image, one well pad as to image the.
<unk> of well pads that exist all across that region and other regions in the country in the world. So before before these customers make that type of decision there is.
Just some natural steps that have to go through.
There are some safety ramifications here, we're talking about a robot.
Interacting next to oil and gas equipment and everybody wants to make sure that this thing is safe and it's reliable.
Things of that nature, so, but you know what once we pass those thresholds are you really anticipate a pretty big step function there.
Oh, great. Thanks, a lot.
Thanks, Mike.
The next question comes from Carter Man Spark of Forte Capital Group. Please go ahead, Marc Good morning, gentlemen, congratulations on all the accomplishments on both sides of the business, Eric I think you need to make it very clear exactly what you think about the cash situation because that's the concern do you think you need to.
Raise more cash or not.
Okay. So I'll reiterate I am very comfortable with our balance sheet and I don't expect we don't the current plan does not require new cash.
Did talk to.
Opportunities to expand the business.
And that's the purpose of the ATM is to give us the flexibility to do that so.
We have the visibility on the rail business is getting better every day.
And of course, those orders have to come.
To help fund us internally and Thats the plan and that's what we believe so I feel very good about where we're at on the balance sheet.
Okay. So just to be clear, if you're not looking to buy another company in the private equity market and things go as planned you do not believe that you need any additional cash.
On the current plan, we do not need additional cash.
Perfect. Thanks, guys I appreciate it.
Yeah.
The next question comes from Ross Stevens of measure capital. Please go ahead.
Hello. Thank you for taking my call question on the product bookings of the $20 million target for 2022, how much is on the books now and how much of that would be 2022 revenue.
I can't give you the number on what that will translate into revenue because it is dependent on the timing of orders and.
Deployment plans for the customer, but we do think quite a bit of it will come into this year.
In terms of backlog, we have not built substantial backlog yet, but as we've described in the call and in prior calls.
That those conversations are beginning and we have visibility on the numbers we're talking about.
Okay. Thank you.
Thank you.
This concludes our question and answer session I would like to turn the conference back over to Eric Berg for any closing remarks.
Well. Thank you operator I want to thank you all for joining US today, we look forward to chatting again soon and sharing updates on our progress at networks in America robotics during the quarter I would also note that we are planning to attend multiple investor conferences in the coming months and I hope to see you there and as.
Close the call I want to thank you again for joining us, but also express gratitude on behalf of the entire team at <unk> for your support we're incredibly grateful and know that every day, we have to continue to earn that support and that's what we're working on so we began the year with terrific momentum and look forward to sharing updates on our key initiatives over the course of the year.
To get back to work. So I hope you have a great day and we'll talk soon.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.
Okay.
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