Q4 2022 Ondas Holdings Inc Earnings Call
Welcome to the <unk> Holdings incorporated fourth quarter and full year 2022 conference call.
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Before we begin the company would like to remind you that this call may contain forward looking statements.
While these forward looking statements reflect on Boston's best current judgment.
They are subject to risks and uncertainties that could cause actual results to differ materially from those implied by these forward looking statements.
These risk factors are discussed on doctors periodic SEC filings and in the earnings press release issued today, which are both available on the company's website.
On death undertakes no obligation to revise or update any forward looking statements to reflect future events or circumstances, except as required by law.
Please note this event is being recorded.
I'd now like to turn the presentation over to Erik Boch, Chairman and CEO . Please go ahead.
Well. Thank you operator, and good morning, I wanted to get started by welcoming everyone to our quarterly conference call. We appreciate the time, you're spending with us and for your interest in our company todays call will be a bit shorter than we're used to for these quarterly updates since we just met a few weeks back at our virtual investor event at that.
Time, we provided both a comprehensive business development review and a detailed outlook for 2023 for both our on dust networks in R&R Autonomous systems business units. So today, we plan to review our financial performance in a bit more detail you can provide updates on recent activity with both on dust networks and non das autonomous systems.
Business units.
That conversation will focus on current activity in the field with customers and partners.
As you continue to see <unk> is picking up momentum we have had a strong start to the year and look forward to sharing details of this customer activity with you.
So let's go.
I'm happy to be joined today by our CFO Derek Rice field in our President <unk>. In addition, we will hear from Stewart Cantor, the founder and President of <unk> networks, and mayor quieter robotics founder and CEO .
We call that in connection with the closing of the Robotics acquisition, we established a new business unit, we call on Das autonomous systems, or Oh, yes, which combines the drone operations of American robotics are robotics and now iron drone.
There is a precedent of OAS and it's my pleasure to have him join us today on his initial investor call.
Now, let's turn to the agenda, we will start the call with some brief comments about the state of our business entering 2023, I will then hand, the call over to Derek for financial review.
He will briefly recap the 2023 outlook.
They only want to provide a business update on dust networks in our OAS business units, where I'll ask Stewart and merit to provide commentary around current business activity again, because we have previously provided a deep dive at the virtual investor event in February . These updates will be mainly focused on recent events and on the ground activity, we're driving here in the first quarter.
We then wrap the call and open the floor for investor questions.
We expect 2023 to be a very good year for Andre I spoke with all on dust networks in OAS business units, we entered the year with momentum fresh on successes in 2022, well, we secured our initial commercial orders signifying the validation of our technology platforms and their scalability with customer.
And then on dust networks, the volume order from Siemens in the 900 megahertz network with a significant event.
Rail networks are large and strategically important and its adoption is beginning.
The strategic value of the 900 megahertz network in all private networks, frankly is becoming more and more apparent today, we've outlined a number of occasions, how private wireless networks enable safe inefficient train operations at specifically, how new industrial broadband capabilities like honest has got 16 compliant system, we call full Max.
In the valley that provides well customers with the ability to adopt new and advanced safety technologies.
900 megahertz network has come into focus with a national attention today on rail safety with this attention the technologies that will be implemented to make our railways efficient and safe are becoming ever more clear.
Through all this conversation again, which is happening nationally one thing it's obvious you need robust wireless networks to implement enhanced safety systems, along the track on locomotives and railcars and at highway crossing our desk.
That was formats wireless platform is well positioned to help address these challenges around connecting these technologies.
Rail industry is facing today, we believe the rail sector, which always has large capital expenditure budgets.
It is poised to accelerate investment and safety technologies Siemens are active in the conversations around how this will happen and we will talk a lot more about that today.
Oh, Yes, we have also seen fleet adoption begin as arrow biotic secured initial commercial orders for the Optimus system customers and partners in the UAE. We are beginning citywide deployment of urban drone infrastructure in Dubai and Abu Dhabi.
This is a development in the drone industry is nothing short of groundbreaking flying autonomous unmanned system in a densely populated urban setting is an unparalleled achievement and demonstrates the massive lead we have in defining these UAS market.
In short we believe <unk> entered 2023 positions to drive significant increase in revenue, which we believe will help support the scaling of our company and put us on a path to profitability.
Again, we believe 2023 is going to be an excellent year for us in the beginning of a long investment cycle in our mission critical Iot and drone businesses.
I am now going to hand, the call over to Derek for the financial review.
Thanks, Eric how do I get started I want to remind our investors that our financial statements reflect investment in preparation for larger commercial rollouts within our on dust networks and Andras autonomous systems business units.
As we outlined in our Investor update last month, we believe we will see that commercial adoption in 2023.
Revenues for the periods presented have been primarily generated by full Max product sales and service revenues customers, including class. One railroads. In addition to product development programs with Siemens and field activity with autonomous drone installations.
Of course, we believe this activity has been valuable serving to establish the broader opportunity, which we expect to lead to significant growth in full Max based wireless systems and optimists deployments in 2023 and in the coming years.
For the fourth quarter of 2022 revenues were approximately $500000. This was a decrease from $600000 for Q4 last year.
<unk> during the recent quarter were generated by full Max product sales driven by orders from Siemens as well as development revenues as we advance the H O T and European product development programs with Siemens.
Based upon the low level of revenues in the pre commercialization peer.
Period gross profits remained low during the fourth quarter of 2022 at roughly $300000 operating expenses increased to $34 8 million for the fourth quarter of 2022, as compared with $7 2 million prior year.
The rise in operating expenses was primarily due to an increase in research and development expenses professional fees associated with the <unk> acquisition, along with an increase in depreciation amortization and stock based compensation expense.
We consider the acquisition related expenses to be nonrecurring.
We also recorded a $19 4 million noncash charge for impairment of goodwill.
The goodwill impairment is an accounting charge, reflecting the write down in the carrying value of the American robotics acquisition.
We perform regular analysis related to goodwill and given the dramatic decline in valuations of comparable small emerging technology and the decline in our share price. We believe the write down is prudent.
While we understand the accounting treatment, we remain very positive on the strength of our IP portfolio and the business outlook across both our business units and do not believe the goodwill write down has a significant impact on our business.
Aside from the $19 4 million goodwill impairment charge noncash expenses totaled $2 5 million for the fourth quarter of 2022.
Stock based compensation was approximately $1 5 million in the fourth quarter that increased by approximately 200000 from the prior year.
Depreciation and amortization expenses increased from 700000 in the fourth quarter of 2021 to approximately $1 million in the fourth quarter of 2022.
Operating expenses in the fourth quarter of 2022 also included professional and advisory fees related to the <unk> acquisition. Once again, we consider these acquisition related expenses to be non reoccurring.
Excluding noncash expenses and nonrecurring professional fees related to the aerobatics transaction operating expenses were equal to approximately $12 3 million.
Each were higher than expected due to accelerated spending on customer related activities at American robotics.
With the completion of aerobatics acquisition, we restructured our activities in the autonomous drone segment.
We believe this will lead to significantly lower operating costs going forward at the combined entity.
We believe the additional investments, we made were prudent and necessary for the expansion of our services and capabilities to <unk>.
Ultimately drive larger revenue opportunities over the long term.
The company realized an operating loss of approximately $34 5 million for the fourth quarter of 2022.
As compared to $7 million for the fourth quarter of 2021.
This loss includes the aforementioned noncash and nonrecurring expenses.
We generated an adjusted EBITDA loss of $12 6 million in the fourth quarter. Excluding these noncash expenses as compared with a $5 million EBITDA loss for the fourth quarter of 2021.
Also noted the increase in both cash and noncash expenses related to the business development activity and preparation to meet the demands of a growing business.
Now, let's look at our full year results.
For the full year of 2022 revenues were $2 $1 million. This was a decrease from $2 9 million during the full year of 2021.
Revenues during the 2022 period were generated by product sales driven by our order from Siemens as well as development revenues as we advance the H O G and European product development programs with Siemens.
Gross profit increased to approximately $1 million for 2022.
This was roughly equal to the gross profit of $1 million last year on higher sales.
Gross margin improved significantly to 52% for 2022 compared with a gross margin of 38% in the prior year period.
Again this low level of gross profit reflects a period of pre commercial adoption of our technology platforms.
As we have described in our prior calls due to the historically lumpy nature of development programs and customer product sales and services gross margins can be volatile on a quarterly basis. The margin improvement is primarily due to a larger proportion of high margin product sales and services in the revenue.
Next during 2022.
Operating expenses increased to $70 5 million for all of 2022 as compared to $19 1 million in the prior year.
$19 4 million of the operating expense was due to the noncash charge related to goodwill impairment.
Also the rise in operating expenses was primarily due to an increase in research and development expenses professional fees associated with the <unk> acquisition, along with an increase in depreciation amortization and stock based compensation expense.
Aside from the $19 4 million goodwill impairment charge noncash expenses totaled $9 9 million for the full year of 2022 <unk>.
Including stock based compensation of $5 9 million.
That increased by approximately $2 6 million from the prior year.
Depreciation and amortization expenses increased from $1 5 million in 2021 to approximately $4 million in 2022.
Operating expenses in 2022 also included professional and advisory fees related to the Arab potash acquisition of approximately $2 1 million.
Once again, we consider these acquisition related expenses to be non reoccurring.
Excluding non cash expenses and non reoccurring professional fees related to the aerobatics transaction operating expenses were equal to approximately 39 million, which were higher than expected due to accelerated spending on customer related activity at American robotics.
With the completion of the <unk> acquisition, we restructured our activities in the autonomous drone shall we.
We believe this will lead to significantly lower operating costs going forward at the combined entity.
We believe the additional investments, we made were prudent and necessary for the expansion of our services and capabilities to ultimately drive larger revenue opportunities over the long term.
The company realized an operating loss of approximately $70 5 million for 2022.
As compared to $19 million for 2021.
This loss includes the aforementioned noncash and nonrecurring expenses we.
We generated an adjusted EBITDA loss of approximately $40 million for the full year 2022, excluding these noncash expenses as compared with $13 2 million EBITDA loss in the prior year.
As noted the increase in both cash and noncash expenses related to business development activity in preparation to meet the demands of a growing business.
Now, let's turn to the balance sheet.
We ended the fourth quarter of 2022, with a $29 8 million of cash our.
Our cash position was aided by the convertible note offering.
Outside of the new convertible notes, we maintain them minimal long term debt and a $58 2 million equity position.
Of course, our equity position reflects the substantial investments made in our technology platforms.
I will now hand, the call back to Eric.
Well. Thank you Derek as you know, we believe 2023 will be the year when on Das begins to monetize the substantial investments we have made in our business development, we expect to generate significant revenue growth and are reaffirming our outlook from February and our target for $26 million to $30 million of revenue for the full year.
We expect adjusted EBITDA losses to narrow to $19 million to $24 million for the year.
Our outlook is supported by over $13 million in backlog and visibility into expected demand from our existing customers as we move through 2023.
We expect cash utilization to improve significantly improved cash efficiency comes from operating expense leverage and on dust networks with expected growth in revenue and gross profit.
A similar dynamic exists at OAS, where we believe the integrated companies will operate with dramatically lower cost as a combined company focused on optimizing the Optimus platform in the field with customers.
Now, we will transition to a business unit review and as Stuart cancer and their client or to share updates on recent activity in the field with customers and industry partners. We're gonna start with Stewart, who will update us on the current status with the rails on 900 megahertz and share some details around the value of our technology in the context of the national Converse.
Nation around rail safety.
Sure.
Great. Thank you Eric.
We believe on just networks, along with our strategic partners Siemens mobility is well positioned to accelerate the adoption of our full Max wireless technology, and our Dot 16 platform.
Over the past few years, we Siemens the class one rails the association of American railroads and their technical arm M. X V rail have worked diligently to lay the groundwork for the wide adoption of our Dod 16 based technology and the 900 megahertz band.
That adoption is happening now.
In this quarter, we've begun to deliver on our initial volume orders to Siemens on behalf of being that has happened. She has sex and look for deliveries to accelerate in the next quarter.
We're also working closely with Siemens and the rail customers to expand the order book and we expect follow on orders from BNS up NCS X as well as new launch orders from additional class ones.
Currently we are actively engaged with all seven of the American North American class ones on various aspects of network adoption <unk>.
Including having established inroads in the 160 megahertz frequency band for data applications.
This is also a safety critical network.
Internationally, we have our ongoing activity with Siemens for Indian Railways as well as a new locomotive radio program for the European market.
And lastly, we have ongoing business development activities with the passenger and transit rail in North America and in international markets.
And we anticipate new activity in these markets.
We'd also like to emphasize that rail safety is not new to us or to our customers and we will outline in a few moments here specifically how recent the.
The recent national focus on rail safety aligns with our core strengths.
We want to emphasize that mission critical networks are fundamental to train operations and their integrated safety systems.
North American rails operate continent wide train systems and require a modern wireless technology to implement large scale connectivity edge computing and automation technologies.
The rail sector has invested and continues to invest heavily in their train operations and safety is front and center to everything they do.
However, the integration of safety technologies has many challenges.
Often the corner of witches reliance on reliable railroad wide communications.
Most of the geography, the traverse is highly remote with.
With challenging terrain.
This is where our $802 16 technology and licensed radio spectrum comes into play.
Also you may recall that in May 2020, when the FCC awarded the rails, New 900 megahertz Greenfield spectrum. One is the primary reason cited for the award was the expected implementation of safety based applications.
Including increased support for rail integrity applications.
Continuous crossing modern monitoring and advanced defect detection, which includes the hot bearing detectors also known as hot box detectors that we've been hearing a lot about recently.
It also provides redundancy for positive train control.
Over the last two years the rail industry has worked with on this Siemens and other ecosystem vendors to develop a standards based wireless system that would be robust and secure and would provide higher data capacity and flexibility in order to update upgrade the private wireless communications network.
They own and operate.
Starting with the 900 megahertz.
Some of this work has taken place inside the eye Tripoli process, where the <unk> 16 wireless standard is evolving to incorporate additional capabilities that will support long term adoption by the railroads.
We're also working cooperatively with the AAR through M Z rail in Pueblo, Colorado.
They determine how <unk> 16 will be implemented as a rail standard.
And you may recall that NXP has been operating their own dog 16 rail law Wayland.
Implementing use cases and focused on integrating existing and new applications into rail operations.
Now, let's turn our attention to detail on some of the safety systems and applications that rail's operate and where our 802016 wireless communications technology comes into play.
On this slide you can see a whole host of applications and devices that the rails used today, our plan to use in the future to address safety and operational purposes.
Most of the current applications operate on frequency specific networks owned by the rails at 900 megahertz 450, megahertz 160, megahertz and 220 megahertz.
So why is it like this.
Well most of these networks evolved overtime and were introduced to meet certain needs at certain times to address certain problems.
But with the advancement in digital wireless technology, like 802016, and Internet protocol. The same protocol, we all used today in our home and enterprise networks. The rails are seizing on the opportunity to move away from application and frequency specific networks to what we call general purpose IP data.
Networks. These networks can support multiple applications at the same time.
Offering redundancy and expansion of current and planned applications.
As we know right now at your home or in your office, you really don't care or don't even know whether you're on one wildfire frequency or another as long as your applications work and whether that connectivity occurs over Wi Fi or cell phone network.
<unk> cable.
This is the same direction the rails must go in order to build their own private networks and expand capacity.
Remember they need private networks, because they are a great addressing nationwide connectivity and have to travel from the most urban dense areas to the most remote areas illustrated by their need for connectivity even in places like the Mojave desert with not a cell tower anywhere to be seen.
So what you've seen on this slide with the implementation of <unk> 16, Meg or date of 2016.
Standard at 900 megahertz. The rails can now host multiple of these applications on the same network with high quality of service and reliability and.
And importantly get to set those levels.
Let's just take one example that has been in the news lately.
Hotbox defect detectors.
The rails with the new network capacity based on our modern wireless standard.
More hotbox detectors onto the same network without the ongoing telecom's operating costs.
It's an exciting time ferrandez and we appreciate the vision and foresight the a a R and the rails have had to see the value of our technology come to the forefront when national attention is so focused on the safety of critical infrastructure.
I'll now hand, this back over to Eric Eric.
Well, thank you Stuart and I want to reemphasize your final comment the purpose of our work with the rails has been to introduce wireless technology that enables the ongoing improvements to the safety and efficiency that the rails are always pursuing but are difficult to implement.
So indeed, it is an exciting time for us to see the value of our technology come to the forefront when national attention is still focused on the safety of critical infrastructure.
Yeah.
I will now transition to an update on activity at Amdocs autonomous systems, when a handsome mayor he will share some updates on our work with customers and partners, we will expand upon our relationships in the UAE with the Dubai Police as Sky go and also touch on the recent announcement, we made highlighting a deployment we have with Intel.
We will start with some commentary around the World Police summit, where Optimus are Optimus platform in iron drone counter UAS systems are generating tremendous interest amongst growing awareness of our capabilities in both public safety and homeland security.
But before I hand, the mayor I Wanna play a brief video. This video was created by the Dubai Police and demonstrates the vision for how they are integrating optimists into their public safety operations of course. This is a vision we share and are implementing in the real world today with the Dubai police.
So let's play the video now.
Okay.
[music].
Okay.
Okay.
Right.
Okay.
Okay.
Okay.
Okay.
Sure.
Got it.
[music].
Okay.
Okay.
Okay.
So Omer. Please proceed.
Thank you, Eric and I wanted to start by saying, it's a pleasure to be here for my first investor call with on this before I proceed I wanted to take a brief moment and show how excited our team into what it sees to join forces with owned US in our move kind of boutiques, we won't extremely to get to where we are today together.
We have no ability to achieve great things.
We have either ground running after closing the acquisition in January and establishing the owners of autonomous system Global business unit.
We have seen tremendous momentum with customers and the combination with the on does the split of the mist wont position to expand our coins relationships and <unk> technology to global markets, including the United States.
<unk> orders in the UAE for fleet deployment of our optimal system for urban public safety or insecurity and small to to use cases, validate the safety and reliability as well as the value of our Optimus platform to customers.
This was quite evident last week in Dubai, where we attended the World Police summit, which is widely attended by the largest and most sophisticated leaders in public safety and O&M acuity across the globe.
And that showed in the video the Optimus platform as I indicted in multiple video segments by the Dubai Police as the hour claimed a reason for smart police infrastructure. We showed a region and believe we are today, we do in scalable technology, and Uber and one infrastructure that is setting the pace.
As for the future of public safety and almonds acuity at the summit. We also presented our counter UAS system from Ireland, one in a moment I will share more details about the island, one system, but I want to highlight the huge interest in counter UAS solutions and specifically on the capabilities of our system.
It's an exciting product and early feedback after the public lunches promising.
We announced an expanded relationship with the Dubai police and the end of the summit.
As part of disagreement the Dubai police expressed an intent to purchase iron rule systems. This came after a successful system demonstration. In addition was ended by police agreed to work together on further technology development.
<unk> capabilities and to continue to enhance the solutions that August autonomous systems can provide to global public safety markets.
We expect orders and installations to grow in Dubai, as we move through 2023 and we continue to scale up the opened one infrastructure within this important partnership.
At the summit it was quite clear that there is extensive and growing interest globally in both Optimus and island one systems.
That interest is coming for both potentially large customers and blue chip industry Windows, which we aim to establish partnerships with.
We have previously announced the Dubai police has begun a program to adapt the Optimus platform across the city to suppose in and public safety across the city. We have installed systems and are operating on a regular daily basis with Io reliability and availability of the system. We are off to a great start.
And look forward to the Optimus fleet footprint expanding in the coming years. Similarly, we announced a $3 $5 million of older from Abu Dhabi based cargo. In addition to the intend to enter into joint venture to provide even better services for smart city use cases in the U a E.
Yeah.
<unk> is an excellent partner women leadership and application expertise. In addition to incredible vision as to where we can take one services in the UAE.
Sky always connected with multiple customers across the UAE and we look forward to sharing more details about our activity you into new future. Leslie were recently announced an extension of our service agreement with a global semiconductor manufacturing film, where we have been providing both areas.
Security and safety services in addition to serving mapping and other inspection applications.
We believe the construction project management market is well suited for adoption of our optimal system and the data services embedded in O insightful data platform.
Yeah.
From a central data proton provided very insightful construction project manager the clients. In addition to vendors and suppliers are able to trick project progress named formation in analytics and to keep the project on a track for my time and budget standpoint, offering the potential for sale.
Inefficient efficiencies and cost savings.
We believe this market is large and growing strongly and are developing strategies to further expand and construction markets.
Leslie I wanted to focus on the island the counter UAS system, We announced the island one acquisition last summer and formally close the transaction. This week Island. One is unique insights into solutions requires two condo all stocked ones.
The threat of all sudden ones in both military and civilian markets has grown dramatically in recent years.
The threat is particularly acute with small low cost drones that are being used as weapons and capable of causing significant damage.
[noise] Island, one has introduced the radio reaches an autonomous platform as you can see you on this line. The radar system is margin that is deployed in a container open which always three small uavs when it all stage one is identified in a sensitive location directed ones can be deployed.
And extremely high speeds to intercept a threat.
Nevada is equipped with the netting system that can capture the OS to drawn at Paris within shoes that the all stage. One is safety landed so it can be secured as evidence was safely protecting assets and people on the ground. The physical cup to metals of counter UAS is differentiated my other counter UAS.
S methods, we chose Germany of radio frequencies or GPS signals to disable that one operation.
German methods or countering authored one if significant drawbacks sensitive civilian locations such as airports government buildings and business areas as they can disrupt critical communications, we see significant market potential for island. One it is obvious use cases protecting <unk>.
Civilian infrastructure and public services. In addition to AUM in security, we also see military potential and expect it to be revenue generating product in 2023.
Eric I'm going to end the call back to you. So you can provide some closing remarks.
Well, thank you mayor and let's wrap this up with a couple of closing remarks before we shift to questions I want to reiterate management is committed to delivering for our investors. We believe we are on the right track to build a large successful company that defines the large high value end markets we are addressing.
We are well positioned to monetize our valuable proprietary platform technologies, which had been funded by you our investors and the substantial efforts of our team.
We are particularly excited on dust networks as the hard work we've put in to create valuable next generation wireless technology for safety critical networks is poised to be recognized as a critical component of rail safety upgrades, we believe that activity around safety at the natural level creates upside for us.
Similarly fleet deployments are optimists are off to a great start with our initial customers launching urban drone infrastructure in major cities as we build inventory in advanced marketing efforts with our customers globally, including in important sectors, such as oil and gas and public safety in the United States, We expect to drive an S curve.
Adoption, highlighting the long term value of our Optimus system to both customers and investors, we expect revenue growth and a focus on efficiency will demonstrate our ability to drive shareholder value, which we believe will be reflected in our share price that is an important focus for our team as I know it is for you again.
Again, I think this is gonna be a great year for us.
With that let's see if they're already questions operator.
We will now begin the question and answer session.
To ask a question you May Press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing the keys.
If at any time. Your question has been attacked and you would like to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
The first question today comes from Mike Latimore with N C. M. Please go ahead.
Great. Good morning, Thank you.
So I guess, Eric the $13 million of backlog.
How do you think about when that will or when will that get recognized is it more first half weighted second half weighted.
I think you're going to see a build through.
Through the year firstly in terms of the revenue target the.
The backlog we have today is there's going to be largely recognized over the first couple of quarters.
So we will be shifting some of.
The systems that Siemens is has ordered on behalf the rail starting this quarter as Stuart mentioned that'll be larger in the second and.
In the second quarter.
And then you'll you'll see a similar ramp.
We recognize revenue on the orders we have pronounced in Dubai, Abu Dhabi for that drone platforms.
Okay.
And then in terms of cash Opex, what level should we think about it in the first and second quarter.
It's a it's it's comparable to what you've been expecting Mike. So one of the things we've done with the restructuring.
Is.
Is putting in robotics in American box together as we've been able to take a lot of cost out of the business. So it's a larger opportunity, but a much more efficient op.
Operating spend and then I'll also add that.
Dust networks outlook continues to offer.
Quite a substantial operating leverage and we made that point again.
We've.
Essentially one a platform sale and it does start with 900 megahertz, but the incremental operating expense need is fairly modest as we do grow the.
The orders and shipments.
Yes.
And then on the.
Drone business I mean is it fair to say that the best prospect for incremental orders coming from the Dubai police here. So if we're thinking about.
New orders do you don't have the most logical places that would come from.
That's the most logical place, but not the only place for sure when you see opportunities.
Community more broadly in the region.
We are working on some of the activities up here in the U S, which is obviously a very large market.
And you'll hear more about that as we're moving through the year because it was conversations continue but we're also building inventory.
To address what we think will ultimately be substantial demand in the U S. So.
Great and just last one on iron grown well.
How do you.
Charged for that sort of I don't know the average price per unit.
We haven't disclosed pricing, yet and so I guess I'm going to defer I do believe that the unit economics of the iron.
That form will be will be very attractive, but we haven't disclosed pricing yet.
Okay. Thank you.
Sure.
As a reminder, if you have a question. Please press Star then one to enter the question queue.
The next question comes from Timothy Horan with Oppenheimer. Please go ahead.
Hey, guys. So we've obviously had some horrific train derailments here and learning more and more about them all the time and I. It sounds like you're kind of implying that this might accelerate the build out of the 900 megahertz network anyway, and maybe other bands and the buildup might be a little bit bigger.
I guess could you.
Give us an update on what the rails are thinking of when they will turn on the 900 megahertz and one they can start utilizing that.
And maybe just overall you know how much for the initial build just any any updated thoughts and when are they planning on shutting down the legacy spectrum.
Okay. So Tim you you're right, we do believe that this.
As we described at the National conversation around rail safety, because a couple of things. So we do think it is going to accelerate the spending on on all the technologies relating to the safety upgrades.
But it also.
As an added benefit of building awareness around on das in the private networks more generally and it does start with 900, but we think all the private networks that they have are going to be part of a longer term solution. So.
As it relates to retiring their legacy background. They still have the deadlines. We've discussed in the past that we believe are.
Are important.
That's in the 2025 so.
So that's the answer.
I'll add Tim that as is the conversations are taking place here, where we talked to is as you would expect the railroads everyday. We also work with the E. R and of course NXP rail that's a very important relationship, but we're doing this all with Siemens as well.
Seeing a lot of activity in D C and I'm sure you are as well and of course folks like Congress.
D O T EPA other agencies are all involved.
And there is activity around legislations related specifically to.
Rail safety.
So you know where we're doing what we can to make sure. We're part of that conversation in D. C. So that there's awareness.
Awareness is we want to ensure that there's awareness around how these solutions come together.
Legislation is likely to have new industry requirements.
And it's likely to call for that the Densification of technologies like Hotbox detectors, which they would describe it.
During his his his.
Presentation.
And so it would be densify and it's also upgrading technology. We do believe that networks are going to be the backbone of that all recall that the positive train control.
Effort was a was a significant one for for.
For the rail industry and that positive train control rollout, which they are says what is in the billions of dollars of cost many billions that doesn't happen without the 220 megahertz network right that doesn't happen what they wireless backbone and that really highlights the value of what we're doing is an enabling technology and enabling platform.
So any update on the total cost for the initial 900 megahertz buildout in and when they would like to get that network up and running do you have any best guesstimate.
No I think that the fact of the matter is this this network is a priority it's always been important.
And that's why you've seen the AAR and it goes back to the AAR and FCC. They negotiated the 900 megahertz swap and we shared some of the language from that report from the FCC, specifically talking about safety technologies, you've seen the E R and the industry more broadly very active with us in that it owns about 60 working group that we picked up the.
Our focus on on slide six and that's all been public and now they are also active in the rail lab working on integrating our dot 16 platform into many.
Aspects of rail.
Operation. So so the AAR has been active this doesn't necessarily I would say is as we outlined the camp last on our <unk>.
Last call in February we did make a deliberate effort to say okay. This is the initial build and then of course, there's the incremental build and whether or not it increases the sizable overall Tam makes sense. It does Ah Stewart also mentioned.
Sort of what we our experience was in our homes put Wi Fi and you have a you have data capacity you tend to use it right. So we started with one P. C. A one phone and now we have all these other.
Edge devices, our house and that's the same thing. So so I think the Tam probably does increase I don't think we have to make any formal statements about that today.
But but but it's likely to see that there is an acceleration in upgrades of technologies and of course, you need the networks to do that.
Great and then can you give us a sense on the cash burn.
The next few quarters and do you have enough cash to make it to breakeven in your current model or how much more do you need to race. Thanks.
Yes, so I'll give you the same answer as we did.
In February we believe our cash needs are modest certainly relative to the opportunities, where we're attacking and they're largely around working capital build of correspond growth and we do think we have.
Access access to capital ranging from non dilutive sources. For example, prepayments are credit lines to be these would be the.
The orders, we have and expect to get.
There's other things you know we mentioned the joint venture and that sort of model is where this is where probably the distribution for the Optimus platform now those joint ventures, Ken can fund certain opex or operating expenses.
So and of course, the equity markets or potential as well. So I think we already are our cash needs will be modest certainly relative to the growth opportunities. We have ahead of us in the strategic value of our technology to really big big customers and partners.
Great. So lastly, I didn't really understand the answer to Mikes question on your operating expenses I think we're closer to $13 million a quarter you've taken some steps here can you talk about what operating expenses will be maybe the first and second quarter I just don't know the order of magnitude on the expense reductions.
Yeah, there'll be there'll be lower and probably call it in the $11 million rate for Opex.
Okay. Thanks, a lot.
Yeah.
Once again, if you have a question. Please press Star then one to enter the question queue.
The next question is from Mike Latimore with N. Cen. Please go ahead.
Okay.
I guess just two follow up questions here you talked about.
Developing or working on artificial intelligence within your own program can you just highlight a little bit more about what the.
And the application is object detection is the insights and changes or just just exactly what might be the result of that investment.
That's a great question and in Alaska.
Last may or if you could shed some light on it.
Sure to the extent, what we would want to talk about because I think you're addressing specifically.
The announcement with the Dubai police. So so marriage, there or is there something you can say specific to what we're doing with AI and incorporating that into Optimus sand or the.
The counter drone system that.
I think the bipolar.
I live in there to really try to take the application to the next level of information.
Are we talking about a potential important quantity for them to reduce their response time by triggering and buy it.
And then if something changed in the peak sharing the video and the mapping and things like that and specifically it looks like the next 11th of application to the next level of information.
Great.
And then what would be the.
Catalyst for the Dubai police to further expand the use of your.
Our products throughout their city is it just kind of getting these first appointment is up and running or.
What gets them to sort of that next.
Level of expansion.
Well I would say theres, a theres plans to do the citywide, which they've talked about publicly.
And Mary maybe you can share a little bit more color on kind of how we think this this does does work in the field and the things we're doing.
Yeah, again, I would say I live and not specific on them by police.
The book an extension to the already deployed over the C. P O U.
U S real time video through a command and control, it's gonna be remote command and control and operate it automatically and the transfer of the video.
A new command and control.
And cover don't sit there and I remember with all of us at one booking information.
Carver 80 square kilometers it's about.
Thank you.
Are you one squirrel money.
Yeah and to that point.
As we've talked about this previously but that's.
The math around the coverage in the areas that they're looking at would indicate 24 systems.
So we think you should hear more about this as we're moving through the year.
Yeah.
Super Thanks.
Great.
This concludes our question and answer session I would like to turn the conference back over to Eric Brock for any closing remarks.
Okay, well. Thank you operator I wanted to just close the call by thanking you again for attending as always we do have a lot of work to do so we're going to get back at it and we look forward to keeping you informed of our progress so have a great day and thanks again.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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Yeah.
Yeah.
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