Q4 2023 Ondas Holdings Inc Earnings Call
Welcome to the on Das holding Inc, fourth quarter and full year 2023 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 doses 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 risks factors are discussed in on Das is periodic S E SEC filings and in the earnings press release issued today, which are both available on the company's website.
<unk> undertakes no obligation to revise or update any forward looking statements to reflect future events or circumstances, except as required by law.
During this call on Death's, we'll refer to certain non-GAAP financial measures. These.
These non-GAAP measures are not prepared in accordance with generally accepted accounting principles.
A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is shown in our press release issued earlier today, which is available at the investors relations section of our website.
This non-GAAP information is provided as a supplement to not as a substitute for or superior to measures of financial performance prepared in accordance with GAAP.
However management believes these non-GAAP measures provide investors with valuable information on the underlying trends of our business.
Please note. This event is being recorded I would now like to turn the presentation over to Eric Brock Chairman and CEO. Please go ahead.
Eric Ashley Brock: 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.
Eric Ashley Brock: I'm happy to be joined today by key members of our leadership team, including our CFO you Shake <unk> returned to us in January after being called the duty to serve as a country.
Eric Ashley Brock: In addition, we will hear from bone marrow quieter who's president of wound up what kind of assistance is the founder and CEO of our Arrow Barak subsidiary and Tim Turner, who is the CEO of American robotics.
Timothy Kelly Horan: And then Tim will provide updates on the business plan and outlook for our drone business as is.
Timothy Kelly Horan: We are joined today by Guy.
Timothy Kelly Horan: Residents and Chief operating officer of on Dust networks. This is the first quarterly investor call guys attending and he will help provide the business update Brian dust networks.
Guy: He's been the CEO at on dust networks for the last 13 years and is instrumental in managing our business by leading much of our direct facing customer development and service activity.
None: Now, let's turn to the agenda.
None: We will start the call with some brief comments highlighting some recent announcements and I will then provide a high level review of 2023, and how we are positioned for success in 2024.
None: I will then hand, the call to Esa for a financial review of our fourth quarter and full year 2023 results.
Esa: We will then provide a business update for our das networks at our Oes business units well I'll ask Guy married 10, right commentary around current business activity. Then we will wrap the call and open the floor for investor questions.
Esa: Let's begin today's update by highlighting a few recent announcements we have shared with investors beginning with this morning's news that Joe Pablo CEO of Charles and Potomac capital has been appointed to the onerous Holdings Board of directors.
Esa: I am very grateful for Joes willingness to serve on the board can help advise me and the management team on our growth plan.
Esa: This along with Joe significant financial interest in the company is a huge endorsement and the opportunity. We have created at on does it reflects a belief in our ability to drive significant returns for our investors in the years ahead.
Esa: I will highlight that Joe has a long and successful track record as a business operator in Investor. This includes leading the growth of large profitable businesses as well as the exit from sex successful ventures as an investor.
Esa: The single largest investor in Argos Joseph centers are directly aligned with our shareholders, which is exactly what we want at Argos and.
Esa: In short this is great news for Argos I welcome Joe to the board. We are excited to work even more closely together in the quarters and years ahead.
Esa: I also want to highlight our announcement on February 26 that we secured $826 million in a.
Esa: New financings.
Esa: As we announced the funding was led by Charles and Potomac and provides additional growth capital to support our business plan.
Esa: This is the second investment the CMP has led after originally leading a $15 million investment in on dust networks in Q3 last year.
Esa: We also announced the formation of onto Autonomous Holdings Donuts O H O H is a new drone holding company established to hold our drone operations, which we operate under the odd autonomous systems business units.
Esa: Bringing American robotics, and robotics under the OE age corporate umbrella is a continuation of the integration we embarked on after closing the robotics acquisition in January 2023.
Esa: We believe this structure will provide many operational and financial benefits as we scale the OE business globally around our world class technology platforms.
I will discuss this in more detail later in the call.
Esa: Only 23 was a breakout year for.
Esa: For the full year, we generated record revenues of $15 $7 million, which was a seven fold increase from the prior year.
Esa: This included 5 million of revenue in Q4, which was above our prior expectations.
Esa: I don't that's networks growth was driven by initial orders from Siemens to feed the market with inventory ahead of the expected 900 megahertz adoption curve.
Esa: While the order ramp on 900 megahertz was further delayed versus our prior expectations. We have nonetheless made substantial progress in the field with customers.
Esa: Guy will provide more detail later regarding the complex systems integration process, which we are engaged with customers.
Esa: We believe we are in the final stage of the adoption of the new <unk> 16 standard, which will allow the class one railroads to launch the 900 megahertz buildout driving a commercial order cycle brandes.
Esa: And on dust networks, we see FCC deadlines generating more activity and urgency to engage and finish proving out the scalable integration of accs in the migration to the new network.
Despite the sluggish orders with the 900 megahertz network our confidence in the rail opportunity is only growing and we foresee demand building in many areas even beyond 900 megahertz.
Esa: This stems from an increase in the growing awareness of our Eagle July 16th technology across the global rail sector and with other rail vendors.
Esa: This is creating visibility around significant new opportunities for network upgrade beyond 900 megahertz in a new rail sectors such as passenger in transit.
Esa: Our August autonomous systems business unit had an exceptional year with market adoption kicking into drive revenues to $9 million for 2020.
Esa: This was ahead of the $8 million goal, we shared at the time of the closing of the robotics acquisition.
Esa: This also represented a massive increase well relative to the $1 million revenue base, we had in 2022.
Esa: Oh, yes revenue growth is being driven by fleet adoption with a particularly impressive drone infrastructure fleet build out build out being supported by our operations in Dubai, where public safety and security are driving E. Initial use case there for optimists.
Esa: We believe our Optimus system is the only truly automated platform seeing scale deployment in large scale operations in urban environment globally of course, we are very proud of this.
Esa: We move into 'twenty 'twenty four we are seeing broadening opportunities that OAS with marketing efforts in the United States beginning to gain positive traction.
Esa: We've strengthened the leadership team through the addition of 10 Tenney and CEO of American Robotics intent is growing as customer service team with proven talent and defense government and commercial sectors.
Esa: As mayor and Tim will discuss the Artemis system inventory availability is improving after the delays related to the Gaza conflict.
Esa: We believe inventory availability will improve in Q2 and beyond.
Esa: This will enable additional customer activity here in the U S and internationally it will allow us to engage a growing and maturing customer pipeline.
In the United States American Robotics is wrapped up its proof of value in demo work with the mass D O T Aeronautics Division.
Esa: We are quite excited about the prospects there.
Esa: We believe this was a very successful program and we anticipate working with the Commonwealth on follow on activities.
Esa: We believe that the critical infrastructure public safety government and industrial sectors will continue to drive the UAS market. It would be the central focus for our capabilities and solutions.
Esa: And the last quarter, we've noticed a large increase in rfps in inbound leads from these same sectors that align with our leadership and offerings.
Esa: To wrap up the overview I want to highlight that we are very excited about the prospects for the iron drone radar system as we disclosed in November 2023, we are responding to an urgent need in Israel.
Esa: Iron drone radar capabilities, the radar system meat counter UAS requirements in other defense use cases by rapidly and autonomous Lee launching multiple high speed unmanned aircraft to perform multiple missions to protect from the threat of hostile drones.
This is clearly an incredible opportunity and we are very excited about our ability to deliver a valuable solution to friendly defense and security forces around the world.
Esa: Barrington will share more on this opportunity this morning.
I'm now going to hand, the call the shape for the financial review.
Esa: Yeah.
Barrington: Thanks, everyone.
None: As I get started I want to remind our investors that the figures we're about to discuss and campus. The inclusion of ore bodies financial effective from January 22023, following our successful acquisition.
This strategic move has significantly augmented our operational effectiveness and revenue stream.
None: Increased our market presence and enhancing shareholder value.
None: Further despite the added scale from the addition of robotics.
None: Operating expenses are down year over year, reflecting an extreme focus on opex efficiency that will continue.
None: Turning to the Q4 2022 zones.
None: We had a strong finish to the U in the fourth quarter of 2023 revenues increased to $5 million.
None: Compared to half a million dollar in Q4 2000 22022.
None: Yeah.
None: Although more than tenfold increase in revenues was primarily a result of higher product sales and development revenue compared to prior year periods.
None: But on the snack books revenue in fourth quarter was 2023 were driven by product set with Siemens and development projects revenues Oh, Yes were primarily driven by a continued build out of the Optimus fleets my our governmental customers in Dubai.
None: For on dust networks revenues will fluctuate from quarter to quarter, given the uncertainty around the timing of customer activity in front of the targeted commercial rollouts. So the 900 megahertz rollout networks.
None: And the development programs underway would see months an M D.
None: Similarly revenues the Doi is.
None: Our expenses were right.
From quarter to quarter and to normalize into a more predictable pattern as we grow our customer base and more of those customers.
None: Our fleet programs go into services agreements in the United States and internationally.
None: Gross profit increased $1 7 million for Q4, 23 compared to $3 million for Q4 2022.
None: Gross profit as a percentage of revenues remains variable in the near term and decrease to approximately 35% for Q4 2023 compared to 56% for Q4 2022, as a result of lower margin product mix.
None: Operating expenses decreased to 14 4 million for Q4, 2023 as compared to $34 8 million below in Q4 2022.
None: The sharp drop in operating expenses was primarily due to recognition of $19 $4 million noncash charge of goodwill impairment in 2022 and decreased R&D activity.
None: Recurring cash operating expenses, which exclude the marketing expenses and nonrecurring costs outlined in the supplemental section of this they have been $8 7 million below Q4, 2023, 2% decline.
None: Total of $9 million in Q4 'twenty to 'twenty three.
The sharp decline in recurring cash operating expenses was due to strong cost controls. Despite the addition of our robotics in 'twenty three.
None: And the increase in revenues.
None: In Australia, the operating leverage we have across the businesses as we drive expected revenue growth in the coming quarters and years, we will discuss the noncash and nonrecurring costs wouldn't be reviewed the full year P&L at this very moment.
None: Okay.
None: The company narrowed operating loss to $12 6 million for Q4 2023 as compared to 30.
None: $34 million for plant two.
None: Two.
None: Operating loss improvement was driven by expense controls and low although noncash charges as mentioned.
None: The EBITDA loss narrowed to $7 million, so when doing a three.
None: Three as compared to four point.
None: For Q4 'twenty to 'twenty two.
None: Turning to the full year results.
None: The physically able to 'twenty to 'twenty three.
None: When you grow $15 7 million, which was a dramatic increase year over year versus only 5 million recognizing 2022.
None: Revenue growth was strong.
None: Both Congress folks in August of autonomous system, both business units posted record levels of revenues gross profit increased by six foot 423 is going through.
None: 2022, gross margins were 41% for 2023 as compared to 52% for 2022, primarily due to a larger pool bocian.
None: Low margin product sales and services in the revenue mix during 2023.
None: Operating expenses narrowed sharply proximately $46 $1 million for 2023 as compared to $75 million for 2022.
The largest component of the decrease in operational expenses.
None: It was due to a onetime noncash goodwill impairment charge of $19 4 million, which was recognized in 2022.
None: Included in operating expenses are noncash expenses, including depreciation amortization stock based compensation as well as charges so certain impairment of assets.
None: All kinds of here.
None: Payment of right of use of assets and leasehold improvement of $2 5 million.
None: Was recognized in 2023. This impairment was connected to the American robotics, and robotics integration and office space reduction in sub leases in order to create additional cash savings.
None: An additional noncash charge is an impairment of long term equity investment of $1 $5 million related to our investment in Diana may I in 2023.
None: As mentioned earlier, a goodwill impairment charge of $19 $5 million was recognized in 2022 in total noncash expenses and impairment charges totaled $10 million in 2023, and $29 $3 million in 2022.
None: Regarding cash operating expenses, which exclude noncash expenses and nonrecurring costs totaled $36 1 million in 2020 three.
None: At 10% reduction versus $41 $2 million in 2022.
None: The bulk of the decline in recurring cash operating expenses was not in this spending which was offset by increased sales and marketing cost.
This shift in Opex reflects the focused in driving platform adoption and revenue growth across the businesses.
None: The company realized an operating loss of $39 $7 million in 2023 as compared to a loss of $69 4 million in 2022.
Operating loss decreased primarily as a result of the aforementioned decrease in operating expenses, including the $9 $4 million goodwill impairment charge.
None: Net loss was approximately $44 8 million for 2023 as compared to a net loss of $73 $2 million for 2022.
None: Excluding noncash and nonrecurring costs, the company's adjusted EBITDA loss narrowed to approximately $29 7 million also 2023 as compared to $41 million for 2022.
None: Now, let's turn to the cash flow statement, we held cash of $50 million as of December 31st 2023.
None: As compared to $29 8 million as of December 31, 2022.
None: The decline in cash is primarily a result of operating expenses and Jude and $5 $5 million cash used to repay debt in the first half of 2023.
None: This use of cash was supported by $24 million of net proceeds raised from the previously announced financing on dust networks in August holdings early in the third quarter of 2023.
None: Cash used in operation during 2023 reflect ongoing investment in the business as we drive platform adoption across August Netbooks and OAS, we expect cash utilization to improve significantly as we move through 2024.
None: Improved cash efficiency comes from operating expenses leverage, but both companies as we felt with spending on driving customer adoption and growth in revenues and gross margin and gross profits.
None: As noted we ended the year with $15 million in cash in February we announced an $8 $6 million capital raised through the sale of undersold in common stock and on dust networks preferred stock in our financing led by Charleston, Potomac capital.
None: Pro forma of these financing and net transaction expenses. The company would have had $23 $4 million of cash as of December 31st 2023.
None: As of December 31st 2023 we had.
None: <unk> 8.5 million incremental notes outstanding.
None: I want to highlight that the convertible notes have maturities in April 25 in July 25.
None: Which means we have some times to manage the amortization and create the condition to equity ties the notes under more favorable conditions.
None: It is our objective to Ecuador. These notes as soon as we can by using shares to retire the notes it it'll be a monkey amortization or to see these notes convert entirely into equity prior to maturity.
None: I will now hand over the call back to Alex.
Alex: Well they can V shape now we would transition to a review of our business units and as Guy said mayor client or to share updates on recent activity in the field with customers and industry partners. We also have 10 tenney to share comments regarding American robotics, and drill down a bit into the outlook for OAS and the United States.
Before I hand afford a guy I want to provide a couple of important updates around the address networks. Firstly, we have made a leadership change at honest networks Stuart cancer is no longer with the company. In addition, Guy Simpson has been appointed as the new President at on Dust networks.
Alex: As I mentioned at the beginning of the call Guy has had a long tenure as COO of August networks I rely on him to manage our growing team from an internal operational standpoint and in parallel his leadership has spanned from spearheading our production capacity ramp the leading our technical field.
Alex: Solutions engineering teams, while also being out in front on the most critical customer related activities.
None: We rely on guy extensively and I am happy to have him assume the added responsibilities as president as we move forward the scale of the company.
None: The purpose and benefit of the management change is to align the company to be Super focused on driving the order ramp in revenue growth, we are targeting while charting a path to profitability. We have done exceptional work it on to us developing innovative world class wireless technology for mission critical networks now it's time to intensively focus our energy.
None: [laughter] towards delivering the solution in the field to customers at scale.
None: We believe our business is at an inflection point, we believe commercial deployments in 900 megahertz will begin soon and that the opportunity at 900 megahertz and the other private networks for the class one rails. In addition to global rail markets remains substantial Guy I am now handing the call over to you.
Guy: Thank you, Eric it's a pleasure to be here and to have the opportunity to work with our investors.
Guy: And all of that is networks, we generated $6 $7 million in revenues. During 2023 led by product shipments to customers. This represented a 250% increase in revenues compared with 2022.
Guy: 2023 was also marked by on dust networks, making investments to significantly increase its production capacity, which supported record production and shipment volumes for the year.
Guy: We continue to be fully engaged with Siemens the class one rails and our transit customers to further prepare for large scale large scale commercial deployment at 900 megahertz.
Guy: Furthermore, we continue our work with the AAR and our rail customers on a development roadmap for Doc fix dating networks, including a number of future products and additional networks beyond 900 megahertz.
Guy: Internationally, we have ongoing activity with Siemens, but Indian railways as well as the development of a new locomotive radio for the European market a program that will be completed in 2024.
Guy: And lastly, we have several ongoing business development activities with the passenger transit railroads in North America and international market.
Guy: We anticipate sharing a new activity in the market, particularly around the passengers ratified soon.
Guy: As our investors know we have engaged in a long term program with Siemens and the class one railroads to pursue an upgrade of the 900 megahertz network.
Guy: I wanted to take some time and provide a factual update related to our work on that 900 megahertz network, while sharing some context on the opportunity and the path ahead.
Guy: First the class one railroads have agreed with the FCC to vacate the legacy 900 megahertz channels.
Guy: In return the FCC has provided new Greenfield spectrum known as the a block for the railroads to build new modern network to build a new modern network for operational and safety use cases.
Guy: On that first engage the a L and development work on 900 megahertz in 2019.
Guy: In April 2020, the FCC issued a formal order for the rails to vacate the legacy 900 megahertz spectrum.
Guy: Also in April 2020, we signed a partnership with Siemens to address this 900 megahertz migration opportunity and to upgrade the a T. S application from the legacy 900 megahertz network.
Guy: So August and Siemens have been deeply engaged on this project for more than four years and let's be clear we have accomplished a lot.
Guy: After extensive lab and field testing of our full Max based platform and a significant joint product development efforts with Siemens the a announced the selection of <unk> 16, as the technology for the new 900 megahertz network.
Guy: This selection was announced by the a of wireless Communications Committee WCC in March 2023.
Guy: Since then we have worked in the field on end to end systems integration with multiple railroads.
Guy: This work is with the railroads train operating groups, principally the communications and signaling or C. N S T.
Systems integration, often encompassing many disparate legacy elements it's complex.
Guy: The good news is the handling complexity is a huge strength of ALDA and a significant reason why customers value our expertise.
Guy: But of course it takes work.
Guy: And in the railroad business developing scalable processes is rarely a straight line as you have seen.
Guy: So, let's take a closer look and describe precisely where we are and the outlook ahead.
Guy: We believe we are in the final stages of the complex systems integration process connected to upgrading the 900 megahertz network.
Guy: If you've been listening closely you will have heard me repeat the term systems integration. Many times. This is an important concept to understand.
Guy: The work that oldest and Siemens and the railroads training operations group is focused on the integration of new modern systems with legacy technologies.
Guy: So first what do we mean by a system.
Guy: The 900 megahertz network upgrade isn't just the communications event. The first application on the line 900 Megahertz network Siemens advanced train control system or a T. C. S is the same application that had been running for at least two decades.
Guy: This means that under from Siemens or upgrading the a T C S application and introducing a new communications technology simultaneously.
Guy: The systems integration of a T C S and adopt 16 network requires backwards compatibility with many other complementary technologies within rail operations.
Guy: Starting at the railway side and all the way to the back office applications.
Guy: Some of this technology is more than 20 years old and as we move forward. We added the customers are learning the other tangential technology needs to be upgraded as well.
Guy: Understandably this integration effort must be done carefully.
Guy: Even minor issues kind of impact timelines more than we would like.
Guy: The good news is the both Siemens and on that as well as the customers are committed to doing the hard work and.
Guy: And we believe we are close to validating the systems integration effort.
Guy: Upon final acceptance from a leading cloud foreign customer we believe initial commercial orders will come from this railroad as well, it's too small a rail system with whom we are also currently engaged.
Guy: Importantly, the other class one railroads are tracking this activity closely.
Guy: We expect them to advance their own field work with under from Siemens and then signal there in 900 megahertz network objective planning timelines once our systems integration process has been validated.
Guy: Of course, while we are reluctant to publicly discuss FCC deadlines. After all day all the rail deadlines no doubt we do believe that these deadlines are motivating increased engagement.
Guy: We believe the hard work on systems integration is nearly behind us and the order and deployment cycle, we have been waiting for is becoming increasingly visible.
Guy: We look to build the order book and backlog with more railroads planning a T C. S upgrades and why the 900 megahertz network build outs.
Guy: 'twenty 'twenty four will be a good year.
Guy: Success in the field and we will build on the increased production capability established in 2023 and further expand our service delivery model with training and marketing programs designed to drive expanded use of the adult 16 technology.
None: So let me try to succinctly summarize the outlook and I'll add on dust networks.
None: We will drive orders backlog delivery and deployment of systems. This year to stop the 900 megahertz network upgrade cycle for the railroads we.
None: We feel like we are close to the customer feedback on the hard task of systems integration has been universally positive.
None: We are very close.
None: As we have stated previously we continue to move forward aggressively on securing new orders and now have the capabilities to meet our customers' production needs.
None: In parallel Siemens and <unk> are advancing our services capability to support wide scale adoption and deployment of our adult 16 wireless technology.
None: As we advance we are seeing a broadening and also a deepening of the engage of engagement across the industry.
None: This includes the class one railroad customers, we have been working with since 2019, and now transit and passenger rail operators.
None: More generally there is an increasing demand for new networks, and new products and new geographic markets and also to develop new rail ecosystem flash vendor relationships.
None: We have outlined some of this here and expect more announcements soon on this front.
None: As we grow we will pay close attention to spending levels on operating costs as we drive towards profitability.
None: We are increasingly focusing our opex dollars on driving revenue and supporting a path to profitability.
None: I'll now hand, the call back to Eric Eric.
Eric Ashley Brock: Thank you Guy.
Eric Ashley Brock: Now as mere client or to take the floor and update us on the progress with customers that aren't as a kind of a systems and provide insight into recent developments at OAS and the outlook from here.
Eric Ashley Brock: Sure.
Thank you Eric 2023 was a pivotal year for Ondansetron almost systems, we have been able to achieve our goals outlined in our roadmap to enable a reason for extending our fully autonomous drones and the transformative solutions they offer for critical operations.
None: Our team has worked over the past two years to bring on us to disappoint, we are concluding 2023 with record revenues and strong validate market feed for the optimal system and a very promising position in the market with the island one radar system.
None: We believe that the owners currently holds two of the most promising technologies in the market and a very strong and capable team to implementing them as a critical infrastructure in civil and military operations.
None: New in 2020 three the optimal system has proven its value for ongoing civilians and emergency response operations in Dubai, UAE, demonstrating the disruptive potential of our trusted technology and coincident with the operations worldwide.
None: In the U S. We have made significant progress demonstrating the capabilities of the optimal system to the Massachusetts Department of transportation and its stakeholders.
None: Our Optimus Dwan has received and worthiness type certification by the Effie make it in the first one in our books and death of capturing one to achieve such simplification. This milestone not only allows our team to continue working with the FAA on events completely autonomous operation and complex.
Environments, such as cities and metropolitan areas, but also signifies that our technology has reached a very mature stage.
None: Our global potential marketing security critical infrastructure protection and remote monitoring services as best we will continue executing our plan focusing on market penetration via public safety and transportation departments, serving ports and terminal operations emergency response.
None: And large construction projects as well.
None: Our drawn and data as a service business models have proven to be scalable.
None: We are receiving strong indications of the value of shared infrastructure demonstrate good with our customers.
None: The impact of a full scale, what's first Ruben one network is reflected in our 2023 revenues in gold is we are believers and additional systems to our customer in Dubai. This is a continuation of our governmental customers, stating its intention to deploy city wide network.
During 2023, and recently major public safety and security groups from the U S and international markets received demonstration of the optimal system network capabilities. It's a dramatic impact on our response time, it's probably aggregated with our customer reducing it from four minutes to 70 seconds.
None: In the optimal network coverage areas, creating a network effect and synergy of Optimus drawn fleets deployed as a smart network.
None: Yes.
None: We will keep working and targeting no expansion in the U E. Two additional Seville, and industrial infrastructure customers and use cases, focusing on certain infrastructure deployment models with multiple customers and leveraging our operational splitscreen for local and expose opportunities from the U a E.
None: Yeah.
None: 2023 was a significant year for our island one radar counted one system, we have acquired and enhance the system to become one of the most prominent solutions for some of the most challenging problems posed by hosting once we have received a grant from the Israeli innovation authority to support this.
None: And cement.
As conflict in Ukraine, and Israel escalate, we are witnessing the growing impact of small autonomy withdrawn the damage they cause and the difficulty in detecting and effectively neutralizing them in a timely manner with minimal collateral damage.
We have responded to the Arizona requirements of defense and security forces in Israel and worldwide. We are rapidly integrating and enhancing this promising technology to address all aspects and become a significant player.
None: In this domain.
None: After initially entering the market in Israel, we are planning to develop a global marketing plan.
None: We are always in conversation with the U S defense and security entities as we explore partnerships for distribution and system integration worldwide to capture market position. In this large market that also includes the protection of critical industrial and civil infrastructure and sensitive public float.
None: Patients.
None: Oh nothing has also made significant progress in the U S market due in 'twenty two 'twenty three.
None: Monetization program aiming to leverage the corporate advantage of integrating American robotics, and robotics has been fruitful.
None: I will now end the call to Tim Tennessee of American Robotics to provide an update on the business has been since we are making an anti American nonvoting.
Timothy Tenne: Thank you Mayor 2023 was a significant year for American robotics since quarter four and throughout quarter. One we have continued to consolidate build immature our customer pipeline focusing on fleet opportunities and shared infrastructure models for the defense government and commercial cell.
Timothy Tenne: Within the United States.
Timothy Tenne: During this period, we have successfully conducted a proof of concept with a mass department of Transportation Division of Aeronautics, which included demonstrations of the Optimus systems wide array of capabilities at multiple locations and in wide ranging environments.
Timothy Tenne: We are planning to advance our marketing efforts with additional governmental customers as part of our go to market penetration plan and to launch more programs during 2024.
Timothy Tenne: Our pipeline includes department of Transportation's ports, and terminals public safety rail utilities, and oil and gas offering them, our unique trusted solutions to some of the most challenging problems of remote monitoring and infrastructure missions.
Timothy Tenne: We are advancing our business and operational capabilities with a lean and effective team a proven experts and expecting optimist inventory arrivals during quarter two.
Timothy Tenne: With the new inventory, we will be able to support increased installations of optima systems for more programs and new sites.
Timothy Tenne: With the arrival of these new systems, we are building a world class customer service and experience center at our new Maryland location that allows for unfettered demonstrations of products and is in close proximity to defense government and commercial customers.
Timothy Tenne: Together with the FAA type certification of the Optimus drone and our ability to operate consistently beyond visual line of sight. These demonstrations will make a huge impact.
Our team's ingenuity and professionalism were proven this quarter working in coordination with the FAA to receive an important beyond visual line of sight waiver based upon a solution that will enable autonomy and adoption of our systems for customers, which I'll discuss shortly in more detail.
Timothy Tenne: I would like to highlight our achievements in the proof of concept program accomplished with the mass department of transportation.
Timothy Tenne: During this program American robotics demonstrated a multitude of use cases, including inspection of rail and other critical assets surveillance and emergency response applications automated mapping and survey by our autonomous Optimists system.
Timothy Tenne: We have continued to build and integrate an ecosystem of technological partners and together with the unique features of the optimists system enable our access to complex aerospace, which is critical for delivering continuous effective drone missions without limitations.
As mentioned earlier, the unrivaled aviation safety and regulatory experience was proven in concert of having an FAA certified UAS and the patented C and avoid system that enabled the rapid approval of a beyond visual line of sight waiver from which allows for truly remote operations.
Timothy Tenne: This remarkable achievement was lauder by mass D O T. Further solidifying our leadership in the U S industry.
Timothy Tenne: This program further validates our assumptions with respect to the size of opportunities with the departments of transportation in the United States and worldwide and establishing a scalable framework and end to end automated data solution that supports customer requirements. We are continuing to explore.
Timothy Tenne: And validate additional deployment locations throughout the United States supporting our expansion efforts as mentioned previously we are excited to introduce the radar system to defense and government clients and believe the rider is an important capability in solution for the U S markets, especially given the refocus of.
Timothy Tenne: UAS into defense and security budgets.
Timothy Tenne: Finally, we continue to evaluate and add partnerships that enable our autonomous network strategy and framework.
Timothy Tenne: Both <unk> and resilience, which were announced this quarter are central to this framework.
Timothy Tenne: I'll now hand back the call to Murr.
Murr: Thank you team we are pleased with the growth in 'twenty, two 'twenty three and looking forward to continuing this momentum in 'twenty to 'twenty four we will continue to grow our revenue and orders for our fleet deployments in the UAE secure additional customer engagement in the U S and expand into other international markets.
Murr: We are planning to start initial operations in Europe.
Murr: Our marketing teams have already begun some business development activities.
We are optimistic for our ability to accelerate business development in the U S. Leveraging American robotics footprint to penetrate dot's public safety and critical industrial end markets.
We will continue with the ecosystem development working with partners to provide full spectrum, the one platforms services and data integration.
Murr: We are focused on scaling our production capability in 'twenty to 'twenty four we are building and delivering inventory expanding to 50, new Optimus system on auto and preparing new production orders for edge to 'twenty to 'twenty four to satisfy expected demand.
Murr: We believe islands, one we launched this year and we look forward to sharing more news about the island one radio we are establishing production capabilities in parallel as we work with customers and partners to formalize the order.
Mentioned before we believe we are well positioned to maintain momentum and generate significant growth in 'twenty 'twenty four.
Murr: Have announced we have decided to create almost a ton almost holdings to scale alcoholic dwelling business, Eric will talk about this great leadership team and I look forward to sharing with you. The next time, we meet.
Murr: This completes my formal remarks, Eric I'm going to end the call back to you now.
Eric Ashley Brock: Thank you Mary Kipp.
Eric Ashley Brock: Before we wrap up the call I want to take a moment and discuss the recently announced the establishment of Amdocs. The timeless holdings are OE H as an intermediate drone holding company breathing.
Eric Ashley Brock: Bringing American robotics, there robotics under the <unk> corporate umbrella is essentially a continuation of the integration we embarked on after closing the <unk> acquisition in January 2020, great.
Eric Ashley Brock: This will provide many operational and financial benefits as we scale the OAS business globally around our world class technology platform.
Eric Ashley Brock: As we illustrate here, which is a wholly owned and controlled subsidiary and controlled by the public company and that's holding.
Eric Ashley Brock: From a consolidated basis nothing has changed.
Eric Ashley Brock: The benefits of this new corporate structure are multifold, firstly, we expect to realize significant operational flexibility with a corporate structure entirely focused on the global development and delivery of best in class economies cereal security and data solution.
Eric Ashley Brock: The markets, we service, our large dynamic and rapidly growing a pure play drone solutions company is the appropriate corporate structure.
Eric Ashley Brock: The actual benefits are also significant we measure our market valuation opportunities with O H in the many billions of dollars, we have an exceptional opportunity to grow a large profitable business and in doing so stake out a dominant position in a massive fast growing market.
Eric Ashley Brock: Having a clean independent balance sheet will lower our cost of capital dramatically.
Eric Ashley Brock: We are in a difficult financial climate for drone companies, we have many competitive advantages that matter to our customers and partners.
Eric Ashley Brock: These advantages are chiefly our best in class proven technology platforms and road map.
Eric Ashley Brock: Our regulatory capabilities and of course, our incredibly talented team.
Eric Ashley Brock: That advantage will be amplified by a strong balance sheet just watch.
Eric Ashley Brock: We plan to have an investor day focused on O. H. During Q2, then we will lay out an expanded business plan, which we think will be well received.
None: So, let's wrap the call now and summarize the outlook, we aren't giving formal guidance today.
None: We have a lot of confidence in our full year outlook. However, right now we want to be conservative given we still need to secure that initial 900 megahertz volume order.
None: Dust networks, we will complete the systems integrator gration effort as Guy discussed it is closed it from their visibility on pipeline and the ability to secure orders.
None: <unk> quite a bit.
None: The opportunity there and as networks remains as big as ever we continue to see the Tam on 900 megahertz at $400 million.
None: She has increased our serviceable addressable market or Sam this year with new customers and network opportunities behind beyond 900.
None: Remember that <unk> is poised to be the private wireless network technology for all the private rail networks, so stay tuned.
I don't want yes, we will see continued growth with existing customers importantly, we see the prospect of adding multiple new customers. This year that have significant potential to drive fleet adoption and accelerate our growth curve.
None: In addition, we believe the iron drone reader is hitting a sweet spot in a drone market segment see explosive growth.
None: Be a major catalyst for our valuation in short we do expect 2024 to be a very good year, when it's all said and done.
None: With that let's see if there are any questions operator.
None: We will now begin the question and answer session.
None: To ask a question you May Press Star then one on your Touchtone phone.
None: If you are using a speakerphone please pick up your handset before pressing the keys.
None: If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
None: At this time, we will pause momentarily to assemble our roster.
None: The first question today comes from Glenn Mattson with Ladenburg Thalmann. Please go ahead.
Glenn Mattson: Yeah, Hi, thanks for taking the questions.
Glenn Mattson: The a couple of times you guys mentioned inventory is a I don't know if perhaps a gating factor in the in the drone space in terms of.
Glenn Mattson: Growth can you just talk about that.
Glenn Mattson: Availability of inventory now and perhaps.
Glenn Mattson: You know I guess the timeline as to when do you think that inventory problem.
Glenn Mattson: Problem alleviated itself versus.
Glenn Mattson: What backlog you have now.
Glenn Mattson: And how you expect that backlog to kind of shift throughout the year that'd be helpful. Thanks.
None: Yeah, Glenn I'll I'll answer this and then I'll ask Mary to provide a few more details so are we.
We were building systems as we communicated to investors last year and of course sorry.
Glenn Mattson: Trying to secrets that for deliveries in the second half.
Glenn Mattson: In in Gaza conflict.
Glenn Mattson: Did throw the supply chain and some in the production capability off.
Glenn Mattson: And it really pushed out the timing of completion of a build and delivery of systems to us.
Glenn Mattson: So we were at the point, where we're seeing that relieve itself.
We've had some unit units delivered recently.
Checked that the pick up in there maybe you can give a little bit more detail on that.
None: Sure. Thanks Humphrey. So as you mentioned, we are in the manufacturing of players right now and the time line of every two weeks, we got a new system for a man from the supplier. So I think we're in good shape your loved it.
None: Ah okay. Thanks.
None: And if I could ask another one just on the on our network a network side.
I guess with the ramping deployments coming a little slower than expected, perhaps can you just give a sense of that.
None: You know it doesn't appear.
None: Perhaps familiar one class one railroad you know if they start to ramp up a little faster.
None: As this year goes by Don perhaps be able to meet some of the hard deadlines that would be.
None: Got that.
None: That has been set by the government, but it doesn't appear that maybe some of the other class one railroads are as far along down the path and you just get a sense of urgency on.
None: On their side you know how your.
None: Same thing with urgency in terms of our of the of the guidelines that the day deadlines.
Bad lines.
None: And.
What the plan would be if they did not meet those in it.
None: And that kind of thing sure.
None: Yeah. So as we sit on that we we gave some context on this and I'll Oh.
None: Circle back to that regarding deadlines, but I do want to emphasize that these are the rail deadlines.
None: And as we talk to the D. A R. Principally the wireless consequently, they continue to express confidence in being able to meet the deadlines, but again I'll leave that to them.
None: Well in terms of the process Glenn we are doing this is guy.
Glenn Mattson: Sure. It has some great detail the complex systems integration.
Work and that's a process that is being done with one rail in particular and we have a couple of other transit rail is involved as well.
Glenn Mattson: And this is a sort of typical I would say about the E. R. WCC work.
Glenn Mattson: It doesn't make sense for Argos with Siemens to be stretch across all six rail systems simultaneously doing the same program to demonstrate the scalability of the network and.
She has integration.
Glenn Mattson: In migration to the new band.
Glenn Mattson: So you're seeing as we do this work are very regular interaction with the broader abuse and see or an hour.
Glenn Mattson: Progress and our belief is that as we validate us we do believe we're close that the engagement. The other railroads is gonna be you know, we're not starting at ground zero essentially they'll go through.
Glenn Mattson: A process, where they start to install themselves getting comfortable with how that process looks.
But the fact that we have gone through and I'd say ironed out the Kinks with all the legacy technologies and how they play with our new systems and a modern network.
The belief is that the there's other railroads can engage.
Glenn Mattson: Quickly.
None: Oh, great. That's good color Eric Thanks for that.
None: Sure.
None: One.
None: The next question comes from Tim Horan with Oppenheimer. Please go ahead.
Timothy Kelly Horan: Thanks, guys.
Timothy Kelly Horan: Or do you think you have enough cash now to make it to free cash flow free cash flow positive for it.
Timothy Kelly Horan: These small formulation.
Timothy Kelly Horan: I think we'll see we'll do some more fund raising Tam and we're trying to position the company so that our access to capital.
Timothy Kelly Horan: Better terms as as possible.
Yeah.
Timothy Kelly Horan: Have you been able to garner any.
Timothy Kelly Horan: With it.
Tam: Yeah, we're not going to we're not going to disclose that amount now I think you can look at the.
Tam: The current opex levels of about something on a cash basis about $7 million per quarter.
Tam: Uh huh.
Tam: Uh huh.
Tam: What the Opex is and then of course, we need to we will be driving revenue growth gross profit.
Tam: And that's going to increasingly one of the business.
None: Got it and so just back to the rails on the 900 megahertz do you have a best guess.
None: One and you know initially they have to vacate the spectrum and in the second phase at this point absent. These FCC timeline and do you have a best.
None: Yes at this point, you know what that means or revenue for.
None: You know for you guys.
None: Yeah, I hesitate to put you know the numbers on it we still look at the addressable market and we made this point on the call is.
At the same we just see things pushed to the right a bit here.
None: But we do believe the order cycle will begin as soon as we clear these final hurdles.
None: And you know with respect to the timing be the legacy 900 network retirement date remains of September 2025, we have not seen any change to that and then build out requirements and the first thing that Oh kick in in the first half of 2026, and we do believe.
None: But there's no urgency here.
None: As we have success on demonstrating the ease of integration.
None: We're going to get a lot more visibility on.
None: Oh God.
None: Plans for the entire sector.
None: Got it. So do you think this year is still primarily year for taking orders or will we actually start to you know should we expect shipments more than 25 or you know should we expect shipments in 'twenty four.
None: I think we're gonna get shipments of 24.
None: Got it and then just.
None: The one partner that you're working on the systems integration you don't how long is this process has taken a it sounds like where are we weeks away or months away for nothing.
None: Finalized and.
None: You know how long do you think it would for others to kind of prove out the system integration.
None: So I think we're very close you know what we're doing in the field is this sort of real time, I would say and I hesitate to put any more finer point on that.
None: Because you're not there until you there, but we have been in the field now.
None: Kurt I'm with this one particular class one for the better part of six months and as we said on the call. There's there's things that come up right and even Nocuous integration.
None: Hum.
None: Small piece of the legacy system, sometimes we'll send you back you have to wait for an upgrade of a certain system.
None: Component of the system and then you get back and even finished so we believe we've done the vast bulk I guess I'd say I think we may have done it all but I don't want to make that point until we're able to say it's finished.
None: I think its close and then from there.
None: Obviously, we'll be communicating this with.
With Siemens.
None: And our customer.
None: The forms that I told you about before.
None: W. P C and what the individual railroads.
None: We from there are those going to be more engagement with people trying to do the same sort of process, but again it doesn't start at ground zero because we've demonstrated.
None: Great that the path in the field.
None: Oh the systems get integrated.
None: Got it so.
None: The remaining where else do you think it's more you know instead of a six to eight month process do you think it's more of a three to four months process for each of them.
None: Yeah, it's it's definitely shorter.
None: I would hope it's shorter than that I think the second railroad will go a lot faster the third railroad will go faster than that.
None: What we're really doing here is it's demonstrating the systems integration.
None: And also that scalable processes to integrate and migrate to the new band.
None: Got it and so.
None: So it sounds like we might be in a situation, where we need to ship like $100 million worth of equipment within like a I mean to meet the timeframe what is it like a six to nine month period.
Do you have the manufacturing capability to do that.
None: So we need to add capacity to hit those numbers you mentioned.
None: That's it.
None: So that's the short answer.
None: I do believe as we're moving through.
None: The second half and into 2025 that we're going out with increases the visibility we could do that along with obviously working closely with our.
None: Our manufacturing partners.
None: Thank you.
None: Thank you too.
Speaker Change: The next question comes from Carter Man Spark with Forte Capital Group. Please go ahead.
Speaker Change: Good morning, guys first of all congratulations on all the progress that you guys have made so couple of questions. So Eric I think I heard you say earlier in the call about other vendors other.
Speaker Change: Are there other vendors that you're talking to or working with besides Siemens for the warehouse.
Speaker Change: Okay.
Eric Ashley Brock: So the short answer is yes, we have and I'll remind you that when we deploy.
This network, there's multiple technologies.
Eric Ashley Brock: That needs to be integrated.
Eric Ashley Brock: Yeah. So that so that's one thing that I liked secondly, this is the global rail market.
Eric Ashley Brock: You know, where we have an outstanding relationship with Siemens that's only getting stronger.
Eric Ashley Brock: Stronger.
Eric Ashley Brock:
Eric Ashley Brock: But there's I think there's more opportunity out there when you think about global rail. So so that's that's that's what I can share with you today.
None: Fair enough all right second question, maybe a little more complicated. So you said that you're going to have a call investor call regarding the possible the spinoff of the draw.
None: Drone business. So can you give us any insight of what it looks like are we talking about two separate stocks I mean, I just I have a lot of questions coming in from investors. We have no clarity. So are we looking at two separate entities will be two separate stock symbols can you give us anything until we actually have a call about.
None: Yeah, I think the.
None: Short answer to that is it may it might be what we do so where we have not.
None: Established as a way HSA intermediate holding company.
None: That can be a funding vehicle, where we raised capital specific to the drilling businesses.
And that could be as you know similar to the way we've done we've raised capital on those networks.
None: And or it could be in connection with the public.
None: Public market transaction say, a spin out or subsidiary IPO.
None: There's a range of Ah.
None: Options, but we'll be evaluating.
None: Hum.
None: Probably share more of that whoever investor call.
None: It sounds good yeah. It sounds like the the drone side there'll be a lot leaner and it'll be great to have separate entities.
None: For your time, congratulations on all the accomplishments I look forward to seeing what happens in 2024.
Thank you Carter.
None: The next question comes from either Yeah with Northland Capital. Please go ahead.
Hi, This is <unk> on behalf of Michael that's booked.
None: Could you give some color on how much of the expected drone revenue should come from international cluster most of it is domestic.
None: Yeah, that's a.
Good question I think you you could expect us to drive probably more than half of our revenue this year from international markets.
None: But I do think you'll see us get traction with some very important customers here in the U S.
None: And that over time, the U S market, it's very likely to be the biggest one for us a little more context on that.
None: [noise] about building expectations are building financial models is when we're working with our initial customers wherever they are and in the world.
None: Typically what you'll see is you know what.
One or a small handful of systems b be deployed and of course, we're focused on customers that can scale multiple systems fleets.
None: So as we've demonstrated in Dubai and the public safety market. There. It started with a couple and then of course now we're into a wide suite deployment. So.
None: So we saw more orders last year and a bigger amounts in terms of number of systems and we do expect this year will see even more.
None: So hopefully that gives you enough.
None: Color on now.
None: Oh I see.
None: Brooks regionally.
Brooks: Got it.
Brooks: He also give some color on the gross margin range you would expect some throw in revenue for this year.
Brooks: Yeah.
None: I'm not going to give that guidance just yet you know that depends on a lot of factors, including what the what the mixes these would be outright sales of the system or.
None: The as a service model.
None: So I think we're going to hold back and share more details. So I won't say that we believe we are.
None: The big market is be a data as a service market.
None: We'll be able to share some a lot of color on the unit economics, we see there.
Uh huh.
None: Each investor day.
Okay. Thank you.
None: Thank you.
None: The next question comes from Matthew <unk> with Maxim Group. Please go ahead.
Matthew: Hey, Thanks for taking my questions.
Matthew: Maybe firstly.
Matthew: Just wanted to focus a little bit on.
Matthew: Maybe your thoughts.
Matthew: Timing for U S fleet deployment.
Matthew: And drones is that something that you know.
Matthew: Following the nasty O T work could be you know what.
Matthew: 2025 event or just sort of frame for us what the what the path into starting to get some thoughts with deployments in the U S.
None: I don't want to speak more.
None: More broadly.
When I answer that question, Matt and not specific to mass D. O T. So so with 2025, we do believe that we're going to have a.
None: Customers, who are and in our fleet expansion mode.
None: And I think you'll see this year, we're gonna be engaging.
None: Multiple customers, who can do just that.
So that's the work we're doing with customers is really trying to qualify them.
None: To ensure that they have the.
None: The capability and the intent to scale.
None: So these technologies.
None: Okay. Thanks, and then can you also maybe frame where higher drone stands against kind of the traditional.
None: Fleet deployments that you've looked at is that something that can.
None: Looking into 2025 be a bigger contributor for period of time, just given you know where we're focused is currently and where budgets are.
None: Sure I'll ask Matt to expand but I think what you'll see in the near term as as we've communicated we're really focused on the initial customer in Israel.
None: And we're excited about that we think we're seeing we do believe we're seeing success.
None: We hope to be able to share more specifics on that soon.
Matt: And we also highlighted some of the work we're doing to bring this to the U S market, but.
None: But but may or maybe you can provide some context as to.
None: You know what to engage in it looks like production capability and things like that to the rest of 'twenty four to 'twenty five.
None: Yeah, right now willing to final stage.
Deployment.
None: The system with Whatsapp in Erie News, one and as you mentioned, Eric we're going to expand it to United States I think soon.
None: A couple of months.
None: We really believe that.
None: Uh huh.
None: The best solution for this kind of threats.
None: Okay, We will show the world really soon about it.
None: Okay. Thank you.
None: Alright, Thanks, Matt.
None: This concludes our question and answer session I would like to turn the conference back over to Eric Brock for any closing remarks.
Eric Ashley Brock: Okay. Thank you operator, I'm going to close the call by simply just thanking you again for attending as always we have a lot of work ahead, and we will get right back at it and I look forward to keeping you informed on our progress and hope you all have a great day.
None: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
None: [music].