Q1 2024 Ondas Holdings Inc Earnings Call
Operator: Welcome to the Ondas Holdings, Inc. First Quarter 2024 conference call. All participants will be in listen-only mode.
Welcome to the on Dice Holdings, Inc. First quarter 2024 conference call all participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing star key followed by zero. After today's presentation, there will be an offer.
Operator: Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two.
Speaker Change: Timothy to ask questions to ask a question you May Press Star then one on your telephone keypad.
Speaker Change: To withdraw your question. Please press Star then two before we begin the company would like to remind you that this call may contain forward looking statements. These.
Operator: Before we begin, the company would like to remind you that this call may contain forward-looking statements. While these forward-looking statements reflect Ondas' 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 in Ondas' periodic SEC filings and in the earnings press release issued today, which are both available on the company's website.
Speaker Change: These forward make forward looking statements reflect on on top of.
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 in on daus periodic S E C filings and in the earnings press release.
Speaker Change: Issue today, which are both available on the company's website.
Operator: Ondas 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, Ondas will refer to certain non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. Reconciliation of the Non-Gap Financial Measures to the Most Directly Comparable Gap Measures is shown in our press release issued earlier today, which is available in the Investor Relations section of our website.
Speaker Change: Does undertakes no obligation to revise or update any forward looking statements to reflect future events or circumstances.
Speaker Change: As required by law.
Speaker Change: During this call on Gospel.
Speaker Change: Her to certain non-GAAP financial measures these non non.
Speaker Change: non-GAAP measures are not prepared in accordance with generally accepted accounting principles.
Speaker Change: Conciliation 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 Investor Relations section of our website.
Operator: This non-GAAP information is provided as a supplement to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. However, management believes that these non-GAAP measures provide investors with valuable information on the underlying trends of our business.
Speaker Change: non-GAAP information is provided as a supplement to <unk>.
Speaker Change: Not as a substitute for or superior to measures of financial performance prepared in accordance with GAAP. However management believes that these non-GAAP measures provide investors with valuable information on the underlying trends of our business. Please note. This event.
Operator: Please note, this event is being recorded. I would now like to turn the conference, the presentation over to Eric Brock. Chairman and CEO, please go ahead.
Speaker Change: Is being recorded I would now like to turn the conference the presentation over to Eric Brock.
Eric Ashley Brock: Chairman and CEO. Please go ahead.
Eric Ashley Brock: Well, thank you, Operator, and good morning. I want 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. I'm happy to be joined today by key members of our leadership team, including our CFO, Yishay Curelaru, Guy Simpson, the President and Chief Operating Officer of Ondas Networks, Meir Kliner, President of Ondas Autonomous Systems and the Founder and CEO of our Aerobotics Subsidiary, and Tim Tenney, CEO Now, let's turn to the agenda.
Eric Ashley Brock: Well, thank you operator and good morning.
Eric Ashley Brock: 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 members of our leadership team, including our CFO, you say terrible rural Guy.
Speaker Change: <unk>, the president and Chief operating officer of on Dust networks Mirror Kleiner President of our invest autonomy system, and the founder and CEO, Our Arrow Barak subsidiary.
Speaker Change: Tenny CEO of American robotics.
Speaker Change: Now, let's turn to the agenda.
Eric Ashley Brock: We will start the call with some brief comments highlighting recent business developments at both Ondas Networks and Ondas Autonomous Systems Business Unit. I will then hand the call to Yishay for a financial review of our first quarter 2024 results. We will then provide a business update for Ondas Networks in our OAS business units, where I will ask Guy, Meir, and Tim to provide commentary around current business activity. Then we will wrap up the call and open the floor for investor questions.
Speaker Change: I'll start the call with some brief comments highlighting recent business developments at both honest networks in autonomous systems business units.
Speaker Change: I'll, then hand, the call to U shape or a financial review of our first quarter 2024 result.
Speaker Change: We will then provide a business update broadcast networks.
Guy: Ah, Yes business unit, where I will ask Guy married 10 terabyte commentary around current business activity.
Guy: Then we will wrap the call and open the floor for investor questions.
Eric Ashley Brock: I expect today's call to be on the shorter side, given we shared a detailed update on our last investor call just six weeks ago when we delivered our annual results for 2023. That investor call covered quite a bit of activity in Q1.
Speaker Change: I expect today's call to be on the shorter side, given we have shared a detailed update on our last investor call just six weeks ago. When we delivered our annual results for 2023.
Speaker Change: That investor call covered quite a bit of activity from Q1.
Eric Ashley Brock: Even so, we have been productive in the last six weeks, and as we will discuss, we have advanced our key business priorities at both Ondas Networks and the OAS Business Unit. But before we get into that, I want to start by acknowledging the disappointing start to 2024 from a revenue perspective. As we mentioned on our call on April 1st, we expect a good year from a growth perspective. However, our revenue will be heavily weighted to the second half of 2024, given the headwinds we face to start the year, namely the extended timelines with the class one railroads to deploy our technology and upgrade the legacy 900 megahertz network, as well as the interruptions with our OAS business unit related to the Gaza conflict. Recall that with the Godiva conflict, the production of Optimist Systems was negatively impacted, which created a bottleneck in advancing marketing equity.
Speaker Change: So we have been productive in the last six weeks and as we will discuss we have advanced our key business priorities that bolt on dust networks and Oes business units.
Speaker Change: Before we dig into that I want to start by acknowledging the disappointing start to 2000 before from a revenue perspective as.
Speaker Change: As we mentioned on our call on April 1st we expect a good year from a growth perspective. However, our revenue will be heavily weighted to the second half of 'twenty 'twenty four given headwinds we face to start the year, namely the extended timelines with the class one railroads to deploy our technology and upgrading our legacy 900 megahertz network.
Speaker Change: As well as the interruptions with our.
Speaker Change: Oes business unit related to the Gaza conflict.
Speaker Change: Recall, what the Gaza conflict the production of Optimus systems was negatively impacted which created a bottleneck and advancing marketing activity.
Eric Ashley Brock: Nonetheless, we are optimistic about the adoption cycle ahead for our three technology platforms, which include, of course, OnDesk Network's Full Max Dot 16 compliant software-defined network platform, as well as OAS's Optimist system and Iron Drone Raider. The value of our DOT16 technology was further confirmed with the order we announced today to provide an upgraded 220 megahertz PTC data radio for a key Northeast Corridor The customer specifications for this upgraded PTC data radio required compatibility with the IEEE 800.16 wireless standard, which of course provides the customer the flexibility to engage a wireless network upgrade roadmap across that Northeast Corridor. This is a landmark deal.
Speaker Change: Nonetheless, we are optimistic about the adoption cycle ahead for our three technology platforms, which include of course and as networks full Backstopped 16 compliant software defined network platform as well as Oas's Optimus system and iron drone Rader.
Speaker Change: The value of our <unk> technology was further confirmed with the order we announced today to provide an upgraded 220 megahertz PTC data radio for a key northeast quarter passenger railroad.
Speaker Change: Customer specifications for this upgraded PTC data radio required compatibility with the eye Tripoli <unk> wireless standard which of course provides the customer the flexibility to engage a wireless network upgrade roadmap across that northeast corridor.
Eric Ashley Brock: And we are very excited to open the passenger rail market and expand our serviceable addressable market, or SAM, to that very large 220 megahertz network. We're also excited about last week's update where we highlighted the first commercial order for our Iron Drone platform. The Iron Drone Raider is a home run product with what we believe are market-leading performance specifications.
Speaker Change: This is a landmark deal and we are very excited to open the passenger rail market and expand our serviceable addressable market, where Sam did that very large 220 megahertz network.
Speaker Change: We're also excited about last week's update where we highlighted the first commercial water or iron throne platform. Our Undrawn rater is a homerun products with what we believe are market leading performance specifications. We are working intently with our customer in defense partners to add even more capability to the writer and we look forward to sharing these details.
Eric Ashley Brock: We have worked intently with our customer and defense partners to add even more capability to the Raider, and we look forward to sharing these details on the Raider specifications and technology enhancements at a later time. We expect to receive additional orders for the Iron Drone platform in the coming months as we prepare for volume production and expanded marketing to other defense and security customers globally. These new orders from Ondas Networks and ROAS Business Unit demonstrate the market leadership and valuable innovation we are bringing to protect and secure the provision of critical services and operation of critical infrastructure assets.
Speaker Change: On the radar specifications and technology enhancements at a later time.
Speaker Change: We expect to receive additional orders for the iron drone platform in the coming months as we prepare for volume production and expanded marketing to other defense and security customers globally.
Speaker Change: These new orders from dust networks in our OE business unit demonstrate the market leadership and valuable innovation, we are bringing to protect and secure provision of critical services and operation of critical infrastructure assets.
Eric Ashley Brock: At Ondas Networks, all signs continue to support a major growth opportunity, starting with the 900 MHz network, where activity continues to advance. On the 900 MHz program, we have made more progress on the systems integration effort we described on our last call. Guy will provide more details, but I am happy to share up front that we have now completed the integration and backwards compatibility on the legacy 900 MHz network with two railroads, including a Class 1 railroad in Chicago and with a smaller commuter rail system in the southwest.
Speaker Change: <unk> networks, all signs continue to support a major growth opportunity starting with the 900 megahertz network where activity continues to advance.
Speaker Change: On the 900 megahertz program, we have made more progress on the systems integration effort. We described on our last call Guy will provide more details, but I am happy to share upfront that we have now completed the integration and backwards compatibility on the legacy 900, Burger megahertz network with two railroads, including a class one railroad in Chicago and with a.
Speaker Change: <unk> the commuter rail system in the southwest.
Eric Ashley Brock: Our progress was validated when our distribution partner received an order in early May for a system-wide deployment on behalf of that commuter railroad. There's still more work in Chicago, which is related to demonstrating the final migration to the new 900 megahertz frequency band. And that migration is being planned now.
Speaker Change: Our progress was validated when our distribution partner receiving order in early may for a system wide deployment on behalf of that commuter railroad.
Speaker Change: There is still more work in Chicago, which is related to the two demonstrating the final migration to the new 900 megahertz frequency band and that migration is being planned now.
Eric Ashley Brock: As we move into 2024, we are seeing broadening opportunities at OAS. With geopolitical conflicts rising, as evidenced by the tensions in the Ukraine, Middle East, and Taiwan, the need to protect and secure critical infrastructure, assets, and services is a significant focus from government, defense, and homeland security officials, as well as for operators of critical technology and industrial assets. These tailwinds are strong and strengthening and benefit our Optimus and Iron Dr
Speaker Change: As we move into 2024, we are seeing broadening opportunities at OAS with geopolitical conflicts rising as evidenced by the tensions in the Ukraine Middle East in Taiwan, the need to protect and secure critical infrastructure assets and services is a significant focus from government defense and homeland.
Speaker Change: Cured the officials as well as for operators of critical technology and industrial assets. These tail winds are strong and strengthening and benefit our Apis and iron throne platforms.
Eric Ashley Brock: In addition to our milestone order for Iron Drone, we continue to advance the customer marketing activity on our Optimist system. Our marketing efforts in the U.S. and Europe are adding to a robust pipeline of attractive customer activities, while our efforts in the Middle East continue to perform well. Meir and Tim will share more details later on in the call.
Speaker Change: In addition to our milestone in order for Iron throne, we continued to advance our customer marketing activity on our Optimus system.
Speaker Change: Our marketing efforts in the U S and Europe, adding to a robust pipeline of attractive customer activities, while our efforts in the middle East continues to perform well Marin Tam will share more details later on the call.
Eric Ashley Brock: And, as Meir and Tim will discuss, the Optimist system inventory availability is improving. This will enable additional customer activity here in the US and internationally and allow us to engage a growing and maturing customer pipeline. I want to highlight the partnership we signed last week with Hala Sky, a drone services unit of Hala, the largest terminal operator at the port of Hamburg in Germany, which is Europe's third largest seaport. This is an important relationship with the Ondas Autonomous Systems business.
And as Tim will discuss the optimists system inventory availability is improving this will enable additional customer activity here in the U S and internationally and allows us to engage a growing and maturing customer pipeline.
Speaker Change: I wanted to highlight the partnership we signed last week with call of Sky, a drone services unit of Haler, the largest terminal operator at the port of Hamburg in Germany, which is Europe's third largest seaport.
Speaker Change: This is an important relationship to be honest autonomous systems business unit.
Eric Ashley Brock: With HoloSky, we are bringing an ability to drive fleet adoption of Optimus systems and build scalable aerial security and data intelligence programs for global terminal operators, where our customer pipeline is growing. I would add that we believe Hala Sky will also provide entry into the large German drone market. So to wrap up the introduction, the week's first half revenue belies the value we are building with customers across our technology platform.
Speaker Change: With Halle Sky, we are bringing in ability to drive free adoption of autonomous systems and build scalable aerial security and David.
Speaker Change: Telegent programs for global terminal operators, where our customer pipeline is growing.
Speaker Change: I'd add that we believe Halle Sky will also provide entry across government and industrial markets and the large German drone market.
Speaker Change: So to wrap up the introduction of the weak first half revenue belies the value we are building with customers across our technology platforms. The order for the 220 megahertz P. C. P. C data radio is a huge signal a broad adoption of <unk> 16 across global rail markets and the strategic value of our formats connectivity platform.
Eric Ashley Brock: The order for the 220 MHz PC data radio is a huge signal of the broad adoption of DOT16 across global rail markets and the strategic value of our Full Max Connectivity platform. Further, the commercialization of the Iron Drone Raider transitions that platform to revenue generation and solidifies our OAS business unit as an important player in a fast-growing market for autonomous systems, providing security and intelligence to critical markets such as defense, security, public safety, and critical infrastructure operations in a world that's requiring more and more of this expertise. I will now hand the call to Yishay to provide the detailed Q1 financial update. Yishay?
Further the commercialization of the iron grown rader transitions that platform to revenue generation and solidifies our OAS business unit as an important player in the fast growing market for autonomous systems, providing security and intelligence to critical markets, such as defense security public safety and critical infrastructure.
Speaker Change: Patients in a world, that's requiring more and more of this expertise.
Speaker Change: I will now hand, the call it the U shape to provide the detail Q1 financial update Michelle.
Speaker Change: Yes.
Speaker Change: Thank you.
Yishay Curelaru: As I get started, I want to remind our investors that the figures we're about to discuss encompass the inclusion of aerobotics financial, effective from January 23rd, 2023, following our successful acquisition. This strategic move has significantly augmented our operational effectiveness and revenue stream, increased our market presence, and enhanced our shareholder value. Further, despite the added scale from the addition of aerobotics, as you will see, operating expenses, both cash and non-cash OPEX, are down quarter over quarter, reflecting an extreme focus on OPEX efficiency. That will continue.
Michelle: As I get started I want to remind our investors that the figures were above discussed encompass the inclusion of favorable its financial debt.
Speaker Change: That is from January 23rd 2023.
Following our successful acquisition. This strategic move has significantly augmented our operational effectiveness and revenue stream increased though market president and enhancing shareholder value.
Speaker Change: Further despite the added scale from the addition of favorable.
Speaker Change: You will see operating expenses.
Speaker Change: Both cash and non cash opex down quarter over quarter, reflecting an extreme focus on opex efficiency.
Speaker Change: But that will continue.
Yishay Curelaru: Turning to the Q124 results, we had a slow start to the year. In the first quarter of 24, revenues decreased to $625,000 compared to $2.6 million in Q1, 23. The decrease in revenues was primarily a result of extended timelines at Ondas Networks related to the 900 megahertz activities with Class 1 railroads and supply chain disruption connected to the Gaza War at our OAS business unit. For Ondas Network, revenues will fluctuate from quarter to quarter given the uncertainty around timing of customer activity in front of the targeted commercial rollout of the 900 MHz network and development programs underway with Siemens and MXB Rates.
Speaker Change: Turning to the Q1 'twenty four is the.
Speaker Change: We had a slow start with you in the first quarter of 'twenty full revenues decreased to 625000 compared to $2 $6 million in Q1 'twenty three.
Speaker Change: The decrease in revenues was primarily a result of extended timeline at on this net books related to the 900 megahertz activities with the class one railroads.
Speaker Change: Supply chain disruption connected the Gaza wall, it, though always business unit.
Speaker Change: So on the net book revenues will fluctuate from quarter to quarter, given the uncertainty around timing of customer activity in front of the targeted commercial rollout in the 900 megahertz network.
Speaker Change: And development programs underway with payment and Amex deal right.
Yishay Curelaru: Similarly, revenues at OES are expected to vary from quarter to quarter and to normalize into more predictable patterns as we grow our customer base and more of those customers enter fleet programs and recurring service agreements in the United States and internationally.
Speaker Change: Similarly revenue that though is that expected to vary from quarter to quarter and to normalize into more predictable as we grow our customer base and more of those customers and the fleet program and recurring.
Speaker Change: Women in the United States and internationally.
Yishay Curelaru: Gross profit decreased to negative $400,000 for Q1'24, as compared to $1 million for Q1'23. Gross margin was negative for Q1'24 as compared to 39.6% for Q1'23. A disappointing gross margin performance is primarily due to subscale operations given the low revenue recorded in the quarter relative to recurring costs of services provided, as well as product development costs overrun on typically low-margin development programs. Cost margins can be volatile on a quarter-to-quarter basis due to low revenue levels and the shift in the quarter mix between products, development, and services revenue.
Speaker Change: Gross profit decreased to negative 400000 for Q1 24 as compared to 1 million for Q1 'twenty three.
Speaker Change: Gross margin was negative for Q1 24 as compared to 39, 6%.
Speaker Change: For Q1 'twenty three.
A disappointing gross margin performance is primarily due to a subscale operation given the low revenue recorded in the quarter relative to the carrying cost of services provided.
Speaker Change: As well as product development cost overrun on typically low margin development program.
Speaker Change: Gross margin can be volatile quarter to quarter basis, due to low revenue level and shift in the mix between product development services revenue. Please.
Yishay Curelaru: Please note that we are targeting higher gross margins at Ondas Network on new development progress such as the PTC data radio announced today. Operating expenses decreased to $8.7 million for Q1'24 as compared to $13.7 million in Q1'23. The sharp drop in operating expenses was primarily due to controls on cash activity and decreased R&D activity both in networks and overhead. This decrease in operating expenses emphasizes the ongoing benefits from the restructuring of our Ondas Autonomous System business unit in connection with the integration of American robotics and aerobotics after the aerobatic acquisition closed in January 2020.
Speaker Change: Please note that we are targeting higher gross margin on the sneath well on new development brokers, such as the PTC data video and now Dave.
Speaker Change: Operating expenses decreased to $8 7 million buildup for Q1, 24, as compared with $13 7 million in Q1 'twenty three.
The sharp drop in operating expenses was primarily due to controls on cash activity and decreased R&D activity, both the networks and Oh yeah.
Speaker Change: This decrease in operating expenses emphasizes the ongoing benefit from the restructuring.
Speaker Change: Understood tournament system business.
Speaker Change: In connection with the integration of American robotics in arable I'll still be over but the cook position closed in January 23.
Yishay Curelaru: The company narrowed operating loss to $9.1 million for Q1'24, as compared to $12.6 million for Q1'23. Although revenue decreased, our operating loss improved 28% year-over-year and was largely driven by strong expense control and lower non-cash charges. Adjusted EBITDA loss narrowed 24% year-over-year to $7.7 million for Q1'24, as compared to $10.2 million for Q
Speaker Change: The company narrowed operating loss to $9 1 million buildup for Q1 24 as compared to 12 6 million below Q1 'twenty three.
Speaker Change: Though revenue decreased our operating loss improved 28% year over year and was largely driven by strong expense control and lower noncash charges.
Speaker Change: Adjusted EBITDA loss narrowed to 24% year over year to $7 7 million for Q1, 24 as compared to $10 2 million for Q1 'twenty three.
Yishay Curelaru: Now let's turn to the cash flow state. We had cash and cash equivalents of $14.6 million as of March 31st, 24, as compared to $14.2 million as of March 31st, 2023. Q1 cash provided by financing included additional gross financing totaling $8.6 million. Cash used in operations during Q124 decreased by $5.3 million due to primarily the restructuring of our Ondas autonomous system business. We expect cash utilization to improve significantly as we move forward into 2024.
Speaker Change: Now, let's turn to the cash flow statement.
Speaker Change: We had cash and cash equivalents of $14 6 million.
Speaker Change: As of March 31st 24, as compared to $14 2 million as of March 2031st go into twenty-three Q.
Speaker Change: Q1 cash provided by financing include additional gross financing totaling $8 6 million.
Speaker Change: Cash used in operation during Q1, 'twenty full decreased by $5 3 million due.
Speaker Change: Due to primarily the restructuring of our honest autonomous system business.
Speaker Change: We expect cash utilization to improve significantly as we move forward into 2024.
Yishay Curelaru: Improved cash efficiencies come from operating expenses leveraged at both companies as we focus spending on driving customer adoption and growth in revenues and growth profits. As noted, we ended Q1 with $14.6 million in cash. In February, we announced an $8.6 million capital raise through the sales of Ondas Holdings Common Stock and Ondas Networks Preferred Stock in a financing led by Charles and Potomac Capital. As of March 31st, 2024, we had $27.4 million in convertible notes outstanding.
Speaker Change: Improved cash efficiencies come from operating expenses leverage at both companies as we focused spending on driving customer adoption and growth in revenues and gross profit.
Speaker Change: As noted we ended Q1 with $14.6 million in cash.
Speaker Change: In February we announced an $8 $6 million capital raised through.
Speaker Change: Through the sale of the fund us holding common stock and on the snap both of it felt though in our financing led by Jonathan Potomac capital.
Speaker Change: As of March 31st 2024, we had $27.4 million in convertible note out then.
Yishay Curelaru: I want to highlight that the convertible notes have maturities in April 2025 and July 2025, which means we have some time to manage the amortization and create conditions to equitize the notes under more favorable conditions. It is our objective to equitize these notes as soon as we can by using shares to retire the notes, either via monthly amortization or to see those notes convert entirely to equity prior to maturation. I will now hand the call back to Eric.
Speaker Change: Want to highlight that the convertible note.
Speaker Change: Maturity in April 2025, and July 2025, which means we have some time to manage the amortization in great condition to Ecuador, and note under more favorable conditions.
Speaker Change: It is the overall objective to Ecuador is note. The one that we can buy using she'll do we dialed in note.
Speaker Change: Either via a monthly amortization.
Speaker Change: Good to see those notes convert entirely to equity high up and mature.
Speaker Change: I will now hand over the call back to Ed.
Eric Ashley Brock: Thank you, Yishay. Now we will transition to a review of our business units and ask Guy Simpson and Meir Kliner to share updates on recent activity in the field with customers and industry partners. We will also ask Tim Tenne to share comments regarding American robotics and drill down a bit into the outlook for OAS in the United States. As I hand the call to Guy, I want to reiterate that I have confidence in our ability to grow an important business at Ondas Networks as we deploy wireless technology that is critically valuable for rail customers and the large industrial vendors and emerging MCIoT technology ecosystems.
Ed: Thank you V shape now we will transition to a review of our business units and as Guy Simpson and mail decliner to share updates on recent activity in the field with customers and industry partners.
Ed: Also asked him penny to share comments regarding American robotics, and drill down a bit into the outlook for OAS and the United States.
Guy Simpson: As I hand, the call the Guy I want to reiterate that I have confidence in our ability to grow an important business around us networks as we deploy wireless technology that is critically valuable for the rail customers and the large industrial vendors and emerging M C Iot technology ecosystem.
Eric Ashley Brock: We believe commercial deployments on 900 megahertz will begin soon, certainly this year, and that the opportunity for 900 megahertz, as well as with the other private networks for class one rails, in addition to global rail markets, remains substantial. Guy, please proceed.
Guy Simpson: We believe commercial deployments on 900 megahertz will begin soon certainly this year and that the opportunity in 900 megahertz as well as with the other private networks for the class one rails. In addition to global rail markets remains substantial.
Speaker Change: Please proceed.
Guy Simpson: Thank you, Eric. I'm happy to be here this morning and to share an Ondas Networks update with our investors. As stated earlier in the call, we provided a very detailed status update on the 900 MHz upgrade activity recently, and so my comments today will focus on our incremental progress and output. I am happy to share that we have achieved the system's integration goals for our Airlink ATCS products and demonstrated backwards compatibility on the live legacy 900 MHz network of a Class 1 railroad in Chicago.
Eric Ashley Brock: Thank you Eric I'm happy to be here this morning and to share on on dust networks update for our investors.
Speaker Change: As stated earlier in the call we provided a very detailed status update on the 900 megahertz upgrade activity recently and so my comments today will focus on our incremental progress and outlook.
Speaker Change: I am happy to share that we have achieved the systems integration goals.
Speaker Change: For our Airlink, a T C S products and demonstrated backwards compatibility and the life legacy 900 megahertz network all the class one railroad in Chicago.
Guy Simpson: Our next step with this railroad is to advance the migration of the installed air link systems to the new 900 MHz frequency band, and we believe we have the right plan to do just that. This effort is currently being planned with the customer, and we expect to complete this migration effort in the second half. In addition, we have completed a second system integration with a commuter railroad in the southwest.
Speaker Change: Our next step with this railroad is to advance the migration of the installed systems to the new 900 megahertz frequency band.
Speaker Change: We believe we have the right plan to do just that.
Speaker Change: This effort is currently being planned with the customer and we expect to complete this migration effort in the second quarter.
Speaker Change: In addition, we have completed a second systems integration with a commuter railroad in the southwest.
Guy Simpson: Our distribution partner has already received an order on behalf of this customer, signaling their confidence in our ability to upgrade the legacy 900MHz network. And let me highlight, this is the first system-wide commercial order for the 900 MHz network. This is a significant milestone validating the progress we are making with its importance.
Speaker Change: Our distribution partner has already received an order on behalf of this customer signaling their confidence in our ability to upgrade the legacy 900 megahertz network.
Speaker Change: And let me highlight this is the first system wide commercial order in the 900 megahertz network.
Speaker Change: This is a significant milestone validating the progress we are making with this important network.
Guy Simpson: Furthermore, we are starting the now well-proven systems integration process with a Midwest commuter rail. As we recommended, they have purchased equipment to establish multiple labs in which they will evaluate Airlink products and DOT16 technology for various applications. The other Class 1 rails continue to closely track our progress.
Speaker Change: Furthermore, we are starting the now well proven the systems integration process with the Midwest commuter railroad.
Speaker Change: As we recommended they have purchased equipment to establish multiple labs in which they will evaluate airlink products and topped 16 technology for various applications.
Speaker Change: The other class one rails continued to closely track our progress.
Guy Simpson: Success in Chicago is expected to lead to further engagement with Class 1 rails on planning and timelines for their own 900 MHz network. We, along with the rail customers and sailors, have learned a lot through these initial integration activities, and we believe we have created scalable processes that can be deployed in other regions across all railroad operations. We want to take a moment and highlight some recent public statements by the AAR regarding plans for the 900 MHz network and some key takeaways. On May 2nd, the AAR submitted a comment letter to the FCC in response to regulatory filings related to a 900 MHz spectrum license.
Speaker Change: Success in Chicago is expected to lead to further engagement with class one rails on planning and timelines for their own 900 megahertz Netflix.
Speaker Change: We along with the rail customers and Siemens have learned a lot through these initial integration activities and we believe we have created scalable processes that can be deployed in other regions across all railroad operations.
Speaker Change: We want to take a moment and highlight some recent public statements by the a O regarding plans for the 900 megahertz network and some key takeaways.
Guy Simpson: In this comment letter, the AAR made some strong statements related to the value of the new 900 MHz spectrum and the networks for train operation. Also, the AAR stated that the 900 MHz frequency band was critical, highly valuable, and that the 900 MHz network was a key component of the industry's next-generation network plan. Furthermore, they signaled the critical role the DOT16 wireless technology will play in the 900MHz build-out, while also referencing the other private licensed spectrum bands.
Speaker Change: On may 2nd they a all submitted a comment letter to the FCC in response to regulatory filings related to 900 and negative 900 megahertz spectrum licenses.
Speaker Change: And this comment letter they a all made some strong statements related to the value of the new 900 megahertz spectrum and the networks the train operations.
Speaker Change: Also the E. All stated that the 900 megahertz frequency band was critical highly valuable and that the 900 megahertz network was a key component of the industry's next generation network plans.
Speaker Change: Furthermore, they signaled the critical role the dropped 16 wireless technology will play in the 900 megahertz Buildout, while also referencing the other private license spectrum bands.
Guy Simpson: I remind our investors that the railroads currently operate four mission-critical private networks across the 160, 220, 450, and 900 MHz frequency bands. We believe the AAR's reference to future innovative technologies across the full suite of Spectrum bands highlights the opportunity for Ondas and its.16s platforms to support network upgrades across all of the legacy networks operated by the railways. We will continue to work hard to realize this massive market opportunity and meet the AAL's requirements.
Speaker Change: I remind our investors that the railroads currently operate for mission critical private networks across the 162, 24, 50, and 900 megahertz frequency bands.
We believe the Ey as reference to future innovative technologies and across the full suite of spectrum bands highlights the opportunity for on this and its adult sixteens platforms to support network upgrades across all of the legacy networks operated by the railroads.
Speaker Change: We will continue to work hard to realize this massive market opportunity and support the a L requirements.
Guy Simpson: Let's turn now to the major announcement we made today regarding the 220 megahertz PTC data rating. Ondas Networks has entered into an agreement with our distribution partner to provide an upgraded on-locomotive radio for a key Northeast Corridor passenger railroad. This radio will be backwards compatible with the legacy 220 MHz network and host positive train control, a critical safety application. Importantly, this new radio will replace a discontinued legacy radio and is designed for adoption across the Northeast Corridor, where track is shared by other passenger, transit, and even freight railroad operators.
Speaker Change: Let's turn now to the major announcement, we made today regarding the 220 megahertz P. T C data radio.
Speaker Change: On dust networks has entered into an agreement with our distribution partner to provide an upgraded on locomotive radio for a key northeast, Colorado passenger railroad.
Speaker Change: This radio will be backwards compatible with the legacy 220 megahertz network and host positive train control a critical safety application.
Speaker Change: Importantly, this new radio will replace a discontinued legacy radio and is designed for adoption across the northeast corridor, where track is shared by other passenger transit and even freight railroad operators.
Guy Simpson: The new 220 data radio will offer an upgrade past Dot 16, which was a specific requirement of the rail customer. I want to note that this project has already started, and we are on track to deliver production radios in the first quarter of 2025. One final note on the 220 MHz program: this win represents a new rail market, passenger and transit, a new private network, 220 MHz, and a new application, positive train control.
Speaker Change: The new two 'twenty data radio will offer an upgrade path to adopt 16, which was a specific requirement of the rail customer.
Speaker Change: I want to note that this project has already started and we are on track to deliver production radios in the first quarter of 2025.
Speaker Change: One final note on the 220 megahertz program. This win represents a new rail market passenger in transit a new private network 220, Mega hubs and the new application positive train control.
Guy Simpson: In short, it expands our Service Addressable Market, or SAM, in the rail sector. In addition, our work with the AAR, and specifically with MXV Rail, continues to point to expanded engagement regarding new networks and applications. For example, work with Class 1 railroads on advancing the commercialization of our base station controller to provide dynamic frequency resource management and new use cases for 900MHz, including CTC over ITCM to provide the required redundancy for the 220 megahertz PTC safety net. Now, I will hand the call back to Eric.
Speaker Change: In short it expands our service addressable market or Sam in the rail sector.
Speaker Change: In addition, our work with the a L and specifically with IMAX. The Euro continues to point to expanded engagement regarding new networks and applications.
Speaker Change: For example work with the class one railroads on advancing the commercial commercialization of that base station controller to provide dynamic frequency resource management and all new use cases for 900 megahertz.
Speaker Change: Including C T C over I T C M to provide the required redundancy for the 220 megahertz P. T C safety network.
Speaker Change: Now I will hand, the call back to Eric Eric.
Eric Ashley Brock: Thank you, Guy. I will now ask Meir Kliner to take the floor and update us on progress at Ondas Autonomous Systems and provide insight into recent developments at OAS and the outlook from here.
Meir Kliner: Thank you Guy I will now ask mayor Kleiner to take the floor and update us on progress at autonomous systems and provide insight into recent developments at OAS and the outlook from here Mer.
Meir Kliner: Thank you, Eric. In the first quarter, we announced the formation of Ondas Autonomous Holding Inc., OAH. This newly formed drone holding company is intended to enhance our operational and financial flexibility as we scale our drone business worldwide. OAH will leverage our market-leading autonomous drone platforms, the Optimus system, and the Iron Drone radar by driving focused and scalable operating models targeted towards providing comprehensive aerial security and data solutions for specific industry verticals. Of course, these initial vertical markets where we are demonstrating scalable go-to market success, including public safety and emergency response, critical infrastructure, construction project management, and data centers.
Meir Kliner: Thank you Eric in the first quarter, we announced the formation of August Autonomous holding Inc. O. H. This newly formed one holding company is intended to enhance our operational and financial flexibility as we scale our drone business worldwide.
Boy age, we leverage our market, leading autonomous drone platforms, the optimal system and Ireland run rate in my dorm room for cruise and scalable operating model targeted towards providing comparable N C area on security and data solutions for specific industry verticals.
Meir Kliner: Let's close this initial real take on markets, where we are demonstrating scalable go to market success, including public safety and emergency response critical infrastructure construction project management and data centers.
Meir Kliner: Our customer pipeline has expanded significantly in recent months, as our investments in our services organizations in both the US and Europe, which include partnerships like we announced last week with HHLA-Sky and Sea Astral Aerospace, begin to mature. Our ability to meet this growing demand for visibility has improved, with Optimus system production now catching up after the dislocation from the Gaza wall. On production, we expect to receive delivery of the 15 systems currently being produced by Q3 2024.
Meir Kliner: Our customer pipeline has expanded significantly in recent months as our investments in our services organization in both U S and Europe, which include partnerships like we announced last week with HLA Sky and sea Astral aerospace begin to mature.
Speaker Change: Our ability to meet this growing demand visibility is improved with optimal system production now catching up after the dislocation from the government.
Speaker Change: On production, we expect to receive delivery of the 15 systems currently being produced by Q3 'twenty 'twenty four we are making plans to expand production behind these systems do.
Meir Kliner: We are making plans to expand production behind these systems. During Q1, Aerobotics secured an expanded services agreement to support the growing fleet of our Optimus systems in the UAE and Israel. Additionally, Aerobotics continued its expansion in the United Arab Emirates, where a local governmental entity is deploying the world's first drone network infrastructure for public safety and other public services. This initiative is expected to continue, aiming to achieve a fleet of more than 20 systems by the end of 2025.
Speaker Change: During Q1, and what is secured and expanded services agreement to support the growing fleet of optimal systems in the UAE and Israel. Additionally, and robotics continued its expansion in the United Arab Emirates with a local governmental entity is deploying the world's first one network infrastructure.
Speaker Change: For public safety and other public services. This initiative is expected to continue aiming to achieve a fleet of more than 20 systems by the end of 'twenty when you frame.
Meir Kliner: As we continue to support this network expansion, we see a growing potential for expanded commercial use cases in the UEE, and we hope to have more to say on this later this year. In the counter-drone domain, we have successfully completed the urgent work to tailor the Iron-1 radar system for certain military requirements. This achievement is evident in our recent announcement of the initial purchase order for major defense companies. We believe the system specifications for the Raider are best-in-class and even disruptive as compared to other systems in the market.
Speaker Change: As we continue to support this network expansion, we see a growing potential for expanded commercial use cases in the UAE and we hope to have more to say on this later this year.
Speaker Change: In the counter drone domain, we have successfully completed urban walk to tailor the island one radar system for certain military requirements. These achievements is evident in our recent announcement of and Michelle purchase order for a major defense company.
Speaker Change: We believe the system specifications for the rate of our best in class and even disruptive as compared to other systems in the market the incredible effort and accomplishments by our team positions us very well in a fast growing market.
Meir Kliner: The incredible effort and accomplishments by our team positions Ondas very well in a fast-growing market. While Tim Tenner will provide an update on U.S. business activity, I want to highlight our business development activities in Europe, where we have established a marketing effort that includes the formation of new partnerships that help leverage the local market expertise of distributors. We believe the market potential in Europe is significant, where we can bring our vast experience and credibility in protecting and monitoring critical assets to key customers in transportation, construction, and many other critical operations.
Speaker Change: While Tim Turner will provide an update on <unk> business activity I wanted to highlight our business development activities in Europe, where we have established a marketing effort that includes the formation of new partnerships.
Speaker Change: And to leverage the local market expertise of distributors.
We believe the market potential in Europe is significant where we can bring our vast experience and credibility in protecting and monitoring critical assets to key customers in transportation construction and many other critical operations.
Meir Kliner: I want to finish my prepared remarks by highlighting that we are operating robotics and American robotics in full synergy, effectively bringing to the table the core advantages of OAH. Together, we are leveraging world-class technology with proven value and reliability, which we are combining with scalable solutions targeting focused vertical markets and use cases. I will now hand the call over to Tim Tenne, CEO of American Robotics, to provide an update on the business achievements we are making at American Robotics.
Speaker Change: I want to finish my prepared remarks, my eye letting that we are operating in robotics and American robotics in a full synergy effectively bringing to the table the core advantages of OE H.
Speaker Change: Together, we are leveraging world class technology with proven value and reliability, which we are combining with scalable solutions targeting and focused vertical markets and use cases.
Speaker Change: I will now end the call over to Tim Tennessee over medical robotics to provide an update on the business achievements, we are making at American robotics.
Timothy Tenne: Thank you, Meir. During the first quarter, we successfully completed a proof-of-value program with the Mass. Department of Transportation Aeronautical Division, which included flawless demonstrations of the Optimus system and our newly positioned Kestrel Detect-and-Avoid solution at the Massachusetts Maritime Academy. These demonstrations showcased our ability to operate the Optima system consistently with remote operations beyond visual line of sight. This demonstration is continuing to drive a maturing pipeline within the defense, federal, state, and commercial segments, which positions us well for successful sales and deployment.
Thank you mayor during the first quarter, we successfully completed a proof of value program with the mass Department of Transportation Aeronautical Division, which included flawless demonstrations of the optimists system and our newly positioned Castro detect and avoid solution at the Massachusetts Maritime Academy. These.
Speaker Change: These demonstration showcased our ability to operate the optimists system consistently with remote operations beyond visual line of sight. This demonstration is continuing to drive a maturing pipeline within the defense federal state and commercial segments, which positions us well for successful sales and deployment.
Timothy Tenne: We have also expanded our ecosystem around field operations and technology infrastructure via new partnerships at American Robotics. For example, we secured a partnership with Sennheis, a leading provider of a portable passive detection system for drones, also known as a counter unmanned aircraft system, as well as additional capability for tracking, participating, and non-cooperative air traffic. Additionally, we have partnered with Resilience, a leader in data quality assurance and real-time aviation safety management systems for highly automated and autonomous systems.
Speaker Change: We have also expanded our ecosystem around field operations and technology infrastructure, the new partnerships with American Robotics. For example, we secured a partnership with Shanghai <unk>, a leading provider of a portable path of detection system for drones also known as a counter unmanned aircraft system as.
Speaker Change: Well as additional capability for tracking participating and non cooperative air traffic.
Speaker Change: Additionally, we have partnered with resilience a leader in data quality assurance in real time, the aviation safety management systems for highly automated and autonomous systems.
Timothy Tenne: Together, these partnerships will assist Ondas in elevating autonomous drone operations through advanced integration of airspace safety and management. American Robotics is engaged in the Green UAS program to certify compliance with the highest levels of cyber security and supply chain requirements of the U.S. National Defense Authorization Act. The Green UAS program is administered by the Association for Uncrewed Vehicle Systems International in partnership with the U.S. Department of Defense and many state governments with the purpose of enhancing the country's UAS technology base. American Robotics expects to complete the Green UAS qualification during quarter three.
Speaker Change: These partnerships will assist aldis and elevating autonomous drone operations through advanced integration of aerospace safety and management systems.
American Robotics: American robotics engaged and the Green UAS program to certify compliance with the highest levels of cyber security and supply chain requirements of the U S National Defense Authorization Act.
American Robotics: The Green UAS program is administered by the association for on crude vehicle systems International and partnership with the U S Department of defense and many state governments with the purpose of enhancing the country's UAS technology base.
American Robotics: American robotics expects to complete the green UAS qualification during quarter three.
Timothy Tenne: We expect to be completed with the buildout of our new Demonstration Training and Operations Center to be launched at our Baltimore County, Maryland headquarters in June. We look forward to sharing more detailed information with everyone soon. We are seeing an increased demand for the deployment of the Optima system with potential customers in both government and commercial segments. Additionally, American Robotics is advancing its go-to-market plans in the U.S. defense and security markets with both Optimus and Iron Drone. We anticipate new opportunities that will come into effect during the second half of 2024, and I look forward to keeping our investors informed about these activities. I will now hand the call back to Eric.
American Robotics: We expect to be completed on the Buildout of our new demonstration training in an operation center to be launched at our Baltimore County, Maryland headquarters in June.
American Robotics: We look forward to sharing more detailed information with everyone soon.
American Robotics: We are seeing an increased demand for the deployment of the optimists system with potential customers in both government and commercial segments.
Speaker Change: Lee American Robotics is advancing its go to market plans and U S defense and security markets with both Optimists and iron drone, we anticipate new opportunities that will come into effect. During the second half of 2024, and I look forward to keeping our investors informed on these activities I will now hand the.
Eric: Call back to Eric.
Eric Ashley Brock: Let's wrap up the call now and summarize the outlook and provide context for where we are. We're going to continue to hold off on providing a formal outlook for 2024.
Eric: Let's wrap the call now and summarize the outlook and provide context for where we are we're going to continue to hold off on providing a formal outlook for 'twenty 'twenty four we want to be conservative given we still need to secure that initial 900 megahertz order.
Eric Ashley Brock: We want to be conservative, given we still need to secure that initial 900 MHz order. However, we do believe order and revenue visibility will improve in the second half. We continue to work hard, and the recent AAR public comment suggests the railroads are intending to build out the 900 megahertz network, and it also suggests that they will have some urgent needs For OAS, customer engagement, conversations, and negotiations are on orders, as well as field trials continue to build, and the availability of optimist systems will help support a recovery in revenue growth.
Eric: We do believe order and revenue visibility will improve in the second half.
Eric: We continue to work hard in the recent public comments suggests the railroads are intending to build out the 900 megahertz network and it also suggests that they will have some urgency.
Eric: For OAS customer engagement conversations and negotiations around orders as well as field trials continue to bill and the availability of the Optimus systems will help support a recovery in revenue growth.
Eric Ashley Brock: The various distribution partnerships we have secured, such as the Hollis Sky announcement last week, are also expected to add to our revenue in the second half. Lastly, Iron Drone will be accretive to the revenue outlook now that it has been officially launched and accepted by a very important reference customer. So the outlook remains positive for Ondas.
Eric: The various distribution partners chose ships, we have secured such as the hall of Sky announcement last week are also expected to add to our revenue in the second half.
Eric: Lastly, iron drone will be accretive to the revenue outlook now that has been officially launched and accepted by a very important reference customer.
Speaker Change: So the outlook remains positive for Argos I understand investors may be frustrated with our choppy performance from a financial and operational standpoint, we share your frustration, especially giving our belief that we have created an extremely valuable technology platforms and very large high growth end markets. We're continuing to work hard to deliver this to.
Eric Ashley Brock: I understand investors may be frustrated with our choppy performance from a financial and operational standpoint. We share your frustrations, especially given our belief that we have created extremely valuable technology platforms in very large, high-growth end markets. We are continuing to work hard to deliver this to you. We are working on business plans and funding strategies, which include capital strategies at our OAH business unit, which we believe will accelerate the execution of its business plan.
Speaker Change: <unk>.
Speaker Change: We are working on business plans and funding strategies, which include capital strategy at our OE H H business unit, which we believe will accelerate the execution of its business plan.
Eric Ashley Brock: My confidence remains high. We are doing amazing things for our customers and partners, and it's our job to make sure that we, meaning our investors and our team, will be rewarded. It isn't easy, for sure, but we remain 100% committed, and we will work hard to deliver for you. With that said, let's see if there are any questions, operator. We will now begin the call.
Speaker Change: My confidence remains high we are doing amazing things for our customers and partners. It is our job to make sure that we meaning our investors and our team will be rewarded.
Speaker Change: It isn't easy for sure, but we remain 100% committed and we will work hard to deliver for you.
Speaker Change: With that said, let's see if there are any questions operator.
Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Tim Horan with Oppenheimer. Please go ahead.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May press Star then one on your telephone keypad. If you were using a speaker phone. Please pick up your handset before pressing the keys.
Speaker Change: Is that any time a question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Tim Horan with Oppenheimer. Please go ahead.
Timothy Kelly Horan: It's great that the rails kind of reaffirmed the FCC meeting the kind of deadline to clear the spectrum. Can you just give us a little bit more color on how much you think they need to spend to meet the intent in that letter, and you know, just a rough update on when you think the revenues kind of start coming in?
Speaker Change: Hi, Eric.
Timothy Kelly Horan: It's great that the all the rails kind of reaffirmed to the FCC meeting their kind of deadline to clear the spectrum.
Speaker Change: Can you just give us a little bit more color on.
Speaker Change: How much do you think they need to spend to meet the the intent in that letter and I'm just a rough update when do you think the revenues kind of start coming in.
Eric Ashley Brock: Okay, so... In terms of sizing, we still look at the TAM, as we've shared with you often in the past. I would point to specific numbers that the AAR used in their comment letter. I think that's a nice number that they've used in terms of size. However, I think it refers to legacy equipment, so it's not necessarily apples to apples. And then in terms of timing, as you know, we've been discussing on the last couple of calls; we are very active across the board with the AAR and specifically Chicago.
Speaker Change: Ah Okay. So.
Speaker Change: In terms of sizing, we still look at the Tam as we've shared with you often in the past I do I would point to specific numbers at the a are used in there a comment.
Comment letter.
Speaker Change: I think that's a nice number that we've used in terms of size. However, I think it does refer to legacy equipment.
Speaker Change: So it's not necessarily apples to apples.
Speaker Change:
Eric Ashley Brock: And that activity is being watched very closely. We do believe that we will have success there, and that'll lead to commercial orders and further engagement with other railroads on their plans for upgrading the legacy network.
Speaker Change: And then in terms of timing.
Speaker Change: You know we've been discussing the last couple of calls we are very active across the board with a.
Speaker Change: The E R and specifically in Chicago.
Speaker Change: And that activity is being watched very closely.
Speaker Change: We do believe that we.
Speaker Change: We will have success, there and that'll lead to commercial orders and further engagement with other railroads on their plants for.
Speaker Change: <unk> upgraded our legacy networks.
Eric Ashley Brock: So is there any change in, you know, it's been a few years, I think, since you updated the TAM, is there any change in your pricing strategy or, you know, scope of the work whatsoever? And do you think you'll I guess you have a best guess on when the revenues might start coming in, you know, at this point? It seems like, you know, If you don't have the firm orders now, revenues are probably more like next year.
Speaker Change: So is there any change in I'm just you know it's been a few years I think since you got three ended the Tam is there any change in your pricing strategy or.
Speaker Change: Scope of the work whatsoever in do you think you'll.
Speaker Change: I guess do you have a best guess on when the revenues might start coming in that you know at this point.
Speaker Change: It seems like.
Speaker Change: No.
Speaker Change: If you don't have them for a mortgage now that revenues are probably more like next year.
Speaker Change: Awards anymore.
Eric Ashley Brock: So I don't want to make any commitments in terms of timelines because we do need visibility. I would again, and Guy covered this in the AAR statement, that they're expecting to meet the deadlines to move off the legacy network. And as a reminder, those deadlines are September 2025. In addition, there is a buildout requirement where the railroads have to show substantial coverage to the FCC, and that deadline is April 2026.
Speaker Change: Yeah, So I don't want to make any commitments in terms of timelines because we do need the visibility I do would refer again and I covered this in the AAR statement.
Speaker Change: That they're expecting to meet the deadlines to move off the legacy network.
As a reminder, those are September 2025. In addition, there is a build out requirement where the railroad sector show substantial coverage.
Speaker Change: You've seen that deadline is April 2026.
Eric Ashley Brock: So the initial deadline is less than 18 months away, and April 2026 is about two years, and actually less than two years. So we have got to get busy. And I guess that's all I can tell you, Tim. I do want to hold off on putting stakes in the ground on the revenue side until we get orders. I will add, if orders come, that we have built up a bit of an inventory so we can be responsive.
Speaker Change: So the initial deadline, so less than 18 months away.
Speaker Change: In April 2026 is a is about two years actually.
Speaker Change: Less than two years so.
Speaker Change: We gotta get.
Speaker Change: Busy.
Tim: I guess, that's all I can tell you Tim I do want to hold off on putting stakes in the ground.
Speaker Change: On the revenue.
Speaker Change: Side until we get orders I will add if orders come back and we have built a bit of inventory.
Speaker Change: Inventory, so we can be responsive.
Speaker Change:
Timothy Kelly Horan: There you go. Great.
Tim: There you go great and can you maybe just update us on that.
Speaker Change: Your liquidity situation do you think you need to raise more capital at this point, a and B can you just remind us.
Timothy Kelly Horan: And can you then maybe just update us on your liquidity situation? Do you think you need to raise more capital at this point? A. And B. Can you just remind us, you know, what your fully diluted shares outstanding are now? Oh gee, um, I don't.
Speaker Change: You know what your fully diluted shares outstanding are now.
Speaker Change: On a fully diluted basis, Oh Gee.
Eric Ashley Brock: I don't have that in front of me on the share count. I'll have to get back to you. On the liquidity side, we do expect to raise capital. And I said that on the last call six weeks ago, and we pointed specifically to some activity with OAH. So I'd like to just leave it at that.
Speaker Change: Don't have that in front of me on the share count I I'll have to get back to you.
Speaker Change: Okay, but oh.
Speaker Change: On the liquidity side, we do expect to raise capital.
Speaker Change: I've said that on the last call six weeks ago, and we pointed specifically to some activity with O H.
Speaker Change: So I'd like to just leave it at that.
Eric Ashley Brock: Okay, so do you think this cash burn rate is kind of good for another quarter or two or any changes to the cash burn rate? I think you'll see.
Speaker Change: Okay. So do you think this cash burn rate is kind of good for another quarter or two or would there be any.
Speaker Change: So the cash burn.
Eric Ashley Brock: I think you'll see our cash op act at these levels. And then on the revenue side, we'll drive or maybe I'd say maybe these levels or maybe slightly lower. And then we look into the second half, where we have gross profit generation picking up with revenue. And we'd like to have that drive the cash utilization down.
Speaker Change: Okay, I think you'll see our cash opex at these levels and then on the revenue side will drive.
Amit: Amit I would say maybe.
Amit: At these levels or maybe slightly lower.
Amit: And then we look into the second half were.
Speaker Change: Gross profit generation picking up with revenue.
Speaker Change: Yeah.
Speaker Change: I have that drive the cash utilization down.
Speaker Change: Thank you.
Operator: Our next question comes from Glenn Mattson with Lautenberg Fowlman. Please go ahead.
Speaker Change: Our next question comes from Glenn Mattson with Ladenburg Thalmann. Please go ahead.
Glenn George Mattson: Hey guys, thanks for taking the questions. Yeah, just, can you give us a sense on the OAH side about... You know, there's been, I guess, a little bit of a push out based on some of the disruptions you mentioned. Just can you give us a sense of the scope of what you feel you see for that unit versus where you were, say, you know, at the beginning, coming into the year?
Glenn George Mattson: Oh, Hey, guys. Thanks for taking the questions.
Yes.
Speaker Change: Can you give us a sense on the OE side about.
Speaker Change: Oh, you know there's been I guess, a little bit of Bush out based on some of the disruptions. You mentioned just can you give us a sense of the scope of what you feel you see for that.
Speaker Change: Unit versus where you were say at the beginning.
Coming into the year.
Speaker Change: Sure Yeah. So.
Eric Ashley Brock: So I'll say I expect our drone businesses to be up year-over-year in revenue. The reason for the first half weakness was clearly the war, which was disruptive.
I'll say I expect our drone businesses to be up year over year in revenue.
Speaker Change: The reason for the war first half weakness is just clearly the war which was disrupted.
Eric Ashley Brock: And we've shared that with you. At OAH, there is pent-up demand. And I want to be specific or careful about the specifics about some of the pipeline. And, of course, that's for competitive reasons, but we're seeing quite a bit of activity in public safety. The Dubai police, the UAE governmental entity, continue to be very active, and we're having great success expanding the fleet there, and we think that will continue. They have publicly restated again their intent to build a citywide infrastructure.
Speaker Change: Hum.
Speaker Change: <unk> shared that with you.
Speaker Change: Oh age there is pent up demand.
Speaker Change: And I want to be specific or careful about the specifics on some of the pipeline, but you know clearly there's a.
Speaker Change: And of course, that's for competitive reasons, but we.
Speaker Change: We're seeing on quite a bit of activity in public safety, the Dubai police UAE government mental entity.
Speaker Change: You know continues to be very active and we're having great success expanding the fleet there and we think that continues they have publicly.
Speaker Change: Restated again their attempt to build a citywide infrastructure.
Eric Ashley Brock: And we do see commercial activity or commercial opportunities in the UAE as well. And that activity in Dubai is leading to more engagement with global security and law enforcement groups. So we're very encouraged by that. We have highlighted some of the demand we're seeing from ports, and specifically inside ports. We're talking about terminal operators where we're going to be building specific programs around security and aerial intelligence or inspection, and the Hala Sky relationship that we established this quarter is a good example of where we are heading there.
Speaker Change: And we do see commercial activity or commercial opportunities in the UAE as well.
Speaker Change: Activity in Dubai is leading to more engagement with global security and law enforcement.
Speaker Change: Groups.
Speaker Change: So we're very encouraged by that.
Speaker Change: We have highlighted some of them demand, we're seeing from courts, and specifically excite courts, we're talking about a terminal operators, where we're gonna be building specific programs around security and the real intelligence.
Speaker Change: Or inspection and the Hollis Guy.
Speaker Change: The relationship that we established this quarter is a good example of us in the direction, we're heading there.
Eric Ashley Brock: Similarly, the Departments of Transportation and other government agencies are engaged, so we see quite a bit of opportunity. And I would also add that we have a new revenue-generating platform in the Iron Drone Raider. We did announce that order last week. We're expecting more orders, so that's going to help support revenue growth this year.
Speaker Change: It really departments of transportation and other government agencies are engaged so we see.
Speaker Change: Quite a bit of opportunity and I would also add that we.
Speaker Change: We have a new revenue generating platform in the iron drawn greater we did announce that order last week, we're expecting more orders. So that's going to help support revenue growth this year.
Eric Ashley Brock: Okay, on the Iron Drone, when you... As the pipeline begins to build or whatever, is it more for... are you saying for more military applications, or is it sometimes more, you know, security and public safety type things? And, you know, what do you think when you're when you're competing against other drone platforms or whatever on that type of application? What, where do you think you stand or, you know? What do you see when there's like a bake-off versus you or somebody else?
Speaker Change: Okay.
Speaker Change: Okay on the iron drilling when you.
Speaker Change: And as the pipeline begins to build or whatever it is it more.
Speaker Change: Before are you seeing for more military applications or is it sometimes like more.
Speaker Change:
Speaker Change: Security and public safety type things and.
What do you think when you're when you're competing against right here.
Speaker Change: Yeah.
Speaker Change: Drone platforms or whatever on that type of application.
Speaker Change: Where do you think you stand here.
Speaker Change: What do you see when there is like a bake offs versus you or somebody else does it.
Eric Ashley Brock: So the initial demand here is clearly going to be for military use cases, and that's where our first orders will come from. And we believe with this customer that we have a substantial growth opportunity. Now, I'd also say we're seeing quite a bit of interest from other governments, homeless security groups, and defense groups as well. So that's where you're going to see us play.
Speaker Change: Yeah. So the initial demand here is clearly going to deal with military for military use cases, and that's where our first orders will come.
Speaker Change: And we see we believe with this customer that we have substantial growth opportunity.
Speaker Change: Now I'd also say, we're seeing quite a bit of interest from other governments homeland security groups and defense.
Speaker Change: Groups as well.
Speaker Change: So that's where you're going to see us play and we feel specifically for the counter UAS platforms at intercept hostile drones that the specifications that were bringing to the table and the reliability of that.
Eric Ashley Brock: And we feel specifically for the counter U.S. platforms that intercept hostile drones, that the specifications that we're bringing to the table and the reliability that we're demonstrating that we have a best-in-class product. The market for counter drone systems is big and growing very rapidly, so we think we're well-positioned there to build a very nice business, and that's going to start now after a lot of effort.
Speaker Change: We're demonstrating.
Speaker Change: That we have a best in class products. So the.
Speaker Change: The market for counter drone systems is big and growing very rapidly.
Speaker Change: So we think we're well positioned there to build a very nice business and that's gonna be starting now after a lot of effort.
Eric Ashley Brock: And maybe the same question on the optimist, just when you're competing for torts and that kind of stuff, is it, you know, are you the kind of go-to solution that people just need to convert to becoming drone operators and users type thing, or are there oftentimes two or three competitors going for that business, and you're having to compete on, you know, either features or price or anything like that?
Speaker Change: Oh, great maybe a quick question on the optimists, when you're competing for for for ports and that kind of stuff is it.
Speaker Change: Or are you going to kind of go to solution that people were just need to convert to C to be coming.
Speaker Change: Drone operators users type thing or is there a is there anything.
Speaker Change: Just two or three competitors going for that business in.
Speaker Change: We're having to compete on.
Speaker Change: The features or price or anything like that.
Eric Ashley Brock: So, I guess I'll share with you how I look at it. The solution we offer from a reliability and functionality standpoint is really unmatched. We can provide security and intelligence, we can do it 24 hours a day, seven days a week, and that's an incredibly valuable solution. We do see quite a bit of activity in these markets using drones, but most of them are piloted single-purpose. They don't have the persistency and, again, the intelligence, and the range of solutions we can bring from an analytics standpoint. So as you see spending grow with the value of the drone being realized and incorporated into workflows, I think that what we're doing is extremely competitive, and I think that
Speaker Change:
Speaker Change: So it's so I guess I'll just share with you how I look at it is.
Speaker Change: The solution, we offer from a reliability and functionality standpoint.
Speaker Change: He's really unmatched.
Speaker Change: We can provide you a security intelligence, we can do it 24 hours a day seven days a week and that's incredibly valuable.
Speaker Change: Illusion we.
Speaker Change: We do see quite a bit of activity in these markets are using using drones, but most of them are piloted a single purpose. They don't have the persistency and again.
Speaker Change: You know the intelligence the range of solutions, we can bring from an analytics standpoint.
Speaker Change: So as you see spending grow with.
Speaker Change: The value of the drone being realized and incorporated into workflows.
Speaker Change: No I think that.
Speaker Change: Doing is extremely competitive.
Speaker Change: And I think that we're gonna be helping drive growth in these markets. So I like our position.
Glenn George Mattson: Okay, great. Thanks for the call, guys. Thanks, Glenn.
Speaker Change: Okay, great. Thanks for the color guys.
Glenn George Mattson: Thanks Glenn.
Operator: Our next question comes from Carter Mansbach with Ford Capital Group. Please go ahead.
Speaker Change: Our next question comes from Carter Man Spark with foreign Capital Group. Please go ahead.
Speaker Change: Good morning, guys.
Carter Mansbach: So I guess congratulations on the $2.8 million commuter. Is there any way that we can know the name of the company that you signed this contract with?
Speaker Change: So I guess congratulations on the 2.8 billion dollar computer is there any way that we can know the name of the company that you signed this contract with and if not why.
Eric Ashley Brock: And if not, why not?
Carter Mansbach: So what I'll say is that there, let me give you some background on the Requests for Proposals that came from a couple of different places on the Northeast Corridor, including Amtrak. And those are publicly disclosed RFPs.
Speaker Change: Well, what I'll say is that there let me let me give you some background on on the the request for proposal.
Speaker Change: The key from a couple of different places in the northeast corridor, including Amtrak and those are public we.
Speaker Change: Disclosed rfps.
Eric Ashley Brock: The engagement we've had is coming with our partner Siemens, so this order for us comes from Siemens. And Siemens is very active with all the Northeast Corridor customers, so I don't want to say specifically about Carter. But it's a radio for a key Northeast Corridor customer, and we believe that the Northeast Corridor rails, which include MBTA, New Jersey Transit, Long Island Rail, MTA, and Amtrak, as well as certain freight rail operators like CSX, will be, you know, the target for this radio. And it's important to also understand that this radio is being developed because the legacy radio is end-of-life and has been discontinued.
Speaker Change: Because the engagement we've had Ah is coming with a partner.
Speaker Change: Siemens.
Speaker Change: So this order that from us for us comes from Siemens.
Speaker Change: You see this as very active with all of the northeast corridor customer. So I don't want to say specifically Carter.
Speaker Change:
Speaker Change: But it's a radio for.
Speaker Change: A key northeast.
Speaker Change: Quarter customer and we believe that the northeast quarter rails, which includes MPT, a new Jersey Transit long Island rail MTA and Amtrak.
Speaker Change: As well as.
Speaker Change: Certain.
Speaker Change: Freight rail operators like C S X.
Speaker Change: There'll be a target for this radio.
Speaker Change: And it's important to also understand that this radio being developed because the legacy radio.
Speaker Change: The agenda of licensee has been discontinued.
Carter Mansbach: That's helpful. So this AAR conversation has been floating around. You guys mentioned it. Tim mentioned it. So the number in that article or that piece was 69 million. So what part of that action could it be?
Speaker Change: Okay. That's helpful. So, let's AAR conversation that's been floated about you guys mentioned that Tim mentioned it. So the number in that article or that piece was 69 million. So what piece of of that action is could be.
Speaker Change: Towards this.
Eric Ashley Brock: So I can't talk specifically about those numbers because those are AAR numbers and, you know, they calculate themselves. But what I will say is that in the new A-band, as they call it, the new 900 megahertz frequency, we are, as far as we know, the only radio that's certified, the only system, wireless systems, that's certified by the FCC to operate.
Speaker Change: So I can't talk specifically about those numbers because those are our numbers and you know they they calculate themselves what I will say is that in the new.
Speaker Change: A ban as they call it the new 900 megahertz frequency.
Speaker Change: That we are as far as we know the only radio that has certified the only system wireless systems as certified by the FCC to operate.
Carter Mansbach: Okay, all right, last question regarding this. The spinoff of the drone industry business, can we get any type of feel as to what the time frame is? Because you said it in the last call, I don't understand it. I think investors don't understand how logistically that's going to happen. Can you give us any color as to how it's going to happen and when you're going to be discussing it further?
Speaker Change: Okay. All right last question regarding this.
Speaker Change: Spin off of the drone industry business can we get any type of feel as to what the timeframe is.
Speaker Change: You said it in the last call I don't understand it I think some investors don't understand how logistically that's going to happen can you give us any color as to how it's going to happen and when youre going to be discussing it further thanks.
Eric Ashley Brock: I can't give you specifics on that. What I did say, and I'll reiterate, is that conversations with investors are active. And I'll say there are a variety of scenarios that could play out today and in the future, which involve investment and potentially spinning the company off into a separate entity.
Speaker Change #100: I can't I can't give you specifics on that what I did say and I'll reiterate is that our conversations with investors are active so.
Speaker Change #100: And I'll say this.
Speaker Change #100: A variety of scenarios that could play out today and in the future, which revolved investment and potentially spending the company off into a separate entity.
Carter Mansbach: Okay, thanks. I appreciate it. Our next question comes from Mike Lattimore with Northland Capital.
Okay. Thanks I appreciate it.
Speaker Change #100: Workforce.
Operator: Our next question comes from Mike Lattimore with Northland Capital. Please go ahead. Hi, this is Aditya on behalf of Mike Lattimore.
Our next question comes from Mike Latimore with Northland Capital. Please go ahead.
Speaker Change #101: Hi, This is <unk> on behalf of Mike Latimore.
Aditya Dagaonkar: Could you give me some?
Speaker Change #102: Can you give some color on what kind of revenue mix between autonomous systems and that would be expect for this year.
Eric Ashley Brock: Well, I would say the outlook for the year is our Autonomous Systems Business Unit will likely have higher revenue than Ondas Networks, but I don't want to forecast. Got it.
Speaker Change #103: Ah well.
Speaker Change #104: Say the outlook for the year is our autonomous systems business unit will likely have higher revenue.
Speaker Change #105: Been honest networks, but I don't want to forecast the mix.
Speaker Change #104:
Aditya Dagaonkar: And also, could you give some color on what the average selling price is for your counter drones? We're not disclosing that at the moment for competitors. All right, I will tell you that we believe it.
Speaker Change #106: Got it and also could you give some color on Oh, what does the average selling price on your condo drones.
We're not disclosing that at the moment.
Competitive reasons.
Speaker Change #106: Alright.
Speaker Change #107: We believe it's going to you know this this is very valuable product.
Speaker Change #107: It's at price points that are very competitive.
And I think lower than other systems, we see out there.
Speaker Change #107: And that we can deliver it at a very attractive margin.
Speaker Change #108: Got it thank you.
Speaker Change #108: Thanks.
Operator: Our next question comes from Matthew Galinko with Maxim Group. Please go ahead.
Speaker Change #109: Our next question comes from Matthew the Linker with Maxim Group. Please go ahead.
Matthew Evan Galinko: Hey, good morning. Thanks for taking my questions. I'm wondering how much custom integration work you expect to be required as the RADAR is sold to other military and defense applications.
Speaker Change #110: Hey, good morning, Thanks for taking my questions I'm wondering how much custom integration work you expect.
Speaker Change #111: To be required as the readers sold to other military and defense applications.
Eric Ashley Brock: Good question, Matt. I don't think we necessarily have a lot of work to do on the system itself, right? So the UAV and the docking station. However, when we go to other markets, there may be different detection technologies. And, you know, when we talk about detection, we're typically talking about radar systems, or radar systems, I'm sorry. So if we have a different radar system, we need to integrate it into that radar system, which is a pretty straightforward process and not necessarily very costly.
Speaker Change #112: Good question, Matt I don't think we necessarily have a lot of work on the system itself right sort of UAV.
Speaker Change #112: And the the docking station.
Speaker Change #113: However, when we go to other markets there may be different detect technologies and yeah. When we talk about detect particularly I'm talking about radar radar systems.
Speaker Change #113: Or radar systems I'm sorry.
Speaker Change #113: So if we have a different radar system, we need to integrate into that radar system.
Speaker Change #113: Which is.
Speaker Change #113: It's a pretty straightforward process and not necessarily very costly.
Matthew Evan Galinko: Got it. Okay. And then I guess a follow-up to that is just given some of the supply chain hiccups you've seen on the optimistic side. Thank you, or How Do You Navigate?
Speaker Change #114: Got it Okay, and then I guess a follow up to that just given some of the supply chain hiccups, you've seen on the optimist side.
Speaker Change #115: Do you expect.
Speaker Change #116: Or how do you navigate.
Eric Ashley Brock: Any limitations or ongoing, you know, limitations when it comes to scaling up the Raider business?
Speaker Change #117: Any limitations are ongoing.
Speaker Change #118: No limitations when it comes to scaling up the reader.
Speaker Change #117: Business.
Eric Ashley Brock: Good question. So the current plans are to produce the Raider in Israel, and as we access customers globally, we're likely to produce in other regions as well. But I would tell you that the complexity of the radar system is dramatically less than what we see with the Optimist.
Speaker Change #119: Yeah. Good question. So the current plans are to produce the rider.
Speaker Change #117: Israel.
Speaker Change #117: And as we.
Speaker Change #117: Access customers globally were likely to produce another other regions as well.
Speaker Change #117: I would tell you that the complexity with the radar system is dramatically less than what we see what the optimal system.
Eric Ashley Brock: And that's from a bill of materials and a build standpoint. So we think we've got this current, the orders that we're tracking now, we think we can produce, and we've identified the plan to do that. But again, I do think, I'll say this for both Optimus and Raider, we will have plans to build in other parts of the world. And we'll add more specifics to that when we're ready to do that.
Speaker Change #117: Basketball Bill of materials in our build standpoint so.
Speaker Change #117: So we think we've got a this.
Speaker Change #117: This card.
Speaker Change #117: The orders that were tracks now we think we can produce oh, we've identified a plan to do that.
Speaker Change #117: But again I do I do think I'll say this for both optimism and in radar.
Speaker Change #117: We will have plans to build in other parts of the world.
Speaker Change #117: We'll have more specifics to that when we're ready to do so.
Speaker Change #117: Yeah.
Matthew Evan Galinko: Great. And I guess my final question on that thread is, you know, just looking at 2025. I know you're not, you know, giving a 2024 outlook, but, you know, relative to how you see demand on the autonomous side developing on both the Optimist and Raider sides, do you expect that Raider could pull through in 2025 that outpaces Optimist? Or is it going to be a more gradual up
Speaker Change #120: Great and I guess final question on that thread.
Speaker Change #117:
Speaker Change #121: Just looking out to 2025, I know you're not.
Giving a 2024 hour book, but.
Relative to how you see demand.
Speaker Change #121: On the autonomous side developing on both the optimistic side.
Speaker Change #121: Do you expect that rate or could have.
Speaker Change #121: Pull through and twenty-five that that pace out pays adopt minutes, where is it going to be a more gradual.
Speaker Change #121: Uptake gray.
Eric Ashley Brock: Great question. So I believe 2025 for both platforms is going to be significant. I think that I would say Optimist will still be larger from a revenue standpoint, where we're gonna see revenue driven through existing customers and fleet adoption. But as we're moving this year through 2024, you're gonna see a number of very significant customers engage, which will start to turn into fleets in 2025 as well. So there's a lot of pent-up demand for what we're doing here with Optimist.
Speaker Change #122: Great question. So I believe 2025 for both platforms is going to be significant.
I think that.
Speaker Change #122: I would say optimists will still be larger from a revenue standpoint, where we're going to see revenue driven is through existing customers and fleet.
Speaker Change #122: Adoption, but as we're moving this year through 2024, you can see a number of.
Speaker Change #122: Very significant customers engage.
Speaker Change #122: Which will start to turn into suites and in 2025 as well so.
Speaker Change #123: So theres a lot of pent up demand for what we're doing here with Artemis same time same thing with greater.
Eric Ashley Brock: Same time, same thing with Raider. So Raider will expand with an existing customer is our strong belief, but we think we're going to be able to engage other homeless security and defense groups. And you add it all up, you know, given the revenue models, I think I think Optimus will probably still be larger than Raider, but they're both going to grow significantly.
Speaker Change #123:
Speaker Change #123: So later.
Speaker Change #123: Will expand with the existing customer is our strong belief.
Speaker Change #123: But we think we're going to be able to engage other homeland security and defense groups.
And you add it all up I you know given the.
Speaker Change #123: The revenue model. So I think I think Optimus will probably still be larger than greater but they're both going to grow significantly.
Matthew Evan Galinko: Great, thank you. Again, if you have a question...
Speaker Change #124: Great. Thank you.
Speaker Change #124: Sure.
Operator: Again, if you have a question, please press star then 1. This concludes our question and answer session. I would like to turn the conference back over to Eric Brock for any closing remarks.
Speaker Change #125: He has a question. Please press star then one.
Speaker Change #125: This concludes our question and answer session I would like to turn the Congress back over to Eric Brock for any closing remarks.
Eric Ashley Brock: Okay, thank you, operator. I'm just going to close the call by simply thanking you again for attending. We have a lot of work ahead, and we're going to get right back at it. And I look forward to keeping you informed on our progress. I hope you have a great day.
Eric Ashley Brock: Okay. Thank you operator, I'm just going to close the call by simply thanking you again for attending our we have a lot of work ahead, and we're going to get right back at it and I look forward to keeping you informed on our progress I Hope you have a great day.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
Speaker Change #126: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.