Q2 2025 Red Cat Holdings Inc Earnings Call
Thank you.
Speaker Change: Leah, do you have a copy of the disclosure? Yeah, I was just going to say, why don't I get our opening remarks going for Stan here? So, why don't I welcome everybody and then hopefully Stan jumps in here and
Speaker Change: Thanks again, everybody for joining us for our call for the.
Speaker Change: The last parts of 2024 as we switch to our new calendar year in 2025. I'm going to have Leah start with some of the disclosure stuff. She'll then hand it off to me.
Speaker Change: and we'll get moving here. We got a lot to talk about. So, Leah, can you read the disclosures for us? Yeah, thanks, Jeff. So welcome everyone to the Red Cat Holdings fiscal 25 second quarter financial results and corporate update conference call.
Speaker Change: After today's presentation, there will be an opportunity to ask questions. To ask a question, you just can submit it through the Zoom Q&A function. Hopefully Stan will be back in to moderate that. Participants of this call are advised that this conference call is being recorded for playback purposes.
Speaker Change: So joining us today from Red Cat Holdings are Jeff Thompson, Chief Executive Officer, myself, Leah Lunger, Chief Financial Officer, and Jeffrey Hitchcock, Chief Revenue Officer.
Speaker Change: During this call, management will be making forward-looking statements, including statements that address Red Cat's expectations for future performance or operational results.
Speaker Change: Forward-looking statements involve risks and other factors that may cause actual results to differ materially from these statements.
Speaker Change: For more information about these risks, please refer to the risk factors described in RedCat's most recently filed periodic reports on Form 10-K and in RedCat's press release that accompanies this call, particularly the cautionary statements in it.
Speaker Change: It is now my pleasure to turn the call over to Jeff Thompson, Chief Executive Officer. Jeff, go ahead.
Jeff Thompson: Thanks, Leah. Well, so just a little bit of housekeeping again, as we usually start off, like I said, we have a lot of fun stuff to talk about.
Jeff Thompson: today's news and a few other great things that are happening and Jeff's updates and a little bit more color on guidance, but not all of it's gonna be super fun. We do have a little bit of sad news and I'm gonna hand this over to Leah for a second here.
Leah Lunger: Thanks, Jeff. So I'm just going to take this opportunity to inform everyone that I have resigned as CFO of RedCat due to family reasons.
Leah Lunger: Just to share a little, one of my children has a disability and his needs have increased such that I can no longer devote the time required to do my job well. This has been an extremely difficult decision to say the least.
Leah Lunger: I'm very sad to be leaving, especially such an exciting time for the company, but I've chosen to prioritize the needs of my family and truly the needs of the company. On a more positive note,
Leah Lunger: I'm also actually five months pregnant. So we've been planning for, you know, some kind of interim support after I have the baby. You know, so now with this change, we're just kind of accelerating that timeline. Jeff, I'll let you add anything that you want to that.
Jeff Thompson: Thanks. Yeah, this is, you know, we're sad to see you go, Leah. You know, we have, the only good news out of this is that we do have a bunch of candidates that we've been talking to to help when Leah had the baby. There's some great CFOs with some industry expertise in the drone space.
that have been doing it for quite some time. So,
Jeff Thompson: I think this is going to be, you know, we're going to be okay. We're going to miss Leah, but we have been kind of planning for this. We're just going to have to accelerate everything.
Jeff Thompson: So, with that, I'm going to kind of move on into some of the stuff that's happened mostly today. I've been on the phone all day. Everybody wants to know about what's what's going on with this new partnership that we did with Palantir.
Jeff Thompson: And it is really amazing. We've been working with these folks.
Jeff Thompson: since AUSA in DC. And what we are doing now is we're taking the Black Widow, which is the winner of SRR SoulSource,
Jeff Thompson: which is going to be, you know, 12,000 drones out there. And we're partnering with Palantir's Visual Navigation.
Jeff Thompson: and their artificial intelligence, MAVEN or MAVEN, I always say it wrong.
Jeff Thompson: So this black widow is going to be one of the most capable birds ever fielded by the DOD.
Jeff Thompson: and it fits in your rucksack. I keep saying that all day long. So this drone has the capability to identify objects. Well, let's just go back to some of the high-level stuff and Jeff will dig into this because he's been selling drones forever.
Speaker Change: The two biggest problems that you're going to face when you're at a battlefield right now is EW.
Electronic Warfare, which we actually have some
Speaker Change: Great testing that we've done and completed in the EW World of Doodle. And again, Jeff will dig in a little deeper. And GPS, GPSs don't work in any battlefield.
Speaker Change: They're basically useless. Our goal is to not even ship a GPS on the Black Widow in the future and just continue to utilize visual navigation. The visual navigation that Palantir has is unlike no other.
Speaker Change: There's 40 companies out there trying to do this right now, but they have access to real-time capabilities in the satellite images
Speaker Change: So if you're in a battlefield and three of the buildings disappear and the road disappears, most visual navigation will not work anymore. We can get real time updates to that mapping that you're comparing the visual, what the camera sees to what the map you have on board the Black Widow.
Speaker Change: So, so this thing is going to be very difficult to defeat in the battlefield, and when you add our strike capabilities, you're really giving a warfighter something that's going to make them safer and more lethal.
Speaker Change: So that's a really great thing that just happened and we finally announced it today, but we've been working on this for quite some time. They're already working on the drones and integrating this. So, a lot of good stuff is going to happen there. The other question we get with this deal is, you know, how does this work financially?
Speaker Change: This is just going to add additional revenue to each drone that we sell. We haven't put the pricing out yet, we haven't put out the revenue share that we're working with Palantir.
Speaker Change: But this is going to be very high margin software that's going to go on every bird that people want visual navigation, specifically visual navigation that we believe is going to be the best.
Speaker Change: in the drone space. So this is going to be an add-on. It'll bring our margins up even once we get to the 50% gross margins with just the hardware side. This software will add to our margins and hopefully accelerate our path to profitability.
Speaker Change: I'm just going to touch on guidance a little bit because we'll be coming back to it, and we upped our guidance from 50 to 55 million goalposts, and we put some kind of wide goalposts out there, 80 to 120.
Speaker Change: So that's basically, you know, adding what we think SOR-related revenue is going to be to the total. The wide goalposts are, you know, we're not completely into all the contracting that we need, which will be happening in the next few weeks.
Speaker Change: We will be probably having an analyst day in New York in early January. We're hoping to pin it down before tonight.
Speaker Change: So we'll be actually giving an update just in a few weeks after the holidays, and we'll be able to give you more detail on all the contracts that we've been signing, and maybe firm up those goalposts a little bit for everybody. But with that, I am going to hand it over to Jeff Hitchcock, our CRO.
Speaker Change: Thank you, Jeff. Thanks, everybody, for joining. I'm looking at the numbers. It's astounding that we have like 1.1. We have 1100 people watching this right now. It wasn't too long ago. It was 10 or 12. So thank you all for joining. I do want to take a minute and thank Leah.
Speaker Change: for everything she's done for the company up to this point. I wish her the best. I understand her reasoning for it, but it does make me sad. She was a joy to work with.
Speaker Change: Hopping into a little bit of what we've got going on. So, first and foremost, since the SRR announcement about three weeks ago.
we have been inundated by customers requesting.
Speaker Change: quotes and pricing in response to RFPs, both through DoD, USG and internationally. And I think as of Friday, the quotes that have gone out the door right around 14.7 million, this is
Speaker Change: No SRR customers. This is all Black Widow customers. Preponderance of those are going to be U.S. DOD.
but they're doing budgeting.
Speaker Change: Now, so when the CR ends, they can pull the trigger on that. So we're super excited about that. We're getting great demand signals globally on the new platform. So we're super excited about that. And then again, as I stated, when the CR ends and the budgets are allocated out to the individual entities, we expect the triggers to start getting pulled on those.
Unknown Speaker
Speaker Change: We have been in discussions with the Army since the award. Right now, we responded to their request for a R&D, six-month R&D contract. We're expecting to kick that off. That's to finish up some of the hard stuff, visual navigation being one of them. We're expecting that in the January timeframe for award.
Speaker Change: We have the short-range reconnaissance contract kickoff briefing scheduled for some time in January. That's when we're going to get a lot more understanding of what initial LRIP and full-rate production contracts are going to look like.
Speaker Change: So over the next couple of months, we'll have some answers for you right now. We're still don't know until we have to sit down. Right. But again, that's supposed to be scheduled in January sometime. And we'll keep you guys updated on that.
Speaker Change: As Jeff was talking about the Palantir announcement that went out today, right? We've been looking at a lot of companies and this is one of the hardest.
Speaker Change: remaining problems to solve that the Army had requested, which is both day and night visual navigation.
Speaker Change: Palantir has been a market leader in this space for a while and the fact that they're bringing it down to a platform our size.
solves the GPS problem and
Speaker Change: I do honestly feel that a day will come where we don't need GPS at all, and we're just flying visual based navigation. And that would, that'll make us all domain, all weather, day and night, ability to navigate safely and accurately, and make us more lethal on the battlefield.
Speaker Change: The other problem, that was one of two problems, right? The GPS jamming or GPS contested environments and then the RF jamming contested environments.
Speaker Change: and we've, you know, our partnership with Doodle Labs is very strong. They offer something in our space.
Speaker Change: with their frequency hopping sense software where it's not actually hopping within a band, it's hopping within six radio bands.
Speaker Change: So, makes it very hard, very difficult to jam. So, again, to kind of reiterate, Palantir, we're going to be working very hard. I think we're going to
Speaker Change: I think it's going to take us about six months. Jeff, you can pipe in. I think it's going to take us about six months before we're showing to the Army that software. They're very excited. We're very excited.
Speaker Change: But I think it's going to be a going to be a good year. Lots of work still to do. The work continues, but we will have the most dominant platform in this market space globally when we get these disintegration done.
So rather than that, I'll wait for your questions later.
Speaker Change: Before we hand it off to Leah, I just want to, you know,
Translates some of the Army speak from Mr. Hitchcock.
Speaker Change: The CR, he's talking about the continuing resolution on budgets, so that money is going to be loosened up pretty soon, it just needs to be signed.
Speaker Change: on some of the contracts he was talking about. Again, we're getting additional new found money. It's going to be approximately three million, Jeff, I think you said that we're going to get in January for these new features.
Speaker Change: LRF starts again, continues to still start the first half of 2025, full rate production still starts in the second half of 2025. And since I'm the guy that's been dealing mostly with Palantir.
Speaker Change: We're going to have the software on that drone a lot quicker than that. We're hoping to demo it in just two months to the public.
So we will have it ready for LRIP.
Speaker Change: That software will be ready. Now, another exciting point is once we have it integrated fully onto the BlackWidow, we're going quickly right on to the flight Edge 130, probably be into the Trikon version when we put visual navigation on there, because we'll be putting the Doodles technology on the Edge 130, so it'll also be able to do EW.
Speaker Change: and go through GPS denied locations, the two hardest things to do on a battlefield with small drones, and we have that cured. And not only that, we have artificial intelligence from the best artificial intelligence in the world.
on our drone. It's really great.
Leah Lunger: So with that, I'm going to hand it off to you, Leah, take it away. All right. Thank you, Jeff.
Leah Lunger: Before I dive into the financial highlights of our 2nd fiscal quarter, I just want to remind everyone that we're changing our fiscal year end from April 30th to December 31st.
Beginning December 31st, 2024.
Leah Lunger: So today we're reporting quarter two results for the six months ended October 31st, 2024 in accordance with our previous fiscal year.
Leah Lunger: Our next report will be a transition report 10K for the eight months ended December 31st, 2024. After that, all future filings will be based on calendar year.
We're kind of in this middle transition phase.
Leah Lunger: Year-to-date revenues totaled $4.3 million compared to $5.7 million for the same period last year.
Leah Lunger: This is a 24% year-over-year decrease and it's due to the company's strategic decision to focus on Black Widow. While we're still selling the TL2, we have dramatically shifted manufacturing and sales efforts to prepare for mass production of Black Widow in calendar 2025, prioritizing long-term growth over short-term revenue.
Leah Lunger: Similarly, gross margin year to date was negative 12% of revenue compared to positive 25% in the same period last year.
Leah Lunger: This was primarily due to the final delivery of the prototypes for the SRR Trunch 2 program at the start of the fiscal year.
Leah Lunger: Also our focus on Black Widow and Webb led to lower than planned production quantities of TL2 which resulted in lower than targeted growth emergence.
Leah Lunger: In spite of this, our efforts have been successful, and we're thrilled to have been selected as the winner of the U.S. Army's Short-Range Reconnaissance Program of Record.
Leah Lunger: We plan to, we've said this before, but we plan to produce a Black Widow for several years, steadily increasing margins over time. Additionally, during quarter two, we closed the acquisition of FlightWave, adding the Edge 130 to our product mix.
Leah Lunger: So now with our family of systems, we expect to reach up to 50% gross margins in the future under mass production.
Leah Lunger: So cash used in operations totaled 12.5 million representing an 11% increase compared to the same period last year. This is similar, right? In the second fiscal quarter, we began to increase staffing and other resources to ensure our ability to fulfill the demands.
Leah Lunger: of not only the Army contract, but also other fields of Black Widow, Webb, and the Edge 130 that we anticipate in the future.
Leah Lunger: We ended the quarter with $5.7 million in cash and accounts receivable and have since closed an additional $6 million financing. So we're still evaluating our long-term cash needs as we prepare for future growth.
and with that I'll turn it back over to Jeff.
I should specify, me and Thompson. Okay, yeah, great. So,
Leah Lunger: We're kind of moderating ourselves here, the practice round, it was much easier when Stan was guiding us around here. You know, I can take questions, Jeff, if you want. I've got that pulled up, so I can do that. Right, yeah, he just emailed me a bunch of the ones from some of the analysts on there. But let me just also just kind of round up, because I bet you all the questions that are going to be coming in are about fundraising. So, as Leah just said, we've got cash in the bank by the end of the quarter, we just closed on $6 million worth of funds.
Leah Lunger: We got some more cash. We got about possibly 3 million coming in January from the new features on the Army. We believe that the debt holders have warrants that are not cashless, that are way in the money. We expect them now that their shares are registered.
to probably exercise those, that's another five million. So.
Leah Lunger: We are very healthy to wait till we need to make a decision to hopefully raise as little money as possible.
Leah Lunger: As we also have been notified to that we should be applying for the Office of Strategic Capital, which does loans between 10 and 150 million they just
Leah Lunger: Appropriated $998 million for that program. It's available now. We're applying for it in early January. We're supposed to know by the end of February, early March, if we can receive that $10 to $150 million. They only want to give it to $10 to $15 million.
10 or 15 companies.
Leah Lunger: there's about 15 categories. I think we we check off six, six or eight of them. We're a perfect candidate. We have a program of record. So we hope that we can get that strategic capital is very low interest. And there's also
Leah Lunger: You can read it. It's all out there publicly that they can you can also waive repaying the loan for years. So it's very grant like type of
funds. So we've got plenty of ways to access capital.
Speaker Change: I want to touch more on the relationship with Palantir. Can you talk further about how that came along? How much collaboration was done before? How much integration still has to get done? And was the relationship driven by customer asking for the two of you guys to work together?
Speaker Change: That's a great question. We are actually going to be working with a joint customer that requested this technology on one of our drones.
Speaker Change: I'll just leave it at that. We've been working with them for, like I said, since AUSA in early September, and we hope to have this complete in the next couple of months for at least initial testing. So this is moving pretty quickly.
Um.
Speaker Change: Also, is there upside from Palantir built into the guidance and if not, can you frame how much upside it could provide?
Speaker Change: Well, that's actually a good question. So we did give guidance of 80 to 120 million.
Speaker Change: That does not include any additional revenue on each Black Widow drone that will probably, I think, I don't think anyone's not going to want to take this software.
Speaker Change: So, it'll be additional revenue on every drone that you get this Palantir VisNav and artificial intelligence on every single drone. So, that will add to our guidance, but this is a relatively new situation. We haven't given pricing or any details yet. So, once we have those pricings, that will add.
to the to the guidance.
Speaker Change: The next question is in terms of funding can you just remind me the time your latest assumptions or needs of investment either OpEx or CapEx?
Speaker Change: Level of Commitment, DOD. I think we, I covered that a little bit, but again, we are trying to wait and find out what type of upfront payments we'll get for LRIP and full rate production. And as I just mentioned that we have the capital to get through that part.
Next question.
Ashok Kumar from Think Equity
Speaker Change: Would you expand on the previous question of what revenue for drone we can expect with AI software from Palantir?
Speaker Change: Oh gosh, I knew everyone was going to want to know that. We don't have the per drone revenue number yet. We hope to get there as quickly as possible. We'll let the street know. Obviously, software has very high margins compared to hardware, and we're hoping to get to that 50% gross margins as we continue to stamp out the Black Widow. As soon as we know, we'll let you know.
Speaker Change: When do you think the flight wave factor will be up and running?
Speaker Change: That's a good question. So we are just starting to move in now. We just signed the lease.
We hope to have a, you know,
Speaker Change: More of a startup style factory in about three or four weeks where basically they're sitting on top of each other in their office right now. They'll be able to spread out, put a bunch of tables out there and just get a production line that's that's mapped out and then.
Speaker Change: It'll look like a real factory like the teal factory, hopefully in about two months. So we are trying to meet some goals that they have at the with all the orders they have they've
Speaker Change: They've got orders for almost 250 drones already. So we need to build them and ship them. So we hope to ship them in Q1. So.
Speaker Change: It'll be up relatively quick. And will we be adding the Palantir software to the Edge 130? Yep, I did mention that earlier, yes. Once we're done with the Black Widow, we're going to move right to integration on the Edge 130.
Next question.
Kevin Mack of Creek Drive, Capital
Speaker Change: You said Black Widow was basically built to spec for the Army SRR program. How do you expect to adapt it for winning non-Army business in the United States, i.e. law enforcement and first responders, etc.?
Speaker Change: This is a really good question because there's actually some, some other things that we were going to bring up later. So,
The band of DJI and Autel.
is past the house.
Speaker Change: and I'm not sure if the Senate's voted on it yet, but when this new NDAA bill goes through.
Speaker Change: It usually goes through on December 20-something for the last two years.
DGI and Autel will be banned.
Speaker Change: within a year. So you will not be able to get Chinese drones anymore.
Speaker Change: Now what that does, you know, Brendan who does our, you know, government work. If we were the numbers that we have been able to derive from, from the customs holding the holding the DJI equipment in customs, we think that there's going to be a tam of about $975 million.
Speaker Change: Once this DGI ban is put in place, and as Kevin's question was, we did build the Black Widow specifically for the warfighter, specifically for the requirements that the Army gave us.
Speaker Change: But in the past, we've done the same thing. And we have first responders, border patrol, almost every agency.
Speaker Change: is either has a TL2 or is asking for a black widow right now.
Speaker Change: So, you know, these do work for first responders and could work for law enforcement. So, with that TAM of, you know, 975 million, I'm going to be very generous to
one of our competitors if Skydio gets
Speaker Change: two and we get one for every of these of that TAM, that could be a big market that we weren't looking at. And frankly, we were ignoring it while we focused on the Army. So that's a massive TAM that we are going to put some efforts towards now that DGI and Autel are going to be banned. Great question, Kevin.
Unknown Speaker 0.0.
Speaker Change: Tim Whitecrow from Alpha Wolf Trading. Is ARCAC going to be presenting at any investment conferences in January and February?
Speaker Change: Yeah, we've been invited to quite a few we've been invited to so many things the last few days. We will get our conference schedule out right after the holidays, but there's going to be quite a few of them and they're going to be some, some, some bigger banks than last year. I'll just say that.
Here's one of the
Speaker Change: emails, I mean chat that came in that I just got forwarded.
Speaker Change: listened to the AV-AV, half aero environment, FY call and they said that small drone business is difficult.
Speaker Change: Referencing RCAP financials and that's why they did not participate in SOR.
Speaker Change: Well that's interesting. Well if they're looking at our financials right now we haven't shipped a single SRR drone so look at our financials in two quarters and I think you'll realize when you have a product like this will have 50% margins and now with software on it that's
Speaker Change: better than almost anything in the industry, or better than everything in the industry, I'll just say that. And I will also remind that company that Jeff might have something to say about this, but they did participate in Tronch One.
are now selected.
There you go. They lost. We won. Okay.
Jeff Thompson: So, that's all the ones that Stan keeps feeding me. I will have to go to the live ones as I don't have a feed anymore from Stan. Leah, if you have. I've got this Jeff. Yeah, I can release it. Okay. So.
Speaker Change: From Hassan Kakli, what is the competitive landscape for drones being able to land in the water, recharge, send data, etc. Does anyone else have a partnership with a company like OPTT?
I can address this. So,
Speaker Change: Competitive landscape, there's not much competitive landscape actually for drones being able to land in the water because that has to be a purpose built drone, right? The only reliable one that I know of.
Speaker Change: is Errol Varmundt's Puma, because it was purpose-built. I was there when they did it for Amphibious Ops.
That being said.
Speaker Change: It doesn't necessarily have to land in the water, but if it lands on something that's in the water, and that's the approach we're taking with some hive solutions and and unmanned surface vehicle approaches that we're talking about when we talk about RedCat future initiatives.
Speaker Change: How many people doing that? I don't know anybody actually that's doing that cradle to grave. That's what makes the Red Cat future initiative so compelling.
Right. Great. Thank you. We'll take another one here.
Speaker Change: Apologize if I'm messing up these names but Sambodhi Sarkar says can you please describe how the Palantir contract will help increase growth margins?
Speaker Change: Yeah, it's pretty simple. So if you look at what we've been saying for quite some time in the modeling that myself, Jeff and Leah
have done while we're in...
Speaker Change: You know, the factory in Salt Lake City recently, we do get to about 50% gross margins, just stamping out the same aircraft quarter after quarter.
Speaker Change: So excited that we don't have to switch aircrafts for the first time ever.
Speaker Change: and just build this airframe that's going to be so important to the industry so people can actually put their software on top of our drone now knowing it's going to be there for years not only to the Army but all the other branches.
Speaker Change: and all the other parts of the DOD and MODs across the globe.
Speaker Change: that want this product. So you're 50% gross margins with just hardware. It's hard to get any further than that. You could squeak out a little extra with scale and getting better prices because of the amount of ordering we're doing now and because we're a program of record.
Speaker Change: We move up the list because we're critical to we so we get moved up on the critical chips list and all that stuff. So that helps with margins a little bit. But no, you're not going to get to 70% gross margins with just the hardware side. Add Palantir software that can do visual navigation, which is very difficult to do with real time updates.
Speaker Change: combined with artificial intelligence from someone that's been collecting objects and data from machine learning for 20 years in wars.
Speaker Change: That is very high margin revenue. So if you throw some number, I'm not going to give a number on the software.
Speaker Change: You can do it. $10,000, $20,000 per drone software that can do those things.
Speaker Change: their margins are up near 80, 90%. So you put those software margins, add on to our 50% gross margins, you can dramatically increase the margins going forward, which hopefully gets us to cash flow profitability quicker.
Speaker Change: Thanks, Jeff. Okay, the next question here is from Akshay Rao. Have we seen any movement on NATO and other EU contracts that were awaiting clarity on the SRR award? Any timeline expectations here? Like that he's pointing to Hitchcock. Why don't you answer that for us?
Hitchcock: Yes. Thanks for asking that question by the way. I ask it every day. Yes, there were several.
Speaker Change: NATO countries awaiting the SRR announcement. We are actively engaged with them. Timing we're not going to release at this point.
Speaker Change: as it continues to work through that. Values, we won't either.
Speaker Change: until it continues to work through that, but part of that's at 14.7 over the last couple of weeks. Some of that is for FMS cases, some of it's for direct commercial sales, but we have several opportunities for working in NATO.
Speaker Change: Actually, let me add to this. So, you know, our guidance is, is, you know, the new guidance is with SOR related revenue and, you know, we
Speaker Change: I was going through the weekly forecast with Jeff and his team the other day, and one of the things that they did bring up, and so I'm going to probably scare Hitchcock right now, but we have no idea how to predict foreign military sales. They come in out of nowhere, they come in hot. We had a very...
Speaker Change: large request the other day, but it wasn't for a class one drone, it was for a class three drone, and they thought we had one, but the number was huge. So, but they just coming out of coming out of anywhere. So none of there's no foreign military sales predictions in there. But I'm sure that we'll get some.
Right. And it's important to keep in mind, folks, that.
Speaker Change: Right now we're in the process of doing the first engineering build, which is going to net some marketing assets.
So we haven't even taken Black Widow out.
Speaker Change: to show anybody. So after the first of the year when we have those assets, we're basically going to revisit everybody we've ever visited.
and start that process all over again.
Speaker Change: Most people want to see it and touch it before they buy it, so we're starting to work demo after demo after demo after demo, so I think the numbers are only going to improve, but the fact that we've got 14.7 in quotes out there for somebody that's never even seen it fly, I've never seen that in my 20 years in this space.
So I think it's a it's pretty incredible.
Speaker Change: All right, thank you guys. Another question comes from Christopher Johnson. How does Red Hat Holdings plan to differentiate itself in the drone market, particularly in defense and commercial sectors, and what steps are being taken to secure long-term contracts in both spaces?
Speaker Change: I'll take that as well, Jeff. I'm just gonna hand it to you. Yeah, so right now, right now, focus is getting ready for the SRR program, finishing up the system for
Jeff Thompson: both US and international government work. The next big thing we have to do after that is get RID, remote ID, incorporated into the drone. The board design already has the hooks for that done, but the first thing we're going to do is get it right for the Army, and then we will start looking probably mid-year, getting RID integrated into that.
We're looking at some other things, it would be.
Jeff Thompson: Very disruptive to the community that first responders are going to love. I'm not going to talk much about it right now because I don't want other people to start working on it. But we have an approach. It's going to be very unique to that. And 90% of the 90% of DFR and USG asking for the same thing the military is asking for. Right?
So you can...
Jeff Thompson: If you've got GPS jamming, the Palantir software is going to work both ways. The Doodle radios are going to work both ways. You know, flying in urban environments are always contested. There's nothing but RF blasting, so we're looking at new and creative ways to make sure we're addressing that market as well.
Speaker Change: I'll just add a little bit to that, Leah, before we go to the next question. So, again, we've basically been laser focused on building a drone that's for the warfighter.
Speaker Change: But having a drone and swarm capability or even the smaller hive, which does 12 drones, it can fit in the back of a truck.
Speaker Change: You know, that's think think of the Border Patrol and things of that nature. That's a that's a great way to do those things. But now with the new total addressable market of almost a billion dollars is becoming available and taken away from the Chinese drone manufacturers.
Speaker Change: That's a chunk of revenue that is probably going to be significant, but we've been focused on SOR for quite some time. So all of those locations...
Speaker Change: They could all use a small swarm. They could surround a building. They could do all the things that they want to do for safety. There's a lot of great things. Or you could chase down a bunch of drones in New Jersey. Just kidding.
Speaker Change: But yeah, this new TAM is pretty exciting to us. You know, we will be putting some effort on it and does expand our capabilities for 2025 calendar. So glad I can say that now.
Speaker Change: All right and this next question just came in for Hitchcock so don't even have to throw it to him. From Luca Soja, does a contract with the U.S. DOD limit you from selling drones to foreign countries?
Not at all.
Speaker Change: Not at all. There's going to be a there's going to be a slice that go to our partners.
Speaker Change: and Foreign Countries, right? As long as you're not on a bad boy list, we'll be able to sell to anybody. It'll still be EAR 99.
Speaker Change: So it'll be totally exportable. The Palantir software ad will have to be worked through, right? That may require an export license, but it's not something we're unfamiliar with. So it's just a matter of getting that approved through state. But yeah, what we're developing for SRR, there will be a slice of that that we'll be able to sell internationally.
Great, thank you.
Speaker Change: All right, next question from George Raymond. I think this might be the last one, but yeah, we'll see. Can you address sentiments of the future administration and how it might affect the size of contracts or volume of contracts available?
Speaker Change: Well, I can start with that. And if Mr. Hitchcock has any more he wants to add to that. So there's been
Speaker Change: A lot of talk from this administration how they don't like big exquisite machines that cost tens of millions of dollars when you can buy drones like ours that are probably more capable than any drone ever fielded and now it fits in your rucksack and costs a lot less.
Speaker Change: We fit perfectly into the efficiency models to make soldiers better, safer, more lethal. And this administration has said many times now, specifically in the last couple days, how they want to build the largest drone and robot army in the world.
Speaker Change: So that's one great thing that we think is going to be very good for us going forward. And we do have a good relationship. My other company that I'm on the board of, I'm one of the founders, is UMAC. We actually have Donald Trump Jr. on our board as an advisor.
Speaker Change: They're really excited to bring U.S. manufacturing back into the United States in the drone space. They've got a 1989 capital, 1789 capital, sorry, when the Constitution was finally ratified.
Speaker Change: So I think that this administration will be great for Red Cat.
I think that's the last one, Leah.
Speaker Change: Yeah, and I just want to say, you know, if we missed your question, I do apologize, because we're kind of trying to sift through everything here, we will continue to improve in this new format that we're, that we're digging into here. So, I think that will end our question and answer session and Jeff, if you just want to have any final closing remarks.
Jeff Thompson: That would be great. So let's let's just do a little bit of review here. So we're pretty darn excited. We don't have to talk about possibly weighing anymore. It's so nice to not have to say that.
Jeff Thompson: We want a sole source contract. We're getting some extra cash from that contract to do a few more features that we'll get in January. We'll start LRIP. We got the kickoff meeting for LRIP in January at Salt Lake City, which is great. Love seeing all those guys and Mr. Hitchcock will be there taking care of that. And then we go from LRIP to full rate production.
Jeff Thompson: with the Black Widow. And now the Black Widow has a lot more capability. We just announced today artificial intelligence for the battlefield.
Jeff Thompson: visual navigation, no GPS required. And those same type of things are going to be going on the FlightWave. We have not spent nearly enough time on the FlightWave Edge 130. It's a very unique bird. It's a very capable bird, has the best flight time out of anyone on the Blue UAS list.
Jeff Thompson: there's going to be a lot more on the Edge 130. We're going to have a lot of updates, by the way, right after the new year, so stay tuned for our Analyst Day, stay tuned for any news.