Q1 2025 Red Cat Holdings Inc Earnings Call
Good day and welcome to the Red Kap Holdings first quarter 2025 earnings release and quarterly update conference call.
Operator: Good day and welcome to the Red Cat Holdings First Quarter 2025 Earnings Release and Quarterly Update Conference Call. All participants will be in a listen-only mode. If you need assistance, please signal a conference specialist by pressing the star key followed by zero.
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Operator: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on a touchtone phone. To withdraw your question, please press star then 2. Please note, this event is being recorded.
After todays presentation, there will be an opportunity to ask questions.
To ask a question you May press Star then one on a touchtone phone.
To withdraw your question. Please press Star then two.
Please note this event is being recorded.
During this call management will be making forward looking statements, including statements that address red cap ex <unk> expectations for future performance or operational results.
Operator: During this call, management will be making four looking statements, including statements that address Red Cat's expectations for future performance or operational results. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements.
Forward looking statements involve risks and other factors that may cause actual results to differ materially from those statements.
For more information about these risks please refer to the risk factors described in Red Cats. Most recently filed periodic reports on Form 10-K T 10-Q and.
Operator: For more information about these risks, please refer to the risk factors described in Red Cat's most recently filed periodic reports on Form 10-KT, 10-Q, and in the Red Cat's press release that accompanies this call, particularly the cautionary statements in The content of this call contains time-sensitive information that is accurate only as of today, May 14, 2025.
And the Red cast press release that accompanies this call.
Particularly the cautionary statements in it.
The content of this call contains time sensitive information that is accurate only as of today may 14th 2025.
Operator: Accept as required by law, Red Cat disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call.
Except as required by law Redcat disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur. After this call.
Speaker Change: I would now like to turn the conference over to Chris Ericsson CFO. Please go ahead.
Chris Erickson: I would now like to turn the conference over to Chris Erickson, CFO. Thank you very much and welcome and good afternoon, everyone. Super excited to have everyone join today. This is Chris Erickson, CFO at Red Cat, and with us on the call as well is Jeff Thompson, our CEO. I know most folks on the call want to hear more from Geoff on this morning's announcement, which has been super exciting.
Yeah.
Chris Ericsson: Thank you very much.
Christopher: Welcome and good afternoon, everyone Super excited to have her boon joined today. This is Christopher since CFO job.
Christopher: With us on the call as well as Jeff Thompson, our CEO.
Christopher: Most folks on the call what do you hear more from Jeff on this morning's announcements, which has been super exciting, but I'm first going to take my two minutes. The same to give you a few key financial highlights for the quarter.
Chris Erickson: But I'm first going to take my two minutes of fame to give you a few key financial highlights for the quarter. First, I'm excited to share that Black Widow manufacturing started this month to begin deliveries to the Army in June. We currently have a non-SRR backlog of $10 million for Black Widow and H-130s to start delivering in June. As far as our guidance goes, we are reiterating our 2025 annual revenue guidance of $80 to $120 million. Also please note, consistent with previous communications, we also reiterate that the bulk of this revenue will be recognized in the latter half of 2025.
Christopher: First I'm excited to share the black widow manufacturing started this month to begin deliveries to the army in June.
Christopher: We currently have a non as far our backlog of 10 billion for black widow, and <unk> to start delivering in June.
Christopher: As far as our guidance goes we are reiterating our 2025 annual revenue guidance of 80 to 140 million also please note consistent with previous communications. We also reiterated the bulk of this revenue will be recognized in the latter half of 2025.
Chris Erickson: We ended the quarter with $9 million in cash and receivables, which was immediately bolstered with a $30 million capital raise in April. This liquidity has given us strength and ability to expand our manufacturing to meet the significant rampant deliveries in the second half of 2025.
Christopher: We ended the quarter with $9 million in cash receivables, which was recently bolstered with the 30 million capital raise in April.
Christopher: This liquidity has given us strength and ability to expand our manufacturing to meet the significant ramp in deliveries in the second half of 2025.
Chris Erickson: We are currently expanding our flyweight manufacturing facility in California to produce beyond 150 drones per month, and we have started discussions to expand our black widow production to an additional manufacturing facility outside of Utah to take us beyond our 600 plus drones per month.
Christopher: We are currently expanding our plywood manufacturing facility in California to produce beyond 150 drones per month okay.
Christopher: We have started discussions to expand our black widow production to an additional manufacturing facility.
Outside of Utah to take us beyond our 600 plus drones per month.
Jeffrey Thompson: Now, with that being said, I want to turn the time over to Geoff to add his commentary and give us more details on the new USB division.
Christopher: Now with that being said I want to turn the time over to Jeff that his commentary and give us more details on the new USP Division.
Joe. Please go ahead.
Jeffrey Thompson: Jeff Bezos, Thanks for joining the call, and thanks, Chris. I'm also going to be brief as we have received a ton of questions all day, so I want to get to them in the Q&A.
Speaker Change: Thanks for joining the call and thanks, Chris.
Speaker Change: I'm also going to be brief as we have received a ton of questions. All day, so I want to get to them in the Q&A.
Speaker Change: I'm going to start with slight ways.
Jeffrey Thompson: I'm going to start with FlightWave. then Black Widow and SR, and then finally our exciting SUV news from this morning.
Speaker Change: Tim Black widow, MSR, and then finally, our exciting SUV news from this morning.
Speaker Change: So slight weight, we have good news and bad news and Chris touched on this we continue to have very strong demand for the H 130.
Jeffrey Thompson: So FlightWave, we have good news and bad news. And Chris touched on this. We continue to have very strong demand for the Edge 130. John Webb, our new president is doing a great job scaling. But to get to that 150 drones per month by the end of the year, we'll run out of space. 150 drones per month is approximately 81 million in annual run rate. So instead of moving in six months, we are ripping off the Band-Aid now and moving into a larger facility. Same landlords with no penalties or paying to rent. We have brought a lot of expertise and process improvements along with product improvements and more reliable production.
Speaker Change: John Webb, our new President is doing a great job scaly.
Speaker Change: But to get to that 150 drones per month by the end of the year well we're out of space.
Speaker Change: 150 draws per month is approximately 81 million in annual run rate.
Speaker Change: So instead of moving it six months ago ripping off the band aid now and moving into a larger facility.
Speaker Change: And more thing landlords, no penalties or paying two rats.
Speaker Change: We have brought a lot of expertise and process improvements along with product improvements and more reliable production.
Jeffrey Thompson: FlightWave is going to be a world-class production facility. I want to thank the team out there. They're doing a great job.
Speaker Change: Slightly just going to be a world class production facility I want to thank the team out there doing a great job.
Speaker Change: Okay.
Jeffrey Thompson: moved to the Black Widow. We have similar news with the Black Widow production. We're also seeing strong demand that it's not SLR related.
Speaker Change: Let's move to the black widow.
Speaker Change: We have some more news with the black widow production.
Speaker Change: We are also seeing strong demand, but it's not as though are related and.
Jeffrey Thompson: And we're going to be starting a second geographical location in California to give us more capacity and redundancy. and with the possible large plus ups in the new budget. We want to be prepared.
Speaker Change: We are going to be starting a second geographical location in California to give us more capacity and redundancy.
Speaker Change: And with a possible large walk ups and the new budget.
Speaker Change: We want to be prepared.
Speaker Change: That's all.
Jeffrey Thompson: That's all. We know that everyone is waiting on this contract to be signed. So are we. Internally, the contracts are called TD1, TD2, and TD3. City One is the one that we signed in late March. TD2 is a contract for UVC, which is Universal Controller. And we've got some great news and results coming in the next few weeks on this incredible project. TD3 is what most people refer to as LRIP. We have not received the final contract yet, but I did actually sign some paperwork that was last night that was connected to TD3 LRIP. So, you know, we're hoping to see this soon.
Speaker Change: We know that everyone is waiting on this contract to be signed so are we.
Speaker Change: Internally the contracts are called PD, one TD to TD tree.
Speaker Change: Anyone is the one that we signed in late March TD.
Speaker Change: <unk> two is a contract for UV C, which is a universal controller.
Speaker Change: We've got some great news and results coming in the next few weeks on this incredible project.
Speaker Change: <unk> three is what most people referred to as <unk>.
Speaker Change: We have not received the final contracts, yet, but I did actually signed some paperwork that was last.
Speaker Change: Last night that was connected to TD three L reps.
Speaker Change: So we're hoping to see this soon.
Jeffrey Thompson: We also, right before I got on the call, so I'm changing my script that I had 20 minutes ago, started seeing parts of the LRIP contract or TD3 come across the portal. We haven't had a chance to review anything. It might just be the services side of the contract, but we expect to have this contract any day now, if not tonight or tomorrow morning, and as soon as we know, we will let you hear. We are probably going to let the Army announce first, and then we will follow up with a more detailed release.
Speaker Change: We are also right before I got on the call. Some change in my script that I had 20 minutes ago.
Speaker Change: Started seeing parts of the Alberta contract or TD tree come across the portals.
Speaker Change: We haven't had a chance to reveal throw anything it might just be the services side of the contract but we.
Speaker Change: We expect to have this contract any day now he's not tonight or tomorrow morning.
Speaker Change: And as soon as we know we will let you here.
Speaker Change: Well, we are probably going to let the army announced first and then we will follow up with a more detailed release.
Speaker Change: We're also hearing like reported in the Wall Street Journal that there was a large plus up coming out of the 150 billion.
Jeffrey Thompson: We're also hearing like reported in the Wall Street Journal that there is a large plus upcoming out of the hundred and fifty billion. And there was a $3.1 billion announcement today from the House Armed Services Committee for unmanned vessel production. Let's talk about unmanned vessels.
Speaker Change: And there was a $3 1 billion announcement.
Speaker Change: Today from the House Armed Services Committee for unmanned vessel production.
Speaker Change: Let's talk about unmanned vessels.
Speaker Change: Our new maritime divisions.
Jeffrey Thompson: Our new maritime division. So we've been working on this new platform for a long time. And I want to thank Brett Belikovich for his travel and diligence. We are building this in a different way than our competitors. US fees are both. Boats are hard to build and scale, specifically if you don't have years of experience. We are partnering with some of the best boat builders in the world, and boats need propulsion. and need jet propulsion to avoid props getting stuck in netting surrounding the ship. We have expertise on our team that started the jet boat craze.
Speaker Change: So we've been working on this new platform for a long time and I want to thank Brett Elokobi for his travel and diligence.
Speaker Change: We are building this in a different way than our competitors. Yes. These are boats.
Speaker Change: Those are hard to build and scale specifically, if you don't have years of experience.
We are partnering with some of the best boat builders in the world and boats need propulsion.
Speaker Change: E jet propulsion to avoid props getting stuck in netting surrounding the ships.
Speaker Change: We have expertise on our team has started the jet boat craze.
Speaker Change: So we started this from the boat side not from the Tech side.
Jeffrey Thompson: So we started this from the boat side, not from the tech side.
Speaker Change: We are also going to have a boat yard now in Florida that will build these boats and they will be made in USA.
Jeffrey Thompson: We are also going to have a boatyard now in Florida that will build these boats and they will be made in USA. On the tech stack. We are fortunate to partner with the best solution. that is used every day in a war zone and is used very successfully and has destroyed more assets than any other company, or probably any Navy, in fact. We are not announcing our partner's name for competitive reasons and for security. We will have a product later this year that's made in the USA. with the most proven tech stack in the industry in a boat yard.
Speaker Change: On the Tech stack.
Speaker Change: We are fortunate.
Speaker Change: Partnering with the best solution.
Speaker Change: It is used every day in a war zone.
Speaker Change: It is used very successfully is destroyed more assets than any other company.
Speaker Change: Probably any maybe in fact.
Speaker Change: We are not announcing a partner's name for competitive reasons and for security reasons.
Speaker Change: We will have a product later this year that's made in USA.
Speaker Change: With the most proven tech stack in the industry.
Speaker Change: Both yards.
Jeffrey Thompson: cranking out these USVs every month.
Speaker Change: Ranking out these U S fees every month.
Operator: And with that, I want to open it up to questions. We will now begin the question and answer session. To ask a question, you may press star and one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing. If at any time your question has been addressed and you would like to withdraw your question, please press star then two.
Speaker Change: And with that I want to open it up to questions.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you May press star.
Speaker Change: Star then one on you touched on something.
Speaker Change: If you are using a speakerphone please pick up your handset before pressing the keys.
Speaker Change: If at any time. Your 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 for a moment to assemble our roster.
Operator: At this time, we'll pause for a moment to assemble our roster.
Speaker Change: The first question today comes from Ashok Kumar with think equity. Please go ahead.
Ashok Kumar: The first question today comes from Ashok Kumar with Think Equity. Please go ahead. Well, the first question on revenue guidance and visibility. What are the key milestones of contract? that you must materialize. coming quarters to reach this goal. And two is the maritime autonomy and the U.S. launch with entry into the unmanned surface vessel market. What is the expected revenue contribution from the segment for 2025? How do you assess the competitive... Any update on Sure. Well, hold on a minute. Writing these down here, Ashok, thanks for all those questions.
Speaker Change: Well the first question on revenue guidance and visibility on what are the key milestones are contracts that.
Speaker Change: You must materialize.
Speaker Change: In the coming quarters to reach this goal.
Speaker Change: And two is the maritime autonomy in the U S. The launch with entry into the unmanned surface vessel market.
Speaker Change: The expected.
Speaker Change: Revenue contribution from this segment for 'twenty to 'twenty five.
Speaker Change: And how do you assess the competitive landscape.
Speaker Change: The company's differentiation in the maritime autonomy and any update on the Russell 2000.
Speaker Change: Inclusion well hold on Brian.
Speaker Change: Writing these down here or shift thanks for those questions. So I'll start with the last one we don't get officially notified but we are.
Jeffrey Thompson: I'll start with the last one. We don't get officially notified, but we are for the Russell 2000, but we are significantly above the lower goalposts that were from last year. So we're expecting to be part of that reconstitution at the end of this month. So we're pretty excited about that. On the competition space in the USVs, there's not many people building USVs of this size that have factories that are ready to start building boats, don't have a boat shipyard. And frankly, the competitors have kind of gone from basically a Silicon Valley model where they get a ton of money.
Speaker Change: For the Russell 2000.
Speaker Change: But we are significantly above the lower.
Speaker Change: Goalposts that were from last year, so while we're expecting to.
Speaker Change: Part of that reconstitution AR at the end of this month, so we're pretty excited about that.
Speaker Change: On the competition space in the U S needs, there's not many people building U S fees of this size.
Speaker Change: Have factories that are ready to start.
Speaker Change: Building boats don't have a boat shipyard.
Speaker Change: And frankly, the competitors have kind of gone from.
Speaker Change: Basically a silicon valley model, where they get a ton of money.
Jeffrey Thompson: They've never built a boat before. They put a bunch of folks on their board and, you know, basically try to start from scratch. We're kind of doing the opposite of that. We're going with some of the best boat builders in the world. We have a way to get into the boat manufacturing very inexpensively. So, we expect to have a productive boatyard in Florida by the end of Q3. I don't think there's going to be significant... revenue in 2025 from this, although we have, we have had a lot of partners call us today that want to use their their products on our on our boat, whether it's missiles, you know, we're putting our own drones on these.
Speaker Change: They've never built a boat before.
Speaker Change: We put a bunch of folks on the board and.
Speaker Change: Basically trying to start from scratch, we're kind of doing the opposite of that we're going with some of the best boat builders in the world.
Speaker Change: We have a way to get into the boat manufacturing very inexpensively.
Speaker Change: So we expect to have a productive.
Speaker Change: Nope yard in Florida by the end of Q3, I don't think there's going to be significant.
Speaker Change:
Speaker Change: Revenue in 2025 from this.
Speaker Change: So we have.
Speaker Change: We have had a lot of partners calls today that want to.
Speaker Change: I use there.
Speaker Change: There are products on the on our on our boat whether it's.
Speaker Change: Missiles.
Speaker Change: We're pretty rosy drones on these.
Speaker Change: We were fortunate that we also have a drone company that has flying drones. These are just floating drones.
Jeffrey Thompson: We were fortunate that we also have a drone company that has flying drones. These are just floating drones. So we can actually combining our swarms on top of these USBs is going to be a very powerful and very useful product set for, you know, helping in choke points in, you know, the Indo-Pakon region. So we think we're, we're in a really good spot for, you know, places like Indo-Pakon. So that's, that's, that's where we think we're going to shine, having this type of range, and having drones that are now, you know, Cost for a five-year process and we're actually down selected for for the army.
Speaker Change: We can actually Oh are combining our swarms on top of these.
Speaker Change: USPS, it's going to be a very powerful and.
Speaker Change: Very useful.
Speaker Change: Yeah.
Speaker Change: Product set for help.
Speaker Change: Helping chokepoints and.
Speaker Change: No pay Com region. So we think we're we're in really good spot for us.
Speaker Change: Places like Endo com so that's.
Speaker Change: That's where we think where we're going to shine are having this type of range and having drones that are now.
Speaker Change: You know.
Speaker Change: <unk> costs were five year processing, and we're actually down selected for for the army. So we have a good combination.
Unknown Speaker: So we have a good combination So, and I don't remember the other question, but if you want to ask one more, we'll move on. All got it. And just the margin improvement and volunteer partnership.
Speaker Change: So and I don't remember the other questions, but it was.
Speaker Change: He wanted to ask one more well move on.
Speaker Change: Oh got it and just the margin improvement and talented partnership Oh, Jeff. How soon do you expect to realize tangible cost reductions and margin improvement from deployment of volunteers walk speed.
Jeffrey Thompson: Jeff, how soon do you expect to realize tangible cost reductions and margin improvement from deployment of Palantir's Warp Speed Manufacturing OS? and then in terms of factory. Long Beach. Yeah, so as we mentioned, our goal was to get to approximately 150 drones per month for FlightWave by the end of this year. I'm hoping we still get there. We'll have plenty of room to do so, which will give us a pretty dramatic run rate going into 2026. But also, as Crystal just mentioned, we are now producing FlightWaves every month. We are now producing Black Widows every month.
Speaker Change: Manufacturing O S and and then in terms of factory utilization.
Speaker Change: Long beach or what are the current and target monthly production capacity and how does this in line with the anticipated.
Speaker Change: The rest of the year.
Speaker Change: Yeah. So as we mentioned our goal was to get to approximately.
Speaker Change: 50 draws per month for flight waived by the end of this year.
Speaker Change: I'm, hoping we still get there we'll have plenty of room to do so.
Speaker Change: Which will give us a pretty dramatic one rate going into 2026, but as also as Christian just mentioned.
Speaker Change: We are now producing slight leads every month, we're now producing black widows every month.
Jeffrey Thompson: You know, we've gone a few quarters now with fully loaded cost basis with no revenue, and that change is, you know, starting now, which is great. So we don't have factory utilization yet to give you, but like I mentioned in my prepared comments, there is about a billion dollar plus up we're hearing all over the hill in the last week or so that's going to be going towards the UAS group. So we're pretty excited about that. And the best way to prepare for that is to have drones that you can ship right away. So that is the goal is to ramp up production, have geographical diversity, and to ramp the Black Widow as drastically as possible because In recent meetings with SRR leadership, they told us very, very frankly saying as soon as we field LRIP, we are going to go big.
Speaker Change: We've got a few quarters now a fully loaded cost basis.
Speaker Change: No revenue and that changes as you know starting now which is great.
Speaker Change: So we don't have factory utilization yet to.
Speaker Change: To give you, but like I mentioned in my prepared comments, there is about $1 billion plus upward hearing all over the hill in the last week or so that's going to be going towards.
Speaker Change: The UAS group.
Speaker Change: Hum.
Speaker Change: So we're pretty excited about that and the best way to prepare for that just to have draws that you can ship right away. So that is a is the goal is to ramp up production have geographical diversity.
Speaker Change: And to ramp the black widow as drastically as possible because.
Speaker Change: In recent meetings with a S. R leadership, they told us very very frankly, saying as soon as we field.
Speaker Change: We are going to go big and that lines up with what they said in the Wall Street Journal recently that the army is going to go big.
Jeffrey Thompson: And that lines up with what they said in the Wall Street Journal recently that the Army is going to go big for small drones and small weapons. Like we're constantly hearing where where DOJ is heading and where the headset, SACDEF is heading. So I think we're in a great spot.
Speaker Change: Small girls and small weapons.
Speaker Change: Constantly hearing where where does she is heading and where the headset.
Speaker Change: Setting so I think we're in a great spot, but one last question, Jeff is just the key milestones or contracts that.
Jeffrey Thompson: One last question, Geoff, is just the key milestones or contracts that must materialize. Thank you for your guidance and just the liquidity of the cash bond, right, with the $30,000. Unknown Speaker, Unknown Speaker, Unknown Speaker, Unknown Speaker, Yeah, we're I mean, we did just raise $30 million. And as Chris said that we ended the quarter before that with 9 million. So we are we are very well financed right now. Very excited about that. Now we're just worrying about building drones and we are. So I think we're, again, financially, we're in a great spot right now.
Speaker Change: That might materialize in the coming quarters to reach Europe.
Speaker Change: Guidance on just the liquidity of the cash burn rate with the $30 million raised post quarter right and the operating cash outflow of 16 right.
Speaker Change: My question any color on the liquidity there at the current run rate.
Speaker Change: Yeah, well I mean, we did just raise $30 million and as Chris said that we ended the quarter before that with $9 million. So we are we are very well financed right now very excited about that now.
Speaker Change: Now, we're just worrying about building drones and we are so I think we're again financially where it was.
Speaker Change: We're in a great spot right now thank you and all the best.
Unknown Speaker: Thank you and all the best.
Speaker Change: Thanks.
Glenn Mattson: Thanks. The next question comes from Glenn Mattson with Latimburg, please go ahead. Yeah, hi, thanks for taking the question.
Speaker Change: The next question comes from Glenn Mattson with Ladenburg.
Speaker Change: Ahead.
Glenn Mattson: Yeah. Thanks for taking the questions just quickly first on the.
Jeffrey Thompson: Just quickly, first on the, you know, the color and the language sounds like the year is going to be even more back-end loaded than we had previously thought, but can you just talk about, there's a good amount of inventory, the inventory has risen a bit, and you had some backlog coming into this year, so can you just talk about why you're adjusting these Unknown Attendee, Ashok Kumar, Leah Lunger, Geoffrey Hitchcock, Red Cat Holdings, Unknown Attendee, Ashok Kumar, Leah Lunger, Geoffrey Hitchcock, Red Cat Holdings, Unknown Attendee, Yeah, so we I mean, the whole goal was, you know, we would have been producing Black Widows sooner and using that inventory.
Speaker Change: You did.
Speaker Change: Color on the language sounds like.
Speaker Change: The year is going to be even more backend loaded than we previously thought but could you just talk about theres a good amount of inventory that inventory has risen a bit.
Speaker Change: And you had some backlog coming into this year and so can you just talk about why your adjusted knees.
Speaker Change: You know the capacity that you have and making the expansion there, but could you talk about what you can do in the meantime in terms of generating revenue in Q2 and your thoughts around that.
Speaker Change: Yeah. So we I mean, the whole goal was you know, we would've been producing black widow sooner and using that inventory.
Jeffrey Thompson: If we had a final version from our partners, and we didn't get that until the very, I think, the 27th of March. So there's no way we're going to be building drones that weren't up to the request from our biggest customer, or soon to be biggest customer. So that's why we had to wait until this quarter to start building. So you'll start seeing that, you know, we are still, obviously, we've got plenty of money to get the inventory. And we don't we don't have long lead times for anything anymore. You know, I think our longest lead time now is, you know, six to eight weeks, which we plan for.
Speaker Change: If we had a final version.
Speaker Change: Our partners and we didn't get that until the very I think the 27th of March and so there's no way, we're going to be building drones at work.
Speaker Change: Up to the rich D.
Speaker Change: <unk> from our biggest customer or soon to be biggest customer.
Speaker Change: So that's why we had to wait until this quarter you start building.
Speaker Change: Youll start seeing that.
Speaker Change: We are still obviously, we've got plenty of money to get the inventory and we don't we don't have long lead times for anything anymore.
Speaker Change: I think our longest lead time now as you know.
Speaker Change: Six to eight weeks, which we planned for so you'll start seeing that go down but well also just continuing now that we're gonna start ramping both production lines will have some hiccups with.
Jeffrey Thompson: So you'll start seeing that go down. But we'll also just continuing now that we're going to start ramping both production lines, you know, we'll have some hiccups with flightways switching into a new place, but it's right down the street, about a quarter mile away. So that's not going to be a big hiccup, but we'll be able to lay out the factory perfectly before we move. And it's going to be a beautiful facility that's going to be able to scale. very quickly. On the Black Widow side, we're just adding a location. So we're not going to disrupt the Black Widow production going forward as we start making deliveries to the SRR program of record next month.
Speaker Change: Slightly switching into a new place, but it's right down the street, it's about a quarter mile away. So that's not going to be a big hiccup, but we will be able to lay out the factory perfectly before we move.
Speaker Change: It's gonna be a beautiful facility, that's going to build scale.
Speaker Change: Quickly on the Black widow side, we're just adding a location. So we're not going to disrupt the black widow production going forward as we start making deliveries to the SLR program of record next month.
Glenn Mattson: So I don't know if I answered the question. Yeah, no, no, it's very helpful.
Speaker Change: So.
Speaker Change: I don't know if I answered the question [laughter] Yeah, no no. It's very helpful. I just wonder if theres. Some finished goods that are that are in inventory that you could ship against the backlog that you came into the year with maybe a slight waiver or something.
Glenn Mattson: I just wondered if there's some finished goods that are that are in inventory that you could ship against the backlog that you came into the year with maybe a flight waiver or something. You know, just curious if there's any of that going on. Um, I'm still not sure I understand the question. I thought in my opinion, I thought there was like a 13 or $15 million backlog coming into the year for black for I'm sorry, for flight wave stuff, mostly. So, so I was just thinking if you could chip against that backlog with some finished goods.
Speaker Change: Just curious if there's anything to that.
Speaker Change: Going on as well.
Speaker Change: I don't know I'm still not sure I understand your question.
Speaker Change: I thought it was my opinion I thought there was like a 13 or $15 million backlog coming into the year for black for I'm, sorry for flight wave stuff mostly.
Speaker Change: So I was just thinking if you could ship against that backlog with some finished goods.
Speaker Change: Yeah.
Jeffrey Thompson: Yeah, we did actually deliver some of those. We, you know, some of that was delivered with the Australian deal that we received in some of it, even a little bit of it last year out of FlightWave and some of it in February. So that has brought down some of the backlog, but the FlightWave, I think we'll end up going up in backlog against, with the FlightWave, because it's now that we have drones to fly and demo, we will be able to get out there. We are a tremendous amount of demand to see this bird fly, and we're just getting them in the hands of our sales team now, now that we've got some production ones under our belt, and the sales team can actually get drones to go demo.
Speaker Change: Yeah, we did actually deliver some of those we.
Speaker Change: Some of that was delivered.
Speaker Change: With the Australian.
Speaker Change: Deal that we received in some of them, even a little bit of it last year.
Speaker Change: Lightwave and some of it in February so that has brought down some of the backlog, but the slightly I think well end up going up in backlog against what.
Speaker Change: What is the flight wave because it's now that we have drones to fly in demo.
Speaker Change: We'll be able to be able to get out there we are.
Speaker Change: Tremendous amount of demand to see this bird fly.
Speaker Change: And we're just getting them in the hands of our sales team now now that we've got some production months under our belt and the sales team can actually get thrown CECO them also.
Glenn Mattson: So, you know, we have brought some of that down from 13 to, as Chris mentioned, 10. Great.
Speaker Change: Yeah, we have brought some of that down from 13 to it as Chris mentioned Ken.
Speaker Change: Great moving onto the the surface basketball program. So I'm I'm not clear or are you going to are you partnering with the shipbuilder or are you going to own a shipyard and how does that work and I'm just.
Jeffrey Thompson: Moving on to the Surface Vessel Program. So I'm not clear. Are you going to, are you partnering with the shipbuilder? Are you going to own a shipyard? And how does that work? And I'm just also thinking about the president signing. directive on shipbuilding in the U.S. and if there's maybe some federal support or just some directive by the federal government for this kind of activity. Yeah, we have. Even before the announcement today, we have been meeting with The correct people that are behind all of that in the administration, and there's, as I mentioned today, there was just a $3.1 billion unmanned vessel that came out of the Armed Services Committee.
Speaker Change: Also thinking about the president signing.
Speaker Change: Directive on shipbuilding in the U S and if there's maybe some federal support or just some.
Speaker Change: Some some directed by the federal government for this kind of activity.
Speaker Change: Yeah, we have even before the announcement today, we have been meeting with.
Speaker Change: The correct people that are behind all of that.
Speaker Change: And the administration and there as I mentioned today, there was just a $3 1 billion dollar.
Speaker Change: [noise] unmanned vessel that came out of the armed services Committee.
Speaker Change: There's the executive order for bringing shipbuilding to the United States has been.
Jeffrey Thompson: There's the executive order for bringing shipbuilding to the United States is something we're directly responding to, and we're getting great support from this administration.
Speaker Change: Being we're directly responding to and we're getting great support from this administration, so I think that.
Jeffrey Thompson: So I think that to back in the other question, we are going to own a boatyard. In Florida, we are getting the partnerships that we're doing are helping us with some of the prototypes that we're building to build the molds to build the plugs to build the, you know, to build the top. I mean, the top of this this vessel is kind of like a stealth bomber has Special curves and I mean angles that deflect the radar, these things are fast so they can get to the enemy and before they even know it's coming, we have specific radar paint on these things.
Speaker Change: Two back and the other question, we are going to own a a boat yard.
Speaker Change: In Florida, we are getting with the partnerships that we're doing are helping us with some of the prototypes that we're building to.
Speaker Change: To build the molds to build the plugs.
Speaker Change:
Speaker Change: The top I mean, the top of this this vessel is kind of like a stealth bomber.
Special curves and angles that deflect the radar. These things are faster they can get to the enemy and before there even though it's coming up.
Speaker Change: Specific radar paying on these things, they're very complex vessels.
Jeffrey Thompson: They're very complex vessels, but they're just boats and you got to build a hull first and so we will have a boatyard building these hulls and putting all the propulsion systems in there and we have some of the best folks in the space to do that. Great, super helpful, very exciting.
Speaker Change: But there just thoughts and you've got to build the whole first and so we will have a boat yard building these halls.
Speaker Change: And putting all the propulsion systems in there.
Speaker Change: And we have some of the best folks in the space to do that.
Speaker Change: Great Super helpful. Very exciting my last one for me is can you just give it do you have a are you comfortable sharing at an estimate for what Capex will be this year with all these plans going on.
Jeffrey Thompson: My last one for me is, can you just give a, do you have a very comfortable sharing an estimate for what CAPEX would be this year with all these plans going on? We don't have it for this call. We will we're digging in right now. And, you know, building out this bill of materials that we need for this new USB, you know, all of the you know, the, you know, the cameras, the satellite communications, the magic that we're partnering with, that goes into this box, the artificial intelligence, and all of the all of the stuff that makes us such a lethal vessel is.
Speaker Change: We don't have it for this call we will we're digging in right now and.
Speaker Change: Building out there's still a materials that we need for this new USD.
Speaker Change: All of the B.
Speaker Change: The cameras the.
Speaker Change: Satellite communications the magic that we're partnering with a that goes into this box.
Speaker Change: The artificial intelligence and all of the all of the stuff that makes us such a lethal.
Speaker Change: Vessel.
Speaker Change: Is.
Unknown Speaker: Not mapped out in the bill of materials for the factory yet, but we'll have, we'll be able to get that information to you probably for the next call. Great.
Speaker Change: Not mapped out in the bill of materials to the factory, yet, but we'll have we'll be able to get that information to you probably for the next call.
Speaker Change: Great. Okay. Thanks to our friends all the questions and congrats on all the progress.
Unknown Speaker: Okay, thanks Geoff for answering all the questions and congrats on all the progress. Great, thank you.
Speaker Change: Great. Thank you.
Speaker Change: The next question comes from Mike Latimore with Northland capital market.
Mike Latimore: The next question comes from Mike Latimore with Northland Capital Markets. Please go ahead. All right, great. Thanks very much.
Speaker Change: Go ahead.
Speaker Change: Alright, great. Thanks very much.
Jeffrey Thompson: Yeah, on the the US v partnership here, can you talk a little bit about the genesis of this partnership? Were you and this other company pursuing similar programs together? SRR win, create, you know, more communications, or just what was the genesis of this partnership?
Speaker Change: In the U S V partnership here can you talk a little bit about the Genesis of this partnership.
Speaker Change: Are you in this other company per savings somewhere programs together.
Speaker Change: I'm sorry.
Speaker Change: More communication because as long as the Genesis of this partnership.
Yeah.
Jeffrey Thompson: Yeah, so I'll go way back. And we've been looking in certain regions to look at some of this technology that's that's proven that we know, can actually that has actually been in combat. And we, you know, through through Brett's relationships, we, we found the best in the best in the world at this right now. And we've actually already, we did apply for the camp project, which is the DIU project for UUVs and USDs. So we have already applied for for I don't know if it's a program of record, but they're pretty large contracts. We are and John C.
Speaker Change: Yeah, So Oh I'll go way back and we've been looking in certain regions to look at some of this technology.
Speaker Change: Technology that's proven.
Speaker Change: But we know.
Speaker Change: That has actually been in combat.
Speaker Change: And we are you know troops two breaths relationships, we we found the best and the best in the World at this right now.
Speaker Change: And we've actually already.
Speaker Change: We did apply for the can't project, which is the <unk> project for.
Speaker Change: Uv's and U S. These so we have already applied for.
Speaker Change: For.
Speaker Change: The program of record, but they're pretty large contracts we are.
Speaker Change: Joining me.
Jeffrey Thompson: We're going to be joining after these, and as everyone knows, if you're going to the DIU, it's got to be made in USA and NDA compliant. So that's what we're going to be doing. These boats are going to be made in USA. They're going to be NDA compliant. But yeah, we are pretty excited how fast we're running right now and getting into the market and the market's kind of coming to us. The phone calls I was getting today were crazy. So we're pretty excited that. We're going to have this boat running right out of the box, because we already know how it all works, because it's working today, it worked yesterday.
Speaker Change: The only after these and as everyone knows that you guys said he was going to be a made in USA and NDA compliance. So that's.
Speaker Change: Well, we're going to be doing. These these boats are going to be made in USA and you're gonna be NDA compliant.
Speaker Change: But yeah. We are we are pretty excited how fast we're running right now and.
Speaker Change: Getting into the market and the.
Speaker Change: The market has kind of come into what's the phone call that was getting today, where we're crazy. So we're pretty excited that.
Speaker Change: We would have this though.
Speaker Change: Robin right out of the box because we already know how it all works because its working today at work yesterday.
Speaker Change: And that's a very complete solution he needs or not.
Jeffrey Thompson: It's a very complete solution. These are not prototypes. These are going to be out-of-the-box effective weapons. Yeah, and it would be something that say, Palantir would want to integrate with data on this just like they use with your drones to or Yeah, no, absolutely.
Speaker Change: Prototypes these are going to be out of the box effective weapons.
Speaker Change: Got it got it.
Speaker Change: Something that I'd say Allen's here would want to integrate with data on this just like the deals with your own sewer.
Speaker Change: Yeah, no absolutely that's something that.
Jeffrey Thompson: That's something that with our partners, actually, we are not only on the tech side, but, you know, we're going to be also utilizing warp speed for this new factory in Florida. So, you know, these, these things are going to tie in greatly. And I think when we bring the software stack from Palantir, along with this proven technology partner, we have that, I think we're going to have an incredible solution that's never been seen before.
Speaker Change: With our partners actually we are not only on the tech side, but.
Speaker Change: We're gonna be also utilizing warped speed for this new factory in Florida. So.
Speaker Change: These these things are going to tie in greatly and I think when we bring the software stack from talented <unk> along with its proven.
Speaker Change: Technology partner, we have that.
I think we're going to have an incredible.
Speaker Change: Solution, that's never been seen before.
Speaker Change: Got it got it and then.
Jeffrey Thompson: And then in terms of your non SRR business for the year, can you highlight who might be some of the more important customers kind of within that non SRR bucket this Yeah, so we have existing customers we've had for years that we've, you know, we went up against in some bake offs with our competitors. You know, if you look at, you know, Border Patrol has been a customer for years. And, you know, now think of this, there's 79,000 miles of United States coastline, we can monitor these coasts with these boats that are autonomous. do not need people, don't need to sleep, could be constantly monitoring the entire coast, could have Black Widows and or Edge 130s on there, soon to be Trikens.
Speaker Change: In terms of your non <unk> business for the year can you highlight.
Speaker Change: It might be some of the more important customers kind of within that non SLR buckets. This year.
Yeah. So we we have existing customers we've had for years.
Speaker Change: Went up against in some bake offs with our competitors.
Speaker Change: If you look at.
Speaker Change: You know border controls that a customer for years and now think of this or 79000 miles of United States coastline, we can monitor the east coast with these boats that are autonomous.
Speaker Change: Do not need people don't need to sleep to be constantly monitoring the entire coast well.
Speaker Change: It could have black widows and or edge, one thirty's on there seem to be <unk>.
Jeffrey Thompson: So once they do spot something, they can send the drone towards them. They also, you know, there's a lot of different customers in the first responder space that would look at this. We've, you know, you've got Puerto Rico that's constantly battling smugglers between the islands into Puerto Rico. So there's a lot of use cases for non-SR capabilities. Again, NATO is still pushing along for us. We've actually, there are actually some folks who are in our office in Salt Lake this week.
Speaker Change: So once they do spot something they can send the drone towards them.
Speaker Change: He also.
Speaker Change: There's a lot of different customers in the first responders basic we'd look at this.
Speaker Change: If you've.
Speaker Change: Got Puerto Rico this is constantly.
Speaker Change: Battling smugglers beats.
Between the islands and to Puerto Rico.
Speaker Change: There's a lot of use cases for.
Speaker Change: Non S all our capabilities.
Speaker Change: Again, a NATO is still are pushing along for us actually no there actually.
Speaker Change: Some folks are in our office in Salt Lake. This week. So there are lots of other customers Besides ISR and.
Jeffrey Thompson: So there are lots of other customers besides SR and probably the revenue from non-SR to the second half will be at least equal to SR if not bigger.
Speaker Change: Probably the revenue.
Speaker Change: <unk> from non S. R.
Speaker Change: The second half will be at least equal to MSR, if not bigger.
Speaker Change: Yes.
Jeffrey Thompson: And just last one for me, in terms of the cash operating expense, you know, you had in the first quarter here, how should we think about that trending throughout the year? Yeah, so I think I kind of mentioned it. We've been here before where we had, when we were launching the TL2, we had negative 10% gross margins, because we had a fully loaded factory and had zero revenue. And then as we've basically been in that, you know, that pattern, that flight pattern, the last two or three quarters. So we are now delivering drones from both FlightWave and from the BlackWidow.
Speaker Change: Okay, and just last one for me in terms of cash operating expense.
Speaker Change: First quarter here.
Speaker Change: How should we think about that trending throughout the year.
Speaker Change: Yeah, So I think I kind of mentioned it we've been here before where we had when.
Speaker Change: When we were launching the tier two we had negative 10% gross margins because we had a fully loaded factory and had zero revenue.
Speaker Change: And then as we basically done and that.
Speaker Change: That pattern that fight that fight pattern the last two or three quarters. So we are now delivering drones from both slightly and from the black widow because that's.
Jeffrey Thompson: So that's going to That's going to reduce the cash needs very rapidly, and it will improve our margins also very rapidly. And like I said, we didn't even mention, I think Ashok asked it earlier, none of this guidance has any Palantir revenue in it. And to just give a little bit of details on the guidance, because I had a bunch of questions about this over the last few weeks, actually people said, with the continuing resolution slowing down your contract award, which hopefully it's tonight. But the... through we change our guidance. And myself and Chris have been putting the modeling together.
Speaker Change: Going too.
Speaker Change: That's driving some of the.
Speaker Change: No that's it that's going to reduce the cash needs very rapidly.
Speaker Change: Will improve our margins also very rapidly and like I said, we didn't even mentioned I think a show cast it earlier.
Speaker Change: None of this guidance are as <unk> revenue in it and to just give a little bit of details on the guidance because I had a bunch of questions about this over the last few weeks actually people said with a continuing resolution slowing down your contract award, which.
Speaker Change: Hopefully Tonight [laughter], but.
Speaker Change: D a.
Speaker Change: Sure.
Speaker Change: Should we change our guidance and myself and Chris have been putting the modeling together.
Jeffrey Thompson: And, you know, it might look daunting to people on the outside, but the way we're looking at it is to meet the bottom end of the guidance is FlightWave does 25 and we're very, 25 million, we're very comfortable with that, specifically with the way it's going to ramp. On the Black Widow side, now with this new geographical diverse location that we're getting up and running as possible. You look at the last two quarters, you break up, you know, because what's left over is $55 million, right? So, some of that will be taken up in Q2.
Speaker Change: And might look daunting to people on the outside that the way. We're looking at it is to meet the bottom end of the guidance is.
Speaker Change: Slightly does 25, and we're very 25 million, we're very comfortable with that specifically, but the way it's going to ramp up.
Speaker Change: On the Black widow side now with this new geographical diverse location that will getting up and running as quickly as possible you look at the last few quarters can you break up.
Speaker Change: I guess, what what's left over $55 million. So some of that will be taken up in Q2 and whatever is left you can you split that between these two no two locations, Utah, and California, and they can split that that delivery I don't I don't think the the problem is going to be demand in our contracts.
Jeffrey Thompson: And whatever is left, you can just split that between these two locations, Utah and California, and they can split that delivery. I don't think the problem is going to be demand in our contracts. I think it's going to be delivery. So, we have been really working on that. So, you break up the last two quarters for the Black Widow, half will come from California, will come from Utah, 60% Utah, 40% California. So, we are still comfortable with our guidance.
Speaker Change: I think it's gonna be delivery. So we have been really working on that so you break up the last two quarters for the black widow, a half will come from California have been cut from Utah, 60%, Utah, 40%, California. So we are we are still comfortable with our guidance.
Speaker Change: Got it alright, great. Thanks best of luck.
Unknown Speaker: All right, great. Thanks. Best of luck.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Jack Thompson for any closing remarks.
Operator: This concludes our question and answer session.
Jeffrey Thompson: I would like to turn the conference back over to Geoff Thompson for any closing remarks. Thanks, everyone. It's been a very exciting time, spent a lot, a lot of time in some boatyards. We are now going to have three product lines. We have two of them shipping now, so we're very excited about this. And as we were getting updates during the call, we're very confident of getting, or finally getting, as we call it, TD3 contract, or as the rest of the world knows it as LRIT. And as I mentioned earlier in the call, we are going to have the Army announce it first, and then you'll be hearing about it in detail from us.
Jack Thompson: Well thanks, everyone. It's been very exciting times at a law in a lot of time and some boat yards.
Jack Thompson: We are now going to have three product lines, we got two of them shipping now so we're very excited about this.
Jack Thompson: As we were getting updates during the call. We're very confident of getting her finally getting as we call. It <unk> three contract.
Speaker Change: Or is the rest of the world knows that is L. Rec.
Speaker Change: And as I mentioned earlier in the call. We are going to have the army announced the first and then you'll be hearing about it in detail from us so.
Operator: So this has been a big week. We were hoping we got that announcement before today, but it looks like it's very close. And Everyone just have a great night.
Speaker Change: This has been a big week, we were hoping we got that announcements before today, but.
Speaker Change: It looks like it's very close and.
Speaker Change: Everyone have a great night.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Operator: The conference is now concluded. Thank you for attending today's presentation.
Operator: You may now disconnect.
Speaker Change: Yeah.
Speaker Change: [music].