Q1 2026 Mobilicom Ltd Earnings Call
Speaker #1: Good afternoon, everyone. My name is Chris Donovan, Mobilecom's head of investor relations. Welcome to Mobilecom's first quarter 2026 earnings results conference call. Joining me today are Oren Elkayem, Mobilecom's founder and chief executive officer, and Liad Gelfer, the company's director of finance.
Speaker #1: Earlier today, Mobilecom issued a press release announcing its financial results and business highlights for the three months ended March 31, 2026. A copy of the release is available on the investor relations section of the company's website.
Speaker #1: Before we begin, I'd like to remind everyone that certain statements made during this conference call may constitute forward-looking statements within the meaning of the private securities litigation reform act of 1995 and other securities laws.
Speaker #1: Forward-looking statements are based on management's current expectations and beliefs and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those described in these statements.
Speaker #1: For a more detailed description of these risks and uncertainties, please refer to Mobilecom's filings with the U.S. Securities and Exchange Commission, including the risk factors section of the company's most recent annual report on Form 20F and the subsequent reports furnished on Form 6K.
Speaker #1: All forward-looking statements speak only as of the date of today's call, and Mobilecom undertakes no obligation to publicly update or revise any forward-looking statements.
Speaker #1: Except as required by applicable law. Following management's prepared remarks, we will open the call for analyst questions. As for the agenda today, there will be a brief introduction to Mobilecom for those joining the story for the first time, our 2026 outlook and progress we've made against it in Q1, an update on programs of record, including progress under the new U.S.
Speaker #1: Army LASO program, and our new our two new U.S. Tier 1 design wins. A cybersecurity regulatory momentum slide, as well as Q1 2026 financial highlights and our equity and cash position.
Speaker #1: An update on our Q1 operational achievements will follow, and lastly, an analyst question-and-answer session with management. This webinar is being recorded and will be available for replay on ir.mobilecom.com.
Speaker #1: With that, I would like to turn the call over to Oren Elkayem, founder and chief executive officer of Mobilecom. Oren, please go ahead.
Speaker #2: Thank you, Chris, and good afternoon, everybody. And I would like to thank you for joining us on this call. For those joining us for the first time, the next few slides will be will be enabled me to introduce and provide a concise overview of Mobilecom.
Speaker #2: If you would like a longer version, they are available on our investor website, obviously. And we will present briefly who we are, what we do, and how the company has strategically evolved to address rapidly growing markets and the cybersecurity opportunities around autonomous platforms and unmanned systems.
Speaker #2: So let's maybe introduce Mobilecom at a glance. So Mobilecom offers essential IT-based high-value cybersecurity software and hardware solutions. Those are subsystems within the drones, robotics, bots, and used by drones, robotics manufacturers to build their platforms.
Speaker #2: Those proprietary solutions are the ones that power, connect, secure, and safeguard drones, robotics. We can say that those are the heart and soul of the drones and robots.
Speaker #2: Mobilecom is actually at the convergence of three major trends. One is the drones, second is cybersecurity, and third is robotics autonomy. Which position the company extremely well in the current evolution that we see in the defense as well as in the commercial market.
Speaker #2: If we would like to describe a little bit more about Mobilecom's offering and our visionary approach, we can see that Mobilecom has two core divisions.
Speaker #2: One is hardware solutions. Those are hardened resilient communication and data link systems designed to operate in contentious environments. And the second is cybersecurity and software solutions.
Speaker #2: Those focus on electronic warfare resistance, cybersecurity protection for the drone platforms and robotics. We can also see that Mobilecom hardware, which is hard and holds significant key U.S.
Speaker #2: defense and regulatory validation, including the BlueAS framework select. We have the trusted cyber certification, the NDAA validation, the DD4094 equipment frequency allocation, approval. And during this quarter, Mobilecom was also included in the SCC new trusted drone list.
Speaker #2: Collectively, all of those certifications and approvals strengthened Mobilecom's position with the U.S. Department of War market for drones and autonomous systems. And being part of the supply chain, for America, and may help streamline the qualification and procurement process for OEMs and defense programs seeking trusted, compliant, drone technology for American solutions.
Speaker #2: Our business model is very clear for those two let's say departments or offerings. On the hardware, we established a we established a customer relationship through the hardware solution that you see on the left side, the families of the data link, the mesh networking, the ground control stations, which enabled them the basic operational capabilities of drones, robotics, and those are generating about 50% to 60% gross margin for our business.
Speaker #2: Which is very steep and high, and it's based on the IP and knowledge and know-how that we have embedded inside those products. Then we have the expansion into higher value cybersecurity and software solution that can generate higher gross margin, which is close to 90% with limited direct competition, as we see today.
Speaker #2: And that gives Mobilecom evolution into a very lucrative licensing per unit business model. Since we already a hardware supplier for the drone manufacturers and the platforms, we can incorporate the cybersecurity and software solutions more efficiently without restarting a lengthy process with the platform and qualification or procurement with the same vendors we supply them the hardware.
Speaker #2: Which makes our cross-sell opportunity easier and market expansion faster and getting into scalability in our business. I would like to with this slide remind everybody what we previously discussed on our 2025 annual earnings update.
Speaker #2: What we expect in 2026 going to be a year of growth for the U.S. drone ecosystem. And we believe we are extremely well positioned as one of the supply chain leaders for components for small-sized drones and larger ammunition providers.
Speaker #2: In this slide, there is our forward-looking framework for 2026. The following slide will show how we progressed on the plan that we set for this year.
Speaker #2: So let me go let me look walk through the progress we have made against the 2026 outlook in Q1. On the hardware side, which is describing the tier one customer pipeline, this is in addition to second and third tier customers.
Speaker #2: So we advised that on design win and R&D stages, our 2026 goal was three to four tier one partners at this stage. As for now, we have met the goal for the year with the four players including the two leading U.S.
Speaker #2: tier one ISR drone platforms for cybersecure Skyhopper and ICE electronic warfare software in the period. Which we announced recently. In the initial production, the goal for the year was to be in three to four players tier one players and customers in this phase.
Speaker #2: As for now, we have three all originating from the 2025 continuing with us. This continued to generate initial follow-on orders still within the low rates initial production scale.
Speaker #2: To support ongoing commercialization activity, demos, and initial deployment with both existing and prospective customers. On the ramp-up stage, which is the goal was two for the year, we are with one currently.
Speaker #2: Our existing ramp-up customer is accelerating into mass production under the OPFL program of record deploying for the U.S. Department of State. So the total tier one customer we anticipate we have right now eight so far against the goal of 8 to 10.
Speaker #2: With the year still in front of us, and we believe that we will continue to grow on that. On the software and cybersecurity side, the AI autonomy and OEM ecosystem, the 2026 goal is for four to six OEM partners across NVIDIA and Qualcomm plus two AI autonomy software partners.
Speaker #2: The status is ongoing progress. We are continuing our engagement with the NVIDIA ecosystem and the partners that we have there for the hardware and the software that we published in 2025.
Speaker #2: And we are constantly working with Qualcomm and Qualcomm-based solution on the AI edge platforms and working with multiple engagements to fulfill the goal for the year.
Speaker #2: Let's discuss some of the operational progress and financial progress. So on the operational side, production capacity, the status is ongoing progress as we planned.
Speaker #2: Our strategic long lead item inventory is building up continuously and component pre-buying has been expanded above. Initial plan as we see stronger than expected demand signals from our tier one customers.
Speaker #2: The U.S. manufacturing our status is ongoing progress as contract manufacturers are in selection process in the United States. With an on-site visit and final terms underway, I will come back to this in more details in later in the call in dedicated slide.
Speaker #2: From the program of record expansion, the status is confirmed as this is the headline of the quarter. We received a $2.2 million purchase order in Q1 under the initial OPFL plan.
Speaker #2: OPFL program of record. And under and there is an additional which is part of the ramp-up that we are experiencing. And separately, our tier one customer in the United States has progressed under the additional program of record, which is the U.S.
Speaker #2: Army LASO program, which will cover both in the next slides. I would like to dedicate this slide on an update on the meaningful progress that was done and ongoing progressing with the program software code.
Speaker #2: Let's spend a moment on the program of record picture because this is where the fundamental story of our U.S. defense business sites. First, during Q1, our tier one customers have progressed under the U.S.
Speaker #2: Army LASO program, which is low altitude striking and strike ordinance. This is a program of record of the army. The progress was this is an initial deployment phase to equip inventory brigade combat teams with main portable precision strike capability.
Speaker #2: What does it mean for probably ask? So our cybersecurity data link and electronic warfare software solutions are embedded with this customer platform. The LASO progress, therefore, broadens the U.S.
Speaker #2: defense footprint of platforms in which mobilicom technology is embedded and could be deployed in masses. And adds a new U.S. service branch the U.S.
Speaker #2: Army to customer-based previously anchored by the Marine Corps. While we are thrilled by this inclusion, however, LASO is currently in initial deployment phase. And we have no mobilicom orders associated with this program to date.
Speaker #2: We anticipate that that will change, but this is part of the progress that we see over those programs. What the LASO progress does tell us and the investors is that something powerful and structural the program of record winners tend to win additional program software code.
Speaker #2: That is what we said in the past and that we are witnessing that is happening today. That is the compounding dynamic of U.S. defense procurement and is now visible visibly playing out for the platform for which we are embedded in.
Speaker #2: And now into onto the fundamental program, the U.S. Marine Corps OPFL already we have close to thousands of systems already fielded in the recent years for testing, evaluations, and use.
Speaker #2: The production for mass deployment start has commenced in January. And the production is ramping up. All of mobilicom recent U.S. tier one orders are related to this program, including the $2.2 million additional order we received in Q1.
Speaker #2: This program has a continued multi-year delivery cadence ahead of it, usually program software codes are at least for five years most are extended. 10 years and then there is additional procurement for spare parts, maintenance, training, and so on.
Speaker #2: So you understand the volume and the value of such program for a company like mobilicom. I would like to take a step back from the individual programs in these slides and provide you with a full picture of our position in the U.S.
Speaker #2: defense drones ecosystem, which that's essential if you compare mobilicom to competition, newcomers, and other players in this market. So currently we have five very important regulatory or compliance certifications.
Speaker #2: Starting with the UAS framework select select means that they selected us and did the entire process by the department of innovation for the Department of War.
Speaker #2: The NDAA certification, which was validated by DOW testers and evaluators. It's not self-decoration. It was a thorough process for software and hardware. We have the trusted cyber testing that we have done under the standardization.
Speaker #2: The DD4094 and excuse me for the numerical description. This is electromagnetic registration within the Department of War map. Which is essential if you would like to catalog and include system for mass deployment within the U.S.
Speaker #2: forces. And the new FCC trusted drone designation which defines mobilicom as a critical provider for the U.S. drones. And that's really important. I would like to say that products not in the on this list cannot participate in future U.S.
Speaker #2: federal program. That's why it's a structured structural mode. Obviously, the program software code deployment and the success today with those programs shows how those our position regulatory wise and being embedded across the Department of War certification and regulation is translated into business.
Speaker #2: And we intend to continue with that and expand that. The operational channels footprint with the U.S. Our U.S. production capacity is being extended. The dual U.S.-Israel operation supporting us in our development combat proven evaluation and then bringing solution to market.
Speaker #2: Establish U.S. Department of War DLA partnership and sales channels are critical factors on the different recent shows seen us with those partners which are critical partners getting into the U.S.
Speaker #2: procurement for the Department of War. Which together give us flexibility to deliver into both allied government and commercial drones market later on. Let's take a moment to discuss the recent announcement from I think a week ago from one of the shows where we announced the two new design wings with tier one platform base.
Speaker #2: This slide discussed one of the most important commercial developments since the annual call that we held a few months ago. We announced new design wings with two leading U.S.
Speaker #2: tier one defense drone manufacturer platforms. For ISR, which means intelligence, surveillance, and reconnaissance drone platforms. So the first design wing is with a well-known American drone manufacturer for a group one which is handheld size ISR intelligence surveillance drone platform supporting military application that already own and have deployment with the United States and scaling dramatically.
Speaker #2: Mobilicom Skyport Datalink and the eye cyberspace security software suite are being integrated to extend operational range improve resiliency in contented environment and provide advanced electronic warfare resistance and secure communication capabilities beyond the platform current configuration.
Speaker #2: Integration activity has been progressing over the past several months and we currently anticipate to complete integration process during the next quarter. That will allow the customer to progress and and catalog and use our solution and start selling them to obviously Department of War and other customers worldwide.
Speaker #2: The second tier one design wing it which is a major U.S. defense and commercial aerospace conglomerate. This is for a group two slightly bigger backpack size ISR drone intelligence surveillance and drone platform designed for long range mission longer payload capacity.
Speaker #2: Mobilicom developed a tailored Skyport configuration specifically for this platform with the customer including customized interfaces mission specific integration requirements and so forth. The combined Skyport and the eyes electronic warfare resistance solution is expected to enhance operational range strength resiliency and electronic warfare resistant capability and support more advanced operational scenarios for the customer's platform beyond what they have today.
Speaker #2: The integration and testing activity for the second design wing are progressing very well. We anticipate to complete the validation process over the coming months or two enabling the customer to begin offering the enhanced platform to the end users.
Speaker #2: So importantly those two design wings represent two more seats at the U.S. tier one table for Mobilicom. With both OEMs selecting Mobilicom cybersecure Skyport Datalink and eyes electronic warfare software protection solutions.
Speaker #2: This reinforced the exact trajectory we said we were on. Expanding presence across the trusted U.S. defense drone platform as ISR and autonomous or loitering munition solution and increasing military grade cybersecurity communication.
Speaker #2: I think it's a it's again a good opportunity to discuss the cybersecurity regulatory momentum and what it means for Mobilicom. On the cybersecurity side we are seeing an urgent need to meet cybersecurity regulations.
Speaker #2: But I would like to mention that Mobilicom strategy was not developed in response to current market trends. Mobilicom began investing in drones and autonomous system cybersecurity years ago based on the belief that cybersecurity would eventually become a core requirement for scalable autonomous operation.
Speaker #2: The challenge was developing cybersecurity solutions specifically designed for small size drones or robots platforms where the size the power consumption the memory the computing resources are highly constrained.
Speaker #2: Mobilicom developed a lightweight embedded cybersecurity solution optimized for this tactical edge environment while also working alongside with U.S. defense organization initiatives. Today we are seeing the market evolve in the direction we anticipated.
Speaker #2: The U.S. defense cybersecurity frameworks that were published we including the CMMS standard the cyber survivability endorsement standard the CRMC initiative the new one that was released in November last year and the broader agenda by the Department of War called the Zero Trust Strategy are increasing cybersecurity requirements across the drone and autonomous platform programs.
Speaker #2: The industry is moving beyond the basic one-time tactic cyber test that they had in the past towards an active always on online cybersecurity protection embedded directly on the autonomy AI edge computing of those platforms this is aligns with closely with Mobilicom OS3 cybersecurity software and the secure autonomy framework Mobilicom released which were specifically designed for this new generation of requirements.
Speaker #2: A cybersecurity is becoming increasingly increasingly integrated into program of efforts and future large-scale drone deployments we believe Mobilicom is well positioned as an early provider of purposely built cybersecurity solution for autonomous systems and specifically for small size loitering drones and autonomous systems.
Speaker #2: Over time this also creates a highly attractive recurring software licensing per unit per unit opportunity for Mobilicom tied to deployed drone and robotics platforms.
Speaker #2: So now I would like to hand the call to Liad to walk through the Q1 2026 financial highlights as well as our equity and cash position.
Speaker #2: Thank you Lawrence. So three months ended March 31st 2026. The single number that frames the quarter is the 2.4 million in revenue visibility. Revenue visibility is what we covered recognized revenues plus confirmed backlogs at quarter end.
Speaker #2: It was up 50% year over year. That is the metric that best captured what actually happened in Q1. Let me unpack the numbers behind it.
Speaker #2: Okay. Revenue we reported Q1 revenue of 548,000 against the 844,000 in Q1 2025. This difference is entirely driven by delivery timing rather than just market demand.
Speaker #2: Specifically certain Q1 shipments were deferred into later quarters. Okay. Due to temporary procurement schedules as the customer transitioned to scale program of record production.
Speaker #2: The underlying demand remained intact. The revenue has simply shifted out in time. Order backlog was 1.8 million at March 31st against 737,000 at the same point a year ago.
Speaker #2: Up approximately 151% above the same point last year. Backlog more than doubled while reported revenue temporarily dipped. Post-quarter momentum since March 31st the order booked has continued to grow with additional orders from our U.S.
Speaker #2: tier one customer under the OPF Air program plus follow-on orders from other global customers. All of them to be delivered within 2026. And as Oren just covered two additional U.S.
Speaker #2: tier one design wins. Cash position 70.7 million as of March 31st sorry March 31st as we mentioned previously zero debt zero credit facility zero convertible clean balance sheet.
Speaker #2: During the quarter we also terminated our eight at the market facility a delivery decision made from a position of strength because we did not need it.
Speaker #2: That decision reflects the discipline we want to demonstrate to investors we will only raise capital when it creates more value than it dilutes. Operating cash burn approximately 528,000 per month in Q1.
Speaker #2: The increase is funding operation readiness and growth initiatives. The investment is target in three areas each tied directly to revenue we expect to recognize within the next 12 to 18 months.
Speaker #2: First one is solution integration work for the new U.S. tier one manufacturers we are designing into like these two new designs we published recently.
Speaker #2: Second one proactive longing item inventory buildup for production scale deliveries including for those under the OPF Air program of record and other orders to come.
Speaker #2: And the third and the last one our U.S. manufacturing strategy and U.S. team expansion. 70.7 million in cash combined with discipline execution provides runway towards positive cash flow as the order momentum continue to build through 2026.
Speaker #2: About our equity and cash position. This slide consolidated our equity structure and cash position as of March 31st 2026. On the capital structure ordinary shares outstanding were 12.6 million.
Speaker #2: Of March 31st 2026. Warrant outstanding are 2.6 million. The majority is struck at $5. Which representing another additional 12.9 million of additional capital if exercised.
Speaker #2: Fully diluted share was 15.2 million excluding employee ease of NRSU grants and 17.8 million including all dilutive components. One thing to say compared to 2025 while the total fully diluted share did not change we did see exercise of warrants in about 1.2 million meaning it's continued with this opportunity for additional future warrants exercise as the share will continue to increase.
Speaker #2: About the balance sheet and cash management metrics this has been covered and discussed in the previous slide so I will not return on that.
Speaker #2: And now back to Oren.
Speaker #1: Thank you Liad. This slide is has six tiles of snapshot and recap of execution across customers technology and partnership in Q1. Most of which we have already covered but I would like to briefly touch on two additional points.
Speaker #1: The international expansion. During the quarter we announced designing with the Asia Pacific customer a UAE based defense manufacturer with initial orders. And an Israeli customer for India deployment with an initial order as well.
Speaker #1: The hardware first foot in the door playbook replicating across the regions. And we see those expansion important for future growth of the of the company beyond United States which is our focus today.
Speaker #1: We also launched two new products during the headquarter during the quarter. So we continue with the innovation with maintaining the gap and answering the needs of the customers we are serving in America in in Europe.
Speaker #1: The first scalper tactical which is a wearable software defined communication solution personally built in response to direct operational requirements from defense customers and and designed for dismounted team operation in contested environment.
Speaker #1: And that was a requirement that came from the early deployment into program software code with the Department of Foreign United States and per those requirements that came in the second half of 2025 new product was initiated development was done and product was released in a very short time and it will arrive to the hands of the soldier that will use that very soon.
Speaker #1: The scalper multiband our next generation communication platform featuring software defined band selection solution. Which is twice the widest available solution in the market until that product was released.
Speaker #1: So we are doubling the capacity of the frequencies and operational scenario from any other solution for this market. And that's unique. Especially given that software that electromagnetic jamming interception and operation is the biggest issues today that we see in Ukraine the Middle East and American operation abroad.
Speaker #1: And therefore expanding or doubling on that give better opportunity and performance to carry on the mission in any operational scenario. I would like to overall I would like to summarize our presentation today.
Speaker #1: Overall we believe that Mobilicom is entering an important transition period as tier one defense programs advance from development to validation into broader production and deployment phases.
Speaker #1: Our investment thesis is centered on three core drivers. First demand is building faster than current delivery timing. Backlog increased approximately 150% year over year revenues visibility increased 50% and Mobilicom secure additional few millions of dollars orders for program of record for deployment in United States in as a follow on to a 1.5 million order in late 2025.
Speaker #1: Second we believe Mobilicom strategically strategic mode continues to widen through expanding program exposure with the SEC trusted drone designation the growing tier one customer relationship and increasing cybersecurity requirements tied to the initiatives across autonomous defense systems.
Speaker #1: And third the company is investing from the position of financial strength. Ending the quarter with almost 18 million cash in hand zero debt no ATM facility while continuing to invest in inventory to supply customer demand and being production readiness including US manufacturing footprint and cybersecurity solutions that support future production scalability opportunities and higher margin recurring software revenue.
Speaker #1: I think that this is the time to thank the leaders and employees around the world of Mobilicom for the tremendous effort this quarter. The execution the dedication behind those results are all thanks to them.
Speaker #1: I also want to extend a specific thanks to our co-founder Yossi Segal probably the smartest person I know. He's continued innovation technology leadership which remains central to Mobilicom differentiation for the long term vision.
Speaker #1: Thanks to our entire team we believe that Mobilicom is positioned at the right place and the right time with properly evolving defense and autonomous system market with significant opportunity ahead to scale and grow production programs ramp up tier one opportunity expansion and demand for trusted cybersecure drone and autonomous solutions acceleration.
Speaker #1: On behalf of the entire Mobilicom team thank you for the continued support. Chris I think that this is the time to move to the Q&A.
Speaker #2: Thank you. Well now to move to question and answer session. Reminder for our analysts that are asking live questions. If you joined via the Zoom platform please use the raise your hand function on the menu bar.
Speaker #2: And we'll unmute your line and you can confirm with the pop up on your on your screen. So with that I will open the line to Barry Sine with Litchfield Hills Research.
Speaker #2: Thank you.
Speaker #3: Hey good afternoon thank you for taking the call. Couple questions if you don't mind. First of all you know congratulations I mean two major tier one design wins so so we're off off to the races there.
Speaker #3: I also really appreciated the update you gave us from last quarter's expected goals and it looks like we're really meeting those goals. So that's a great update so thank you for that.
Speaker #3: Question is on the new US tier one ISR design wins. Could you just walk us through typically what is the path from a design win to the different milestones and when might investors expect to see significant revenue coming from those new design wins?
Speaker #1: Thank you Barry. So I would like to say typically what we usually have and specifically for those specific programs so for typical Mobilicom cycle with customers and it's mainly dependent on the customers Mobilicom is very fast and agile.
Speaker #1: So typically six to twelve months for integration certification and then we move to initial production orders and then to ramp up. For the two new design wins customer evaluation and integration through 2026 is already in very progressed stage.
Speaker #1: Therefore we expect that they will translate from completion of all the validation testing and catalog into their sales catalog solutions. Within the third quarter which allow them initial orders in late 2026 and material contribution of those platforms move to scale production in 2027 onward.
Speaker #1: Short answer initial revenue in 2026 and meaningful revenue in 2027.
Speaker #3: And then presumably because of these are programs of record or large tier ones not just in 2027 but continuing on beyond that.
Speaker #1: Yes both of those platforms are of very large known companies significant significant tier one players that already have substantial business both in United States with the Department of War but also with allied countries.
Speaker #1: Therefore they don't have to look for the business the business exists. And the fact that they are partner with Mobilicom integrating Mobilicom to close the gap on needs that they have that couldn't be met and answered with the current solution stands speaks volume about our opportunity and how fast they can scale that from validation and testing which is completed right now and to business creation which is the next phase.
Speaker #3: Okay and then my next question you announced during the quarter and you referenced this in the call about your recent most recent regulatory win which is all of your products are in the FCC trusted drone program and that is on top of multiple other compliance certifications.
Speaker #3: Can you walk us through what does that mean when you're going to a customer and competing you know for a design win how does that impact customers' decisions not just for you know US tier ones but for other customers and internationally presumably if you're that if you're meeting the standards in the US that should benefit you globally.
Speaker #1: Yes definitely. So first it was important that you mentioned but I would like to note that again that our full suite is covered. The scarper data link the mesh networking the ground control station the OS free cybersecurity for autonomous platform the IS electronic warfare software all of them were defined in the papers and the publication made by the Department of War and the FCC public to the world under Mobilicom as trusted and critical components for America.
Speaker #1: For drones robotics. So that was amazing that they decided to include all of our offering. Second federal customers and their OEMs can use our components without any restriction or risk for government exclusion.
Speaker #1: Which means it signals to the market that Mobilicom is a critical technology provider for trusted drone yet another validation for Mobilicom position by the government which is the regulator.
Speaker #1: I would like to emphasize it's creating a US small ecosystem of vendors that meet the different criteria who will enjoy the market scalability. You cannot buy something which is not within the ecosystem that was approved certified and regulated.
Speaker #1: Which is in a sense a walled garden opportunity for the players that are in this list and it's a very very short list. In addition to that I think that the CSRMC and the CMMC standards and the zero trust strategy on cybersecurity are becoming gating criteria for mass production.
Speaker #1: Competitors hitting delays before I mean before it can ship to scale and we we do not. So we can anticipate that if customers would like to scale their production and they have to meet the cybersecurity criteria they will not be allowed to do so without meeting those things and therefore we are the solution for the scalability going forward.
Speaker #1: And with your question to the regulatory procurement decisions we witnessed that bids and programs recently initiated required that the winners will meet such regulation before they receive mass procurement orders.
Speaker #1: One example that I can use is from the drone dominance initiative or program which is very famous recently. Where in the where several of the eleven winners named several months ago didn't receive eventually the commercial order and they didn't because they didn't meet those criteria.
Speaker #1: And that was a very powerful sign that it's great that you have technology and you passed the first holders of first phase second phase but before you are getting any commercial large quantity orders most of the list of the eleven didn't receive that because they didn't meet either those NDA requirements by validation and testing not by declaration the cybersecurity requirements and other procurement registration that Mobilicom has.
Speaker #1: Which then advises you the importance of what we have achieved for getting to the scalability with different programs in the United States going forward.
Speaker #3: Okay and one more question if you don't mind please. You've talked about two key programs of record. So the first one and I think you know that's tied to you know some of the large orders you've announced recently is the United States Marine Corps OPFL program.
Speaker #3: The new one is the US Army LASSO LASSO program. The US Army is about two and a half times bigger than the Marine Corps.
Speaker #3: So I'm assuming that this is a much larger potential opportunity with this new program of record than even the one that you already have won with OPFL.
Speaker #3: Can you talk about that?
Speaker #1: Yes. So any program of record is substantial for Mobilicom beginning the fact that it's not a regular order it's a long-term multi-year commitment of the government to buy preserve the capability maintain and replace and so forth.
Speaker #1: So any program of record is a huge one. Yes you've mentioned the fact that our partner progressed on the LASSO program which is not yet in the commercial stage but it's getting there.
Speaker #1: And there is few players over there so the fact that our partner the tier one American platform maker that used our solutions or multiple of our products progressed to the next phase is very important.
Speaker #1: Because once they win that that can open a huge scalability opportunity which is multiple times bigger than the OPFL that we have today. So that's obvious the Army is much much bigger than the.
Speaker #1: Means and and and that could accelerate significantly our adoption obviously. But what we said in the past is once you win the first one your chances of winning the following ones are much bigger and the fact that they move to the next phase actually prove what we said and I would like to remind that this specific partners is not engaging on one program of record like the OPFL.
Speaker #1: They are targeting eight. Four in the US and four international. So you can imagine their importance for Mobilicom if they will scale to two three four of the eight.
Speaker #1: And that's obviously a strategic partner that we are proving our commitment joint work and acceleration with him as we speak.
Speaker #3: Okay thank you for taking my questions Oren.
Speaker #1: Thank you very now we're going to take a question from Blair Carey I3 Capital.
Speaker #4: Hey Oren and Lead how are you guys?
Speaker #1: Thank you Blair thank you for joining us.
Speaker #4: Thanks for the update. I just have a couple quick questions here. More relating to not necessarily US operations. What we've seen a dramatic depreciation or appreciation of the new Israeli shekel versus the US dollar over the last even six months.
Speaker #4: I would say it's really accelerated over the last Q1 of this year. What is sort of the expense mix and how are you guys thinking about hedging against your US revenues and your Israeli expenses?
Speaker #1: So it's a tough question. But important question. To be asked and so I would like to address it. First I would like to say that the fact that we have R&D and operation team and and site in Israel is very important given the fact that the the Israeli that Israel is in the forefront of drones robotics autonomy and cybersecurity.
Speaker #1: Everybody clearly see the biggest cyber or drones companies coming from Israel. So being with foot on the ground with sites over there with R&D center over there with talent over there is extremely important for Mobilicom.
Speaker #1: In addition to the fact that the combat proven experience that we gained from our product being deployed over there and the technology that we understand and develop with in cooperation with the government over there is essential and priceless for that innovation into America and elsewhere.
Speaker #1: So that's important to understand. Second the recent year FX changes and it's it's been I think in the last twelve months was significant yes.
Speaker #1: It affects our new Israeli shekel which is mainly labor costs for the team in Israel. Yet the production that we are doing in Israel is done under US dollars which means that it's not suffering or affected by the changes in the FX currency between US dollars and new Israeli shekels.
Speaker #1: And third point I think is that the ongoing team growth in the United States the operation in the United States alongside with the planned US production capacity this year will decrease the effect of FX going forward while contributing to our business opportunity growth in the United States.
Speaker #1: In the short term we also implement different defensive methodology FX currency and that's another angle that we took on that.
Speaker #4: Okay thanks very much for that Oren. That helps me understand. And as I understand it right now the current contract manufacturing is done both in Israel and the Philippines.
Speaker #4: Is that correct?
Speaker #1: Currently the production is done in in Philippines and Israel. Where we are producing everything is done under the US dollars. And then the new production capacity is built in the United States based on the Pentagon requirement and request and increase our footprint in America and made it one hundred percent American product.
Speaker #1: Which we are proud of and aligning ourselves with the Department of War requirements.
Speaker #4: Yep.
Speaker #1: And and would like to win on the back of that additional business obviously.
Speaker #4: Yeah I understand. Okay. So basically over the course of the next of this year as the production capacity expands in the US we should expect less impact as a result of foreign exchange on on the cost structures.
Speaker #4: What was what I'm hearing?
Speaker #1: Yes definitely. The fact that we're increasing our team over here and operation over here and production over here will balance the effects of the FX and give us a more balanced strategy for Mobilicom being an international company with different sites.
Speaker #1: Yes.
Speaker #4: Can you thank you very much. So can you give me an idea about what's going on with a sales cycle and compare between what you've experienced in the US versus the rest of the world but in particular APAC and in the NATO region countries?
Speaker #1: So what we've seen in the US is affecting obviously Europe and Israel and other sites which are worldwide which are leaders in the drone evolution.
Speaker #1: And most of them are targeting also the American Department of War and market. So we've seen that the fact that there is tremendous budgets being allocated by America to close the gap on the production scalability that is was done by our adversaries like Russia and elsewhere Iran.
Speaker #1: Budgets and programs are being allocated and progressed rapidly. Therefore we see momentum build in the market and therefore we see more more of players building their capacity and need and adjusting their solution to mass market and adjusting their solution to meet with the challenges that we see in the battlefield where we have experience.
Speaker #1: And that accelerates the market momentum. Obviously there is one end of the equation that's fueled the entire anticipation of ramp up. On the other hand it takes time for large programs of record to be seeded.
Speaker #1: Or to be let's say deployed. But once they are deployed the beauty behind those programs is that it will continue for long term. It's not one procurement process that I have to chase the other one.
Speaker #1: It's procurement processes that have multi-year usually five to ten years of constant deployment and deliveries. And I would like to also mention that Mobilicom specifically our biggest success so far is in the larger munitions space which is one way ticket kamikaze drones.
Speaker #1: What's one you use them even for training you have to buy another one. Which makes the recurring revenue on the hardware let alone on the software.
Speaker #1: So we have few things that are working well for us. Although the recent wins were in a new field in in in intelligence and surveillance field.
Speaker #1: But our previous wins in integrations and design wins by multiple tier one players are in the larger we are now expanding into ISR drones and other elements.
Speaker #1: So it's exciting time because the cycles in the States it's really depends on the companies some of the large large companies we work with.
Speaker #1: Obviously our moving slower than Mobilicom. We are agile very fast moving company usually our head of the curve we are before their needs. And we are waiting for them which is obviously what you have to do when you're working with giants.
Speaker #1: But once the giants are getting to mass market deployment it's a great machine to ride to success and this is what Mobilicom is doing.
Speaker #4: And and just just to follow along on that how does that relate that cycle that you've described there today in the US relate to your efforts in in Europe and in the APAC region.
Speaker #4: Are you are you winning deals faster? Are your partners winning deals faster because there's already a quasi certification from the Department of War? Or do you have to go through the same sort of procurement journey?
Speaker #1: So I would like to use real data from real meetings from the last few weeks. Okay. Let's not you know extrapolate. Let's give you some information and choose.
Speaker #4: Yep.
Speaker #1: So in the last few weeks Mobilicom was super busy across the globe we've been in multiple conferences exhibitions where we sponsored the event had booths lots of meetings with government procurement officers.
Speaker #1: Program officers as well as OEMs and manufacturers which are eventually our target customers. And we've done it in Europe in in multiple locations in the United States.
Speaker #1: In those locations obviously we met with a lot of American companies which are some of them our partners right now or in partnership in progress.
Speaker #1: But a lot of other European or Israeli companies. The fact that we had met with Mobilicom and they want to replace their existing solution and add Mobilicom to their offering is to mainly shortcut the reduce the risk that that once they will win something in America they will have to replace their elements inside to something that America can trust which is Mobilicom one of few players over there.
Speaker #1: So it's opened the door for us for additional business with Israeli as well as European companies that now would like and open the gate for Mobilicom for partnership and integration on the back of our success in America because if they want to win the American or NATO market they have to use solutions that were certified and approved in America.
Speaker #1: Therefore it's accelerate or increase the opportunity for Mobilicom with companies outside of America. This is what I see. And I can name you it's not one or two or three customers.
Speaker #1: Discussion were made and progress was made with multiple of those across the globe that we met in the recent recent weeks. In the recent two three weeks.
Speaker #4: I understand. Okay. Thank you. That's somewhat helpful. And just quickly your OEMs are they is it still mostly airborne drones that that that that the that that of interest or or are you seeing are they seeing more interest in land and sea drones as well?
Speaker #1: One of our biggest one of the big tier ones that we are having from the eight tier ones that we've mentioned and discussed in Asia Pacific used conglomerate is all about ground robotics.
Speaker #1: Okay. So this is ground robotics. We've done some implementation with other tier ones tier ones in Israel which is maritime that was deployed to India.
Speaker #1: I mean actively deployed in India. So we've seen and already implemented in other applications which are either maritime or our ground robotics from different kinds.
Speaker #1: But majority of their larger munition or small size drones group one group two which are scalability wise and volume wise are the biggest and the lion's share of the market.
Speaker #4: Okay. I think you are.
Speaker #1: And dollars are big I get it.
Speaker #4: Thank you.
Speaker #5: All right. Thank you Oren and thank you for those questions. With the interest of time we're going to cut the presentation here. We saw some other questions come in via Q&A.
Speaker #5: We'll make sure to respond to you separately. So that's going to conclude our session on behalf of Oren, Lead and the entire team. I want to thank you for joining us today and your continued interest in Mobilicom.
Speaker #5: A replay for this webinar along with this presentation and related materials will be available shortly on the IR site at IR dot Mobilicom dot com.
Speaker #5: And along with the SEC filings including our Form 20F can be found at SEC SEC dot gov. For any follow-up questions feel free to reach out to me directly.
