Ondas Holdings Inc (ONDS) 2024 Q1 法說會逐字稿

Welcome to the Ondas Holdings Inc. first quarter 2024 conference call. (Operator Instructions) Before we begin, the company would like to remind you that this call may contain forward-looking statements.

While these forward they make forward looking statements reflect on Ondas best current judgment, they are subject to risks and uncertainties that could cause actual results to differ materially from those implied by these forward-looking statements.

These risk factors are discussed and on Ondas periodic SEC filings and in the earnings press release issued today, which are both available on the company's website and US undertakes no obligation to revise or update any forward-looking statements to reflect future events or circumstances, except as required by law.

During this call, Ondas will refer to certain non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures, as shown in our press release issued earlier today, which is available at the Investor Relations section of our website.

This non-GAAP information is provided as a supplement to not as a substitute for or superior to measures of financial performance prepared in accordance with GAAP. However, management believes that these non-GAAP measures provide investors with valuable information on the underlying trends of our business. Please note this event is being recorded.

I would now like to turn the conference presentation over to Eric Brock, Chairman and CEO. Please go ahead.

Well thank you, operator, and good morning. I want to get started by welcoming everyone to our quarterly conference call. We appreciate the time you're spending with us and for your interest in our company. I'm happy to be joined today by key members of our leadership team, including our CFO, Yishay Curelaru; Guy Simpson, President and Chief Operating Officer of our Ondas Networks; Meir Kliner, President of our Ondas Autonomous systems in the foundries, and CEO robotics subsidiary; Tim Tenne, CEO of American robotics.

Now let's turn to the agenda. We will start the call with some brief comments highlighting recent business developments at both our Ondas Networks in autonomous systems business units. I will then hand the call to issue for a financial review of our first quarter 2024 results.

We will then provide a business update for August networks in our OAS business units, where I will ask Guy Meir and Tim provide commentary around current business activity, then we will wrap the call and open the floor for investor questions.

I expect today's call to be on the shorter side. Given we have shared a detailed update on our last investor call just six weeks ago when we delivered our annual results for 2023. That investor call covered quite a bit of activity from Q1.

Even so we have been productive in the last six weeks, it as we will discuss, we have advanced our key business priorities at both honest networks and OAS business units. Before we dig into that, I want to start by acknowledging the disappointing start to 2024 from a revenue perspective. As we mentioned on our call on April 1, we expect a good year from a growth perspective.

However, our revenue will be heavily weighted to the second half of 2024, given headwinds we faced the start of the year, namely the extended time lines with the Class one railroads to deploy our technology in upgrading the legacy 900 megahertz network as well as the interruptions with our OAS business unit related to the Gaza conflict.

Recall with the Gaza conflict, the production of Optimus systems was negatively impacted, which created a bottleneck in advancing marketing activity. Nonetheless, we are optimistic about the adoption cycle ahead for our three technology platforms, which include, of course, on Ondas networks FullMAX dot16 compliant software defined network platform as well as OAS Optima system in iron drone rater.

The value of our dot16 technology was further confirmed with the order we announced today to provide an upgraded 220 megahertz PTC data radio for a key Northeast corridor passenger railroad customer specifications for this upgraded PTC data radio required compatibility with the IEEE 812.

16 wireless standard, which of course provides the customer the flexibility to engage a wireless network upgrade road map across that Northeast corridor. This is a landmark deal and we are very excited to open the passenger rail market and expand our serviceable addressable market or SAM to that very large 220 megahertz network.

We are also excited about last week's update where we highlighted the first commercial order for our Ion drone platform. Iron-Drone Raider is a home run product with what we believe are market leading performance specifications.

We have worked intently with our customer in defense partners to add even more capability to the operator and we look forward to sharing these details on the Raider specifications and technology enhancements. At a later time.

We expect to receive additional orders for the Android platform in the coming months as we prepare for volume production and expanded marketing to other defense and security customers globally. These new orders from the Ondas Networks in our OAS business unit demonstrate the market leadership and valuable innovation, we are bringing to protect and secure provision of critical services and operation of critical infrastructure assets.

At Ondas Networks, all signs continue to support a major growth opportunity. Starting with the 900 megahertz network where activity continues to advance on the 900 megahertz program, we have made more progress on the systems integration effort we described on our last call.

Guy will provide more details, but I am happy to share upfront that we have now completed the integration and backwards compatibility on the legacy 900 megahertz network with two railroads, including a Class one railroad in Chicago and with a smaller commuter rail system in the Southwest.

Our progress was validated when our distribution partner receive an order in early May for assistant wide deployment on behalf of that commuter railroad.

There's still more work in Chicago, which is related to the two demonstrating the final migration to the new 900 megahertz frequency band, and that migration is being planned now. As we move into 2024, we are seeing broadening opportunities at OAS.

With geopolitical conflicts rising as evidenced by the tensions in the Ukraine, Middle East and Taiwan. The need to protect and secure critical infrastructure assets and services is a significant focus from governments, defense and homeland security officials as well as for operators of critical technology in industrial assets. These tailwinds are strong and strengthening and benefit our office and Iron-Drone platforms.

In addition to our milestone for Iron-Drone. We continue to advance the customer marketing activity on our Optimus system, our marketing efforts in the US and Europe, adding to a robust pipeline of attractive customer activities. Our efforts in the Middle East continue to perform well. Meir and Tim will share more details later on the call.

And as Meir and Tim will discuss the optimal system inventory availability is improving. This will enable additional customer activity here in the US and internationally and allows us to engage a growing and maturing customer pipeline.

I want to highlight the partnership. We signed last week with HHLA of Sky, a drone services unit of HHLA, the largest terminal operator at the Port of Hamburg in Germany, which is Europe's third largest seaports.

This is an important relationship on the Ondas Autonomous Systems business unit with our Sky, we are bringing an ability to drive fleet adoption of optimus systems and build scalable aerial security and data intelligence programs for global terminal operators where our customer pipeline is growing. I would add that we believe HHLA Sky will also provide entry across government and industrial markets and the large German drone market.

So to wrap up the introduction, so weak first half revenue belies the value we are building with customers across our technology platforms. The order for the 220 megahertz PTP data radio is a huge signal of broad adoption of dot16 across global rail markets and the strategic value of our FullMAX connectivity platform.

Further the commercialization of the ion growth rate are transitions that platform to revenue generation and solidifies our OES business unit as an important player in a fast-growing market for autonomous systems, providing security and intelligence to critical markets such as defense security, public safety and critical infrastructure operations in a world that's requiring more and more of this expertise.

I will now hand the call to Yishay to provide the detailed Q1 financial update. Yishay?

Thank you. Eric. As I get started, I want to remind our investors that the figures were about to discuss encompass the inclusion of Airobotics financial effective from January 23, 2023. Following our successful acquisition.

This strategic move has significantly augmented our operational effectiveness and revenue stream increased our market presence and enhancing our shareholder value. Further, despite the added scale from the addition of Airobotics, as you will see, operating expenses, both cash and noncash OpEx are down quarter-over-quarter reflecting an extreme focus on OpEx efficiency. That will continue.

Turning to the Q1 2014 note, we had a slow start to the year in the first quarter of '24 revenues decreased to $625,000 compared to $2.6 million in Q1 '23. The decrease in revenues was primarily a result of extended time lines at Ondas Networks related to the 900 megahertz activities with the Class one railroads and supply chain disruption connected to the Gaza War at our Alvarez business units.

For Ondas Network, revenues will fluctuate from quarter to quarter, given the uncertainty around timing of customer activity in front of the targeted commercial rollout in the 900 megahertz network and development programs underway with payments and MxV rail.

Similarly, revenue at OAS are expected to vary from quarter to quarter and to normalize into more predictable pattern as we grow our customer base and more of those customers enter fleet programs and recurring service agreements in the United States and internationally.

Gross profit decreased to negative $400,000 for Q1 '24 as compared to $1 million for Q1 '23. Gross margin was negative for Q1 '24 as compared to 39.6% for Q1 '23. The disappointing gross margin performance is primarily due to subscale operations, given the low revenue recorded in the quarter relative to recurring cost of services provided, as well as product development cost overruns on typically low margin development projects.

Gross margin can be volatile on quarter by quarter basis due to low revenue levels and shift in quarter mix between products development services revenue. Please note that we are targeting higher gross margin at Ondas Network on new development progress such as the PTC data radio announced day.

Operating expenses decreased to $8.7 million for Q1 '24 as compared to $13.7 million in Q1 '23. The sharp drop in operating expenses was primarily due to controls on cash activities and decreased R&D activity both in networks and OAS.

This decrease in operating expenses emphasizes the ongoing benefits on the restructuring of our understood Autonomous Systems business unit in connection with the integration of American robotics and Airobotics after the Airobotics acquisition closed in January 23.

The company narrowed operating loss to $9.1 million for Q1 '24 as compared to $12.6 million for Q1 '23, although revenue decreased, our operating loss improved 28% year-over-year and was largely driven by strong expense control and lower noncash charges. Adjusted EBITDA loss narrowed 24% year-over-year to $7.7 million for Q1 '24 as compared to $10.2 million for Q1 '23.

Now let's turn to the cash flow statement, we had cash and cash equivalents of $14.6 million as of March 31, '24 as compared to $14.2 million as of March 31, 2023. Q1 cash provided by financing includes additional gross financing totaling $8.6 million.

Cash used in operation during Q1 '24 decreased by $5.3 million due to primarily the restructuring of our Ondas Autonomous System business unit. We expect cash utilization to improve significantly as we move forward into 2024.

Improved cash efficiencies come from operating expenses leverage at both companies as we focused spending on driving customer adoption and growth in revenues and gross profit as noted, we ended Q1 with $14.6 million in cash.

In February, we announced an $8.6 million capital raise through the sales of Andaz holding common stock and Ondas Networks preferred stock financing led by Charles and Potomac Capital. As of March 31, 2024, we had $27.4 million in convertible notes outstanding.

I want to highlight that the convertible notes have maturities in April 2025 and July 2025, which means we have some time to manage the amortization and create condition to equitize the notes under more favorable conditions. It is our objective to equitize these notes as soon as we can by using share to retire the notes either we are monthly amortization or to see those notes convert entirely to equity prior to maturity.

I will now hand over the call back to Eric.

Thank you. Now we will transition to a review of our business units. And as Guy Simpson, Meir Kliner to share updates on recent activity in the field with customers and industry partners was also asked Tim Tenne to share comments regarding America robotics and drill down a bit into the outlook for OAS in the United States.

As I hand the call to Guy, I want to reiterate that I have confidence in our ability to grow an important business at US networks as we deploy wireless technology that is critically valuable for the rail customers and the large industrial vendors and emerging MC-IoT technology ecosystem.

We believe commercial deployments on 900 megahertz will begin soon certainly this year and that the opportunity in 900 megahertz as well as with the other private networks for the Class 1 rails in addition to global rail markets remains substantial.

Guy, please proceed.

Thank you, Eric. I'm happy to be here this morning. And to share on US networks update for our investors. As stated earlier in the call, we provided a very detailed status update of the 900 megahertz upgrade activity recently and so my comments today will focus on our incremental progress and outlook.

I am happy to share that we have achieved the systems integration goals for our Airlink ATCS products and demonstrated backwards compatibility in the live legacy 900 megahertz network of a Class 1 railroad in Chicago.

Our next step with this railroad is to advance the migration of the installed AirLink systems to the new 900 megahertz frequency band. And we believe we have the right plan to do just that this effort is currently being planned with the customer, and we expect to complete this migration effort in the second quarter.

In addition, we have completed a second systems integration with a commuter railroad in the Southwest. Our distribution partner has already received an order on behalf of this customer, signaling their confidence in our ability to upgrade the legacy 900 megahertz network.

And let me highlight this is the first system-wide commercial order in the 900 megahertz network. This is a significant milestone, validating the progress we are making with this important network.

Furthermore, we are starting the now well proven systems integration process with the Midwest commuter railroads. As we recommended, they have purchased equipment to establish multiple labs in which they will evaluate Airlink products and dot16 technology for various applications.

The other Class 1 rails continue to closely track our progress success in Chicago is expected to lead to further engagement with Class 1 rails on planning and time lines for their own 900 megahertz network. We, along with the rail customers and Siemens have learned a lot through these initial integration activities and we believe we have created scalable processes that can be deployed in other regions across all railroad operations.

Wanted to take a moment and highlight some recent public statements by the AAR regarding plans for the 900 megahertz network and some key takeaways on May 2, the AAR submitted a comment letter to the FCC in response to regulatory filings related to a 900 megahertz spectrum licenses in this comment letter, the ARR made some strong statements related to the value of the new 900 megahertz spectrum and the networks for train operations.

Also, the ARR stated that the 900 megahertz frequency band was critical, highly valuable and that the 900 megahertz network was a key component of the industry's next-generation network plans.

Furthermore, they signaled the critical role the dot16 wireless technology will play in the 900 megahertz buildout while also referencing the other private license spectrum bands. I remind our investors that the railroads currently operate for mission critical private networks across the 160, 220, 450 and 900 megahertz frequency bands.

We believe the ARR reference to future innovative technologies across the full suite of spectrum band highlights the opportunity for Ondas and its dot16 platforms to support network upgrades across all of the legacy networks operated by the railroads. We will continue to work hard to realize this massive market opportunity and support the ARR requirements.

Let's turn now to the major announcement we made today regarding the 220 megahertz PTC data radios Ondas Networks has entered into an agreement with our distribution partner to provide an upgraded on locomotive radio for a key Northeast Corridor passenger railroad. This radio will be backwards compatible with the legacy 20 megahertz network and host positive carry train control, a critical safety application.

Importantly, this new radio will replace a discontinued legacy radio and is designed for adoption across the Northeast corridor where track is shared by other passenger transit and even freight railroad operators.

The new 220 data radio will offer an upgrade path to dot16, which was a specific requirement of the rail customer. I want to note that this project has already started, and we are on track to deliver production radios in the first quarter of 2025.

One final note on the 220 megahertz program. This win represents a new rail market passenger and transit, a new private network, 220 megahertz and a new application positive train control. In short it expands our service addressable market or SAM in the rail sector. In addition, our work with the AAR and specifically with MxV rail continues to point to expanded engagement regarding new networks and applications.

For example, work with the Class 1 railroads on advancing the commercial commercialization of our base station controller to provide dynamic frequency resource management and our new use cases for 900 megahertz, including CTC over ITCM to provide the required redundancy for the 220 megahertz PTC safety network.

Now I will hand the call back to Eric.

Thank you, Guys. I will now ask Meir Kliner to take the floor and update us on progress at Odyssey autonomous systems and provide insight into recent developments at OES. and the outlook from here. Meir?

Thank you, Eric. In the first quarter, we announced the formation of Ondas Autonomous Holding, Inc. OAH. This newly formed one holding company is intended to enhance our operational and financial flexibility as we scale our drone business worldwide.

OAH we leverage our market leading autonomous drone platforms, the optimal system and the Ireland run rate, I mean driving focused and scalable operating models targeted towards providing comprehensive areas, security and data solutions for specific industry verticals.

Of course, these initial vertical markets where we are demonstrating scalable, go to market success, including public safety and emergency response, critical infrastructure, construction, project management and data centers.

Our customer pipeline has expanded significantly in recent months as our investments in our services organization in both US and Europe, which include partnerships like we announced last week with HHLA Sky and C-Astral aerospace begin to mature. Our ability to meet this growing demand visibility has improved with optimal system production now catching up after the dislocation from the Gaza War.

On production, we expect to receive delivery of the 15 systems currently being produced by Q3 2024. We are making plans to expand production behind these systems. During Q1 and what is secured and expanded services agreement to support the growing fleet of our optimal systems in the UAE and Israel.

Additionally, Airobotics continued its expansion in the United Arab Emirates with a local governmental entity is deploying the world's first one network infrastructure for public safety and other public services. This initiative is expected to continue aiming to achieve a fleet of more than 20 systems by the end of 2025.

As we continue to support this network expansion, we see a growing potential for expanded commercial use cases in the UAE, and we hope to have more to say on this later this year.

In the council's one domain, we have successfully completed the Eldon walk to tailor the island one way the system for certain military requirements. This achievement is evident in our recent announcement of initial purchase order for major defense company.

We believe the system specifications for the data are best in class and even disruptive as compared to other systems in the market. The incredible effort and accomplishments by our team positions Ondas very well in a fast-growing market.

While Tim and I will provide an update on US business activity, I want to highlight our business development activities in Europe, where we have established a marketing effort that includes the formation of new partnerships that help leverage the local market expertise of these three raiders.

We believe the market potential in Europe is significant, where we can bring our vast experience and credibility in protecting and monitoring critical assets to key customers in transportation, construction and many other critical operations.

I want to finish my prepared remarks by highlighting that we are operating in robotics and American on what is in a full synergy effectively bringing into the table the core advantages of OAH. Together, we are leveraging world-class technology with proven value and reliability, which we are combining with scalable solutions targeting at focused vertical markets and use cases.

I will now hand the call over to Tim Tenne, CEO of American robotics to provide an update on the business achievements we are making at American robotics.

Thank you, Meir. During the first quarter, we successfully completed a proof of value program with the mass Department of Transportation aeronautical division, which included flawless demonstrations of the Optimus System and our newly positioned Kestrel Detect and avoid solution at the Massachusetts Maritime Academy.

These demonstration showcased our ability to operate the optimal system consistently with remote operations beyond visual line of sight this demonstration is continuing to drive a maturing pipeline within the defense, federal, state and commercial segments, which positions us well for successful sales and deployment.

We have also expanded our ecosystem around field operations and technology infrastructure via new partnerships. At American robotics, for example, we secured a partnership with Senhive, a leading provider of a portable passive detection system for drones. Also known as a counter unmanned aircraft system as well as additional capability for tracking participating and non-cooperative air traffic.

Additionally, we have partnered with ResilienX, a leader in data quality assurance and real-time aviation safety management systems for highly automated and autonomous systems. Together, these partnerships will assist on this and elevating autonomous drone operations through advanced integration of aerospace, safety and management systems.

American Robotics engaged in the Green UAS program to certify compliance with the highest levels of cyber security and supply chain requirements of the US National Defense Authorization Act.

The Green UAS program is administered by the Association for Uncrewed Vehicle Systems International in partnership with the US Department of Defense and many state governments with the purpose of enhancing the country's UAS technology base. American robotics expect to complete the green UAS qualification during quarter three.

We expect to be completed on the build-out of our new demonstration training and operation center to be launched on our Baltimore County, Maryland headquarters in June. We look forward to sharing more detailed information with everyone soon. We are seeing an increased demand for the deployment of the Optimus system with potential customers in both government and commercial segments.

Lastly, American robotics is advancing its go-to-market plans in US defense and security markets with both optimism and Iron-Drone. We anticipate new opportunities that will come into effect during the second half of 2024. And I look forward to keeping our investors informed on these activities.

I will now hand the call back to Eric.

Let's wrap a call now and summarize the outlook and provide context for where we are. We're going to continue to hold off and providing a formal outlook for 2024. We want to be conservative given we still need to secure that initial 900 megahertz order. We do believe order and revenue visibility will improve in the second half.

We continue to work hard in the recent AAR public comment suggests the railroads are intending to build out the $900 megahertz network and it also suggests that they will have some urgency. For OAS, customer engagement, conversations and negotiations and orders.

As well as field trials continue to build and the availability of Optimus Systems will help support a recovery in revenue growth. The various distribution partnerships we have secured, such as the HHLA Sky announcement last week are also expected to add to our revenue in the second half.

Lastly, Iron-Drone will be accretive to the revenue outlook, now that has been officially launched and accepted by a very important reference customer. So the outlook remains positive for Ondas. I understand may be frustrated with our choppy performance from a financial and operational standpoint.

We share your frustrations, especially giving our belief that we have created extremely valuable technology platforms in very large high growth end markets. We are continuing to work hard to deliver this to you. We're working on business plans and funding strategies, which include capital strategies at our OAH business unit, which we believe will accelerate the execution of its business plan.

My confidence remains high. We are doing amazing things for our customers and partners and it’s our job to make sure that we, meaning our investors and our team will be rewarded. It isn't easy for sure, but we remain 100% committed and we will work hard to deliver for you.

With that said, let's see if there are any questions. Operator?

(Operator Instructions) Tim Horan, Oppenheimer.

Yes, hey, Eric. It's great that the kind of rails kind of reaffirm to the FCC of meeting that kind of deadline to clear the spectrum and can you just give us a little bit more color on that. You don't how much you think they need to spend to meet the or the intent in that letter and on just a rough update when you think of revenues kind of start coming here?

Okay. So in terms of sizing, we still look at the TAM as we've shared with you often in the past, I do I would point to specific numbers that they are used in their comment letter. I think that's a nice number that we've used in terms of size. However, I think it does refer to legacy equipment, so it's not necessarily apples to apples.

And then in terms of timing, as you know, we've been discussing the last couple of calls, we are very active across the board with the AAR and specifically in Chicago. That activity is being watched very closely. We do believe that we will have success there and that will lead to commercial orders and further engagement with other railroads on their plans for upgrading of legacy networks.

So is there any change in on you? It's been a few years. I think since you updated the TAM, is there any change in your pricing strategy or scope of the work whatsoever? And do you think you'll on. Yes, I guess you have a best guess on when the revenues might start coming in at this point on? It seems like it's some of the firm orders now that revenues are probably more like next year, multiple awards are multi-year.

So I don't want to make any commitments in terms of time lines because we do need the visibility. I do would refer again and I covered this in the statement that they're expecting to meet the deadlines to move off the legacy network. As a reminder, those are September 2025. Behind addition, there's a build-out requirement with the railroads have to show substantial coverage to the FCC that deadline is April 2026.

So the initial deadline, so less than 18-months away in April 2026 is about two years and actually less than two years. So we're going to get a bit busy. And you said that's all I can tell you, Tom, I do want to hold off on putting stakes in the ground on the revenue side until we get orders. I will add if orders come that and we have built a bit of inventory, so we can be responsive.

Great on. And can you then maybe just update us on your liquidity situation? Do you think you need to raise more capital at this point A and B, can you just remind us from what your fully diluted shares outstanding are now on a fully diluted base?

I don't have that in front of me on the share count, I'll have to get back to you.

Okay.

But on the liquidity side, we do expect to raise capital. And I've said that on the last call six weeks ago, and we pointed specifically to some activity with OAH. So I'd like to just leave it at that.

Okay. Should you think this cash burn rate is kind of good for another quarter or two or would there be any changes to the cash burn?

Yes, I think you'll see our cash OpEx at these levels. And then on the revenue side will drive or May, I'd say, maybe in these levels or maybe slightly lower. And then we look into the second half, we have gross profit generation picking up with revenue and would you like to have that drive the cash utilization down.

Thank you.

(Operator Instructions) Glenn Mattson, Ladenburg Thalmann.

Hey guys. Thanks for taking the questions. Yeah, just can you give us a sense on the OAH side about there's been, I guess, a little bit of push out based on some of the disruptions you mentioned. Just can you give us a sense of the scope of what do you feel do you see for that unit versus where you were say at the beginning coming into the year?

So, I expect our drone businesses to be up year over year in revenue. The reason for the work first half weakness is clearly the war, which was disruptive, and we'll share that with you at OH., there is pent up demand and I want to be specific. We are careful about the specifics on some of the pipeline. But clearly, there's a of course, that's for competitive reasons.

But we're seeing quite a bit of activity in public safety, the Dubai police and the UAE governmental entity. It continues to be very active and we're having great success expanding the fleet there. But we think that continues. They have publicly stated again, their attempt to build a citywide infrastructure. And we do see commercial activity or commercial opportunities in the UAE as well.

That activity in Dubai is leading to more engagement with global security and law enforcement groups. So we're very encouraged by that. We have highlighted some of the demand we're seeing from ports and specifically the excite ports. We're talking about terminal operators where we're going to be building specific programs around security and aerial intelligence or inspection.

And the HHLA Sky relationship that we established this quarter is a good example of us in the direction we're heading there. Certainly departments of transportation and other government agencies are engaged. So we see quite a bit of opportunity. And I would also add that we have a new a revenue generator platform and the hydrogel rater, we did announce that order last week, we're expecting more orders. So that's going to help support revenue growth this year.

Okay on iron drone when you as the pipeline begins to build or whatever, is it more for ICE and firm more military applications? Or is it sometimes like more security and public safety type things. And what do you think when you're when you're competing against and drone platforms or whatever, and that type of application, what where do you think you stand or what do you see winners like a bake-off versus you or somebody else that?

So the initial demand here is clearly going to be with military for military use cases and that's where our first orders will come in. We see big, we believe, with this customer that we have substantial growth opportunity.

Now, I'd also say we're seeing quite a bit of interest from other governments, homeland security groups and defense groups as well. So that's where you're going to see us play. And we feel specifically for the counter-UAS platforms that intercept hostile grows that the specifications that we're bringing to the table and the reliability that we're demonstrating that we have a best in class product.

So the market for counter drone systems is big and growing very rapidly. So we think we're well positioned there to build a very nice business on and that's going to be starting now a lot of efforts.

Great. And maybe a second question on the Optimus. Just when you're competing for ports and that kind of stuff, and are you the kind of go-to solution and people just need to convert to two to becoming drone operators, users type thing? Or is there is there oftentimes there's two or three competitors going for that business and you're having to compete on either features or price or anything like that?

So it's -- so I guess I'll just share with you. How I look at it is the solution we offer from a reliability and functionality standpoint, it's really unmatched on what we can provide you security intelligence. We can do it 24 hours a day, seven days a week, and that's incredibly valuable solution. We do see quite a bit of activity in these markets using drones.

But most of them are piloted single-purpose on they don't have the persistency. And again, the intelligence of the range of solutions that we can bring from an analytic standpoint. So as you see spending grow of the value of the growth being realized and incorporated into workflows, I think that what we're doing is extremely competitive.

And I think that we're going to be helping drive growth in these markets. So I like our position.

Okay, great. Thanks for the color, guys.

Thanks, Glenn.

(Operator Instructions) Carter Mansbach, Forte Capital Group.

Good morning, guys. So I guess congratulations on the [$2.8 billion] computer. Is there any way that we can know the name of the company that you signed this contract with And if not, why?

Well, what I'll say is that to me, let me give you some background on the request for proposal that came from a couple of different places in the Northeast corridor, including Amtrak and those are public. We disclosed our piece on the cost. The engagement we've had is covering with our partner, Siemens. So this order that provide for us comes from Siemens and Siemens is very active with all the Northeast corridor customers.

So, I don't want to say specifically, Carter. But it's a radio for a key northeast corridor customer and we believe that the northeast corridor rails which includes MBTA, New Jersey Transit, Long Island rail, MTA and Amtrak, as well as certain straight rail operators like CSX.

There will be the target for this radio, and it's important to also understand that this radio is being developed because the legacy radio incentive license fee has been discontinued.

That's helpful. So that's a conversation has been floated about. You guys mentioned that Tim mentioned it. So the number in that article or that piece was $69 million. So what piece of that action is could be thoughts on this?

So I can't talk specifically about those numbers because as a our numbers and they calculate them themselves, what I will say is that in the new rig a band as they call it, the new 900 megahertz frequency that we are as far as we know the only radio that's certified, the only system wireless systems certified by the FCC it operate.

Okay. Last question regarding this spin off of the drone industry business, can we get any type of feel as to what the timeframe is? Because you said it in the last call, I don't understand it investors don't understand how logistically that's going to happen. Can you give us any color as to how what's going to happen and when you're going to be discussing it further? Thanks.

I can't give you specifics on that. What I did say or reiterate is that the conversations with investors are active. So I'll say this, there's a variety of scenarios on that could play out today and in the future, which revolved investment and potentially spinning a company off into a separate entity.

Okay, thanks. Appreciate it.

(Operator Instructions) Mike Latimore, Northland Capital.

Hi this is [Adithya] on behalf of Mike Latimore, could you give some color on what kind of revenue mix between autonomous systems and networks could be. But for this year?

Well, I would say the outlook for the year is our Autonomous Systems business unit will likely have higher revenue than on its networks, but I don't want to forecast the mix.

Got it. And also, could you give some color on that? What is the average selling price on your console drones?

We're not disclosing that at the moment for competitive reasons.

Well thank you

I will tell you that we believe it's because this is a very valuable product at price points that are very competitive and I think lower than other systems we see out there and that we can deliver at a very attractive margin.

Got it. Thank you.

Thanks.

(Operator Instructions) Matthew Galinko, Maxim Group.

Hey, good morning. Thanks for taking my questions. I'm wondering how much custom integration work you expect and to be required as the raters sold to other military and defense applications?

Good question that I don't think we necessarily have a lot of work on the system itself, right? So the UAV and the, um, the docking station. However, when we go to other markets, there may be different detect technologies. And when we talk about the tech vertical and talking about radar systems, our radar systems, I'm sorry.

So if we have a different radar system, we need to integrate into that radar system, which is some it's a pretty straightforward process and not necessarily very costly.

Got it. Okay. And then I guess a follow-up to that and just given some of the supply chain hiccups you've seen on the optimist side, do you expect or how do you navigate any limitations or ongoing? There's limitations when it comes to scaling up the separator business?

A good question. So the current plans are to produce the operator in Israel. And as we access customers globally, we're likely to produce in other regions as well. And I will tell you that we the complexity with the Raider system is dramatically less than what we see with the Optima system on that's though materials in a build standpoint.

So and so we think we've got this current the orders that we're tracking now, we think we can produce, and we've identified the plan to do that. But again, I do I do think I'll say this for both optimism and in Raider, we will have plans to build in other parts of the world, and we'll have more specifics to that when we're ready to do so.

Great. And I guess final question on that thread it hit and Tom just looking out to 2025, I know you're not you're giving your 2024 outlook, but down relative to how you see demand on the autonomous side developing on both the optimist and Rader side, do you expect every year could haṁve pull through in '25 that, that that pace outpaces optimism or is it going to be a more gradual, uptake.

Great question. So I believe 2025 for both of these platforms is going to be significant. I think that I would say Optimus will still be larger from a revenue standpoint and where we're going to see revenue driven is through existing customers and fleet adoption. But as we're moving this year through 2024, you can see a number of very significant customers engaged, which will start to turn into fleets in 2025 as well.

So there's a lot of pent-up demand for what we're doing here with Optimus Sametime instant thing with greater. The Raider will expand with the existing customer is our strong belief, but we think we're going to be able to engage other homeland security and defense groups.

You add it all up. I mean, given the revenue models, I think I think Optimus will probably still be larger than later, but they're both going to grow significantly.

Great. Thank you.

(Operator Instructions) This concludes our question-and-answer session. I would like to turn the conference back over to Eric Brock for any closing remarks.

Okay. Thank you, operator. I'm just going to close the call by simply thanking you again for attending. We have a lot of work ahead and we're going to get right back at it and look forward to keeping you informed on our progress. I hope you have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.