Ondas Holdings reports a decline in revenues compared to last year By Investing.com

Ondas Holdings Inc. (ONDS) reported a challenging start to the first quarter of 2024 but remains optimistic about its future growth prospects, according to CEO Eric Brock and CFO Yishay Curelaru during the company’s earnings call. Despite a decline in revenues to $625,000 from $2.6 million in the same period last year, the company highlighted strategic partnerships and technological advancements in its FullMAX and Optimus Systems. Operating losses and adjusted EBITDA improved year-over-year, and the company maintained a cash position of $14.6 million as of March 31, 2024. American Robotics, a subsidiary of Ondas, showcased progress in autonomous drone operations and anticipates revenue growth in the latter half of 2024.

Key Takeaways

• Q1 2024 revenue fell to $625,000 from $2.6 million in Q1 2023.
• Gross profit was negative, but operating expenses decreased.
• Operating loss improved by 28%, and adjusted EBITDA loss narrowed by 24% year-over-year.
• Cash and cash equivalents stood at $14.6 million, with additional financing of $8.6 million.
• Landmark deals and partnerships were achieved, including an upgraded PTC (NASDAQ:) data radio contract and a first commercial order for the iron-drone platform.
• American Robotics advanced in autonomous drone operations and expects increased demand in defense and commercial sectors.
• The company is considering a potential spin-off of its drone business and anticipates significant demand for its Optimus and Raider platforms in 2025.

Company Outlook

• Ondas Networks made progress with the 900 megahertz upgrade, achieving integration goals.
• Ondas Autonomous Systems enhanced operational and financial flexibility.
• The Optimus System is expected to generate higher revenue due to customer engagement and fleet adoption.
• Significant demand for both Optimus and Raider platforms is anticipated in 2025.

Bearish Highlights

• Q1 2024 marked a disappointing start with reduced revenue.
• Gross profit was negative due to challenges such as extended timelines with railroads and interruptions from the Gaza conflict.

Bullish Highlights

• Strategic partnerships, such as with HHLA Sky, aim to drive global adoption of Optimus Systems.
• The company secured a landmark deal to provide an upgraded PTC data radio for a key Northeast Corridor passenger railroad.
• American Robotics completed a proof-of-value program and formed partnerships to enhance operations.

Misses

• The company did not provide specific revenue mix forecasts or disclose the average selling price of their counter-drones.
• No specific details or timelines were given for the potential spin-off of the drone industry business.

Q&A Highlights

• Discussions with investors about a potential spin-off of the drone business are ongoing.
• The company plans to produce the Raider system in Israel, with a view to expand production globally.
• Optimus and Raider platforms are expected to see significant demand, particularly from the homeland security and defense sectors.

As Ondas Holdings Inc. navigates through a challenging quarter, the company is looking ahead to the second half of 2024 with a focus on technological adoption and strategic partnerships to drive growth. The company’s commitment to equitizing outstanding convertible notes and securing initial orders for their 900 megahertz products underlines their strategy to improve financial stability and market position. With the drone industry’s rapid growth, Ondas’s emphasis on autonomous systems and counter-drone technologies positions it to capitalize on emerging opportunities within the sector.

InvestingPro Insights

Ondas Holdings Inc. (ONDS) has experienced significant stock price volatility and a substantial decline over the past three months, with analysts not expecting profitability this year. Despite these challenges, the company’s leadership remains focused on long-term growth and technological advancements.

InvestingPro Data metrics reveal a market capitalization of $54.03 million, indicating the company’s relatively small size in the market. The revenue growth for the last twelve months as of Q4 2023 stands at an impressive 638.14%, which is a bright spot amidst the company’s financial situation. However, the operating income margin for the same period is deeply negative at -243.63%, highlighting the company’s struggle to manage its expenses in relation to its revenue.

An InvestingPro Tip worth noting is that while Ondas is quickly burning through cash, analysts are anticipating sales growth in the current year, which may offer some optimism for potential investors looking at the company’s future prospects. The company’s short-term obligations also exceed its liquid assets, which could be a point of concern for its financial health in the immediate future.

For readers interested in a deeper analysis, there are an additional 9 InvestingPro Tips available at https://www.investing.com/pro/ONDS. These tips can provide further insights into Ondas Holdings Inc.’s financial health and market performance. To access these valuable insights, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

Full transcript – Ondas (ONDS) Q1 2024:

Operator: Welcome to the Ondas Holdings Inc. First Quarter 2024 Conference Call. All participants will be in listen-only mode. (Operator Instructions) Before we begin, the Company would like to remind you that this call may contain forward-looking statements. While these forward-looking statements reflect Ondas’ best current judgment, they are subject to risks and uncertainties that could cause actual results to differ materially from those implied by these forward-looking statements. These risk factors are discussed in Ondas’ periodic SEC filings and in the earnings press release issued today, which are both available on the Company’s website. Ondas undertakes no obligation to revise or update any forward-looking statements to reflect future events or circumstances, except as required by law. During this call, Ondas will refer to certain non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with Generally Accepted Accounting Principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is shown in our press release issued earlier today, which is available at the Investor Relations section of our website. This non-GAAP information is provided as a supplement to, not as a substitute for as superior to, measures of financial performance prepared in accordance with GAAP. However, management believes 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 presentation over to Eric Brock, Chairman and CEO. Please go ahead.

Eric Brock: Thank you, operator, and good morning. I want to get started by welcoming everyone to our quarterly conference call. We appreciate the time you’re spending with us and for your interest in our company. I’m happy to be joined today by key members of our leadership team, including our CFO, Yishay Curelaru, Guy Simpson, the President and Chief Operating Officer of Ondas Networks, Meir Kliner, President of Ondas Autonomous Systems, and the Founder and CEO of our Airobotics subsidiary; and 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 Ondas Networks and Ondas Autonomous Systems business units. I will then hand the call to Yishay for a financial review of our first quarter 2024 results. We will then provide a business update for Ondas Networks and our OAS business units where I will ask Guy, Meir and Tim to provide a 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 and as we will discuss, we have advanced our key business priorities at both Ondas 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 1st, 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 face to start the year namely the extended timelines with the Class I 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 Ondas Networks FullMAX dot16 compliant software-defined network platform, as well as OAS’ Optimus System in iron-drone radar. 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. The customer specifications for this upgraded PTC data radio required compatibility with the IEEE 802.16 wireless standard, which of course provides the customer the flexibility to engage a wireless network upgrade roadmap across that Northeast Corridor. This is a landmark deal 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 iron-drone platform. Iron-Drone Raider is a home run product with what we believed our marketing-leading performance specifications. We have worked intently with our customer in defense partners to add even more capability to the Raider and we look forward to sharing these details on the Raider specifications and technology enhancements at a later time. We expect to receive additional orders for the Iron-Drone platform in the current months as we prepare for volume production and expanded marketing to other defense & security customers globally. These new orders for Ondas Networks and our OAS business unit demonstrate the market leadership and the 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 I railroad in Chicago and with a smaller community rail system in the Southwest. Our progress was validated when our distribution partner received an order in early May for a system-wide deployment on behalf of that committed railroad There’s still more work in Chicago which is related to demonstrating the final migration to the new 900 megahertz frequency band and that migration is being planned now. As we moved into 2024, we are seeing broadening opportunities at OAS. With geopolitical complex 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 tailwind are strong and strengthening and benefit our Optimus and Iron-Drone platforms. In addition to our milestone order 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 while our efforts in the Middle East continues to perform well. Meir and Tim will share more details later on the call. And as Meir and Tim will discuss, the Optimus 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 Sky, a drone services unit of HHLA, the largest terminal operator at the Port of Hamburg in Germany, which is Europe’s third largest seaport. This is an important relationship to the Ondas Autonomous Systems business unit with HHLA Sky, we’re bringing an ability to drive free adoption of Optimus Systems and build scalable aerial security and data intelligence programs the 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 in a large German drone market. So to wrap up the introduction, the weak first half revenue belies the value we are building with customers across our technology platforms. The order for the 220 megahertz PTC 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 Iron-Drone Raider transitions that platform to revenue generation and solidifies our OAS business unit as an important player in a fast growing market for Autonomous Systems providing security and intelligence to critical markets such as defense, security, public safety and critical infrastructure operations in a world that’s requiring more and more of this expertise. I will now hear the call to Yishay to provide the detailed Q1 financial update. Yishay?

Yishay Curelaru: Thank you, Eric. As I get started, I want to remind our investors that the figures we’re about to discuss encompass the inclusion of Airobotics financial effective from January 23rd 2023, following our successful acquisition. This strategic move has significantly augmented our operational effectiveness and revenue streams, increased our market presence and enhancing our shareholder value. Further, despite the added scale from the addition of Airobotics, as you will see operating expected both cash and non-cash OpEx are down quarter-over-quarter reflecting an extreme focus on OpEx efficiency. That will continue. Turning to the Q1 ‘24 results. We had a slow start to the year. In the first quarter of ’24, revenues decreased to $625,000 compared to $2.6 million in Q1 ’23. The decrease in revenues was primarily a result of extended timelines at Ondas Networks related to the 900 megahertz activities with the Class I railroad and supply chain disruption connected to the Gaza War at our Alvarez business unit. For Ondas Network, revenues will fluctuate on 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 Siemens and MxV rail. Similarly, revenues 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 flick 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 sub-scale operations given the low revenue recorded in the quarter relative to recurring cost of services provided, as well as product development costs overrun on typically low margin development projects. Gross margin can be volatility on quarter-to-quarter basis due to low revenue level and shifts in quarter mix between products, development, and services revenue. Please note that we are targeting higher gross margins at Ondas Network on new development programs such as the PTC data radio announced today. Operating expenses decreased to %8.7 million for Q1 ’24 as compared to $13.7 million in Q1 ‘23. The sharp drop in operating expenses was primarily due to controls on cash activity and decreased R&D activity both in Networks and OAS. This decrease in operating expenses emphasizes the ongoing benefit from the restructuring of our Ondas Autonomous System 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 non-cash charges. Adjusted EBITDA loss narrowed 24% year-over-year to $7.7 million for Q1 ‘24 as compared to $10.2 million for Q1 ’23. Now let’s turn to the cash flow statement. We had cash and cash equivalents of $14.6 million as of most 31st ’24, as compared to $14.2 million as of March 31st 2023. Q1 cash provided by financing included additional gross financing totaling $8.6 million. Cash used in operations during 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 s we move forward into 2024. Improved cash efficiencies come from operating expenses leveraged at both companies as we focus spending on driving customer adoption and growth in revenues and gross profits. As noted, we ended Q1 with $14.6 million in cash. In February, we announced an $8.6 million capital raise through the sales of Ondas Holdings common stock and Ondas Networks preferred stock in a financing led by Charles & Potomac Capital. As of most 31st 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 conditions to equitize the notes under more favorable condition. It is our objective to equitize these notes as soon as we can by using shares to retire the notes either via monthly amortization or to see those notes convert entirely to equity prior to maturity. I will now hand over the call back to Eric.

Eric Brock: Thank you, Yishay. Now we will transition to a review of our business units and ask Guy Simpson and Meir Kliner to share updates on recent activity in the field with customers and industry partners. We will also ask Tim Tenne to share comments regarding American Robotics and drill down a bit into the outlook for OAS in the United States. As I hand the call to Guy, I want to reiterate that I have confidence in our ability to grow an important business at Ondas Networks as we deploy wireless technology that is critically valuable for the rail customers and the large industrial vendors in 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 I rails in addition to global rail markets remains substantial. Guy, please proceed.

Guy Simpson: Thank you, Eric. I’m happy to be here this morning and to share an Ondas Networks update for our investors. As stated earlier in the call, we provided a very detailed status update on the 900 megahertz upgrade activity recently. And so my comments today will focus on our incremental progress and outlook. 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 I 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 what 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 railroad. 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 I rails continue to closely track our progress. Success in Chicago is expected to lead to further engagement with Class I rails on planning and timelines for their own 900 megahertz networks. 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. We want to take a moment and highlight some recent public statements by the AAR (NYSE:) regarding plans for the 900 megahertz network and some key takeaways. On May 2nd, the AAR submitted a comment letter to the FCC in response to regulatory filings related to a 900 megahertz spectrum licenses. In this comment letter, the AAR made some strong statements related to the value of the new 900 megahertz spectrum and the networks for train operations. Also the AAR 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 that dot16 wireless technology will play in the 900 megahertz build-out, while also referencing the other private license spectrum bands. I remind our investors that the railroads currently operate four Mission Critical private networks across the 160, 220, 450 and 900 megahertz frequency bands. We believe the AAR’s reference to future innovative technologies and – across the full suite of spectrum bands, 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 AAR’s requirements. Let’s turn now to the major announcement we made today regarding the 220 megahertz PTC data radio. Ondas Networks has entered into an agreement with our distribution partner to provide an upgraded on locomotive radio for a key Northeast corridor passenger railroad. This radio will be backwards compatible with the legacy 220 megahertz network and hosts positive train control, a critical safety application. Importantly, this new radio will replace a discontinued legacy radio and is designed for adoption across the Northeast corridor, where a track is shared by other passenger transit and even freight railroad operators. The new 220 data radio will offer an upgrade pass to dot16, which was a specific requirement of the rail customer. I want to know 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 the point to expand it engagement regarding new networks and applications. For example, work with the Class I railroads on advancing the commercialization of our base station controller to provide dynamic frequency resource management and on 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. Eric?

Eric Brock: Thank you, Guy. I will now ask Meir Kliner to take the floor and update us on progress at Ondas Autonomous Systems and provide insight into recent developments at OAS and the outlook from here. Meir?

Meir Kliner: 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 one business worldwide. OAH will leverage our market-leading autonomous drone platforms, the Optimus System and the Iron-Drone Raider, by driving focused and scalable operating models targeted towards providing comprehensive area of 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 datacenters. 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 Optimus 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, Airobotics secured an expanded services agreement to support the growing fleet of our Optimus Systems in the UAE and Israel. Additionally, Airobotics continued its expansion in the United Arab Emirates, where a local governmental entity is deploying the world’s first drone network infrastructure for public safety and other public services. This initiative is expected to continue aiming to achieve a fleet of more than 20 systems by the end of 2025. 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 counter-drone domain, we have successfully completed the urgent works to tailor the Iron-Drone Raider 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 raider 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 Tenne 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 Airobotics and American robotics in a full synergy effectively bringing to the table the core advantages of OAH. Together, we are leveraging world-class technology with proven value and reliability, which we are combining with scalable solutions targeting at focus 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.

Tim Tenne: Thank you, Meir. During the first quarter, we successfully completed a proof-of-value program with the Mass Department of Transportation Aeronautical division, which included flawless demonstrations of the Optimus System and our newly positioned Kestrel Detect-and-avoid solution at the Massachusetts Maritime Academy. These demonstrations showcased our ability to operate the Optimus System consistently with remote operations beyond visual line of sights. This demonstration is continuing to drive a maturing pipeline within the defense, federal date and commercial segments, which positions us well for successful sales and deployments. 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 affordable passive detection system for drones, also known as a counter unmanned aircraft system as well as additional capability for tracking, participating in non-cooperative air traffic Additionally, we have partnered with ResilienX, a leader and data quality assurance and real-time aviation safety management systems for highly automated and autonomous systems. Together, these partnerships will assist Ondas in elevating autonomous drone operations through advanced integration of airspace 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 expects to complete the Green UAS qualification during quarter three. We expect to be completed on the build out of our new demonstration, training and operations center to be launched at our Baltimore County Maryland headquarters in June. We look forward to sharing more detailed information with everyone soon. We are seeing an increased demand for the deployment of the Optimus System with potential customers in both government and commercial segments. Lastly, American Robotics is advancing its go to market plans and US defense and security markets with both Optimus and Iron-Drone. We anticipate new opportunities that will come into effect during the second half of 2024 and I look forward to keeping our investors informed on these activities. I will now hand the call back to Eric.

Eric Brock: 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: (Operator Instructions) The first question comes from Tim Horan with Oppenheimer. Please go ahead.

Tim Horan: Hi guys. Hi Eric. It’s great that the rails kind of reaffirm to the FCC meeting the kind of deadline to clear the spectrum. Can you just give us a little bit more color on how much you think they need to spend to meet the intent in that letter? And just a rough update when you think of revenue start coming in?

Eric Brock: Okay. So, in terms of sizing, we still look at the TAM as what we’ve shared with you often in the past. I do – I would point to specific numbers that the AAR used in their comment letter. I think that’s a nice number that they’ve used in terms of size. However, I think it does refer to legacy equipment. So, it’s not necessarily apples-to-apples. And then, in terms of timing, as we’ve been discussing in the last couple of calls, we are very active across the board with the AAR and specifically in Chicago and that activity is being watched very closely. We do believe that that we will have success there and that will lead to commercial orders and further engagement with other railroads on their plans for upgrading the legacy networks?

Tim Horan: So, is there any change in – it’s been a few years I think since you upgraded the TAM. Is there any change in your pricing strategy or scope of the work whatsoever? And do you think you’ll I guess, you have a best guess on when the revenues might start coming in at this point. It seems like it’s some of the firm orders now that revenues are probably more like next year? (Indiscernible)

Eric Brock: Yeah, so, I don’t want to make any commitments in terms of timelines, because we do need the visibility. I do would refer again and Guy covered this in the AAR statement that they’re expecting to meet the deadlines to move up the legacy network. And as a reminder, those are September 2025. In addition, there is a build-out requirement. The railroads have to show substantial coverage to the FCC and that deadline is April 2026. So the initial deadlines less than 18 months away and April 2026 is about two years. And actually less than two years. So we are going to get busy. And I guess, that’s all I can tell you, Tim. I do want to hold off on putting stakes in the ground on the revenue side until we get orders. I will add if orders come, that we have built a bit of inventory. So we can be responsive. But there you go.

Tim Horan: Great. 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 what your fully diluted shares outstanding are now on a fully diluted basis?

Eric Brock: Oh gee, I don’t have that in front of me on the share account. I’ll have to get back to you.

Tim Horan: Okay.

Eric Brock: 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.

Tim Horan: Okay. So do you think this cash burn rate is kind of good for another quarter or two or will there be any changes to the cash burn?

Eric Brock: Yeah, I think you’ll see our cash OpEx at these levels and then on the revenue side, we’ll drive or I’d say maybe these levels are maybe slightly lower and then we look into the second half where gross profit generation is picking up with revenue and we would like to have that drive the cash utilization down.

Tim Horan: Thank you.

Operator: Our next question comes from Glenn Mattson with Ladenburg Thalmann. Please go ahead.

Glenn Mattson: 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?

Eric Brock: Yeah, so, I expect our drone businesses to be up year-over-year on revenue. The reason for the work in first half weakness is just clearly the war which was disruptive. And we’ve shared that with you. At OAH, there’s pent-up demand and I want to be specific or careful about the specifics on some of the pipelines, but clearly there’s and of course that’s for competitive reasons. But we’re seeing quite a bit of that activity in public safety, the Dubai Police and the UAE Governmental Entity continue to be very active and we’re having great success expanding the fleet there and we think that continues. They have publicly restated again their intent 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 are seeing from ports supreme and specifically a side ports we talk about terminal operators, where we’re kind of building specific programs around security in the 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, the departments of transportation and other government agencies are engaged. So we see quite a bit of opportunity and I would also add that we have a new revenue generating platform in the Iron-Drone Raider. We did announce that order last week. We are expecting more orders. So that’s going to help support revenue growth this year.

Glenn Mattson: Okay. On Iron-Drone, when you – as the pipeline begins to build or whatever, is it more for – are you saying for more military applications or is it sometimes like more security and public safety type of things and what do you think when you’re when you’re competing against other drone platforms or whatever on that type of application, where do you think you stand there? What do you see when there’s like a bake off versus you or somebody else done this?

Eric Brock: Yeah, so the initial demand here is clearly going to be for military use cases and that’s where our first orders will come. And we see – 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 county us platforms that intercept hostile drones that the specifications that we’re bringing to the table and the reliability that we are 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 are well positioned there to build a very nice business. And that’s going to be starting right now after a lot of effort.

Glenn Mattson: Great. And maybe a same question on the Optimus just when you’re competing for ports and that kind of stuff, is it – are you the kind of go to solution that people just need to convert to become a 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?

Eric Brock: So it’s – so, I guess I’ll share with you how I look at it is, the solution we offer from a reliability and functionality standpoint, is really unmatched. We can provide security, intelligence. We can do it 24 hours a day, seven days a week. And that’s an incredibly valuable solution. We do see quite a bit of activity in these markets using drones, but most of them are piloted single purpose. They don’t have the persistency. And again, the intelligence, the range of solutions that we can bring from an analytics standpoint. So, as you see, as spending grow with the value of the drone being realized and incorporated into the workflows, I think that what we’re doing is extremely competitive. And I think that we are going to be helping drive growth in these markets. So I like our position.

Glenn Mattson: Okay great. Thanks for the color guys.

Eric Brock: Thanks, Glenn.

Operator: Our next question comes from Carter Mansbach with Forte Capital Group. Please go ahead.

Carter Mansbach: Good morning, guys. So, I guess, congratulations on the $2.8 billion commuter. Is there any way that we can know the name of the company that you sign this contract with and if not, why?

Eric Brock: What I’ll say is that, there – let me let me give you some background on the request for proposal that came from a couple different places in the Northeast corridor including Amtrak. And those are publicly disclosed RFPs. Because the custom engagement we’ve had is coming with our partner Siemens. So this order that for us comes from Siemens. Siemens is very active with all the northeast corridor customers. So, I don’t want to say specifically, Carter. But it’s a 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 (NASDAQ:). They will be the target for this radio. And it’s important to also understand that this radio is being developed because the legacy radio is end of life and has been discontinued.

Carter Mansbach: Okay. That’s helpful. So, with AAR conversation has been floated about, you guys mentioned it, Tim mentioned it. So the number in that optical or that piece was $69 million. So what piece of that action could be told on this?

Eric Brock: Though I can’t talk specifically about those numbers, because those are AAR numbers and they calculate themselves, what I will say is that, in the new A band, as they call the new 900 megahertz frequency, that we are as far as we know, the only radio that’s certified. The only system, wireless system that’s certified by the FCC to operate.

Carter Mansbach: Okay. All right. Last question regarding this spin-off of the drone industry business. Can we get any type of feel as to what the time frame is, or because you said it in the last call, I don’t understand that, I think that investors don’t understand how logistically that’s going to happen. Can you give us any color as to how it’s going to happen? And when you’re going to be discussing it further? Thanks.

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

Carter Mansbach: Okay. Thanks. Appreciate it.

Eric Brock: Of course.

Operator: Our next question comes from Mike Latimore with Northland Capital. Please go ahead.

Aditya Iyer: Hi, this is Aditya on behalf of Mike Latimore. Could you give us some color on what kind of revenue mix between Autonomous Systems and Networks could we expect for this year?

Eric Brock: Well, I would say the outlook for the year is our Autonomous Systems business unit will likely have higher revenue than Ondas Networks, but I don’t want to forecast the mix.

Aditya Iyer: Got it. And also could you give some color on what is the average selling price on your counter-drones?

Eric Brock: We’re not disclosing that at the moment for competitive reasons.

Aditya Iyer: Alright. Thank you.

Eric Brock: I will tell you that we believe it’s going to – this is very valuable product. It’s at price points that are very competitive. And I think lower than other systems that we see out there. And that we can deliver it at a very attractive margin.

Aditya Iyer: Got it. Thank you.

Eric Brock: Sure. Thanks.

Operator: Our next question comes from Matthew Galinko with Maxim Group. Please go ahead.

Matthew Galinko: Hey, good morning. Thanks for taking my questions. I’m wondering how much custom integration work you expect to be required as the Raiders sold to other military and defense applications.

Eric Brock: A good question, Matt. I don’t think we necessarily have a lot of work on the system itself, right? So the UAE and the docking station. However, when we go to other markets, there may be different detect technologies and when we talk about the detect we are typically talking about raider systems or radar systems, I’m sorry. So, if we have a different radar system, we need to integrate into that radar system which is a pretty straightforward process and not necessarily very costly.

Matthew Galinko: Got it. Okay. And then, I guess a follow up to that is, just given some of the supply chain hiccups you’ve seen on the Optimus side, do you expect or how do you navigate any limitations or ongoing limitations when it comes to scaling up the raider business?

Eric Brock: Yeah, good question. So the current plans are to produce the Raider in Israel. And as we access customers globally, we are likely to produce in other regions, as well. I’ll tell you that the complexity with the Raider system is dramatically less than what we see with the Optimus system. That’s not build materials in a build standpoint. So, we think we’ve got this current – the orders that we’re tracking now, we think we can produce and we’ve identified the plan to do that. But again, I do think I’ll say this for both Optimus and Raider. We will have plans to build in other parts of the world. And we’ll add more specifics to that when we’re ready to do so.

Matthew Galinko: Great. And I guess a final question on that thread in just looking out to 2025, I know you’re not giving a 2024 outlook. But relative to how you see demand on the Autonomous side developing on both Optimus and Raider side, do you to expect that raider could have pull-through in ‘25 that that outpaces Optimus or is it going to be a more gradual uptake?

Eric Brock: Great question. So I believe 2025 for both platforms is going to be significant. I think that I would say Optimus will still be larger from a revenue standpoint 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 engage, which will start to turn into fleets in 2025, as well. So, there’s a lot of pent-up demand for what we’re doing here with Optimus. Same time same thing with Raider. The Raider will expand what the existing customer is our strong belief. But we think we’re going to be able to engage other homeland security and defense groups. And you add all up given the revenue models, I think Optimus will probably still be a larger than greater but they are both kind of grow significantly.

Matthew Galinko: Great. Thank you.

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

Eric Brock: Okay. Thank you, operator. I’m just going to close a 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 we look forward to keeping you informed on our progress. I hope you have a great day.

Operator: The conference is now concluded. Thank you for your attending today’s presentation. You may now disconnect.

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