Ondas Inc

Good day, and welcome to the ONDIS Holdings, Inc. Third Quarter 2021 Earnings Conference Call. Today, all participants will be in a listen-only mode. Should you need assistance during today's call, please signal for a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone telephone keypad. To withdraw your question, you may press star then 2. Before we begin, the company would like to remind you that this call may contain forward-looking statements. While these forward-looking statements reflect ONDIS's 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 ONDIS's periodic SEC filings and in the earnings press release issued today, which are both available on the company's website. ONDIS undertakes no obligation to revise or update any forward-looking statements to reflect future events or circumstances except as required by law. Please note that today's event is being recorded. At this time, I would like to turn the conference over to Eric Brock, Chairman and CEO. Please begin, sir.

Well, thank you, Operator. Good morning and welcome to our third quarter investor call. I'm joined today by Stuart Cantor, our President and CFO, and Reece Moser, the CEO of our wholly owned subsidiary, American Robotics. I'd like to set the stage for today's call by providing an overview of Ondas Holdings now that we've closed the American Robotics acquisition effective August 5th. Andas Holdings is now formally comprised of two wholly-owned subsidiaries, Andas Networks and American Robotics. Both companies, Networks and AR, provide platform technologies as full end-to-end integrated mission-critical IoT data solutions. Networks provides mission-critical private wireless networks, offering unmatched data capacity and operating flexibility for industrial and government markets. American Robotics offers the Scout system, the first and only fully autonomous drone platform approved by the FAA to fly beyond visual line of sight without on-site human operation in industrial, agriculture, and government settings. Both companies have attractive, high-margin, capital light, and high return on investment business models. Networks offers a large platform sale, whereby our Fullmax wireless technology is able to generate significant revenue at network deployment, And, of course, those networks then grow. The network platform sale is complemented by recurring software and systems maintenance providing SaaS-like revenue and profit streams. Similarly, Merica Robotics deploys a Scout system in a turnkey robot-as-a-service, also known as data-as-a-service, business model. The Scout drone system is owned and operated by AR, while the customer pays an annual subscription to receive the data analytics required for each of their use cases. Together, you will see tremendous synergy between the two companies as we scale. We have the opportunity to bring the Fulmax wireless platform to the Scout system and extend the reach of the Scout system more deeply across field-era operations for our customers. Similarly, we see customer interest in the Scout system as driving new MCIoT wireless network opportunities for OnDOS networks. We see significant customer marketing and field services synergy across the common customer and market both companies target. In short, Andas Holdings has a full suite of technology positioned to attack large end markets with significant growth potential, and we do this with businesses operating under attractive financial models. With that overview, let's shift towards outlining the agenda for today's call. First, I will highlight the progress we are making on the key business priorities of Andas Networks and American Robotics. Then I will ask Stuart to share our Q3 financial results. Next, Stuart and I will provide detailed updates on activity with the rails, Siemens, and Aura networks. Reese will then provide a similar update for American Robotics as we execute the go-to-market strategy with the Scout system. Then I will summarize the call and then open the floor to questions and answers. So let me start by highlighting that we've made significant progress over the second half of 2021 in executing on all our key priorities for both OnDesk Networks and American Robotics. Importantly, at OnDesk Networks, we are now marking this upcoming period as a transition. We are transitioning from investment mode to FOMACS platform delivery in adoption mode. I want to emphasize this. Commercial adoption of our FOMACS technology platform has begun in and we are transitioning towards platform delivery. Today, we are excited to announce that OnDots has received the first commercial purchase order for systems connected to that all important Greenfield 900 megahertz network. This order has come from Siemens on behalf of a major class one rail. In addition, Siemens and OnDots are in conversations with other class one rails about additional 900 megahertz orders. This moment has been eagerly awaited for by our investors. and we continue to be thankful for your support. Again, we have now transitioned ONDOS networks towards platform delivery. This is a huge accomplishment, and I want to take a moment to acknowledge the team at ONDOS and all the hard work and talent that has gotten us to this point. It's really exceptional, and I'm very proud of our team and grateful for their efforts. In addition to the initial order for 900 megahertz, our partnership with Siemens continues to broaden. On the call, we will share details on the outlook for additional jointly developed products whereby Siemens continues plans to integrate our FOMAX wireless technology in the critical train systems that Siemens markets to rail customers worldwide. The Siemens partnership is also expanding on the marketing side. We see identified customer network opportunities in international markets and have also begun exploring near-term opportunities in transit markets, as we expand beyond our initial focus on North American Class I rails, and as interest in IEEE 83.16s and .16t builds throughout the global rail sector. So the SEMA's relationship continues to grow across products and end markets, signaling the value which our full max connectivity platform provides as we build our ecosystem. We've also now completed the phase one effort with Aura Network Systems. We will provide more insight on the technical development there and the value created for Aura Networks. Let's turn to American Robotics. We are now in execution mode as AR focuses on scaling their business. We laid out the American Robotics business expansion plan in great detail in our business update investor call at the end of September. That plan has been launched, and as you know, it's very ambitious. Key hires are being onboarded, and we're adding significant talent to help build our business. We have ramped production capability of the Scout system, and deliveries have begun. We believe field installations are poised to accelerate. Customer activity is expanding, and the ecosystem around Scout is also growing, as evidenced by the recently announced partnership with Dynam AI. Dynam is a supplier of artificial intelligence technology with physics-based foundations. REES is going to provide important highlights of all this activity as American Robotics scales its Scout delivery platform. Stuart, I will now hand the call over to you to provide more details regarding the third quarter.

Great. Thank you, Eric. As I share our financial results today for the third quarter and first nine months of 2021, please note that we've included our financial statements in this morning's press release and that we'll be filing our 10Q by the end of the day. The numbers we are reporting do include financials for American Robotics beginning August 6th. Now, moving to our third quarter results. Revenues decreased by 54% to approximately 0.3 million for the three months ended September 30th, 2021, as compared to approximately 0.6 million for the three months ended September 30th, 2020. The decrease in revenue was primarily a result of lower product sales and development revenue in the three months ended September 30th, 2021, as compared to the three months ended September 30th, 2020. Gross profit decreased by 95% to approximately 14,000 for the three months ended September 30th, 2021, as compared to 248,000 for the three months ended September 30th, 2020, as a result of lower revenue and higher cost of goods sold related to development agreements. Gross profit on a percentage basis was approximately 5% for the three months ended September 30, 2021, compared to 40% for the three months ended September 30, 2020. The lower gross profit percentage was driven by lower amounts of product revenue with higher gross margin and higher cost of goods in development revenue. Operating expenses increased by $1.9 million for the three months ended September 30, 2021, as compared to three months as compared to the three months ended September 30, 2020. The increase in operating expenses was primarily due to an increase of approximately $664,000 in professional fees related to the American Robotics acquisition, an increase of approximately $629,000 in depreciation and amortization expense due to amortization of American Robotics intangible assets and an increase of approximately 463,000 in R&D development expenses for the three months ended September 30th, 2021. The company realized an operating loss of approximately 4.9 million for the three months ended September 30th, 2021, as compared to 2.7 million for the three months ended September 30th, 2020. Operating loss increased primarily as a result of an increase in operating expenses of approximately 1.9 million, primarily associated with the American robotics acquisition, and a decrease in gross profit of approximately 235,000 for the three months ended September 30th, 2021. Net loss was approximately 4.9 million for the three months ended September 30th, 2021, as compared to a net loss of 3.3 million for the three months ended September 30th, 2020. I'll now transition to our first nine months financial results. Revenues increased by 19% to approximately $2.3 million for the nine months ended September 30, 2021, compared to approximately $2 million for the nine months ended September 30, 2020. The increase in revenue was primarily due to larger amounts of development revenue from Siemens and Aura Networks during the first nine months of 2021, offset by lower amounts of product revenue. Gross profit increased by 5% to $929,000 as a result of higher revenue for the nine months ended September 30, 2021, as compared to $882,000 for the nine months ended September 30, 2020. Gross profit on a percentage basis was approximately 40% for the nine months ended September 30, 2021, as compared to 45% for the nine months ended September 30, 2020. operating expenses increased approximately 36 percent to $11.9 million for the nine months ended September 30, 2021, as compared to $8.7 million for the nine months ended September 30, 2020. The increase in operating expenses was primarily due to an increase of approximately $1.5 million in professional fees related to the American Robotics acquisition, an increase of approximately $644,000 in depreciation and amortization, expense due to the amortization of American Robotics intangible assets and an increase of approximately $743,000 in development expenses for the nine months ended September 30th, 2021. The company realized an operating loss of approximately $10.9 million for the nine months ended September 30th, 2021 as compared to a loss of approximately $7.8 million for the nine months ended September 30th, 2020. Operating loss increased primarily as a result of an increase of approximately $1.5 million in professional fees due to the American Robotics acquisition, increase of approximately $644,000 in depreciation and amortization expense due to amortization of American Robotics intangible assets, and an increase of approximately $743,000 in development expenses for the nine months ended September 30th, 2021. Net loss was approximately 10.9 million for the nine months ended September 2021, as compared to a net result of 9.4 million for the nine months ended September 30th, 2020. And lastly, the company held cash and cash equivalents of approximately 47.5 million as of September 30th, 2021, as compared to approximately 26.1 million as of December 31st, 2020. Now I'll turn this back over to Eric.