Ondas Inc

Welcome to the Undisputed Inc. Fourth Quarter and Full Year 2021 Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal 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 telephone keypad. To withdraw your question, please press star then two. 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. On this undertaking, no obligation to revise or update any forward-looking statements to reflect future events or circumstances, except as required by law. Please also note this event is being recorded. I will now turn the conference over to Eric Brock, Chairman and CEO. Please go ahead, sir.

Well, good morning, and it's a pleasure to welcome you to our conference call. I'm pleased to be joined today by our President and CFO, Derek Reisfield, Stuart Cantor, the President of OnDust Networks, and American Robotics CEO, Reece Moser. Today, we plan to review last year's financial performance and strategic accomplishments and discuss our outlook for 2022. Similar to our last call, I want to set the stage by starting with an overview of OnDust Holdings' In order to provide some important context on our market opportunity and business strategy before we outline our plan to deliver on the growth opportunities ahead, Adas Holdings has two complementary lines of business, Adas Networks and American Robotics. Both companies provide platform technologies for high-value industrial markets. These are 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 human operation on site. We do this in industrial, agriculture, and government settings. Adas Networks processes and transfers mission-critical industrial data via its software-based Fulmax connectivity platform, and American Robotics, via the Scout system, provides automated data collection and edge processing. We believe both companies have attractive, high-margin, capital-lite, and high-return-on-investment business models. We offer these platform technologies under the Adas Holdings umbrella. providing us with a unique opportunity to build the ecosystem around our technology platforms. We believe this allows OnDesk Networks and American Robotics to invest in and develop even more valuable, fuller-stack solutions for our customers via partnerships like we have with Siemens, or via investment as we have done with artificial intelligence and machine learning specialist DynamAI, or via strategic acquisitions like the definitive agreement we announced yesterday to acquire Ardena, a leading rail track inspection analytics provider. We believe our technology platform and business platform strategy is poised to deliver incredible value to our customers. We have argued, I think successfully, that we are at the foothills of an industrial technology investment cycle driven by next-generation data solutions. We call this mission-critical IoT. Data collection, wireless broadband communications, and data analytics are at the core of these MCIOT solutions, and customers need companies like Andas Holdings to bring these complex technologies together into complete, integrated, end-to-end data solutions. We believe there are outsized rewards available for companies and their investors who are able to define the full-stack solutions for these high ROI next-generation data services. We also believe that Andas has a business strategy and the talent and experience to bring this value to customers for the benefit of our shareholders. I want to share a few words on yesterday's announcement of our definitive agreement to acquire the Ardena assets from industrial technology developer Burl Applied Research. The Ardena deal is a perfect example of how ONDOS and AR can bring substantial value to customers and unlock bottlenecks holding back growth in industrial and CIOT data markets. We believe Ardena is widely regarded as one of the most sophisticated providers of drone-driven rail inspection analytics across the global rail industry. They are pioneers in the business today. and began developing these systems back in 2014 when they partnered with BNSF Railway as part of the FAA-sponsored Pathfinder UAS program. While Adrena's analytics software and services are extremely valuable, market growth has been held back by a data collection bottleneck. If you're in the business of offering data analytics services, you need data to analyze, and as we know, collecting the data has been the conundrum for industrial markets. Of course, we believe the data collection problem is one that American Robotics and our Scout system can solve. Similar to other industrial sectors, the railroads need to scale their data collection abilities. They need automation and BVLOST drone operating capability to reduce the cost and complexity of data collection related to human pilots and FAA regulations. This transaction solved the problem for rail customers by combining the leading automated industrial data collection platform in our Scout system with Ardenda's world-class analytics capabilities. This is a powerful solution for our rail customers and accelerates Ondas' ability to penetrate the rail sector, providing end-to-end data services. We expect the deal to close in the second quarter and want to highlight that the bulk of consideration for Ardena will be Andas shares of common stock, suggesting that Beryl, Ardena's owners, find this transaction to be value-creating. We believe this deal is a home run for our rail customers and Andas shareholders. With that introduction, let's shift towards outlining the agenda for today's call. First, I will highlight the progress we're making on key business priorities at Networks and American Robotics. Then I will ask Derek to share our Q4 and full year 2021 financial results. Then Stuart and I will provide an update on ONDOS Network's business development progress and growth plan, of course, focusing on our progress with the railroads and Siemens. Reese will then provide a similar update for American Robotics as we execute the go-to-market strategy for the Scout system. and I will then summarize the outlook before we open the floor for Q&A. Let's now bring you up to speed on how we are executing on our key priorities. As you will learn on this call, we are on a roll executing the growth plans with both OnDOS Networks and America Robotics. In 2021, we saw our substantial investments in technology platforms in business development pay off at both networks and AR. At networks, after working with the Class 1 Rails for several years, we received our initial launch order for the 900 megahertz platform in December. This marked the transition for on dust from investment in technology and business development to platform delivery as full max, our patented 802.16 wireless technology begins to be adopted across the class one rail networks. In addition to that initial order, we're announcing today that we received a second commercial launch order in January from a second class one rail. We also highlight that a third Class 1 railroad has begun work in the field in preparation for a significant launch order, which we expect to receive in the second quarter. The early ordering activity from Siemens on behalf of the Class 1 rail signals the platform adoption of our Fulmax technology. The establishment of a federated MCIOT rail lab is further evidence that our Fulmax technology is positioned at the core of railroad mission-critical network performance. As Stuart will share later, the Rail Lab is a critical development, which we believe is cementing ONDEF's DOT16 as the railroad connectivity platform of the future across multiple mission-critical networks. In parallel with the increase in order activity and deeper engagement in our platform by the Class 1s, our relationship with Siemens continues to flourish and expand. We successfully completed the initial joint development of the Next Generation Advanced Train Control System, or ATCS, platform for Siemens in the fall of 2021. Recall that program called for the development of a base station, we refer to that as the BCP, and an edge remote. That's a system at the wayside referred to as the WCP. Siemens Next Generation ATCS comes embedded with Andas FOMAC software and edge computing capabilities inside. As Siemens has introduced ATCS in the market, it's now receiving orders, which OnDOS is delivering against. In addition to selling next-generation ATCS systems, Siemens also formally launched marketing programs for OnDOS Fullmax catalog products under the brand name Airlink. We also expanded with Siemens via the launch of additional product development programs, including the next-generation Head of Train, or HOT, program in the 450 MHz network for the Class 1. Again, an additional network. The 450 megahertz is in addition to the 900 megahertz network. That on-locomotive HOT program was expanded to include development for a version of HOT tailored towards the requirements of a large Siemens customer in Asia. We will provide more details on the Siemens product development roadmap on this call. On the marketing side, Siemens has identified additional customer opportunities beyond our initial focus on the Class I rails in North America and This increases our addressable market. Those opportunities include transit markets in the U.S., where investment is expected to grow substantially, with rail transportation infrastructure being a significant beneficiary of the recently announced Federal Infrastructure Investment in Jobs Act, legislated by Congress. The takeaway here is that ONDAS is executing for Siemens, and Siemens is executing for ONDAS exactly the way we envisioned when we entered the partnership in May of 2020. Lastly, our work with Aura was successfully advanced last year as we completed the development work connected to the Command and Control, or C2, aviation network targeted towards the navigation of uncrewed aircraft systems, or UAS. From here, Aura is working with regulatory authorities and aviation customers to determine the next steps for development as they work towards designing an FAA-approved C2 wireless network. In the meantime, we will continue to support Aura and their customers as needed with service and equipment related to the demonstration network that was deployed using ONDOS Fulmax technology and for which we secured FCC certification for our Mercury Edge remotes. Let's transition to American Robotics. It's been quite a year for AR. 2021 kicked off with the receipt of a best in class FA approval for operating the Scout system DV loss with no on ground human intervention. Our acquisition of AR closed in August, and we have been entirely focused on building the infrastructure in team to service large blue chip customers who we call franchise customers. Reese will be sharing details on the progress to date. What I want to highlight is the level of talent we are attracting to help scale the business at AR. American Robotics recruiting efforts have been very successful, which is further evidence that our team, the market opportunity, and, of course, our market-leading Scout platform is special. In addition to scaling the team, we have substantially increased production capability and begun to accelerate Scout deliverance. Customer activity has expanded, beginning with installations for Stockpile Reports, ConocoPhillips, and now Chevron, which had its initial installation a few weeks ago. Demand for Scout systems remains high, and we have the enviable position of being able to work with select customers to design drone-driven automated data solutions that are scalable as fleets of drones. We could sell Scout systems in many, many locations today at a faster pace. We believe the demand is there. However, the better strategy is to work hand-in-hand with franchise customers to design these scalable data solutions, which will allow for fleet deployments of Scouts in the hundreds or even thousands of installations. On the customer side, we are focusing on high-value markets, including oil and gas, mining, and now rail, which, of course, is on us as home turf. These markets are all large in size and offer multiple use cases from the Scout system. These markets also receive tremendous value from the drone-driven automated data solutions we provide. You have seen us make bold moves to partner and invest to extend our moat, and accelerate business development in our key markets, again, oil and gas, mining, and rail. The relationships with Stockpile Reports, Dynam AI, and now Ardena are great examples of us advancing our strategy and driving more comprehensive customer solutions. In short, we have accomplished a lot in 2021 and earlier this year, and we've successfully set up OnDots for growth in 2022 and beyond. I will now hand the call to Derek. He will share information regarding our financial performance with you.

Great. Thank you, Eric. As I share our financial results today for the fourth quarter and for the full year 2021, please note that we include our financial statements in the press release and Form 10-K filings this morning. The numbers we are reporting include financial results for American Robotics beginning in August 6, 2021. Moving to our fourth quarter results, revenue increased by 194 percent to approximately 0.6 million for the three months ended December 31, as compared to approximately 200,000 for the three months ended December 31, 2020. The increase in revenue was primarily a result of higher development revenue in the three months ended December 31, 2021, as compared to the three months ended December 31, 2020. as we achieved milestones in our development contract with Siemens. Gross profit increased by 264% to approximately $166,000 for the three months ended December 31st, 2021, as compared to approximately $46,000 for the three months ended December 31st, 2020, as a result of higher revenue. Gross profit on a percentage basis was approximately 29% for the three months ended December 31st, 2021, compared to 23% for the three months ended December 31st, 2020. Operating expenses increased by 3.5 million for the three months ended December 31st, 2021, as compared to the three months ended December 31st, 2020. The increase in operating expenses was primarily due to the expenses associated with the American Robotics acquisition. The company realized an operating loss of approximately $7 million for the three months ended December 31st, 2021, as compared to 3.7 million for the three months ended December 31st, 2020. Operating loss increased primarily as a result of the increased operating expenses of approximately 3.5 million primarily associated with the American robotics acquisition. Please note that the operating expenses and our operating loss included non-cash expenses related to the amortization of intangibles and stock-based compensation equal to $2.1 million for the three months ended December 31st, 2021, as compared to $1.7 million for the three months ended December 31st, 2020. Net loss was relatively flat at $4.1 million for the three months ended December 31st, 2021, as compared to the three months ended December 31st, 2020. The net loss was favorably impacted by the release of $2.9 million of valuation allowance against the company's deferred tax assets. Moving on to the next slide, I'll now transition to ONDAS's full-year financial results for 2021. Revenues increased by over 34% to approximately 2.9 million for the year ended December 31st, 2021, compared to approximately 2.2 million for the year ended December 31st, 2020. The increase in revenue was primarily due to larger amounts of development revenue from Siemens and Aura Networks during 2021, offset by lower amounts of product revenue. Gross profit, increased by approximately 18% to $1.1 million as a result of higher revenue for the full year 2021 as compared to $927,000 for 2020. Gross profit on a percentage basis was approximately 38% for 2021 as compared to 43% for 2020. The lower gross margin was the result of a lower share of revenue coming from higher margin product sales. operating expenses increased approximately 53% to $19.1 million during 2021, as compared to $12.5 million during 2020. The increase in operating expenses was primarily due to an increase of approximately $1.6 million in professional fees related to the American Robotics acquisition, an increase of approximately $1.3 million in depreciation and amortization expense, due largely to the amortization of American robotics intangible assets and an increase in research and development expenses during 2021. The company realized an operating loss of approximately 18 million for the full year 2021, as compared to an operating loss of approximately 11.5 million for 2020. Operating loss increased primarily as a result of an increase of approximately $1.9 million in professional fees due largely to the American robotics acquisition, increase of approximately $1.5 million in depreciation and amortization expense due to the amortization of American robotics intangible assets, largely, and an increase in research development expenses for 2021. Note, non-cash expenses amounted to approximately $4.8 million. This is comprised of the aforementioned depreciation and amortization charges of approximately $1.5 million as well as approximately $3.3 million in stock-based compensation. Net loss was approximately $15 million for the full year 2021 as compared to a net loss result of $13.5 million for 2020. And lastly, the company exited 2021 with a strong balance sheet. We held cash and cash equivalents of approximately $40.8 million as of December 31st, 2021, as compared to approximately $26.1 million as of December 31st, 2020. Now I'll turn the call back over to Eric.