Ondas Holdings Inc.

Welcome to the ONDIS Holdings, Inc. first quarter 2022 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 risk 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 statement to reflect future events or circumstances except as required by law. 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.

Good morning. It's a pleasure to welcome you to our conference call. I'm happy to be joined today by our President and CFO, Derek Rydesfield. Stuart Cantor, the President of ONDOS Networks and American Robotics CEO, Reece Moser. Today, we plan to review our financial performance and strategic progress for the first quarter and the year to date and discuss our outlook for the rest of 2022. I want to start the call by highlighting that business momentum remains strong at ONDOS with both ONDOS Networks and American Robotics leveraging their respective technology platforms to drive market adoption and deployment, which we believe will result in substantial growth. At OnDesk Networks, the work with customers remains focused on the large rail networks. We have previously announced initial launch orders for the 900 MHz network, and as you will learn, we expect expanded orders with these and additional customers over the course of the year. As we execute on the 900 MHz network, OnDesk Networks and our partner Siemens are actively marketing our Fulmax wireless platform into additional Class 1 rail networks beyond 900 in North America. This includes Europe and Asia in both freight and transit markets. At American Robotics, we remain very focused on executing the business plan. We call AR strategy is to partner with franchise customers such as Chevron, ConocoPhillips, Stockpile Reports, and others on initial Scout system installation. As we will describe, our early work with customers in the Scout system has been positive. When you are introducing new, game-changing, mission-critical technology in industrial markets, such as oil and gas, rail and mining, doing it the right way is critical, and AR is on that path. This American Robotics fieldwork with customers, along with the ongoing regulatory work with the FAA, is positioning us to define the market for automated, drone-driven data solutions in terms of how they are architected and delivered to large, sophisticated blue-chip companies in critical sectors of our economies. And the bottom line is, ONDAS continues to invest to win. We're investing on behalf of our customers who need our next-generation data solutions to run their businesses more efficiently, safely, and profitably. With that introduction, let's shift towards outlining the agenda for today's call. First, I plan to highlight the progress we are making on the key business priorities at both ONDAS Networks and American Robotics. Then I will ask Derek to share our Q1 financial results. Stuart will then provide an update on ONDAS Network's business activity, of course, focusing on our work with the railroads and Siemens. And then Reese will provide a similar update for American Robotics as we execute the go-to-market strategy with the Scout system. 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. We continue to have deep engagement with the railroads in Siemens in preparation for volume deployment, starting with the 900 megahertz network. The initial launch orders for 900 from two rails have now both been delivered. These launch orders were firstly for the ATCS products we have jointly developed with Siemens. In addition, we have been working closely with the third class one railroad and began field work in preparation for securing a significant launch order from that customer. I want to highlight that this third order is for a railway signaling and interlocking use case with protocols that differ from the ATCS application. We expect this customer to initially focus their deployment on our Venus platform. This is particularly significant as it validates the fact that ONDUS' Fulmax IEEE 802.16 compliant platform with its greater data capacity and flexibility allows the railroads to expand the utilization of the new 900 MHz network beyond the legacy ATCS application. In other words, we are already seeing the evolution away from single-purpose legacy networks to multi-purpose Fulmax-enabled networks. Quite clearly, this is very positive for the railroads, and as additional use cases are established, the value of our Fulmax.16 platform to the rail customers only increases, and we expect this to ultimately drive wider deployed systems across all of the Class 1 rails. The establishment of the federated MCIOT Rail Lab is still further evidence that our Fulmax .16 technology is positioned at the core of railroad mission-critical networking. During the quarter, we constructed and delivered the Rail Lab to MXV Rail. Recall that MXV Rail, which was formerly known as TTCI, is a division of the Association of American Railroads, or AAR. In parallel, our relationship with Siemens continues to flourish and expand beyond the initial 900 megahertz network and jointly developed ATCS products. Our head of train or HOT program with Siemens for the class one 450 megahertz network and for a customer in Asia is progressing well, and we expect to announce more joint product development programs with Siemens in 2022. Lastly, I want to highlight that our operations team at OnDesk has been working diligently to prepare customers For the volume orders we expect from the Class 1 rails and Siemens, we have now qualified and secured contract manufacturers and component vendors, and this is important work as we navigate supply chain issues like those reported by many technology and industrial companies. Let's turn now to American Robotics. As I mentioned at the outset, our field work with customers, including Stockpile, ConocoPhillips, and Chevron, has been positive to date. And Reese will share more details on this activity and the important work we are doing to transition these customers to fleet orders. The customer pipeline remains robust, and this week's announcement of an order from Scott's Miracle Row is evidence of that. Scott's becomes just the latest blue-chip AR customer we will onboard with our Scout system. We expect additional franchise customer announcements in the coming months. Our pipeline at AR was further supported with the addition of Ardena, a leading provider of rail infrastructure inspection analytics. We believe Ardena provides a significant lever for American Robotics to introduce our Scout system to the Class 1 rails and in other global rail markets. I would also like to highlight that American Robotics continues to demonstrate leadership with customers and regulators, and this was further evidenced by our recent announcement that the FAA had provided additional BV loss approvals covering existing and expected customer sites. Our engagement with the FAA remains very positive, and we expect further site approvals over the course of the year. I also want to note that our work with franchise customers has identified several additional scalable use cases for our Scout system, which are highly valued by our customers, particularly in oil and gas markets. Some of these use cases require expanded UAV payload and sensor integration, as well as data analytics advancements. We have begun to plan for this product development effort. In certain places, we expect to accelerate the development work to satisfy what we believe is immediate demand for these data services. We look forward to sharing more details of this effort with you soon. In short, we continue to make progress on our key initiatives to start the year and have successfully set up on us for growth in 2022 and beyond. I will now hand the call to Derek so he can share information regarding our financial performance with you. Derek?

Great. Thank you, Eric. As I share our financial results today for the first quarter of 2022, please note that we've included our financial statements in the press release and the Form 10-Q filed this morning. Also note, the numbers we are reporting don't reflect the performance of American Robotics in 2021, as the acquisition of American Robotics closed on August 6, 2021. Moving to our first quarter results, starting with the P&L, please note that our revenues and expenses reflect the business development activity in preparation for larger commercial rollouts we expect in the future. Revenues for the three months ended March 31, 2022 were approximately $400,000 as compared with approximately 1.2 million for the three months ended March 31, 2021. The decline in revenue was primarily a result of lower product development activity with Siemens and Ora in the current period as compared with the prior year. Gross profit was approximately $100,000 for the three months ended March 31, 2022 as compared with approximately $600,000 for the three months ended March 31, 2021. Operating expenses increased to $10.1 million for the first three months ended March 31, 2022. as compared with 3.5 million for the three months ended March 31, 2021. The increase in operating expenses was primarily due to operating expenses associated with American Robotics, which we acquired in August 2021, and whose expenses were not included in the first quarter of 2021. The company realized an operating loss of approximately 10 million for the three months ended March 31, 2022, as compared with 2.9 million for the three months ended March 31, 2021. The operating loss increased primarily as a result of the increase in operating expenses associated with the American Robotics acquisition and the decline in revenue. Note that operating expenses and our operating loss included non-cash expenses related to depreciation and amortization and stock-based compensation equal to 2.4 million for the three months ended March 31, 2022, as compared to 1.5 million for the three months ended March 31, 2021. The majority of the increase in depreciation and amortization costs in 2022 is related to the amortization of intangible assets related to the American Robotics acquisition. Now let's turn to our cash and investing activity. OnBus maintains a strong balance sheet with cash and cash equivalents of approximately $32.1 million as of March 31, 2022, as compared to approximately $40.8 million as of December 31, 2021. We utilized 8.8 million in cash during the quarter, which included 7.1 million of cash used in operations, reflecting primarily operating expenses related to serving customers for networks and American robotics. We used 1.6 million in investing activities, primarily related to one-time capital expenditures associated with the build-out of the new Waltham headquarters for American robotics. and on-dash holdings, in addition to spending related to building out scout systems. As we will discuss, we anticipate moving into these offices in June and do not expect to see this level of ongoing capital expenditures in the coming quarters. We are well-positioned to continue to invest in customer pipeline development and support, and Eric will share those details later in the call. Now, I'll turn the call back over to Eric.

Thank you, Derek. Now, I will ask Stuart and Reese to share a more detailed update on business activity in Q1 and early Q2, starting first with on-desk networks and then America Robotics. Stuart?

Great. Thank you, Eric. Let's begin by discussing the 900 megahertz network status in North America. As Eric mentioned previously, we have now received multiple launch orders from Siemens for the 900 megahertz network. This includes launch orders from two Class 1 rails for the ATCS application we jointly developed with Siemens. The launch order for the first Class 1 was received and delivered in Q4 of 2021. The second launch order was received in January 2022 for a second Class 1, and we are pleased to announce on today's call that we have now delivered that order. We also informed you in the last call that a third Class 1 had begun field work in the 900 megahertz in advance of a significant launch order. We're making excellent progress with this customer as they plan for a new non-ATCS application in the 900 megahertz band. This activity is critical as it reinforces that the Class 1 rails are now transitioning away from single purpose, single application networks to multipurpose, multi-application IP-based networks. All of this activity is reinforced and supported by the critical MCIOT rail lab that ONDIS and Siemens secured from the rail industry. And we're pleased to announce on today's call also that the lab has now been constructed and delivered to MXV Rail, the non-technical standard, the technical standard body for the Association of American Railroads. Siemens, MXV Rail, and ONDIS have jointly begun to develop and implement use cases for multi-rail interoperability and coexistence in the 900 megahertz frequencies. Now moving to the status of the joint development programs with Siemens. As most of you know, ATCS was our first joint development program with Siemens. This program has now been successfully launched and is actively being marketed and sold by Siemens to the Class I rails in North America. Recently, Siemens requested that we obtain Canadian certification for the ATCS radios to meet new demand identified from freight and transit customers in Canada. And we're pleased to announce we're in the final stages of obtaining that certification. We also informed you that we have multiple other joint development programs in process with Siemens centered around the head of train application both in Asia and North America. We're making excellent progress on these development programs and have now qualified and selected contract manufacturers both in Asia and in the U.S. to support volume production of these new radio boards. Also in the last call, we outlined multiple other programs that we are targeting with Siemens, including a new radio for European locomotives. We intend to keep you updated on these new initiatives as they come to fruition. It's important to know that we continue to identify global opportunities for the full max technology in rail. In terms of growing our organization, we continue to bring on team members to support production and manufacture. We are pleased to announce today a strategic new hire, industry veteran Kevin Nichter, who will serve as our VP of product marketing. Kevin has deep industry relationships with the major rail customers in both freight and transit, serves on several key industry advisory committees, and has prior experience working with the Siemens team. Kevin will help accelerate the deployment of Fulmax across the Class 1 railroads and also open new opportunities in transit markets. We're very pleased to have him on board now. And lastly, we'd like to highlight that Siemens and we will be jointly attending the upcoming RSSI rail show in Kansas City during the week of May 16th, where the entire Airlink product line will be highlighted. and we'll be engaging directly with major Class I rails on implementation goals. As we shared on our last call, we believe the Greenfield 900 megahertz network deployment will follow previous large-scale technology rail deployments, and we are again sharing the key steps which are integral for a wide-scale rollout of the 900 megahertz network. The technology choice for IEEE 802.16 has been led by the AAR, which represents all of the Class 1s. This centralized approach and control has been critical given the need for both interoperability and peaceful coexistence among the rails. Furthermore, the rail lab is under AAR's direction and control to ensure ongoing seamless operation. Each Class 1 controls its own rollout plans with ONDIS and Siemens providing backup support The heavy lifting for the network installation and operation is almost entirely in the hands of each individual railroad. There are many activities that the rail customers, along with Siemens and ONDIS, need to coordinate and complete in connection with rollout plans. This work ranges from acceptance testing to engineering design and training, all the way through to ongoing customer support and maintenance. The launch orders tend to be smaller in size, followed by larger, more substantial orders six to 12 months later. These larger orders typically come with precise delivery schedules that support the Rails rollout plan. Our primary goal at Networks is to obtain and deliver on scaled orders to multiple Class 1s. We believe that our launch work with the Class 1s, the MCIoT lab, and our partnership with Siemens will deliver that success. Our initial launch customers have begun discussions with Anderson Siemens regarding their initial volume orders to begin the wider 900 megahertz deployment. In addition to the 900 megahertz activity, we expect Siemens to place orders for equipment for the HOT edge remotes currently under development. With that, let me hand this back to Eric so he can go into greater detail.

Thank you, Stuart. Before I hand the call to Rhys, I want to remind our investors that Siemens, ONDA, and a host of other technology providers are working with the rail customers to drive intelligence into their field operations. And ultimately, that leads to more and more automation. And quite clearly, we are in the early innings of the digital railroad investment cycle and the broader MCIOT investment cycle across not just rail, but other critical infrastructure markets, which we believe will be enabled by next-generation mission-critical private wireless networks. I'll now hand the presentation to Rhys for a detailed update on American Robotics' progress. Rhys?

Thank you, Eric. American Robotics is in an exciting period of growth, as we are well on our way to scaling up operations en route to fleet deployments across the United States. Additionally, we've taken several important steps to ensure long-term leadership in our markets, some of which I can share today. As you all know, we are currently engaged with Chevron, ConocoPhillips, and Stockpile Reports, as well as a backlog of customers in the pipeline. Yesterday morning, we announced a new customer, Scott's Miracle-Gro, one of the largest lawn and garden companies in the world. It's worth noting that the majority of our customer engagements have been the result of inbound inquiries, as American Robotics still stands alone as the only drone manufacturer approved by the FAA to operate fully automated drone systems. It's been a year since our historic FAA approval, and as predicted, American Robotics remains in a unique position of leadership within our industry. We're taking full advantage of this first mover position building long-term relationships with customers in our target markets and investing in the platform. In support of our plan to deploy hundreds and eventually thousands of these systems, we continue to make strides in both maturing our operations and manufacturing capacity, both of which we see as additional differentiators for the company. Finally, in support of this, we are honored to continue to attract some of the world's brightest minds to join the American robotics team. I'd like to share updates on the engagements with our initial franchise customer base. We are currently in an important period where we are working closely with these Fortune 500 companies to prove out the demonstrated safety of the system in the field, deployed in places like North Dakota, Louisiana, Ohio, and South Carolina. New technology, particularly robotic hardware systems, that operate among safety-critical assets, like oil and gas infrastructure, must go through proper vetting processes before adopting on a large scale. We see this process as yet another opportunity to separate American robotics from the pack and believe our position as both developer and operator of these systems puts us in an ideal position to do so. It is also worth noting that the safety analyses performed by our customers are very similar to those performed by the FAA, again placing us in an ideal position to be the leader in this regard. Examples of this include job safety analyses, reliability testing, cybersecurity audits, and integration into existing company software systems. Once complete, we believe these engagements will become a blueprint for which we can duplicate with other customers. As a result, we anticipate significantly reduced sales cycles in 2023 and beyond. As a result of the technology, regulatory and customer milestones over the past year, our industry leadership and influence are accelerating. Last month, we announced the receipt of seven additional sites approved by the FAA to operate the Scout system in a fully automated manner, bringing the total portfolio to 10 sites spread across eight states. As predicted, our waiver portfolio is growing, whereas the rest of the industry remains stuck. And though we do not anticipate this singular position to last forever, We do believe this headstart is valuable enough to snowball into a position of sustained market leadership. Additionally, this recent regulatory milestone proves a very important point. Our current waiver and exemption package are scalable and will permit us to pursue the commercial targets we've shared with you for 2022 and beyond. I've said before that it takes the best to build the best. I think it's also true that the best minds want to join the best teams. To that end, I'm very proud of our team growth at all levels of the organization. In leadership positions over the past quarter, we have added Tracy Lamb, aviation safety expert 25 years, as senior advisor of regulatory affairs and safety. We also added Gretchen West, former president and CEO of Sheeble Aircraft, and 20-year veteran of the drone industry, as senior advisor of business development. In other roles, we have added talent from MIT Lincoln Labs, GE Aviation, Boston Dynamics, VA Systems, Soft Robotics, Amazon Robotics, Google, iRobot, Textron, and others. Summing all this up, we are on track in executing the growth plan we laid out previously. Hiring is on target, with the AR team now up to roughly 60 people and growing. We are scheduled to move into our new headquarters on June 5th. The manufacturing ramp-up is on target, with 30-plus systems on order for delivery in 2022. The final topic I'd like to discuss this morning is our product roadmap. True autonomy and FAA approval are the baseline for scalable drone operations in what we estimate to be 90% of all commercial drone applications. As a reminder, this represents an annual and mostly untapped TAM of $100 billion or more. The number of data solution and AI opportunities as a result of this is truly massive. We estimate over 10 million or more asset sites globally have the use for automated drone-in-a-box technology, and as the uniquely enabled extractor of this data, that puts American Robotics in a position for a number of valuable leadership opportunities. To this end, we have been working closely with our initial customer base to structure partnerships with both near and long-term goals for the product. Some of these you already know, some I can announce today, and others will be announced later this year. You are already aware of our acquisition of the assets of Ardena, the leader in AI-powered image analytics for the rail industry, and our investment in Dynam AI, a leader in AI model generation for physics-based scenarios. For new announcements, we have partnered with CloudFactory, providing American Robotics with a dedicated data labeling team for training AI models. We are also expanding our partnership with DynamAI, who is now providing us with a dedicated team of data scientists, physicists, and AI software engineers. For announcements expected later this year, we've been working closely with our customers at both the corporate and operations levels to structure a technology roadmap centered around new payload integrations and AI software offerings. We plan to announce these new product offerings as they become available this year. For a peek into some of those announcements, I would focus your attention on the oil and gas market, and in particular, oil and gas leak detection. Again, the number of feature opportunities within each of these markets is truly massive. In our current target markets, we have worked with customers to prioritize these opportunities based on customer value and the speed of integration. And we believe these investments will further accelerate fleet adoption throughout our customer organizations in different departments, environments, and use cases. The diversification of capabilities and use cases will not only cement our stickiness with industrial customers, but we believe will also present the opportunity for additional revenue generation, potentially beyond our current financial models. I look forward to sharing more of these details with you all in the coming months. I will now hand the call back to Eric for some closing remarks.

Well, thank you, Reese. Now let's turn and summarize some of our key business objectives for 2022. We continue to expect ONDOS Networks will generate orders this year from at least five railroads, and we are maintaining our goal of at least 20 million in bookings. And I would highlight that this bookings target is a significant component of our bonus plans at ONDOS Networks. In addition to platform product sales, we plan to secure at least one new joint product development program from Siemens in 2022. For American Robotics, the key targets include securing orders from at least 10 customers and for at least 30 scout systems by the end of the year. In addition, we are also targeting at least one customer reorder for fleet deployments by the end of the year. And lastly, for AR, our success with customers comes down to partnering, partnering with customers to develop solutions that are valuable yet complex. We expect to secure at least one formal partnership with a customer in 2022. Now let's turn to the balance sheet and cash outlook, which remains healthy and supportive of our ongoing investment in technical solutions and business development. We expect cash outbacks to be about $7 to $7.5 million in Q2, with modest working capital requirements as we build inventory for expected orders and revenue growth. As discussed on our last call, we put in place a public at-the-market or ATM offering in March. The purpose of the ATM is to provide additional balance sheet flexibility to the companies. We believe we may have opportunities to accelerate certain technology investments with OnDesk Networks and American Robotics to respond to customer demand. We raised about $2.5 million in April, and that helped offset some of the cash used in the Ardena acquisition. We've recently seen some dislocation in public and private equity markets within our MCIOT ecosystem. This, too, could create investment opportunities for OnDesk. In short, ONDOS intends to stay on offense and invest and pursue opportunities to cement and extend our leadership positions, and we will do this when and where we feel we can create incremental shareholder value. Let's take a minute to summarize the call and wrap our prepared remarks. Business development is on track with both ONDOS Networks and America Robotics, and we expect to build momentum with customer purchase orders throughout the year. As we have outlined, the Class 1 rails are beginning to launch the 900 megahertz network, and we have a plan in place to transition launch orders to volume deployments over the course of the year into 2023. As Stuart mentioned, we expect a good turnout and quite a bit of attention at the RSSI rail show next week. The Siemens partnership remains strong and is broadening across new products, additional networks, and with new customer segments in transit and international markets. OnDIS is preparing internally for a ramp in sales, by building capacity and inventory to support expected demand from Siemens in the Class 1 rails during the year. We expect AmeriCorps Robotics to continue to extend its industry leadership by driving value for customers and demonstrating the value of its automated data solution in the field. AmeriCorps Robotics will continue to scale operations in its key target markets, oil and gas, mining, and rail, as we expand the number of customers of Scout installations and do the work to transition these franchise customers to fleet orders. And AR will continue to invest in technology, particularly in expanding its payload and data analytics capabilities. And we will do this hand in hand in partnership with our customers. Before we open the call to questions, I want to make a few comments regarding the economy and market volatility we've seen in 2022. Clearly, we are all operating in a new business environment, one that is characterized by changes related to the pandemic and also public policy. We've seen supply chain disruption, war and geopolitical conflicts increase inflation in a host of other headlines that seem to show an increasingly complex business world today and maybe in the future this impacts how and where people live and work and of course how businesses operate while i don't have a unique take on what this all means for economic growth or how this impacts financial markets and other important factors that could impact our business on us i do want to shed light on how we plan to run the business and build value for customers and shareholders in this new environment. First, we see absolutely no indication that the critical infrastructure markets we serve are structurally hobbled in this environment. In fact, as globalization trends change, the services, production, and labor sides of the economy rebalance, and supply chains adjust across the world, we believe that it is likely that investment in infrastructure will accelerate in the years ahead. And of course, that will be terrific for on-desk networks and American robotics. We also believe our critical infrastructure customers and partners need, more than ever, our next-generation data platforms to operate their businesses more efficiently, safely, and profitably. We are in the early innings of an NCIOT investment cycle, and the solutions we architect will define these markets. We will continue to do this work and strengthen our ecosystem. So with that said, I'm excited about 2022 and the momentum we have in the businesses. Our team has worked extremely hard, and our shareholders have supported this difficult work which we are grateful for. We firmly believe we are well positioned to deliver for you in the quarters ahead. Operator, I'd like to open the call to Q&A.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If you withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. And our first question will come from Timothy Horan of Oppenheimer. Please go ahead.

Thanks, guys, and thanks a lot for all the information on the call. Eric, can you look, maybe go into some detail on the 900 megahertz? build out what do you your guess now on maybe what the TAM is on that market in total and and more maybe boiling down into breaking it down between what's needed for the FCC requirements to vacate the spectrum and then or and then maybe other value-added services on other products kind of on top of it and then you know related to that you know when do you think equipment had to really start shipping for them to meet the FCC requirements

Okay, yeah, thanks, Tim. So we've outlined a TAM for the 900 megahertz network at $300 million, and we think that will grow. Over a third of that should be related to the ATCS upgrades.

What was the second part of the question? Yeah, the timing of that $100 million, like when do they really have to get the network up and running? And so, you know, to meet that requirement, when does your equipment really have to start shipping?

Okay, so by the second half of next year, some of these deadlines are starting to kick in, and then for over the next two years, the rest do. So the answer to the question is they need to start working now, and we are engaged in those conversations. I want to just step back and maybe look at it a little bit more broadly as to kind of where we've been and where we are today and where we're going to be. It's great to be able to say that visibility is improving and getting the launch orders, has started to allow us to see more of the rest of that deployment process. And as Stuart mentioned, we're talking to more and more folks inside the rails who need to be brought into the process. And, of course, FEMA is part of that as well. The railroads are massive organizations, and there's all these departments that have to come together to first acquire, you know, do the purchasing plan and implement the deployments and operate the network. So, That work is happening now, and we expect, as Stuart said, we're in discussions now around those volume orders, which, of course, is very exciting. So we think they're going to get started.

Great. Tim, it sounds like maybe I could jump in real quickly, Tim, and just mention that the use case applications that we're developing with MXV Rail are – they're broadening too, which is a good thing, reinforcing the network. So it started with ATCS. Eric has mentioned the interlocking application. And I think we've gone through some of these. There's a whole host of applications that are being tested for the 900 megahertz network. So I think we're making excellent progress in bringing all this together for the macro network.

Great. So I guess when do you think equipment will start shipping in size orders for them to meet this deadline? Is it third quarter of this year, fourth quarter, first quarter of next year? Any color on that would be helpful. I mean, I know you don't know exactly, but when do you think they really have to start buying the equipment in size orders? And I guess do you have the equipment? Do you have the inventory to kind of ship the equipment? Or can you get the inventory?

Well, we're in conversations now for the volume purchases, and we expect deliveries to begin in the second half. Some of that will be in Q3. A bunch of it will be in Q4. Q4.3 is going to be even bigger with even more revenue. And in terms of inventory building for that, that process is well underway. We began ordering components and contract manufacturing partners. We have seen longer lead times, so you haven't seen the inventory build just yet, but that will start this quarter into Q3. But I do believe we're going to be able to deliver.

Great. So just on the cash front, do you have enough cash to meet your business model now, or do you have to raise more cash? Because we don't really know the timing at this point, you know, the revenues. And then secondly, can you talk about maybe some of the sources for cash? I mean, you know, can you tap into some, you know, some credit markets or, you know, other markets besides, you know, the public market? Thanks.

Yeah. So I feel good about where we're at on the balance sheet. And, of course, the rail orders are going to become meaningful. This is not a small network. It's not a small market. In the margins and gross profit we can generate there, will increasingly offset the cash effects. And, again, the visibility on those orders is now improving. So, you know, the cash – and I also add that the cash use relative to our technology platforms that we're developing in the market opportunity at 10 is very modest. We're getting a lot of bang for the investment bucks. So, you know, I feel good about where we're at. And, you know, I'm not going to predict the stock price, but I believe our institutional investor base will expand dramatically this year and our access to capital to expand the business even further as we have success will be there. And to answer you specifically, if we did want to export credit opportunities on some of the rail activity, I do believe they're there, but that's not our plan. I believe we're well capitalized and our ongoing access to capital is very strong. Thank you.

The next question comes from Mike Lattimore of NCM. Please go ahead.

Great. Thanks a lot. Yeah, I guess first question is on the rails. So you mentioned that second order I think was delivered. Is that going to be a second quarter revenue event?

No, that was a first-quarter revenue event. The launch orders are modest in size, and that sort of starts the whole internal process of work with the railroads, the specific railroads in Siemens on the larger volume purchases. And I'll add, as we in Siemens get more experience here, the time between launch to volume purchases on the next railroad and the railroad after that is likely to shrink. So we'll be able to turn these launch processes around more quickly over time.

And then on the third quarter, you know, the larger size, is that still kind of a second quarter event or second half of the year?

Yeah, we're trying to get it in the second quarter. You know, it's hard to say if we put a stake in the ground to say we will do that. We are active with the customer. This is for a use case that they need, and the work is to date with that customer in the field for this new application has been very positive.

And on Ardena, you know, super interesting and logical service. What is the next step here in terms of go-to-market with that?

So I'll ask Reese to expand on this, but Arden has got a really significant pipeline of potential customers, actually, not just here in North America with the big class ones, but globally. So there's a lot of interest. We're getting to know those customers now and trying to sort of see how and where their timelines are. Like many of these customers, historically, they've been challenged in being able to gather the data at scale. And, of course, that's something that we believe we can and will help with with the Scout system. So getting slotted into their timelines is what we're exploring now. But there is a significant customer pipeline, which we're going to grow. Reese, would you add anything?

Yeah, the plan with Ardena is to sell both as a standalone product as well as integrated with the Scout system. The two big customers that Ardena worked with prior to the acquisition were our BMSF and CSX, obviously two of the biggest rails in the space. So, yeah, we see a lot of opportunity there. We're getting to know those customers through our business development team, and we're working to map out some deployment plans for this year.

Yeah, and it would be logical that customers would want to buy that packaged solution with Scout, I would imagine.

Yeah, absolutely. You know, ultimately that's been kind of the issue with drone analytics in the past is you need that source for high-quality data, for high-resolution, high-frequency, which is what the Scout system provides. So, you know, ultimately we see that that package is the more valuable choice. But, you know, if folks want to try out the software independently to start out with, that's fine as well.

And then You talked about, I think, 10 customer accounts by year end for American Robotics. I think you mentioned one repeat order for fleet. How would you define fleet at this point in terms of number of units?

Yeah, it's a good question. I think, I mean, a fleet, I would say, is at least 10 with, you know, visibility towards 100 or more. You know, we see this business really being a step function with these customers, especially at this point. It's, you know, one to two unit pilots with these guys. And once we prove out a number of aspects, whatever they're interested in, the plan for both sides is to scale that across all of those like assets. So if we're dealing with well pads in the Bakken, for example, obviously the goal is not to just image one well pad, it's to image the, you know, thousands of well pads that exist all across that region and other regions in the country and the world. So, you know, before these customers make that type of decision, there's, just some natural steps that have to go through. You know, there's some safety ramifications here. We're talking about a robot that's interacting next to oil and gas equipment, and, you know, everybody wants to make sure that this thing is safe and it's reliable and things of that nature. But, you know, once we pass those thresholds, we really anticipate a pretty big step function there.

Great. Thanks a lot.

Thanks, Mike.

The next question comes from Carter Mansbach of Forte Capital Group. Please go ahead.

Good morning, gentlemen. Congratulations on all the accomplishments on both sides of the business. Eric, I think you need to make it very clear exactly what you think about the cash situation because that's the concern. Do you think you need to raise more cash or not?

Okay, so I'll reiterate, I'm very comfortable with our balance sheet. I don't expect we don't the current plan does not require new cash. We did talk to opportunities to expand the business. And you know, that's the purpose of the ATM is to give us the flexibility to do that. So we have visibility on the rail business is getting better every day. And of course, those orders have to come to help fund us internally. And that's the plan, and that's what we believe. So I feel very good about where we're at on the balance sheet.

Okay. So to be clear, if you're not looking to buy another company in the private equity market and things go as planned, you do not believe that you need any additional cash? On the current plan, we do not need additional cash. Perfect. Thanks, guys, and I appreciate it.

The next question comes from Ross Stevens of Nesher Capital. Please go ahead.

Hello. Thank you for taking my call. Question on the product bookings of the $20 million target for 2022. How much is on the books now and how much of that would be 2022 revenue?

I can't give you the number on what that will translate into revenue because that is dependent on the timing of orders and you know, the deployment plans for the customer, but we do think quite a bit of it will come into this year. In terms of backlog, we have not built substantial backlog yet, but as we've described in the call and prior calls, those conversations are beginning and we have visibility on the numbers we're talking about.

Okay, thank you. Thank you.

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

Thank you, Operator. I want to thank you all for joining us today. We look forward to chatting again soon and sharing updates on our progress at Networks in America Robotics during the quarter. I want to also note that we are planning to attend multiple investor conferences in the coming months, and I hope to see you there. And as we close the call, I want to thank you again for joining us, but Also express gratitude on behalf of the entire team at ONDOS for your support. We're incredibly grateful and know that every day we have to continue to earn that support, and that's what we're working on. So we begin the year with terrific momentum and look forward to sharing updates on our key initiatives over the course of the year. It's time to get back to work, so I hope you have a great day, and we'll talk soon.

The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.