Ondas 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.