Ondas Inc

Welcome to the ONDAS Holdings Inc. fourth quarter and full year 2024 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 ONDUS'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 ONDAS's 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, or 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 conference over to Eric Brock, Chairman and CEO. Please go ahead.

Well, thank you, Operator, and good morning. I want to get started by welcoming you to our quarterly conference call. We appreciate you joining us today and for your continued interest in OnDust. I'm happy to be joined today by key members of our leadership team, including Neil Laird, our interim CFO, and Merrick Kleiner, president of Adas Autonomous Systems and the founder and CEO of our Aerobotics subsidiary, both of whom are very familiar to you. We're also joined by two new members of our leadership team for their first investor call of ONDOS. Of course, I am speaking about Ashri Lugasi, our new co-CEO of ONDOS Autonomous Systems, and Marcus Nadelman, the new CEO of ONDOS Networks. I'm excited to have Marcus and Ashri here with us. They bring exceptional leadership and industry experience that is sure to be invaluable. Further, both have been known to ONDOS for a while now and are already making an impact in the field with customers. You'll hear more about these two leaders later in the call. So let's now turn to the agenda. I will begin with a review of our key highlights from 2024 and provide an outlook for 2025, where we anticipate a record year of revenue growth, primarily driven by OAS. I will also share some important details on the partnership we announced yesterday with Palantir. Neil will then walk through our financial results for the fourth quarter in full year 2024, And after that, we will provide a business update where I will ask Marcus, Ashri, and Mair to provide their perspectives on the progress within our ONDOS networks and OAS business units. Then I will wrap the call and move to take investor questions. 2024 was a defining year for ONDOS, marked by pivotal milestones that sets the stage for accelerated growth in 2025 and beyond. It was also marked by overcoming challenges, and I am extremely proud of our teams across ONDOS. Recall that early in 2024, we faced the challenges of extended timelines on these networks and, of course, the war activities in Israel, which placed pressure on our operating capabilities. Nonetheless, we persevered through these challenges. We firmly established our presence in the global defense market, securing two major programs of record with a key military customer in the Middle East for both our Optimus and Iron Drone Raider platforms. These programs validate our dual-use autonomous drone technology and have also dramatically increased both our TAM and the serviceable and obtainable market, or SOM, and they're expected to increase the velocity of our business at OAS. Iron Drone Raider is now positioned as the market-defining platform for low kinetic county OAS in the mitigation of drone threats, meeting the critical need for drone interception in contested environments. This market is seeing massive demand growth, and we believe our opportunity is to position Iron Drone as a category owner. We recently announced that we have launched an Iron Drone demo team, which has already begun to engage customers globally. And we are already seeing tangible activity with additional military and Homeland Security customers. We're engaging with these new defense and Homeland Security customers through government-to-government channels, as well as through our own direct marketing efforts. As Merrill will share, we have similarly engaged with new customers around our Optima system, which is now being deployed to secure military bases and border checkpoints, demonstrating the exceptional capabilities of this market-leading system in high-value security markets in both defense and critical industrial markets. Beyond our commercial traction, we invest in significant energy to enhance operational efficiencies to scale our growth, ensuring we are positioned to meet demand. That includes furthering the development of our supply chain and field services capabilities. Enhancing our operational platform is a perpetual focus for us and will be critical as we drive growth across technology platforms, geographies, and end markets. Despite the lack of revenue traction on our networks, we further solidified our position in technology network roadmaps for our customers, which of course includes Amtrak. while also broadening our engagement with new industry and ecosystem partners. We close the year with a $10 million backlog, primarily with OAS, reinforcing the strength of our pipeline and the visibility we now have on future revenue. That backlog is buttressed by a growing Invisible Order book. This gives us confidence in projecting at least $20 million in revenues from OAS and supports the total revenue expectations of $25 million for Andas Holdings in 2025. Recall that we originally set expectations for 2025 revenue at $15 to $18 million for OAS at our investor day in September 2024, and I stated that we want to set conservative expectations, which we will strive to beat at that time. This remains the case with our updated outlook today, which I will touch on in some more detail at the end of today's call. We also fortified our capital position, raising $35 million in Q4 alone, which meant the goals we articulated back in our last investor update. This provided us with a strong liquidity position and financial runway to execute our expansion strategy with confidence. ONDOPS enters 2025 stronger than ever with a clear runway for growth in defense, homeland security, and critical infrastructure security markets. As we look ahead, 2025 is set to be an acceleration year for ONDOS. With momentum building from our execution in 2024, we believe we are positioned to deliver record revenue as we scale our existing programs and expand into new customer opportunities. We have the following key objectives for 2025. Firstly, we intend to drive growth with existing programs and customers. We are intensely focused on executing and expanding on existing programs with Optimus and Iron Drone, ensuring successful deployments and sustained customer adoption. As we build on what we have, we plan further expansion through new customer programs. Our defense and homeland security engagements in Israel and the UAE provide a strong foundation for broader adoption. From here, we expect to secure multiple additional military customers in 2025, leveraging both G2G channel opportunities in addition to Adas' direct marketing efforts. We believe these efforts will be enhanced with Archery's leadership based on his demonstrated success in securing over $20 billion in defense contract sales by leading the go-to-market strategy at one of Israel's most important global defense companies. Of course, we will also look to pull through on our existing pipeline with critical infrastructure and public safety customers in the U.S. and Europe, which also presents substantial growth opportunities. We intend to continue to invest to scale our operating platform. We are building a scalable infrastructure with investments in supply chain, sustainment, and field services to support long-term customer adoption. These activities will have the benefit of leveraging our new partnership with Palantir, whereby they are providing their foundry AI systems for enterprise resource efficiencies, which I will expand upon in a moment. Lastly, we intend to further build strategic value at Onnus Networks, despite timeline challenges. We continue to believe in both the long-term opportunity at Onnus Networks and the strategic value of the business, and we are intent on realizing that value. Recall, the private wireless network is a platform to create value along the technology ecosystem at the edge of rail operations. The capacity and flexibility to drive new applications supporting advanced intelligent safety and operating systems is strategically valuable for both our rail customers and the large rail edge technology vendors. Under Marcus's leadership, we expect to see broader customer and partner engagement, ensuring continued progress in 900 MHz rail network deployments, while exploring additional product and network opportunities. With a strengthened leadership team, validated market traction, and a robust pipeline, OnDesk is poised for transformative growth in 2025. As the year progresses, I believe a deeper customer pool, a growing order book and backlog, and our continuous focus on operational scale will support a growth flywheel. With proper execution, this will be a year when our investments in technology, operations, and market expansion deliver tangible results for our customers and our investors. Yesterday, we announced a strategic partnership with Palantir Technologies, a leading provider of AI systems. I am very excited about engaging with Palantir and the breadth of capabilities and solutions they bring to the markets we care about. This is an incredibly important relationship, which we have established with significant long-term benefits to Andas. Initially, we will leverage Palantir's Foundry AI platform to scale OAS's operating platform in support of our revenue ramp. With Foundry, we aim to unify data in streamlined operations, which will help enable scalable adoption of our Optimus system and Iron Drone Raider globally. This entails connecting to our supply chain production as well as our field services and sustainment activities with customers across the world. This will also ultimately extend to our product and solutions development where we are likely to create further AI-enabled advancements in our platform capabilities in support of evolving customer requirements for autonomy and data intelligence. I believe Palantir sees similar scope for product and market development as we advance our relationship. I expect this partnership to ultimately be a force multiplier across a number of important facets of our business and look forward to sharing more details as we begin to integrate Foundry, eventually other talent-driven AI capabilities into our business. I will now hand the call to Neil to provide a detailed financial update. Neil?

Thank you, Eric. As I get started, I want to remind our investors that our financial statements reflect the early stage of platform adoption. for both ONDAS networks and OAS, and the preparation for larger commercial rollouts. We expect significant operating leverage as revenues grow, though today's revenue levels do not yet cover our operating expenses. For ONDAS networks, revenues will fluctuate from quarter to quarter given the uncertainty around the timing of customer activity in front of the targeted commercial rollouts of the 900 MHz network and the development programs underway with Siemens and MXV Rail. Similarly, revenues at OAS are expected to vary from quarter to quarter and normalize into a more predictable pattern as we grow our customer base and more of those customers enter fleet programs and recurring service agreements in the United States and internationally. Revenues increased 173% to $4.1 million quarter over quarter for the three months ending December 31, 2024. compared to $1.5 million for the three months ending September the 30th, 2024, and were down 18% from $5 million for the three months ending December the 31st, 2023. Revenues from on that networks were $0.5 million, relatively flat compared to the third quarter of 2024, and down $1.1 million from the fourth quarter of 2023. This was primarily a result of extended timelines related to the 900 megahertz activity with the Class 1 Rail 1 roads. OAS revenues were $3.6 million, an increase of $2.6 million, or 260%, from the third quarter of 2024, and an increase of 10% from the fourth quarter of 2023. This increase reflects the shipment of products and services from the 14.4 million in orders primarily related to the two new programs secured with a military customer in the third quarter of 2024. Gross profit was 0.9 million, or 22%, for Q4 2024, as opposed to 0.1 million, or 3%, for the third quarter of 2024, and 1.7 million, or 35%, for the fourth quarter of 2023. The increase in gross margins from the third quarter results from increased product revenue at OAS. Compared to the fourth quarter of 2023, the decrease reflects the lack of higher margin product sales at OnBus Networks and slightly lower margins at OAS because of the inclusion of third-party products in the current quarter revenue. Gross margins can be volatile on a quarter-to-quarter basis due to revenue levels that reflect the early stage of platform adoption and shifts in revenue mix between products development and service revenues. Operating expenses decreased to $9.4 million for the fourth quarter of 2024, as opposed to $8.7 million in the third quarter of 2024 and $14.4 million in the fourth quarter of 2023. The decrease from the prior year was primarily due to a $4.0 million non-cash impairment charge in the fourth quarter of 2023, and various cost savings implemented in 2024 at ONDAS networks. The increase from the third quarter was primarily the result of a credit loss charge in the current quarter. Cash operating expenses were $7.9 million in the fourth quarter of 2024 compared to $8.7 million in the third quarter of 2024. These exclude non-cash operating expenses for depreciation and amortization of $1.2 million in both quarters, stock-based compensation of $0.3 million in the fourth quarter of 2024 compared to $0.4 million in the fourth quarter of 2023, and impairment of long-term assets charge of $4 million in the fourth quarter of 2023. The operating loss was $8.5 million for the fourth quarter of 2024 compared to $12.6 million for the fourth quarter of 2023. Adjusted EBITDA loss was $7 million for the fourth quarter about the same as the $7 million for the fourth quarter of 2023. For the full year of 2024, revenues were $7.2 million, as opposed to $15.7 million for the full year of 2023. This was largely due to extended timelines at ONDA's networks and war-related disruptions in Israel for OAS that impacted operations, particularly in the first half of 2024. Gross profit was $0.3 million for the full year of 2024, as compared to $6.4 million for the full year of 2023, reflecting lower revenue compared to fixed operations costs, particularly at OAS. We expect margins to recover in 2025 with higher revenues and improved scale from larger production volumes at OAS. Operating expenses for the full year of 2024 were $35.0 million. as compared to $46.1 million for the full year of 2023. The reduction was due to the absence of one-time non-cash charges of $4 million in 2024, achieving the full savings from the integration of American Robotics and Air Robotics operations to form OAS that was implemented during 2023, and additional cost savings achieved at ONDOS networks during 2024. Cash operating expenses were $28.9 million for the full year of 2024, a decline of $7.2 million from 2023. This was due to the OAS integration mentioned previously and cost savings achieved at Andas Networks. Adjusted EBITDA loss was $28.5 million for 2024 as compared to $29.7 million for 2023. So now let's turn to the cash flow statement. We held cash of $30 million as of December the 31st, 2024, compared to $15 million as of December the 31st, 2023. The full-year cash provided by financing includes additional financing totaling $50.2 million, of which $35.3 million occurred in the fourth quarter. Ondas Holdings received proceeds from convertible loans of $28.3 million, OAS received $5.1 million, and OnBus Networks received $1.9 million. Cash used in operations during the fall year decreased slightly to $33.5 million. Investments in working capital accounted for $4.8 million of this usage compared to $3.9 million in 2023. We expect cash utilization to improve in 2025. Improved cash efficiency comes from operating expense leverage at our OAS business unit, given our expectation of a recovery in revenue and gross profit growth over the course of 25, and continued cost controls across the company. The company expects to fund its operations from cash on hand of $30 million as of December 31, 2024, from gross profits achieved from revenue growth, potential prepayments from customers for purchase orders, and potential proceeds from warrants issued and outstanding, and additional funds if needed that the company may seek through equity or debt offerings and borrowings under additional notes payable, lines of credit, or other sources. As of December the 31st, 2024, OnLess Holdings had $52 million in debt outstanding. $9.6 million of this balance has been converted into equity during the first quarter of 2025, $6.2 million of ONDAS Holdings convertible debt matures in April of 2025, a further $12 million in July of 2025, and the balance of $24.9 million in December of 2026. We have been focused on maintaining liquidity to fund our growth plan and raised a further $0.9 million in convertible notes of ONDAS networks in January. We have also established a relationship with CLEAR a working capital provider to allow us to factor receivables as needed. We also anticipate that the maturing notes will either be converted into equity or will have their terms extended. And I will now hand the call back to Eric.