Ondas Inc

Welcome to the ONDIS Holdings, Inc. First Quarter 2025 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 two, excuse me, 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. ONDIS undertakes no obligation to revise or update any forward-looking statements to reflect future events or circumstances, except as required by the law. During this call, ONDIS 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.

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 ONDIS. I'm happy to be joined today by key members of our leadership team, including Neil Laird, our interim CFO, Oshie Lagasse, the co-CEO of ONDIS Autonomous Systems, and Marcus Nadelman, the CEO of ONDIS Networks. So let's now turn to the agenda. I will begin with a review of our key highlights from the first quarter of 2025. I will then hand the call to Neil for a financial review of our Q1 2025 results. We will then provide a business update for our OAS and ONDIS Networks business units, where I will ask Oshie and Marcus to provide commentary around current business activity and the progress we are making on our business plans. I will then provide an outlook for the remainder of 2025, where we continue to anticipate a record year of revenue growth primarily driven by OAS. We will then wrap the call and open the floor for investor questions. Let me start by saying we have a very positive story to tell today. As you're well aware, we have worked extremely hard over a long period of time to build the exceptional capabilities represented by our technology platforms across both OAS and ONDIS Networks. Not only that, we have also worked to both demonstrate their value to our customers and begin to drive adoption in the large critical markets we are addressing. These efforts have been very successful, and we are beginning to pay dividends in very tangible ways, in ways that you as investors can measure. With this backdrop, ONDAS entered 2025 with strong momentum, especially with ONDAS autonomous systems. We put up a strong quarter from both a growth and operational standpoint, further accelerating our multi-year growth plan, which is also being supported by growing global tailwinds in demand for our autonomous drone platforms. As we will outline, we are expanding existing customer programs and securing new programs with new customers across the world. In Q1, we generated $4.2 million in revenue, primarily driven by execution against the $10 million backlog we began 2025 with. We also secured more than $9 million of additional orders year to date, further growing our backlog to $16.8 million. In addition, we have strong visibility on a number of additional orders for both Iron Drone and Optimus that are likely to further increase our backlog by the end of the second quarter, as well as during the second half of 2025. With this momentum in a growing order pipeline, we are reaffirming our full year revenue goal of at least $25 million for 2025, with at least $20 million to be generated by our OAS business unit. OAS continues to deliver against existing customer programs while expanding its presence with new defense and homeland security customers across Europe, the Middle East, and the West. Notably, our Iron Drone radar system is now operational in a live combat environment with a leading military customer, further demonstrating its status as a -in-class, low-collateral counter-UAS platform. The Iron Drone demonstration team, which we launched in February, has been successfully engaging customers, and these marketing activities are generating significant new demand supported by the Iron Drone's real-world combat readiness. We are actively investing behind the Iron Drone expansion to support the scaling of this platform with customers. As we talk further about specific customers, orders, and backlog, I want to take a moment to remind our investors that certain customer activities at OAS can be sensitive or even classified in nature. This is obviously true for many of our defense and homeless security customers this can also be the case with certain commercial customers as well. As a result, we need to be sensitive to this while being as transparent as possible on our business development progress understanding this constraint. With that said, I am happy to report today that we are announcing our third customer for Iron Drone with a 1.7 million dollar order. This is a governmental customer that will deploy Iron Drone for border security. This newly announced customer today for Iron Drone is in addition to the initial order from a European governmental entity in NATO member country we announced a few weeks ago whereby the Iron Drone radar is being deployed to protect critical locations. These new customers are demonstrating the global opportunity for Iron Drone as we pursue our strategy to establish a platform as a category leader for low-kinetic CUS, CUAS threat mitigation. These new customers also mean we have met our initial goal of adding two new military or homeless security customers in 2025. In addition to our initial military customer we secured in the second half of 2024. With proper execution we will be able to expand these new Iron Drone customer programs with future orders. I want to add that with our new customer goal met for 2025 we now also expect to add even more military and homeless security customers this year beyond the initial two. The Optimus Drone fleet in the UAE for DFR use continues to expand under the Drone Box program with new deployments supporting public safety missions in urban environments. We expect additional growth in 2025 for Optimus including with existing customers as well as new customers including those in the United States where we are pursuing important business. At Optimus Networks we made meaningful progress which included the selection of DOT16 by the Association of American Railroads or the AAR as a communications protocol standard for the next generation head of train, end of train or NGHE system. This validates our long-term strategic efforts and positions us for commercial adoption for rail networks across the 900 megahertz, 220 megahertz and 450 megahertz frequency bands. In addition the 802.16T standard for which we created the design in critical software-based intellectual property was formally ratified by the IEEE committee last week. Recall that the AAR and its railroad members were actively involved designing the requirements for the DOT16T standard. This is another marker of success for Andas and was especially gratifying given the rigorous work of our team and the leadership we have displayed to drive this new standard on behalf of our customers and the rail vendor ecosystem. Lastly, while the 900 megahertz deployments remain slow we are seeing encouraging signs with key customers actively running small-scale critical live network deployments and we are also integrating new IP-based applications which we believe will result in additional sales system sales over time. Of course Marcus will share more details later in the call. Overall we are executing well against our strategy, expanding our production and service capabilities to scale with demand, deepening customer relationships and positioning Andas for sustained growth throughout 2025 and into 2026. 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 Andas networks and OAS. We expect significant operating leverage as revenues grow though today's revenue levels do not yet cover our operating expenses. For Andas networks revenues will fluctuate from quarter to quarter given the uncertainty around the timing of customer activity in front of the targeted commercial rollouts in the 900 megahertz network and the development programs underway with Siemens and MXV. Similarly revenues at OAS are expected to vary from quarter to quarter and to normalize into a more predictable pattern as we grow our customer base and more of those customers enter fleet programs and recurring service agreements. Revenues increased over 500% to 4.2 million in Q1 2025 from 0.6 million dollars in Q1 2024. Revenues from Andas networks were 0.2 million dollars relatively flat compared to 0.3 million dollars from Q1 2024 and were primarily the result of extended timelines related to 900 megahertz field deployments with the class one railroads. OAS revenues were 4.0 million dollars an increase of over 600% from Q1 of 2024. This increase reflects the shipment of products and services from the 14.4 million dollar orders primarily related to the two new programs secured with a military customer in the third quarter of 2024. We also recognize revenues from additional deployments in United Arab Emirates. Growth profit was 1.5 million dollars representing a 35% gross margin in Q1 2025 as compared to a 0.4 million dollar gross loss in Q1 of 2024. The increase in gross margins year over year results from increased higher margin product revenues at OAS compared to lower margin service and Q1 of 2025. Growth margins can be volatile on a quarter to quarter basis due to revenue levels that reflect the early stages of platform adoption, certain fixed service costs reflected in our cost of goods sold and shifts in revenue mix between product development and services revenue. Operating expenses increased to 11.8 million dollars for Q1 of 2025 as compared to 8.7 million dollars in Q1 of 2024. Cash operating expenses were 9.0 million dollars in Q1 2025 compared to 7.3 million dollars in Q1 2024. The increase in cash operating expense was the result of investments in headcount and programs at OAS to support the business growth we discussed above. Operating expenses also increased because of additional stock compensation expense. Operating loss was 10.3 million dollars for Q1 2025 as compared to 9.1 million dollars for Q1 2024. Adjusted EBITDA loss was 7.5 million dollars for Q1 2025, improving slightly from the 7.7 million dollar loss in Q1 of 2024. Now let's turn to the cash flow statement. We held cash of 25.4 million dollars as of March 31, 2025 compared to 30 million dollars as of December 31, 2024 and 14.6 million dollars as of March 31, 2024. The increase from March 2024 reflects the financing received during the last 12 months less cash used in operations. Cash used in operations during Q1 of 2025 decreased slightly to 6.7 million dollars compared to 7.5 million dollars for Q1 2024 as we saw improved cash collections from the orders received and shipped in 2024 and early 2025. We also received cash from financing activities of 2.3 million dollars including proceeds from government grants and other financing. We expect cash utilization to continue to improve in 2025. Improved cash efficiency comes from operating expense leverage at our OAS business unit given our expectation of increased revenue and gross profit over the course of 2025. The company expects to fund its operations from the cash on hand of 25.4 million dollars as of March 31, 2025, gross profits generated from revenue growth, potential pre-payments from customers for purchase orders, potential proceeds from warrants issued and outstanding and additional funds if needed that the company may seek through equity or debt offerings and or borrowings under existing notes additional notes payable lines of credit or other sources. Turning to the balance sheet, again we held cash of 25.4 million dollars as of March 31, 2025 compared to 30 million dollars as of December 31, 2024. As of March 31, 2025, Arndas Holdings had 25.4 million dollars in convertible debt outstanding down from 44.6 million as of the end of 2024 reflecting a significant conversion of our outstanding convertible notes into equity. We're pleased to say that during the second quarter of the date we have seen further debt reduction via conversion of convertible notes to equity and our outstanding balances on the convertible notes as of today have been reduced to 20.6 million dollars. This debt reduction included conversion of notes that were due to mature at the end of April. Of course we plan to support the conversion of these remaining notes to equity before maturity. And I will now hand the call back to Eric.