Red Cat Holdings, Inc.

Q1 2022 Earnings Conference Call


spk_0: ladies and gentlemen thank you for standing by good afternoon and welcome to the red cat holding fiscal quarter two thousand and twenty few financial goals and corporate update conference call at the time or participants are in to origin only mode should you need a certain way for your crawford specialist by pressing the start he followed by zero after to three than caesarea will be an opportunity to ask questions to ask the question in their darn than one on your telephone keypad to withdraw your question to stuff done then few participants of this call our advice that the audio at this conference call is being broadcast live over the internet and has also been recorded for playback perpetrated a webcast replay up recall will be available approximately one hour after the end of the call through december twentieth two thousand twenty one i would now like to turn the call over to scott gordon president of core i are the company investor relations firm please go ahead sir
spk_1: thank you are really good afternoon everyone and thank you for joining us from a red card holdings to school first quarter twenty twenty two financial results in corporate update conference call during a today from red card holdings are geoff thompson chief executive officer broker opens joe foreman chief financial officer during this call management will be making forward looking statements including statements and address red cap expectations for future performance or operational results for looking statements involved russian other factors that may cause actual results to differ materially from those statements for more information about these risks please refer to the best doctors described in red cat most recently bought periodic reports reform ten k and porn turn que the form eight k the bf issue today and red cat personally for a company has call particularly the cautionary statement in the contract of this call contains time sensitive information that is accurate only adds up to today september twenty twenty twenty one such as required by law red cat disclaims any obligation to publicly update revived any for nation to reflect events or circumstances that occur after this call it is now my pleasure to turn the call of and jack thompson red cat ceo just please go ahead
spk_2: thank you scott
spk_1: good afternoon and thank you all for joining our to go first quarter twenty twenty two call and webcast also during me today is joseph korean of the about
spk_2: the theory the recent acquisition we are complete open to school twenty twenty one and twenty twenty two thus far either go to the direction and outlook or red cap the acquisition the you'll grounds that beginning of september twenty twenty one and skype or sonic in early may twenty twenty one position to compete compete effectively in the military infrastructure inspection marketplaces respectively and bottle at considerable contribution to our enterprise second
spk_3: with field wrong that condition we gain a media access to the military reconnaissance and public safety applications markets are small you a be healed golden eagle drown in one of just five rounds approved by the department of defense and we're both invigorated an optimistic about the military contractor we can now bid on additionally the golden eagle is currently the only drug approved why on united states airport property
spk_1: that's an important exclusivity and we intend to continue to leverage is competitive advantage moving forward
spk_3: he'll drones are made in the usa
spk_2: on the ban on grown meat and drunk components made in china coming into effect yet another competitive advantage for red cat
spk_3: additionally we continue to move forward with a deity in the short range reconnaissance at our our program
spk_2: and we are participating the second part of that program that doctor alan abby or the in georgia the tooth ceo and founder of fuel drones are telling the program for advanced autonomous short range veto veto as we speak
spk_1: after telling product one we receive no party five weeks later
spk_3: it could be a two million dollar when parochial and red cat
spk_1: well we're working on securing government contract we also rapidly feeling golden eagle production committee the current levels of government agency demand we are fortunate to be fully funded and we plan on using some of our cash reserve admin mcconnell and document to grow production capabilities during a scarecrow far we have an incredible up to the wrong to die wait the structural integrity of enterprising and or government structures or other assets particular location winners high risk for human operators and ball amazon allows for the execution of remote wrong flights with operators anywhere in the world
spk_2: using patented technology that allows for type beaten statues even areas where vps not allowed or bill
spk_1: we've already received small purchase orders for pilot programs for artificial intelligence platform this guy percent of the building as part of a dropbox we anticipated that news programs as well as more substantial revenues for the services and the next twelve months
spk_2: also we're currently out of the any bid on jobs in europe and the general motors and other domestic government agencies we're currently called bidding on a project with of nearly them approximately eight million dollars and if we were selected will get a material portion of the the war
spk_3: what we wanted consumer sentiment i pleaded with performance especially given the adversity in the core global supply chain crisis resulted in being out of stock of our most popular item that that sharp and road right the didn't for over a month
spk_1: luckily we anticipate the issue you minimize the impact we're very excited with a typical second quarter because we have gotten ahead on inventory in effect robust christmas spirit rudder right along growing digital god will feels i'm fat shot
spk_2: run riot had a backlog of almost one hundred ready to fly drones
spk_1: we have quickly start building in our second be caught up now that we had the supply chain issues resolved that york is also poison due to to rebound with new products improper inventory
spk_2: you can teleport to form strong in the market carving out a leadership position the industry through acquisitions and performance
spk_1: as you can t to execute on the financial the company with it come company expansion of our revenue and obama one as a joseph are yeah paul mccartney little later we recognize a hundred fifty five percent year over year increase in our revenues in our good corporate core and in july thirty one and we are extremely a strong position to a large contracts and execute on a road map
spk_2: thanks to the sixty six million dollars in cash and equipment on balance sheet at the july
spk_3: thirty one twenty twenty one
spk_2: and with that i'm gonna hand the call over joseph
spk_4: thank you jeff and to everyone for joining today
spk_2: our first quarter of fiscal twenty it with the fighting an eventful in a number of respect
spk_1: a strategy to acquire gonna just the ground technologies them platform continued to move forward as we completed our first full quarter of operations with that shark
spk_4: closed on the acquisition it's hypersonic in may binder a letter of intent to acquire feel in july and then closed on that acquisition at the end of august
spk_1: revenues despite the challenges that jeff described killed me strongly in que one twenty two compared to que one twenty one primarily the driven by bad shock
spk_4: like many companies a gross margin in our availability of them and tory to meet the man during the quarter will adversely impacted by higher shipping and fulfillment costs in part related to the coven nineteen pandemic all of our functional expense categories were higher in fiscal twenty two compared to the same quarter of fiscal twenty one reflecting the growth of the company as we integrated the fact sharpton skype or sonic acquisition the largest increase in expenses incurred in the category of general and administrative in which were heavily impacted by our up with thing to the nasdaq market including the associated nasdaq lifting the the carrying dino coverage to track qualified additional board members as well as formally engaging a pr i farm while i net loss with hiring you one twenty two compared to que one twenty one we continue to efficiently grow the enterprise were controlling cash burn
spk_1: are adjusted net loss in the first quarter twenty two twenty twenty two tease me
spk_4: which excludes non cash expenses related to derivative liabilities and start date comp
spk_5: two employees and service providers
spk_4: total only one point one million and que one twenty two we think this is an impact of accomplishment and figuring that we were bidding integrating backtrack and skype or sonic during the quarter as most of us know integrating acquisition is up and expensive in summary we were pleased with are operating performance during the quarter we were equally pleads with our ability to strengthen our financial position during the quarter in may we closed an offering up four million shares common stock was generated gross proceeds of sixteen million in july we closed the second operation of slightly more than thirteen million shares a common stock which generated gross proceeds of sixty million it is important to note that we completed these are friends without having new include warrant what's your very typical for a company of our side this enable it enables us to avoid an overhang of future dilution
spk_3: we ended the quarter with approximately sixty six million in cash and equipment
spk_4: if you compare that amount to i just the net loss of one point one million for the first quarter of fiscal twenty twenty two you can quickly understand why we feel so strongly and confident about our financial position at this time with that i would night i would like to turn the call over for question operator
spk_0: ladies and gentlemen if you wish to after question on today's call a fresh start than the number one on your telephone if your question has been answered and you wish to a trial require you may do so by pressing star then too if you're using a speakerphone pick up your hands that before entering your request and speaking on the all one moment please for the first question efforts questions that i come from ashok kumar with fake equity
spk_6: oh good afternoon i'm jeff jeff could you please review the short term and the long run me opportunity the thank you very much
spk_3: yeah yeah thanks for jumping on the culture we're at there's a lot about that kind of imagine my prepared remarks but job would be pretty exciting right now we are killed grounds we ah have already ordered about hundred and thirty i'd keep a drone chipsets to be able to construct over over six hundred browns
spk_1: ah we are that we could actually have delivered and in the next six months depending on if we use distributor that would generate about
spk_3: six point five million in revenue
spk_2: our and we sell direct
spk_1: generate about a point four million in revenue from not very strong
spk_3: that we have off the are you being being constructed right now
spk_2: ah in that if we added a possibility of winning be the second trial which our team is attending right now this week
spk_1: if they get they get that awarded the next five or six weeks i'll be an additional two million so there's a short term as i would say the next sixty eight months just can feel could be anywhere from six and a half million with all the relaxed it's got up to canada half million ah to when we think that that you're gonna start to you know hit it's stride and and the goal is to get to a certain amount of drones per month that they get to break even so we're we're pretty tight with he opened the now scrapper sonic is is also starting to get it artificial intelligence platform in in in grade or of the we're really going out with you constantly me sure that it was a working the way we wanted it to we now think that the product is ready to start scaling and as we mention of and and remarks that we we do have we have a heat from are smaller purchase orders on on those got sunk world for basically getting units out to a companies and then week
spk_3: that yet it be like what they see that bill the grown very large contracts so i think weren't wouldn't really good spot of next six months to get to ramp probably pretty quickly
spk_7: the read it again know all the very back
spk_0: i next question comes from kevin dealing with h t h c way like
spk_8: hey jeff and and spencer gershman and for kevin congrats on a great color i was just curious how us you're thinking about branding and potential brand consolidation given the the various subsidiaries
spk_1: i'm yeah that's actually a could get pretty interesting were you know the some of the brands have a bigger appealed and others are in a broader right ran is so well now that will keep that it a standalone brand the same with that shark that shark is and them on a leaders on the god of space for for eight years so does your does your brand he would not wanna touch
spk_2: york the it in the on the than the military mob portion would feel and the government contract new capabilities they also have a relatively great brand so if if the branded a well known is starting to traction will probably leave it out is
spk_3: and you know that the people note i barely know who wrecked added but the note they knew who the heck god you're grounded in the same thing with run right back so will be select your the are on how we would or and or rebrand company that we acquire them
spk_8: that's gray color thank you and
spk_5: that i believe you're you're going to continue with that am in a strategy of just child trying to acquire other draw manufacturers or her no software whatever it may be
spk_2: can provide any more color on that in terms of what you see in the space terms of now but that potential consolidation
spk_3: yeah so we were looking at a specific league with a deity contractor we're looking at are there there's five companies that are able to participate in these programs are at since gone down to four on which allowed out had the on the
spk_1: no water pursuing after the a pop tart i super one of four ah which really put this in a good spot we want to make sure that we have the best features you hopefully when eat large contracts in price three so i get there any peter the puzzle that we don't think we have we would probably go after other than they're mostly in software world
spk_3: we will probably not going such as a vicious rape with her acquisitions
spk_1: we haven't last six months you know we'd like to continue to work on the lucas feel now that we've got he'll squared away
spk_9: i'm in which gives the great simulation platform ah that is is needed in all of our age of basically the actually already working with lucas so you you will sweet we will still be don't acquisition i will be at the same paper we dunlap slick month
spk_5: okay thank you
spk_1: i'm and last question are you able to provide any additional color on different view the activities like different kinds of project that you may be looking at yeah some the things that we're hearing right now to specifically for it did the beauty of he pitched that we're going to this week
spk_2: we we've we've actually found out that it was you're used to be just with typically put the army
spk_1: and we can leave her dipped they're adding a marine navy to to the program which good in a enlarge the he contract award next year so but we are basically already in
spk_0: almost every government entity and have children's there
spk_3: backyards gray color really appreciate it
spk_1: the concluded our question and answer session i like to turn the call back over to just thompson for an equal to the like
spk_3: yeah thanks everybody hopefully your you survived it's crazy day
spk_0: but go we're pretty excited megafauna wish i wish the team lockdown import betting

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