Ondas Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 15, 2023

There are 10 speakers on the call.

Operator

Good morning, and welcome to the Onda's Holdings First Quarter 2023 Earnings and Business Update Conference Call. All participants will be in listen only mode. After today's presentation, there will be opportunity to ask questions. Please note that this event is being recorded. I'd like to turn the conference over to Mr.

Operator

Eric Brock, Chairman of CEO of Andis. Please go ahead, sir.

Speaker 1

Well, thank you, operator, and good morning. Want to start by welcoming everyone to our Q1 investor call. We appreciate the time you're spending with us and for your interest in our company. I'm happy to be joined today by our CFO, Derek Rysfield and our President, Reese Moser. In addition, we will hear from both Stuart Cantor, the Founder and President of Andas Networks And Meir Kreiner, the Founder of Aerobotics and President of Andas Autonomous Systems.

Speaker 1

Today, we plan to review our financial performance And strategic progress for the recently completed Q1 and discuss our outlook for the rest of 2023. Now let's turn to the agenda. We will start today's call with some brief comments about the Q1 performance and recent industry and company specific developments Driving the outlook for our business entering 2023. I will then hand the call over to Derek for a financial review of the Our discussion on our financial performance will include commentary around the streamlining of operating expenses. As part of the we review, I will discuss our balance sheet and liquidity position and provide an update for our outlook of 2023.

Speaker 1

Then we will transition and provide a business update for Andes Networks and our OAS business units, where I will ask Stuart and Mayer to provide commentary around current business activity. We will then wrap the call and open the floor for investor questions. 2023 is off to a great start operationally at Andas, highlighted by record revenues of $2,600,000 in the Q1, which exceeds all of 2022's revenue. This reflects the beginning of shipments on the backlog secured as we enter 2023. Of course, we have a lot more to do on production shipments and installations on both sides of the business to deliver current backlog and drive new orders from customers.

Speaker 1

Regarding customer activity, We want to highlight a critical milestone we cleared with OnDeck Networks. In March, we saw the Association of American Railroads, Or AAR, formally announced to the rail industry that they have selected the IEEE 802.16 wireless technology as a platform to the new 900 Megahertz network. In addition, the AAR publicly confirmed key timeline dates, which includes both the September 2025 deadline to retire the legacy 900 Megahertz network as well as the requirement from the FCC To substantially build out the new greenfield 900 Megahertz band by April 2026. We believe the formalization of the technology choice in 900 Megahertz, along with the communication of deadlines, is a huge catalyst for the Onondas Networks business. Stuart is going to share more details around these developments and time lines, though I want to emphasize that since this announcement by the AAR, We have seen a significant increase in customer engagements, including deployment plans.

Speaker 1

These announcements from the AR are also supporting increased Across the rail vendor ecosystem, we expect further development opportunities both with Class 1 freight rails as well as in passenger and transit in international rail markets with both Siemens and MXV Rail as well as with other vendors. At OAS, we have previously outlined Fleet adoption is moving along as Aerobotics executes commercial fleet orders to the Optimus system and customers and partners in the UAE. We have now begun citywide deployments of urban drone infrastructure in both Dubai and Abu Dhabi. In addition, we have advanced marketing activity of the Optimus system In U. S.

Speaker 1

Markets and are seeing significant interest in oil and gas, public safety and other government markets. We will discuss this in more detail as well. I want to once again highlight the fleet deployment activity of the Optimus system is nothing short of groundbreaking for the drone industry It has clearly separated Andas from the rest of the pack. Flying autonomous unmanned systems in a densely populated urban setting is an unparalleled achievement It demonstrates the lead we have in defining these UAS markets. As we execute these initial fleet deployments, we believe customer adoption will accelerate.

Speaker 1

Mehro is going to share some details around installation and operation of the systems on behalf of customers and expectations around future growth. So to wrap up the introduction, we are now beginning to scale in both the OnDeck Networks and OAS business units. With expected revenue growth a focus on cost controls and cash efficiency, we believe our cash burn will move significantly lower on a quarterly basis as we move through the year. I'm now going to hand the call over to Derek for the financial review. Derek?

Speaker 2

Thanks, Eric. As I get started, I want to remind our investors that our financial statements continue to reflect investment in preparation for larger We expect significant Operating leverage as revenues grow, though today's revenue levels are not yet covering our operating expenses. Revenues for the periods presented have been generated by both Andas Networks and OAS business units and totaled approximately $2,600,000 for the Q1 of 2023. This was a significant increase from $400,000 of revenue generated in the Q1 of 2022. Revenue growth was primarily the result of higher product shipments at Andas Networks and installations of Optimus systems for OAS.

Speaker 2

Gross profit in the Q1 of 2023 was approximately $1,000,000 a nearly tenfold increase from the same period in 2022. Operating expenses increased to approximately $13,700,000 in the Q1 of 2023 as compared with $10,000,000 in the prior year. The increase in operating expenses was primarily due to onetime costs related to the reduction in force and termination of certain development programs at Andas Autonomous Systems as well as professional fees associated with the Aerobotics acquisitions. We expect these elevated expenses to come down in the second quarter. Non cash expenses totaled approximately $2,500,000 for the Q1 of 2023.

Speaker 2

Stock based compensation was $1,300,000 in the Q1 of 2023, a slight decrease from the prior year. Depreciation and amortization expenses increased to approximately $1,200,000 in the Q1 of 2023, up from approximately $900,000 in the prior year. Excluding non cash expenses, operating expenses were equal to Approximately $11,100,000 which were about in line with expectations and again reflected elevated costs at American Robotics due to the restructuring. The company realized an operating loss of approximately $12,700,000 for the Q1 of 2023 as compared to $10,000,000 for the Q1 of 2022. This loss includes the The company realized a net loss $14,500,000 for the Q1 of 2023 as compared to a $10,000,000 loss in the first The higher loss included some of the non cash and non reoccurring costs previously discussed.

Speaker 2

In addition, we incurred $1,800,000 of mostly noncash interest expense, which was related to the accounting treatment of the and of the original issued discount or OID of the convertible note. We generated an EBITDA loss of $10,200,000 in the Q1, excluding these noncash expenses as compared to a $7,800,000 EBITDA Loss to the Q1 of 2022. Before turning to the balance sheet, I want To emphasize that we expect to see the full benefit of lower spending at OAS on a quarterly basis Beginning in Q2, as such, we expect to incur approximately $9,000,000 of cash operating expenses In the Q2 of 2023, which is a more than $2,000,000 decline from the elevated $11,100,000 of OpEx in the Q1. Now let's turn to the balance sheet. We ended the Q1 with $14,200,000 in cash.

Speaker 2

As described, cash expenses were elevated in the quarter and included certain costs related to the reduction in force and termination of development programs. We also used $3,700,000 of cash to repay debt for both amounts due in connection with the Aerobotics closing in January and for cash amortization payments on the convertible note. That outstanding convertible note had a that matures in October 2024. Outside of the new convertible notes, we maintain a minimal Long term debt and a $54,200,000 equity position. Of course, our equity position

Speaker 1

Well, thank you, Derek. As you know, we believe 2023 will be the year that Andas begins to monetize the substantial investments we have made in our business development. We expect to generate significant revenue growth for the full year 2023 and are reaffirming our revenue outlook from February. Recall that our revenue target for 2023 is $26,000,000 to $30,000,000 That outlook included targets of $8,000,000 for revenue at OAS and $18,000,000 to $22,000,000 at Ondesk Networks. Our revenue outlook is supported by the $13,000,000 backlog we entered 2023 with and by visibility into expected additional demand from customers.

Speaker 1

Visibility on customer ordering plans is improving noticeably, and Stuart and Maher will share more details. I want to note that we are currently tracking to the low end of that revenue range at Onondas Networks, and this is primarily due to certain component tightness In the supply chain, which may constrain production plans temporarily, we are working to alleviate the near term supply challenges As we deal with the complexity of ramping up our production, we expect cash utilization to improve significantly beginning in Q2. Improved cash efficiency comes from operating expense leverage at both OnDeck Networks and OAS, with expected growth in revenue and gross profit. In addition, Q2 will be the 1st full quarter, which reflects the cost savings from the restructuring we announced in Q1 when we established the OAS business unit. We expect cash operating expenses to be approximately $9,000,000 for the Q2 of 2023 versus our target of $11,000,000 in the So we are tightening OpEx, and we will look for even more efficiencies going forward.

Speaker 1

As we outlined, EBITDA loss was a bit higher than we expected in Q1, So we were tracking a bit above our original target. From here, we plan to focus the company on delivering revenue growth and very tightly managing expenses, Which we are doing. To be clear, we expect profitability to improve as we move through the year. To that point, we reiterate our targets for Ondesk Networks achieve EBITDA positive levels on a quarterly basis by the end of 2023 and for OAS to be similarly profitable by the second half of twenty twenty four. The bottom line is we expect operating cash flow to improve structurally as we move through 2023, given the expectation of revenue and gross profit growth And the commitment to continue to tightly control costs.

Speaker 1

I also want to touch on the balance sheet. We are confident in our ability to raise additional capital, We believe we have a variety of potential sources and strategies to pursue. Firstly, we believe both certain financial and strategic investors have Further, we do have access to the ATM, which can also be a source of equity capital. There are other non dilutive financing strategies to pursue as well. For example, given the growing level of orders we expect from Siemens In the need to respond to rail customer deadlines, we believe that down payments for inventory can be a significant tool to help manage working capital.

Speaker 1

Similarly, credit lines are likely available with the growing order book that we expect. Net net, It remains a difficult funding market and the early stage nature of our business in this environment has contributed to an unfortunately high cost of capital for Andas today. Nonetheless, we believe we will have sufficient access to capital to fund our business, and we will seek to execute this funding in the most optimal way for our shareholders. We believe we are creating tremendous value for investors, and as we execute our growth plan, we believe we will be rewarded for this hard work. Now we will transition to business unit review and ask Stuart Cantor and Merritt Kreiner to share updates on recent activity in the field with customers and industry partners.

Speaker 1

We'll start with Stuart, who will update us on the current status with the rails on 900 Megahertz and focus on the important milestones we have achieved with the AAR regarding platform acceptance and the drivers behind the accelerating order pattern we anticipate. Stuart?

Speaker 3

Great. Thank you, Eric. We're off to a strong start in 2023 at OnDeck Networks. We began volume shipments to Siemens to fulfill the order we received in the second half of twenty twenty two and are ramping production to meet the backlog. We generated $1,100,000 in revenue for the quarter and expect to deliver sequential quarter over quarter growth in 2023 as we track to our target.

Speaker 3

Commercial deployments in the field are now happening with rail customers led by BNSF and CSX. BNSF is deploying Siemens AirLink ATCS systems as they upgrade the legacy application. The initial deployment in Minnesota is now operating live and we expect expansion of field deployments in other locations with BNSF. CSX is deploying our Venus platform at 900 megahertz for a critical interlocking use case. CSX's first deployment in Northern Florida is also now carrying live traffic and CSX has identified a number of new locations for installations of our 900 megahertz Venus platform.

Speaker 3

As Derek mentioned, the Q1 was marked by a critical milestone. The Association of American Railroads Formerly announced in March that the IEEE 802.16 industrial wireless broadband standard will be the platform for the greenfield 900 Megahertz Band. This was a major achievement and has resulted in a significant increase in commercial activity across the Class 1 rail sector around planning for the 900 megahertz integration. We will discuss this in greater detail in a moment, but suffice To say, customer intentions around purchasing dot16 compliance systems have accelerated, and we are seeing increasing visibility in our customer In March 2023, the Wireless Communications Committee within the AAR Made an industry announcement confirming that the greenfield 900 megahertz network would standardize on the IEEE 802.16 technology promoted by Andas and Siemens. In addition, the AAR publicly confirmed key deadlines around the 900 megahertz network migration.

Speaker 3

The Class 1 rails are required to retire the legacy 900 megahertz channels and return the spectrum to the FCC by September 2025. In addition, the FCC is requiring that the new greenfield 900 megahertz band be substantially built out by April 2026. And subsequent to the AAR announcement, the American Railway Engineering and Maintenance of the Way Association, also known as ARIMA, Move to ratify the selection of 802.16 as the wireless standard for the 900 megahertz network. Arema's members include railroaders and rail vendors and the ratification happened by vote at the end of April with over 98 And discussions around deployment plans. We believe we are moving closer to the significant order ramp we have been expecting and that orders will begin to move higher.

Speaker 3

There are a number of additional trigger events that we believe are driving adoption. As we mentioned previously, The key rail organizations have now authorized and require the use of 802.16 technology and have recognized the need to vacate. Other rail equipment suppliers are facing significant supply chain issues, including forcing the rails to look for alternative and standardized solutions. Certain legacy technologies are deteriorating due to age, interference issues and the lack of robust modern security protocols. Other applications and protocols are creating capacity constraints in the critical PTC 220 megahertz band and are now required to move to new frequencies such as 900 megahertz.

Speaker 3

Furthermore, the recent derailment in the Midwest is fueling the need for additional defect detectors, which have a good home in the 900 Megahertz Greenfield band. And lastly, transit agencies in the U. S. And internationally are facing significant end of life legacy radio issues, where our radios offer a capacity and application upgrade. All of these combined lead us to believe that we are at a growth Now I'll hand the call back to Eric.

Speaker 3

Eric?

Speaker 1

Well, thank you, Stuart. I will now ask Mayor Kleiner to take the floor and update us on progress with customers at Andas Autonomous Systems And provide some insight into the outlook for the rest of 2023. Maier?

Speaker 4

Thank you, Eric. We had a great start to 2023 at Onbus Autonomous System. We delivered $1,500,000 of revenue in the Q1, largely related to fleet deployments with the Dubai Police. We also advanced on the ground activity in Abu Dhabi with Skyco, A new relationship we announced in January. We have now installed the first system in Abu Dhabi with CAGO at critical infrastructure locations.

Speaker 4

We are meeting our performance applications and expect the Sky Go installation to translate into Q2 revenue. We look forward to soon sharing more details around the Skyvo Smart Cities operations and our joint venture plans. In parallel, we have been working hard marketing and qualifying customers in the United States. We are excited to bring Optimus into the U. S.

Speaker 4

And believe the opportunity to drive fleet adoption as drone infrastructure is substantial. We expect to share more details on our U. S. Plan soon and expect international customer deployments in the fall as OPTIMO's inventory is delivered Lastly, I want to remind you that we introduced the IronOne On the strategic side, as you're well aware, the Q1 was the first where American Robotics and Aerobotics We're combined under the OAS, Hondas Autonomous Systems Business Unit. We have now completed the OAS integration, And we have closed on the IronOne acquisition, which adds CounterDrawn capabilities, leveraging advances in AI computer vision technology To our set of autonomous drone solutions, the combination of American Robotics and Robotics has created significant benefits from operational We have streamlined research and development and operations on a single platform, the OPTIMO system, which places OAS in a strong position to deliver solutions to customers globally.

Speaker 4

We are benefiting further from sharing technologies, I want to also highlight The Sky Go relationship is trading strongly. As mentioned, we have advanced installations in Abu Dhabi and look forward to sharing more details as they emerge. At the World Police Summit in March, we also announced And expanded relationship with the Dubai Police. This expanded collaboration calls for further technology development Around our AI capabilities and other technological upgrades. As part of this agreement, the Dubai Police also expressed The intent to purchase Ion Drone System.

Speaker 4

This came after a successful system demonstration. As the threat of AUSTED RUNs is widely understood, we are working on distributing the IronOne solution to additional geographies and customers. We expect orders and installations to grow in Dubai as we move through 2023, And we continue to scale up the Uber and WAN infrastructure with this important partnership. We continue to expect strong growth in the OAS business unit. We entered the year with $5,500,000 of backlog, which we will deliver this year.

Speaker 4

We believe existing customers will provide new orders for 2023 2024 As citywide fleet deployments continue. We are excited to bring OPTIMUS to the U. S. And as we mentioned, Initial qualification of customers has been positive development. We expect to announce new customers in the oil and gas as well As new partnership and initial customers in public safety and government markets as we move through to 2023, We are finding that the U.

Speaker 4

S. Customers value the unique capabilities of the OPTIMO system, which include the ability to swap payloads and batteries, which allow the system to perform as a multipurpose infrastructure for industrial and municipal end users and to provide a wide variety of datasets. These capabilities, in addition to the proven reliability of OPTIMUS, Our strong selling points with the U. S. Customers.

Speaker 4

As we have described previously, entering new markets Required additional tailoring of solutions. We have implemented 5 gs wireless connectivity, and we are in advanced stages of integrating payloads Specific to the oil and gas markets in urban and industrial environments. Specifically, we are adding OGI and TDLAS capabilities Similarly, we are integrating the TASA Detect and Avoid technology with the OPTIMO system to support BiviLOS operations As well as advancing the OPTIMO system type certification with the FAA, these cutting edge capabilities We'll enable the OPTIMO system to operate in complex and urban environments. Lastly, I want to remind you that we are building via our contract manufacturing partner in Israel an additional 15 OPTIMO systems. We expect delivery of at least 10 units by the end of the year with initial systems being ready to install later in Q3.

Speaker 4

This completes my formal remarks. Eric, I'm going to hand the call back to you now.

Speaker 1

Thank you, Mair. Let's wrap this up with a couple of closing remarks before shifting to questions. I want to reiterate, management is committed to delivering for investors, We think we are well down the path to monetize the significant investments we have made in our platform technologies. We are particularly excited at Onondis Networks as the work we've put in to create a valuable next generation wireless technology for safety critical networks is now being recognized and adopted with the Class 1 rails. We are particularly pleased to see the AAR take the next step to formally select 802.16 as a technology platform for 900 megahertz.

Speaker 1

This milestone can't be understated as it has provided greater than expected energy to our conversations with customers. We think this momentum will build over the initial 900 migration and beyond, we will be very busy in the coming years scaling with Siemens and the rail customers. Similarly, fleet deployments of OPTIMIST are off to a great start. Our initial customers have launched our urban drone infrastructure in major cities. Strong operating performance with these initial installations are expected to lead to continued fleet expansion with these customers.

Speaker 1

The success With the Optimus platform helps reinforce the opportunity we have here in the United States. As Meyer shared, we are progressing and qualifying initial customers and partners in the U. S, We look forward to sharing more details when available. We expect revenue growth across the business units in a focus on efficiency and tight expense management We'll demonstrate our ability to drive shareholder value as we deliver on our plan to improve profitability as we move through the year. Again, This is shaping up to be a great year for Onondas.

Speaker 1

With that said, let's see if there are any questions. Operator?

Operator

Thank you. We'll now begin the question and answer session. First question will be from Mike Latimore, Northland Capital Markets. Please go ahead.

Speaker 5

Yes. Good morning. Congrats on the rapid growth in the quarter here.

Speaker 3

In terms

Speaker 5

of the potential new orders from the rail industry, I guess, Are you expecting or does the demand seem to be coming from the 2 customers that you've highlighted here, BNSF and CSX or is it expanding into other Class 1s in terms of interest level?

Speaker 6

Yes. Thank you, Mike, for the Shneur, the answer is it's expanding beyond BNSF and CSX, although of course, we're going to be deploying with BNSF and CSX during the year and we expect additional orders from those rails as well. But we are seeing this broaden across the Class Is And it really is being driven by the validation in the announcement by the AAR that 900 We'll be the platform, so that formal announcement is important. And then, of course, these deadlines, which are now coming pretty quickly. So we're seeing a lot of activity really across Good, Hector.

Speaker 5

And I think there's always been the view that sort of mid-twenty 25 was a Key date here. So I guess, can you clarify what is new in terms of this announcement?

Speaker 6

Nothing is new, but so the dynamics here is kind of a shift. So our effort up until The biggest part of our effort has really been working with the AAR, specifically the Wireless Comms Committee within the AAR, which The work on the platform adoption on behalf of the sector. And as we've been progressing, we've gotten to this point. Now it's not a surprise that the railroads have these deadlines, but the announcement just reinforces to the folks who actually use the networks That they're going to be losing the network and they have to replace it. So just to expand on that a little bit, if you think about our work with WCC, Now they've been telling internally across the railroads, hey, this is happening, this is happening.

Speaker 6

And the railroads, the guys who operate trains, so you think about Switching and signaling folks, the guys who run crossings and on locomotive technology, when the formal announcement comes That the platform has been validated and those deadlines are reinforced, that has generated a lot of activity. And this another thing I'd Highlight here is again how Siemens fits into this. The relationships we've been building, the support we've been building from the networking folks, is really enhanced by Siemens being able to plug into those train operations groups that I referred to. So that's the dynamic. No, this is not a surprise at all.

Speaker 6

However, now there's this really we've taken up sort of the next step, and there does seem to be an increased urgency here, Which we're not surprised about.

Speaker 5

Can any other company provide that 16 Technologies?

Speaker 6

Today, the vendors are Siemens and ONDOTs, and there's no other qualified vendor. And as you know, we have created most of the critical if The vast majority of the critical IEP are on 0.16. So as we see this market grow and the railroads start spending a lot of money, it's very possible when New Vendor comes. And when they do, it's very likely that they'll be making financial arrangements to license or compensate us for our technology in some manner.

Speaker 5

Great. And then I guess just last on the autonomous system side of things. What does the What do the customers in Dubai and Abu Dhabi need to see before they place more orders?

Speaker 6

So I'll ask Maher, if he wants to add anything, but we're well into the fleet adoption at Dubai, And they've been testing an operating system now for the The entirety of this year, but obviously, as we had previously shared, they had 2 systems coming into this year. So they don't have to see anything. They're just sort of doing it to their budgeting plans. And ultimately, they've said that they're going to have 24, 25 systems to And they've said that they're going to do that by 2025. So that's well underway.

Speaker 6

With Skygo, we have worked on the initial installations and we then there's and we expect those units to be deployed And I'll let Meyer share anything else on kind of what he thinks that triggers for additional orders would be for Skykla. Yes. I agree, Arik. Right now, we are in the phase of the deployment and not the testing, specifically because Eric mentioned in Dubai and also We're targeting right now the deployment in Abu Dhabi and the relationship with CAGR.

Operator

And the next question will come from Timothy Horan of

Speaker 6

Oppenheimer, please go ahead.

Speaker 7

Thanks, guys. For the 900 megahertz, where are you with bookings orders that you've received? And Can you give us a little bit more update how much needs to be spent between like now and mid-twenty 24 on you guys? How much revenue you think you'll receive in maybe Now when the network really has to be substantially complete. And just to be clear, what is the date when the network you think has to be substantially complete?

Speaker 7

Thanks.

Speaker 6

Okay. So the deadline to retire the legacy network is September 2025, then the FCC for the new radio spectrum That they've provided the railroad, the greenfield band, they have a requirement for substantial build out by April of 2026. But of course, when they're losing the legacy network, we expect that activity to come well in advance. We've sized that up on our last conference call When we gave the outlook for the year and we think the initial migration to the new network is well over $200,000,000 opportunity. We're not going to provide sort of the 2024 expectation just yet.

Speaker 6

But Tim, what you're going to see is customers, as I said, activities broadening beyond the first two Customers and you're going to see Siemens start to build inventory through the year for these customers. And in fact, I think as we're going into the second The need to really get that supply chain tuned up for a significant 2024 is going to be there. So we do think the order is going to continue to build as we're moving through into 2024.

Speaker 7

But I guess I was confused of the different dates, like why is the FCC given the 26 date? I mean, doesn't the network have to largely be up and running and tested before the end of 2024 If they have to take the spectrum It does.

Speaker 6

Well, I don't say necessarily end of 2024, but you're right. They have to do a lot of work Because 6 Class 1s, given the footprint, they can't all show up in July of 0.25 and say, hey, let's build a network. So that's why we're seeing, as we said, a lot more activity around deployment plans and more of the railroads getting involved. BNSF and CSX really did the work to validate the platform. All the rails were follow-up, were Tracking the progress.

Speaker 6

Now they're getting their hands on it and making their own plans. So you're right. I think the

Speaker 7

Yes. So I'll just say

Speaker 6

the substantial build out, the substantial build out, the reason we're highlighting that is The railroads value the spectrum, it's worth a lot of money and they bargained really hard for it. But at the same time, as you You and I have talked and we've got some pushback. Okay, when they retire the legacy network, there's no mandate that they have to build a new one. But if they want to keep the radio spectrum, they have to. So In the real world, that's why you're seeing this activity.

Speaker 6

So I think that the September 2025 date is the most much more significant date.

Speaker 7

But if they retire the spectrum and they retire the network, they still need a network to run all their operations. I guess I'm just confused with Apple. Okay. So it's not just the value of the spectrum. They got a month of business on the new network.

Speaker 7

And you keep saying Yes, initial deployment, I mean, either you have a network with good coverage or you don't have a network with good coverage. I guess I don't understand what you mean by initial Deployment versus kind of future deployments, if you got to shut down the legacy network. And can you give us an update And where you are with bookings or how much have you booked at this point for the 900?

Speaker 6

So again, when we talk about the 900 The initial migration will be the coverage and as we outlined it in our February call with investors, That was going to be very base station heavy for that coverage aspect as you described. And of course, the first thing that they're going to do is move traffic Of the legacy application, which is ATCS, as Stuart mentioned, we're seeing already demand from folks like CSX for applications Different than ATCS. So that really proves out the fact that this is a multipurpose or general purpose network that can handle more than one application. Remember, this legacy network only had ATCS to do nothing else. So again, the first build is coverage.

Speaker 6

It is going to be ATCS Plus additional and then as the network still in the rail start to deploy more endpoints beyond ATCS, you'll see them densify. That's the expansion phase. They're going to densify the network and add more endpoints along the wayside in that crossing. So we're not so in terms of orders, we're Seeing working very closely with team to bringing new orders and you'll see us building inventory For that as we move into the year.

Speaker 7

Okay. Can you give us an update on the dollar amounts of orders you've received?

Speaker 6

No, I'm not giving that update right now.

Speaker 7

Okay. And can you talk about how much cash burn you expect this year in total? I know there's 1,000,000 moving parts This year and next year, if you don't mind.

Speaker 6

So no, I'm not giving that level of precision. So as we mentioned, our Cash operating expenses are going to decline significantly this quarter, and I think we can hold those levels for the rest of the year. And of course, as we're growing revenue into what we believe is that $26,000,000 number in the gross profit It's going to increasingly lower our cash burn.

Speaker 7

Okay. And lastly, so it sounds like you think you can get paid upfront for some of the equipment. Is that what we're talking about here? And has Siemens kind of Do they agree with you on that or are the customers are they willing to pay upfront with equipment or yes, right?

Speaker 6

I'm not going to Yes. So Tim, we're sort of now in these preparations for these new orders for the inventory build, and I don't want to have that conversation here on this call.

Operator

Next question will be from Matthew Gallego of Maxim.

Speaker 8

Can you touch on some of the supply chain issues that I think you referenced in the prepared remarks and then I think in your comments as well, is there any particular component that you could call out that are that's an issue? And Just go over what you're doing to work through any limitations you're seeing?

Speaker 1

Yes, sure, Matt. And I think what you really just

Speaker 6

see is complexity of us starting our initial ramp up production, there's a specific component, I don't want to call it out here That we are seeing supply tightness on. And for us, it's really just working with the suppliers, qualifying some new suppliers. And This is really all what I would describe as just the blocking and tackling of beginning this production ramp. We did highlight it because it was a specific component that we're seeing now that we were needing to make Do more planning around.

Speaker 8

Got it. I guess 2nd part of that question is around, I guess, supply chain resiliency and obviously, As you scale production, there's work to do on that. But I mean, is there should we expect to see you Building inventory around components that can be problematic to source as capital position Solidify us a little bit more or just talk maybe broadly about how you plan to address securing Supply?

Speaker 6

Yes, sure. So there's a handful of components or I'd say at least a handful that we do have to do more longer term planning and we We do feel like we have our arms around that. Stuart, I'll ask if you would have any more anecdotes around that question.

Speaker 3

Yes. We're constantly looking at different options to substitute parts. So we're always looking to Qualify ways to bring in the supply chain faster and looking at alternative parts is one of the ways.

Speaker 8

Got it. Thanks. And you might have mentioned this in the prepared remarks, apologize if I missed it, but Could you provide an update on urban operation in the U. S. For ParaBotics or anything additional or color you could provide along those lines?

Speaker 6

Yes. So we're actively Discussing or in discussions with customers both in oil and gas, in government and partners Well, about bringing the Optimus platform here to the U. S. We're not making any announcements today in terms of customers or giving any specific, We are optimistic. We started what we call the qualification process right after The acquisition closed.

Speaker 6

So you should expect to hear something on that front that we're moving through the quarter into the experience. Remember, We are building inventory. So when we acquired AeroBotics, the inventory was tight and we expect inventory to begin to Arrive at some point in Q3, and that's probably going to you're probably going to see more announcements around customers as the inventory comes

Operator

Thank you. Our next question will be from Carter Mannbach Forte Capital, please go ahead.

Speaker 9

Good morning, gentlemen. Thanks for taking my question. So congratulations on what seemingly is the beginning of a hockey stick of growth for the company. My question is regarding news flow. So there's a dichotomy in the last quarter where you guys see record growth, but the shareholder value continues to suffer.

Speaker 9

And part and parcel from me is that there has been absolutely no news flow at all during the quarter. My question is going forward, being that you're the small guys

Speaker 1

So Carter, I hear what you're saying, and I think what you try what we try to

Speaker 6

do as a company is really Try to be as substantive and informative as we can as it relates to sharing business updates. I'll give you an example. We would have loved to put a press release out in around this AAR event. However, that's AAR's news. And they disclosed that to the industry in the way they do it.

Speaker 6

And we really didn't have the opportunity to amplify it until we got on this call. As it relates to specific customers and orders, we do as I said, we expect more activity from Siemens. We're getting more customers talking About bigger and bigger plans, and I do expect to be able to share that with you. I think what we're doing in the UAE is going to grow. We are advancing With Sky Go, for example, and I expect to have be able to share more details about that As we're moving forward as well.

Speaker 6

So the short answer is, I do think you're going to hear a lot from us As we're moving through Q2 into Q3.

Speaker 9

That's great to hear. I look forward to hearing more from you guys and thanks for taking my questions.

Speaker 6

Sure. Absolutely. Thanks, Corey.

Operator

Thank you. This concludes our question and answer session. I'd like to turn the call back over to Mr. Eric Brock for closing remarks.

Speaker 1

Okay. Well, thank you, operator. I want to close the call by just thanking you once again for attending. As always, we have a lot of work ahead and we're going to Right back at it. So, as you just talked with Carter, we're going to look forward to keeping you informed on our progress.

Speaker 1

Have a great day.

Operator

Thank you. Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Earnings Conference Call
Ondas Q1 2023
00:00 / 00:00
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