Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ondas Holdings Inc (ONDS, Financial) achieved important technical and operational milestones across its business units, positioning the company for long-term success.
- The company completed significant systems integration efforts in the 900-megahertz network, with live operations for two customers and a successful field trial with a third.
- Ondas Autonomous Systems secured initial orders for its Iron Drone Raider from a large global defense vendor and a major military end customer.
- American Robotics announced a landmark deal with the US Coast Guard for emissions monitoring at the Port of Long Beach, supporting the EPA Clean Ports initiatives.
- Operating expenses decreased significantly to $8.1 million for Q2 2024 from $11.6 million in Q2 2023, due to strict controls on cash expenditures and decreased R&D activity.
Negative Points
- Ondas Holdings Inc (ONDS) experienced a disappointing start to 2024 from a revenue perspective, with Q2 2024 revenues at approximately $1 million compared to $5.5 million in Q2 2023.
- Gross profit was negative $190,000 for Q2 2024, a significant drop from $3.1 million in Q2 2023, resulting in a negative gross margin of 20%.
- Extended timelines for railroad deployment plans and the impact of the Gaza war created inventory, production, and other bottlenecks, pushing out customer and business development activities.
- The company held cash and cash equivalents of $5 million as of June 30, 2024, down from $15 million as of December 31, 2023, indicating a significant cash burn.
- Adjusted EBITDA loss increased to $6.7 million for Q2 2024 from $5.6 million in Q2 2023, reflecting ongoing financial challenges.
Q & A Highlights
Q: Could you give us a better sense of the scope of the 900-megahertz network deployments and how far along you are in the migration plan?
A: We are working with three customers on area-wide networks, which are smaller deployments largely fulfilled out of Siemens inventory. These include two transit operators and a Class I Railroad. We are using these proof points to demonstrate deployment and maintenance, while working on broader deployment plans. The total addressable market for the 900-megahertz network is over $400 million, with the initial build-out expected to be half of that.
Q: Can you talk about the potential for further deployments in the UAE in the second half of the year?
A: Our government customer in Dubai plans to deploy 22 systems by the end of 2025, with eight systems already deployed. We expect a significant order in the second half. Additionally, we are building three revenue streams: Optimus in the Middle East and rest of the world, commercial activity with American Robotics in the US, and Iron Drone in the military sector.
Q: What level of support do you see from the US government for building the industrial drone manufacturing base?
A: There is major support from all levels of government, including DoD and DHS, for drones as tools for security, inspection, and defense. This support includes funding for OEMs, supply chain, production capacity, services capabilities, and regulatory frameworks. This government support is encouraging private sector investment and demand.
Q: Can you provide some color on bandwidth allocation for the European Union and its impact on the total addressable market?
A: The opportunity in the EU is similar to the US, with railroads and other critical infrastructure industries needing low-frequency band networks. The public infrastructure for wireless networks is more densely deployed in Europe. The issuance of licenses for bandwidth is typically handled by individual countries rather than centrally by Brussels.
Q: Do you expect more of the Iron Drone pipeline to go directly through defense customers or intermediaries?
A: It depends, but we are going direct to customers because our technology needs to be integrated into various systems, including detect technologies and ground vehicles. Going direct allows us to set the economics for the system and qualify as a vendor for government-to-government sales, which can lead to new customer activity.
Q: Does the Iron Drone opportunity create conversations to expand the visibility of Optimus Systems in defense?
A: Yes, conversations around securing critical locations naturally lead to discussions about Optimus for homeland security and defense. This market is emerging and will be a focus for us going forward.
Q: Are you waiting for more performance data of Iron Drone in actual use before further orders?
A: We have done extensive real-world testing and validation with our customer and military partners. The initial orders are intended for live combat and security operations. We expect successful operations to lead to expanded volume orders.
Q: What are your capacity plans for Iron Drone production?
A: Initially, we will produce tens of systems per month in-house. We will scale to hundreds of systems with contract manufacturers and thousands of systems with a larger group of contract manufacturers as we move through 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
