ONDS - NASDAQ

Welcome to the Ondas Holdings Inc., Fourth Quarter and Full Year 2024 Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Before we begin, the company would like to remind you that this call may contain forward-looking statements. While these forward-looking statements reflect Ondas' 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' 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 Ondas. I'm happy to be joined today by key members of our leadership team, including Neil Laird, our interim CFO, and Meir Kliner - President of Ondas Autonomous Systems and the Founder and CEO of our Airobotics Subsidiary, both whom are very familiar to you. We're also joined by 2 new members of our leadership team for their first investor call to Ondas. Of course, I am speaking about Oshri Lugasi, our new Co-CEO of Ondas Autonomous Systems, and Markus Nottelmann, the new CEO of Ondas Networks. I'm excited to have Markus and Oshri here with us. They bring exceptional leadership and industry experience that is sure to be invaluable. Further, both have been known to Ondas 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'll 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 and full year 2024. And after that we will provide a business update where I will ask Markus, Oshir, and Meir to provide their perspective on the progress within our Ondas Networks and OAS business units. Then, I will wrap the call and move to take investor questions. 2024 was a defining year for Ondas, 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 Ondas. Recall that early in 2024 we faced the challenges of extending timelines at Ondas 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 2 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 in the serviceable and obtainable market or SAM, 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 UAS 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 the 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 Meir will share, we have similarly engaged with new customers around our Optimus System, which is now being deployed to secure military bases and border checkpoints, demonstrating the exceptional capabilities of this market leading system and high value security markets in both defense and critical industrial markets. Beyond our commercial traction, we invested 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 Ondas 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. It supports the total revenue expectations of $25 million for Ondas Holdings in 2025. Recall that we originally set expectations for 2025 revenue at $15 million 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 met 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. Ondas enters 2025 stronger than ever with a clear runway for growth and defense, homeland security, and critical infrastructure security markets. As we look ahead, 2025 is set to be an acceleration year for Ondas, 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 tend 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 deployment is 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 Ondas’ direct marketing efforts. We believe these efforts will be enhanced with Oshri’s leadership based on his demonstrated success in securing over $20 million -- $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're 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 build further build strategic value at Ondas Networks despite timeline challenges. We continue to believe in both the long-term opportunity at Ondas 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 Markus’ leadership, we expect to see broader customer and partner engagement, ensuring continued progress in 900 megahertz rail network deployments while exploring additional product and network opportunities. With a strengthened leadership team, validated market traction, and a robust pipeline, Ondas 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'm very excited about engaging with Palantir and the breadth of great 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 Ondas. Additionally, 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 and streamline 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 custom requirements for economy 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 Palantir 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 megahertz 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 3 months ending December 31, 2024, compared to 1.5 million for the 3 months ending September 30, 2024, and we're down 18% from 5 million for the 3 months ending December 31, 2023. Revenues from Ondas Networks were [indiscernible] 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 railroads. 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 2 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 Ondas 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 product, 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] [ph] 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, an 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 2023. This was largely due to extended timelines at Ondas 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 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 Airobotics operations to form OAS that was implemented during 2023, and additional cost savings achieved at Ondas 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 Ondas 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 31, 2024, compared to $15 million as of December 31, 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 Ondas Networks received $1.9 million. Cash used in operations during the full year decreased slightly to 33.5 million. Investments in working capital accounted for 4.8 million of its 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 2025 and continued cost control 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 31, 2024, Ondas 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 at 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.

Thank you, Neil. Now, we will transition to a review of our business units and ask Markus, Oshri, and Meir to share updates on business development activity and operations at Ondas Networks and OAS. As I hand the call the Markus to provide a business update for Ondas Networks, I want to reiterate how excited we are to add this level of talent to our management team. Markus brings deep experience in railroad operations, industrial technology, and strategic finance. In addition to financial and strategic roles within the private equity industry, his experience included senior leadership positions at Sperry Rail Service and Acuren Inspections, subsidiaries of Rockwood Holdings. There he focused on integrating new technologies into railroad markets and was instrumental in driving improved operational efficiency and revenue velocity. These experiences are highly relevant and complimentary to the exceptional technical talent at Ondas Networks, enabling us to drive deeper conversations with customers and business partners. I am very confident that Markus is the right person to help us drive the adoption of our dot16 technology across rail networks. Markus, welcome to the call. The floor is yours.

Thank you, Eric. As I start, I want to say simply that I'm happy to join Ondas Networks, and I'm grateful for the opportunity to work with you and the board, as well as with Guy Simpson, our COO, and the extremely talented team we have at Ondas Networks. I believe we have an exceptional technology platform with our dot16 system and we also have extremely valuable expertise in industrial networks, which of course extends to the railroad communications. Together with -- this has the promise of creating significant value for both our railroad customers and the broader rail technology ecosystem. Of course, we have a lot of work ahead of us to drive adoption and leverage the significant efforts we have made to create business development opportunities. With that introduction, it's great to join you today to provide you with a review of key developments at Ondas Networks in 2024 and how we are positioning ourselves for 2025. While we continue to support the railroad industry with their specific 900 megahertz network needs, we are also positioning Ondas Networks robust technology platform to address the railroad's broader communication needs. I will expand on this in a moment, but first I'll provide an update on our specific activities and outlook for the 900 megahertz network. In 2024, 1 of our distribution partners, Siemens Mobility, received and fulfilled an order from Metra, the primary commuter rail system in Chicago, for a system-wide upgrade of their 900 megahertz network. This project includes the migration of the network to the new A block channels and the introduction of 802.16 to support IP applications. In addition to Metra, a Class 1 railroad has also deployed and is operating a live 900 megahertz system with the AirLink equipment in the Chicago area. Both of these infrastructure upgrades highlight the seamless -- seamless upgrade process associated with our technology and the benefits to be gained from the dot16 platform. Rather than continue to operate their silo communications platforms as is, multiple Class 1’s are evaluating the possibility of having the 900 and 220 megahertz networks act as backups for the critical systems that run in each of these networks. Specifically, there's an interest in extending the new 900 megahertz network from its primary use of transporting legacy centralized train control traffic to providing a backup for the positive train control applications operating on the 220 megahertz network. This strategy adds resiliency, redundancy, and diversity to critical railroad operations by eliminating single points of failure. We're supporting various Class 1 in their evaluations and based on the results to date, expect that this strategy will be adopted for network rollout by at least several Class 1’s. The Class 1 railroads through the AAR has communicated on several occasions at the end of last year and earlier this year that the Class 1’s are firmly committed to meet the 900 megahertz transmission satellites as well as the related build-out timeline. The railroad's communication needs extend far beyond the 900 megahertz network. Just as our customers are beginning to examine their broader communication needs, we intend to bring our capabilities to bear in providing holistic communication solutions. In the 220 megahertz band, we continue to execute on the new PTC data radio program for Amtrak in the Northeast Corridor. The first prototype radios were delivered to Amtrak in Q3, and the development activity is on track to be completed in Q1. We expect deliveries of the new 220 megahertz radios to begin in the second quarter of 2025 with a subsequent rollout to other operators in the Northeast Corridor. In the 450 megahertz band, we are making steady progress with next generation head-of-train, end-of-train technology. Testing of our communications technology is complete, and we're working with several head-of-train, end-of-train equipment manufacturers on integrating our technology. We expect that this will lead to commercialization at the end of 2025. Next Generation head-of-train, end-of-train, or NGHE is critical to the railroad industry to ensure significant improvement in safe train operations as well as to enable operations of longer trains. Both NGHE and the Northeast Corridor work highlight on this network's breadth and depth and communication expertise. Our goal for 2025 is to work directly with the Class 1’s and other industry stakeholders to address broad industry communication needs and provide solutions for long-standing industry challenges. Since the beginning of the year, we have engaged with several Class 1’s and other industry stakeholders on topics related to large volume data transmission and railroad operations. This is an industry-wide topic with significant implications for safety, operational continuity, and capital spend. The railroad operating environment presents some significant challenges, rendering off the shelf technology irrelevant. The Class 1’s are looking to Ondas Networks to provide comprehensive solutions that overcome these challenges. We are applying our broad expertise to design, develop, and commercialize solutions that address these real communication needs of the Class 1’s. We look forward to updating you on this topic throughout 2025. I will now hand the call back to Eric.

Thank you, Markus. I will now ask Oshri Lugasi to take the floor and share his thoughts on the opportunities ahead at OAS. As I do, I want to say once again how thrilled we are to have him join Ondas. Oshri brings several decades of leadership experience in military operations and autonomous systems, having served with great acclaim with the Israeli Defense Forces, where he commanded over 30,000 personnel. Prior to joining Ondas, Oshri served as vice president of marketing at Rafael Advanced Defense Systems. At Rafael, he had prolific success leading the marketing and execution of critical security capabilities totaling over $20 billion in government-to-government defense contract sales and helped grow Rafael's defense technology footprint globally. His deep industry relationships with defense ministries, military forces, and intelligence agencies worldwide are sure to be hugely valuable as Ondas continues to expand into defense and homeland security markets. After Oshri’s comments, he will hand the call to Meir Kliner, who will provide a detailed update on the business development progress at OAS. Oshir, please proceed.

Thank you, Eric, and I also want to thank you and the board for the opportunity to join the team and advance the important work we are doing together. And I am also happy to join the call and engage with our investors in this forum. Let me begin by sharing that I joined Ondas Autonomous Systems because I believe the future of defense is rooted in systems that are autonomous, intelligent, and built for real world operations. Having spent years working on government-to-government defense programs, I've seen firsthand how critical advanced technology is protecting people. Defense isn't just about equipment. It's about delivering reliable, field-proven solutions that support those on the front lines and strengthen national security. Global threats are evolving at an unprecedented pace, and traditional defense systems cannot keep up. There is an urgent need for AI-driven autonomous solutions that can operate 24/7, integrate seamlessly with allied forces. Ondas is uniquely positioned as a leader in autonomous defense technology, bringing combat-proven, AI-driven solutions to allied forces; with our advanced platform and operational expertise, we are poised to shape the future of modern warfare and strengthen national security. At the core of our success is the talent and expertise of our teams at Airobotics in Israel and American Robotics in the U.S. These teams bring decades of experience in developing and deploying autonomous technologies, ensuring that we deliver not just innovation, but real world capabilities that defense forces can trust. Looking ahead, my vision is clear. We will become one of the leading next generation defense technology providers delivering autonomous systems that enhance security operations and provide real tactical adventures. Our ability to operate across both U.S. and allied defense ecosystems gives us strategic edge, as we work closely with government agencies, security forces and defense partners to deploy mission critical solutions where they are needed most. We are not just adapting to the future, we are shaping with practical results driven solutions that protect people and secure nations. So I am thrilled to be here and working with a strong team. We are fully committed to both our mission and to delivering great outcomes for our investors. I will now hand over the call to Meir, who will give you a detailed update on our activities. I look forward to the quarters and years ahead with all of you. Thank you.

Thank you, Ashri. It is great to have you here with us today. I look forward to seeing your leadership at OAS help us drive the expansion of our business in the defense and homeland security sectors. 2024 was a remarkable year for Ondas Autonomous Systems. We established a new business around our cutting edge counter-drone system, the Iron Drone Raider, secured our first deal with a strategic defense customer for our legacy system Optimus, and have already begun deploying these orders in a real world operational environment. In the U.S. market, American Robotics made significant progress in expanding our footprint and strengthening relationships with strategic partners. We launched our training and demo center in Maryland, successfully conducted demonstrations, and obtained designated waivers and unique technological approvals to enable fully autonomous behind visual line of sight flights. Outside of America, we continued scaling our drone network in Dubai while expanding our business into Europe and Asia, developing key relationships with customers and strategic partners. In Europe, we secured multiple agreements with local distributors and integrators and conducted real world demonstrations of both the Iron Drone and Optimus Systems. These activities have already resulted in significant business development progress, and we look forward to sharing more details on our business progress in this country soon. The nature of modern warfare, as seen in recent global conflicts, is rapidly involving creating new demands for both defensive and offensive technologies. OAS is in a unique position with both Optimus and Iron Drone Raider undergoing accelerated upgrades and rigorous testing in real world combat environments. We closed 2024 with significant deals involving key customers with strong expansion potential in 2025 and beyond through government-to-government agreements and multi-million dollar opportunities in the global defense market, driving by the next generation warfare and cutting edge defense technology. Airobotics is currently focused on fulfilling major military and defense contracts, enhancing our products with next generation capabilities, meeting defense specific operational needs, and deploying our systems according to plan. Our initial platform, Optimus stands out in the market for its maturity, scalability, and advanced capabilities. Unlike first generation drone-in-a-box solution that struggled with automated landing, battery and pilot swapping, and fully automated data handling, Optimus has already surpassed these challenges. It operates autonomously, even in disconnected environments without reliance on internet connectivity or external networks. Our defense customers recognize Optimus as a scalable platform as we are actively collaborating to integrate advanced AI driven autonomy to make it truly unstoppable in emission critical scenarios. Iron Drone Raider has been tested and refined with real world operational feedback, making it the most versatile and mature counter-drone interceptor on the market today. We are continuously integrating it with other advanced defense systems and enhancing its features through a designated program with our defense partners. I am confident that we will soon witness additional breakthroughs and new capabilities that will further strengthen our position as a leader in next-gen autonomous defense technology. During 2024, we managed to fulfill most of our business development targets, creating our marketing infrastructure in targeting regions and sectors. In the U.S. market, American Robotics completed the establishment of its customer demonstration and training center at its new Maryland headquarters, supporting the introduction of Optimus and Iron Drone Raider to the defense, public safety, and critical infrastructure sectors. In addition, the Optimus System was showcased through multiple [indiscernible] demonstrations, including New York, Texas, and Massachusetts, providing its ability to execute fully autonomous missions without an on-site pilot or visual observer. Our marketing activity at American Robotics is gaining traction and our customer pipeline is maturing. I am happy to report today that we have received a purchase order from a large U.S. water utility based on the east coast where we will deploy an optimal system along with our [Castrol] [ph] aerospace awareness system. The Optimus system will be used to secure important water resources in support of local community, and we believe this program could expand from here. American Robotics integrated the [Castrol] [ph] system, and advanced airspace monitoring solution combining active and passive detection technologies with air traffic situational awareness software. This system meets regulatory detect and avoid the requirements, enabling behind visual line of site operations and fully autonomous transmissions. [indiscernible] waiver was achieved, allowing for flights over people and moving vehicles, further expanding American Robotics operational capabilities. We also executed a contract with the U.S. Coast Guard Maritime emission monitoring, supporting EPA Clean port initiatives at the Port of Los Angeles and Long Beach. This milestone positions American Robotics as a prime vendor for U.S. Federal Agencies. In the Middle East, we have expanded our business footprint and continued our project in Dubai and Israel. Our Optimus Networks in this region performing hundreds of flights every week, completely autonomously 24/7 over populated urban areas. We are very excited to see this level of operational maturity in the Optimus system, and we will soon have more news on scaling up our drone network in Dubai and additional locations. In Europe, we have partnered with HHLA Sky and C-Astral Aerospace, expanding our reach into key markets such as Germany and Slovenia. We conducted multiple demonstrations of Optimus and Iron Drone Raider for key customers and partners, reinforcing robotics growing market presence in the region. We recently announced the launch of our Iron Drone Demo team in Europe, and we are already seeing strong engagement and positive result, which we believe will lead to important commercial activity in 2025. We have also announced that Ondas and Volatus Aerospace formed a strategic partnership to enhance border civilians, utilizing advanced and drone technologies, reinforcing OAS's role in security and defense applications. I would like to thank all of our teams in Airobotics and American Robotics. I believe we are making very significant progress. In the last year and as 2025 started, we have witnessed big changes in the world, in the market, and within our company. Every day we see our systems getting better and conversations with more top customers. I'm looking forward to sharing some more news with you soon. I will now hand over the call to Eric, so he can provide the outlook for 2025.

Thank you, Meir. Let's now turn to our outlook. I am excited for Ondas and believe 2025 will see accelerated growth leveraging the momentum from our successes in 2024. So let me set that stage for you. Our key objectives at OAS include driving growth through the expansion of our ongoing Optimus and Iron Drone programs with our current military and public safety customers, ensuring successful deployments and further customer adoption. We also plan to expand new customer programs, particularly in the defense and homeland security sectors, and aim to secure additional military customers through both government-to-government channels and direct marketing. Similarly, we are focused on leveraging our dual use capabilities across critical infrastructure and public safety sectors to capture new customers in the U.S. and in Europe. To support this growth, we will continue to invest in scaling our operating platform with a focus on supply chain and field services and leveraging our new partnership with Palantir to enhance efficiencies through AI. And Ondas Networks, we are committed to building strategic value by advancing private wireless networks to critical rail operating and safety systems. As Markus highlighted, that entails driving the 900 megahertz build-out as well as broadening the use cases at the edge, which will include additional applications on 900 megahertz, as well as the other private rail bands, including the new systems such as NGHE at 450 megahertz. Given the building momentum at Ondas, we expect to generate record revenues for 2025. This is supported by a significant backlog we bring into the year and visibility we have on the order intentions of customers. Indeed, our business development pipeline is expanding, and we also expect a record year for bookings and backlog growth. For the full year, we expect to generate 25 million in revenue across Ondas business units. We believe this is a conservative forecast. For OAS, we are raising our revenue outlook to at least $20 million as compared to our initial $15 million to $18 million given at our OAS Investor Day in September 2024. We want to carefully manage the expectations at Ondas Networks due to the lack of tangible orders in hand today. For now, we have a conservative outlook expecting just 5 million in revenue for 2025, of course these numbers would change dramatically to the upside with the network build-out, which I believe is inevitable. For some more context on the outlook, when sharing targets, our objective is to provide as much transparency as we can when setting expectations on financial performance. There is always risk in providing revenue targets, but it is important to help our investors evaluate both our potential and performance. Simply put, we believe these revenue targets are conservative. We are targeting huge markets with proprietary and valuable platform technologies. We're engaging with various customers at both OAS and Ondas Networks, who could enter into and expand programs around our platforms that could substantially increase this outlook. Of course that is our goal, and I hope we will be able to do that in 2025. With a strengthened leadership team and validated market traction, I believe we are poised for significant growth supported by a robust pipeline and a focus on operational scale. We are focused on delivering for our customers and for you, our investors. To sum it up, we are executing our vision to scale Ondas, and I believe 2025 will be a breakout year. With that said, let's see if there are any questions. Operator.

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Glenn Mattson with Ladenburg Thalmann. Please go ahead.

Yeah, hey guys, thanks for taking the question and congrats on the progress at OAS. Nice to see the 10 million of backlog coming into the year. Could you just give us some more color on your visibility into the number you provided at least 20 million, a couple things like just the timing of how you see that kind of when you expect orders to come in, in order to get them shipped out this year and then also generally the mix that you envisioned between Optimus and Iron Drone.

Sure, Glenn, thanks for the question. So bringing the $10 million into this year, we expect that to be realized and recognized in revenue in the first and second quarter, and we are actively engaged with various customers, both on the military side, new customers that is, for new programs with Iron Drone, as well as customers on Iron Drone and Optimus who are looking to expand programs, and that specifically is with our major military customer in the Middle East and of course a public safety customer in Dubai.

On the Dubai customer, can you give us an update on had you shipped any units in Q4 and maybe just a general sense of how many you expect in 2025 [indiscernible].

I'm not able to share specific details on that, but there's active and advanced dialogue specifically on that. We didn't ship units in Q4, but I won’t forecast the Q1 specifically for that just yet.

Okay, great, I'll jump in the queue and let someone else go.

Alright, thanks Glenn.

The next question comes from Matthew Galinko with Maxim Group. Please go ahead.

Hey, good morning. Thanks for taking my questions. I wanted to maybe check in on the first responder opportunity in the U.S. market. How is that developing and how are any -- I guess changes to access to drones, how is that impacting first responder interest in the Optimus platform?

Thank you, Matt. So there is quite a bit of interest in Optimus specifically, but of course, as we've shared on recent calls, and I know you're observing in the market, demand for DFR programs generally across the U.S. is growing very rapidly and we do expect to participate. We highlighted at the end of last year that we had a demonstration with a public safety customer, a major one. And in the first quarter this year, we have performed a pilot program for that. It was a major pilot program, which was successful, and I guess I need to leave it at that. We're going to see from here how things progress with that customer on commercial orders and with things like that.

Got it. All right. And just as my follow up, I guess it wouldn't be conference call if we didn't ask about U.S.'s tariff posture and how that might influence your ability to deliver product and how it might affect cost, so just curious how you are positioned against some of the tariff issues and how nimble you can be to kind of offset some of them.

Well, I don't see it having a major impact for us. We are not sourcing much if anything really from China directly, and so I think [indiscernible]. At the same time, I do say policy, if I blow it up a little bit more, I think policy, particularly the Trump administration is going to be proved to be extremely supportive for Western and U.S. producers like us. So, I do think that's going to be a nice tailwind for us, really in the near term.

Great, thank you.

The next question comes from Mike Latimore with Northland Capital. Please go ahead.

Hi, this is [Aditya] [ph] on behalf of Mike Lattimore. Could you give some color on the gross margins for this year?

Yeah, sure. So, we're expecting gross margins to recover this year, specifically driven by OAS and improved volumes. So, if I'm looking at the first couple of quarters, you should probably look at them to be in the 40% range, and I think they can get to 50% or better as we're moving through the second half.

Got it. And could you also give some color on how many drones you have in the inventory and how much do you expect to manufacture this year?

I don't want to share those details.

All right, got it. Thank you.

Thank you.

The next question comes from Carter Mansbach with Forte Capital Group. Please go ahead.

Well, that was slow. Good morning, gentlemen. Congrats on all that you've achieved and I look forward to 2025. I need some clarity on Palantir. So, it seems that you put out a press release yesterday with a partnership. You doubled and tripled down on that during this call, and it seems there's confusion as to the meaning of partnership. So, clearly Palantir gave you permission to put out that press release. It reads as if you're utilizing their product, not partnering with them. So please explain to me and I guess shareholders why it's considered a partnership and how are they actually a partner. Thank you.

Sure. So, first of all, as you're well aware Palantir has vast capabilities, and that range -- those capabilities range from enterprise resource planning systems, and of course Foundry AI is one of the key pieces or services they provide there. But it also includes tools around making economy more robust, and they have tools, data analytics for example that can be combined with the data we collect via our sensors that provide actual intelligence. So in that sense Palantir also serves as an integrator of capabilities, where they can take complete advanced AI enabled solutions directly to customers. So, today for us the first step is really to integrate Foundry AI, but I do believe longer term that we will see this evolve with Palantir AI being embedded in the product and solutions we develop on behalf of customers in terms of technology roadmap, and this partnership does call for some elements of that that we're likely to be able to share in the future.

Okay, great. Thanks guys. Best of luck.

Thank you.

And we have a follow-up from Glenn Mattson with Ladenburg Thalmann. Please go ahead.

Yeah, just on the network side, could someone just comment about the level of significance that the new administration is putting on, whatever timelines that were previously in place, obviously it seems like, I believe it was April 2026 there was a deadline to meet some sort of FCC requirements, just what the status of that is, what the general thought of it is on how the administration is going to enforce that or extend that or just thoughts around that'd be great. Thanks.

Yeah, let me take a crack at it and I'll see if Markus has anything to add. So firstly, we let the railroads speak to the deadlines, and as Markus highlighted the AAR has publicly said they expect to meet the deadlines, and I'd highlight there's a couple of deadlines that matter. Firstly, there's September 2025 where they have to -- they've agreed to -- to retire the legacy network, and that spectrum is being returned back to the FCC to be reused elsewhere. And then there's also what is known as utilization requirements, so they're required to utilize the spectrum or, in that instance, if they don't, [indiscernible] would require the spectrum to be the new spectrum, I'm talking about, the green field, also known as the A block, to be returned to the FCC. So that's simply it. I do believe that, let me leave it at that. I don't want to speculate on what the administration or the FCC thinks about this, but Markus, would you add anything? I mean, perhaps you can share a bit more on the 220 and the 900 megahertz, the redundant network strategies and things like that, as well as the other used cases in addition to CTC and PTC backup on 900.

Yes, certainly. Thanks, Eric. So, the administration is new still, although it probably seems like it's been a long time already for some people, but still things are still shaking out at the FRA, at the FCC and I think as Eric said, speaking for them in terms of what actions they will take and when they will enforce decisions, I think that's probably premature and the agencies have to speak for themselves. Now, I do think the railroads are becoming more sophisticated in terms of how they look at their overall communication strategy. The idea of creating redundancy between the 220 and the 900 megahertz networks, I think that's a very real consideration for many of the Class 1’s. They do realize they have to upgrade their communications capabilities. They want to move away from single points of failure, and we're supporting them in those efforts. As stated earlier in the presentation, again those efforts are very real. We have a number of trials out on our pilot projects out on some of the Class 1’s. And as those programs close out, we expect to see network-wide rollouts of those capabilities.

Okay, great, thanks for the color and I guess we'll see -- look forward to further updates as the year progresses. Thank you.

Yep, thanks Glenn.

And we have a follow-up from Matthew Galinko with Maxim Group. Please go ahead.

Hey, thanks. Can you maybe give us a refresher on the competitive environment for drone-in-a-box, maybe domestically and international, more on the Optimus side.

The question was on the competitive environment?

Yes.

Sure, so I'll start by just discussing capabilities, and I think we would highlight that Optimus has unique capabilities around persistent availability and functionality. With the persistent availability being particularly important for DFR applications where critical security is obviously critical, and that's of course is enabled by -- our ability to swap batteries, so the drone will -- your mission comes back, it's available immediately for the next mission. It's also critically important that the dock itself is industrial grade, and I think that's where we are able to work in very difficult conditions, particularly from a weather standpoint, either hot or cold environments, and that is a key differentiator. Otherwise, I think you'll see in the U.S., Skydio obviously has a very competitive drone-in-a-box capability. You'll see DJI as well, the design capabilities of Skydio system and DJI are fairly comparable, and I think the 2 that we see the most.

Got it, thank you. And just as a follow up, again on the rail side, you brought up the scenario of, I guess the railroads looking to eliminate single points of failure in their communications. Did that open up any avenue for competitors to 802.11 or 802.16 to sort of work their way into the network now, or do you still feel, as confident as you were on our last update that you're sort of in a prime position.

No, we don't see any new competition to 802.16 for the private wireless networks. Was there a follow-up Matthew?

No, that was it. Thank you.

Thanks Matt.

The next question comes from [Craig Scott] [ph] with CSR Consulting. Please go ahead.

Hey Eric, good job, nice call, glad to see the progress being made. Could you just take us through a little bit of the cash position and I know you have about 30 million on the books at the end of the year and what you foresee as a slowdown in cash burn or any possible need for more capital in 2025? Thank you.

Sure. Thank you, [Craig] [ph], and we feel very good about our cash position for 2025, and of course as we're moving through the year and seeing the revenue ramp, we're going to realize some operating leverage that will bring the burden down progressively. So, we would expect sequential growth of revenues for each quarter this year and for gross profit as well. So cash burn will be [indiscernible].

Okay, thank you. I'm good.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Eric Brock for any closing remarks.

Well, thank you. As we wrap up, I do want to give you just a preview that we do expect to see an article run tomorrow on Breaking Defense. This article is going to provide an update on our activity with Iron Drone and Optimus. It shares context on the progress we are making in military and homeland security markets. So, please keep your eyes open for that. With that said, we appreciate you spending time with us today. I will reiterate that we expect a great year in 2025, and I do look forward to keeping you informed of our progress. So, hope you have a great day. Thanks again.