Try our mobile app
<<< back to ONDS company page

Ondas Holdings Inc. [ONDS] Conference call transcript for 2022 q1

2022-05-11 12:22:13

Fiscal: 2022 q1

Operator: Welcome to the Ondas Holdings Inc., First Quarter, 2022 Conference call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. . Before we begin, the Company would like to remind you that this call may contain forward-looking statements. While these forward-looking statements are 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 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. Please note this event is being recorded. I would now like to turn the presentation over to Eric Brock, Chairman and CEO. Please go ahead.

Eric Brock: Good morning. It's a pleasure to welcome you to our conference call. I'm happy to be joined today by our President and CFO, Derek Reisfield, Stewart Kantor, the President of Ondas Networks, and American Robotics CEO Reese Mozer. Today we plan to review our financial performance and strategic progress to the first quarter in year-to-date, and discuss our outlook for the rest of 2022.

Eric Brock: I want to start the call by highlighting that business momentum remains strong at Ondas, with both Ondas Networks and American Robotics leveraging their respective technology platforms to drive market adoption and deployment, which we believe will result in substantial growth. At Ondas Networks, the work with customers remains focused on the large rail networks. We have previously announced initial launch orders for the 900 megahertz network. And as you will learn, we expect expanded orders with these and additional customers over the course of the year. As we execute on the 900 megahertz network, Ondas Networks and our partner Siemens are actively marketing our FullMAX wireless platform into additional Class 1 rail networks beyond 900 in North America. This includes Europe and Asia, in both freight and transit markets. At American Robotics, we remain very focused on executing the business plan. Recall A; our strategy is to partner with franchise customers such as Chevron, ConocoPhillips, stockpile reports and others, on initial Scout System installations. As we will describe, our early work with customers in the Scout System has been positive. When you are introducing new game changing, mission-critical technology in industrial markets, such as oil and gas, rail and mining, doing it the right way is critical and AR is on that path. This American Robotics field work with customers along with the ongoing regulatory work with the FAA is positioning us to define the market for automated, drone-driven data solutions in terms of how they're architected and delivered to large, sophisticated blue-chip companies in critical sectors of our economy. And the bottom line is Ondas continues to invest to win. We're investing on behalf of our customers who need our next-generation data solutions to run their businesses more efficiently, safely, and profitably. With that introduction, let's shift towards outlining the agenda for today's call. First, I plan to highlight the progress we're making and the key business priorities at both Ondas Networks and American Robotics. Then I will ask Derek to share our Q1 financial results. Stewart will then provide an update on Ondas Networks business activity, of course, focusing on our work with the railroads in Siemens. And then Reese will provide a similar update for American Robotics as we execute the go-to-market strategy with the Scout System. I will then summarize the outlook before we open the floor for Q&A. Let's now bring you up to speed and how we are executing on our key priorities. We continue to have deep engagement with the railroads in Siemens in preparation for volume deployments, starting with the 900 Megahertz network. The initial launch orders for 900 from two rails, have now both been delivered. These launch orders were firstly for the ATCS products we have jointly developed with Siemens. In addition, we have been working closely with the third Class 1 railroads, and began fieldwork in preparation for securing a significant launch order from that customer. I want to highlight that this third order is for a railway signaling an interlocking use case with protocols that differ from the ATCS application. We expect this customer to initially focus their deployment on our Venus platform. This is particularly significant as it validates the fact that Ondas's FullMAX IEEE 806.16 compliant platform with it's greater data capacity and flexibility, allows the railroads to expand the utilization of the new 900 megahertz network beyond the legacy ATCS application. In other words, we are already seeing the evolution away from single-purpose legacy networks to multi-purpose FullMAX enabled networks. Quite clearly, this is very positive to railroads, and as additional use cases are established, the value of our FullMAX.16 platforms to the rail customers only increases and we expect this to ultimately drive wider deployed systems across all of Class 1 rails. The establishment of the federated MC - IoT Rail Lab is still further evidence that our FullMAX.16 technologies is positioned at the core of railroad mission-critical networking. During the quarter, we constructed and delivered the Rail Lab MSC Rail. Recall that MSC Rail, was formerly known as TTCI, is a division of the Association of American Railroads or AAR. In parallel our relationship with Siemens continues to flourish and expand beyond the initial 900 Megahertz network in jointly developed ATCS products. Our head of train or H-O-T program with Siemens for the class ones, 450 Megahertz network and for a customer in Asia is progressing well and we expect to announce more joint product development programs with Siemens in 2022. Lastly, I want to highlight that our operations team at Ondas has been working diligently to prepare for the volume orders we expect from the class one rails of Siemens, we have now qualified and secured contract manufacturers and component vendors, and this is important work as we navigate supply chain issues like those reported by many technology and industrial companies. Let's turn now to American Robotics. As I mentioned at the outset, our field work to the customers including stockpile, ConocoPhillips and Chevron has been positive to date and we shall share more details on this activity in the important work we're doing to transition these customers to fleet orders. The customer pipeline remains robust in this week's announcement of in order from ScottsMiracle - Gro is evidence of that. Scott's becomes just the latest blue-chip AAR customer we will onboard with our Scout System. We expect additional franchise customer announcements in the coming months. Our pipeline AAR was further supported with the addition of Ardenna, a leading provider of rail infrastructure inspection analytics. We believe Ardenna provides a significant lever for American Robotics to introduce our Scout System in class one rails and in other global rail markets. I would also like to highlight that American Robotics continues to demonstrate leadership with customers and regulators, and this was further evidenced by our recent announcement that the FAA had provided additional BV loss approvals covering existing and expected customer sites. Our engagement with the FAA remains very positive, and we expect further site approvals over the course of the year. I also want to note that our work with franchise customers has identified several additional scalable use cases for our Scout System, which are highly valued by our customers, particularly in oil and gas markets. Some of these use cases will require expanded UAV payload, in-sensor integration, as well as data analytics advancements. We have begun to plan for this product development efforts in certain places we expect to accelerate development work to satisfy what we believe is immediate demand for these data services. We look forward to sharing more details of this effort with you soon. In short, we continue to make progress on our key initiatives and start the year. It has successfully set up ONDAS for growth in 2022 and beyond. I will now hand the call to DEREK so he can share information regarding our financial performance with you. DEREK.

Derek Reisfield: Great. Thank you, Eric. As I share our financial results today for the first quarter of 2022, please note that we've included our financial statements in the press release and the Form-10-Q filed this morning. Also note that the numbers we are reporting don't reflect the performance of American Robotics in 2021 as the acquisition of American Robotics closed on August 6, 2021. Moving to our first-quarter results, starting with the P&L, please note that our revenues and expenses reflects the business development activity in preparation for larger commercial roll outs we expect in the future. Revenues for the three months ended March 31, 2022 were approximately $400,000 as compared with approximately $1.2 million for the three months ended March 31, 2021. The decline in revenue was primarily a result of lower product development activity with Siemens and Aero in the current period as compared with the prior year. Gross profit was approximately $100,000 for the three months ended March 31, 2022, as compared with approximately 600,000 for the three months ended March 31, 2021. Operating expenses increased to $10.1 million for the first three months ended March 31, 2022, as compared with $3.5 million for the three months ended March 31, 2021. The increase in operating expenses was primarily due to operating expenses associated with American Robotics, which we acquired in August 2021, and whose expenses were not included in the first quarter of 2021. The company realized an operating loss of approximately $10 million for the three months ended March 31, 2022, as compared with $2.9 million for the three months ended March 31, 2021. The operating loss increased primarily as a result of the increase in operating expenses associated with the American Robotics host app acquisition and the decline in revenue. Note that operating expenses and our operating loss included non-cash expenses, related to depreciation and amortization, and stock-based compensation equal to $2.4 million for the three months ended March 31, 2022, as compared to 1.5 million for the three months ended March 31, 2021. The majority of the increase in depreciation and amortization costs in 2022, is related to the amortization of intangible assets, related to the American Robotics acquisition. Now let's turn to our cash and investing activity. Ondas maintains a strong balance sheet with cash and cash equivalents of approximately $32.1 million as of March 31, 2022, as compared to approximately $40.8 million as of December 31, 2021. We utilized $8.8 million in cash during the quarter, which included $7.1 million of cash used in operations, reflecting primarily operating expenses related to serving customers for Networks and American Robotics. We used $1.6 million in investing activities primarily related to one-time capital expenditures associated with the build-out of the new welcome headquarters for American Robotics and Ondas Holdings, in addition to spending related to building out Scout Systems. As we will discuss, we anticipate moving into these offices in June and do not expect to see this level of ongoing capital expenditures in the coming quarters. We are well-positioned to continue to invest in customer pipeline development and support, and Eric will share those details later in the call. Now, I'll turn the call back over to Eric.

Eric Brock: Thank you, Derek. Now, I will ask Stewart and Reese to share a more detailed update on business activity in Q1 and early Q2, starting first with Ondas Networks, and then American Robotics. Stewart.

Stewart Kantor: Great. Thank you, Eric. Let's begin by discussing the 900 Megahertz network status in North America. As Derek mentioned previously, we have now received multiple launch orders from Siemens for the 900 - megahertz network. This includes launch orders from two class one rails for the ATCS application we jointly developed with Siemens. Launch order for the first class one was received and delivered in Q4 of 2021. The second launch order was received in January 2022 for a second Class one, and we're pleased to announce on today's call that we have now delivered that order. We also informed you in the last call that a third Class one had begun fieldwork in the 900 megahertz in advance and a significant launch order. We're making excellent progress with this customer as they plan for a new non - ADCs application in the 900 megahertz band. This activity is critical as it reinforces that the Class one rails are now transitioning away from single-purpose, single application networks to multi-purpose, multi-application, IP-based Networks. All of this activity is reinforced and supported by the critical MC-IoT Rail Lab the Ondas and Siemens secured from the industry. And we're pleased to announce on today's call also that the Lab has now been constructed and delivered to MXZ rail. The technical standard body for the Association of American Railroads. Siemens MXZ rail, and Ondas have jointly begun to develop and implement use cases for multi-rail interoperability and coexistence in the 900 Megahertz frequencies. Now moving to the status of the joint development programs with Siemens. As most of you know, ATCS was our first joint development program with Siemens. This program has now been successfully launched and is actively being marketed and sold by Siemens to the Class 1 rails in North America. Recently, Siemens retested that we obtained Canadian certification for the ATCS radios to meet new demand identified from freight and transit customers in Canada. And we're pleased to announce we're in the final stages of obtaining that certification. We also informed you that we have multiple other joint development programs in process with Siemens centered around the Head of Train application, both in Asia and North America. We're making excellent progress on these development programs, and have now qualified in selected contract manufacturers, both in Asia and in the U.S. to support volume production of these new radio ports. Also in the last call, we outlined multiple other programs that we are targeting with Siemens, including a new radio for European locomotives. We intend to keep you updated on these new initiatives as they come to fruition. It's important to know that we continue to identify global opportunities for the FullMAX technology in rail. In terms of growing our organization, we continue to bring on team members to support production and manufacture. We are pleased to announce, today, a strategic, new hire, industry veteran Kevin Nichter, who will serve as our VP of Product Marketing. Kevin has deep industry relationships with the major rail customers in both freight and transit, serves on several key industry advisory committees and has prior experience working with the Siemens team. Kevin will help accelerate the deployment of FullMAX across the Class 1 railroads and also open new opportunities in transit markets. We're very pleased to have him onboard now. And lastly, we'd like to highlight that Siemens and we will be jointly attending the upcoming RSSI rail showing Kansas City during the week of May 16th, whereas the entire Airlink product line will be highlighted. And we'll be engaging directly with major Class 1 rails on implementation goals. As we shared on our last call, we believe the Greenfield 900 Megahertz network deployment will follow previous large-scale technology rail deployments, and we're again sharing the key steps which are integral for wide-scale rollout of the 900 Megahertz network. The technology choice for IEEE 802.16 has been led by the AAR, which represents all of the Class 1s. This centralized approach and control has been critical given the need for both interoperability and peaceful coexistence among the rails. Furthermore, the Rail Lab is under AAR's direction and control to ensure ongoing, Siemens operation. Each Class 1 controls its own roll-out plans with Ondas and Siemens providing backup support. The heavy lifting for the network installation and operation is almost entirely in the hands of each individual railroad. There are many activities that the rail customers, along with Siemens and Ondas, need to coordinate and complete in connection with roll-out plans. This work ranges from acceptance testing to engineering design and training all the way through to ongoing customers support and maintenance. The launch orders tend to be smaller in size, followed by larger, more substantial orders, six to 12 months later. These larger orders typically come with precise delivery schedules that support the rails roll out plan. Our primary goal at Networks is to obtain and deliver on scaled orders to multiple Class 1 s. We believe that our launch work for the Class 1s, the MC-IoT lab and our partnership with Siemens will deliver that success. Our initial launch customers had begun discussions with Ondas and Siemens regarding their initial volume orders to begin the wider 900 Megahertz deployment. In addition to the 900 Megahertz activity, we expect Siemens to place orders for equipment for the HOT edge remotes currently under development. With that let me hand this back to Eric, so he can go into greater detail.

Eric Brock: Thank you, Stewart, before I had the call to Reese, I want to remind our investors that Siemens, Ondas in a host of other technology providers are working with the rail customers to drive intelligence into their field operations. And ultimately that leads to more and more automation. And quite clearly, we are in the early innings of the digital railroad investment cycle in the broader MC-IoT investment cycle across not just rail, but other critical infrastructure markets, which we believe will be enabled by next-generation mission-critical private wireless networks. I will now hand the presentation to Reese for a detailed update on American Robotics progress. Reese.

Reese Mozer: Thank you, Eric. American Robotics is in an exciting period of growth, as we are well on our way to scaling of operations en route to fleet deployments across the United States. Additionally, we've taken several important steps to ensure long-term leadership in our markets. Some of which I can share today. As you all know, we are currently engaged with Chevron, ConocoPhillips, and Stockpile Reports, as well as a backlog of customers in the pipeline. Yesterday morning, we announced a new customer, ScottsMiracle - Gro, one of the largest lawn and garden companies in the world. It's worth noting that the majority of our customer engagements have been the results of inbound increase. But American Robotics still stands alone, as the only drone manufacturer approved by the FAA, to operate fully automated drone systems. It's been a year since our historic FAA approval. And as predicted, American Robotics remains in a unique position of leadership within our industry. We're taking full advantage of this first mover position, building long-term relationships with customers in our target markets, and investing in the platform. In support of our plans to deploy hundreds, and eventually thousands, of these systems, we continue to make strides in both insuring our operations and manufacturing capacity. Both of which we see as additional differentiators for the company. Finally, in support of this, we are honored to continue to attract some of the world's brightest minds to join the American Robotics team. I'd like to share updates on the engagements with our initial franchise customer base. We're currently in an important period, where we are working closely with these Fortune 500 companies to prove and to demonstrate the safety of the system in the field. Deployed in places like North Dakota, Louisiana, Ohio, and South Carolina, new technology, particularly robotic hardware systems that operate among safety-critical assets, like oil and gas infrastructure, must go through proper vetting processes before adopting on a large-scale. We see this process as yet another opportunity to separate American Robotics from the pack. And believe our position as both developer and operator of these systems puts us in an ideal position to do so. There's also worth noting that the safety analysis performed by our customers are very similar to those performed by the FAA. Again, placing us in an ideal position to be the leader in this regard. Examples of this include jobs, safety analysis, reliability testing, cyber -security audits, and integration into existing company’s software systems. Once complete, we believe these engagements will become a blueprint for which we can duplicate with other customers. As a result, we anticipate significantly reduced sales cycles in 2023 and beyond. As a result of the technology, regulatory, and customer milestones over the past year, our industry leadership and influence are accelerating. Last month, we announced the receipt of seven additional sites approved by the FAA to operating the Scout System in a fully automated matter, bringing the total portfolio to 10 sites to spread across eight states. As predicted, our waiver portfolio is growing, whereas the rest of the industry remains stuck. And though we do not anticipate the singular positioned to last forever, we do believe this head-start is valuable enough to snowball into a position on a sustained market leadership. Additionally, this recent regulatory milestone proves a very important point. Our current waiver and exemption package are scalable and will permit us to pursue the commercial targets we've shared with you for 2022 and beyond. I've said before that it takes the best to build the best. I think it's also true that the best minds want to join the best teams. To that end, I'm very proud of our team growth at all levels of the organization. In leader -- leadership positions over the past quarter, we have added Tracy Land, aviation safety expert 25 years as Senior Advisor of regulatory affairs and safety. We also added Gretchen West, former President and CEO of Shiba aircraft, and 20-year veteran of the drone industry, as Senior Advisor of business development. In other roles, we have added from MIT Lincoln Labs, GE Aviation, Boston dynamics, systems software, Robotics, Amazon Robotics, Google, iRobot, Textron, and others. Summing all this up, we're on track in executing the growth plan we laid out previously. Hiring is on target, with the air team now up to roughly 60 people and growing. We're scheduled to move into our new headquarters on June 5th. The manufacturing ramp-up is on target with 30-plus systems on order for delivery in 2022. The final topic I'd like to discuss this morning, is our product road map. True autonomy and FAA approval, are the baseline for scalable drone operations in what we estimate to be 90% of all commercial-grown applications. As a reminder, this represents an annual, and mostly untapped, TAM of $100 billion or more. The number of data solutions and AI opportunities as a result of this is truly massive. We estimate over $10 million or more asset sites globally have the use for automated drone-in-a-box technology, and as the uniquely enabled extractor of this data, that puts American Robotics in a position for a number of valuable leadership opportunities. To this end, we have been working closely with our initial customer base to structure partnerships with both near and long-term goals for the products. Some of these, you already know, some I can announce today, and others will be announced later this year. You are already aware of our acquisition of the assets of our Ardenna, The leader in AI-powered image analytics for the rail industry, and our investment in Dynam AI, a leader in AI model generation, for physics-based scenarios. For new announcements, we have partnered with Cloud Factory, providing American Robotics with a dedicated data-labeling team for training AI models. We're also expanding our partnership with Dynam AI, who is now providing us with a dedicated team of data scientists, physicists, and AI software engineers. For announcements expected later this year, we've been working closely with our customers at both the corporate and operations levels to structure a technology roadmap, centered around new payload integrations and AI software offerings. We plan to announce these new products offerings as they become available this year. For a peek into some of those announcements, I would focus your attention on the oil and gas market, and in particular, oil and gas leak detection. Again, the number of future opportunities within each of these markets is truly massive. In our current target markets, we have worked with customers to prioritize these opportunities, based on customer value, and the speed of integration. And we believe these investments will further accelerate fleet adoption throughout our customer organizations in different departments, environments, and use cases. The diversification of capabilities and the use cases will not only cement our stickiness with industrial customers, but we believe will also present the opportunity for additional revenue-generation, potentially beyond our current financial models. I look forward to sharing more of these details with you all in the coming months. I will now hand the call back to Eric for some closing remarks. Well, thank you Rick. Now, let's try to summarize some of our key business objectives for 2022. We continue to expect Ondas Networks will generate orders this year from at least five railroads, and we're maintaining our goal of at least $20 million in bookings, and I will highlight that this bookings target is a significant component of our bonus plans at Ondas Networks. In addition to platform product sales, we plan to secure at least one new joint product development program from Siemens in 2022. For American Robotics, the key targets include securing orders from at least 10 customers, and for at least 30 Scout Systems by the end of the year. In addition, we are also targeting at least one customer reorder for fleet deployments by the end of the year. And lastly, for AR, our success with customers comes down to partnering, partnering with customers to develop solution that are valuable, yet complex. We expect to secure at least one formal partnership with a customer in 2022. Now, let's turn the balance sheet and cash outlook, which remains healthy, and supportive of our ongoing investment in technical solutions and business development. We expect cash OpEx to be about 7 to $7.5 million in Q2 with modest working capital requirements as we build inventory for expected orders and revenue growth. As discussed on our last call, we put in place a public at-the-market or ATM offering in March. The purpose of the ATM is to provide additional balance sheet flexibility to the Company. We believe we may have opportunities to accelerate certain technology investments with Ondas Networks and American Robotics to respond to customer demand. We raised about $2.5 million in April, and that helped offset some of the cash used in the Ardenna acquisition. We've recently seen some dislocations in public and private equity markets within our MC - IoT ecosystem. This, too, could create investment opportunities for Ondas. In short, Ondas intends to stay on offense and invest and pursue opportunities to cement and extend our leadership positions, and we will do this when and where we feel we can create incremental shareholder value. Let's take a minute to summarize the call and wrap our prepared remarks. Business development is on track with both Ondas Networks and American Robotics, and we expect to build momentum with customer purchase orders throughout the year. As we have outlined, the Class 1 rails are beginning to launch the 900 Megahertz network. And we have a plan in place to transition launch orders to volume deployments over the course of the year into 2023. As Stewart mentioned, we expect a good turnout in quite a bit of attention at the RSSI Rail Show next week. The Siemens partnership remains strong in this broadening across new products, additional networks, and with new customer segments in transit in international markets. Ondas is preparing internally for a ramp in sales by building capacity and inventory to support expected demand from Siemens in the Class 1 rails during the year. We expect American Robotics to continue to extend its industry leadership by driving value for customers and demonstrating the value of its automated data solutions in the field. American Robotics will continue to scale operations in its key target markets, oil and gas, mining and rail, as we expand the number of customers in Scout installations and do the work to transition these franchise customers to fleet orders. And the AAR will continue to invest in technology, particularly in expanding its payload and data analytics capabilities, and we will do this hand-in-hand in partnership with our customers. Before we open the call for questions, I want to make a few comments regarding the economy and market volatility we've seen in 2022. Clearly, we're all operating in a new business environment, one that is characterized by changes related to the pandemic and also public policy. We've seen supply chain disruption, war, and geopolitical conflicts increase inflation in a host of other headlines that seemed to show an increasingly complex business well today and maybe in the future. This impacts how and where people live and work and of course, how business is operated. While I don't have a unique take on what this all means for economic growth, or how this impacts financial markets in other important factors that could impact our business in Ondas, I do want to shed light on how we plan to run the business and build value for customers and shareholders in this new environment. First, we see absolutely no indication that the critical infrastructure markets we serve are structurally hobbled in this environment. In fact, as globalization trends change, the services production in labor size of the economy re-balanced and supply chains adjust across the world, we believe that is likely that investment in infrastructure will accelerate in the years ahead. And of course, that will be terrific for Ondas Networks and American Robotics. Secondly, we also believe our critical infrastructure customers and partners need, more than ever, our next generation data platforms to operate their businesses more efficiently, safely, and profitably. We are in the early innings of an MC - IoT investment cycle, and the solutions we architect will define these markets. We will continue to do this work and strengthened our ecosystem. With that said, I'm excited about 2022, in the momentum we have in the businesses. Our team has worked extremely hard and our shareholders have supported this difficult work, which we are grateful for. We firmly believe we are well positioned to deliver to you in the quarters ahead. Operator, I'd like to open the call to Q&A.

Operator: We will now begin the question-and-answer session. At this time, we will pause momentarily to assemble our roster. And our first question will come from Timothy Horan of Oppenheimer. Please go ahead.

Timothy Horan: Thanks, guys, and thanks all for all the information on the call. Eric, can you look at -- maybe go into some detail on the 900 Megahertz build-out of -- what do you -- your guess now on maybe what the TAM is on that market total. And more, maybe boiling down into breaking it down between what's needed for the FCC requirements spectrum and then maybe our value-added service is another product on top of it. And then related to that, when do you think equipment had to really start shipping for them to meet the FCC requirements?

Eric Brock: Thanks, Tim. We've outlined the TAM for the 900 Megahertz network at $300 million, and we think that will grow. Over a third of that should be related to the ATCS upgrades. What was the second part of the question?

Timothy Horan: Yeah. Tell me of that $100 million. Like when did they really have to get the network up and running. And so meet that requirement. When did you click and really have to start shipping?

Eric Brock: By the second half of next year, some of these deadlines are starting to kick in. And then over the next two years, the rest do. So the answer to the question is, they need to start working now, and we are engaged win those conversations. I wanted to step back, maybe look at it a little bit more broadly as to kind of where we've been, where we are today, where we're going to be. It's great to be able to say that visibility is improving, and getting the launch orders, has started to allow us to see more for the rest of that deployment process. And as Stewart mentioned, we're talking to more and more folks inside the rails, who need to be brought into the process. And of course, is part of that as well. The railroads are massive organizations, and there's all these departments that have to come together to first acquire, do the purchasing, plan and implement the deployments that can operate the networks. So that works happening now, and we expect, as Stewart said, we're in discussions now around those volume orders, which of course, is very . So we think they're going to get guarded. Great.

Stewart Kantor: Maybe I could jump in really quickly, Tim and just mention that the use case applications that we're developing with rail are -- they're broadening to which is a good thing, reinforcing the network. So it started with ATCS. Eric has mentioned the interlocking application and there's, I think we've gone through some of these. There's a whole host of applications that are being tested for the 900 Megahertz network. So I think we're making excellent progress in bringing all this together for the macro network.

Timothy Horan: Great. So I guess when do you think equipment will start shipping in size orders for them to meet this deadline? Is it a third quarter this year, fourth-quarter, first quarter of next year? Any color on that would be helpful. I mean, I know you don't know exactly, but when do you think they really have to start buying the equipment in size orders and I guess do you have the equipment -- do you have -- yes, or you have the inventory to ship the equipment, or can you get inventory?

Eric Brock: Well, we were in conversations now for the volume purchases and we expect deliveries to begin in the second half, some of that will be in Q3, a bunch of those will be in Q4 we're going to be bigger with even .

Timothy Horan: Great.

Eric Brock: And in terms of inventory building for that, that process is well underway. We began ordering components and contract manufacturing partners. We've seen longer lead times. So you haven't seen the inventory build just yet, but yes, will start to this quarter into Q3 and I do believe we're going to be able to to deliver.

Timothy Horan: Great. So on the cash front, do you have enough cash to meet your business model now, or do you have to raise more? I don't really know the timing at this point, of the revenues. And then secondly, can you talk about some of the sources for cash? Can you tap into some credit markets or other markets, besides of the public market? Thanks.

Eric Brock: Yes. So I feel good about where we're at on the balance sheet. And of course, the rail orders are going to become meaningful. This is not a small network, it's not a small market in the margins and gross profit. We can generate there. We'll increasingly offset the cash OpEx. And again, the visibility on those orders is now improving. So the cash -- and I also added, the cash use relative to our technology platforms that we're developing in the market opportunity at TAM, is very modest. We're getting a lot of banks, the investment box. I feel good about where we're at in. And I'm not going to predict a stock price, but I believe our institutional investor base will expand dramatically this year, and our access to capital to expand the business even further. As we have success, it will be there. So to answer you specifically, if we did want to export credit opportunity on some of the rail activity, I do believe their there, but that's not our plan. I believe we're well capitalized and our ongoing access to capital is very strong.

Timothy Horan: Thank you.

Operator: Next question comes from Mike Latimore of NCM. Please go ahead.

Mike Latimore: Thanks a lot. I guess first question is on the rails. So you mentioned that second order, I think was delivered. Is that going to be a second quarter revenue event?

Eric Brock: No, that was a first-quarter revenue event. The launch orders are modest in size and that starts the whole internal process to work with the railroads, the specific railroads in Siemens, on the larger volume purchases. And I will add, as we and Siemens get more experienced here, the time between launch to volume purchases on the next railroad and the rail road after that is likely to shrink. So we'll be able to turn these, these launch processes around more quickly over time.

Mike Latimore: And then on the third quarter, that's on the larger size. Is that still kind of a second quarter events or second half year?

Eric Brock: Where we're trying to get it in the second quarter. It's hard to say if put a stake in the ground to say we will do that; we are active with a customer. This is a for use case that they need in the work is to-date with that customer in the field for this new application has been very positive.

Mike Latimore: The Ardenna super-interesting and logical service. What is the next step here in terms of go-to-market with that?

Eric Brock: So I'll ask REESE to expand on this, but Ardenna has been a really significant pipeline of potential customers. Actually, not just here in North America with the big Class 1s, but globally. So there's a lot of interest. We're getting to know those customers now, in trying to sort of see how and where their timelines are. Like many of these customers historically, they've been challenged in being able to gather the data at scale. And of course, that's something that we believe we can, and will help with the Scout System. So getting slotted into their timelines is what we're exploring now. But there is significant customer pipeline, which we're going to grow. Reese, would you add anything?

Reese Mozer: Yeah. The plan with Ardenna is to sell both as a standalone product as well as integrate it with the Scout System. The two big customers that Ardenna worked with prior to the acquisition, are BNSF and CFX, obviously two of the biggest rails in the space. So yes, we see a lot of opportunity there. We're getting to know those customers through our business development team, and we're working to map out some deployment plans for this year.

Mike Latimore: It would be logical that customers would want to buy that package, solution with Scout, I'd imagine.

Reese Mozer: Yes, absolutely. Ultimately that's -- it's been kind of the issue with John analytics in the past is, you need that source for high-quality data, for high-resolution, high-frequency, which is what the Scout System provides. So ultimately we see that packages to more valuable choice, but folks want to try out the software independently. To start out with that's fine as well.

Mike Latimore: And then you talked about, I think 10 customer accounts by year-end for American Robotics. I think you mentioned a one repeat order for fleet. When you mentioned -- when you -- how would you define fleet at this point in terms of number of units?

Reese Mozer: Yes. Good question. I would say is at least 10 visibilities towards a 100 and more. We see this business really being a step function with these customers, especially at this point, it's one to two units’ pilots with these guys. And once we improve out a number of aspects, whatever they are interested, then the plan for both sides as to scale that across all of those like assets. So if we're dealing with well pads in the back end for example, obviously the goal is not to just image one wells pad as to image the thousands of well pads that exists all across that region and other regions in the country in the world. So before these customers make that type of decision, there's just some natural steps they have to go through. There's some safety ramifications here. We're talking about a robot hat's interacting next to oil and gas equipment, and everybody wants to make sure that this thing is safe, and it's reliable, and things of that nature. But once we pass on threshold, really anticipate a pretty big step function there.

Mike Latimore: Thanks a lot.

Reese Mozer: Thanks Mike.

Operator: The next question comes from Carter Mansbach of Forte Capital Group. Please go ahead.

Eric Brock: Morning.

Carter Mansbach: Good morning, gentlemen. Congratulations on all the accomplishments on both sides of the business. Eric, I think you need to make it very clear exactly what you think about the cash situation because that's the concern. Do you think you need to raise more cash or not?

Eric Brock: Okay. So reiterate, I'm very comfortable with our balance sheet and I don't expect -- we don't -- the current plan does not require new cash. We did talk to opportunities to expand the business, and that's the purpose of the ATM, is to give us the flexibility to do that so, we have -- visibility on the rail business is getting better every day. And of course, those orders have to come to help fund us internally, and that's the plan. And that's what we believe. So I feel very good about where we're at on the balance sheet.

Carter Mansbach: So to be clear, if you're not looking to buy another company in the private equity market, and things go as planned, you do not believe that you need any additional cash?

Eric Brock: On the current plan we do not need additional cash.

Carter Mansbach: Perfect. Thanks, guys. I appreciate it.

Operator: Our next question comes from Ross Stephens of Capital. Please go ahead.

Unidentified Analyst: Hello. Thank you for taking my call. Question on the product bookings of $20 million target for 2022, how much is on the books now, and how much of that would be 2022 revenue.

Eric Brock: I can't give you the number of what that will translate into revenue because that's it is dependent on the timing of orders and the deployment plans for the customer. But we do think quite a bit of it will come into this year. In terms of backlog, we have not built substantial backlog yet, but as we've described in the call, and prior calls, that those conversations are beginning and we have visibility on the numbers we're talking about.

Unidentified Analyst: Okay. Thank you.

Eric Brock: Thank you.

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

Eric Brock: Thank you, Operator. I want to thank you all for joining us today. We look forward to chatting against soon, ensuring updates on our progress at networks and American Robotics during the quarter. I would also note that we are planning to attend multiple investor conferences in the coming months, and I hope to see you there. And as we close the call, I want to thank you again for joining us, but also express gratitude on behalf of the entire team at Ondas for your support. We're incredibly grateful, and know every day we have to continue to earn that support. And that's what we're working on. So we began the year with terrific momentum and look forward to sharing updates on our key initiatives over the course of the year. It's time to get back to work, so I hope you have a great day, and we'll talk soon.

Operator: The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.