Red Cat Holdings, Inc. Price & Performance (RCAT)

Except as required by law, Red Hat disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. Is now my pleasure to turn the conference over to Jeff Thompson, Chief Executive Officer. Jeff? Please go ahead.

Great. Thanks.

Thanks everybody for joining the call tonight. This call is going to be brief. As we just hosted an Investor Day late last month, and plan on having another Investor Day Town Hall in a couple of weeks. The Town Hall Investor Day will cover defense contracts, Office of Strategic Capital Funding continuing resolution updates, new partnerships, regulatory opportunities, and we will have the entire management team available. Some housekeeping for this call and the reason for its brevity We hired Chris Erickson as our CFO a couple of weeks ago. The SEC requires the CFO sign the 10 ks, no exception. This document would have taken weeks to review and did not even ask for us to sign it, If Chris did sign that what would sign that would have been a big red flag anyway. I do want to give a shout out to Sam Pelletier, our VP of Finance and his team, did a great job on the 10 ks. This CFO limited Limited prompted to have another investor update later this month, one that he can participate in.

Some quick updates before we open it up for questions. Let's jump on to our Long Beach factory Long Beach is up and running. And shipped its first drones in March. We expect Flightwave to be shipping drones every month from now on, as they expand and scale the Long Beach facility and as we clean up backlog. We'll give more details on the Investor Day town hall.

Some updates on the Black Widow, Vehicle navigation is almost complete on the Black Widow. This is a vital feature that gives the Black Widow a unique competitive advantage. This software, as we mentioned previously, will expand our margins. The flight data and test look incredible. We also look forward to upgrading the Edge 130 soon to be on the Tricon [indiscernible] navigation. I told you folks I'd be brief.

And with that, we're going to turn it right over to questions.

We will now begin the question and answer session. You will need to press If you are using a speakerphone, please pick up your handset before entering your request and speaking on the call. Our first question comes from Glenn Mattson with Ladenburg Thalmann. Please go ahead.

Yes. Hi, Jeff. Thanks for taking the question.

So yes, I get that this is a quick update just on the kind of stub period. So, kind of more curious about looking ahead, can you give us some sense as to a little bit more on the timing perhaps on signing of the SRR deal and then the scope of LRIP kind of as you're seeing it as they're talking to you about it, just the most recent update on that would be great.

I figured everybody was gonna keep going there. You know, we're having a call in a couple weeks. But, anyway, thanks for the question, Glenn. And I've talked to you quite a bit over the last few weeks and a lot of other with you. So yes. So some some activities moving along. I'll I'll just on a high level, I'll say, we're pretty excited that the LRIP is going to be significantly higher than we did a nasty report that came out in January, which will be that'll be fun to report when once we officially sign and we did, I'm pretty sure that we got the the yesterday or the day before, we got the features contract signed. So we mentioned that there was going to be three contracts this year. First would be features. Some additional features for the Black Widow for the SRR program. Then we'd sign LRIP, which we hope is very soon.

We'll let you know as soon as we do. During probably during the town hall. And then we have mass production later this year. So again, nothing's changed except we knocked one of those off the list. And that we're pretty excited about where LRIP will probably land.

Great. That's helpful. Just as a quick follow-up on the international front, can you just talk about opportunities you're seeing with the either NATO allies or in the Pacific, just general update based on versus where you might have thought about it a month ago so when you did the Investor Day?

Yes. Yeah.

Actually, I'm getting that question quite a bit now. Mostly because of the tip between President Trump and Zelensky. Everyone thought that everyone's kinda gonna turn into anti US based drones. Just to be very blunt, and frank here, There are almost no drones in the category of the Black Widow just because DJI unless you do Chinese drones, which NATO won't use, there's almost no companies in that category, in the Black Widow category, because DJI put them all out of business over the years. And specifically, there's nothing that's as robust as the Black Widow not only robust with the modular design. It's a very rugged drone. Unlike a Chinese drone that feels like a toy. It's it has EW capabilities and now has visual navigation. So a couple of things. One is we're continuing on the previous tender [indiscernible] RFPs that everyone's getting frustrated that we have not updated on yet, but those are continuing. But there was a consortium put together of all of the Europeans. It it wasn't massive, but it was $2,000,000,000 to push Ukraine. And And we were not excluded from some of these people looking to put together tenders for that. So Europe is not ignoring The U. S. Manufacturers because of the tip between the Ukraine and The United States.

So all those things are still ongoing and some of them are actually more enhanced now.

Okay. Great. Good luck on that, and I'll jump back in the queue. Thanks.

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

All right.

Yes. Thanks very much. Great to hear about the future contracts here.

And then you mentioned the VNAV software. In the prepared remarks. I guess how should we think about that relative to your guidance? Would that would cross sales, would that be incremental to guidance? Or how do we think about that in terms of kind of the financial impact? Yes.

Yes. Yes, great question. Yes. So we have not added that to any of our guidance yet. It's a I don't want to say it's expensive, that's the wrong word, but it's such a required piece of software on every drone from now on. And it's from one of the best software companies in the world. We think that we'll be able to get full price We haven't announced the pricing. That we're working on with Palantir. I got to see the first video the other day. It's just incredible. And to have this capability, it is one of the biggest problems that the Army is having, actually every branch is happening because GPS, the ships do not work. Putting any modules on a drone like the Black Widow would reduce flight time. There's a lot of quick fix hardware platforms that just really don't work for drones our size. And frankly, nobody has basically real time map updates like Palantir can provide. So we're partnered with Palantir on this digital navigation. We couldn't have a better partner because they're going to dominate digital navigation. But yes, it's not included in any of our guidance yet so far. Once we get a quarter under our belt selling the software, feature, we will probably update the street after we have a full quarter of selling this product.

Got it. Got it.

And then how much just in terms of your company moving to Palantir's operating system? You know, maybe a quick update on the status of that and when do you think that might be complete?

Yeah. We're we're yeah. We're just implementing it now. Was it was I actually was able to be a keynote, week before last out in Palo Alto. Got to meet with a lot of other companies that are using it like Palantir, like Andral, the Saronic and companies like that and they think it's going to improve their margins. So that's how well the system can work. So we're just in the very first few weeks of the installation. The good news is they're they're much quicker than if you're ever been to an SAP install much different game already. So we're glad that we're getting it done right now before we're in mass production. But we believe it's going to give us so many efficiencies get rid of a lot of redundancy across all of the factories And as other companies have stated, they think it's going improve their margins dramatically. [indiscernible] I guess last one for me, and this may be more of a town hall question, but at your Analyst Day, you talked about the prospects potential of additional SRR funds this year, not next year, but this year again, any additional context or view into that?

Yeah. It was a little scary. They didn't send that extension in, then all kind of as they say on the Hill apps were going to be basically deleted but they did continue it.

So as Brendan mentioned on our last Investor Day last month, we requested another additional $100,000,000 to what we wanted for 2025, which ends in September. We're feeling pretty good about what LRIP is going be for for through September. I think we'll be very we're very comfortable with our 25% to 65 guidance already and that's not even we also get one full quarter of 2026 with the SRR contract.

So we asked for an additional $100,000,000 frankly, just because this administration every single person that's talking to them is talking about drones of the future for warfare. That you're only going to have drones in the fronts. Whether it's generals that are speaking at West Point or the Elon Musk, whether it's some of the most influential people at the administration, They're all moving away from exquisite expensive systems into drones like ours.

And having a program of record as this is happening with this new administration doesn't hurt. So we ask for an additional $100,000,000 for 2025. We're prepared to deliver that if they're able to get that. Maybe it ends up being 50%, 25%, 75%, we don't know or if could be it could be nothing. We're not depending on it whatsoever. But as I mentioned, we're very pleased with where we are probably with LRIP. With the last few meetings that we've had on it.

This concludes our question and answer session. Would like to turn the conference back over to Jeff Thompson for any closing remarks.

Well, thanks everybody for joining I apologize the brief call. But we'll give a detailed update later this month to the entire management team We believe this will be much more beneficial for investors than reviewing a sub period covering two months from last year Thanks again, everyone, and look forward to talking to you in a couple of The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.