Ondas Inc. (ONDS) Earnings Call Transcript & Summary

Okay. We're going to get going now. This is Eric Brock, CEO -- Chairman and CEO of Ondas. We're here for our OAS Investor Day, the webinar. We spent some time this morning on the first phase of the Investor Day with some folks running through demonstrations of our systems and capabilities. And I want to thank those folks who are in the room with us today for attending that, and we enjoyed the opportunity to do -- to walk you through the systems. I want to thank the folks who are joining us online via the webinar. It does look like we have a good showing for this presentation. So why don't we get going? We do have a lot to talk about. I think the program should be about 1.5 hours, and we'll talk about the agenda and stuff like that in just a moment. So let's go and -- this is working. I'll just start with the disclaimers. Of course, we are going to make some forward-looking statements today. We would ask you to read our safe harbor disclaimer. These -- we will be making forward-looking statements. And of course, they're not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. And of course, our actual results, performance or achievements could differ materially from those expressed or implied by the forward-looking statements as a result of a number of factors, including the risks discussed in our public filings with the SEC. I think I'm one behind here on this. Give me a moment. I think we have some technical difficulties. Okay. Looks like we're all set. So I'm going to walk through the agenda. And at the outset, I want to just say we are going to be very transparent as we lay out the market opportunity and the business plan. I want to note that there's going to be certain areas that we're going to use discretion due to sensitivity around customer privacy and/or competitive concerns. So we're going to be careful how we broadcast customer names in this format. And I'll remind you that there are certain things we can't discuss because our customers typically are in the security business, and it's not appropriate for us to give those details around their business operations. And also, we're going to be sensitive to detailed conversations on pricing strategies as we want to preserve our flexibility in how we engage customers. And of course, we don't want to provide market information that our customers may be able to misuse -- I'm sorry, our competitors, of course. And I do think some are joining us. And lastly, I want to emphasize that we have undertaken a rigorous business planning process. We have a huge opportunity at OAS, but we want to be measured on how we present it to you. In general, we have been conservative in our operating assumptions in and around the business plan and our financial models. Our real objective is to underpromise and then do better with execution. So the agenda today, we're going to start with an introduction and a corporate overview. We'll spend quite a bit of time talking in detail around our technology solutions and services platforms. We will spend some time as well on our go-to-market strategy. And then again, we will be sharing a detailed financial overview and outlook. We'll leave some time for questions and answers at the end. I'll start by introducing the team. So I'm here at our American Robotics headquarters in Baltimore, and I'm joined by T3. That's Tim Tenne, the CEO of American Robotics; Meir Kliner, the President of OAS and the Founder and CEO of Airobotics along with Yishay Curelaru, our CFO; and Eitan Rotberg, the Senior Vice President in charge of Product and Marketing for OAS and Airobotics. They are joining us via the webinar in Israel. This is the first time Eitan is joining us, and he's going to spend a lot of time as a Product Manager, walking us through our solutions and the go-to-market plan and marketing strategies. I will say that we are blessed to have a very strong and seasoned and experienced leadership team. But we're also backed by a strong team across the board at OAS at both American Robotics and Airobotics. And I hope that we have the chance for you to meet more folks over time, like we have that opportunity today here in Baltimore with the team at American Robotics. I'll start with a very big -- with a kind of very big picture first here, and I'm going to ask you to bear with me because I think it's important to share some context to help frame the opportunity for our company, and we can do that as we communicate our corporate mission at OAS. And I'll just introduce the context is that we live in this digital economy where the mobility of people and the unleashing of information and ideas has really transformed the world. And it's an information economy. And while it's enabled massive economic growth and widening the prosperity globally, it has also introduced challenges. And okay, this information economy I speak to is not something that's just happened today. This has been 10, 20 years in the making. And the change has really introduced new challenges and created an interesting climate for all of us. And many of the challenges I'm talking about, of course, are geopolitical in nature and those geopolitical challenges are defining the current global climate. And what I mean is we have a lot of conflict in our world. So with that reality comes opportunity. And I will go as far as to, say, even a responsibility for our company. And this is what informs our mission. So I think we collectively need to do our part to help ensure the economic and national security of the people in the United States and our allies around the world. And of course, that includes Israel, which is core to our company and is importantly core to our corporate values. So security requires new investment in new defense and security technologies, and it requires new business models. And that is what OAS is investing behind today and in the future. And if you choose to invest in OAS, that's what you're investing behind with us. So we are totally committed to our mission, which again, I appreciate you bearing with me here as I introduce it, and I'm going to read the mission to you. So at OAS, we aim to protect and secure critical assets, locations and populations and support the homeland defense of allied nations. We deliver aerial security, intelligence and data solutions to critical military, government and industrial markets across the world. We develop and produce highly functional, industrial-grade autonomous drone platforms that defend hostile drone threats, collect and process data and provide essential intelligence, enabling customers to efficiently and safely execute their operations. We deliver these complex, highly integrated end-to-end autonomous capabilities with integrated operational infrastructure, which ensures aerospace safety and operational authorities for our customers. We have several key competitive advantages in executing our mission, and I start with dual-use technologies. Our technologies are designed for both military, homeland security as well as commercial markets, that being critical infrastructure, critical industrial operations, nondefense government operations. And that means, we have an extremely large addressable market, which, of course, allows us to make the significant investments we have and spread them over a larger market opportunity. We have an extreme expertise in developing end-to-end software and systems, and that is an engineering effort and team that has many years of experience and has developed this world-class technology. We have reliable industrial-grade solutions. And we've shared them with you today. We're going to talk a lot about those, of course, being the Optimus System and the Iron Drone Raider. We package that and wrap it with safety and regulatory expertise, and we're deploying this at the industrial scale, even military scale, this capabilities and expertise is essential, it's not optional. And of course, we do that with a seasoned leadership team. We're veterans. Our team are pioneers in the industry, we are defining what these solutions are. So let me move to a high-level overview of OAS. We have 2 subsidiaries. There's American Robotics, which is headquartered in Baltimore; and Airobotics, which is headquartered in Petah Tikva, Israel. The Iron Drone team is fully integrated with the Airobotics team in Israel. We have 75 employees at OAS with the bulk of them in Israel. We plan to grow the U.S. footprint, which we're going to discuss further today. In addition, we have a sales and marketing in-field support team in Dubai, supporting customers there in the UAE. We have invested over $150 million. And when I say $150 million, I'm talking about real capital on the technology and market development. We picture here our 2 primary autonomous drone platforms, that's being the Optimus System and the Iron Drone Raider system. We're going to spend quite a bit of time outlining the key capabilities and use cases with the Optimus and Iron Drone platforms. We have successfully deployed these platforms with marquee customers. Optimus is being scaled today for public safety with drone as a-first-responder use cases in emergency response as a fleet, as a network fleet in the city of Dubai, a major urban area that is deploying autonomous drone fleets. We're also deploying, as a service, data-as-a-service, the Optimus System to a major global semiconductor provider on a long-term construction project, where it's used for security and intelligence. It's a project management tool with significant ROI. And we've announced just this quarter that we have secured a major military customer in the Middle East for Iron Drone, and we're going to discuss that platform and customer use cases in some detail today in addition to the Optimus System. I want to spend some time outlining the corporate structure, and I'm going to just admit that it's a bit complex and maybe even unorthodox. At the same time, I'll just say it's really relatively straightforward, and we're going to walk through it. Ondas Holdings, the public company, ticker ONDS that you know and love, is the 100% owner of Ondas Autonomous Systems or OAS. OAS is a 100% owner of the operating subsidiaries, American Robotics and Airobotics. American Robotics and Airobotics are the go-to-market operating companies, as I've described. Ondas Holdings is the financial sponsor and provide strategic leadership. It's public company and has access to capital. OAS is responsible for integrating global operations and capital allocation across the operating businesses globally. It's a management layer to link that go-to-market and funding strategies across the drone businesses, which is going to help us achieve global scale. Airobotics is the primary developer of the platform technologies. Our engineering efforts are managed in Israel. The Airobotics is also a solutions architect. It is a drone services provider and executes those operations in the Middle East, in Europe or what we refer to as the rest of world. American Robotics is a U.S.-based drone services provider, developing solutions that are architected for U.S. markets and primarily focused in North America. And like Airobotics, we are architecting those solutions for specific key focus markets and verticals, end markets and customers that we're going to talk quite a bit about today. The primary role from -- in American Robotics is to bring the Optimus and Iron Drone platforms to these large U.S. markets. It's an exceptional opportunity, and that's what we've been operationalizing here in Baltimore. However, I will say, we're not limited to that. You've seen innovation here, including our cash flow system, which Tim will talk about. Now that's enabled us to be a more complete services provider to our customers here. We can do more of that. What we've been doing with the U.S. Coast Guard is another example, and we'll touch on that. The benefits of this corporate structure are funding and capital flexibility. And again, it allows for the scaling of operations in the large global markets and target industrial verticals that we're serving, okay? We're gaining scale by the experiences we have in Dubai, for example, in DFR use cases. There's major urban police departments, home and security operations in the United States where we can replicate those sorts of solutions, and it goes both ways, whether you're talking about data center security intelligence, the large construction projects we mentioned, ports and terminal operators and so forth, our key focus markets. We get global scale with this corporate structure. I'm going to spend a couple of minutes here sharing some context on our history, which I think will help you understand what that would mean for our path ahead. So how our history is setting us up to capitalize on all the progress and success we have made from a technical standpoint, from a regular standpoint and then, of course, from an operational standpoint. So I really break it down, and we've done this kind of in colors, so it's a bit clever. But there's really been 3 distinct phases for our company in its development. Firstly, there was a platform development, then there was a phase of what I would call, market development. And now we're in a phase what I believe is market adoption or acceleration of the business as we operationalize. And of course, the platform development really happened before OAS was even started, right, before Ondas made its first step into the business. And between 2014 and 2016, that's when American Robotics, Airobotics and Iron Drone were formed. They have spent years at each entity, advancing the autonomous systems and capabilities, which you know and love today. There are no shortcuts in this development work. There's no shortcuts. Robotics requires hard work, requires sweat equity, and it requires real capital investment. And I would say, most importantly, time, Again, there's no shortcuts. Starting in the third quarter of 2021, Ondas recognized an opportunity in the industrial and commercial drone sector, and we began assembling the pieces of OAS. It started with the acquisition of American Robotics in 2021. We closed on that transaction in August of that year. In the first quarter of last year 2023, in January to be precise, we closed on the acquisition of Airobotics. And a couple of months later, we closed on the acquisition of Iron Drone, that was in March. And that's when we integrated these platform technologies and companies into the Ondas Autonomous Systems global go-to-market umbrella. And since we've done this, we've had some very significant accomplishments. First, I want to highlight, we generated $9 million in revenue in OAS in 2023. While that's noteworthy is the prior year, we generated just under $1 million, right? So we started to get -- demonstrated not just product market fit, but market acceptance and adoption of the technologies. We also made our numbers, right? When we put this together, we layered in Airobotics, we had guided to $8 million, we did $9 million, okay? And that's a big focus for us. We want to deliver on our promises. And then, of course, last year, we were -- we secured the type certificate for Optimus, and that was granted to us by the FAA. There is no other comparable system in the world, small UAS, drone-in-a-box, that has received a type certificate. That in the urban autonomous fleet deployments, that we -- that I just referenced, are clear validation of the Optimus System's maturity and reliability, which we continue to believe is unmatched. And as we move through 2023 and into 2024, we intended to leverage these successes I'm talking about, and we are. However, the Gaza conflict has threw us a curveball. That erupted in October of last year, and it did disrupt our business from a personnel and supply chain standpoint. And that clearly hurt our financial results in the first half of this year. On the other hand, as disruptive as the Gaza conflict has been, it has also created significant opportunities. It has accelerated -- first I'll say, it has expanded our addressable and attainable market today, almost overnight, b opening up our platforms from military and homeland security use cases. Now, we always do the potential, as I said just a moment ago, when we put OAS together, we really were orientating the business to attack the industrial and commercial markets. We knew this was potential. But today, where this transpires is the military business, defense, home and security globally is demonstrating huge demand. And not just huge demand, urgency. And also, not just opening military since 12 months ago, we had an exceptional opportunity to accelerate the productization for Iron Drone, which we had originally had on a slower path of development just 12 months ago. And we're going to talk a lot about that Iron Drone, what that productization has been, the market opportunity and the adoption we're seeing because as you're all well aware, we've announced purchase orders, actually several this quarter alone, aggregating $9 million, and we believe there's a lot more behind that. So here are our platforms. I'm not going to belabor this, but I'm going to tie it back to our mission. We are providing aerial security and inspection tools to support the maintenance and resilience and efficiency of critical operations for our customers. And I do want to highlight, this is a portfolio of systems. We have 2 platform technologies that are deployable today in our revenue drivers in our -- in the quarters and years ahead. Now let's discuss some of the key attributes, which I believe make OAS an attractive investment opportunity. In short, we are positioned with high-performance leading technologies in large markets with strong and growing demand function today. We have true dual-use autonomous drone security platforms. And again, I've said this earlier, but I'll say it again, that means our addressable market opportunity is at least twice as large as you may have thought just 12 or 18 months ago. As I said a moment ago, we announced this month that we have secured which is the equivalent of a program of record with a major military customer. We announced 3 purchase orders, which totaled $9 million in this quarter alone. And we believe that program will expand. And we think there are other similar global defense opportunities for Iron Drone. We're very proud of this, and this points to the unique and special capabilities that the radar system has. I believe, and we're going to make this case that the Iron Drone can be positioned to win the hard kill, so-called hard kill counter-drone system. I think this is a category winner. There is a significant need for an urgent solution, and we are in the lead with a built-for-purpose system. And again, we're going to make that case. Our Optimus System has similar military opportunities, and it is already being deployed for public safety, emergency response and homeland security applications and use cases in urban environments. And our U.S. footprint here with American Robotics is now operational. And we're building an attractive set of customer opportunities with major significant customers in the key verticals that we've touched on here in the U.S. Okay. Let's discuss our business model and strategic priorities. First, we are going to execute and deliver the Iron Drone platform to our initial customer. We're going to build supply chain and services infrastructure for sustainment of that program as a program of record, sustainment ranging from field support, provision of spares, MRO type of work is critical. Second, we're going to build on the success with other -- the success of the Iron Drone with other global military customers. And we're going to continue to support fleet expansion with our customer in Dubai. Fourthly, we're going to drive adoption of our Optimus System in the U.S. and European markets. We have a new services capability here with American Robotics in Baltimore, and we're going to leverage that. And again, we have an impressive pipeline of large opportunities. And lastly, we need to properly capitalize this exceptional growth opportunity, and we're working hard to do that and we're going to provide some context for that as well. So with that introduction, we'll now transition to a detailed overview of our services, systems and solutions. And as you know, I'm not going to belabor this because we're going to come back to it in greater detail. We are attacking defense markets, military homeland security as well as commercial. That's critical industrial markets, that's critical infrastructure, that's nondefense government, right? And these are the use cases. It's ISR, this kinetic capabilities, the security. This is for the low skies with Iron Drone, maritime opportunities, U.S. Coast Guard for both platforms and more. Commercial, security, safety, inspection, these are tools that we've been delivering at scale with great success and reliability, and we're going to drive growth across both businesses here, both business units or subsidiaries. Let me talk now about the Iron Drone System. The Iron Drone System is a counter-drone platform. It's part of a multilayer security system. It's a hard kill capability, so we are capturing the hostile drones. As we're all well aware, the drone has emerged as almost overnight as a dominant factor in the battlefield. It is a threat that all homeland security officials and even critical industrial operators are greatly concerned about. You can't pick up Twitter, get on LinkedIn, watch the nightly news or read a newspaper and not see this issue now on almost a daily basis. The drone has exposed a huge threat and vulnerability and this needs to be solved. And that's creating a massive opportunity for us at OAS, especially with this Iron Drone platform. And again, the Iron Drone platform has been designed for day 1 to combat that threat. So in short, what we have with Iron Drone is a critical platform to protect the lower skies. And I want to sort of walk through this a bit with you and help you understand the context of the opportunity. So militaries have armies. They have soldiers, ground vehicles, artillery. They have navies. They have similar capabilities on the sea. They have Air Force, that's fighter jets, bombers, other aircraft. That's missile defense systems. And of course, there's lots of money being spent and capabilities being built in space today, okay? The vulnerability, the gap from a homeland security and defense standpoint, is the lower skies. And this was a vulnerability that didn't exist 2 years from now. And that's the vulnerability that Iron Drone, again, was built to solve. And we're seeing a major impulse from militaries around the world, particularly our first customer for the Iron Drone work to solve. So solving the issue with hostile drones and protecting the lower skies is going to require a multilayered security system. This is installed as infrastructure with ongoing operations and maintenance and sustainment activities. This is a program of record type business. So what is multilayered? Well, you do need that autonomous hard kill CUAS platform like the Raider. In addition, we need to be integrated. The Raider system needs to be integrated with ground infrastructure, such as Raider technologies. That's the technologies that detect the hostile drones and the threat. We also integrate with vital command and control systems or C2 systems and as well as electronic warfare type capabilities, the jamming, spoofing technologies that you've been also been reading quite a bit about. There are various suppliers of this infrastructure, it's very sophisticated. Don't get me wrong. Some are better than others. And some of this architecture, take example of Raider, is tailored to specific environments. So I'm talking about defense systems for drones is very much like missile defense. Iron Drone is a great example. David's Sling another. These are very high altitudes. The ground infrastructure I just described is also deployed for those sorts of systems, but it's architected. It's a solution for the high altitudes, You need a total different set of technologies for the lower sky. And in that realm, we're going to go through the competitive analysis a bit and I'm happy to answer more questions, I believe we have a best-in-class system. It takes all the requirements, and I'm going to hand to Eitan in a moment to go through that in some more detail, but it's built for purpose, okay? And I think we're building a substantial lead in solving this urgent problem. So I'm going to now turn the mic to Eitan, and Eitan, you can take over.

Hi, all. Thank you, Eric. So as Eric mentioned, the counter drone market is growing. This is due to increasing drone threats worldwide. The current drone interception method includes both hard and soft solutions. The hard solutions, like guns and lasers, tend to be expensive and not often cause -- and often cause collateral damage. Softer methods such as jamming and cyber attacks are not always effective and can also cause unintended interference. The Iron Drone Raider is designed to fill these gaps, providing cost-effective solutions with minimal collateral damage. It's also highly effective against autonomous drones. They do not rely on communication and difficult to stop. Iron Drone Raider, AI-driven software, we call it the Iron Drone Raider DeepStream, there's a significant advantage against those advanced and fully autonomous hostile drones that are coming to the ground very soon. The Iron Drone Raider has a fully automated docking station that can store and launch up to 3 Raider drones. This is completely autonomous and reusable, significantly reducing the cost of its operations. Let's watch a short video to show how this system operates. [Presentation]

Okay, so as you could see in this video, the Iron Drone Raider system is usually integrated with a radar detection system. The complete system include a docking station, the Raider interceptor drones, a command and control interface, a ballistic net and an optional parachute that can be attached to minimize collateral damage. The Raider drone are stored in a protective docking station. This docking station can hold up to 3 drones, keeping them hot and ready for a quick launch. This readiness is crucial since the interception window is often very short. Once the Iron Drone Raider receive the target location, typically from a radar or any other detection system, it autonomously launches and flies to the estimated location. Its flight is entirely autonomous, powered by its built-in AI-driven software, the Iron Drone DeepStream. This advanced AI engine, combined with optical sensor, allowing the drone to conduct all the mission autonomously. During the flight, the Raider uses thermal camera to search and identify hostile drones. Its AI software has been trained to recognize various drone types under different conditions. Every identification of target and tracking is using a highly sophisticated calculation for optimal interception. The interceptor route using the guiding camera, onboard computing power and micro radars. When ready, the radar intercept the target using the ballistic net, which can be attached to a parachute to reduce the collateral damage, usually in populated areas. The Iron Drone Raider stands out from the other intercepting drones due to its speed, agility, unique motor configuration, its AI-driven software and its cost effectiveness. The system is highly effective and it gets a wide variety of targets, thanks to its AI-driven vision and guidance system that can operate in any environment, even in a very complicated environment and to be compatible with various platforms. Another significant advantage compared to other solutions is the better price point. It can be reused, which means that it's cost effective and gives a lot of opportunities to our customers to use the economy. Now let's move to the Optimus System. This is the world's first drone-in-a-box, unmanned aerial system. We will start with a short video introducing the system. [Presentation]

So as you could see in the movie, the Optimus is designed for continuous 24/7 drone missions without the need to wait for battery charging. It also allows the use of different payloads, making it versatile system capable of performing various missions. Optimus is the only system in the world with these capabilities. It's the only one featuring this high level of reliability, robustness and IoT capabilities, making it ideal for remote data operations. The Optimus enables fully automated mission sequences. The drone takes off based on a user request or any other trigger, and conduct data capturing or delivery missions in the area. It is uploaded, processed automatically and delivered to the end user. The system supports several payloads, as you could see in the movie, including the video, electro-optical and thermal video with powerful zoom, 2D and 3D mapping sensors that can be used for documentation, progress monitoring, planning, risk assessment and many other missions. And LiDAR, which is a powerful tool for survey mapping, volumetric calculations and other applications that require precision and the aerial delivery payload, which can deliver some emergency aerial deliveries in urgent situation to the high priority to any kind of case such as infrastructure maintenance or in any limited area that we need to provide. So in summary, we can say that the Optimus payloads, they're giving an opportunity for visual asset inspection, they support a range of applications, various payloads, including real-time video inspection, mapping and many others. Optimus can be deployed as a network. Each Optimus System can cover up to 3-mile radius. That's going to be performing a variety of missions and applications from a certain place or a city, for example. When looking at the certification of Optimus, Optimus is the first and only system of its kind to receive an FAA airworthiness type certification. This certification was achieved after extensive testing, confirming compliance with air worthiness and emission standards. Compared to the competition, Optimus stands out with the highest level of maturity, robustness and required support for successful integration. It is not the cheap assistant, but it's the only one in the market that can swap both batteries and payload, which is critical for mission continuity in a critical operation. It's the only drone of its kind with the FAA type certification, allowing it to fly over roads and people. The system is provided by a trusted manufacturer and equipped with an API. It is provided with all of the required services, designed to support its fast integration in very complex operations. So as you could see up until now, Ondas portfolio of autonomous aerial systems is really best in class. It's offering cutting-edge hardware for both data collection but also for hostile drone interception. Ondas is also best-in-class in software. In addition to the hardware, we provide best-in-class full-stack software platform for both Optimus and Iron Drone Raider. The software supports our docking stations and the automation of the docking stations, the IoT edge computing, making it an integral part of these systems. I will start with the Primus. The Primus is a command and control system. It offers fleet control, mission management, diagnostics, real-time video, data collection from the Optimus [ Urban ] sensor. The software is designed mainly for command centers, but it can also be used by mobile tablets and its key features are an AI edge computer for payload management, real-time video and camera control, fleet and mission control via mobile tablet, integration with UTM airspace operations and the highest level of cybersecurity and on-prem configurations. Optimus also includes the Insightful. This is a powerful data processing and delivery platform that enables users to interact with the drone data in real time. This includes the multisource data storage, distribution options for implementation of AI engines and data analytics and enterprise-grade security. Insightful offers cloud or on-prem storage for geovisual data and multisource data analytics and visualization. It's fusing data sets from aerial and ground system altogether and designed for fast integration with third-party applications. Optimus allows seamless integration with its API with core systems and functions. Users can control the drones from any command and control system and also utilize video management solution for AI and video analytics. Another interesting side of the software is the software of Iron Drone Raider. It makes it a super intelligent drone. We call this AI-driven software, the Iron Drone DeepStream. Iron Drone DeepStream enables the Raider drone to autonomously navigate, track and hunt hostile drones with remarkable precision. The autonomous decision-making process, of course, is very fast and very high speed, orchestrating chases and capture within milliseconds. Iron Drone DeepStream excels in tracking and recognizing various drones as well as navigating through hard environments. This is crucial for operating in complex aerial spaces where GPS and radio communication are compromised. In such challenging conditions with the Iron Drone DeepStream, the Iron Drone can effectively execute its mission and neutralize threats autonomously. I will now hand over the call to Eric.

Okay. Thank you. And I am going to hand the call to Tim, and we can start Kestrel and...

Absolutely. Thank you. Thank you, Eric. Thank you, Eitan. As we mentioned earlier, our Kestrel system serves a few purposes. It started out as a story of a large DOT needed us to get beyond visual line of sight in short order to enable the Optimus System. And to do that, we saw what was on the market. We had active doppler radar companies. We had passive RF spectrum detection companies, and then these UTM airspace management providers. So the team got together and we thought, well, we really need an integrated solution to enable autonomy for the Optimus System. And we knew that it would also be a significant positive towards our Iron Drone Raider system as well for both a counter drone as well as the radar integrated system for the Raider. We actually received that FAA beyond visual lines of sight waiver in just a matter of weeks, very quickly. And we filed a patent around it. And that system itself does those 3 things. It gives us autonomy through beyond visual line of sight. You can look us up in the FAA waiver database. We're up to 6 waivers. We'll have a seventh here shortly. And we're very confident if a customer needs that, we can get that today. And that is due to that full integration, improving capability from FAA inspectors and leadership, building upon the safety of the Optimus that Eitan talked about with our type certification, and the safety of the airspace management tool that we have. We've also seen a lot of traction in the market from drone-as-a-first-responder from police and security and critical infrastructure of using this as a drone detection and mitigation. And as we talked about today with some of our visitors here that visit us here at the Maryland headquarters, talking about how the FAA will soon, in the next 3 to 4 months, have a notice for public rulemaking that will not only enable the Kestrel to be in use even more, but our Iron Drone Raider system on the nondefense side. So we're very excited to bring those things together. And as you saw of those that were here with us today in the demonstration, we can use it as a piece or a part or a fully integrated system. It can be fully integrated to the Optimus and the Iron Drone Raider system or it can be a stand-alone product that can be both fixed as an infrastructure system or it can be a mobile system that could be used for pop-up events or rallies or functions that the government and commercial entities need. We're very, very proud of being able to have both that passive and active detection that's fused in the airspace management tool. And then to move on to our integrated remote operations control center. You saw what a mini control center looks like here with us here at the Maryland headquarters. As Eitan and the team have mentioned and Eric has mentioned, we can operate our systems anywhere in the world. We've built that from our full stack software development and integration, and we've also received the ability from the FAA that we are able to do this. So if you bought the drone and wanted to operate here in Maryland, and you wanted our company to operate it for you in Florida or you wanted operate it in Florida or another state or location, you absolutely can do that. The system is ready to go today to do that. So we're very confident that it can be done and that we are ready to scale with multiple systems per operator as the FAA allows. And based upon these solutions together, we're confident we can achieve that for our customers. And that's where we really talk about, unleashing autonomy for each and every person that's out there. But more importantly, if a customer wants us to own and operate the system, we can do that here today in Maryland. With very little change and expansion, our operators are confident, respected and ready to do that. Customer training and demonstration center. We talked about the key benefits of being here. We're 1 hour from Washington, D.C., 1 hour from key components, whether that's defense or government or commercial nondefense customers. It's a very key location for us to be in unrestricted airspace to be able to integrate into the National Airspace System each and every day. We have the tools and the team able to scale with our customers. And we'll talk a little bit about how we've started to do that with the U.S. Coast Guard and EPA, and we're able to do that right here each and every day. So we talked about this, this morning with those that joined us, but for those not on the call, we're in one of the most highly regulated industries on the planet. I'd rival to say, we're equal to that. We're not selling screw drivers or wrenches or something you can buy from your Home Depot. It's highly complex. These are aircraft, whether they're 1 pound or hundreds of pounds or thousands of pounds. It takes airmen aircraft and the integration into the National Airspace System operating into the construct of how you're going to use those things. And that's why the FAA has been slow to adopt. This industry has exploded. We've had thousands of companies, and we watch thousands of companies go away based upon not being able to operate in this highly regulated environment. And as you've seen, Ondas and Airobotics and American Robotics have been able to do that, and we continue to do that and be able to scale with our customers, and we're trusted to do that and respected. As we had on our opening day here, we had the Deputy Regional Administrator from the FAA. And if you've seen online our videos, they were very pleased and happy to see the high level of safety, the high level of experience and the high level of maturity around our type certified product. And we're happy to say that's not going to change from now into the future. Now let's talk about -- a little bit about how we're building that traction that Eric mentioned earlier in the conversation today. We just completed, and I want to stress, it was not a POC, it was a first time full operation for the EPA, Environmental Protection Agency in the U.S. Coast Guard at the Port of Long Beach in Los Angeles. And the U.S. Coast Guard is putting together a public release of the operation. It was successful. And to build upon that, we were the first in the world, not just in the United States, to do emissions monitoring or sniffing, as it's like -- it's likely to be called, of pollutants coming out of container vessel stacks, whether they're bunkered oil and gas vessels or container vessels going into and out of the Port of Long Beach. We operated 24/7, day and night over a 2-week period. And now we're happy to report based upon our latest meetings, the U.S. Coast Guard and EPA are looking to take that to a larger scale and being able to follow up on federal regulations and law on the Clean Airports Act and also safety and security. They also got to see a glimpse of what else Ondas and American Robotics and Airobotics have to offer with our Optimus platform and with the Iron Drone Raider. And of course, as we know, within a maritime port, we have multiple customers. We have municipal, police, first responders, maritime port authorities at the state municipal level. We actually had a federal prison very interested in counter drone and surveillance systems. Perimeter security for the U.S. Coast Guard base there at the Port of Long Beach, Los Angeles, and the list goes on. So very happy and pleased to report and hopefully, much more good news in the coming quarters.

Okay. Thank you, Tim. So now we'll transition to talk a bit about our go-to-market strategies and how we're operationalizing the business. I made the point earlier, I'll make it again now that we spent a lot of time and energy and have successfully developed these scalable technology platforms. We've demonstrated how to deploy them in the field for value with customers. And now as we -- the challenge we have and the opportunity we have is how do we put the operating procedures together to target the specific verticals where we want to deploy and scale, and we think we have a right to not just play but win. So I'm going to ask Eitan to, again, help us outline the opportunity and talk about some of the specific approaches we're taking to deliver growth. Eitan?

Thank you, Eric. Thank you, Tim. So let's speak a little bit about the markets. So the markets of Iron Drone Raider and Optimus System are really growing rapidly. According to the latest research, both the counter drone and drone-in-a-box markets are forecasted to continue growing over the coming years and reaching to a multibillion worth around security, critical infrastructure, industrial and commercial domains. OAS is well positioned within these markets, with the 2 of the most promising platforms available to date. When we analyze these target markets, we can identify which ones show the highest level of readiness for our unmanned aerial solutions, given their high levels of autonomy and capabilities in terms of regulatory barriers, privacy and customer needs. The most mature segments where such system can rapidly be installed are defense, homeland security, public safety, where critical -- where lives are on stake when these things are critical for lifesaving. Other applications such as critical infrastructure facilities as well as the industrial and commercial services are not yet completely ready for fully autonomous drone operations due to the infrastructure and regulatory acceptance challenges worldwide. According to this approach, OAS is focusing first on defense, homeland security and public safety segments for the initial stage of its growth. Critical infrastructure facilities are targets for scaling up the next couple of years, along with multiple industrial and commercial services. That will be part of OAS expansion, where our autonomous drone infrastructures will be deployed in many cities, economic centers and across national borders worldwide. When looking more closely in a relatively new counter drone market, we distinguish between several options for drone detection, interception and end-user applications. To better estimate the size of the opportunity for Iron Drone Raider, we have chosen to focus on military and border patrol application, which are the most mature and have ready-to-go customers. The Iron Drone [Technical Difficulty]

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[Audio Gap] Terms of the regulations and infrastructure in most of the countries. The FAA and other civil aviation authorities are advancing regulations for counter UAS applications, and we expect this market to open up over the next few years. Based on these applications, we have conducted the bottom-up estimation to understand the serviceable addressable market, specifically for the Iron Drone Raider in defense and homeland security. We have estimated this market worth over $2 billion, including deployment of system along national borders, military bases and on ground and naval vessels. This huge potential does not include the promising nonmilitary market, which, as I mentioned before, pending for further maturity for [ Air Force ] regulation in the U.S. and also worldwide. As to the Optimus System. The potential of the Optimus System is reflected and its impact has already been proven, especially in Dubai, where it was deployed as an emergency-response infrastructure by local government entity. This project is the first of its kind in terms of scale, and it's a dream for many emergency respond bodies worldwide, which are coming to Dubai to witness this futuristic drone network. Over time, we expect more and more cities to adopt our solutions, which have unparalleled capabilities and hardly can be found anywhere else except in Ondas Autonomous Systems. The Optimus System has already made significant steps in critical facilities in industrial services sector. The Optimus is playing a crucial role in the major fabrication facility since 2015. These markets are developing gradually, and OAS has a significant offering with unmatched capabilities. In Israel, in aerial drone performance, data capturing and aerial construction monitoring. Can you hear me?

[Technical Difficulty] Yes. Yes. Yes. So we lost you for a minute, but we can just go back.

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Yes. So we lost you for a minute, so if you could please go back.

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Yes. Please.

Great. So our go-to-market strategy is focusing on 3 main activities. The first one is leveraging G2G and [indiscernible] platforms. These platforms are usually available when working with militaries and governments. These marketing platforms are unique to the defense and national security sector, where international entities share weapon system and other means after operational success is achieved, and the system is validated under combat conditions. The other more traditional activities including building channels with partners, which involves traditional activities such as working with distributors and resellers. Additionally, it includes working with OAS sales team to conduct inbound and outbound marketing activities, which are relevant for all types of applications in the markets. In addition, inbound and outbound marketing, engaging in both inbound and outbound marketing activities to reach potential customers. This includes digital marketing, content creation and direct sales efforts to generate leads and convert them into customers.

Well, thank you, Eitan. Great. Thank you, Eitan. Yishay is now going to discuss and provide important details concerning our financial outlook. As I said earlier, we're going to need to be sensitive to specifics around customers and pricing strategies. And I also want to highlight and remind you that the financial model we built to manage the business was created with a rigorous planning process. I think we do have a very attractive growth plan, and at the same time, I believe, and our team also believes, that it's likely to prove conservative, which is good. We want to build a track record around delivery and execution for OAS like we did in 2023. And that's going to serve us well looking ahead. So Yishay, I will hand the call to you.

Thanks, Eric. We have undergone a detailed business planning exercise for the last several months and designed a high-growth, capital-efficient business plan. Similarly, the financial model reflects conservative assumptions and a very focused capital allocation efforts. Our objective is to provide a conservative outlook and drive execution of the plan. If we execute, we believe there is upside to our forecast. The plan builds on the development efforts where we have built robust technology platforms, worked extensively with customers in the field and demonstrated product market fleet for Optimus and Iron Drone. We have also built repeatable field operations and services, which we will leverage going forward. From here, our focus is to operationalizing business to support scalable service delivery for our customers. This includes sales and marketing and field services capabilities, which we have described in our use cases with the operational capability established in Baltimore with American Robotics. We also plan to build and expand the required supply chain and production capability to meet the demand for our systems. We are very focused on specific verticals and on maturing the pipeline and securing high-volume customers for fleet operations. The scalable go-to-market platforms enables platforms and service delivery to support the growth we are modeling and the outlook we will share. As we move into profitability, we expect revenue and cash flow to result internally fund continued rapid growth in 2027 and beyond. We have a large customer pipeline, totaling $365 million, which is comprised primarily of customer opportunities we see in our focus end markets. Our Optimus and Iron Drone platform play at high end of defense, HLS and public safety markets as well as in critical infrastructure. Our pipeline represents active engagements where customers have begun fleet deployments or expressed interest in pursuing deployments. As you can see, Iron Drone has been a huge addition to the pipeline since accelerated our commercialization efforts over the last year. The market we address are large, so we see opportunities for both mature and expand this pipeline. However, the investment in scalable operations are going to be critical for us to pull this through as revenues. I want to highlight that while our Iron Drone pipeline is nearly half of the total, we haven't assumed any U.S. DoD revenue in the pipeline for now. We're seeing the opportunity to take Iron Drone to the U.S. DoD is large, and we will pursue various avenues to engage. Over the last 12 months, we have seen opportunity in the defense sector open up in a significant way. As we shared, a military customer and large different vendors have emerged as customers, starting with Iron Drone platform. We have been qualified as direct vendor to a major military customer, and we are very proud of this accomplishment. This has led to what you will call in the U.S., a program of [indiscernible] for a critically strategic counter UAS infrastructure. This has led to $9 million in purchase order in the third quarter alone. We think upside remains with successful field deployments in live homeland security operations. As a direct vendor, we benefit from stronger control over timelines and we can more easily defend our margins. Lastly, our status with our military customers is facilitating marketing efforts to other major militaries through G2G channels, government to government, which we believe will open large different markets globally. We have been very careful to size and qualify the market potential, and we believe the obtainable market for Iron Drone is $17 million over the next several years. This could develop much sooner with success and be larger as well. Similarly, we believe we have opportunities to deploy Optimus in different operations as well. That sum is at least $50 million. We have not fully reflected these numbers in our forecast as we want to build the operations to support growth and successfully deliver the early demand. We are hopeful that pull forward thereafter will be significant, and we can grow other defense customers and partners as well. A couple of statements I want to make as we discuss the financial outlook. Firstly, we are sharing revenue targets for the second half of 2024 and the next 2 years. These are our best estimates of achievable goals, again, reflecting a desire to be conservative and then deliver. Secondly, we are being careful on what we share with respect to unit economics and pricing strategies. We do this for competitive reasons and to ensure we have flexibility to derive the business. We believe our software and AI-driven platforms and solutions are highly differentiated and the services we provide are highly valued by customers. This will be reflected in attractive margins and ROI as we grow. For the next plus 24 months, our revenue models are primarily based on estimates of obtainable markets, which active customers. Again, we are making an operational investments to support this customer success. We believe we can be EBITDA positive in the second half of 2026 with growing profitability in the years thereafter. '24 was off to a slow start as we shared on our recent conference call. While the Gaza war was disruptive, it is also driving a significant demand for both Iron Drone and Optimus as evidenced by our recent announced POs. I want to emphasize that looking into '25 and '26, there are reasonable scenarios where customers expand fleet deployments to a faster and larger extent than we have modeled for both Iron Drone and Optimus. Also, we have been very conservative on assumption in the United States and Europe. As we have said previously, we believe there is a global interest in large military customers. We are busy and focused on delivering Iron Drone for our first customer today, and we pursue our defense opportunities and provide updates along way. We have been working for several months on our funding strategy. The objective is to finance under most attractive terms for our investors. As Eric said earlier, we have flexibility in our corporate structure, and are able to access public and private capital. Our belief is that we are likely to pursue of private capital at the OAS level in our next funding round. I want to highlight that we have invested over $150 million in development and hardening our technology and end market use cases. There has been a significant derisking of our business from technology standpoint. Our imperative today is to build repeatable operating procedure to support high-growth path to profitability, and we will be as capital efficient as possible to do that. We believe we need $25 million to $30 million of capital over the next 30 months to support our plan. Our key initiative in addition to working capital are outlined here. We will build the go-to-market effort in global defense markets and invest to increase supply chain and sustainment activities to customers. We will fund a technology road map for expanded capabilities, which is facilitated by the modularity of our Optimus and Iron Drone platforms. In addition to equity capital, we are pursuing a non-dilutive working capital finance, which we believe will be available for us as we build inventory to support recent orders. For equity capital, we have current conversation with investors who have experience supporting and building growth and successful defense and security technology ventures. There is significant interest in OAS, and that has only intensified as we have shared updates with success we are having with military customers and partners. To summarize the financial outlook, we believe we will generate over $35 million in 2026, with that growth and operating leverage supporting positive EBITDA in the second half of 2026. At that point, our global operational flywheel should have engaged to support accelerated growth. By 2029, we believe we can generate $125 million of revenue and an increased EBITDA profitability. From there, growth should remain high as we scale in large defense security and infrastructure markets we are targeting. I'm very excited about this outlook for our business. We have worked very hard to get here, and we are committing to executing it. I will now turn back the call to Eric.

Thank you, Yishay. I'm going to wrap the call before Q&A, but first take a moment to sincerely thank you for spending time with us for this deep dive into OAS and our business plan. I have some very simple takeaways. We have world-class dual-use technologies. We have demonstrated value with key customers in huge markets. And I will highlight that our ambition, which I believe is an achievable ambition, is to own the hard kill counter UAS market, and the rewards for winning in the segment will be substantial. Those markets for both Optimus and Iron Drone are growing, and in certain places, we even have urgent demand. So we now have to invest behind the operational plan to realize the growth opportunity in front of us, and we're committed to doing this. And we believe, as we do, we're going to drive significant value for shareholders. So let's open the call for questions and answers. Thank you. Questions?

Curious about the most recent order for the Raider system. Can you get a sense -- you talked about it being part of what's similar to a program of record that almost kind of takes that there might be continuous order flow from that program. Could you maybe elaborate on that? And then I'm just curious about the timing of the revenue and the deployments and all that? And how much of that is part of your second half of '24 forecast? Or do you need other orders alongside that to hit those numbers?

Okay. So I'll share some details, but there's some I can't, particularly around timing of delivery and installs and things of that nature. So the answer to the question as to our second half forecast, we don't need additional orders to make those numbers. So we think we're in good shape in terms of visibility. We are now working to build the systems and get them into live security operations. That's going to take some time. And we do believe, and I think we've said this in our press release, is that successful operation and live combat operations or environments is expected to lead to expansion of the program. So we expect that we -- well, I don't want to put any more dates on it, but we do expect to ship this year.

Right. We have a question that came in online. Does the UAV subsidiary platform leverage the RF IP from the network side of the business? For example, is encrypted 802.16t used in the command and control systems to operate the drones?

So no, the short answer is we have not integrated the Ondas networks communications, wireless communications technology with the drone systems. And I'll ask Meir or Eitan, if you want to give some color on the communications links that we are using in the system and just, it can be generally about the capabilities.

Yes. So that's going to be a bit long, but I will try to do it shortly. So basically, Optimus is working with 2 channels, it has its primary channel, which is usually [indiscernible] or cellular. It's going to be configurated. It's encrypted in whatever standard that required. And there's another channel, which is a safety channel, usually a lower channel, with just the flight commands. And the system is very robust and it can be very easily converted into the needs of the customers. That's really what makes it different.

And redundancy we have in communications is important for obvious reasons. Other questions?

I guess in regards to the defense system and its ability to identify hostile drones based on, I guess, image classification and understanding the drone that it's targeting as it's in play, I guess, GPS-denied and other acute case -- in that environment. Do you expect to need to iterate on on-net detection and on-net classification software for drones in the field as countermeasures are developed as we've seen that can happen relatively quickly? And I'm just curious what -- kind of what your expectations there are? And if you have ways to kind of deliver evolution of that to deployed systems?

Okay, Eitan, I'll ask you to take that. And of course, some of the answer would be sensitive, right? So we will have to be careful on what we can say. I will say before Eitan chimes in that this part of the product and the infrastructure as we're deploying it, the environment is likely to be continuing to evolve. I think we've got a system that can -- I guess, is certainly as advanced as it can be today. So I'll leave it at that, and Eitan, you can add further color.

Yes. Without going into too much classified details. I would say that this system is designed to be trained and designed to be improved all the time. Also, Ondas has a advantage of having Airobotics and its teams, both as a manufacturing and operating under the same roof. So this makes it easier to us to improve the platform according to the operational learnings. And when I'm saying that, I also refer to all of the aspects of the system, including the AI, but not only the AI, all the parameters can be adjusted and configurated to the right condition that we'll meet on ground. So I hope it answered the question.

Next question we have is a 2-part question. It is, is the Iron Drone effective at neutralizing large fixed-wing drones that have been attacking Israel? And in the heat of battle, how can other drone countermeasures distinguish between the friendly Iron Drone and the attack drone?

Okay. Eitan, I'll ask you to answer that as well.

Yes. So basically, Iron Drone can handle the majority of the targets and the majority of the threats. It really depends on the flight profile. There are some flight profile that will require a different system maybe, like an airplane or a gun. But basically, it's capable of handling the majority of them. And for the second question, sorry?

Can you repeat the question?

And in the heat of battle, how can the other drone countermeasures distinguish between the friendly Iron Drone and the attack drone?

Yes. So usually, these systems are connected to an aerospace management system like a larger one. which is responsible for that. And this is how it's usually sold when the air space knows exactly which drones are flying in the sky and they're separating them. I can say that also, if we're losing an Iron Drone, it's not such a big lose. It's not a very expensive platform.

Sorry, just 2 on the Iron Drone and the technology. Just a lot of talk about like drone swarms as the next kind of evolution. So is there -- would there be a separate solution would we need to address that perhaps? Or -- and then second other option I've heard a lot about is just kind of like with laser technology. So how it compares versus that as well?

Yes. So again, I'll try to take the beginning, and then I'll ask Eitan to expand. So as you see, the system design, each pod or docking station is capable of having 3 separate Raider UAVs. So of course, we can handle multiple threats that way. And of course, there can be more than 1 docking station. So we can have a lot of drones in the sky at one time and defending against threats. But it is multilayer security and the homeland security officials will be deploying all the tools at their disposal and just really trying to optimize for what the threat is that has been identified. So Eitan, would you add anything to that? And also, can you comment on the laser systems as part of multilayered security?

So for the swarm question, I think it's -- the question is just using more drones of Iron Drone in more means. For the laser, the laser is not -- like it's pretty hard to use it in every weather condition. So I guess it's a complementary system. So I guess they're going to use the laser and they're going to use Iron Drone in parallel, makes sense. And the Iron Drone has a different collateral damage. So not always they will choose to use one system such as laser, they might be also choosing to use the drone. It's a multilayer protection.

With the Optimus System, what is the limiting factor restricting it to a 3-mile radius?

The limiting factor is typically battery life, really. It's -- the drone has a mission and it has to be able to return. So we're careful to make sure it doesn't go far -- too far, so it can come back.

Is there any plans to adapt the Iron Drone system to have ballistic capabilities?

I don't want to answer that, but it's capable of carrying additional payloads besides on that.

And can you give a little bit more detail on what private financing would look like and what type of partner would be ideal?

I can't go into further detail on that. Other questions? Okay. All right. Well, I think we can wrap it up. I just want to, again, thank everybody for attending both the session this morning here in Baltimore in the webinar and in-person event this afternoon. We really appreciate the opportunity to provide context in and around our business plan and opportunity. and we're going to work really hard to execute. So thanks again, and we'll stay in touch. Enjoy the day.