Participants

Jeffrey Thompson; President, Chief Executive Officer, Director; Red Cat Holdings Inc

Glenn Mattson; Analyst; Ladenburg Thalmann & Co. Inc.

Mike Latimore; Analyst; Northland Capital Markets

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to the Red Cat Holdings' December 31, 2024, 8-month stub period financial results and corporate update conference call.
(Operator Instructions)
Participants of this call are advised that the audio of this conference call is being broadcast live over the internet and is also being recorded for playback purposes. A webcast replay of the call will be available approximately one hour after the end of the call through April 30, 2025.
Joining us, today, from the Red Cat Holdings is Jeff Thompson, Chief Executive Officer and Interim Chief Financial Officer.
During this call, management will be making forward-looking statements, including statements that address Red Cat's expectations for further performance or operational results.
Forward-looking statements involve risks and other factors that may cause actual results to differ, materially, from those statements. For more information about these risks, please refer to the risk factors described in Red Cat's most recently filed periodic reports on Form 10-K and in Red Cat's press release that accompanies this call, particularly the cautionary statements in it.
The content of this call contains time-sensitive information that is accurate only as of today, March 31, 2025. Except as required by law, Red Cat disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call.
It is now my pleasure to turn the call over to Jeff Thompson, Chief Executive Officer. Jeff, please go ahead.

Jeffrey Thompson

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.
I'm housekeeping for this call. Hence, the reason for its brevity.
We hired Chris Ericson as our CFO a couple of weeks ago. The FCC requires the CFO sign the 10-K, no exceptions. This document would have taken weeks to review. We did not even ask Chris to sign it. If Chris did sign that, (inaudible) would sign that, it would have been a big red flag anyway.
I do want to give a shoutout to Sam Pelletier, our VP of Finance, and his team did a great job on the 10-K. The CFO limit prompted to have another Investor Update later this month, one that he can participate in.
A quick update 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 Flight Wave 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 get more details on the Investor Day Town Hall.
Some updates on the Black Widow. Visual navigation is almost complete on the Black Widow. This is a vital feature that gives the Black Widow a unique competitive advantage. The software, as we mentioned previously, will expand our margins. The flight data and tests look incredible.
We also look forward to upgrading the Edge 130 soon to be on the TRICHON with visual navigation.
I told you folks I'd be brief. And with that, we're going to turn it right over to questions.

Question and Answer Session

Operator

We will now begin the question-and-answer session.
(Operator Instructions)
Glenn Mattson, Ladenburg Thalmann.

Glenn Mattson

Yeah. Hi, Jeff. Thanks for taking the question.
I get that this is a quick update just on the stub period. More curious about -- looking ahead, can you give us some sense as to -- a little bit more on the timing, perhaps, on the signing of the SRR deal?
And then, the scope of LRIP, as you're seeing it as they're talking to you about it? Just the most recent update on that would be great.

Jeffrey Thompson

Yeah. I figured everybody was going to keep going there, even though we're having a call in a couple weeks. But, anyway, thanks for the question, Glen. I've talked to you quite a bit, over the last few weeks, and a lot of other investors with you.
So some activities, moving along. On a high level, I'll say we're pretty excited that the LRIP is going to be significantly higher than in the [nasty] report that came out in January, which will be fun to report, once you officially sign.
We did -- I'm pretty sure that we got -- yesterday, the day before -- the features contract signed. We mentioned that it 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 it's very soon. We'll let you know as soon as we do, probably during the town hall.
And then, we have mass production later this year.
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.

Glenn Mattson

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

Jeffrey Thompson

Yeah. Actually, I'm getting that question quite a bit now. Mostly because of the tip between President Trump and Zelenskyy, everyone thought that everyone was going to 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 has EW capabilities and, now, has visual navigation. So a couple things.
One is we're continuing on the previous tenders and RFPs that everyone's getting frustrated that we have not updated on yet. Those are continuing.
But there was a consortium put together of all of the Europeans. It wasn't massive but it was a $2 billion to push Ukraine. And we were not excluded from some of these people looking to put together tenders for that.
So Europe is not ignoring the US manufacturers because of the tip between the Ukraine and the United States. All those things are still ongoing and some of them are actually more enhanced now.

Glenn Mattson

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

Operator

Mike Latimore, Northland Capital Markets.

Mike Latimore

Alright. Yeah. Thanks very much. Great to hear about the feature contract, here.
And then, you mentioned the VNav software in the prepared remarks, how should we think about that relative to your guidance? Cross sales, would that be incremental to guidance? How do we think about that, in terms of the financial impact? (multiple speakers) --

Jeffrey Thompson

Yeah. Great question.
We have not added that to any of our guidance yet. 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, albeit 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.
To have this capability, it is one of the biggest problems that the army is having -- actually, every branch is happening -- because GPSs just 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 visual navigation. And we couldn't have a better partner because they're going to dominate visual navigation.
But, yeah, this 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.

Mike Latimore

Got it. And then, how about just in terms of your company moving to Palantir's operating system? Maybe, a quick update on the status of that and when do you think that might be complete?

Jeffrey Thompson

Yeah. We're just implementing it now.
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 Anduril, the Saronic, and companies like that.
They think it's going to improve their margins. 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 much quicker than if you've ever been to an SAP install. It's a 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 to improve their margins, dramatically.

Mike Latimore

Yeah. Makes sense.
Just last one for me and this may be more of a town hall question. But, at your Analyst Day, you talked about the potential of additional SRR funds this year, not next year but this year, can I get any additional context or review into that?

Jeffrey Thompson

Yeah. It was a little scary if they didn't send that extension in an all, as they say on the hill, ask. We're 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 million to what we wanted for 2025, which ends in September.
We're feeling pretty good about what LRIP is going to be through September. I think 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.
We asked for an additional 100 million, frankly, just because this administration, every single person that's talking to them is talking about (inaudible) that drones are the future for warfare; that you're only going to have drones on the front, whether it's Generals that are speaking at West Point, whether it's Elon Musk, whether it's some of the most influential people at the administration, they're all moving away from exquisite, extensive systems into drones like ours.
And having a Program of Record, as this is happening with this new administration, doesn't hurt. So we asked for an additional $100 million for 2025. We're prepared to deliver that if they're able to get that.
Maybe, it ends up being $50 million, $25 million, $75 million, we don't know. Or 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.

Mike Latimore

All right. Great. Thanks very much.

Operator

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

Jeffrey Thompson

Well, thanks, everybody, for joining. I apologize for 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 in reviewing out stub period covering 2 months from last year.
Thanks, again, everyone. I look forward to talking to you in a couple of weeks.

Operator

The conference is now concluded.
Thank you for attending today's presentation.
You may now disconnect.