Red Cat Holdings, Inc. (NASDAQ:RCAT) Q3 2025 Earnings Call Transcript

Red Cat Holdings, Inc. (NASDAQ:RCAT) Q3 2025 Earnings Call Transcript March 31, 2025

Operator: Ladies and gentlemen, thank you for standing by. Good afternoon and welcome to the Red Cat Holdings December 31st, 2024, 8 months stub period Financial Results and Corporate Update Conference Call. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [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 conference over to Jeff Thompson, Chief Executive Officer. Jeff, please go ahead.

Jeff Thompson: Great. Thanks. And 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-K, no exceptions. This document would have taken weeks to review, and did not even ask Chris to sign it. If Chris did sign that would sign that it 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-K. This CFO 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 Lightwave 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. Well, based 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 Triton provisional navigation. I told you folks I’d be brief. And with that, we’re going to turn it right over to questions.

Q&A Session

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

Glenn Mattson: So, yes, I guess this is a quick update just on the kind of sub-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.

Jeff Thompson: I think everybody was going to keep going there. We’re having a call in a couple weeks. 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 investors with you. So, yes, so some activities moving along. 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 will be fun to report when once we officially sign. And we did, I’m pretty sure that we got the yesterday 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 SIR program.

Then we signed LRIP, which we hope it’s, very soon. And we’ll let you know as soon as we do, 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.

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

Unidentified Company Representative: Yes. 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 kind of going to turn into anti-U.S. 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 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 tenders and LRIPs 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 wasn’t massive, but it was a few billion dollars to push Ukraine in. And we were not excluded from some of these people looking to put together some tenders for that. So, Europe is not ignoring 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.

Glenn Mattson: Okay. Great. Good luck on that, and I’ll, jump back in the queue. Thanks.

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

Mike Latimore : Alright. Yeah. Thanks very much. Great to hear about the feature 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 the financial impact?

Jeff Thompson: Yes, great question. 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, although 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 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 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 sheet after we have a full quarter of selling this product.

MikeLatimore: 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.

Jeff Thompson: Yes, we’re just implementing it now. 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 Anduril the Ceramic and companies like that. And 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 through 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.

MikeLatimore: Just last thing for me and this may be more of a town hall question. But at your analyst day, you talked about the prospect’s potential of additional SRR funds this year not next year but this year. Again, any additional, context for you into that?

Jeff Thompson: Yes, it was a little scary, if 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 million to, what we wanted for 2025, which ends in September. We’re feeling pretty good about what LRIP is going to be 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 additional $100 million frankly just because this is this administration every single person that’s talking to them is talking about that drones are the future for warfare that you’re only going to have drones on the fronts, 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 are 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 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, 25, 75 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: Alright. 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.

Jeff Thompson: Well, thanks, everybody, for joining. I apologize for the brief call, but we’ll give a detailed update later this month with the entire management team. We believe this will be much more beneficial for investors in reviewing a sub period covering two months from last year. Thanks again, everyone, and 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.