Ladies and gentlemen, thank you for standing by. Good afternoon, and welcome to the Red Cat Holdings Fiscal 2024 Annual Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. [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 1 hour after the end of the call through November 8, 2024. Joining us today from Red Cat Holdings are Jeff Thompson, Chief Executive Officer; and Leah Lunger, Chief Financial Officer. During this call, management will be making forward-looking statements, including statements that address Red Cat's expectations for future 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, August 8, 2024. 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.

Thank you. Welcome everyone to our fourth quarter and full fiscal year 2024 earnings conference call. I will start by summarizing our performance and recent achievements. Leah will then take you through our financial results in greater detail, and then Leah and I will take your questions. I am pleased to report record results for the quarter and a record-breaking fiscal year for Red Cat. First, for the full fiscal year, revenue increased 286% to a record $17.8 million compared to $4.6 million last fiscal year. Fourth quarter revenue rose to $6.4 million, over a 100% increase from the same period last year, and now a new top line quarter record. This is our fourth consecutive quarter of top line sequential growth averaging above 10%. The last four quarters were driven by feet-on-the-street organic sales revenue. None of this revenue was from a program of record production contract or the Replicator Initiative. These record-breaking achievements were completed with a single product, the Teal 2. During this past fiscal year, global demand continued to surge for small, portable autonomous systems, and Red Cat responded accordingly. We invested across the organization to strengthen our product portfolio and expand our manufacturing capacity to meet the evolving needs of our customers. Our product portfolio has expanded from one drone to three drones, completing our recently announced Family of Systems. Let's discuss the Red Cat Family of Systems. Our Family of Systems strategy is a result of looking to our urgent user needs regarding the deployment of low-cost, portable, field-repairable and recoverable ISR and precision strike systems. This is a paradigm shift in the drone industry where more expensive, nonrecoverable systems have dominated the market for the last decade. The Family of Systems addresses a variety of mission sets for medium-range ISR, short-range reconnaissance and…

Thank you, Jeff and everyone, for joining the call this evening. As Jeff highlighted, fiscal '24 was an exceptional year, marked by record revenues of $17.8 million compared to $4.6 million in fiscal '23. This represents growth of 286%. All four quarters of fiscal '24 brought record revenue sequentially. Quarter four revenues totaled $6.3 million compared to $1.1 million in the same quarter of the prior year, representing a 485% increase. Gross profit for fiscal '24 totaled $3.7 million or approximately 21% of total revenues compared to negative 18% in fiscal '23. We continue to expect steady improvements in gross margin over time as we focus efforts on manufacturing efficiencies and reductions in cost of goods sold. We now have dedicated teams for manufacturing, engineering and warranty and returns to accomplish these goals effectively. Our focus on controlling costs while scaling revenues led to a decrease in operating expenses for fiscal '24. Adjusted operating expenses, which exclude noncash items of impairment loss and stock-based compensation expense, totaled $17.5 million in fiscal '24 compared to $18.1 million in fiscal '23. This represents a decrease of approximately $600,000 or 3%. As a percentage of revenue, adjusted operating expenses decreased from 391% of revenue in fiscal '23 to 98% of revenue in fiscal '24, which demonstrates our success in controlling costs while nearly quadrupling revenues. Our combined cash and accounts receivable balances as of April 30, 2024, totaled over $10 million. Additionally, in July, we secured $4.4 million of non-dilutive financing through the divestiture of our investment in Unusual Machines. Closing this transaction eliminated our equity method investment while providing additional funding for accomplishing our strategic objectives. We are pleased to report that our cash used in operations has decreased significantly on both a quarterly and annual basis. Cash used in operations for…

We will now begin the question-and-answer session. [Operator Instructions].

Before we start with the questions, I just want to do a little bit of housekeeping. I know we've got -- I'm seeing a very large list of questions already, so people don't waste the same question on this. So for guidance, we will resume guidance next quarter. We are in the middle of suites [ph] for the next six weeks. We expect to hear on SRR down selection in the next few weeks. We hope to close FlightWave in the next week or two and believe they could add $10 million to $20 million in revenue in calendar 2025. So we will be able to give and resume with guidance once these data sets are resolved. So I want to get that out there before we took questions. Thank you.

The first question today comes from Ashok Kumar with ThinkEquity. Please go ahead.

Thank you. A three-part question. The first question is that you had mentioned you had $10 million in cash and receivables. Does that include the $4.4 million you just closed with UMAC? The second question is you mentioned that some of the NATO programs of record, the POR are larger than the U.S. Army POR. Can you give us the magnitude? And the last one is, have you received any demand for the FlightWave Edge 130 system? Thank you.

Great, thanks, Ashok. Actually, Leah, why don't you grab the first one and I'll grab the second and third?

Yes, I'd be happy to answer that. So the $10.4 million in cash and accounts receivables was our balance as of April 30, and we closed the sale of our investment in Unusual Machines last month. So the $4.4 million mentioned is in addition to cash and AR as of year-end. Okay, go ahead, Jeff.

Great. Thanks. Yes. So the programs of record in NATO are significant, and you can understand why with them being so close to the Ukraine war. So I'll just give an example of one of them and compare it to SRR. SRR is about a little under 6,000 systems. It's still a very significant contract, but the -- at least one of the programs of record in NATO is for 25,000 systems, it's 4x. So they are pretty massive compared to the SRR program of record. And then I think you mentioned demand for the Flight Edge 130. We've got a great response since we announced the LOI. A lot of our customers that want the cost knowing that we can actually build and meet the demand. It's a great system. And Mike had done a great job designing that system, and the employees there have made a very unique platform that can fly longer than any other vehicle in its size and range. We think it's a great replacement for the now discontinued AeroVironment Ravens. So that's -- we have seen great demand signals for the Edge 130. Thanks.

Thank you and all the best.

The next question comes from Glenn Mattson with Ladenburg Thalmann. Please go ahead.

Hi, yes. Thanks for taking the question and congrats on the quarter. On the -- there was a period of time where you lowered production in Q4 to get the Teal 3 out. So just generally asking about the production capacity and capabilities, so is that back up and running and things going out the door again? And then when it comes to FlightWave and the acquisition, would you move that manufacturing into your existing facility? And just give us an update on some -- on how that all will play out, if you could. Thanks.

Yes. Thanks, Glenn. So the -- we are back in production. We're also -- we are in a pretty large hiring spree right now to scale production of the future Teal drone that we -- that's the drone that we actually submitted for the Army prototype. We are preparing for large-scale production and moving into the deal. We're calling it currently the Teal 3. So we're back in production, we did almost take six weeks. It was a pretty easy decision. Did we want to try to make guidance or do we want to spend the right amount of time building those prototypes to get to the Army to win a contract that's worth hundreds of millions? So obviously, we chose to make sure the prototypes were perfect and built a great bird. And the team did an exceptional job that the new drone has been flying flawlessly. And then on the FlightWave, once we close, we will probably -- we'll be doing simultaneous paths. They actually have a huge amount of demand right now, and we hope to be able to meet that demand for them, one, by continuing to do the production they have in California and simultaneously, in parallel, building a production line in Salt Lake City. So we're -- as you can see, we've been hiring quite a bit. We're gearing up to do both those things I just talked about.

Great. You just mentioned a number of $25 billion potentially for FlightWave in 2025. Is that based on some awards you expect to win? I did -- you mentioned a lot about the Family of Systems and the Replicator program and how maybe you're more applicable to be able to get awards against that revenue source, potential revenue source. So maybe just a little background on that color that you -- since you gave that number. Thanks.

Yes. So the FlightWave system, we go from having a one-product company now into three drones, Family of Systems are all going to be working together through a single controller. So the FlightWave capability puts us into a completely kind of different class of drone. Even though it's still a Class 1 drone, it can do -- it can compete against Class 2 drones with Class 1 pricing. And that's been resonating very well and its unique capability in flight time that's more than its predecessors, but this one is rucksack portable. You don't need two people to launch it. It's not seven feet. You don't have to stand up and throw it in an open field and get shot at. So we think there's a huge amount of demand for this unique product. And I think that the FlightWave is going to fill a huge void. The capability and the time frame and the distances and the speed, it's one of the -- yes, I think it's the fastest drone in the Blue UAS group. So it can get places very quick, they can go very high and it has very long flight time. So we believe $10 million to $20 million was a very safe projection for next calendar year 2025 for that product.

Great. Thanks. And last one for me, Jeff, you mentioned the NATO stuff, and I couldn't quite get what you said. I think you said down selected in the next two months and then I thought I heard you say awarded by the end of the year. Is that -- did I get both those right? And if not, maybe you can correct me.

Yes, down -- once you get down selected, then you work on production contracts. So yes, you've got those time frames correct.

Great, okay. Thanks. Congrats and good luck.

Thank you.

The next question comes from Carlo Corzine with Dawson James Securities. Please go ahead.

Thank you. Great quarter, Jeff. I wanted to kind of go back to the manufacturing capacity. I think the full capacity in Salt Lake was 300 at one time. And now we've got -- I'd like to know how much to FlightWave, what their capacity is and where we're at in the capacity there? One thing we had always talked about because of so many contracts you can't announce was the backlog, hopefully, on a monthly basis, and we haven't seen that a lot. I'd love to see that as you get contracts you can't speak about. And last was, which one gives you the lethal payload? Is that the new thing? I thought it took like two years to get that kind of accreditation or did you buy that through one of the acquisitions? That's it.

Great. Thanks, Carlo. So I'll try to go in reverse here. So we don't actually make munitions that work on FANG, which is our FPV drone. And we're also working on kinetic capability for the Teal 3. So both of those birds will have strike capability. And long-term, we actually expect to look at, in long-term, I mean like next year, we're looking at having the Edge 130 be able to handle a kinetic payload also, which could be very compelling considering it would be a much longer-lasting loitering munition than even the Switchblade 300, which I think only has 12 minutes. So there's -- but when we partner, we're able to basically drop almost anything from these drop mechanisms. They can be kinetic or they don't have to be kinetic. They could be supplies, they could be ammunition. So we don't have to get those approvals. The companies that are making the actual kinetics would have to get those approvals, which can take like two years.

Okay. And on the capacity at Salt Lake?

Yes. Yes, I mean the Salt Lake facility can easily do 1,000s of drones -- not easily, it's hard to do 1,000s of drones a month. But we can get to 1,000 drones a month for the Teal 2/Teal 3 based on getting the demand that we want from that. So we're preparing, as you can see that we are preparing and getting ready for that type of scale immediately. And the FlightWave capacity, we don't know yet. We're hopefully closing in the next week or two. We're going to ramp up their capacity dramatically. We're getting great demand signals on the Edge 130. It's a great bird. It's a great team. But I don't have the answers on the FlightWave yet.

Okay, thank you.

[Operator Instructions] This concludes our question-and-answer session. I would like to turn the call back over to Jeff Thompson for any closing remarks.

Great. Well, thanks for joining us tonight. I want to thank our investors and our employees. I want to thank the finance team for getting two years of audits done in three months. That was a heavy lift. The entire field team for delivering an incredible prototype for the U.S. Army. And I saw a very interesting quote from the CEO of Rheinmetall today. It doesn't convert so well from Germany, but he said, the super cycle, a long-term surge in defense spending is in full swing. Now I'll leave you with that. Thanks, and good night.

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