Red Cat Holdings, Inc. Q1 FY2025 earnings call

• Switched to a calendar year starting January 2025, aligning guidance with calendar year 2025.
• Record Q1 revenue of $2.8 million, a 59% Y/Y increase.
• Delivered final prototypes to the Army for IOT&E, with ~40 systems sent to the Army and Teal 3 units built for demos and partner integrations.
• Retooling and preparing for high volume production of Teal 3, implementing quality management systems to meet scaling requirements and aim for AS9100 certification in 2025.
• Launched the Red Cat Family of Systems, expanding from one product to three, including the FlightWave Edge 130 Blue, Teal 2, and FANG.
• Backlog reached a company record of $13 million.

In the first quarter of Fiscal 2025, Red Cat Holdings reported revenue of approximately $2.8 million, a 59% year-over-year increase. The product segments include the Family of Systems. About half of the $13 million backlog is attributed to the FlightWave Edge 130 Blue, which was recently acquired. The Teal 2, FlightWave Edge 130 Blue, and FANG are part of the product mix, with the Family of Systems expanding the product range and revenue streams.

• Expect revenue for 2025 to be $50 million to $55 million without SRR or NATO programs of record.
• Backlog stands at approximately $13 million, with potential to change daily as sweeps are finished.
• Raised approximately $8 million in debt to help reach prepayments for large contract wins without further dilution, aiming to get to January/February time frame for first funds from large production contracts.
• Switching to calendar year aligns guidance for better visibility and consistency.

• Uncertainty regarding SRR down selection, as the Army has not provided an update yet and final production contract award was scheduled for September 2024 but not received.
• Dependency on bureaucratic processes for NATO contract wins, with delays possible due to government fiscal year and continuing resolutions.
• Potential delays in large contract wins affecting the timeline for shipping backlog items.

Q: Can you give color on the product mix of the $13 million backlog and if it will ship this calendar year?

A: About half of the backlog is FlightWave Edge 130 Blues. Hoping to ship a significant portion of the backlog by the end of 2025, though transitioning from fiscal to calendar year adds some complexity but the company is working to ship as much as possible.

Q: Can you talk about the product mix in the $55 million guidance for 2025, including FPV?

A: FPV is expected to be ~$5 million to $8 million of the $55 million, with the remaining split roughly 50-50 between Teal 3 and FlightWave Edge 130 Blue.

Q: How much capital is needed to get to profitability, and about the $8 million debt raised?

A: Raised ~$8 million in debt to get to January/February time frame for first funds from large contracts. Goal is to get to prepayments without further dilution, and this debt helps in that process.

Q: How are SRR and NATO contracts tied, and when will FlightWave financials be combined?

A: SRR and NATO contracts are independent. FlightWave financials will be included in the report for the three months ended October 31, reported in mid-December, including September and October activity. Switching to calendar year aligns better with contract finalization timelines around December/January.