Overview of Ondas Holdings Inc.

Ondas Holdings Inc. is a leading provider of private wireless, drone, and automated data solutions through its subsidiaries Ondas Networks Inc., Ondas Autonomous Systems Inc. (OAS), Airobotics Ltd., and American Robotics, Inc. Ondas Networks provides wireless connectivity solutions for mission-critical Industrial Internet applications, while OAS develops and integrates drone-based solutions for government and commercial customers.

Financial Performance in 2024

Ondas Holdings reported a decrease in total revenue from $15.7 million in 2023 to $7.2 million in 2024, a decline of 54%. This was primarily due to a $5.2 million decrease in product sales at Ondas Networks, as orders from the rail industry were delayed, and a $4.1 million decrease in product sales at OAS, which had significant multi-drone orders in 2023 but no comparable sales until the second half of 2024.

Cost of goods sold decreased by $2.5 million, or 26%, to $6.8 million in 2024, but gross profit declined significantly from $6.4 million in 2023 to just $345,000 in 2024. Gross margin fell from 41% to 5% due to a shift in revenue mix towards lower-margin development projects.

Operating expenses decreased by $11.2 million, or 24%, to $35.0 million in 2024. This was driven by reductions in human resource costs, professional fees, long-term asset impairments, and research and development expenses. However, the company still reported an operating loss of $34.6 million, an improvement of 13% from the $39.7 million loss in 2023.

Total other expenses, net, decreased by $1.7 million to $3.4 million, primarily due to lower interest expense and foreign exchange losses. As a result, Ondas Holdings’ net loss for 2024 was $38.0 million, a 15% improvement from the $44.8 million loss in 2023.

Segmental Performance

Ondas Networks Segment:

• Revenues decreased by $4.8 million, or 71%, to $1.9 million due to lower product sales to Siemens as rail customers delayed orders.
• Cost of goods sold decreased by $2.4 million, or 51%, to $2.3 million, but gross profit turned negative at -$359,000 compared to $2.1 million in 2023.

OAS Segment:

• Revenues decreased by $3.7 million, or 41%, to $5.3 million due to lower product sales, partially offset by increases in service and development revenue.
• Cost of goods sold decreased by $105,000, or 2%, to $4.6 million, and gross profit declined from $4.3 million to $704,000.

Liquidity and Capital Resources

As of December 31, 2024, Ondas Holdings had $30.0 million in cash and restricted cash, an increase of $15.0 million from the prior year. This was primarily due to $50.2 million in net cash provided by financing activities, including $37.0 million from issuing convertible notes and $7.3 million from selling common stock and warrants.

However, the company had a working capital deficit of $3.1 million and $56.8 million in total borrowings, including $38.7 million in short-term debt. Management expects to fund operations for the next 12 months from existing cash, proceeds from recent financing activities, gross profits, potential prepayments from customers, and additional debt or equity offerings.

The company acknowledged there is substantial doubt about its ability to continue as a going concern, as its funding plans may not be successful. Its future capital requirements will depend on successfully marketing and securing purchase orders for its products and services, as well as efficiently manufacturing and delivering the equipment.

Key Strengths and Weaknesses

Strengths:

• Leading provider of private wireless, drone, and automated data solutions for critical infrastructure markets
• Established partnerships with industry leaders like Siemens Mobility
• Regulatory successes, including the first-of-its-kind FAA Type Certification for the Optimus 1-EX UAV

Weaknesses:

• Significant revenue declines and gross margin compression in 2024
• Ongoing operating losses and reliance on external financing to fund operations
• Uncertainty around the company’s ability to continue as a going concern

Outlook and Future Prospects

The outlook for Ondas Holdings is uncertain given the company’s financial performance in 2024 and the substantial doubt about its ability to continue as a going concern. While the company has made progress in developing its technology and securing regulatory approvals, it faces challenges in generating consistent revenue and profitability.

To improve its prospects, Ondas Holdings will need to successfully execute on its sales and marketing strategies, efficiently manage its operations, and secure additional financing to fund its growth plans. The company’s ability to capitalize on the demand for its solutions in critical infrastructure markets will be crucial to its long-term success.

Overall, Ondas Holdings faces significant headwinds, but its innovative technology and industry partnerships provide a foundation for potential future growth if the company can navigate its current financial challenges.