Earnings Call Transcript - ONDS Q1 2022

Operator, Operator

Welcome to the Ondas Holdings Inc., First Quarter, 2022 Conference call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Before we begin, the Company would like to remind you that this call may contain forward-looking statements. While these forward-looking statements are Ondas’ best current judgment, they are subject to risks and uncertainties that could cause actual results to differ materially from those implied by these forward-looking statements. These risk factors are discussed in Ondas' periodic SEC filings, and in the earnings press release issued today, which are both available on the company's website. Ondas undertakes no obligation to revise or update any forward-looking statements to reflect future events or circumstances, except as required by law. Please note this event is being recorded. I would now like to turn the presentation over to Eric Brock, Chairman and CEO. Please go ahead.

Eric Brock, CEO

Good morning. It's a pleasure to welcome you to our conference call. I'm happy to be joined today by our President and CFO, Derek Reisfield, Stewart Kantor, the President of Ondas Networks, and American Robotics CEO Reese Mozer. Today we plan to review our financial performance and strategic progress for the first quarter and year-to-date, and discuss our outlook for the rest of 2022. I want to start the call by highlighting that business momentum remains strong at Ondas, with both Ondas Networks and American Robotics leveraging their respective technology platforms to drive market adoption and deployment, which we believe will result in substantial growth. At Ondas Networks, our work with customers remains focused on the large rail networks. We have previously announced initial launch orders for the 900 megahertz network. And as you will learn, we expect expanded orders with these and additional customers over the course of the year. As we execute on the 900 megahertz network, Ondas Networks and our partner Siemens are actively marketing our FullMAX wireless platform into additional Class 1 rail networks beyond 900 in North America. This includes Europe and Asia, in both freight and transit markets. At American Robotics, we remain very focused on executing the business plan. Our strategy is to partner with franchise customers such as Chevron, ConocoPhillips, Stockpile Reports, and others, on initial Scout System installations. As we will describe, our early work with customers in the Scout System has been positive. When you are introducing new game-changing, mission-critical technology in industrial markets, such as oil and gas, rail, and mining, doing it the right way is critical, and American Robotics is on that path. This American Robotics fieldwork with customers, along with the ongoing regulatory work with the FAA, is positioning us to define the market for automated, drone-driven data solutions in terms of how they're architected and delivered to large, sophisticated blue-chip companies in critical sectors of our economy. The bottom line is Ondas continues to invest to win. We're investing on behalf of our customers who need our next-generation data solutions to run their businesses more efficiently, safely, and profitably. With that introduction, let's shift towards outlining the agenda for today's call. First, I plan to highlight the progress we're making and the key business priorities at both Ondas Networks and American Robotics. Then I will ask Derek to share our Q1 financial results. Stewart will then provide an update on Ondas Networks business activity, focusing on our work with the railroads and Siemens. Reese will provide a similar update for American Robotics as we execute the go-to-market strategy with the Scout System. I will then summarize the outlook before we open the floor for Q&A. We continue to have deep engagement with the railroads and Siemens in preparation for volume deployments, starting with the 900 Megahertz network. The initial launch orders for 900 from two rails have now been delivered. These launch orders were primarily for the ATCS products we have jointly developed with Siemens. In addition, we have been working closely with a third Class 1 railroad and began fieldwork in preparation for securing a significant launch order from that customer. This third order is for a railway signaling and interlocking use case with protocols that differ from the ATCS application. We expect this customer to initially focus their deployment on our Venus platform. This is particularly significant as it validates the fact that Ondas's FullMAX IEEE 802.16 compliant platform with its greater data capacity and flexibility allows the railroads to expand the utilization of the new 900 megahertz network beyond the legacy ATCS application. In other words, we are already seeing the evolution away from single-purpose legacy networks to multi-purpose FullMAX enabled networks. Quite clearly, this is very positive for railroads, and as additional use cases are established, the value of our FullMAX.16 platforms to the rail customers only increases, and we expect this to ultimately drive wider deployed systems across all of Class 1 rails. The establishment of the federated MC-IoT Rail Lab is further evidence that our FullMAX.16 technologies are positioned at the core of mission-critical networking. During the quarter, we constructed and delivered the Rail Lab MSC Rail. Recall that MSC Rail, formerly known as TTCI, is a division of the Association of American Railroads or AAR. In parallel, our relationship with Siemens continues to flourish and expand beyond the initial 900 Megahertz network in jointly developed ATCS products. Our head of train or H-O-T program with Siemens for the Class 1s, 450 Megahertz network and for a customer in Asia is progressing well. We expect to announce more joint product development programs with Siemens in 2022. Lastly, I want to highlight that our operations team at Ondas has been working diligently to prepare for the volume orders we expect from the Class 1 rails of Siemens. We have now qualified and secured contract manufacturers and component vendors, and this is important work as we navigate supply chain issues like those reported by many technology and industrial companies. Let's turn now to American Robotics.

Derek Reisfield, CFO

Great. Thank you, Eric. As I share our financial results today for the first quarter of 2022, please note that we've included our financial statements in the press release and the Form-10-Q filed this morning. Also note that the numbers we are reporting don't reflect the performance of American Robotics in 2021, as the acquisition of American Robotics closed on August 6, 2021. Moving to our first-quarter results, starting with the P&L, please note that our revenues and expenses reflect the business development activity in preparation for larger commercial rollouts we expect in the future. Revenues for the three months ended March 31, 2022 were approximately $400,000, as compared with approximately $1.2 million for the three months ended March 31, 2021. The decline in revenue was primarily a result of lower product development activity with Siemens and Aero in the current period as compared with the prior year. Gross profit was approximately $100,000 for the three months ended March 31, 2022, as compared with approximately $600,000 for the three months ended March 31, 2021. Operating expenses increased to $10.1 million for the first three months ended March 31, 2022, as compared with $3.5 million for the three months ended March 31, 2021. The increase in operating expenses was primarily due to operating expenses associated with American Robotics, which we acquired in August 2021, and whose expenses were not included in the first quarter of 2021. The company realized an operating loss of approximately $10 million for the three months ended March 31, 2022, as compared with $2.9 million for the three months ended March 31, 2021. The operating loss increased primarily as a result of the increase in operating expenses associated with the American Robotics acquisition and the decline in revenue. Note that operating expenses and our operating loss included non-cash expenses related to depreciation and amortization, and stock-based compensation equal to $2.4 million for the three months ended March 31, 2022, as compared to $1.5 million for the three months ended March 31, 2021. The majority of the increase in depreciation and amortization costs in 2022, is related to the amortization of intangible assets related to the American Robotics acquisition. Now let's turn to our cash and investing activity. Ondas maintains a strong balance sheet with cash and cash equivalents of approximately $32.1 million as of March 31, 2022, as compared to approximately $40.8 million as of December 31, 2021. We utilized $8.8 million in cash during the quarter, which included $7.1 million of cash used in operations, reflecting primarily operating expenses related to serving customers for Networks and American Robotics. We used $1.6 million in investing activities primarily related to one-time capital expenditures associated with the build-out of the new headquarters for American Robotics and Ondas Holdings, in addition to spending related to building out Scout Systems. As we will discuss, we anticipate moving into these offices in June and do not expect to see this level of ongoing capital expenditures in the coming quarters. We are well-positioned to continue to invest in customer pipeline development and support, and Eric will share those details later in the call. Now, I'll turn the call back over to Eric.

Eric Brock, CEO

Thank you, Derek. Now, I will ask Stewart and Reese to share a more detailed update on business activity in Q1 and early Q2, starting first with Ondas Networks, and then American Robotics. Stewart.

Stewart Kantor, President of Ondas Networks

Great. Thank you, Eric. Let's begin by discussing the 900 Megahertz network status in North America. As Derek mentioned previously, we have now received multiple launch orders from Siemens for the 900 megahertz network. This includes launch orders from two Class 1 rails for the ATCS application we jointly developed with Siemens. The launch order for the first Class 1 was received and delivered in Q4 of 2021. The second launch order was received in January 2022 for a second Class 1, and we're pleased to announce on today's call that we have now delivered that order. We also informed you in the last call that a third Class 1 had begun fieldwork in the 900 megahertz band in advance of a significant launch order. We're making excellent progress with this customer as they plan for a new non-ATCS application in the 900 megahertz band. This activity is critical as it reinforces that the Class 1 rails are now transitioning away from single-purpose, single-application networks to multi-purpose, multi-application IP-based networks. All of this activity is reinforced and supported by the critical MC-IoT Rail Lab that Ondas and Siemens secured from the industry. We are pleased to announce on today's call also that the Lab has now been constructed and delivered to MXZ rail, the technical standard body for the Association of American Railroads. Siemens MXZ rail, and Ondas have jointly begun to develop and implement use cases for multi-rail interoperability and coexistence in the 900 megahertz frequencies. Now moving to the status of the joint development programs with Siemens. As most of you know, ATCS was our first joint development program with Siemens. This program has now been successfully launched and is actively being marketed and sold by Siemens to the Class 1 rails in North America. Recently, Siemens reported that we obtained Canadian certification for the ATCS radios to meet new demand identified from freight and transit customers in Canada. We're pleased to announce we're in the final stages of obtaining that certification. We also informed you that we have multiple other joint development programs in process with Siemens centered around the Head of Train application, both in Asia and North America. We're making excellent progress on these development programs, and have now qualified selected contract manufacturers both in Asia and in the U.S. to support volume production of these new radio ports. Also in the last call, we outlined multiple other programs that we are targeting with Siemens, including a new radio for European locomotives. We intend to keep you updated on these new initiatives as they come to fruition. It's important to know that we continue to identify global opportunities for the FullMAX technology in rail. In terms of growing our organization, we continue to bring on team members to support production and manufacturing. We are pleased to announce today a strategic new hire, industry veteran Kevin Nichter, who will serve as our VP of Product Marketing. Kevin has deep industry relationships with the major rail customers in both freight and transit, serves on several key industry advisory committees, and has prior experience working with the Siemens team. Kevin will help accelerate the deployment of FullMAX across the Class 1 railroads and also open new opportunities in transit markets. We're very pleased to have him onboard now. Lastly, we'd like to highlight that Siemens and Ondas will be jointly attending the upcoming RSSI rail show in Kansas City during the week of May 16th, where the entire Airlink product line will be highlighted. We will be engaging directly with major Class 1 rails on implementation goals. As we shared on our last call, we believe the Greenfield 900 megahertz network deployment will follow previous large-scale technology rail deployments, and we're again sharing the key steps which are integral for the wide-scale rollout of the 900 megahertz network. The technology choice for IEEE 802.16 has been led by the AAR, which represents all of the Class 1s. This centralized approach and control have been critical given the need for both interoperability and peaceful coexistence among the rails. Furthermore, the Rail Lab is under AAR's direction and control to ensure ongoing Siemens operation. Each Class 1 controls its own rollout plans with Ondas and Siemens providing backup support. The heavy lifting for the network installation and operation is almost entirely in the hands of each individual railroad. There are many activities that the rail customers, along with Siemens and Ondas, need to coordinate and complete in connection with roll-out plans. This work ranges from acceptance testing to engineering design and training all the way through to ongoing customer support and maintenance. The launch orders tend to be smaller in size, followed by larger, more substantial orders, six to 12 months later. These larger orders typically come with precise delivery schedules that support the rails' rollout plan. Our primary goal at Networks is to obtain and deliver on scaled orders to multiple Class 1s. We believe that our launch work for the Class 1s, the MC-IoT lab, and our partnership with Siemens will deliver that success. Our initial launch customers have begun discussions with Ondas and Siemens regarding their initial volume orders to begin the wider 900 megahertz deployment. In addition to the 900 megahertz activity, we expect Siemens to place orders for equipment for the HOT edge remotes currently under development.

Eric Brock, CEO

Thank you, Stewart. Before I hand the call to Reese, I want to remind our investors that Siemens, Ondas, and a host of other technology providers are working with the rail customers to drive intelligence into their field operations. And ultimately that leads to more and more automation. Quite clearly, we are in the early innings of the digital railroad investment cycle in the broader MC-IoT investment cycle across not just rail, but other critical infrastructure markets, which we believe will be enabled by next-generation mission-critical private wireless networks.

Reese Mozer, CEO of American Robotics

Thank you, Eric. American Robotics is in an exciting period of growth, as we are well on our way to scaling operations en route to fleet deployments across the United States. Additionally, we've taken several important steps to ensure long-term leadership in our markets, some of which I can share today. As you all know, we are currently engaged with Chevron, ConocoPhillips, and Stockpile Reports, as well as a backlog of customers in the pipeline. Yesterday morning, we announced a new customer, ScottsMiracle-Gro, one of the largest lawn and garden companies in the world. It's worth noting that the majority of our customer engagements have been the result of inbound inquiries. American Robotics still stands alone, as the only drone manufacturer approved by the FAA to operate fully automated drone systems. It's been a year since our historic FAA approval, and as predicted, American Robotics remains in a unique position of leadership within our industry. We're taking full advantage of this first mover position, building long-term relationships with customers in our target markets, and investing in the platform. In support of our plans to deploy hundreds, and eventually thousands, of these systems, we continue to make strides in both ensuring our operations and manufacturing capacity, both of which we see as additional differentiators for the company. Finally, in support of this, we are honored to continue to attract some of the world's brightest minds to join the American Robotics team. I'd like to share updates on the engagements with our initial franchise customer base. We're currently in an important period, where we are working closely with these Fortune 500 companies to prove and demonstrate the safety of the system in the field. Deployed in places like North Dakota, Louisiana, Ohio, and South Carolina, new technology, particularly robotic hardware systems that operate among safety-critical assets, like oil and gas infrastructure, must go through proper vetting processes before adoption on a large scale. We see this process as yet another opportunity to separate American Robotics from the pack. We believe our position as both developer and operator of these systems puts us in an ideal position to do so. It's worth noting that the safety analysis performed by our customers is very similar to those performed by the FAA, placing us in an ideal position to be the leader in this regard. Examples of this include jobs, safety analysis, reliability testing, cybersecurity audits, and integration into existing company software systems. Once complete, we believe these engagements will become a blueprint for which we can duplicate with other customers. As a result, we anticipate significantly reduced sales cycles in 2023 and beyond. As a result of the technology, regulatory, and customer milestones over the past year, our industry leadership and influence are accelerating. Last month, we announced the receipt of seven additional sites approved by the FAA to operate the Scout System in a fully automated manner, bringing the total portfolio to 10 sites spread across eight states. As predicted, our waiver portfolio is growing, whereas the rest of the industry remains stuck. Though we do not anticipate the singular position to last forever, we do believe this head start is valuable enough to snowball into a sustained market leadership position. Additionally, this recent regulatory milestone proves a very important point: our current waiver and exemption package are scalable and will permit us to pursue the commercial targets we've shared for 2022 and beyond. I've said before that it takes the best to build the best. I think it's also true that the best minds want to join the best teams. To that end, I'm very proud of our team growth at all levels of the organization. We have added Tracy Land, aviation safety expert with 25 years as Senior Advisor of Regulatory Affairs and Safety. We also added Gretchen West, former President and CEO of Shiba Aircraft, and 20-year veteran of the drone industry, as Senior Advisor of Business Development. In other roles, we have added talent from MIT Lincoln Labs, GE Aviation, Boston Dynamics, and others. Summing all this up, we are on track in executing the growth plan we laid out previously. Hiring is on target, with the team now up to roughly 60 people and growing. We're scheduled to move into our new headquarters on June 5th. The manufacturing ramp-up is on target with 30-plus systems on order for delivery in 2022. The final topic I'd like to discuss is our product roadmap. True autonomy and FAA approval are the baseline for scalable drone operations in what we estimate to be 90% of all commercial drone applications. This represents an annual, and mostly untapped TAM of $100 billion or more. The number of data solutions and AI opportunities as a result of this is truly massive. We estimate over 10 million or more asset sites globally have the use for automated drone-in-a-box technology. As the uniquely enabled extractor of this data, that puts American Robotics in a position for a number of valuable leadership opportunities. To this end, we have been working closely with our initial customer base to structure partnerships with both near and long-term goals for the products. Some of these, you already know, some I can announce today, and others will be announced later this year. You are already aware of our acquisition of the assets of Ardenna, the leader in AI-powered image analytics for the rail industry, and our investment in Dynam AI, a leader in AI model generation for physics-based scenarios. For new announcements, we have partnered with Cloud Factory, providing American Robotics with a dedicated data-labeling team for training AI models. We're also expanding our partnership with Dynam AI, which is now providing us with a dedicated team of data scientists, physicists, and AI software engineers. For announcements expected later this year, we've been working closely with our customers both at the corporate and operations levels to structure a technology roadmap centered around new payload integrations and AI software offerings. We plan to announce these new product offerings as they become available this year. For a peek into some of those announcements, I would focus your attention on the oil and gas market, and in particular, oil and gas leak detection. The number of future opportunities within each of these markets is truly massive. In our current target markets, we have worked with customers to prioritize these opportunities based on customer value and the speed of integration. We believe these investments will further accelerate fleet adoption throughout our customer organizations in different departments, environments, and use cases. The diversification of capabilities and the use cases will not only cement our stickiness with industrial customers, but we believe will also present the opportunity for additional revenue generation, potentially beyond our current financial models. I look forward to sharing more of these details with you all in the coming months. I will now hand the call back to Eric for some closing remarks.

Eric Brock, CEO

Thank you, Reese. Now, let's try to summarize some of our key business objectives for 2022. We continue to expect Ondas Networks will generate orders this year from at least five railroads, and we're maintaining our goal of at least $20 million in bookings. I will highlight that this bookings target is a significant component of our bonus plans at Ondas Networks. In addition to platform product sales, we plan to secure at least one new joint product development program from Siemens in 2022. For American Robotics, the key targets include securing orders from at least 10 customers and at least 30 Scout Systems by the end of the year. Additionally, we are also targeting at least one customer reorder for fleet deployments by the end of the year. Our success with customers comes down to partnering, partnering with customers to develop solutions that are valuable, yet complex. We expect to secure at least one formal partnership with a customer in 2022. Now, let's turn to the balance sheet and cash outlook, which remains healthy and supportive of our ongoing investment in technical solutions and business development. We expect cash OpEx to be about $7 to $7.5 million in Q2 with modest working capital requirements as we build inventory for expected orders and revenue growth. As discussed on our last call, we put in place a public at-the-market offering in March. The purpose of the ATM is to provide additional balance sheet flexibility to the Company. We believe we may have opportunities to accelerate certain technology investments with Ondas Networks and American Robotics to respond to customer demand. We raised about $2.5 million in April, and that helped offset some of the cash used in the Ardenna acquisition. We've recently seen some dislocations in public and private equity markets within our MC-IoT ecosystem. This too could create investment opportunities for Ondas. In short, Ondas intends to stay on offense and invest and pursue opportunities to cement and extend our leadership positions, and we will do this when and where we feel we can create incremental shareholder value. Let's take a minute to summarize the call and wrap our prepared remarks. Business development is on track with both Ondas Networks and American Robotics, and we expect to build momentum with customer purchase orders throughout the year. As we have outlined, the Class 1 rails are beginning to launch the 900 megahertz network. We have a plan in place to transition launch orders to volume deployments over the course of the year into 2023. As Stewart mentioned, we expect a good turnout in quite a bit of attention at the RSSI Rail Show next week. The Siemens partnership remains strong and is broadening across new products, additional networks, and with new customer segments in transit and international markets. Ondas is preparing internally for a ramp in sales by building capacity and inventory to support expected demand from Siemens in the Class 1 rails during the year. We expect American Robotics to continue to extend its industry leadership by driving value for customers and demonstrating the value of its automated data solutions in the field. American Robotics will continue to scale operations in its key target markets: oil and gas, mining, and rail, as we expand the number of customers in Scout installations and do the work to transition these franchise customers to fleet orders. The AAR will continue to invest in technology, particularly in expanding its payload and data analytics capabilities, and we will do this hand-in-hand in partnership with our customers. Before we open the call for questions, I want to make a few comments regarding the economy and market volatility we've seen in 2022. Clearly, we're all operating in a new business environment characterized by changes related to the pandemic and public policy. We've seen supply chain disruption, war, and geopolitical conflicts increase inflation in a host of other headlines that seem to show an increasingly complex business landscape today and possibly in the future. This impacts how and where people live and work and, of course, how business is operated. While I don't have a unique take on what this all means for economic growth or how this impacts financial markets and other important factors that could impact our business in Ondas, I want to shed light on how we plan to run the business and build value for customers and shareholders in this new environment. First, we see absolutely no indication that the critical infrastructure markets we serve are structurally hobbled in this environment. In fact, as globalization trends change, the services production in the labor size of the economy rebalance and supply chains adjust across the world, we believe that investment in infrastructure will accelerate in the years ahead. Of course, that will be terrific for Ondas Networks and American Robotics. Secondly, we also believe our critical infrastructure customers and partners need, more than ever, our next-generation data platforms to operate their businesses more efficiently, safely, and profitably. We are in the early innings of an MC-IoT investment cycle, and the solutions we architect will define these markets. We will continue this work and strengthen our ecosystem. With that said, I'm excited about 2022 and the momentum we have in the businesses. Our team has worked extremely hard, and our shareholders have supported this difficult work, for which we are grateful. We firmly believe we are well positioned to deliver to you in the quarters ahead. Operator, I'd like to open the call to Q&A.

Operator, Operator

We will now begin the question-and-answer session. At this time, we will pause momentarily to assemble our roster. Our first question will come from Timothy Horan of Oppenheimer. Please go ahead.

Timothy Horan, Analyst

Thanks for the information on the call. Eric, could you provide more details on the 900 megahertz build-out? What is your current estimate of the total addressable market for that sector? Additionally, could you differentiate between what is necessary to meet FCC requirements and the value-added services that could be offered? When do you anticipate that equipment will need to start shipping to comply with the FCC requirements?

Eric Brock, CEO

Thanks, Tim. We've outlined the TAM for the 900 megahertz network at $300 million, and we think that will grow. Over a third of that should be related to the ATCS upgrades. Some of these deadlines are starting to kick in in the second half of next year. Over the next two years, the rest will follow. So, we expect to start working on this now, and we are engaged in those conversations. Launch orders have started to allow us to see more for the rest of the deployment process.

Timothy Horan, Analyst

When do you think equipment will have to start shipping in size orders for them to meet this deadline? Is it the third quarter this year, fourth-quarter, or first quarter of next year? Any color on that would be helpful.

Eric Brock, CEO

We are in conversations now for the volume purchases and we expect deliveries to begin in the second half. Some of that will be in Q3, and a bunch of those will be in Q4. We're starting to see the inventory build for that, and we began ordering components. Yes, we will be able to deliver.

Timothy Horan, Analyst

On the cash front, do you have enough cash to meet your business model now, or do you have to raise more? Can you talk about some of the sources for cash? Can you tap into some credit markets or other markets, besides the public market?

Eric Brock, CEO

I feel good about where we're at on the balance sheet. The rail orders will become meaningful. This is not a small network or a small market. We can generate significant margins and gross profit. We have bank opportunities to expand our business, but that's not our plan right now. I believe we're well capitalized.

Timothy Horan, Analyst

Thank you.

Operator, Operator

Next question comes from Mike Latimore of NCM. Please go ahead.

Mike Latimore, Analyst

Thanks a lot. First question is on the rails. You mentioned that the second order, I think, was delivered. Is that going to be a second-quarter revenue event?

Eric Brock, CEO

No, that was a first-quarter revenue event. The launch orders are modest in size and that starts the whole internal process with the railroads, as well as with Siemens regarding the larger volume purchases.

Mike Latimore, Analyst

And then on the third quarter, that's on the larger size. Is that still kind of a second quarter event or second half year?

Eric Brock, CEO

We're trying to get it in the second quarter. It's hard to put a stake in the ground; we are active with a customer and the work to date has been very positive.

Mike Latimore, Analyst

The Ardenna acquisition seems interesting. What is the next step here in terms of go-to-market with that?

Eric Brock, CEO

Ardenna has been a significant pipeline of potential customers, not just in North America with big Class 1s, but globally. So, there's a lot of interest. We're getting to know those customers now and trying to see where their timelines are.

Reese Mozer, CEO of American Robotics

The plan with Ardenna is to sell both as a standalone product and integrate it with the Scout System. The two big customers Ardenna worked with prior to the acquisition are BNSF and CFX, obviously two of the biggest rails in the space.

Mike Latimore, Analyst

It would be logical that customers would want to buy that package solution with Scout, I'd imagine.

Reese Mozer, CEO of American Robotics

Yes, absolutely. Ultimately, that's been kind of the issue with data analytics in the past: you need high-quality data for high-resolution, high-frequency, which is what the Scout System provides.

Mike Latimore, Analyst

You talked about 10 customer accounts by year-end for American Robotics, and you mentioned a one repeat order for fleet. How would you define fleet at this point in terms of number of units?

Reese Mozer, CEO of American Robotics

At least 10 visibility towards 100 and more. We see this business really being a step function with these customers, especially at this point, it's one to two units’ pilots. Once we improve out a number of aspects, we anticipate a big step function there.

Mike Latimore, Analyst

Thanks a lot.

Reese Mozer, CEO of American Robotics

Thanks, Mike.

Operator, Operator

The next question comes from Carter Mansbach of Forte Capital Group. Please go ahead.

Carter Mansbach, Analyst

Good morning, gentlemen. Congratulations on all the accomplishments on both sides of the business. Eric, I think you need to clarify what you think about the cash situation because that's a concern. Do you think you need to raise more cash or not?

Eric Brock, CEO

I want to emphasize that I am very confident in our balance sheet and we don’t anticipate needing new cash with our current plan. We see potential for improvement in the rail business.

Carter Mansbach, Analyst

So to be clear, if you're not looking to buy another company in the private equity market, and things go as planned, you do not believe you need any additional cash?

Eric Brock, CEO

On the current plan, we do not need additional cash.

Carter Mansbach, Analyst

Perfect. Thanks, guys. I appreciate it.

Operator, Operator

Our next question comes from Ross Stephens. Please go ahead.

Unidentified Analyst, Analyst

Hello. Thank you for taking my call. Question on the product bookings of $20 million target for 2022: how much is on the books now, and how much of that would be 2022 revenue?

Eric Brock, CEO

I can't give you the number of what that will translate into revenue because that's dependent on the timing of orders and the deployment plans. We do think quite a bit of it will come into this year. In terms of backlog, we have not built substantial backlog yet, but those conversations are beginning, and we have visibility on the numbers.

Unidentified Analyst, Analyst

Okay. Thank you.

Operator, Operator

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

Eric Brock, CEO

Thank you, Operator. I want to thank you all for joining us today. We look forward to chatting again soon, ensuring updates on our progress at Networks and American Robotics during the quarter. We plan to attend multiple investor conferences in the coming months, and I hope to see you there. As we close the call, I want to thank you again for joining us and express gratitude on behalf of the entire team at Ondas for your support. We're incredibly grateful and know every day we have to continue to earn that support. That's what we're working on. We began the year with terrific momentum and look forward to sharing updates on our key initiatives over the course of the year. It's time to get back to work, so I hope you have a great day, and we'll talk soon.

Operator, Operator

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