Red Cat Holdings, Inc. (RCAT) September 2026 Conference Transcript

All right. We'll go ahead and get started. My name is Clark Jeffries. I'm a lead-up defense tech researcher at Piper Sandler. Happy to be joined by Jeff Thompson, chairman and CEO of RedCat. Thank you for joining us.

Thanks for having me.

Well, let's give a primer for anyone in the room who might not be familiar. How did RedCat come to be, and how do you serve the defense industry today?

Yeah, RedCat was founded in 2016, actually, as I started getting into the FPV space when no one knew what FPV was. And I ended up kind of consolidating a bunch of small FPV companies, Rotoriot, Fat Shark, which is now all part of Unusual Machines. And I'm another company, I'm a co-founder. But was looking to put all this great tech in the drone industry together under using a public vehicle. And I think we've done seven acquisitions so far. And then in the middle of all this, which is very interesting. I was probably the most hated person in the FPV community in the mid-teens because I was looking at these things, doing things with defense and or police and first responders, and that whole community was totally anti. So I was literally the most hated man in FPV for many, many years. And then we got it onto the NASDAQ in 2021, and then the war broke out, and the whole world has realized how important, you know, 80% of all activity in Ukraine is from FPV drones. So it is the most prominent munitions, and you need an ISR drone to do that, which we make the Black Widow. And then we recently, in the last year and a half, have gotten into USVs, which we also think is very, very important, considering 70% of the globe is wet.

Yeah, absolutely. So yeah, you've got a portfolio that spans this sort of FPV space, quadcopter, sort of hybrid VTOL, USV, so like boat-to-air, multi-domain autonomous systems. Well, then maybe let's just go through some product lines because I think obviously when we talk about the defense industry, we're talking about procurement motions and gaps in needs within the department. So let's talk about Black Widow. That's the flagship drone program in terms of breaking into the defense sector and winning the short-range reconnaissance program. um where is where was the army at when they were looking at the ssr program and and what led them to selecting red cat they were obviously looking at ukraine trying to learn as quickly as possible um what were the the obvious gaps that they were trying to uh procure yeah a lot of people don't understand this but uh sr was formed because of the first drone use in syria uh and uh people these cheap drones can be used to come after soldiers and the requirements are very old

they were from like 2018 or 2019 pre-war so we got down selected with the original 5 then FLIR Teledyne bowed out because they didn't want to compete against their customers then it went down to 3 then it went down to 2 it was just us and Vantage and then somehow Skydio got back in we have no idea and then it was down Then it was finally just down to us in Skydio, and we do a thing called IOT&E. And I'll just be very blunt, we crush them going head-to-head and write a letter a month later.

Well, I mean, you know, when you think about those requirements and how it's progressed, like where are we at in the sophistication of them knowing that, well, you know, we want this to be ISR, but it's also got to be doing dual mission, It's going to be doing strikes some of the time. Like, how sophisticated is the procurement motion at this point in time, just so that we're aware of level setting where autonomous systems in something like SSR is today?

Yeah, we, you know, and this has been kind of a big subject recently from some other FPV companies, but there's, we didn't go by the requirements. We've been testing against EW in Ukraine. You know, GPS denied wasn't even part of the requirements for SR. So if you just went to the requirements document, you were going to give a soldier a product that was not going to work. So you're putting this thing in his rucksack, sending him to war, and he could probably die because the product doesn't work. And that's still going on. So the evolution of what we've been doing with SR, which is a very sophisticated bird, we can do. We can help helicopters find targets that we interact with the helicopter. We can interact with the FPV drones to tell it, not just say, hey, go over there and look for it. It'd be like, here, we can tell you exactly where it is and push that to the FPV drone. So we're looking, we're integrated, because we sell an FPV, ISR drone that's very, very capable. But what we've done recently, we have a team that's so responsible is to make sure that we never give a warfighter a product that doesn't work in Ukraine. And I can tell you right now, there's a lot of products they're buying right now that do not work, and we see them all the time. um so we've um recently just got back from uh you know over 20 days of flying on the front we don't go to ranges we actually go to the front lines and uh we've had we had the most unbelievable you know flight times we integrated with some other technologies that i can't really talk about that can get the drone back we we were 14 kilometers in on in the front line two miles away from the actual russian border we lost the bird connectivity the the the ukrainian turn the turn the web off our controller and just waited and the technology that we're using there right now it flew back by itself without any communications then they saw the bird turned it back on we recovered the bird i mean that's that's the tech over there right now and we've just we've been integrating with ukrainians the new version of our drone is called the hellcat uh which is based on all the the the new stuff that we've been doing to the it's based on the black widow but the ukrainians helped us develop this new hellcat that works in battlefields we're actually live in the fourth.

And it's something we talked about earlier in the year about the big differentiator being something that's battle proven or something that's reliable because there have been so many new entrants to this space that there's clearly matching to spec or chasing a commercial opportunity but it's not quite technology that's ready for deployment and obviously EW or very denied environments was a big filtering event for the UAS space in the first few years of the war Let's talk about Hellcat and Black Widow in terms of the international opportunities, given that you just mentioned that. What are you seeing from outside of Ukraine, Japan, Philippines, Taiwan? Where are those countries in terms of their procurement process? Do you think that they'll be in a position where Black Widow or a similar SSR requirement will be an obvious near-term opportunity? Just what are you seeing on the ground in terms of their procurement process?

Yeah, we've been in Korea, Philippines, Taiwan, Japan for the last four or five months. We're there right now. We've got a team there right now working with JMOD. And I didn't know because I'm a typical American with bad geography, but Japan goes down to almost 60 kilometers off of Taiwan. So we're looking at ways to change that area so that it can utilize a lot of the tech that we're using in Ukraine right now So when everything gets jammed, our stuff will work. Our boats will work. Our birds will work. There was, you know, a lot of stuff wasn't working in the first few weeks of the Strait of Hormuz. The boats, the USVs weren't working. Orca drones weren't working. And there was some tech that fixed all that. And then they were able to actually function in that environment. So we want to make sure when we look at all those markets that, A, show them stuff that actually works from lessons learned in Ukraine. There's a lot of USV activity there. There's so many islands. We've been working with General Lombardo in Korea, who just got promoted. So other than Ukraine and Europe right now, we're probably doing almost as much right now from Japan all the way down.

Just to put on your kind of military strategist hat for a second, how do you think that those theaters might be different in their procurement desires? I mean, certainly Ukraine is a unique theater. where we've already seen some differences in Iran. Indo-PACOM, I think, is a huge question mark for a lot of people on what will rise to the top. Just to the extent that you have an opinion there, what do you think will shake out?

Well, we've brought some expertise on in Indo-PACOM. We're working with General Flynn, who ran it from 2021 to 2024. He's telling us exactly what you would need to protect that area. So you've got to use a lot of small, smart weapons. If you listen to Alex Karp, even Elon Musk, small, smart weapons that are fully attributable in mass. Everyone used to talk about mass, but in the old days, mass in the art of war was humans. Now it's robots. So you can't just put like 100 boats to cover that area. You need thousands, if not tens of thousands. And we're not going to be able to build them all. And they're different sizes. So to do certain things, like to protect a fleet, you maybe want 50 boats that are like ours that can do kamikaze, ISR. We can spot objects miles away, which we've been very successful, proving to the Navy over the last few months. So you have to have, you know, some people don't like golf, and they don't like golf, but, like, you don't get up on the first tee and take out your putter, right? You take out a driver. So drones are very similar to that. You've got bomber drones, FPV drones, ISR drones. to tell the FPV where to go. They all have to be able to work together. And the same things with the boats, right? If you've got a massive fleet out there, you need reconnaissance. You need logistics. And we have a whole new team of stuff coming out just purely for logistics, for refueling. If you look at how we won the, you know, midway, it was logistics. It wasn't just we had, you know, a lot of different carriers that they didn't know we had. So you just really have to look at the, you know, logistics is how wars were won. So we're really concentrating on that and how to get stuff in the theater. We're also looking at UUV space right now because that's going to play a big part for cat and mouse over there. But it is a massive opportunity.

And anything that you would say is most interesting from a technology perspective that will better allow UAS or autonomous systems to integrate within the force structure? I think something that I'm looking at are like launched effects or swarming, where you kind of imagine if you're looking outside of the bubble of Ukraine, where it's a lot of trenches and people on sticks, the U.S. military is probably not going to want to interact with UAS in that way over the long term. So what do you think is going to be the big kind of magic bullet to sort of getting this equipment in the sort of overall force structure, multi-service adoption? Is it the one-to-many swarming? Is it integrating in launch platforms with launch effects? What do you think will be most important?

It is integration, and a lot of companies just want to sell their whole family of systems and not talk to other people. It's already public knowledge that we integrated into Lattice. We also integrate with Palantir. We're actually looking at an exercise with Palantir right now with our USVs. So you have to integrate with the other players because we're all on the same team. So if your stuff doesn't work with everybody else's stuff, your stuff is kind of useless. So if you look at being able to work with other common controllers, we just partner with Havoc. I think they're here as a private company. They're up in Rhode Island. And so we work with a lot of different folks. We work with a lot of different, like we have some anti-Shaheed stuff. We have missiles, but they use Echodynes, which seems like everyone's going that way. So you can have no need for terminal guidance on the actual interceptor, which saves eight grand per flight. So you have to integrate with all these people because we can't invent all that stuff ourselves. And then you've got to be able to have the common control there, whether it's Lattice or Palantir or someone else. You've got to be able to play nice with that so they can direct that entire theater with, you know, maybe our couple hundred boats, their ships, their birds, bigger birds, you know, group three birds, all interacting together and knowing, like, if you look at some of the lessons they're learning, like, in Ukraine, you ever hear the big wall, the Delta wall? Every single drone in the battle is on that wall, and they know everything about it right to when it actually takes out a target. So having that plane of glass where everybody knows what's going on is crucial for Indopaycom. It's going to be such a massive area. So knowing everything here is going to be super important.

Yeah, the mention of the software layer is super important. Obviously, we're getting to next generation C2 and these things that might be moving people from screens and raw footage or people on sticks to a lot more of a living, breathing pane of glass for assets, especially as we multiply the sensors. Maybe we could, you know, pivot to drone dominance and, you know, the outside of the normal procurement mechanism or a one-off OTA, this industrial-based investment to build a domestic industry. You know, it's still early. We haven't gotten full production awards, but we're in step 2.5. Any big learnings or takeaways from the process? Even just maybe your view on what announcements have come out of the government in terms of the industrial base, what needs to happen from here after we get to the awards, and then the kind of next step.

Pretty interesting. you know drone dominance one the first gauntlet was um the first one i'll just leave it at that um we didn't do so great we uh we had a soldier that had flown on a simulator for three hours and he was to fly one of our missions that's the way it was set up he went the wrong direction completely the 180 of where he's supposed to go but the second gauntlet they did was very professional they learned super quick uh it was a like nine days long um we we we delivered our drones, you know, days early, which was supposed to matter. We worked with two different partners for Kinetics. I think we were the only ones that actually showed up with two different partners that they suggested. But what baffles me is the first award, half those guys on that leaderboard have not delivered. They should be thrown off. It's like you haven't delivered. I mean, you're proving that you can't deliver in months for just 500 drones or 500 drones. I mean, if we win And Gauntlet, too, we'll deliver in about a week. And try to get those extra drones that you get for delivering early. So we have them on the shelf. We build them not just for the U.S., we build them for all over.

Were you surprised by things like the 2.5 where we're going to do bomber platforms? Are any of these SKUs surprising to you that they're being encapsulated in the Gauntlet so far?

No, I think they, well, the drone dominance began the program just thinking FPV drones just go around and fly and look around for targets. That's not how it works. They have to have an ISR drone that tells, like, in Ukraine it's mostly DGIs, which we're trying to replace right now. They go through 350,000 a year of DGI drones. And they tell the FPV drones where the target is because the FPV drone's battery is very short. So if they go out and look around, their battery is going to die and the kinetic is going to go off. So they wait until they see a target, and once the ISR drone sees the target, he tells the FPV pilot where it is, and they guide him to it so they can get right to that. And drone dominance wasn't doing any of that. They were just like, oh, fly around with FPV, which is never going to happen in the battlefield. So I think they've quickly learned that that's not the case. And then we just spent a full day flying with, what do they call it? Oh, vampires. They are massive bombers, and they're blowing 20 watts out. And it was difficult to fly next to them, but we figured it out. And we spent a whole day flying with vampires, bomber drones. Bomber drones are so important over there. I can see why that 2.5, they went to a bomber drone. It's a need. Because FVs are small loads.

And even, you know, based on what you're saying, where, like, even there are some vendors out there that are struggling to meet diminished delivery requirements. You know, how are you feeling about the requirements in two and beyond where we're talking about full domestic supply chain of components? How much of that is going to be a filtering event, you think, for these vendors where they're just not prepared to have the full compliance of domestic components? And then where do you sit today in terms of being able to achieve that?

When we won SOR, we had to go through a production-ready milestone. where they actually, I think we got a check for 300 grand for meeting that milestone for the SR program. And then since then, for drone dominance, they come out and see your stuff, make sure you can produce. And we've actually, the Navy just came out to see our factory in Valdosta for our boats for the same exact reason. Can we meet the production requirements if they give us a big order? So a lot of people have not gone through that process and they're just like, oh no, we can make a bunch of FPVs. We'll just hire a bunch of people. It's like, if you win the contract and you don't have the scale to do it at that point in time, you're never going to meet there. I mean, just go look at the leaderboard, all of you. Drone Dominance leaderboard, you'll see like half of them still haven't delivered, or if they have delivered, it was this week.

Well, let's maybe transition to USVs and Blue Ops. I mean, we were talking a little bit beforehand. What does the pipeline look like for USVs? And maybe just give a background on the State of the Union for USVs, what we've learned so far from similar learnings from Ukraine, maybe early learnings from Vermeuse, like State of the Union on USVs before diving into Blue Ops?

Yeah, I think everyone was really excited about USVs in a very limited space. Like Black Sea is, like, it's not an ocean. You don't have sea state four or five. But they did take out 25% to 30% of the Russian fleet, which has been stuck in the northeast corner of the Black Sea for nine months. They won't move. And then we saw our first USV against USV the other day made history. But people started to realize, gosh, these small, smart boats can do a lot of damage to a lot of USV companies. We're seeing Silicon Valley guys building for requirements. We've got a cool tech stack, and then they try to build a boat, and the ocean eats everything. We did the opposite. I went and met an old friend of mine I've known for 25 years. His family's been building Hinkley boats for 100 years. They became one of the largest boat makers in World War II. They made 500 wooden boats that mines couldn't attach to. But anyway, he had nothing to do what he was working on. He said, I'll make these boats for you any day. It's my dream job. And he's an ex-software guy. He never got into the boating industry because he wanted to not be under the guise of all years to Hinkley. And he just has been running with it. If you come to our Valdosta Day in 21st, it's going to actually, the town's going to be called and the whole state of Georgia on the 21st is going to be Blue Ops Day. But if you go to the factory, you'll see, our quality is so much higher. I'll go against any company. Anyone want to meet us in the ocean, that's an open challenge. We'll meet you any day. We'd love to. We're doing really good in our exercises against other competitors. I'm not going to say names, but we've won every exercise we've went to.

And then maybe we'll just talk about the specific products and sort of the functional categories that you see them going into. Variant 7, but is there anything on the horizon? Let's just talk about specifically your carve-out with what you're doing today in terms of form factor.

Yeah, so the most successful boat ever in USVs is the Magora V5. It's a 15-meter boat, and that's taken out the most target ever. We have a 15-meter boat that we designed from scratch. It can capsize and come back, and we just really over-engineered it a little bit here because the Navy uses it different than Ukraine. Those things maybe last a day. The Navy might practice with it for three or four years and then finally field it into a battle. So we're all the way up here. We actually have stabilizers. They cost a lot of money to put on a boat. They can't afford them over there. So we have a V5 version. We haven't named it yet. But we have our first few coming off the line right now, and they're mostly just kinetic kamikaze. The V7 is a Swiss Army knife. We can do missiles. We can do torpedoes. We have the ACS machine gun that Trump always talks about with taking down Shahids and FPV drones. We now have the Echodyne radar, so we can do all the missiles, the interceptors, all use Echodyne's system. So all that on one little boat that's 28 feet long. It's faster than everyone else. I will actually talk about our competitors. We're twice the speed of Saronic with twice the load, and we still go the same distance. So if you want to go fast and have a boat that's maneuverable, ours is by far a leader.

Before I transition, any questions from the room? Well, you know, it's so interesting based off of what we've seen already in the development of the USB space and that side. Maybe, just curious on what you think will be the procurement trend or trajectory there similar to the question around Indo-PACOM regions, looking at UAS, are the Gulf states going to start seriously thinking about this? I mean, there are obviously some nations that might have not considered it even a year ago and are now faced with very significant economic incentives to maybe have an unmanned surface vessel fleet.

Yeah, there's a lot changing. I think a lot of people didn't pay attention to what's going on in Ukraine and the Black Sea, but when the Schrader-Hammuz happened, everyone realized they're at a disadvantage. We've been to a few places over there recently, requested to come, present EV-7s, and they like the fact that we have integrated drones already on there and it can do interceptors. So also the South America, there's a ton of activity going down there. They can't afford a traditional Navy like we have, but we could build a Navy for some of these countries for $100 million. That would be better than most traditional three or four big ships, right? There's a lot of activity down in South America. I mean, I already talked about from Japan down to Taiwan. there's a ton of activity going on everywhere. Catalyst with Australia Hamu saying, wow, if you've got a waterway and you're not ready for that, you're in trouble.

Do you think it will take longer for the Blue Water Navy to really adopt this procurement change, given that drones don't compete with the Air Force necessarily? So there's a little bit of a category separation there, but we've seen some things in headlines where a USV or a UUV will pop up next to a real naval asset of an adversary, and it's sort of like, oh no, we're going to start having these assets be very, very close to each other and have interactions. Do you think the Navy is ready for the sort of philosophical change required to maybe, instead of orient around number of boats in the water, go after a long tail of autonomous systems?

I've got to be careful because we're hoping them to be one of our biggest customers here. But I'll just be very frank, you know, the admirals like ships. They like big ships to command around. And the new way of doing it, no one believed that FPV was going to be the most successful munition in a massive war. And it is. No one, you know, I don't think the Navy's there yet on, are we going to have, you know, thousands of these small boats mentally? I think everyone in the Department of War thinks that we should be doing that, but I don't know if they're connected yet.

Well, then, you know, last question for me around, you know, just capacity expansion. Obviously, an enormous amount of capacity expansion has come on for the business over the last 12 months. Maybe just if you could share major initiatives that you're planning to do across the business. You talked about over 100,000 square feet for the Blue Ops business. And then also, you know, as you think about serving these international allies, how important do you think it's going to be for the ecosystem to have in-nation production.

Yeah, that request is coming every single day. I had a long call yesterday for a place in the Indo-Pac region. People want to maybe buy a couple hundred boats from us, then partner with someone locally, and then start building there. We have a great relationship in Taiwan. Actually, Hinkley Yachts has been building yachts with a firm in Taiwan since 1978. So we already have a really good partner there. A lot of countries want to get some immediately and then start working on a partnership to build in-country. We've also got a way to ship 20 V7s in one 20-foot container, and it's basically 3D-printed hulls. We have the 3D printer in theater, and we can ship 20 engines, 20 wiring harnesses, everything, and then all the pellets in one container and get that to theater and they can just start building them there.

Yeah, that's fantastic. Yeah, it's a super fascinating question because, I mean, obviously the defense industry has had industrial work share agreements for like the mega billion, you know, if you're going to do a, you know, share the IP for a multi-billion dollar defense contract, industrial work shares. But autonomous systems, you know, we're in this interesting new frontier where we don't quite know how much localized production they're going to absorb, absorb, how strategic they're going to view it, and so it's something to very much watch. Last thing before we wrap it up, most exciting thing that you would want investors to pay attention to over the next 12 months on the red cab business?

We're getting a USB division. Once you start seeing sales, a lot of that can be a massive year for USBs, but we're also getting harder to get.

Yeah, and you think that'll be a direct arrangement rather than an FMS kind of arrangement? and give to Ukrainians. Well, Jeff, thank you very much for making it to Nashville. Thank you.