Ondas Holdings Inc. (ONDS) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A session indicate a positive outlook. The company is on track for record revenue growth and backlog expansion, with strategic partnerships enhancing market reach. Debt reduction and operational efficiency improvements are positive indicators. While some responses were vague, the overall sentiment from analysts was optimistic, especially regarding potential large contracts and expanding customer base. The reaffirmed revenue guidance and strategic acquisitions further support a positive sentiment, likely resulting in a stock price increase over the next two weeks.
Key Financial Performance
Quarterly Revenue $6.3 million, a more than sixfold increase over the same period last year and up 50% sequentially. This growth was driven by disciplined execution at OAS, delivering against existing programs, expanding with current customers, and capturing new programs with new customers globally.
OAS Revenue $6.1 million compared to $0.3 million a year ago, reflecting a significant increase due to shipments of products and services to defense and homeland security customers in Israel, UAE, and Europe.
Gross Profit $3.3 million, representing a 53% gross margin in Q2 2025, compared to a gross loss of $0.2 million in Q2 2024. The increase in gross margins year-over-year results from higher-margin products revenue at OAS compared to lower-margin service and subscription revenue in Q2 2024.
Operating Expenses $12.6 million in Q2 2025, up from $8.1 million in Q2 2024, an increase of $4.5 million. This was primarily due to increased human resource costs to support business growth and strategic initiatives, including $2 million higher employee costs and $1.6 million higher stock-based compensation.
Adjusted EBITDA Improved from a $6.7 million loss in Q2 2024 to a $5.8 million loss in Q2 2025. This reflects the increase in gross margin exceeding the increase in cash operating expenses.
Cash Position $68.6 million as of June 30, 2025, compared to $30 million as of December 31, 2024. This improvement was due to $53.9 million in cash from financing activities, including $42.7 million from an equity offering and $10 million from warrant exercises.
Backlog $22 million at the end of Q2 2025, up from $10 million at the end of 2024. This growth reflects strong global demand for the Optimus and Iron Drone platforms.
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Operating Highlights
Record quarterly revenue: Generated $6.3 million in Q2 2025, a sixfold increase from the same period last year, driven by OAS.
Iron Drone Radar system: Combat-proven with a leading military customer, fueling global marketing push and new customer acquisitions.
Optimus System: Expanded UAE drone box fleet for public safety missions and secured additional defense and homeland security opportunities.
Defense and homeland security markets: Expanded footprint in Europe, the Middle East, and the U.S., with deployments in NATO countries and Asia.
FAA regulatory advancements: FAA launched new rule-making process to enable nationwide BB loss drone operations, benefiting Ondas' drone platforms.
Backlog growth: Backlog increased to $22 million at the end of Q2 2025, up from $10 million at year-end 2024.
Balance sheet strength: Ended Q2 with $68.6 million in cash and fully retired convertible notes, leaving no holding company debt.
Production and service scaling: Expanded operational footprint in the U.S. and Europe to support scaled adoption of platforms.
Mistral partnership: Accelerates U.S. government adoption of Iron Drone and Optimus platforms.
Rift Dynamics partnership: Supports localization efforts in Europe and aligns with U.S. DoD priorities for low-cost, mass-producible drones.
Zickel Engineering acquisition: Enhances capabilities in advanced drone and defense system development, strengthening relationships with military customers.
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Risk or Challenges
Market Conditions: The company faces risks from fluctuating revenues in Ondas Networks due to the uncertainty around the timing of customer activity and commercial rollouts in the 900 MHz network and other rail networks.
Competitive Pressures: The company is in the early stages of platform adoption, which could expose it to competitive risks as it works to establish its position in the market.
Regulatory Hurdles: While the FAA's new rule-making process for BB loss drone operations is a positive development, the company is still navigating regulatory complexities for its drone systems, including achieving Green UAS and Blue UAS certifications critical for DoD adoption.
Supply Chain Disruptions: The company is reliant on partnerships for manufacturing and supply chain resilience, which could pose risks if these partnerships face disruptions or fail to deliver as expected.
Economic Uncertainties: The company’s financial performance is heavily reliant on securing new customer programs and expanding existing ones, which could be impacted by broader economic conditions.
Strategic Execution Risks: The company’s ambitious M&A program and global expansion plans require significant operational and financial resources, posing risks if not executed effectively.
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Guidance & Outlook
Revenue Target for 2025: Ondas reaffirms its full-year revenue target of at least $25 million in 2025, with more than $20 million expected to be generated by Ondas Autonomous Systems (OAS).
Customer Pipeline and Backlog: The customer pipeline is growing and maturing, with significant strategically important orders expected from new customers in the second half of 2025. Backlog has grown to $22 million at the end of Q2 2025, up from $10 million at the end of 2024.
Defense and Homeland Security Expansion: OAS is expanding its footprint in defense and homeland security markets in Europe, the Middle East, and the United States. The Iron Drone Radar system is combat-proven and fueling global marketing efforts. Additional defense and homeland security opportunities are anticipated to close before year-end.
Product Deployment and Market Opportunities: The Optimus System and Iron Drone platforms are seeing growing adoption. Deployments include NATO governmental orders, homeland security pilots in Asia, and public safety missions in the UAE. These deployments are expected to convert into multiyear programs and additional growth opportunities.
Strategic Acquisitions: Ondas plans to execute at least two strategic acquisitions in the second half of 2025 to expand capabilities, market reach, and enhance revenue mix and margin profile.
Regulatory and Policy Tailwinds: The FAA's new rule-making process to enable beyond visual line of sight (BVLOS) drone operations nationwide is expected to benefit Ondas significantly. The company is also pursuing Blue UAS certifications for its platforms to facilitate DoD adoption.
M&A Program and Partnerships: Ondas is progressing its M&A program and has recently acquired Zickel Engineering and partnered with Rift Dynamics. These moves aim to strengthen its defense and homeland security capabilities and expand its global operating platform.
Production and Supply Chain: Partnerships with Detroit Manufacturing Systems and others are expected to strengthen U.S. supply chain resiliency, reduce costs, and improve gross margins.
2026 Outlook: Ondas is positioning itself for sustained growth into 2026, supported by a growing backlog, maturing customer pipeline, and strategic acquisitions.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Eric, just on that last slide, I guess, you talked about $23 million plus of bookings. It seems like demand is very diverse, and you could kind of hit that or exceed that in several ways. But are there 1 to 2 big deals that you're expecting here? Or maybe just clarify kind of the source of those bookings confidence and a little bit more international versus U.S., Optimus versus Irone Drone.
A:Eric explained that the $23 million bookings are based on their marketing program and customer engagement strategy. They start with small orders (POC) and aim to expand to larger infrastructure buildouts. He mentioned that the pipeline includes potential orders in the tens of millions of dollars, but they are being conservative in their guidance until visibility improves.
Q:You mentioned 2 control acquisitions. Is that in addition to the small one you just referenced today? And then I assume would that be upside to revenue?
A:Eric confirmed that the 2 control acquisitions are in addition to the transaction with Zickel and Rift. He stated that these acquisitions will be revenue-generating and that the pipeline is robust.
Q:The gross margin was really good in the quarter. Is that a good sort of reflection of what your OAS business looks like kind of at scale?
A:Eric stated that the gross margin is a good reflection of the OAS business at scale and believes it can improve over time through volume and design for manufacturing. However, he cautioned that margins might be volatile quarter-to-quarter as they are not yet at scale.
Q:If I look back at the Investor Day, I think you guys talked of $40 million for 2026 of OAS revenue. I mean, was that always thought to be organic? Or did this $40 million target always kind of include these 2 potential acquisitions in the second half of 2025?
A:Eric clarified that the $40 million target for 2026 is entirely organic, and the acquisitions will be accretive to the 2026 outlook as well as the second half of 2025.
Q:Maybe can you offer up a little bit more detail around the Kestrel win with the Urban Public Safety Agency and the use case around that?
A:Eric explained that the Kestrel system is an airspace awareness tool and part of a layered security approach. The bulk of Kestrel activity is bundled with Optimus infrastructure deployments. The first order was delivered, and there is potential for further engagement with the customer.
Q:Are you guys working with additional police departments around the U.S.?
A:Eric mentioned significant interest in counter-drone technologies globally and in the U.S., particularly from ministries of defense, homeland security, and major urban public safety groups. He refrained from naming specific organizations but highlighted evolving regulations that will allow broader deployment of their technologies.
Q:Eric, on Ondas Networks, qualitatively, it seems like we've broken the ice here, and it feels like we're seeing more momentum, I think, than we've seen in a few years. But what are your thoughts on what's going on there?
A:Eric agreed that engagement with railroads is broadening and deepening. He noted progress in validating technology and applications, moving from siloed networks to general IP networks. He expressed confidence in revenue generation from 900 MHz and 450 MHz networks by 2026.
Q:Can you give us maybe just a sense of what's going on with the pipeline at this point?
A:Eric stated that the pipeline is growing and advancing, with significant activity in Europe and the U.S. He highlighted engagements with homeland security organizations, militaries, and defense vendors, as well as participation in high-profile projects like Project Vanaheim. He expressed optimism about converting the pipeline into revenue over the next 3-12 months.
Q:Do you know of anyone else that's trying to pursue a platform strategy for OAS like you are? And maybe you can elaborate a little bit more on what the strategy is for that platform.
A:Eric explained their focus on both technology platforms (e.g., Iron Drone, Optimus) and an operating platform strategy. The modular systems allow integration with various technologies and partners. He emphasized the importance of scaling operations globally and leveraging partnerships for efficiency and market penetration.
Q:Can you maybe just broadly give us a sense of if you need to make any more big investments or new partnerships to meet the kind of capacity you need to deliver these systems?
A:Eric stated that they are building leadership, partnerships, and ecosystems to support scaling. They are layering in leadership at OAS, building an advisory board, and leveraging partnerships to achieve positive operating leverage. Acquisitions and partnerships are also aimed at acquiring expertise and scale.
Q:Do you have multiple DoD potential large contracts in the pipeline? Could you win more than one?
A:Eric expressed optimism about the DoD pipeline and mentioned the possibility of winning multiple contracts. However, he set the expectation for at least one contract by year-end, with the potential for more.
Q:Review of Unclear Management Responses
A:Eric avoided providing specific details about additional police departments they are working with in the U.S., citing regulatory and confidentiality reasons. He also refrained from elaborating on the exact number of DoD contracts in the pipeline or their specific timelines, using cautious and vague language.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Asia
Block
Co Inc
Counter UAS
DoD requirement
Drone Radar
Drone platform
FAA
IP network
Inc Research
Iron drone
Kliner
NATO
NYPD
RD
Research Division
Secretary
UAS capability
advantage
balance sheet
conversion
counter UAS
delivery
detection system
distribution
dot network
future
megahertz network
network capacity
noncash item
order defense
partnership
period
quality
share
standard
system development
track
voice IP
ONDS Transcript
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The earnings call showed mixed signals. While there was a 25% revenue increase and improved gross margin, the company still reported a net loss and negative cash flow. The use of non-GAAP measures raises concerns about financial transparency. The raised revenue outlook and strategic partnerships suggest potential future growth, but current financials and lack of detailed strategic discussion temper expectations. Given these factors, a neutral stock price reaction is anticipated over the next two weeks.
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The earnings call summary indicates strong financial performance with significant cash flow from financing activities and strategic acquisitions. The Q&A highlights robust demand due to geopolitical factors, successful integration of acquisitions, and positive growth forecasts. The partnership with Palantir and the development of innovative products like ISR systems and stratosphere balloons further enhance the outlook. Despite some uncertainties in management responses, the overall sentiment is positive, with expectations of long-term growth and operational leverage. The stock is likely to react positively, driven by strong demand and strategic initiatives.
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Positive11-13
The earnings call reveals strong financial metrics, a growing customer pipeline, and strategic acquisitions that bolster Ondas' market position. The Q&A section highlights robust product demand, especially in defense and homeland security, and confidence in future growth, despite some unclear timelines. The positive outlook for 2026 and improving margins further enhance sentiment. While specific guidance details are deferred, the overall sentiment is positive, with an expected stock price increase of 2% to 8%.
Ondas Holdings Inc. (ONDS) Q2 2025 Earnings Call Transcript
Positive8-12
The earnings call summary and Q&A session indicate a positive outlook. The company is on track for record revenue growth and backlog expansion, with strategic partnerships enhancing market reach. Debt reduction and operational efficiency improvements are positive indicators. While some responses were vague, the overall sentiment from analysts was optimistic, especially regarding potential large contracts and expanding customer base. The reaffirmed revenue guidance and strategic acquisitions further support a positive sentiment, likely resulting in a stock price increase over the next two weeks.
ONDS Slides
ONDS Report
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