“NASDAQ RCAT – Interview with CEO Jeff Thompson –($RCAT Impact Stock)

Good to see you.

Yeah. You know, we've been putting our heads down just working on everything that's super important for our products and to get ready for what's looking like it's going to be an unbelievable 2026. The way basically all these budgets have changed from 2025, and the $35 million LRIP contract we got, which put us at about 40 million for 2025 for SR, which is great. But the total for the Army in the budget for last year was actually, it's right here, it was 70.5 million for SUAS, and this year it's 747 million, a 961% increase. So that should be pretty exciting for everybody. But that's a specific line item that we're pulling from as a contract winner.

There's a lot of steps that lead up to things like this, which we'll be very cautious on going forward in the future. But our goal was, we thought we'd get approximately what we got, but we got actually more from the US Army for the SR contract for 2025. But we're also hoping to get three months of 2026, but we're not getting that because of the continuing resolutions stuff that went into not getting approved till July, and then they shut down the government, and they still haven't approved the new budget, which supposedly is supposed to be signed end of December or early January because they don't want it to go past that and have to deal with another shutdown thing. So the budget for 2026 for just the Army's SUAS, which like I said went from 70 million that we got 40 million of, to 747 million. Now that doesn't even include the 1.4 billion for small drones for the One Big Beautiful Bill, which goes through 2029. So that is exceptionally more stuff. But I mean, when we got our down select last year, basically a year ago, we knew how many systems they were supposed to buy. We knew it would go into a bunch of small contracts. Then LRIP was the last one. Everyone said, all the haters said that LRIP was going to be 12 million. Ended up being 35.1 million. Which gave us a total of about 40 million. Our competitor got about 12 million, and five of that was five million that we turned down because we couldn't make them because the Army was still giving us new issues to add to the drone. So we weren't going to go to mass production just to get a small piece of that pie. So it would have been 45 million for us and seven million for our competitor, ended up being 40 to 12. That's 74% to Red Cat. If you ask Gemini what Red Cat's going to get in 2026 from the budgets, it's insane. It says that between the One Big Beautiful Bill and the 747 million, we should get at least 400 million. That's not me. That's me playing on Gemini.

Yeah, Gauntlet just came out. So the big headline number that's getting everyone really excited is 300,000 drones. And frankly, the only way they're going to get there is mostly it's going to be FPV, one-way attack drones. But people don't understand, or they've never done a ride-along to see how they're actually used, like I have. And I was in training, I wasn't in battle. I don't want to do a Tim Waltz on us all here. But they train like they operate there, and they use one is none and two is one. So they use two or three Mavics, it can be 20, sometimes it's 40, as many as they can carry FPV drones. So if they're trying to do 300,000 drones, it's going to have to be cut back to 250,000, and 50,000 of those are going to have to be ISR drones because FPV is useless without the US getting the targets for them and to give the shooter something to shoot down. That's literally how it works. So it's going to be a good portion of those are going to have to be from SR, short-range reconnaissance, which is exactly what they're supposed to do, go find targets so FPV can go in and kill them. So this Gauntlet's going to be massive, absolutely massive for Red Cat.

Oh, we're getting zero. We're getting zero, which is fine because you know what? People don't understand that. They're not hearing from us. We're not being very vocal. What we're doing is going into places constantly to work on our boats to make sure they're getting proven every single day. They're in a proven environment every single day. So we got the best tech stack out there. We get a three-year head start on all these people that are just starting to learn how to build USVs here in the United States. And then we got boat builders that are the best in the world. Our hulls are going to be magnificent. You combine our tech stack, our hulls, our scalability, we've done this before. The people that we hired to build the Blue Ops team, Barrett Hinckley and Sandy Spalding, they're building an incredible team. The tech that we're putting into these things has never been done. So the improvements we're getting from our partners in Europe are going to be unbelievable. Because they're trying to just get stuff out there, just like FPV drones, just get something out there that works and can go kill bad guys, blow up all those ships. But we're looking at refinements. We're looking at ways to make sure that our boats are so stable when we fire missiles to try to take down a plane that we have great aiming capabilities with that. When we launch torpedoes, when we launch our swarms off of these boats, having Blue Ops gives us a huge advantage over other drone competitors that just have drones that can only launch on land. We now have a navy. One of them, the V11, we're basically calling an aircraft carrier that's going to have so much stuff on them. We'll have swarms. We'll have some bigger bomber drones. They can drop heavier loads. We can get you 1,200 nautical miles into theater. Then we can put drones that can actually go another 80 kilometers. And you're deep into the enemy and you don't care if they come back, right? So we got torpedoes that'll be on these things that can launch underneath. We'll have the missiles for surface-to-air. And then these things are filled with explosives. If we think it's worth killing a $600,000 boat to take out a billion-dollar ship, we'll do it, and we'll have swarms of these things.

Yeah, the baseline, the V7's around 750. If you get some volumes, you can get it down. So you sell 100 boats at 75 million, you sell 300 boats, it's a lot more than that, right? So 225 plus. I mean, all the revenue that we've been talking about and any projections or any stuff, like for instance Q4, so everyone's all bummed out that we brought down our guidance after we had to sit through all these weird government issues and not getting our contracts signed till July so we couldn't start building them until August. But when you look at what we're doing, we're going from 3 million in revenue, our guidance was like 23 million for Q4. Let's just call it 24 million. So 800% growth in two quarters. I mean, that's insane. And that puts us at 100 million annual run rate for 2026 coming out of Q4. So we're not getting credit for a lot of things. And it's because we're in the penalty box. That's fine. But I don't care if I'm in the penalty box right now. We're so well funded. I don't have to kiss Wall Street's ass. I appreciate our investors, but right now we can just put our heads down. And some of the things we're doing with the Black Widow, which people will find out soon enough, it's going to be one of the most capable drones in the battlefield. Real battlefields, proven battlefields. We're not just talking about a requirements document that we can all go fly around and everyone's like, 'Oh my gosh, the camera's not perfect.' The bottom line is almost all of these drones that we compete against don't work. They do not work in a real theater. And so what are you going to do? Give that to the war fighter? 'Oh, we sold it. Okay, great. We got a $100 million contract of drones that really don't work. Are you happy giving that to a war fighter?' I wouldn't be happy about that. I'd be embarrassed. And frankly, I think it's sick. You're going to give a tool to a soldier that could get them killed. So we're concentrating on making sure that the drones that we're making are going to be worthwhile giving to our soldiers. And we've got a unique little team that's working on a lot of this. I'm not going to say their names, but they're doing a great job. They know who they are. And so we're going to have one of the most capable drones out there, and we're going to put that across all of our other platforms. We're going to take all those lessons learned, put it on the Triken. It's going to be right behind the Black Widow. But literally all this revenue that we're talking about is only for the Black Widow right now.

So we haven't even really ramped up the other revenue streams. We're kind of taking it on the chin. Just going to fill some of the backlog for the Edge130. And then we're going to switch over to the Triken, make it a much more hardened package. Right now it's a great bird. When it's in the air flying, it does stuff no one else can do. But you hand it to a soldier and it's going to last about three flights. Just they're fragile. They're too fragile. So we're going to fix that. I mean, when we acquired Teal, they had a prototype, and we had to build a factory, build processes, hire all these teams. We actually had to take it over. The Golden Eagle was a piece of crap. And that's not unusual for a first prototype. And Teal 2 is now a pretty darn good bird. But it can't do EW, so I'm not going to hand that to soldiers, you know, where it's not just for training or things of that stuff in the US. But it's a good bird now. But the Black Widow is really a good bird. So if you look at Flight Wave, same thing, we got a prototype machine that came out of some founders that built something very unique, very capable, but not very robust as a machine that's got to be in a battlefield. So the new version is going to be battlefield capable. It's not going to be fragile. Still going to have great flight time. We haven't updated the battery on that thing. It actually hasn't been updated in three or four years. We're already getting 70 minutes. So we're going to be able to get way more than that when we upgrade the batteries. We're doing a lot of great stuff with the battery technology like we did for the Black Widow. Black Widow is now best in class for endurance. We hit 56 minutes the other day at 4,000 feet. So certain times we could probably hit over an hour with a quad. Unheard of. Totally unheard of, which also equates to better range. So there's some really interesting things that we're doing there. And we're pretty excited about how we're going to bring that to the Triken, which are all going to launch off the Red Cat Navy called Blue Ops.

Well, I get a little, I really always look for the best possible outcome. I don't like to be a pessimist. And I'm like a lot of other people. I'm in some good company for missing deadlines for stuff that does eventually happen, which, you know, when your customer's the governments across the globe, there's nothing I can do to make a contract go quicker.

Yeah, I'm still a forever optimist. We're going to always figure out ways to solve problems. We get feedback from a battlefield, we're going to just go and fix it. We're not going to just say, 'Oh, well, it meets the requirements. Let's sell it to them anyway.' No, we're going to make sure that what we give to a soldier is actually going to work.

Yeah. Think about this. This is crazy. For the SR requirements document, EW wasn't even in there. We made sure that our drone was EW capable. And I'll just say our competitors didn't. So all the 12 million of drones are just useless in a real battlefield that are getting fielded. But I mean, if you look at it, we were late. We were late. We get it. And it's not like the revenue went away. I literally said this on the call and ripped off the band-aid. Everything's just shifted. We're going to do about a little under 40 million for 2025, right? And we did that basically in one quarter and a half.

So because we had to wait on our customer to finalize the bird, the last change I think was July 27th, and then we still had to make a delivery on the 15th of August, and we did. So like I said, every quarter is going to be a record. Last quarter was a record, by far. If what we gave for guidance, 23, which is again triple-digit sequential growth, that's two quarters in a row with triple-digit sequential growth. We expect Q1 to be great too. And now this is again, and that's even without the other two divisions helping yet and without any other acquisitions that we might announce. So we are leaning on Mitch at Teal, the president of Teal, and he's doing a great job and his team's doing a great job. But our manufacturing is through the roof right now.

So people always just get into these weird conversations. 'Oh, they don't have enough scale. They don't know how to do this. They don't know how to do that.' I said, 'Do you know how many 50 a day are?' That's a thousand drones a month. That's 37 million, right? Could we? We've actually figured out we can do 200 to 300 in our existing footprint now that we doubled the size of Teal again. We've doubled the size of Teal again. We just doubled the size for Flight Wave again in our manufacturing capability. We are very comfortable doing 200 to 300 a day, which is about 6,300 drones a month, which is what, 250 million, 220 million a month. So that's here and now, I'm not worried about our production capability. And that's without us building the Fangs now. So the Fangs are actually starting to get pretty popular. We've had some people from other countries from INDOPACOM come in and they immediately wanted a bunch. So we're pretty excited. We got all these PABAS fly-offs and all this stuff and the Gauntlet that we'll be flying in. We're pretty excited. And that, like I said, that's just all additive to what we've been talking about with the Black Widow. Again, the budget for the small UAS, which is just the Army, it's not the other branches. If you look at the other branches, it's way higher. But from 70 million in 2025 to 747 million plus 1.4 billion on top of that is quite an increase from the new administration. So, and out of the 70 million we got 40 million.

You are a customer, but you're also totally a customer. They make great software. They make factory basically operating systems. They're going to make us more profitable. They're going to raise our margins. We're pretty close to being done with Teal, and the next step is Flight Wave, and then they're going to finish up at Valdosta. So yeah, we are a customer. We will be a customer for a long time. We're also a software partner that we develop together with the visual navigation that we're selling. That's a product that we both are working on together every single day to make visual navigation work on the Black Widow. And it does. So that's fantastic. That's going to bring up our margins. We have a lot of partnerships with companies like this, but this one's just incredible to have the support. I'm actually excited they're bringing me to the Army-Navy game this weekend. So it's going to be exciting and hopefully going to meet a lot more folks at the company. And I'm proud to be working with those guys. They're smart as hell and they get stuff done real quick.

Look, it increases our capability to launch from 29% of the globe to 100% of the globe. We can launch from 80% of the ground. So if you're only a land-based company, you can't launch. And there's going to be some really exciting companies that want to be on our boats, and a lot of them are, well, actually almost all of them are much bigger than us. And when we start combining that with torpedoes and missiles or what other loitering munitions they're going to fly off these things, plus our bomb drones, plus our Triken, the Black Widow, we'll have so many. We're standardizing our payloads now. And Barry and his team are constantly going over to Europe to look for other payloads that are being successful. We want to use stuff that we know is being super successful as payloads, but we're going to be standardizing them and actually probably have to use US partners, or we can use these guys. A lot of people want partners in the US right now to export their technology. We're one of the first to do it out of Europe. So we're stoked that we are basically building ourselves a whole new market with Blue Ops.

Yeah. So it's not just what they're doing over in the war in Ukraine, they're not just developing great incredible technology that the whole world should listen to. You know, frankly, when I was at AUSA, the biggest army show of the year, almost all the people I talked to from the army saying, 'If your stuff doesn't work in that theater, truly work, then we're not going to buy it.' And they have more boats than the Navy, by the way. But back to that, the payloads are great, but it's also the tactics. So some of the things, we'll have jetboats, which have no propellers, right? So that's actually the Hinckley family, which Barrett Hinckley runs Blue Ops, started the jetboat craze in 1994. They know how to do jetboats better than anyone in the world. So you can take jetboats because there's nets with mines, right? So you got props. You could just throw one in to waste it with props, right? Pull all the mines in, explode the boat. Who cares? You got 20 others flying in there trying to kill these massive targets. You've got missiles launching at it if they've got aircraft trying to protect their carrier fleet. I mean, there's going to be so many interesting ways to use this technology.

Using it to protect the big fleet, go way out ahead of it, be 300, 400 miles out in front of the fleet using EW to block stuff.

Yeah. We have the capability to drive a boat that we just worked on near the new showroom in West Palm Beach. We can drive it from Australia if we want. And we might have, I don't know if that's even legal. But we might have. But yeah, we can drive, I mean, Red Cat's been doing remote piloting, gosh, if you go look at our press releases, we did a big inspection during COVID.

From Florida. Exactly.

Yeah. So I mean we know how to do remote piloting. We've been doing it for quite some time. But the people that we're working with on our tech stack are veterans and really great partner to have.

We just turned down some sales.

We just turned down some sales. I'm not going to say which country. I think it was for two or three boats. They wanted them immediately and I was like, we got these first 10 coming off the line for demos and we don't want to ruin the demo team because that's going to be bigger sales and greater sales. So we've turned down sales already, but I expect, hopefully the first few sales could come in the end of Q1 and we'll start delivering in Q2.

Going to let people see it very soon and in person.

Oh, it's phenomenal. We got a great team. Someone was sending me some more hater stuff this morning about we have a billboard in Georgia and they're like what the hell do they have a billboard for? It's like again another jackasses that have never built a company. You need employees. And Georgia, that section of Georgia, really awesome.

In Valdosta. It's kind of the fiberglass belt. When this factory was getting mothballed by another company that they were making 850 boats there a year, lakeboats, and then they consolidated with a company in Orlando. So the employees all went off to, like Jacuzzi tubs are there, right, another big fiberglass shop, another bath place is called Bath. So we got to steal all those employees back. So we got some really good leaders. We got some really great boat builders, master boat builders, naval architects. We already got the tooling going out of the Hodgdon team, which makes some of the best boats in the world. No, I mean, if you're the third and fourth richest person in the world, you buy your boats from these guys. Some of the most complex boats ever built. So it's going to be some pretty unique stuff that we're going to be putting on these boats that's not in the existing versions you see out there that have been very successful in real theaters. But we're going to be adding some really key items that no one thought about. But yeah, so we'll hopefully get our first sales at the end of Q1. We're getting an incredible response from the US government. We're getting right to the people we need to. So having certain partnerships and the things that happened at RIMPAC really helped us. The US, I don't think, won anything. They had to show up with these really crappy old boats. Actually there was an article in Reuters talking about all those drones that didn't work because the software failed. Boats, they didn't fare well either in RIMPAC, and our partner went 5-0. But anyway, 2026 is shaping up even just on the Black Widow between going from 70 million to 747 million in the budget currently. It's got to get signed. They still could change.

Well, you know, hey, a lot of people have been burned by drone companies in the past. Okay, this is a show-me, you've got to prove it. You got to stamp that. Our just under $10 million quarter was a good quarter for us, but it's still small, right? And if we're going to have these valuations that some of the momentum stocks have had, now we're going to get to closing on 25 in a quarter, which puts you at $100 million run rate, which probably should be closer to a 2.2 billion based on all the other multiples. Not, I don't make the multiples, based on all the other multiples that companies are getting in the space. But you got to prove it. So until people see that release of the top line that we're going to do in January, people aren't going to believe it until we print it, right? It's got to see it on the tape.

And then we're excited for each quarter going forward. We got to deliver some boats. People got to see these boats coming off the production line, which they're going to be doing. And they're going to be badass. Man, these things going to be badass. We got to get the Triken out. Some of these bumps and bruises are self-inflicted by us. We're not going to deny it, but now we're moving on. Learn from it. As I said in the Q call, that we're not going to put out any guidance specifically on the Black Widow for 2026 until we actually have a signed contract. Right. Which we're hoping, usually it's right around this time of the year that we get our contracts done with the Army. So we are hoping the OTAA, what some people are calling a full-rate production contract, is signed in early Q1 or later this month. Who knows? I have no idea when it's going to come. I can't force their pen onto the signature line. But the good news is we'll be delivering drones every month to the Army.

We're pretty excited.

Like, the total place now is 50,000 square feet. And now we're able to put the engineers in a certain section so they're not sprinkled out throughout the whole buildings. Um, so it's a little bit better organized. Chris Ericson, our now COO who just got promoted, is really just, you know, hitting the ground running to have us build and in just speed and volume.

Right, if you listen to the Hexath speech, which was great, the Arsenal of Freedom, if you haven't seen it you should. But speed and volume are key. You know, they also mentioned that we'll take products that are 85% done and we'll get the rest done, we'll get it to 100% after we give you the purchase order. I don't believe that whatsoever. They keep giving us more and more stuff in requirements. They literally changed the drone two weeks before they were supposed to get it shipped to them. So we think they should be taking 75% of the features off of the requirement stacks from what we're learning in true proven battlefields. When for the Mavics they use in Ukraine, they don't use 80% of the stuff that's on that drone to make them super simple and reliable to use, but they're so fragile. They are consumer toy drones so they don't last long over there.

Yep, yeah. You know, when Sean — I gave him the, here's what you got to go do. Here's your mission. You got to be able to get to this capacity at this certain time. And he said, 'You're not going to like this because to get to that capacity, I need a bigger place.' Which he knows what he's doing. He built the Switchblade 600 line for AeroVironment to get to the scale that we wanted. He says, 'We're going to slow it down in 2025 on top of the other issues that we had, and to get to the scale you want.' I think they're moving in right now, like literally this week. So they'll be overlapping on the two factories. So they'll set that factory up properly to be able to do the scale that we want. So, hopefully the flight wave can really start to contribute next year, which will be exciting.

So, all that stuff that I talked about from the US government, which, you know, 70 million last year, 747 million this year, plus the new 1.4 billion from the big beautiful bill, is getting deployed now. They want this ASAP. And that's mostly just Black Widow. When we start getting the Triken into the mix, Fang into the mix, the V7 into the mix, the aircraft carrier, the V11 into the mix, the five or six meter kamikaze boat into the mix, which there's a lot of interesting RFPs and INDOPACOM out there for the five or six meter. So you combine all that, 2026 going to be nuts, and we're poised and we're well financed for it.