Welcome to Alpha Wolf Capital, I'm Tim, and I want to personally thank you for stopping by. This channel is designed to help small companies, both public and private, gain exposure with potential consumers, investors, even partners. Take for example today's guest, CEO Jeff Thompson with Red Cat Holdings. Red Cat Holdings is emerging as a key player in the defense-oriented drone market through its innovative technologies, strategic partnerships, and focus on secure, US-manufactured solutions. These efforts underscore its potential to shape the future of unmanned aerial systems in both military and commercial domains. Establishing partnerships with Palantir AI, Palantir Technologies, Tomahawk Robotics, and Reveal Technology has expanded the company's offering with a keen focus on military applications and helping our warfighters through their innovative subsidiaries Teal Drones and Flightwave Aerospace, with Black Widow, Trion, and Fang drones designed to meet the stringent DoD standards. This is not to be taken as investment advice. I am not a certified financial planner. This is for education and entertainment purposes only. I encourage everyone to do their own due diligence.
Hey everybody, Tim from Alpha Wolf Capital coming at you with a long overdue, but you know, look, he's got so much stuff going on. Red Cat, Jeff Thompson coming in to just share some things that have been happening with the company, where you're at, and maybe give a little bit of guidance of where, what people can expect. How about that?
Yeah, I don't want to set expectations as a public company, but you know, it's been a crazy few weeks. Been on the road since we did that investor conference in New York, which we got a great response from. And then going out and visiting a lot of drone companies, I spent a day out in the cold out in Palo Alto world and saw some really cool, interesting large drones there. And then did the AUSA conference, which was exciting, and a lot of great leaders there. Got to hang out with the Palantir team, amazing company, you know, still function like a startup, but one of the most competent software companies I've ever dealt with. And you know, we're building two factories right now, so a lot's going on.
And I know that you've been pinging me constantly for your viewers that follow, when the heck is our earnings call and this and that. So it's Monday, I think it's going to be 4:30 on the 31st. But just to be very frank, it's literally a nothing burger because we're doing a stub, they call it a stub period, and we're finally switching to the calendar year. So we are only going to have November and December added to the last earnings that we did to be our 10-K, which only includes November and December. But you know, only two holiday months, so there's not much going on in this two-month period that we're adding to the last earnings release that we did. But it does give us our 10-K that we need to switch to a calendar year.
We're already going there. There's no analysts that have a two-month estimate on those, on November-December. So all the previous analysts that were covering us, except for the newest one that last week, you know, they had like a January year-end. So all their numbers are wrong and not going to match or do anything. So kind of a nothing burger. And it's even worse than that, is we just got our new CFO, which I think he's going to be incredible for the company. And he just came on, he wanted to come on early, he didn't even want to take a break, but the SEC said that he had to sign the 10-K. And he's only here for a few days, and I'm like, I'm not even going to ask him to do that. So we had to make me interim CFO again until after the 10-K.
And by the way, if he said that he would sign it after, it takes a month or two to review a 10-K, so that would have been a little weird, might have put up some red flags. But anyway, so it's just going to be me on Monday. But because of that, we got such a great response from our investor day in New York that we're going to do a town hall, hopefully within 7 to 14 days after Monday. And we're going to have the whole team on. We're going to have myself, we'll have Hitchcock, our new CFO Chris Erickson, we're going to have Brendan who does all the work on the Hill with the continuing resolution, and Stan will be running the show. And I promise he's not going to disappear this time. So we'll have the full team, and I think people will be able to ask a lot of questions, not just to me, not just to the CFO, to get a really good full picture of what's going on for 2025.
You know, again, we haven't changed our guidance. We're still at the minimum of 80 million for 2025. You know, we've got two factories going right now.
Let me focus on what you just said for a second here. You said minimum 80 million, that's the low number for 2025. Right now there's all this speculation out there about all these different scenarios, all these different things, new administration. Don't you know, would it be fair to say that basically you don't really have a contract right now with the SRR? Or is it fair to say that it could be, you could have any contract at all because of this administration change?
No. So when you get down selected, like I said, we've had to go review this so many times, and I'm not going to comment on what's signed and what's not signed. So we did get our down selection, that's public information as of November. And then you negotiate, as I said, we got a features enhancement that we have to do, then we go into LRIP, and then we go into mass production. Nothing has changed whatsoever. As I mentioned on the investor day, they have already certain budget, and that's our SRR guidance was 25 to 65, and because of that, the low end of that is what they actually have available to spend without worrying about the continuing resolution. And then we also get one full quarter of 2026.
But with this new administration, if you're not, some people are saying that everyone's going to lose their contracts, DOGE is going to kick everybody out. But if you actually listen to what DOGE is doing, what Elon Musk said at West Point, you got to use AI and drones. If you listen to what Dr. Karp said on some recent interviews, he says we're all going to be using smaller, smarter weapons. If you listen to literally what they're saying at DOGE, is we got to move into drone swarms. So smarter, smaller, less expensive, but in mass. Mass is the word we keep hearing about. As we've been really focused on Indo-PACOM recently, mass is a big word. And it's not mass like the old days of people, it's of drones. And not just aerial drones, you're talking USVs, like all the stuff that basically pushed the Russian fleet out of the Ukrainian space.
When I was at AUSA, they took us all out to dinner and I got to meet with the founder of the company that just did a, he was sitting across from me from Saronic, they're building a USV company, they just did a round, I think they raised 600 million bucks at like a $4 billion valuation. There's a lot of activity in that space, capability to put drones on those things, swarms going into the Taiwan Strait. And you know, one of the guys from Anduril was there at that dinner. It's a lot of smart people at that conference that are going to help shape the next few years of the Department of Defense. So it was really fun to be with a bunch of folks like that.
Let's make this real clear, you're not there as a competitor, you are there working together, talking about the industry and where it's heading.
Yeah. And Anduril does not have an SRR drone. They're, I think their smallest drone is their MR drone, the Anduril Ghost, which got down selected for MR. They also got a lot of other, you know, a lot more drones and other avenues. They got submarines, they've done a lot of acquisitions. You know, they throw a lot of stuff against the wall and they're doing great, they're a great company. It's good to get to know some of those guys. And I'm sure we'll be working alongside them to help the warfighter.
Right, right. I mean, I look at it Jeff, would this be fair to say? I know there's all kinds of articles coming out about the cheap drones from Ukraine, right? There they've got somebody over there that's making all these cheap drones. There are cheap drones out there, right? Those cheap drones don't have the capabilities of what your drones have?
Not even remotely. No. Everyone gets, you know, FPV drones are just really basic drones that can do really incredible stuff. I've been in the FPV space since 2016. You can do so much with those drones, but they're also limited. They don't have a lot of brains, they don't have a lot of compute. If you start doing all this extra stuff on FPV drone, it basically becomes an ISR drone, and they're not cheap anymore. And they're not made in the USA. Most of those drones have Chinese parts in them. Ukraine could never be used in the United States. So there's a lot of companies we're meeting with that are from the Ukraine that want to partner to be manufactured in the United States. There'll be a lot of opportunity in the Ukraine over the next six to nine months, and everybody knows it. So it's not a secret. But there's a lot of opportunity because if that winds down, there's going to be a lot of companies that are going to be out of revenue and want to be looking at the DoD. And with their smart, small weapons, they're going to need a USA partner for made in USA parts.
Right. Okay, I mean, so let's talk about the Edge 130, right? You've said repeatedly that people are underestimating that drone, right?
Yeah, no, it's never been mass-produced. You know, we just opened up the factory. We are building drones every day. We had a great call yesterday with the team in the factory and got some shipments going already over to some overseas partners in the Indo-PACOM region. And they'll be making drones every month from now on. And it's a really capable drone. It does everything it says it does on the spec sheet. Our goal is to switch it to the Triken instead of the Edge 130, which will put in an EW-capable radio like we have in the Black Widow, and then to enhance the camera. And at that point, it's just really an incredible drone.
The fact that it can fly so long, the fact that it can hover as a fixed-wing, the fact that it can go from vertical to horizontal flight in just five seconds, it just does stuff that no one else does. We just have to mass-produce it, we just have to get them out in the wild and get some feedback, which we've finally got a little bit of feedback from some of the initial customers we finally shipped to, which was how we got the Teal to improve. So all the same typical stuff, you get it out in the wild, you find out what it can do, what it can't do. And so when we do this, the second rev, that's going to be the Triken. She's going to be a beautiful bird.
So you did some debt financing, right? So how do you feel you're set for financing for right now?
It depends, you know, and believe it or not, it's the weirdest thing, there's a lot of large shareholders that want us to raise money. And they never usually say that, but they do see the opportunity so large. And we're just being patient. You know, when this market got nailed the last four to six weeks, I'm glad that we did the debt before this. But we would just, if we ever do any raises, it's going to be at the right time, and if we need it, not just because we want to do a raise. We might bolt on a small amount here and there, but not right now. And we'll probably wait until we find out about the Office of Strategic Capital, which has already got appropriated, right?
Highlight that again real quick, though.
Yeah, so I've applied for a lot of federal money over the years in all my companies, and I've never even got a response most of the time. We've actually had two additional meetings since we filed with the Office of Strategic Capital for 58 million. It's very low-cost debt, and there's a lot of other things that you can do once it's due to extend it or reup some stuff or whatever. But you know, we're getting feedback, which makes me feel like there's actually a chance on this, because every other time I've filed for federal money, it always seems like it's a boondoggle, you never get it. We're not depending on it, but you know, $58 million of very inexpensive money is much cheaper than doing a financing. But you know, as we get these contracts in, even LRIP, we'll be getting 50% up front. So you know, we're not going to cut off our nose despite our face. We don't want to raise money, and some people even say, hey, you're a larger shareholder, you're being too stingy, you need to bulk this balance sheet up so you can go faster. And we're not being slowed down right now at all. If it ever does slow us down, we'll raise a little bit of money, but like I said, we're not going to pounce on everything with like a $100 million round or something like that.
Jeff, you still have a majority of your shares, right? Your major...
I sold 500,000 in December, but all my shares vested, so I plus 90 shares compared to that day. So I have more shares now than I had in December.
Okay. All right, so you're not dumping.
Nope, no. And that was actually the first liquidity that most of us had, because we did the spin-out with USMC and we were all locked up for almost two years. So that was kind of a once-in-a-lifetime situation. You know, everyone's got, everyone knows why you buy a stock, everyone knows there's a thousand reasons to sell, for employees, or they got tuition or this or that. But you know, I have more shares now than I had before. This is, you know, I read all these different articles, different things that they assume about Red Cat.
I don't look at you as a little startup anymore. I look at you as you're one of the players now, right? Is that, do you think that's an inaccurate way to look at you?
Well, you know, we are winning a program of record, which, you know, I was with a lot of companies at the AUSA conference which have not won their first program of record, and they asked me a lot of questions about it. How do you do it? How long does it take? And you don't realize what an achievement it is and how it can help out your company. To start, it took AeroVironment I think 15 years to get their first program of record. So I would agree that we're very well known in the industry now. Along with, you know, seeing all the banners at the conference, we're just a few of our names on there, and all those names are pretty cool to be alongside. But you know, a lot of them don't have a program of record yet that we're on those banners. So I agree, yeah, we're well known throughout the DoD. You know, we're making our name for ourselves, people know who we are now.
Same in NATO. You know, and I know everyone's, when's your NATO contracts, when are you going to get a NATO contract, blah, blah, blah. But a lot of that stuff's been changing by the week, specifically with all the Trump and Zelensky stuff. But most of all that stuff is still just moving along at their own pace. They're not going to give us the contract because a bunch of people on X or StockTwits want us to get a contract. They're going to give us a contract because we have a good drone, we went through the process, we did all their testing, and we're through it. So we'll get it when we get it. Same thing with SRR, no one believed that we got SRR for months, then it got delayed a month or two, and then all of a sudden we finally got it. Like, oh gosh, okay. So we can't force people to do our contracts just because they own stock. We're a business, we're not a stock, you know?
Let me ask you this question. Since you got the SRR, the announcement of it, do you feel as though you have more opportunities on the table now than you did prior?
Absolutely. Anyone that wins a program of record instantly goes onto a list of heavily vetted by the best army in the world. So when you win that, we will get other branches buying the Black Widow, which is normal. It's not like because we're specialists, it's because that's what people do when the Army has a program of record, the other people buy. Currently the Air Force is our largest customer until we get, you know, till we announce LRIP. So there's a lot of stuff that happens with that. Plus in NATO, same thing, getting a program of record is a great checkbox for them in NATO countries.
Listen, when you guys were at the SHOT Show, I got to go down and meet Brian and Hitchcock, right? And I mean, I love your team, man. You got a bunch of smart, passionate guys on your team, right?
Yeah, no, they worked hard to get us to where we are now. And now that we do have SRR, we get to start delivering and, you know, getting all these brand new Black Widows out to the sales team to go fly everywhere. That's a lot of times the last stage before you get contracts, they want to see it fly on the range. Which we're excited about, because we're excited about the Black Widow, we're excited about the Edge 130. We did some really cool stuff in the last week with the Edge 130. So yeah, there's going to be a lot of updates. That's why we're going to have that meeting after Monday with the whole team, so people can get it from the people that are actually doing it instead of having to hear it third party through me.
But yeah, things are, it's going to be quite a 2025. And like I said, we are reiterating our guidance. You know, there's a lot of activity around in the world that's exciting. I'll be at Huntsville, Alabama tomorrow for the show that's there. That's where the Army is and that's where the PM office is. So should be an exciting week there for everything drones. But yeah, that's, I don't want to talk too much more until we have that meeting with the rest of the team and let them discuss.
14,000 drones. The order that you have, right, is that 14,000 drones, is that what it is?
Yeah. So the last couple times that I talked with the office, with the Army, they just kept mentioning the, well, they would state as 14,000 drones, or they would say the 6,930 systems or whatever it is is the number they keep quoting us. So our first goal is just to get a big chunk of those for LRIP.
So the big thing that I keep reading out there is the inability to be able to produce those drones.
Yeah, that's a little silly. And I've gone through all the numbers many, many times before. And I don't even have the spreadsheet in front of me, but if we build 500 drones a month, we'll do about 240 million in a year. We were building 200 plus Teal Drones before we basically kind of wound down the Teal Drones, other than stuff we have to save for SWARM, which has also been going really well. So you know, those numbers are tiny for us to hit these numbers. So I don't know how many more times we have to reiterate that doing 500 drones is not a big deal for us.
All right. I'm just trying to nail all the things that I get these guys coming back and yelling at me, why didn't you ask this, why didn't you ask that. Okay, let's see, what else does anybody write anything down? Well, you know what, it's just a lot of it is just the speculation. Then you get these jackasses that write these negative hit pieces, right? And they're well, they're paid for by those short reports, and that's all lined up.
Yeah, they actually the same with the lawyers, they hire the lawyers, they go out all at the same day. And you know, it's just coordinated. It's a, you're right, it's a coordinated effort to scare people. And look, there's always going to be that time frame between execution and delivery and the whole thing, and that unknown zone is where they feast. They put out coordinated... It's what we said when we had the town hall, we announced SRR, we said we're going to get the features and the LRIP and then the mass production. None of that's changed. We reiterated a few weeks ago in New York City, we had a great investor day. You know, after that short report came out, I met with a ton of investors, I got one fund to jump in and buy 12 point something million shares.
And speaking of that, do you have any conferences coming up that you're going to be attending?
Yeah, we have been invited to so many in the last couple of weeks. I'll have a full schedule, and you'll see some pretty elevated banks from where I've been in the past conferences. Although I've had some really good conferences recently, I'll have a pretty full schedule this year with some pretty massive banks that will have great funds at those shows. So I will have a pretty full schedule this year, and a lot of additions, and hopefully some more coverage coming our way.
So you just had somebody pick you up and put a $13 price target on you, right?
Yeah, Northland. He spent a lot of time, did a lot of work. I think that's a great report. Got a lot of feedback from a bunch of investors for it. So yeah, that's the latest one that came out. I think ThinkEquity came out at, I think 12 yesterday, and Ladenburg is at 15. Glenn's done a great job too. So yeah, you'll see continued coverage.
You're starting to talk to some institutions that before they wouldn't have even given you the time of day, right?
Oh, I've talked to the full team of analysts all the way from Goldman Sachs down to almost everyone in the top 10.
And you never would, six months ago you wouldn't have had those conversations, right?
No. Yeah, a couple of them were starting to poke around. Actually, a couple of the large banks I just mentioned were going to have me at their conference, where I get invites, you know, save the date. So yeah, I'm going to be able to meet a lot of great funds this year that I've never met with so far. Okay. Which to me is all very good.
