Blue Ops 55 HULLS. NOW WHAT? CEO Jeff Thompson Red Cat Holdings $RCAT

I am great. Yeah. You know, we had just to keep it on the, you just came to see our facility in Georgia which was basically on a whiteboard a year ago August and we splashed our first boat in December. We got our lease in September of last year in Valdosta, Georgia and it got hit by two hurricanes. We had to clean that place. It was a boat facility, had great bones. Then we had to fix it because it did get hit by hurricanes. And then we had to hire teams. We started making boats there in January and the production line is going at full tilt. We had a massive day celebrating the first year there. We had Austin Scott there who's on the Armed Services Committee, also McCormick also on the Armed Services Committee and a bunch of other politicians. It was a great day, but it was exciting to get all the support we got from the city, the entire state of Georgia. Kemp made it Blue Ops Day last Monday. So it was a great day. We had over 300 people there and we gave all the employees a day off, paid day off and a lot of them came which speaks volume. We have a really good crew there. The morale there is off the charts. Actually when the DoD came to see our production ready at the factory just a couple weeks ago, they actually even mentioned the morale in the building. So, we're just excited to make awesome boats. You got to see some really cool stuff there. You get to see the, you know, all the way from the beginning of the line when we're just laying up molds all the way to seeing a boat get dropped in the pool and testing the engine. I think the one you saw being dropped had the brand new Bullfrog that's made, we got the first one that's made for marine capabilities because a lot of stuff will rust when they're on a boat. So, we had to make sure that we had something that was marine capable. So you saw the future being made there through there.

Oh, yeah. The patriotism in that building is off the charts. I don't know if you, when you pulled up, if you actually saw the flag pole there. We were looking at a facility across the street about a couple months ago and it's another boat company and they have a facility right across the street from us. They're trying to sell it. So, we're looking at maybe possibly putting all the 3D printing on that side of the highway. And we're walking back from that location. And I looked at our flag pole and I looked at all the flag poles on the street. There's a lot of factories on the road and I was like that flag pole is not worthy. It was a wimpy little flag pole. When I pulled into the parking lot on Sunday afternoon I was like so proud. It's the largest flag pole you can have that the FAA would have, was so close to the airport and the flag is massive. I think the flag's like 50 feet or something crazy like that. So, it's like I said, the patriotism in that building is literally off the charts and I love that.

Yeah, that's what Barry said. You know, look, he's like we're building these things to come back, right? It's not a one-way trip. And you do have an answer for the one-way trip as well. You saw one of the first ones fully equipped that we actually, that one took a while to build, believe it or not, even though it's smaller because we actually did a full naval architecture review of what we wanted to do on the kamikaze boat because it's going to be in crazy seas. It might even flip over. That boat's going to have self-healing gas tanks. So you can shoot up the gas tanks and it's not going to do anything to it. It's fast. Same size engine as the V7 and it's tiny compared to the V7. That thing is going to be lightning. We're not going to publish the stats yet because we don't want our competitors to know how much faster we are than them. But, it is quite a magnificent piece of engineering. Even though it's only going one way, we want to make sure it makes it all the way to that target.

I stole that from, I've read every book on Midway in the last 6 months, and hence one of our new birds is called the Hellcat, which helped win the war in Midway. And the US had self-healing gas tanks, even on the planes that were horrible against the Zero. And the Zeros didn't have self-healing gas tanks, so sometimes they'd blow up when you hit them. Or you just shot them, they just losing gas everywhere. And eventually something caught on fire, they just ran out of gas. So they were doing it way back then. So I told the team they got to make sure that we have them in, you know, in 2026.

Yeah, we, to go from August whiteboard to December splash. That's probably a first in speed and then to be able to get a factory to scale in the hundreds and now soon to be thousands starting January 1. That's probably another, you know, boat manufacturing record. And you know, so we're stoked about those types of thing, but we got a way to start making from prototype to splash. We're looking at three months now.

3D and also making our own molds. So if you look at the long pole in the tent for getting our production numbers higher is not the factory size. It's not the workers. Although it does take a while to get people trained up because the way we infuse these boats is super high-tech. We're not using old chopper guns and just spraying molds with fiberglass. These hulls are pretty scientific and now we have, and we're going to basically be embedding Quads inside the blend so that the entire top of the boat is rechargeable for drones or anything that lands on it. You think of boats are just hulls, you know, propulsion system, top deck, put your payloads on top. No, these things are pretty high tech. Even the way we're making the hull of

Yeah, you know we can serve the entire globe now because we have boats, not just 30% of the globe. So, but now you put these two combinations together. You can go deep in a country and then do strikes using our ISR and our Fang systems. We're also partnering with some of the bomber drones that are out there. I mean, so many of the old school primes want their payloads on our boats, right?

Yeah. We won't do any integration with anyone anymore unless they have a mission from the DoD and the customer. Because if we did integrations for everyone that came to us, we'd be just doing integrations for a living and wouldn't be making any money on these boats.

Yeah. Well, let's get all the drama out of the way that all these people talk about online. So, we have been working in a lot of different ways since, actually AUSA is in a few weeks and that's going to be the anniversary when we decided to start changing the way we're going to actually do things and we built a team that is literally not only just in drones. We built this team and their whole entire goal is to make sure anything that we ever make gets into live theaters and we actually go ankle to ankle with the war fighters to make sure our stuff works. We know most of the stuff being bought in the drone space does not work in Ukraine. We know that for a fact. We know that ours does now. It didn't work. We handled EW. But we had a lot of work to do. We've done some incredible partnerships that you're going to hear all about. Actually, one of our partners was in the meeting with Zelensky 2 days ago at the UN. And so you're going to be hearing a lot about the stuff that we're doing in Ukraine and how we'm going to bring that back to our war fighters so they have the best tech that knows it works in battle, in the battlefield. Knows that it works at the front lines, the most contested place on the planet. We know the Hellcat works there. Okay? And I challenge any of our SRR peers, I'm not going to use names, to come hang out anytime they want. We know they don't work and we know how much we beat them in IoT. So, but anyway, it's more of a concept that we're never going to sell something that we know doesn't work in theater. The Hellcat is currently in four active theaters right now. And they're all a little different and you have to make sure that you can adjust to that new battlefield, but the highest bar to jump over is does it work in the front lines of Ukraine front lines. So, you know, and we want to continue to work with them as much as possible. We got an office there now. We're hiring Ukrainian coders to try to get rid of the relay of information. Used to be front line information, we need this fix. Goes to Kyiv. Kyiv goes all the way back to Salt Lake City. Salt Lake City, back to Kyiv, Kyiv, back to the front line. That ends up taking three or four days where we want it now. Information, coders, Kyiv, get it, send it back, bam, done. Could be done in hours sometimes. So we're pretty excited about that. We're not just doing that on the aerial side. We are very close to getting our boats in theater as quickly as possible and there's so much different interest from so many different groups from so many different countries. I mean we were requested as we already mentioned to come out to some of the countries in the Middle East along the strait right away after the war started. Everybody wants to get their hands on the V7. Everyone wants to integrate on the V7. So any product we make, if we acquire a new company, we have to make sure it works in theaters. We're not going to just be Silicon Valley. We might write stuff for requirements documents and never real or go to a range and test it. We don't do that.

Yeah, this is a year ago. We've got actually Barry was about to head back to Ukraine for I think his second or third trip at that point in time. I mean, he was only with the company a few months and we've got some other patriots on the team that said, 'Hey, we'll go with you.' And the focus was back then would be called the Black Widow. And I said, 'Listen, let's make, we're not going to, if our Black Widow is not ready, I want to know. I don't want to be selling these things and putting them in a soldier's rucksack if they don't work, which we know that happens all the time right now, which makes me sick.' So, you know, the first phone call was not that pleasant when they got far enough away from the front where they could actually call me. Not from the front, from the, got someplace safe where they could communicate. They said it's not ready. We did handle EW with our radio group, which was, I mean I thought they were going to say, 'Oh, we're going to have to use fiber. Our radios suck. Got to use fiber.' And I was like, 'But no.' So all the other stuff was much easier to fix. And this team is, these guys are warriors. I'm so lucky to have this team and they're building that team pretty rapidly right now because of the success they're already having. But that's how we do it from now on. And then as you saw, we've made a lot of changes in our, in the biz dev team. It's no longer a biz dev team. It's actually a sales team now. And we're not, as you mentioned, we're not going to spend time going to a bunch of trade shows being booth bunnies. We'll go to a few trade shows a year, the ones that we think are important. We're going to spend more of our time getting our products developed and getting them to the end user as quickly as possible, get their feedback, make sure it works. Keep that iteration going constantly. And no one gave us a dime to do this. We did this on our own dime. So when we've actually gone back and reported to the Pentagon, they were amazed that we didn't, you know, we didn't get paid to do it. We did it on our own and we're again, we're not going to sell products that don't work.

Actually there's no such thing anymore. Or we keep getting told by the program officers, nothing's a program of record anymore. They can decide to make you do a fly-off at any point in time which we're happy with. We love you. Let's have that fly-off in Ukraine. So, but anyway, the, yeah, we went through a very long process which they're trying to completely eliminate the process that we went through. Went from 35 or 37 companies down to five, down to four, down to three, down to two. Then we got the down-select after IOT&E, red team against blue team. It was, I mean it was an absolute beating that we gave the other team and then you know we got LRIP going and then the new administration over the last year and a half, two years has completely changed how they're doing everything. We still meet weekly with the SRR team and you know the way they're doing things now is you don't know it's the, you've got very important groups now, right? You got DIU, love those guys over there. They're doing some great stuff. You know, Travis is doing an unbelievable job. And you've got DOGE now. You've got, to be a, drones are, that I don't think it's been announced yet. I don't know if they announced it this week if not, but I'm pretty sure it hasn't been announced, which is going to be reporting straight to Feinberg. You got the Department of War and so these groups have changed and evolved and the way the procurement is all supposed to be going kind of through them now but we're not, there's still a huge disconnect because all the stuff you're hearing about and reading about on X and everywhere, it's completely different that at the program level they're just like still doing it the way they were doing it, you know, two years ago before the new administration came in. It's starting to filter down and we're all for fast iteration, scale, speed and volume. You know, they always talk about speed and volume. So, that's why we are just working on speed and volume no matter what we're making. So, yeah, we have redone the entire team. I've got someone that's kind of stepped up on the sales team now and I'm, he's a superstar. So, we got a lot of superstars now. No more booth bunnies. And we've got new marketing capabilities. You're going to see a lot of that coming out soon too in just a few months once we made all these changes over the last six months. So you're going to see a much better fine-oiled machine. And you know we've been working on scale for all of our factories the last year. We went from like 25,000 square feet of factory to 270,000 and probably growing from there. We're in a great spot right now, you know, and there's so much investment in this.

Yeah. 2025 was one product, one customer. We had about 10 products now. We're selling to countries across the globe between, you know, NATO, Ukraine, Middle East. Now, and then I mean, we built Blue Ops mostly. Blue Ops was supposed to be like a two-year project to get ready for INDOPACOM. And I said, 'No, screw that. Step on the gas. Come on, Barry.' Barry and his teammate Sandy Spalding, they stepped on the gas and whenever they say, 'Hey, hey, yeah, we look at this. Look at this.' I'm like, 'Double it. Double it.' And they handle it pretty well, though. They say, 'All right, let's go.'

Well, I mean, their goal is to get into the thousands for 2027 if we have that demand, which we believe we will, and they're going to be there by January 1. So, they're going to hit that, you know. So, I will push people like other entrepreneurs to really go and then, you know, we don't always hit that time frame, but you know, we are in a great spot. The way the company's positioned, we can handle any orders that come in. We've grabbed some great tech recently, you know, APM, which we're partnered with the Prime. We can't say who it is, and we've been down-selected twice in Swarm Forge. So, you know, we're excited about that. We just want to keep building on that success. You know, we didn't make it in this recent Gauntlet, but we did beat 30 other companies when we got down-selected. We do believe that we did better than anyone else in the kinetic section because we saw the other folks ahead of us. Their stuff did not blow up. Ours blew up five out of five times. So, we're hoping to get the, I wish they just printed all the scores of every single company and said, 'Here's the five winners, but here's everyone else's scores.' We'd be okay with that. But anyway, we're going to continue to develop the Fang. We're going to jump back into the next Gauntlet. But you know, as I said at Innovation Day in February, our focus is not FPV. It's a munition.

It is a race to the bottom business-wise, but you've got to have, it's a munition. You got to have a bullet, right? If you have guns, you got to have bullets for the guns. And the new bullets are FPV. So, we are always going to be investing in that and getting better and better and better. Right now, now we're interacting with our own drone can give the FPV actual coordinates to go hit it by itself without having to guide it, you know, from ISR standpoint where you're saying go left, go right, go left. Do you see it yet? You know, like how they do it in Ukraine. But, you know, we're going to go into the next Gauntlet. Hopefully, we'll make that one. But our FPV drones are actually being bought all over the countries, all over the world right now anyway. But, you know, we would like to win that and be in the top five. We'll try harder next time, right?

Right. We're getting orders from the US government and you compare what even just Ukraine's making, never mind what China and Russia's making. They're in the 7 to 10 million a year and we're super excited because there's going to be 300,000 drones delivered this year. That just doesn't make sense to me. And frankly, that's why our focus for the last eight or nine months has been on Ukraine. There's 350,000 drones of Chinese drones that they're going through every year and they want to get off Chinese drones and now that they're winning the war, we believe it's getting tougher for them to get those Chinese drones from DJI. So, our opportunity is to replace those drones and we're being, now that they've seen our stuff work. We just got back from gosh, I don't know how many sorties we did in August with our final testing, but we flew flawless. We had flights that I can't give too much detail, but were very deep. We're only 22 kilometers from the actual Russian border and we thought one of our drones got snagged by EW and they were going to grab it and we just turned off the controller and it came back by itself. We didn't lose a single drone while we were there in August. So we're very pleased with our performance and we're going to keep improving it. You're never done there, but now our goal is to start replacing all of those. That opportunity is so much larger than anything that's going on in the United States. And then all the NATO countries are actually buying all their drones for the Ukrainians plus FMS type stuff. So we've been laser focused on the largest opportunity for our company which is Ukraine, right?

Yeah. And our stuff's working in those theaters, right? We saw a few of our competitors in a country I'm not going to say. We delivered, we hand delivered some batteries. You know, one of our patriots went and hand delivered some batteries and we saw some of our competitors. They said they couldn't even get into the air. They wouldn't launch in that theater. So, you know, we're very happy that our stuff's working and we did the hard work to make sure it could work.

Can't fake a factory. You just saw a factory in progress there. So, you can't fake the fact.