Interview with $ONDS CEO Eric Brock

about your long-term kind of goals with the company. But let's get started. All right, very good. Let's do it. Thanks again for having me. This is a very welcome. And the first question is really kind of to set the stage of where we are in the market. Obviously, the stock price of on this hasn't done great year to date. But if, coming from someone who looks at a lot of different stocks across the market, you really have to look at any stock and say, OK, what is the sector done? Whether that's Mag 7, whether that's AI. And if you really look at the drone industry in general, ONDS is not the only company, the only stock that has had some trouble this year. So it's hard to sometimes get out of that cyclical nature of sectors and how they move and where liquidity is going. But there comes a point where how do you potentially decouple the stock price from this generic kind of drone industry weakness that we're seeing and capitalize on recent defense sector policy catalysts, US tariffs on foreign anonymous tech, and defense budget shifts and all of that border contract. All these things that are kind of popping up then have popped up since the new administration took over. Yeah, Jake. So it's a great place to start. And it has been a tough year. It's been, as you said, just a tough year for on-dust investors, which I am one, but also the sector, which is a bit of a curve oil fall. I think for those of us who have been around for a while, and I've been around for a long while, we always try to keep the context that market cycles are unavoidable. They really are part of investing. And I'll say that if on-dust shares were weak, like they have been, and the sector was rallying, I would be very concerned. At the same time, I'm not necessarily happy to see on-dust shares weak and take solace in the fact that the sector moved. And when I was on the other side of the table, we used to say things like, you can't eat relative performance and you can't. So what I'm trying to do is continue to build a business and really create an advanced platform. So we're creating long-term upside. And my strong belief, which I'll come back to, is that we're going to capture that upside for you. But it's really hard to just spin the wind when there's market-y rating as as strong as it is. And what you're essentially seeing is multiple collapsing. If you think about the issues that have been playing us because of fair word, people point to a number of things. Is the budget coming? Is the government going to shut down? Is all this stress in Washington? And to that point, that's kind of weird for me because I think as an investor in the unmanned sector, the one thing that you can count on is demand. We are in the early meetings of the demand cycle. And whether the, where the continuing resolution or not, or there's a shutdown, and all I know is that each year we're going to spend more and more on drone and on man's systems. And because we know that our adversaries are as well and more, they've industrialized it. Unless you want to see competitive advantage, and that is unacceptable, it will not happen. The Department of War and the government is going to back the dry sector. It's not Republicans. It's not Democrats. So as an investor, the one thing you can underrate amongst anything, first and foremost, is the demand environment. There is going to be no alpha in studying and ringing your hands over demand, where you really want to spend your time in studying platforms and technologies in delivery systems so you can capture that demand. And I think that's important. If I think about what's really going on, I think it's a macro issue that's out of our control. And you know, you're seeing not just the unmanned sector and drone stocks. It's really early stage growth stocks. I have a tough year. And that's connected to oil crisis, inflation, interest rates rising, driving de-risking, portfolio managers that have to prepare for redemption or get more defensive with their drawdowns. So anyway, that's the issue. Now, how do we decouple? The only thing I can do is that because I can't hold up. I can't really control the macro. But we can control the business. And on this is growing, right? And we're demonstrating that to you quarter after quarter now and I believe we're going to continue. That means our pipeline is growing, our backlogs growing, and our revenue is growing. And I will say not just growing, but we're significantly building the business. And more important than to that is what we're trying to do is build this long-term platform to capture markets. Where in its theme reflected in these KPIs around our PNL and operating performance, where we're aggregating technology, where our grading services were capturing customers. And then we're building. This is really important. We're building a strong operating platform and a strong financial model. And that's going to allow us to be a leader and really build this platform company. I think platform companies are going to be the winning models. That becomes repeatable and scalable in creating competitive advantage. So I think we're seeing this. Now, it's not fun. I don't like to see our investors go through this drawdown. It's very painful. But again, they're not unusual. This is scenes we've seen. I've said this before in public forums. They'll say they, again, as a reminder. You think about the scope of our opportunity. The massive markets we're addressing and the capital and energy we're deploying towards these. This is very similar to many technology adoption cycles where massive industry has been created. And massive wealth has been created. But you don't get to do that without going through cycles. You can't build a valuable company without going through cycles. And we're not going to be exception. Google wasn't. Microsoft wasn't. Tesla and Vidya, Netflix. They weren't Paletteur wasn't. So as a leader of OnDos, what I'm trying to do is establish and extend competitive advantage. Sometimes in the never waste a difficult time, as they say. What I'm trying to do is position OnDos as a business to be a must own defense and security stock. So when we get this recovery, and we will, it's a question of when, not if, there's going to be a slingshot. We want to be leading that slingshot. And I've seen it time and time again. I think we're a well-positioned work. Awesome. And to kind of touch on this a different part of the cycle. I think one thing that really kind of threw me off, as well as other people, I'm sure a lot of people. But when the war in Iran started, drones were a big thing. Everyone's like, oh, man, drones are going to, drone stocks are going to go crazy, because that's their starting to use drones and all that. Is there, from your experience, or just in general, is there a cycle in which during wars, is it almost after the war is over, and kind of both sides are kind of ready to restock and repile their inventory of all types of defense abilities? Is that when the cycle, is it backwards? Where actually, the cycle starts once these wars are done? Because a lot of people think, oh, the war in Ukraine, if that ends and maybe there won't be enough demand anymore. Is it the opposite? Where essentially, that's when people really start thinking about the next crisis, and that's when they're starting to put in these big contracts for new spending and all of that. Great question. And I think it's both, right? But it also, perhaps, I'll share the view from on to us, because we are global, and we're building our business, as you know, an United States Europe, and of course, the Israel and the Middle East. And there's some nuances. So firstly, what we see in combat situations and conflicts is you go to the stockpiles, right? You've been building and sustaining your defense and ammunition, and that's where you go. And then you start to be gearing up to restock our pile into a sustainable war. And that doesn't happen immediately, right? Because particularly in the US, you have to go through the budgeting and the procurement process. And when you're fielding new systems and new capabilities, you can't be as reactive as you can say with the current systems that are familiar and are already scaled from a production and delivery standpoint. That's a bit different in different markets. So obviously now in a wartime economy that's been, now for a number of years, Ukraine, they've got this systemic and production capability and evolution. And that's quite unique. I'd say if you look in Israel, there's also a unique situation where the response times, and that's really the structure of the government in the military can be much quicker. And you've seen, you know, on us, certainly the benefit of that. So we think now say, okay, the war in Iran obviously has, had an impact on our munitions. There is a huge effort being underway here in the United States at restock piling. And I think we certainly will have a role to play. And as we're restock piling, there are going to be more and more of these new and low cost and probabilities. And like I said, I think we're going to have a role to play. And then from the investor standpoint, Jake, I think you're right on that front. That's perhaps when, you know, people are like, okay, when the war's over, the trade's over and it's not. It's really just beginning because not only do we have to rebuild our stockpiles, we're going to take munitions and security and these tools to a new level. Because one thing that is quite apparent is you look at our adversaries and they'll highlight Russia, Iran and of course even maybe especially China. They are industrializing this capability around the systems, the type of systems that on-dust specializes in. And they're taking their stockpiles and capabilities and their ability to continue to produce to a new level. So that's a challenge. But I see all the signs that we would expect to see in the United States that we will not seed competitive advantage to those adversaries. So it's a massive opportunity for investors that we're, you know, we're positioning for it. Makes sense. And I remember when the war started and, you know, there was I think the first 30 minutes of the open, you know, all drone stocks went up like 15%. And then since then, you know, I think a lot of people, I think that is actually one of the problems, not problems, so I think misunderstandings that a lot of people have is, you know, they essentially were like, well, this was the catalyst for this to move and it didn't. And, you know, why would I be in this if the war's happening and all that? And to that point, you know, I know war and all that, it's just a part of unfortunately the world and it is a part of your business. But, you know, what other parts, you know, I know, you know, the NFL stadium kind of security and all that, you know, how do you see that being just as important moving forward versus, you know, just focusing on war? I know obviously it happens, but, you know, are there other parts of the business that you're even more excited about than just, you know, having to wait around for, you know, these government contracts to come through and essentially restock pile everything, you know. I know there's the border control. There's a lot of other things that are not necessarily tied to war that I think there are huge opportunities as well. Absolutely. And I can't say I'm more excited because, you know, as we're architecting, you know, our portfolio and strategy, and we use the term dual purpose, which I'll come back to define because it's a very important one. You know, I really believe that we have secular growth in huge tailwinds on this adoption curve, across all the markets we're in and of course that's countered-grown in aerial security. It's persistent ISR, it's strike, which is, you know, long endurance, one way effectors all the way down to one way attack drones. It's ground robots and pulling those all together, you know, the air and the ground and the software. And there's just huge tailwinds. Now, at the same time being a dual purpose company, I use that term more so than dual use because the strike drone is not gonna go to the New York Police Department or say Chevron or Pacific Gas and Electric. However, the ISR tools will and as will the ground vehicles. And even more importantly than the technology, the operating platform that we're building, you know, being able to address dual purpose, meeting our tans that were addressable tans, which are massive, are even bigger. What we're able to do then is to drive more scale across the operating platform. So we're driving more gross profit, right? So revenue and gross profit dollars over the supply chain driving scale over the sales and marketing, even the back office administration, and especially across our field services in support. So we are providing these tools that we're providing for critical operations. Again, across the military and defense, home and security, public safety, and critical infrastructure and industrial markets, having the ability to drive more gross profit dollars means you're able to invest in scale in a way these customers have to. You can't service those markets on serious A balance sheets and you can't fund that as investors on very narrow revenue streams. So that's very important. And if I talk specifically as examples, Jake, the non-military, non-front line stuff that we're doing, you did touch on, I think the counter drone markets is well a cyber-hawk. Now cyber-hawk is a growth platform for us. We just put that into the company. The incredible leadership team really leading the way and providing drone service.