Red Cat Holdings, Inc. Common Stock Piper Sandler 5th Annual Growth Frontiers Conference

We'll go ahead and get started. My name is Clarke Jeffries. I lead up Defense Tech Research here at Piper Sandler. Happy to be joined by Jeff Thompson, Chairman and CEO of Red Cat. Thank you for joining us.

Thanks for having me. Yeah.

Let's give a primer for anyone in the room who might not be familiar. How did Red Cat come to be, and how do you serve the defense industry today?

Yeah. Red Cat was founded in 2016, actually, as I started getting into the FPV space when no one knew what FPV was. I ended up kind of consolidating a bunch of small FPV companies, Rotor Riot, Fat Shark, which is now all part of Unusual Machines, another company I'm a co-founder. But was looking to put all this great tech in the drone industry together using a public vehicle, and I think we've done seven acquisitions so far. In the middle of all this, which is very interesting, I was probably the most hated person in the FPV community in the mid-teens because I was looking at these things, doing things with defense and/or police and first responders, and that whole community was totally anti. So I was literally the most hated man in FPV for many, many years.

We got it onto the Nasdaq in 2021, then the war broke out and the whole world has realized how important. 80% of all activity in Ukraine is from FPV drones. It is the most prominent munition, and you need an ISR drone to do that, which we make the Black Widow. Then we recently, in the last year and a half, have gotten into USVs, which we also think is very, very important considering 70% of the globe is wet.

Yeah, absolutely. You have got a portfolio that spans the FPV space, quadcopter, hybrid VTOL, USV. Like boat to air, multi-domain autonomous systems. Well, then maybe let's just go through some product lines because I think obviously when we talk about the defense industry, we are talking about procurement motions and gaps and needs within the department. Let's talk about Black Widow.

Yeah. That is the flagship drone program in terms of breaking into the defense sector and winning the Short Range Reconnaissance program.

Where was the Army at when they were looking at the SRR program, and what led them to selecting Red Cat? They were obviously looking at Ukraine, trying to learn as quickly as possible. What were the obvious gaps that they were trying to procure?

Yeah, a lot of people do not understand this, but SRR was formed because of the first drone use in Syria.

Yep. These cheap drones can be used to come after soldiers, and the requirements are very old.

They were from, like, 2018 or 2019, pre-war. We got down-selected with the original five, then Teledyne FLIR bowed out because they did not want to compete against their customers. Then it went down to three. Then it went down to two. It was just us and Vantage. Then somehow Skydio got back in. We have no idea. Then it was finally just down to us and Skydio, and we do a thing called IOT&E. I will just be very blunt. We crushed them going head to head in Red Flag 16, and we got a letter a month later.

Yeah. When you think about those requirements and how it has progressed, like where are we at in the sophistication of them knowing that, "Well, we want this to be ISR, but it also has got to be doing dual mission. It has got to be doing strikes some of the time." How sophisticated is the procurement motion at this point in time? Just so that we are aware of level setting, where autonomous systems and something like SRR is today.

Yeah. This has been kind of a big subject recently from some other FPV companies, but we did not go by the requirements. We have been testing against EW in Ukraine. GPS-denied was not even part of the requirements for SRR. If you just went to the requirements document, you were going to give a soldier a product that was not going to work.

Yeah. You are putting this thing in his rucksack, sending him to war, and he could probably die because the product does not work.