Red Cat Holdings Inc (NASDAQ:RCAT) stock plunges 18.80% (As on September 24, 11:18:46 AM UTC-4, Source: Google Finance) after the company posted lower than expected results for the first quarter of FY 25. Red Cat said it had a record backlog of $13 million at the quarter’s end. About half of the backlog is FlightWave Edge 130 Blue. The company is hoping to ship a significant portion of that backlog by the end of the calendar year. The company ended the quarter with $7.7 million in cash. Key highlights from the quarter include drone solutions presentations at multiple Defense conferences, the announced development of a new family of small ISR and precision strike systems, the closing of the company’s FlightWave asset purchase agreement and the launch of the Red Cat futures initiative. The company successfully delivered final prototypes to the Army for initial operational test and evaluation (IOT&E), showcasing their capability to meet military standards. Red Cat Holdings Inc launched a new product line, the Family of Systems, diversifying their offerings and reducing investment risk. The company is transitioning from the old fiscal year into a calendar year and are working hard to build and ship drones to prepare for 2025.

Moreover, gross margin for the quarter was negative 17%, primarily due to the final delivery of prototypes for the SRR Tranche 2 program. The pause in manufacturing Teal 2 units impacted sales as customers awaited the release of Teal 3. Cash used in operations for the first quarter was $2.3 million, indicating ongoing cash flow challenges. The company is still awaiting news on the SRR production contract, creating uncertainty in future revenue projections. Further, the debt deal includes $8 million in proceeds with no repayments for six months. The warrants have a 30% coverage and a $6.50 exercise price, potentially generating an additional $4.9 million in proceeds.

RCAT in the first quarter of FY 25 has reported the adjusted loss per share of 17 cents, missing the analysts’ estimates for the adjusted earnings per share of 8 cents. The company had reported the adjusted revenue growth of 59 percent to $2.78 billion in the first quarter of FY 25, missing the analysts’ estimates for revenue of $3.85 billion. This is being driven by strong domestic and international adoption and sales across our entire Family of Systems, which now includes the Edge 130 Blue.

Looking ahead, Red Cat said it anticipates revenue of $50 million to $55 million in calendar year 2025, exclusive of government or NATO programs of record. For 2025, FPV drones are expected to contribute $5 million to $8 million due to their low cost. The remaining revenue will be split approximately 50/50 between the Teal 3 and the Edge 130 Blue.