Ondas raises annual forecast, but executive compensation deepens losses
The American-Israeli defense company Ondas reported second-quarter revenue of $84 million, a 14-fold increase year-over-year. Despite this growth, the company's operating loss widened to $163 million, driven largely by significant stock-based compensation for executives.
The American-Israeli defense company Ondas, which recently recruited former Mossad chief Dadi Barnea, is beginning to generate significant revenue, but is simultaneously recording heavy losses. Following an extensive series of acquisitions of Israeli defense companies along with the recruitment of their former executives for management roles, Ondas concluded the second quarter with revenue of $84 million, a 14-fold increase compared to only $6 million in the same quarter last year. In the first quarter of the year, the company recorded revenue of $50 million, meaning revenue in the second quarter rose by nearly 70% compared to the previous quarter.
The company noted that during the quarter, new orders totaling $175 million were received, and from the beginning of the third quarter to date, orders totaling $105 million have been added. Ondas's order backlog currently stands at $613 million, and against this backdrop, Ondas is raising its annual revenue forecast to the range of $525-550 million. At this level of revenue, the company's valuation, which stands at $5.5 billion, reflects a revenue multiple of about 10, which is high but less absurd than it was recently. In the second quarter, it expects an acceleration in growth to 76%, which will bring it revenue of $140 to $155 million.
Ondas, which was previously an almost inactive American company, began acquiring Israeli companies in the defense sector over the past year. One of them is the drone manufacturer Airobotics. Today, it was revealed in Calcalist that the company won a Ministry of Defense tender for the supply of attack drones, after the tender had apparently already been closed with the victory of two Israeli startups — Kela and Izatop. In total, Ondas has completed 15 acquisitions in the last two years. The latest deal was completed in May, when the company paid $200 million for Omnisys from Rosh HaAyin. The operations in Israel are led by Oshri Lugasi, a former Chief Engineering Officer in the IDF and VP of Marketing at Rafael.
Against the backdrop of the series of acquisitions and capital raises, Ondas's stock price has doubled over the past year, and the company is currently trading at a valuation of $5.5 billion. At the end of the quarter, it had $1.4 billion in cash, so it is capable of continuing to acquire companies and recruit Israeli executives who are leaving positions in the defense establishment for generous compensation in the public company.
The compensation for executives is also reflected in the company's expenses and Ondas's bottom line. Operating expenses jumped nearly threefold and totaled $199 million for the quarter. Among the reasons for this was an expense of $67 million for stock-based compensation for managers. Consequently, Ondas's operating loss deepened to $163 million in the second quarter, compared to $43 million in the previous quarter. Ultimately, the company recorded a loss of $90 million, with part of the loss offset by financial income from the large cash reserve. The company estimates that a significant decrease in expenses will be recorded in the third quarter. Ondas is recruiting not only executives but also additional employees, and according to its reports, 560 employees were added during the last quarter, 155 of whom are engineers.
