Volatus Aerospace Q2 2026 Earnings Call: Complete Transcript

Volatus Aerospace (TSX: FLT ) held its second-quarter earnings conference call on Friday. Below is the complete transcript from the call. This content is powered APIs. 6 million defense contract delay caused by supply chain issues.

The company's gross margin was 29% for the quarter, impacted by project mix and fuel prices, with a long-term target margin of 35-40%. Notable strategic developments include the opening of the Mirabel facility, investments in defense capabilities, and strategic partnerships for autonomy and manufacturing. 2 million in cash and $64 million in working capital, supporting its strategic initiatives and production scaling. Future outlook emphasizes converting infrastructure investments into revenue, with expectations of significant growth in defense and autonomous systems.

Management highlighted ongoing engagements with Canadian and NATO defense programs, emphasizing the importance of timely execution to capture opportunities. Full Transcript Christina Davis, VP of Corporate Affairs and Strategy (Moderator) Glenn, I think I've signed in through your account and I'm afraid if I leave it may kick you out. So good morning everyone and welcome to the Volatus Aerospace Earnings Call. My name is Christina Davis, the VP of Corporate Affairs and Strategy, and I'm today's moderator.

Before we get started, just a reminder that we welcome your questions and we'll be having a Q&A session at the end of the presentation. You're welcome to submit your questions at any time during the webinar by clicking on the Q&A box at the bottom of the screen and typing in your questions. And if we're unable to answer your questions today, we'll be happy to connect with you after the program. This presentation will be recorded and made available on our investor website within 24 hours.

I'd also like to take a moment to point out that certain information set forth in this presentation contains forward-looking information, including future-oriented financial information and financial outlook, and actual results may differ materially. The risks, uncertainties, and other factors that could influence actual results are described in the presentation, in the press release, and in our MD&A filed with Canadian regulators. This presentation also contains non-IFRS measures which are also outlined in the presentation.

There is a full disclosure on page two of this presentation, which you're seeing now, which we encourage you to read and can be found on the Volatus Aerospace investor website. The company considers the earnings call part of its routine disclosure to educate investors on information contained in the quarterly results and related MD&A. If you have any questions, please feel free to contact the Volatus Aerospace IR team. So now that's done, it's an honor to introduce Glen Lynch, CEO, and Abhinav Singhvi, CFO, of Volatus Aerospace.

I'll let you both take it away. Glen Lynch — Chief Executive Officer Thanks, Christina. Good morning everyone, and thank you for joining us for Volatus Aerospace Q2 2026 business update and earnings call. We've got a lot to cover this morning, but we'll keep the presentation focused.

Abhinav will begin with the financial results for the quarter, including revenue, margins, our cost structure, and the balance sheet, and then I'll take you through the operating and strategic developments across the business, particularly focused on Mirabel, defense, autonomy, and the programs we're pursuing for the balance of the year. We recognize that the financial results do not yet reflect the level of growth we are building the company to deliver, so an important part of today's discussion will be connecting the defense investments we've made to the opportunities they're intended to support.

We'll finish by opening the call for questions, and with that I'll turn it over to Abhinav. Abhinav Singhvi — Chief Financial Officer Thanks, Glen. Let me take everyone through the financial performance of the quarter. 5% sequentially from Q1.

We are pleased with the sequential recovery, but we also recognize that the result was below where we want the business to be at this stage of its development. 6 million of contracted defense revenue that was not delivered in the quarter due to the continuing supply chain impact around batteries and is now expected to be completed in the second half of this year. The important distinction is that it was a timing issue on signed business rather than any cancellation or loss of demand. Gross margin was 29% for the quarter.

The quarter-over-quarter movements reflect the timing and mix of the project-based deliveries, including a greater contribution from defense-related programs. Given the project-based nature of our business, we believe the six months and trailing performance provides a better view of the underlying economics than any individual quarter, which we will discuss in the upcoming slide in detail. We ended June with a strong balance sheet, giving us substantially greater financial flexibility.

This flexibility allows us to support production inventory requirements, continue investing in our proprietary technology platforms, and pursue larger programs where we have the ability to carry working capital through a multi-year delivery cycle, an important competitive consideration. The next slide highlights the overall chart on a quarterly basis. This chart gives us the best context for the quarter as well. 4 million, but was also down 20% over Q2 of last year, and we don't want to minimize that.

6 million of contracted defense revenue that moved into the second half. As I mentioned, it's signed business, not a cancellation or lost customer, and we are on time and on schedule on the delivery in the upcoming months. The other thing I would like to point out is the revenue mix: services and training represented 57% of Q2 revenue while product and equipment represented 43%. We continue to want both sides of the business.

Services provide continuity and stronger recurring economics; products, defense systems, and technology give us access to much larger program opportunities. Our challenge now is getting those large programs to convert quickly enough that the revenue begins to catch up with the capability we have built. That's what the second half of this year is all about. Let me spend a minute on the margin.

3% in the quarter compared to 35% in Q1 and 32% in the second quarter of last year. The primary driver of the movement was delivery mix and certain impact of the increasing fuel prices. Importantly, we did not see material deterioration in pricing or underlying cost economics. The movement was predominantly a function of what was delivered within the quarter.

That's why I think the first half yearly number provides a better indication of the underlying margin profile. 9% in the same period of last year—essentially stable year over year. So while the quarterly margin moved by 260 basis points, the first half of the year margin movement was only 30 basis points. Our long-term objective remains to have a gross margin in the 35% to 40% range.

We see three principal drivers towards this range: one, greater scale and operating leverage across our defense program; second is a contribution from higher proprietary platform and program revenue as commercialization progresses; and lastly is a continued growth in the services and training business. The revenue mix on the right supports that strategy. Services and training represented 56% for the first half of the year; product represented 44%. That's within the 55% to 60% services mix we have been working towards.

That matters because services generally provide greater revenue continuity and stronger margins, while the equipment and defense side of the business gives us access to substantially larger program opportunities over time. We believe the combination of these two is more important than either one of them independently. So the takeaway on the margin is the quarter was affected by mix and program timing; first half margins remain essentially stable year over year.

As defense programs move from early-stage deliveries into production scale, as proprietary technology contributes more revenue for us, and as services revenue grows, we believe there's a path back towards a 35% to 40% margin objective. The important point is that the investments we are making in defense are intended to create that scale and operating leverage. Let me spend more time here because we recognize that this is probably one of the most important questions for shareholders today. 3 million a year ago.

That's an increase, and we are not dismissing it. The central issue is timing. Over the past 12 months we are deliberately building capacity ahead of the revenue. The largest increase was personnel, particularly engineering, defense, and technical talent.

We have invested in vcotex, AI, and other proprietary technology platforms. We have opened up Mirabel. We have expanded the system, compliance, and infrastructure required to compete for larger defense programs. We have materially increased our engagement with Canadian, NATO, and allied procurement organizations.

Much of that spending has to occur before a defense award production program. We cannot build the engineering organization after we are expected to deliver. We cannot begin the security clearances, quality, and manufacturing processes after customers require them. And we cannot establish sovereign production capacity after the procurement starts.

So there is a timing gap between the investment and the revenue. The responsibility on management now is to close that gap. A number of that initial build-out costs are behind us and much of the organizational capacity we need now is in place. So second half is increasingly about utilization, conversion, and operating leverage rather than simply continuing to add infrastructure.

Let me close the financial section with the balance sheet because this gives us the capacity to execute on the strategy we just described. 2 million in cash, approximately $64 million in working capital, and total assets of almost $119 million, with shareholders' equity of approximately $87 million. The result is the strongest balance sheet in the company's history and, importantly, a substantially stronger financial foundation from which we execute. But the important point isn't simply about the capital we have; it's about what that capital allows us to do.

Our priorities are disciplined: support manufacturing capacity as demand scales; continue the development and commercialization of defense and autonomous systems; maintain strategic flexibility; and provide the working capital capacity required to pursue larger government and commercial programs. And the last point is particularly important for larger multi-year programs. Financial capacity can itself be a part of a qualification process. Customers need confidence not only in our technology and manufacturing capability, but also in our ability to support inventory, production, and working capital across long-term delivery cycles.

Our financial position today materially strengthens our ability to compete on those opportunities. And that connects directly to the investment profile I discussed on the previous slide. We have built the people, technology, and manufacturing capability required for the next stage of the development of our business, and we now have the financial capacity to support that infrastructure as we scale revenue against it. The balance sheet gives us the ability to execute the strategy from a position of strength.

But having capital does not reduce our focus on cost discipline. The objective is not to consume that capital building an ever larger cost base. The objective is to use it to support programs, production, working capital, and selective investment that can generate meaningful returns. And as we move forward, investors should expect increasing cost discipline around the relationship between incremental investment and identified revenue opportunities.

With this, I will hand it back to Glen. Glen Lynch — Chief Executive Officer Thanks, Abby. The reason I wanted to start my portion here is that this slide helps connect the financial investments you've just seen with what we've actually built over the first half. We opened Mirabel, we launched our VCortex AI autonomy suite, we secured a new NATO-aligned training business, we expanded our engagement with Ukraine and allied defense partners, and we strengthened the balance sheet sufficiently to pursue much larger programs.

Those capabilities and developments haven't yet translated into the level of revenue that we ultimately expect from them, but the capability is now substantially in place. So we're moving from a period that was heavily weighted towards building the foundation into one that's increasingly focused on converting that foundation into contracts, production, and revenue. Mirabel is perhaps the clearest example of the investment we've made ahead of the market. We now have 53,000 square feet of dedicated manufacturing and systems integration capacity.

But the key point isn't the building; it's what the facility qualifies us to compete for. We're already producing our docking stations there. We're actually shipping. For reference, I think we took possession of the facility on February 26th.

So I'm quite pleased with the progress that's happening there. We're preparing additional aircraft and systems for production. And Mirabel gives us a Canadian manufacturing base where we can integrate both our own technologies and the licensed technologies that we've been announcing from international partners. We're also progressing the federal security and defense facility approval processes for both Mirabel and our operations control center.

This is particularly important to understand because the increasing sensitivity of defense programs require not only the technology, but the secure facilities, controlled processes, and the ability to operate within government security frameworks. That's precisely why we've invested ahead of revenue. As Canada shifts towards sovereign defense production, domestic manufacturing capability is becoming an increasingly important part of winning the program. And Mirabel gives us that capacity today.

Wildfire is a good example of how we're using the same infrastructure and technology across more than one end market. This initiative has developed quickly from conversations with senior levels of government around Canada's need for a more persistent national wildfire capability. The opportunity is to combine technologies we're already developing or integrating. That includes our long-endurance intelligence aircraft, rapid-response autonomous aircraft, our operations control center, and our sovereign Canadian manufacturing all into one national operating system.

So rather than being a completely separate R&D initiative, it uses many of the same capabilities that we're investing in for defense. In the case of wildfire, the objective is simple. We want to see the fires sooner, we want to understand them better, and we want to respond faster. We're engaging actively with government on what that capability could look like.

For investors, the important point is that the infrastructure we're building for defense has potential applications across all major national resilience programs as well. This gives you a sense of the architecture at the intelligence layer. The long-endurance aircraft can provide persistent surveillance over very large areas. That feeds information into an operations center where data can be fused, analyzed, and acted on.

And then the autonomous aircraft can potentially provide rapid response, including operation during periods at day, night, and reduced visibility where conventional assets may be constrained. We're not proposing to replace Canada's existing wildfire aviation infrastructure. We're proposing an autonomous layer that can make the overall system more persistent and more responsive. And importantly, we're not trying to invent every component ourselves.

We're working with leading international technology partners, integrating our own proven systems around our operations, our autonomy, and our Canadian manufacturing capability. That partner-and-integrate model is going to be increasingly important across both our wildfire and defense strategies. This is the proprietary technology layer underneath that strategy. VCortex is becoming the common autonomy and intelligence architecture across multiple platforms.

Skydra gives us a proprietary counter-UAS software product and platform. And our first recurring software model, Condor, addresses heavy lift. And the V-series gives us long-endurance aircraft that can increasingly be manufactured and integrated at Mirabel. The distinction we're trying to create is important.

We don't want Volatus Aerospace to simply be a reseller of someone else's drone. But equally, we don't believe we need to invent every airframe, sensor, or propulsion system ourselves. The model is to own the high-value intellectual property where it differentiates us, and most particularly around autonomy, guidance, integration, and operations, and then combine best-of-breed technology from strong partners.