Transcript: Unusual Machines Q2 2026 Earnings Conference Call

Unusual Machines (AMEX: UMAC ) held its second-quarter earnings conference call on Thursday. Below is the complete transcript from the call. This content is powered APIs. 7 million, marking a 687% year-over-year increase and a 107% rise from the previous quarter.

7% gross margin. 5 million with no debt. Significant growth was driven by the enterprise segment, with strategic expansions in manufacturing and headcount. The company faced and overcame supply chain and production quality challenges, demonstrating resilience and effective team management.

S. government drone programs, and plans for further manufacturing capacity expansions. Internal revenue targets aim for $12-$14 million in Q3 and $25 million in Q4 2026, with long-term aspirations of $250 million by 2027. M&A activities focused on integrating Upgrade Energy and scaling battery production to meet increasing demand.

Full Transcript OPERATOR Greetings and welcome to Unusual Machines' second quarter 2026 financial results conference call and webcast. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star on your telephone keypad.

Please note, this conference is being recorded. I will now turn the conference over to Christine Petralia, Investor Relations for Unusual Machines. Christine, over to you. Christine Petralia, Investor Relations Thank you, operator.

Good morning, everyone. With us today are Unusual Machines CEO Alan Evans and CFO Brian Hoff. During this call, management will make forward-looking statements regarding our expectations for product demand, revenue growth, manufacturing expansion, gross margins, and anticipated regulatory developments. Actual results may differ materially due to factors including government program funding and timing, customer concentration, inventory risks, manufacturing challenges, supply chain disruptions, tariff impacts, and other risks described in our Form 10-K for the year ended 12-31-2025.

We undertake no obligation to update forward-looking statements except as required by law. For a complete discussion of risk factors, please refer to our SEC filings and the shareholder letter accompanying this call. In addition to reporting financial results in accordance with GAAP, we will discuss certain non-GAAP financial measures, including adjusted EBITDA. We believe these measures provide useful supplemental information to investors regarding our operating performance.

A reconciliation of non-GAAP measures to the most directly comparable GAAP measures is included in the shareholder letter and earnings press release, which are also available on our website and filed with the SEC. As a reminder, this call is being recorded and a replay will be available on Unusual Machines' website at Now let me hand over the call to our CEO, Alan Evans. Please go ahead, Alan. Alan Evans (Chief Executive Officer) Thank you, Christine.

Good morning, everyone, and thank you for joining us today. During this call I will discuss our second quarter 2026 performance. 7 million in operating revenue. This is a 687% year-over-year growth from the second quarter in 2025 and it's more than double the revenue we generated last quarter.

32 per share from the second quarter of 2025. The key takeaway from this quarter for me is that we are continuing to dramatically increase revenue while getting closer to consistent profitability. The Q2 results begin to reflect the underlying financial structure Unusual Machines is working to achieve. There is rapid continued growth, doubling to almost $17 million in revenue, with the growth driven entirely from our enterprise segment.

6 million last quarter to a loss of only $400,000 this quarter. 7% gross margin. This is in that backdrop of scaling, as our headcount went from 141 employees to 240 employees as of July 1. A healthy balance sheet remains a priority for us, and we took the opportunity to raise another $60 million at $30 a share.

We did this with block ATM transactions. 5 million in total working capital, and no debt. It's very important to remember that we don't burn cash. So this money remains in the war chest and enables us to both manage inventory and make investments that accelerate our customers and the entire drone marketplace.

The success of this quarter and of the company just would not be possible without the hard work everyone on the entire Unusual Machines team puts in. Everybody works hard and brings incredible energy to all of the challenges we face. I am confident we can handle continued growth because I am confident in everyone I have the pleasure of working with. So I want to say thank you to everyone working at Unusual Machines.

I'll hand this call off to our CFO, Brian Hoff, to cover our financial results in detail, and then once he finishes, I'm going to go into more detail on both this quarter and our plans going forward. With that, I'm handing the call off to our CFO, Brian Hoff. Brian Hoff, CFO Thank you, Alan, and thank you everyone for joining the call. 7 million recognized in revenue for the quarter, which, as he said, is a 687% increase from the prior year and a 107% increase from the prior quarter.

8 million, and we continue to see this significant shift toward enterprise revenue. Approximately 95% of our second quarter revenue was generated from enterprise customers, which is across a diverse base of customers and products. 7% for the quarter, which is an increase from last quarter and slightly below our 2025 margins. We expect to continue to see these margin fluctuations as we can scale our manufacturing and work to capture the market demand.

We anticipate additional margin fluctuation for the remainder of 2026, primarily related to our growth initiatives. However, we expect them to kind of continue to recover. 6 million for Q2 of '26. This increase reflects deliberate investments and strategic decisions to support our continued growth and scale of our business—things that are including building out our G&A infrastructure: headcount, systems, process, including IT.

8 million in non-recurring expenses. We continue to expect additional operating expenses as we continue to hire additional staff, add additional manufacturing space, and have additional public company-related expenses. Please reference the tables at the end of the shareholder letter for the additional detail which reflects our adjusted EBITDA. 6 million in Q1 to about $400,000 in Q2, showing very positive trends.

In other income and expense, we had additional positive results from our investments. S. drone industry and develop supplier partnerships and customer relationships. Our strategy is continuing to work.

3 million realized gain from investments during the quarter, which is a nice add-on to our overall cash without adding additional dilution. 8 million during the quarter. Our balance sheet also remains very strong and reflects our focus on positioning for anticipated growth. Our cash balance ended the quarter at $229 million, which included the $60 million from our ATM block funding in May at $30 a share.

4 million. And we're going to see this continue to increase in Q3 and Q4 as we can make significant purchases to meet demand and do our part in managing supply chain issues as much as possible. Our total working capital is over $367 million, which puts us in a great position to capitalize on demand moving forward. I'd also like to reiterate what Alan just said.

None of this is possible without the fantastic team working extremely hard to make things move. It's an exciting time to be at Unusual Machines, and looking forward to the rest of the year. Thank you to our shareholders and partners for continuing to support our mission throughout it all. Back to Alan.

Alan Evans (Chief Executive Officer) Thanks, Brian. At a high level it's been an impressive quarter. We keep scaling both sales and company size. We maintain a strong cash position.

We've added product categories through activities like the Upgrade Energy acquisition, and we've been able to achieve these results while reducing our operating losses. We believe we remain well positioned to be a supply chain leader for components for small drones as the domestic industry expands. I'm about to go into a lot more detail in the second quarter and also discuss our outlook going forward. I'd like to remind everyone that my comments coming forward from here definitely contain forward-looking statements and actual results may differ from those anticipated.

Quarter two—the second quarter—is worth talking about in more detail. The second quarter is the moment where I've gone from hoping we could be a major supplier in the emerging drone industry to believing that we will be. Two major threads emerged in the second quarter that are not going to show up in the financial statements, but are really core to Unusual Machines' ability to effectively grow forward and be a larger company. The first was a supply chain issue.

During the quarter we outgrew one of our electronics vendors, and we had to work through challenging supply chain challenges as we replaced different components and where we got parts as we still fulfilled products for our customers. Our sales and operations team did an incredible job of navigating this and putting in the extra hours and working with customers, and I could not be more proud of those teams and how they handled what was this really challenging situation to deliver for our customers and keep our business on track. The second challenge was that we had a quality issue with one of our motor SKUs.

There was this intermittent issue that required deep coordination with our product team, our motor production team, and our customers to go in and find the root cause of the intermittent challenge. They then had to go through and create remedies to our production processes as well as new ways to do quality testing to eliminate the issue from everything we're doing going forward. These two challenges are both pretty normal types of issues for a company like ours. At scale, they should be expected, but this is really the first time that we faced either one of these types of challenges at this scale.

At the same time they both showed up simultaneously. Either one of these operating issues could have easily been used to justify a flat quarter, could have easily derailed what we were doing or slowed it down. Our team members could have treated this as routine. They could have not put in the 10- to 12-hour days and worked the long hours required to be sure our customers were in the best place they could be.

They didn't. Watching everyone—and I mean everyone—involved work through these challenges and still deliver the kind of growth we've seen and the margins that we've seen has me fully believing that we have the team and the mindset to be successful as we continue to grow. I absolutely believe in the team we have and what we are continuing to build. That's probably enough on the second quarter, but I think it's important for everyone to understand that as it doesn't show up.

So now let's talk about the future. First and foremost, demand remains strong. S. marketplace remains very supply constrained.

And we still see demand outstripping supply both this year and deep into 2027. We are continuing to build the company and procure raw material to grow into this demand as fast as we possibly can. And we don't see any signs of softness now or in the near future. The primary driver of this demand growth continues to be the Department of War.

The drone dominance gauntlet program remains on track as phase two is currently in the final selection process, and more than 60,000 drones are expected to be ordered in the second half of 2026, mostly in the fourth quarter. The NDAA continues to move forward through legislation with big increases in spending for autonomous systems. And in addition to that, there are drone programs and counter-drone orders for the same parts. That counter-drone is really becoming another emergent, addressable market segment that's creating immediate and near-term demand.

There have also been orders that have been propagating through the sort of Department of War procurement process, and I just want to give some examples. There was a $90 million counter-UAS order for Power US. There was $500 million in counter-UAS from AeroVironment, $500 million in counter-UAS orders from Perennial Autonomy, a $500 million IDIQ for FPV drones from Neros, which is an extension of the PBAS program, and very recently an $820 million loan from the OSC to PDW. These and other orders are really just starting to propagate through the supply chain.

And we expect that they're going to create additional demand here in late Q3 and Q4 and then into 2027. So one thing we did learn in the second quarter is that we do not yet have the infrastructure to support hundreds of millions or billions of dollars in annual revenue. The massive amount of money flowing into the drone marketplace is coming faster and is than we anticipated. And so we are in the middle of transforming Unusual Machines.

And we now very strongly believe that we only have until the end of the third quarter to complete this transformation. Because of this demand wave, our high-speed motor production line is just in the process of being installed. The components are in Florida and it's going to take some time to bring that online. Our HR team is very busy in California even this week, actively working on helping Upgrade Energy hire people, scale their team and process, and prepare for integration into the greater Unusual Machines umbrella.

Even though we're not going to see any revenue from that acquisition in this quarter until we close, our supply chain team is working closely with them to drive battery vendors and work on bringing in the cells and the material. Then that is a long-term endeavor in terms of transitioning and qualifying new electronics providers. And these are all to address some of the challenges we had in the second quarter and are a ton of work that we're setting up for the long-term future.

These activities—all of this work—will not show up in the top line for the third quarter, but this is the work that positions us to continue our dramatic growth during the fourth quarter and into 2027 as this massive demand wave starts to fully manifest. To summarize, the second quarter of 2026 showed strong results despite operating challenges. We doubled revenue to almost $17 million and reduced our adjusted EBITDA loss to $400,000. We continued our staircase financing strategy and we're now focused on building a strong foundation with the industry through the end of '26 and into 2027.

Unusual Machines remains at the forefront of the domestic components market, and the market is growing in a way never anticipated, with additional demand from counter-drone pushing things even faster. Our business is well capitalized and healthy, and we're continuing to grow as fast as we possibly can. And I am now confident and believe that our team is positioned to meet this demand. I want to say thank you again to our entire staff and to all of our shareholders who are part of this with us.

And with that, I would like to open up the call to questions. OPERATOR Thank you very much. We are now opening the floor for questions. If you would like to ask a question, please press star one on your phone keypad.

While you're posing your question, please pick up your handset if you are listening on a speakerphone to provide optimum sound quality. So, star one for questions. Please wait a moment whilst we poll for questions. Thank you.

Our first question is coming from Austin Bolig of Needham & Co. Austin, your line is live. Austin Bolig, Analyst at Needham & Co. Thanks, guys, for taking my question, and congrats on the great results.

First, Alan, just wanted to kind of dive a little bit more into the revenue outlook for the rest of the year. I think prior you guys were talking about trying to grow internally 50% quarter over quarter. Understanding this is at a much larger base, is the plan to still try and grow sequentially throughout the year?