AIRO Group Holdings, Inc. (AIRO) Q4 2025 Earnings Call Transcript

Thank you for standing by. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Arrow Fourth Quarter 2025 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. Thank you. I would now like to turn the call over to Dan Johnson, Executive Vice President of Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Welcome to the Arrow Group Holding Incorporated fourth quarter 2025 earnings call. We appreciate you joining us today and look forward to sharing an update on our progress and performance. With me on the call are Dr. Chiranjeev Kuthuria, our executive chairman, Captain Joe Burns, our chief executive officer, and Dr. Maria Pilipiv, our chief financial officer. Replay information for today's call can be found in our earnings press release issued earlier this morning. Today's call will include forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements relating to Arrow's 2026 outlook. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance, or achievements to be materially different from those expressed or implied by the forward-looking statements. Forward-looking statements represent our management's beliefs and assumptions only as of the date made. Information on factors that could affect the company's financial results is included in its filings with the SEC from time to time. In addition to our prepared remarks, our earnings press release, SEC filings, and a replay of today's call can be found on our Investor Relations website at investor.thearrowgroup.com. In addition, during today's call, we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Reconciliations between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus their closest GAAP equivalent is available in our earnings release. Additionally, we plan to discuss drone segment backlog, a definition of which can be found in our earnings release. With that, I'll turn the call over to our Executive Chairman, Dr. Chiranjeev Kuthuria.

Thank you, Dan. It's a pleasure to be with all of you today. As Executive Chairman, I'll begin with a brief strategic overview before turning it over to Joe to walk through our operating segments. 2025 was a defining year for AeroGroup. We made meaningful progress operationally, strategically, and financially as we continued building what we believe is a differentiated, integrated aerospace and defense platform positioned at the intersection of defense mobility, security, and training. During the year, we continue to refine our strategic focus around areas where we see the strongest alignment between customer demand, execution timelines, and long-term value creation. I'm extremely proud of how our team executed across our core businesses – drones, training, and avionics, while advancing our roadmap in defense mobility with increased emphasis on medium-lift, multi-role, unmanned platforms that support logistics, ISR, and other mission-critical applications. This focused approach allows us to deploy capital more effectively, accelerate platform development, and scale the business in a disciplined manner as a newly public company. For full year 2025, we delivered revenues of $90.9 million and EBITDA of $24.7 million. Fourth quarter revenue came in at $48.3 million, reflecting strong execution, particularly within our drone and training segments. Also, cash totaled $74.4 million as of December 31, 2025. We are pleased with this performance, especially given the rapidly evolving operational requirements of our defense customers. One of Arrow's core strengths is our ability to rapidly integrate new capabilities into deployed platforms and deliver mission-ready systems in a dynamic and contested environment. it. That agility continues to differentiate us. Beyond the financial results, 2025 was a transformational year. We successfully went public, strengthened our balance sheet, expanded our U.S. manufacturing footprint, advanced towards blue UAS certification, and announced strategic joint ventures that will expand our global reach and production scale. At the same time, we've broadened our presence across North America, Europe, Asia Pacific, and Ukraine. We exited the year with strong momentum and increasing visibility into 2026. With that, let me turn it over to Joe to give you more color on our segments and the market. Joe?

Thanks, Cheranjeev, and welcome, everybody. Let me start by stepping back and framing how we are approaching the business. 2025 was an important execution year for Aero. Across our drone, avionics, and training businesses, we made meaningful progress in advancing our position as a defense-focused, integrated, unmanned systems platform, delivering combat-proven ISR capability today while building towards scalable logistics and multi-role drone platforms in the future. Importantly, our business today is overwhelmingly driven by drones, which represented approximately 87% of total revenue in 2025 and continue to be the primary engine of growth and demand across the company. Our focus is clear, supporting U.S. and allied defense customers with mission-ready systems that can be produced, upgraded, and sustained at scale. One of the highlights of 2025 was completing the first RQ-35 intelligence, surveillance, and reconnaissance drones produced a full operational standard in our U.S. manufacturing facility in Phoenix, Arizona. This marks the first U.S.-manufactured RQ-35 systems and a major milestone in our Made in America expansion strategy. The systems were built to the same specifications as those produced at our Denmark facility, completed Phase 1 of U.S. manufacturing and validation, and concluded a comprehensive flight test campaign successfully in December. This achievement reflects our commitment to delivering combat-proven ISR systems from U.S. soil and strengthens our ability to serve both domestic and Allied defense customers. The RQ35 hydrant continues to perform exceptionally well in GPS-denied and contested environments. Demand for combat-proven, autonomous ISR systems remain strong across NATO-aligned nations and Allied Defense customers. We are increasingly positioned as a scaled supplier of mission-ready platforms to Allied Defense customers. We continue to invest in strengthening and expanding our UAS solution offering and are preparing for new multiple product launches in the first half of 2026. In particular, we are embracing our capabilities in artificial intelligence and edge computing to further broaden and differentiate our solution portfolio. We remain on track to receive Blue U.S. certification in the first half of 2026, which we believe will meaningfully expand our addressable U.S. Department of Defense opportunities and allow us to scale domestic adoption more aggressively. In addition, Skywatch, together with Alborg University and a third partner, was awarded a $4.5 million program to develop counter-electronic warfare technology for integration into Skywatch UAS platforms, providing operators with greater mission assurance and operational continuity in denied or degraded environments. On the production side, we continue to scale manufacturing capability and operational efficiency. Modernization of the Stovering facility in Denmark is intended to increase production throughput as demand expands. We have already invested heavily in plant expansion in Denmark and have the capacity produced roughly 30% beyond our existing order stream. To support continued international growth, we opened a sales hub in Singapore to serve the Asia-Pacific region, initiated new trial programs across the APAC and EU, and expanded our local presence in Ukraine, allowing us to remain closely aligned with real-time battlefield requirements and continuously refine our systems based on active operational feedback. Additionally, we have added significant personnel resources with strong international governmental sales experience to our enterprise. Of note, we have also added the UK as a sales hub, allowing access to UK MOD and Middle East channels. Taken together, these initiatives reinforce our strategy of delivering mission-ready ISR systems that can be produced, upgraded, and supported from both U.S. and allied manufacturing bases. Moving on to our two joint ventures that we announced in the second half of 2025. In November, we executed a joint venture with Nord Group to accelerate the deployment of battlefield-tested, unmanned aerial systems across the United States, Ukraine, and NATO defense markets. The partnership, when completed, will combine Aero's U.S. manufacturing infrastructure and government procurement expertise with Nord Drones' combat-proven technologies and high-volume production capabilities. Together, this will create a scalable framework to rapidly deliver mission-ready systems to Allied defense customers. We also signed a letter of intent with Bullitt, a Ukrainian developer of high-speed interceptor drones designed to counter hostile unmanned aerial threats. The proposed joint venture is focusing on advancing these interceptor platforms for the U.S. and NATO defense markets while expanding production capability and accelerating next-generation development. We are working to finalize the JV with BULLET in the coming quarter and are excited to partner with them. Together, these partnerships will position Arrow not just as a drone developer, but as a scalable platform delivering combat-proven systems across the NATO defense ecosystem. Within that focus, medium lift multi-role capability has become an increasingly important part of our long-term roadmap. These platforms are designed to support defense, logistics, persistent ISR, and other dual-use missions that require greater payload capacity, endurance, and operational flexibility. They allow us to address multiple mission sets with a single adaptable platform without the regulatory and infrastructure complexity associated with the passenger transport and represent a significant long-term opportunity for aero. The launch aircraft, the JX-250 and the JC-250, is designed to carry up to 500 pounds of payload over distances of up to 250 miles, enabling high-value logistics and ISR missions in challenging or infrastructure-constrained environments. We expect the JAUNT platform to officially commercialize and be operationally ready in 2027. The use cases are compelling and initially defense dual-use driven. In natural disaster environments, the ability to rapidly deliver critical supplies into damaged or inaccessible regions. In military settings, the aircraft can be utilized to transport ammunition and medical supplies to forward operating locations without exposing personnel to unnecessary risk. In commercial markets, it addresses remote and time-sensitive shipping applications, where traditional infrastructure is limited. From inception, the Jaunt medium-lift multi-role drone has been engineered as a dual-use platform, serving both defense and commercial markets, which we believe significantly expands its long-term addressable opportunity. We expect the platform to follow a disciplined development path with first flight targeted for late 26 and the initial market availability expected in late 2027. Our training business continued to build momentum as well. We are proud to share that Aero's training division, through our wholly owned subsidiary, Coastal Defense, Inc., was awarded a $1.9 million one-year indefinite delivery and quantity contract to support U.S. Navy flight and joint terminal attack controller training programs. This award enhances a core element of naval readiness by delivering specialized training support services designed to elevate realism and execution of aviation and JTAC events. It reflects the Navy's continued confidence in our ability to support mission-critical training requirements. We have also finished the modification of one of our S-211 aircraft to make it flight-ready for military contracts and have already flown it on a contract to great success. Our second S-211 will be ready by mid-2026. Additionally, we are 90% complete with modifications to our first L-39 aircraft to support live ordnance training missions. The second L-39 will be ready to employ live training munitions in May. Lastly, we are well positioned to bid on multiple upcoming long-term close air support training contracts. The request for proposals should be released sometime in the second half of 2026. Aspen Avionics also performed well during the year. We advanced the development of the NEXNAV MAX 2, secured multi-year OEM purchase orders, and continued expanding foreign military engagement. Aspen remains strategically important for the vertical integration advantages it provides across our unmanned systems profile. Stepping back, the macro environment remains supportive, with sustained increases in defense spending across NATO and allied nations, driven by modernization requirements and evolving threat profiles. These investments are not only focused on force expansion, but increasingly on capabilities that enhanced defense mobility, resilience, and operational flexibility, including ISR, counter-electronic warfare, resilient logistics platforms, and integrated training solutions. Importantly, this demand extends well beyond active conflict zones. It includes border security, maritime domain awareness, infrastructure protection, and allied force modernization across Europe and Asia Pacific. We believe Arrow is well-positioned to capitalize on these trends through our integrated unmanned systems platform, with a particular emphasis on medium-lift, multi-road drones that support mission-critical mobility and logistics requirements. In addition to organic growth, we remain disciplined in evaluating inorganic opportunities. I'd like to provide some color about the types of targets we're evaluating. Companies that will be evident at creative within 12 months, strategically aligned with our drone and avionics platforms, and value enhancing for our shareholders. Our balance sheet provides flexibility, and we intend to deploy capital thoughtfully as we remain opportunistic. As we close out the year, I want to step back and provide an update on how our priorities have continued to evolve as we focus on execution and long-term value creation. Building on the momentum we've seen across the business, including the continued success of the RQ35 ISR drone and the deliberate shift away from passenger EV tolls toward the medium-lift multi-role drones, where demand is more immediate and development timelines are better aligned with defense procurement cycles. Over the past year, we've made meaningful progress across our drone family, supported by increasing integration between our platforms, avionics, and training capabilities. These systems continue to address real-world defense and dual-use mission requirements, ranging from ISR and logistics to operations in austere and infrastructure-constrained environments, where demand is tangible and use cases are well-established. As expected, our training and avionics segments remain important enablers of this strategy. Training continues to support customer readiness and fleet adoption, while avionics provides common architecture and mission flexibility across the platforms. Together, these segments strengthen customer relationships and scale alongside deployed fleets, reinforcing the durability of our overall business model as programs mature. Operational, we have continued to invest in manufacturing, supply chain, and commercial infrastructure, with a particular emphasis on scaling capacity in the United States, while continuing to expand our European footprint. This integrated transcontinental approach supports our resilient production, tighter execution, and compliance across the U.S. and allied programs. Our research and development, manufacturing, and commercial teams are increasingly coordinated, leveraging shared architectures, suppliers, and production processes across the aero portfolio. Against that backdrop, one of the most important refinements we made this year was sharpening our platform focus. As we've discussed previously, we have stepped away from passenger eVTOL concepts and concentrated more deliberately on multi-role medium-lift drones, where demand is more immediate and timelines are better aligned with customer procurement cycles. This refinement and strategy directly informs how we will allocate capital. Throughout the year, we've prioritized investments in R&D, manufacturing readiness, avianics commonality, training infrastructure, and supply chain resiliency. while primarily in the U.S., while continuing to support our European expansion. As a result, investment levels can vary from quarter to quarter based on program milestones, production sequencing, and supplier ramp-up. These fluctuations are intentional and protect the long-term capacity building, not changes in underlying demand. Similarly, revenue in our markets does not develop evenly on a quarterly basis. Delivery schedules, milestone timing, customer acceptance, and procurement cycles, often across U.S. and allied defense programs, can influence when revenue is recognized within a given year. In parallel, our training and avionics segments continue to scale as fleets deploy and operations mature, providing complementary growth characteristics over time. For those reasons, we continue to evaluate performance and provide guidance on a full year basis. expressed as an annual revenue growth range. This perspective better reflects the progress we're making, the investments we're putting into place, and the underlying demand profile across our programs as they move from development into production and scale. Taken together, these efforts position Arrow as a focused defense mobility platform with differentiated capabilities in ISR, logistics, avionics, and training, and a clear path towards scalability, long-term value creation. With that context, I'll turn it over to Maria, who will walk you through the financial results and discuss our annual revenue growth outlook in more detail.

Thank you, Joe, and good morning, everyone. For the fourth quarter of 2025, revenue was $48.3 million, compared to $39.7 million in the fourth quarter of 2024, reflecting a continued demand for our drone platforms and deliveries incorporating the customer-requested capability upgrade to the RQ35 Hadron system. On a sequential basis, revenue increased from $6.3 million in Q3 to $48.3 million in Q4 of 2025, primarily reflecting approximately $20 million of revenue that shifted from the third quarter into the fourth quarter as a result of customer modifications. Gross profit for the quarter was $29.7 million, representing a gross margin of 61.4%, compared to a gross profit of $27.8 million and gross margin of 69.9% in the fourth quarter of 2024. The change in the margin primarily reflects product mix, the timing of deliveries across the year, as well as the integration of upgraded system capabilities. Operating income for the quarter was $6 million compared to $16.1 million in the fourth quarter of 2024, reflecting continued investment in engineering development, product scaling, and public company infrastructure as we support the growth of the platform. We reported break-even results for the quarter compared to the net loss of $800,000 in the fourth quarter of 2024. First quarter of 2025, EBITDA was $8.8 million compared to $8.7 million in the fourth quarter of 2024. Adjusted EBITDA for the quarter was $8.9 million compared to $19.2 million in the fourth quarter of 2024, reflecting the same product mix dynamics and continued investments in scaling the business. Turning to full year 2025, revenue was $90.9 million compared to $86.9 million in 2024, driven primarily by the drone segment despite shipment timing adjustments earlier in the year. Full-year gross profit was $54.4 million, representing a gross margin of 59.9%, compared to $58.3 million and 67.1% gross margin in 2024. The change primarily reflects a different mix of product deliveries and the investments we have made to support long-term growth. For the year, we reported an operating loss of $28.8 million compared to an operating loss of $17.4 million in 2024, reflecting continued investment in engineering capabilities, production capacity, and infrastructure to support our growth strategy. Net loss for the year was $4.1 million compared to a net loss of $38.7 million in 2024, reflecting the absence of certain non-recurring items recorded in the prior year. For the full year 2025, EBITDA was $24.7 million compared to negative $13.1 million in 2024. Adjusted EBITDA for the year was $5.7 million compared to $33.7 million in 2024. The year-over-year change primarily reflects shipment timing, product mix, and investments made throughout the year to scale the business following our transition to a public company. Turning to cash flow and liquidity, as of December 31, 2025, we had $74.4 million in cash on the balance sheet. During the third quarter, we successfully completed a follow-on offering that raised $89.4 million in gross proceeds, which significantly strengthened our balance sheet and provided substantial resources for gross investments across our integrated drone, training, and avionics platform, as well as the flexibility to pursue opportunistic acquisitions of complementary businesses, products, services, or technologies. On the backlog and demand visibility, our order pipeline remains strong. As of March 31, 2026, we had approximately $150 million in drone segment backlog. This backlog amount was translated to U.S. dollars using applicable exchange rates as of the market close on March 27, 2026, and may increase or decrease based on fluctuations in the foreign exchange rates. We may experience reduction to drone segment, backlog, and or significant order cancellations due to various factors, including delivery delays and production disruptions. This backlog reflects continued demand for our drone platforms and provides meaningful visibility as we enter 2026. While we continue to grow our training and avionics businesses, our revenue profile remains predominantly driven by the drones. Turning our outlook, based on our current order pipeline and demand environment, we expect full year 2026 revenue growth of 15 to 25% year over year. Importantly, the guidance I provided for full year 2026 does not include the two joint ventures we have announced in the second half of 2025, with Nordron and Bullitt. However, we do expect them to both be additive to our financials in 2026. Let me now provide some additional context on our revenue cadence. Aero is a drone-led business and drones drive most of our revenue. As a result, quarterly performance can vary based on delivery timing, customer acceptance, and program execution. In the drone segment, we expect first quarter revenue to be primarily driven by field upgrades to deployed systems, with larger shipment plan for the following quarters. Accordingly, we believe it is more appropriate to view the first half of the year in aggregate rather than focusing on any single quarter initialization. This reflects delivery timing, not any change in underlying demand or customer activity. Moving now to investment and margins, we continue to invest deliberately to scale the business for long-term growth. Those investments include expanding our sales capabilities, advancing R&D, strengthening strategic partnerships, and building out manufacturing and supply chain capacity. As those investments ramp, there may be some near-term impact on margins, but they are intentional and are aligned with supporting a larger, more diversified business over time. Importantly, current margin dynamics reflect plan mix and timing effects associated with scaling production and integration of hands capabilities, rather than pricing pressure and changes in underlying demand. In summary, quarterly variability in revenue and margins should be viewed in the context of delivery timing and plan investment. Given the delivery-driven nature of our drone business, we believe that business is best evaluated on a full-year basis, where demand strengths, backlog conversion, and the benefits of our investments are more clearly reflected. With that, operator, we are ready for questions.

If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again. We do ask that you please limit yourself to one question and one follow-up. We'll pause for just a moment to compile our Q&A roster. And our first question today comes from the line of Colin Canfield from Cantor Fitzgerald. Your line is open.

Hey, thank you for the question. As we think about the strategy change on air mobility, we estimate about $15 million of R&D in 26 and $10 million in 27 related to the human-rated portion of that project. Is it fair to assume that both of those line items of specific investment roll off? And then if that's fair, can you perhaps talk about kind of how you think about the profitability of the business in 26 relative to that tailwind? Thank you.

Maria, do you want to answer or then I can go ahead. So, Colin, just to answer your first question, you know, we're going to reduce our capital expenditure because we're not developing a passenger eVital. We're focusing on the multi-role, multi-lift cargo joint vehicle. So it is fair to say that capital expenditure is going to drop off. And going forward, it'll add meaningful revenues post-2027.

Got it. Okay. And then in terms of the line of sight for kind of the next set of orders, can you maybe talk about kind of how you see the mix of customer demand between U.S. and international? And then how is the team kind of treating about, or how is the seem thinking about accounting treatments. It sounds like we're getting a more crystallized definition of backlog. Is it fair to assume that when we see essentially orders from U.S. or orders from international, like we'll see those recognized as firm backlog?

Yeah, thanks, Colin. It's Joe. Our backlog today is approximately $150 million, and we have really good visibility on a meaningful portion of that converting to revenue over the next 12 months. Our contracts tend to be large and program based as you know so backlog growth and conversion could be non-linear from quarter to quarter demand today today remains primarily international while the u.s pipeline continues to build as we've talked about earlier we have significantly added to our personnel roster to to assist in that uh in that pipeline construction from an accounting perspective revenue is recognized upon delivery with a customer acceptance which can create normal quarterly variability And if we talk about other things of certification that will help with this model, with respect to Blue UAS, certification is helpful, but not necessarily the primary driver of our near-to-revenue outlook. We're estimating to finish up that Blue certification mid-year, as we've talked about before and as planned.

Got it. Thank you.

Your next question comes from the line of Andre Madrid from BTIG. Your line is open.

Yep. Thanks. Good morning. You know, another one on drone backlog, you know, it seems like there's some unfilled definitive orders, and then there's some in backlog that is kind of undefinitive. Could you even provide more color as to what the mix exactly is? Yeah.

All right, Joe, and then I can answer.

We have significantly strong visibility into our backlog as we've described. So very comforting that, in fact, we've gone so far as to produce massive numbers of airframes in anticipation of this actual backlog that we've discussed.

So to answer your question, you know, the backlog was based, we did a bottoms-up approach looking at all our customers and NATO orders. So over the next, you know, 12 months, the team is very comfortable on the $150 million firm backlog going forward.

Got it. And then I guess to follow up to that, I mean, you know, your current backlog seems to, you know, last you through 2026. I mean, when do you expect orders to immediately step up to the point where we can be confident and growth into 27 and beyond? Joe, you want to start?

Yeah, it's a continuing process, right, as we get in further and further into the year and we get orders from various NATO countries that continues to substantiate itself. The actual product itself, the RQ35, that's the primary drive for this, is really, you know, continues to outperform in the battlefield. So we continue to see growth and acceptance across that pipeline. So as we get further and further into the year and certainly into 2027, we'll release further guidance as to the growth of the product. But so far, it looks like it's a very, very, very stable and solid growth platform.

And the only thing, you know, we expect also meaningful growth as our joint ventures, you know, continue to mature. And in our $150 million backlog, you know, we also expect, you know, significant U.S. pipeline growth. And Joe can talk to you about, you know, delivery of our hydrant and what we've done in our Phoenix facility.

Yeah, if you can allow me just a second to address that. We, you know, we have got the certified or the facility up and running now in Phoenix. We produced multiple drones already, as we talked about just a little bit ago. So it's exciting times for that. We are ready to produce a significant number of drones out of Phoenix and are filling the pipeline with DOD, DOW types of orthotics and currently in process and doing flight demos to support all of that.

Got it, got it. One more if I could squeeze it in. You know, you previously said, I mean, to your point, you were talking about the Phoenix facility, and you previously said the 26th Outlet doesn't assume any U.S. sales. Is that still kind of the case? And if so, I mean, just how much upside could we see to 15 to 25 percent growth if we see any orders coming earlier than that?

Right. And I'll jump in. Apologies for earlier. I had a connection error and could not hear the first question. But in terms of guidance, again, guidance is primarily on NATO backlogs that we currently have and any meaningful upside we will be releasing throughout the year when we see orders coming from the U.S.

And to specifically address the U.S. output, our Phoenix facility is up and operational. It's progressing in line with our plan. Our target capacity on that, by the way, is to produce up to 100 units per month. So that's a significant growth for us. Current production is focused on demos and trials and business development. And we'll scale production in line with our demand and our contract visibility, particularly to U.S. and D.O.W. customers.

Got it. I appreciate the color. Thank you all. Thanks.

And again, if you'd like to ask a question, it's star one on your telephone keypad. Your next question comes from a line of Brett Lindsey from Mizuho. Your line is open. Brett, your line is open.

Hey, good morning all. So yeah, just back to the full year 2026 revenue growth outlook. So the 15 to 25%, maybe just a finer point on the individual pieces within that. And how much of the 150 backlog are you expecting to ship this year, so within 26, as part of that outlook for drones?

Brett, we expect, as we're giving guidance for the backlog, we expect a significant portion of it to convert in the next 12 months. And the reason our guidance is below the backlog is just to give us an arrow of margin if it shifts to the other quarters of the 2027.

And Brett, I'll just add, and Maria can add, the key drivers are drone profitability. That's still 87% of our revenues today.

And then maybe just shifting to the U.S. pipeline that you indicated was seeing pretty good momentum. Is there any way to dimension or quantify the level of activity relative to maybe 150 that you're seeing within the U.S. pipeline? Is it a magnitude of that? Is it a small fraction? Any color would be helpful.

Maria or Joe?

I'm happy to jump in. In terms of 2026, as I mentioned, we did not provide any guidance for the U.S. sales. However, we expect that we'll be able to ramp up in a future where North America sales will be a significant portion of overall drone sales.

So, and just to quaff that a little bit, we do put that all in perspective of filling the pipeline. So we have, as I mentioned just a bit ago, dramatically increased our sales and BD team specifically for the U.S. marketplace. We're currently participating in trials. We're excited to get in, and we do expect to see some activity in the near future with the U.S. with continued growth. As we all know, the U.S. marketplace is massive, and we plan on being a major player in that market.

Okay, great. And then just a quick follow-up on some of the JV structure and what the contribution could look like this year. I understand it's not contemplated within the framework and the outlook, but what are you thinking in terms of the financial impact this year, potentially, both on the cost side and the revenue side?

So, you know, I can start, I think, and then I'll let Joe and Maria. I think what you're seeing, especially in the current conflicts, first person view drones or kinetic drones are becoming very important. And with NordDrone, we have battlefield-proven drones. And as you can see from the Middle East conflict, interceptor drones are becoming more and more important. Even if you look at yesterday's Wall Street Journal article, they don't want to spend the millions of dollars. So we're very well positioned along with our ISR, our Q-Hedron drones. In terms of, as Maria pointed out, we haven't included potential revenue from those two joint ventures as we're now currently looking at, you know, developing the pipeline and where they can be bid. Joe or Maria, do you want to add anything?

Sure. Our joint ventures are contemplated as close to a 50-50 type of a relationship. ship. So with all sales and contributions from the various conflicts around the planet, we'll roll into the joint venture. So it's all accretive to what we've already provided for guidance. And anything we do out of those between now and the end of this year certainly will add to the bottom line as well.

All right. Got it. Thanks a lot. Best of luck. Thank you.

And this concludes our question and answer session.

I will now like to turn the call back over to joe burns chief executive officer for closing remarks yeah thank you everybody for for joining us today we're excited about uh about our results from 2025 and really looking forward to a very successful 2026. we spent a lot of of capital putting the company together and building building for this growth opportunity and we certainly are seeing it in the drone segment and feel like we're putting our efforts in the right direction so we're excited to continue this growth pattern and look forward to our progress and giving you more guidance on our progress as we get through the quarters. Thanks again for joining us today.

This concludes today's conference call. Thank you for your participation. You may now disconnect.