Draganfly Inc. Q4 FY2025 Earnings Call

Welcome, everybody, to our call today. I'm just going to give it a minute here while people start to file in, and then we'll get started. All right. Then just to make sure we keep on schedule, I think we will get started with today's call. So as always, greetings, and welcome to everybody, to the shareholders and stakeholders, to today's Draganfly 2025 Q4 and Full Year Earnings Call. My name is Rolly Bustos, and I am the internal Investor Relations representative here at Draganfly. We appreciate you all joining us today. We will start, as usual, with our CEO and President, Cameron Chell, recapping the fourth quarter and full year earnings highlights. Next will be a more detailed financial review with our CFO, Paul Sun. We will then conclude by addressing the pre-submitted questions that we have received. Though I know I talk to many of you often, as always, you are welcome to reach out to me with questions directly at [email protected]. I remind everyone that this presentation may include forward-looking information and statements. These statements are not guarantees of future performance or financial results and undue reliance should not be placed on them. Any future events or financial results may differ from what might be discussed here. The company's results and statements are accurate as of today, March 24, 2026. We are under no obligation to update or renew these statements outside material press release disclosure going forward. The full forward-looking disclaimer can be found on Page 2 of this presentation. So Cam, if you're ready, please go ahead.

Great. Thanks, Rolly. Appreciate that. Thank you, everybody, for taking the time and your consideration to be here. We appreciate you as shareholders of the company, enthusiasts and maybe even some fans. And certainly, if there are any of our team members, employees or customers here, we deeply appreciate you. First and foremost, we want to just throw out all our blessings and prayers to all of those who are fighting for our freedom today and those who are in service and away from their families. We wish them Godspeed. So Q4 and year-end highlights for 2025. 2025 was a really solid year for us in terms of building on top of our infrastructure in preparation for the predetermined revenue ramp that we expect to experience throughout this year and certainly into '26. We did have record revenues in '25. We were up 17.8% and closed off the year with $7.7 million. We had gross profit of $1.3 million on that, which we're pretty pleased with given all the R&D and the additional work that we've been doing on our systems and trying to do our best to overservice our customers. And we ended the year with a cash balance of about $90 million. So a strong balance sheet for us to continue to build on as we move into '26 and '27. A few of the operational highlights for us this year, and there were many. In particular, Draganfly unveiled a new product called the Outrider. This was built for the Southern Border multi-mission agenda or concept of operations. The Southern Border sheriffs have a very unique situation in terms of securing the border. While the mass migration flow has been stemmed, human trafficking, firearms, and drugs have become more intense. The southern border commitment that the sheriffs have is more imperative now than before. From a special operations command, we were referred into the Southern Border sheriffs, in particular, to Cochise County. Cochise County is renowned as a Southern Border sheriff county. They secure much of the Arizona border and parts of the New Mexico border with covert cameras and an AI system and covert camera system that they built themselves. When they get hits on those cameras, the challenge is they can have up to two hours to get to that location. Their AI system is very effective at identifying if it's human trafficking, drugs, and it can often provide intelligence about cartels, firearms, or combinations of those. Then they've got to deploy resources into that area. They've been experimenting for a couple of years with drones to be able to get to those locations long before personnel can, whether by RZR, ATV, horse, or four-wheel drive. Often it takes a couple of hours to get there. By the time personnel arrive, situational awareness and the theater have changed dramatically. They wanted drones that could get there, stay on task for a long enough time, and perform multi-mission roles — not just ISR, but interdiction, holding people in place, acting as a communications hub in very challenging communications terrain, and supporting search and rescue or personnel support. Most drones available to them, especially multi-rotor drones, had only 30 to 40 minutes of flight time, which may get you there but leaves little dwell time and often insufficient time to return. Smaller drones don't give much ability to interdict and primarily provide ISR. We spent a couple of months working with them, embedding our Integrated Tactical Solutions team. They spent time on horseback and in RZRs understanding the use cases and concepts of operation. Then we designed a drone platform with the sheriffs to execute on all the missions. We wanted a platform that could do what a fixed wing could do (stay aloft for multiple hours) and what a multi-rotor could do (carry payloads and operate in adverse conditions). The product we designed with them is the Outrider drone. This drone can stay aloft for seven hours and carry up to 100 pounds. It can be a communications hub, an interdiction device, a search and rescue device, a resupply device, and a sophisticated ISR device. The sheriffs get the best of all worlds. We were able to deploy this quickly because Draganfly is one of the very few companies with a full product lineup — everything from small FPV attritable one-way drones, sometimes called 'suicide drones,' as small as five inches, up to something as big as the Outrider at nine feet across. We took our heavy lift drone, which was all-electric, and built on that platform two diesel engines and other modifications that gave it the capability to stay up for that amount of time with that payload. It is interoperable with our other drone platforms, so training on one platform carries over to others. Often you don't need a nine-foot drone to respond; sometimes you need a smaller drone with 40 minutes of flight time. All of these platforms are connected and provide multiple views to multiple command centers: search and rescue, sheriffs, local police, border control, whoever the case may be. This project has been extremely successful. We now have a border solution that was designed with the concept of operations in mind. That expertise is something we can now take into several border opportunities in multiple countries and jurisdictions around the world. We continue to resource up the company and are fortunate to bring on Victor Meyers and Keith Kimmel. Victor is a former Navy SEAL and Keith is a former TOPGUN. Both have incredible careers, are highly educated, and have strong capital markets and sales backgrounds. They are leading our Military Board of Advisers and our sales efforts within the military. They bring operational expertise and trusted contacts, and we are learning so much from them and the organization they're building within Draganfly, which allows us to deliver solutions rather than just hardware or software. A hot topic recently has been swarming. Swarming is an important part of the drone ecosystem and has received attention over the last couple of weeks. We have been doing swarming work and building FPVs within our company for over 15 years. An important story often overlooked is that the U.S. Marines developed FPVs and introduced them into Ukraine in 2022. Ukraine has advanced these capabilities significantly. Two of the people who did the original training and initial design work are now part of Draganfly. We partner with multiple swarming technology providers and are particularly excited about what Palladyne is doing. They have a sophisticated swarming system and have won recent contracts. We announced some recent contracts in the last week regarding military contracts and how those are integrated into the Draganfly line. We view swarming and AI software as payloads; Draganfly's platform supports dozens of integrations, allowing customers to select the camera, AI systems, or swarming software they need. Palladyne is an important partner, and we are enthusiastic about the software and work they do and the contracts we are winning together. We showcased at the Advanced Drone Systems exhibition at AUSA, which was a big show for us. We had a large Ukrainian contingent of military folks participate and speak, and we had dignitaries from the Department of Defense (DoD) there as well. We performed a meaningful strategic planning session and have seen many developments since that show. Draganfly announced a strategic partnership with Defense Prime Global Ordnance. Global Ordnance is a large defense prime known for ordnance work; they provide a significant portion of ordnance into Ukraine and have a strong push into drones. They understand that sometimes the drone is the ordnance, whether FPV swarms or larger formats. We have a strong partnership with them, are integrating deeply, and are working to ensure Draganfly product capabilities are featured in their ecosystem. We also deployed with Autonome a landmine-clearing mechanism: a carpet that lays out and includes explosives that quickly clears mines to create a path. We integrated this with the heavy lift drone, where the drone carries the carpet, lays it out, backs off, the carpet detonates to clear mines, and then the drone moves the next carpet into place and collects the spent material. We've had great success with this integration, and Autonome is gaining traction globally. This is an exclusive integration with our heavy lift platform. One of Draganfly's differentiators is integration experience from 27 years in the industry. Whether cameras, radio systems, or partners like Autonome Labs or Palladyne, we focus on integrating technologies so the Draganfly product line has as many options as possible. Those partners often become channel resellers for the Draganfly line. You'll continue to see many integrations, primarily in public safety and military, but also in commercial sectors like energy. We have multiple energy projects integrating specialized sensors or tools. Our Commander 3XL can carry payloads useful for tooling around power lines, windmills, or pipelines. We had a Fortune 50 telecom company standardize on our heavy lift drones to stand up cell towers post-disaster; we're deploying drones with them to help restore communications. After initial orders from the Southern Border sheriffs, we launched a large demonstration for multiple agencies on the Cochise border showcasing multiple concepts of operation. That event has led to multiple jurisdictions, national and international, looking at or engaging with the Outrider as their border protection solution. We've secured a number of military orders from the DoD and have seen uptake from the Department of National Defence (DND) or the Canadian Armed Forces, as well as multiple militaries around the world. These forces look to the U.S. for signals on adoption, so credibility built with specialized special operations units has helped us sell internationally as well. We have significant partnerships in the Asia Pacific region and are seeing demand in Southeast Asia and surrounding countries where militaries are rearming with asymmetric capabilities. We received another significant order for FPV drones from the U.S. Army. We expect more orders from individual units, brigades, and special operations commands as they get exposure to our products and the custom work we do. We also closed a $50 million registered direct offering — a no-warrant straight common deal. As a quick review of our product lineup (the deck hasn't updated to include the Outrider yet): - Flex FPV: a unique FPV designed from our experience in Ukraine since 2022. It performs well as an ISR drone and can carry from 1 lb up to 6 kg and ranges from 1 km to 10 km, extendable with fiber. - Apex drone: a replacement competitor to DJI's enterprise models like the M30/M350 series; it can carry 6 kg, fly about 40 minutes, carry multiple payloads, and fit multi-mission use cases. We will have a product announcement on this soon. - Commander 3XL: about a 22 lb drone that we keep under the 55 lb weight limit for easy qualification on a Part 107 license. It's a workhorse that can drop FPVs, ordnance, do logistics, and provide strong ISR capabilities. - Heavy lift drone: a nine-foot platform that flies about 40 minutes and can carry 67 lbs. With diesel engine variants, it can stay aloft for up to seven hours and carry up to 100 lbs. The Commander 3XL can also come with diesel variants for extended endurance. When units — public safety or military — look at our lineup, they realize they can solve many concepts of operations because we have variable platforms. Fielding a new drone system takes at least a couple of years. We've been around 27 years, which is why we have a full lineup. The drone market continues to grow rapidly. We've seen a surge in inbound demand from the Middle East due to the conflict there, with jurisdictions wanting to develop their own manufacturing and capability to avoid supply chain risk. Drones represent mass precision: inexpensive to build and deploy at scale with significant tactical impact. Many jurisdictions want their own capabilities for supply chain security and regionalized needs. We are in a multi-year super cycle around drones as a subset of autonomy, driven by national policy and military adoption globally. At this point, I'd like to turn it over to our CFO, Paul Sun, to run through our financial highlights. Paul?

Yes. Sounds good. Thanks, Cam, and thanks, everyone, for joining the call. Appreciate it. So just looking at this brief income statement here, I'll take you through year-over-year changes. As Cam mentioned, revenue for the year was up 17.8% from 2024. Full year revenue comprised of $6.86 million from product sales and $861,000 from drone services. Gross profit was $1.32 million for the year compared to $1.39 million last year. This year's gross profit included a one-time noncash write-down of inventory of $259,000, while last year's gross profit included a noncash adjustment of $627,000 related to inventory. Excluding these adjustments, gross profit decreased by $444,000 year-over-year. As a percentage of sales, adjusted gross margin decreased from 30.9% in 2024 to 20.4% this year, and sales mix was the main driver here. Total comprehensive loss for the year, including all noncash items, was $22.9 million compared to a loss of $14.06 million last year. The comprehensive loss for the year ended December 31, 2025 included noncash changes comprised of a loss in fair value of derivative liability of $2.64 million. As a quick reminder, that's legacy back to a financing we did that is in a different currency than our reporting currency, so we have to report it as a liability. We also had a recovery of an impairment of notes receivable of $69,000 and that inventory write-down of $259,000. Excluding those items, we would have had a comprehensive loss of $20.1 million versus last year's $15.3 million, excluding that year's noncash items. The largest contributor to the year-over-year change was an increase in office and miscellaneous wages and travel as we scale up the business. Adjusted comprehensive loss per share this year would be $1.28 versus $1.46 shown here, compared to the adjusted loss per share of $4.85 versus $4.45 last year, respectively, again, as shown. I'll do a quick snapshot of Q4 2025 year-over-year compared to Q4 of last year. Revenue for the fourth quarter was up 18.5% to $1.91 million, up from $1.61 million in Q4 of 2024. Fourth quarter revenue comprised $1.8 million from product sales and $108,000 from drone services. Gross profit was $85,700 compared to $215,700 in Q4 of last year. Q4 this year had a one-time noncash inventory write-down of $244,000 and otherwise would have been a gross profit of $329,700 compared to the same period last year where there was a one-time inventory write-down of $167,000, making the adjusted gross profit there $383,200. Adjusted gross margin for Q4 was 17.2% compared to last year's 23.7%. This was a result of product and services mix comparing the two quarters. Total comprehensive loss for the quarter was $9.3 million compared to a loss of $4.7 million in the same period last year. This quarter includes noncash changes comprised of a fair value of derivative liability for the quarter of $788,000 and a one-time inventory write-down of $244,000 and would otherwise be a comprehensive loss for the quarter of $8.3 million versus an adjusted loss of $3.6 million in the same quarter last year. The increase in loss was primarily due to higher office and miscellaneous costs and wages. I'll also do a quarter-over-quarter look at Q4 this year versus Q3 of this year. Revenue for Q4 decreased 11.3% to $1.91 million compared to $2.15 million for Q3, mainly due to lower product sales. Gross margin for Q4 was 4.5% compared to 19.5% in Q3. However, if we back out that one-time inventory write-down, gross margin for Q4 would be 17.2% compared to 21.5% adjusting for noncash items in the previous quarter. Total comprehensive loss for Q4 was $9.3 million compared to a comprehensive loss of $5.43 million in Q3 of '25. Again, recall we had a fair value of derivative of $788,000 and the write-down of inventory. Q4 2025 comprehensive loss would have been $8.3 million versus a loss of $3.54 million, excluding noncash adjustments in Q3. The increase in loss was primarily due to higher office miscellaneous costs and wage costs as we continue to scale the business. Finally, a quick snapshot of the balance sheet. Total assets increased from $10.2 million to $101.3 million year-over-year, largely due to the increase in cash. Working capital surplus at December 31, 2025, is $95.2 million versus $3.8 million from 2024. Working capital would have been a surplus of $95.7 million and shareholders' equity would have been $97.18 million versus the $96.5 million shown here if we exclude the noncash fair value of derivative liability of $492,000. Last year's adjusted working capital would have been $6.04 million and shareholders' equity $6.81 million. We continue to have minimal debt. Cash at the end of the year was $90.1 million compared to $6.2 million at the end of 2024. Our current cash balance is even higher following the $50 million raise that Cam mentioned earlier. With that, Cam, I'll pass it back to you.

Great. Thanks, Paul. Great job, as always. So I'm going to go next into a bunch of questions that have come in. The first question is: you've had a lot of meetings with the government and military of Canada. Do you see meaningful contracts coming from that? We are hopeful. The Canadian Defence Industrial Strategy is a paramount document put out by the Canadian government that outlines a significant spend over the next five years related to defense. A large portion of that is scheduled to go into drones, in particular Class I and Class II drones. There are two manufacturers of drones in Canada in that category; neither of our product lines cross over with each other. We have been very active with the Canadian government over the last year. Two weeks ago, we completed an exclusive Draganfly-only Capabilities Day organized with the Canadian Armed Forces, which demonstrated the five vignettes or concepts of operation they plan to put into immediate use over the next 18 months using Category 1 and Category 2 drones. Within two weeks of that announcement, we were able to successfully display all five vignettes and concepts of operation, and we did so in an ice storm. We did not plan to display the Arctic vignette, but we proceeded with the Capabilities Day despite the weather and it went very well. There's a lot of activity and we're meeting with government at all levels, including participating in hearings. We believe we're well positioned in Canada, but we'll continue to earn the business. Being Canadian is an advantage, but the customer is discerning. Next question: Why do we think we didn't make it past Gauntlet I in Drone Dominance, and do you think we'll reapply for Gauntlet II? Gauntlet I was an incredible experience. We did not receive notice that we were in Gauntlet I until 36 hours before, while most other companies had a couple of weeks to prepare. We showed up and performed well. There was one mission set involving live ordnance that, because of the time frame, we couldn't perform, and we believe that's primarily why we didn't score on those points. We scored well on the other two categories. We learned a lot and there are definitely things we could have done better. We are aggressive about Gauntlet II, we've seen the capabilities out there, and there are fantastic companies participating. We expect to compete strongly in Gauntlet II. Another question: Canada seems to be focusing on drones. Are we in a good position? Yes — as I mentioned, we are very active and believe we are well positioned, but we must continue to earn the business. There seem to be a lot more drone companies now. What are our competitive advantages? There are certainly many more drone companies, but building and fielding aircraft for public safety, commercial, or military clients requires far more than assembling parts. It takes time, regulatory understanding, manufacturing scale, and operational maturity. It typically takes up to two years to field a true commercial, military, or public safety system. Our primary competitive advantage is the length of time we've been in the industry and having a full, integrated product lineup. I would say there are really only two companies in the world with a full integrated lineup at scale: DJI and Draganfly. When we bring a product to market, it has been through testing, been in customers' hands, and designed for concepts of operation we were asked to build for. Scaling manufacturing is very different than building a few elegant machines; it's an entire manufacturing process and workflow. While access to capital seems liberal now, customers will become more discerning, and winners will emerge. More competition does not scare us; in fact, it validates the market and drives innovation. There is more demand than current supply can meet. Do you see Draganfly doing acquisitions? Yes, we do. We are fundamentally different in that we are organically focused and spend time refining products with customers. Our acquisition strategy is targeted. We have acquisitions in the pipeline, but they will be strategic — technologies with manufacturing maturity and design that can be mass produced and fit within our multi-mission platform. We play for the long term. We believe in 10 years Draganfly will be more than a drone company; it will be a super-intelligence company. Drones collect and deliver data better than anything, and when combined with autonomy, the possibilities extend far beyond the device. We tend to announce many partnerships and pilot projects. Are they translating into meaningful orders like competitors? Yes, they are. Our approach is more organic and blue ocean. The Cochise County example is a year-long project turning into revenue and creating a blue ocean opportunity for border management. Many competitors can put drones on borders, but few have deep operational experience designing and integrating a total solution with command and control, AI, and logistics. Our partnerships sometimes take longer to convert because we are integrating and ensuring the customer gets a robust solution. We are capital markets focused, but we are an employee-first, customer-second, shareholder-third organization. That philosophy has allowed us to survive 27 years and now move from survival to growth while maintaining our core principles. Can you expand on your integration with Palladyne's AI software stack and how it expands your total addressable market and potential revenue? Palladyne has a strong swarming system, and we also have proprietary swarming capabilities. We do not want to force customers into a single solution. Palladyne is an important partner, and our platform supports their swarming software across multiple drone classes. Imagine swarming capabilities across FPVs, fixed wing, heavy lift, and Commander 3XL platforms that can drop FPVs or carry out targeting acquisition; capabilities become broader than a single-class swarm. We want to be the platform that can perform multi-mission tasks with minimal cognitive load for the user and simplified logistics for the customer. Other swarming and AI technologies will also be incorporated into the platform. Our customers have told us they want one system that provides capacity, logistics, and supply where and when needed, and that's what we aim to deliver. That was the end of the questions Rolly forwarded to me. In closing, first and foremost, blessings to all the men and women fighting for our freedom today. Thank you to our shareholders — we wouldn't be here without you — our customers, and especially our employees. Thank you for your belief in what we're doing together. I hope you all have a blessed day.