KULR Technology Group, Inc. Q1 FY2026 Earnings Call

All right. Welcome to the KULR Technology Group First Quarter 2026 Earnings Call. I'm your host, Stuart Smith. And in a moment, I'll be joined by management from KULR Technology Group. But before we can begin this call, please listen to these forward-looking statements covering the comments on the call today. The call today may contain certain forward-looking statements based on the company's current expectations, intentions and assumptions that involve risks and uncertainties. Forward-looking statements made on this call today are based on information available to the company as of the date hereof. KULR Technology Group's actual results may differ materially from those stated or implied in such forward-looking statements due to risks and uncertainties associated with their business, which include the risk factors disclosed in their Form 10-K filed with the Securities and Exchange Commission on March 31, 2026, as may be amended or supplemented by other reports the company files with the Securities and Exchange Commission from time to time. Forward-looking statements include statements regarding their expectations, beliefs, intentions or strategies regarding the future and can be identified by forward-looking words such as anticipate, believe, could, estimate, expect, intend, may, should and would or similar words. All such forward-looking statements that are provided by management on this call are based on the information available at this time, and management expects that internal expectations may change over time. These statements are not guarantees of future performance and are subject to known and unknown risks and uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Except as otherwise required by applicable law, the company assumes no obligation to update the information included on this call, whether as a result of new information, future events or otherwise. Now with that, the call today will begin with opening comments from Chief Executive Officer, Michael Mo. We will then pivot to a question-and-answer portion where management will field questions that you have submitted via social media, e-mail and other mediums. With that, I'll turn the call over to CEO Michael Mo. Michael, the call is yours.

Thank you, Stuart. Good afternoon, everyone. Thank you for joining. On our last earnings call, we told you 2026 will be measured by product revenue growth, gross margin improvement and cost discipline. Q1 showed progress against each of these priorities. Total revenue grew 98% year-over-year to $4.8 million compared to $2.4 million in Q1 2025. Product sales grew 84% year-over-year to $2.1 million. Overall blended gross margin was approximately 29%, up from 8% of Q1 2025. Product sales gross margin was 26%. Total loss from operations decreased approximately 22% year-over-year. As we move from platform development into production scaling, we signed a new lease for an additional 25,000 square feet of manufacturing space to support new battery production lines and high-volume customer programs. We remain in solid financial position with approximately $19 million in cash as of today and approximately 1,085 Bitcoin in our treasury. We're committing all of our financial resources to our battery business and not acquiring any Bitcoin with cash. The only Bitcoin acquisition is through our existing BTC mining contracts. One quarter does not make a turnaround, but Q1 is evidence that the vision and discipline we commit to for 2026 is starting to translate into measurable results. KULR is beginning to scale its battery business with better cost discipline and improved operating leverage. The core objective of 2026 is straightforward: scale the KULR ONE platform to build more batteries, sell more batteries while converting customer traction into margin-accretive revenue. Let me start with KULR ONE Air. Before walking through the program updates, I want to remind everyone why KULR ONE Air is positioned the way it is. On our last earnings call, I explained that the high-growth markets KULR serves—autonomous platforms, direct energy systems and digital infrastructure—share one common technical constraint: power density. Drones, robots and other autonomous systems do not need batteries that simply store energy. They need batteries that can deliver power at 5x to 20x the discharge rate of a standard battery, sustain that output through repeated high demand cycles and manage heat generated without failure. That's the engineering problem KULR ONE was built to solve. And it's the reason why our platform is gaining traction we're able to walk through. Power is the wedge. Every program update that follows is downstream from the core advantage. KULR ONE Air continues to gain strong traction with U.S. and NDAA-compliant drone manufacturers. Our 6S 3P LiFT battery is seeing broad adoption. This quarter, we expanded the LiFT Pack family with additional configurations designed specifically for long-duration flight applications. We've also advanced the KULR ONE Air power class for agriculture and heavy-lifting applications. On the BMS side, we are on track with our customer for 6S, 12S and 18S battery management systems targeting large UAV platforms. These are high-volume, high-demand applications and KULR is well positioned to serve them. We've also completed design of a MIL-spec EMI-resistant BMS for drone-based defense applications. Customer development activities are increasing across defense, aerospace, space and unmanned systems. We're seeing especially strong growth in our UAS battery programs. Existing customers are launching new drone models that require entirely new battery systems. We have also expanded the platform's reach in two important directions: into humanoid robots, where we are now engaged with two customers, and into large Class II and Class III drones. Working with a broad base of battery cell providers in cylindrical, pouch and prismatic formats is central to building out the KULR ONE ecosystem. The same platform architecture paired with the best available cell technology is what gives KULR ONE a roadmap that extends well beyond current production configurations. KULR ONE Air is now actively exploring configurations with NDAA-compliant solid-state and lithium metal battery cell providers capable of exceeding 380 watt-hours per kilogram. I'm very excited about these developments. The same engineering discipline—build the architecture first, then bring the best cell technology to it—is what defines our work in Space and Triton, which I'll cover next. On the Space side of our operation, I want to start with the point that we made in our last earnings call. KULR ONE Space is not just a product line. It's the program that sets the performance standard for the entire KULR ONE portfolio. Space operates in an environment where battery failure is not recoverable. Every performance requirement met in spacecraft—propagation resistance, thermal stability under extreme conditions, certification under scrutiny—raises the engineering baseline that KULR ONE Air, MAX and our maritime platforms inherit. Customers in defense, drone, electric aviation and AI data center programs are buying a proven architecture that has already been qualified in the most demanding operating environments. With that context, I'm pleased to report that KULR ONE Space was selected by several additional LEO and GEO missions this quarter. This continues the validation of the platform and the trust our customers are placing in us for mission-critical applications. Our XLT and REACH series batteries remain in active deployment across multiple satellite programs in both LEO and GEO. Recent investments in our BMS are enabling higher radiation tolerance and improved current-carrying capabilities, both critical for expanded space missions. I also want to give you a brief update on our KULR ONE Triton, our maritime battery family. Triton extends, with the same engineering principle I just described—the architecture first, safety-first standards developed for space—into autonomous surface and subsea systems. We're developing and testing Triton in partnership with several OEMs, bringing aerospace-grade and Navy 9310 reliability standards to a market where battery failure under water carries similarly nonrecoverable consequences. Consistent with the cell partnership theme I covered earlier, we're currently testing Triton across multiple chemistries—solid-state, nickel metal hydride and small-format lithium-ion—to identify the optimal configuration for next-generation autonomous maritime vehicles. It's an exciting and fast-growing market, and KULR is building the right foundation to compete in it. Moving to our data center platform. On our last earnings call, we described a shift underway in the industry. As AI workloads grow and hardware becomes more power intensive, battery backup is moving out of the dedicated UPS room into the computing rack itself. A battery operating next to the processor it protects must meet higher safety standards, handle higher voltage and respond faster than conventional backup systems. This is the opportunity KULR ONE MAX is built for. This quarter, KULR attended the Open Compute Project's European Summit, where we met with major data center OEMs. Our focus was to license our PPR and thermal management IP for data center BBU applications. The data center market is enormous, and KULR's PPR architecture and thermal expertise give us a technology edge that OEMs want access to. We're continuing to advance the design and optimization of our KULR ONE MAX, our 48-volt high-power PPR BBU platform. Progress this quarter includes advances in power conversion efficiency, continued development of our custom distributed BMS and PPR testing for higher-energy 21700 cells. We're targeting edge, AI data center and telecom infrastructure with this platform. Speaking of the telecom infrastructure market, we observed a shift underway in the telecom industry. 5G rollouts and rising uptime requirements are pushing operators away from legacy lead-acid systems towards lithium-ion. At the same time, operators are looking to move battery backup assets off the balance sheet entirely, shifting CapEx from nonrecurring assets into lower-cost OpEx models with clear total cost of ownership advantages. KULR's position in this market is unique. We're demonstrating to operators that we have a proven, safe and reliable option to contract mission-critical DC power as a full service and never have to buy a battery again. Our platform pairs the KULR ONE battery architecture with the operational and financial structure operators need to make that transition. On execution, this quarter we delivered production battery packs against our existing supply commitments, and we remain on track with the manufacturing consolidation milestones we outlined on our last earnings call. Beyond those committed programs, we now have over half a dozen engagements with telecom service providers on KULR ONE Battery-as-a-Service, a clear sign that the market opportunity that we described in March is materializing. Next, I'd like to address the Board changes we announced on April 28. We appointed two new directors, Ben Frank from Microsoft and Dr. Mike Kimball, and at the same time streamlined the Board to three members, two of whom are independent. The smaller, more focused Board is itself part of the operating principle message. It reduces SG&A and ensures that every director seat directly contributes the expertise we need to scale. These two appointments are not generic Board additions. Each one fills a specific gap that becomes critical as KULR moves from platform development into platform monetization. Mr. Frank is the Director of Workforce AI Solutions Engineering at Microsoft, where he leads engineering teams supporting large enterprise customers deploying AI platforms within Microsoft's energy and resource organization. Microsoft is one of the best technology companies in the world that won its markets by building an ecosystem platform and then opening that platform to a broad range of partners, customers and developers. That's the playbook KULR is running with KULR ONE. The KULR ONE ecosystem is built as follows: open the architecture to multiple cell chemistry partners across cylindrical, pouch and prismatic formats; build the battery management software and electronics to increase customer stickiness to the KULR ONE platform; pursue IP licensing for AI data center BBU applications; and expand the customer base in defense, aerospace, maritime and humanoid robotics. Ben brings firsthand experience from inside the most successful enterprise ecosystem company of the modern era, applying directly to AI-driven industries that are core KULR end markets. Dr. Kimball has more than 30 years of experience as a corporate executive, consultant and academic, specifically focused on pricing strategies and margin performance. He holds a PhD in Economics from UCLA and has previously held senior pricing positions at OmniSource, Toyo Tires and Sears Holdings. His expertise is perfectly aligned with our 2026 mission: build and sell more batteries for product revenue growth, higher margins and reduced costs. Dr. Kimball's appointment is how we institutionalize that progress, bring discipline to how we price every contract, structure customer engagements and convert revenue growth into durable profitability in addition to top-line growth. Before turning the call over, I want to share one observation about where the industry is headed. In recent weeks, a publicly traded UAV component company agreed to acquire a U.S. drone battery manufacturer for over $50 million, adding battery capabilities to a portfolio that over the past 12 months has been assembled through separate acquisitions of drone software, motor manufacturing and distribution alongside a $75 million strategic materials purchase. We view this as validation. The UAV and broader autonomous system supply chain is consolidating around three requirements: NDA compliance, domestic vertical integration and a complete component ecosystem rather than a single product. That's exactly the platform KULR has been building organically with in-house engineering for the last few years. Let me put our position in context. KULR already operates over 31,000 square feet of vertically integrated R&D and production facility in our headquarters in Webster, Texas, and we're adding another 25,000 square feet of manufacturing capacity in Q2. Our portfolio spans NDA-compliant battery packs, custom battery management systems and electronics, thermal management IP and platform architecture qualified across drone, space, maritime, AI data center and telecom applications. We engineered the battery cell partnerships, the cell-agnostic architecture, the BMS and the safety system together, and we're doing it for end markets that extend well beyond UAVs alone. With the industry paying over $50 million for a battery pack manufacturing operation for UAV, it tells you what the market now believes domestic vertically integrated battery capabilities can be valued at. The market will be moving and evolving towards an ecosystem platform that KULR has been investing in and building for multiple end markets for many years. We're focused on building more batteries and selling more batteries. Now back to you, Stuart.

All right. Thank you, Michael. Now let's pivot into the investor questions that have been sent in. Here is the first question, Michael, and it is: What were the primary drivers of Q1 2026 revenue? And how should investors think about revenue visibility for the remainder of 2026?

Cost reduction is already visible in the Q1 numbers. R&D expense declined 28% year-over-year. SG&A declined approximately 9% and total operating loss declined 22% year-over-year. We'll continue to be more disciplined about our cost structure while investing in our growth. As I said in the prepared remarks, our appointment of Dr. Mike Kimball is aligned with that strategy. With his expertise in pricing, margin and profit optimization, we'll bring discipline to how we price every contract, how we structure customer agreements and how we convert revenue to durable profitability in addition to top-line growth. Yes. Cost reduction is already visible in the Q1 numbers. R&D expense was down 35% year-over-year in one internal measure, and SG&A declined 8% year-over-year in that view. I think we can do a lot more on that. The total operating expenses, excluding the $500,000 credit loss, declined actually 24% year-over-year. We will continue to be disciplined on our cost structure while investing in growth. As I said in the prepared remarks, our appointment of Dr. Mike Kimball is aligned with that strategy; with his expertise in pricing, margin and profit optimization, we'll be bringing discipline to how we price every contract, how we structure customer engagements and how we convert revenue growth into durable profitability in addition to top-line growth.

All right. Here's question #3 then. How many KULR ONE Air programs are moving from prototype or development work into production? And what does that imply for the second half of 2026 revenue visibility?

Yes. Multiple KULR ONE Air programs are in transition. The 6S 3P LiFT pack has moved to broad adoption and is in production now. The expanded LiFT family with the long-duration configurations is moving from design into qualification with customers. Also on the BMS side, the 6S, 12S and 18S systems for large UAV platforms are on track with customers. Our MIL-spec EMI-resistant BMS design is complete. Two humanoid robot customers were added in Q1, and existing UAS customers are launching new drone models that require new battery systems at all times. We haven't disclosed a program-by-program count, but underneath all these activities, that's what's going to drive the second half of 2026 ramp profile.

All right. Speaking of drones, here's a question about that. How is demand developing for KULR's defense and drone battery solutions? And are defense-related programs becoming a larger portion of the company's near-term opportunity?

Yes. Defense demand is definitely accelerating from what we can see. Customer development activities are increasing across defense, aerospace and unmanned systems, and the conversations we're having with defense customers are more about volume and timeline. So it's all about execution on our side now to deliver to these customers. Defense and defense-adjacent programs have really become a larger part of our near-term opportunity. Our work on the NDAA-compliant battery cell partnerships, including the emerging solid-state and lithium metal suppliers, is really exciting for us, and that's going to play an increasing role for these customers.

So what progress has KULR made with domestic battery supply, Texas-based manufacturing and NDAA-compliant battery systems for government and defense-adjacent customers?

Yes. We have been developing a full NDAA-compliant ecosystem for the KULR ONE battery platform for a while now. From battery cell suppliers in cylindrical, pouch and prismatic formats to solid-state and lithium metal chemistries, to BMS and the electronic systems supporting all the batteries—these are all aligned around NDAA compliance. And just like our battery packs, they will all be made in Texas. That is definitely a core part of our strategy.

Very good, Michael. The next question talks about gross margin. It says product gross margin was low-single-digit in 2025. What progress did KULR make in Q1 towards improving margins? And when should investors expect improvement to become visible in the financials?

Yes. Q1 is an example of that progress: our blended gross margin was 29% and product sales margin was about 26%. One quarter doesn't make a trend or a complete turnaround story, but I do believe that we're on the right track to execute our strategy for 2026 and drive margin improvement over time.

Is the automated production line still on schedule for the second half of 2026? And what impact could it have on production capacity, labor cost, yield consistency and gross margin?

Yes. The new production lines will be installed at our new 2,000-square-foot facility in Q2, and we expect them to start production in Q3 of this year. We will have capacity to produce 10,000 battery packs per month and expect the unit economics for our batteries to improve, thereby improving margins.

All right. Well, let's talk more about those 10,000 battery packs. KULR ONE Air was highlighted as the company's highest momentum platform with a target of approaching 10,000 battery packs per month in the second half of 2026. Are customer qualification, schedules and production timelines still on track?

Yes. Again, another question around KULR ONE Air and our production schedule, which I know a lot of investors really care about. Yes, we have the new facility now. The new production lines will be installed and operational in Q3. There is a lot more going on behind the scenes than just the production lines themselves. We now have our own copper busbar laser cutter in-house that dramatically lowers our lead time to get these high-performance components made in-house and also lowers our cost. We're putting UN 38.3 certification infrastructure in-house—all the equipment—so that we can build, qualify and ship batteries very quickly to customers and also lower the cost. Overall, we've been making significant investments in our infrastructure to make the best one-stop shop in the U.S. for all these high-performance batteries.

All right. Michael, here's our final question for this call today. How should investors think about cash usage, working capital needs and capital allocation priorities for the rest of 2026?

Yes. For us, it's all about building more batteries and selling more batteries. So our cash usage will be capital expenditures for equipment and facilities, working capital for inventory, SG&A which we are on a path to reduce, and continued investment in our people to build the best team in the industry to deliver the best product for our customers at very good value. This is how we're going to win.

Well, as mentioned, that was our final question for the call today. I want to thank everyone for joining us today. More than that, I want to thank the shareholders for their continued support and for sending in their questions throughout the quarter. And of course, our gratitude to the team at KULR Technology Group. Michael, thank you so much for your time here today. With that, we will turn the call over to the operator.

Thank you. This does conclude today's webcast and conference call. You may disconnect at this time, and have a wonderful day. Thank you once again for your participation.