Earnings Call Transcript - UMAC Q3 2025

Operator, Operator

Greetings. Welcome to Unusual Machines' Third Quarter 2025 Earnings Conference Call and Webcast. Please note this conference is being recorded. I will now hand the conference over to Christine Petraglia, Investor Relations for Unusual Machines.

Christine Petraglia, Investor Relations

Thank you, operator. Good afternoon, everyone. With us today are Unusual Machines' CEO, Allan Evans, and CFO, Brian Hoff. During this call, management will make forward-looking statements, including statements that address Unusual Machines' expectations regarding the impact from tariffs, our ability to add more employees to our ranks, our factory expansions, our ability to increase our margins and revenues, our ability to achieve aggressive growth, our expectation that the marketplace will change in quarter 4 of 2025 and 2026, our plan of keeping our cash burn low, our ability to scale our motor and headset manufacturing capabilities, our ability to scale supply chains to meet our customers' needs, receipt of orders from the U.S. Department of War, our ability to continue to grow revenue, the timing of our 2026 inventory and other expenses, revenues, expected GAAP profits, and positive cash flow from operations and our expectation that the U.S. drone market will continue to explode. Forward-looking statements involve risks and other factors that may cause actual results to differ materially from those statements. For more information about these risks, please refer to the risk factors described in Unusual Machines' most recently filed 10-Q, Form 10-K and prospectus supplement. Except as required by law, Unusual Machines disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. As a reminder, this call is being recorded, and a replay will be available on Unusual Machines' website. Now, let me hand the call over to our CEO, Allan Evans. Please go ahead, Allan.

Allan Evans, CEO

Oh, I'm sorry, I was muted. Thanks, Christine. Sorry, everyone. Before we get into the main part of the call, I want to address the change to an audio-only format. We switched to this channel for our earnings calls due to direct integrations with various investor portals like Bloomberg Terminals. This should provide all of our investors, especially those who can't make the call, quicker and easier access to information. As our company continues to evolve, we truly value your feedback and would love to hear your thoughts, whether positive or negative, on the new format. Please feel free to e-mail us if you have anything to share. Now, today is a good day. We were profitable in the third quarter. Let me emphasize that. We weren’t just cash flow positive; we actually had our first profitable quarter as a company. The good news doesn’t end there. It was the sixth consecutive quarter we achieved record revenues, and it was our best gross margin quarter ever. It is also the first quarter where over 50% of our revenue came from enterprise sales, and we already have enterprise purchase orders exceeding $16 million from a diverse range of customers moving forward. We successfully closed the Rotor Lab acquisition, our motor factory in Orlando has started production, and we are now manufacturing American-made motors. We executed our staircase financing strategy and currently hold more than $130 million in the bank. Our strategic investments have strengthened partnerships and generated financial returns. Finally, our team has grown from 19 people at the beginning of the quarter to over 60 today, and we are continuing to expand to meet demand. Eighteen months ago, we embarked on a journey to transform this company from a retail channel into a leader in the domestic production of drone components. The results this quarter reflect the initial outcomes of the efforts and dedication we've put in. This is not just a good quarter; it signifies the first signs of a successful transformation and the beginning of rapid growth for Unusual Machines. This achievement would not be possible without the hard work of our entire team. As we grow, both seasoned and new employees are diligently contributing and injecting incredible energy into the challenges we face. The culture and quality of our workforce genuinely excite me about what we can collectively accomplish in the future. The way we have preserved our culture during our growth reassures me that our workforce is prepared for the upcoming wave of demand we are beginning to encounter. We have been aggressively expanding as the marketplace evolves, and I know this is what many of you are eager to hear about. I will now hand the call over to our CFO, Brian Hoff, to go over our financial results in detail. After he finishes, we’ll discuss the future. With that, I’m passing the call to our CFO, Brian Hoff.

Brian Hoff, CFO

Thank you, Allan. As Allan just noted, we're seeing the initial signs of our transformation from growing from our seasonal retail operation into an organization with significant focus on enterprise sales with expanding margins. We ended Q3 with over $2.1 million in revenue for the three months ended September 30, 2025, which is a 39% growth from the prior year. Year-to-date revenue is at $6.3 million, which is a 55% increase year-over-year. We see the shift from retail to enterprise first through our margin expansion from 28% year-to-date in 2024 to 34% year-to-date in '25. And second, we continue to maintain top-line revenue quarter-over-quarter, which typically we saw larger fluctuations from seasonality that typically comes with our retail operations. Now, looking into Q4, we are bringing those strong enterprise orders that we will start fulfilling in Q4, along with our strongest retail quarter with the holidays coming. We did see an increase in our operating expenses quarter-over-quarter, which is intentional given our investment in our motor and headset production and at scaling our operations. We fully expect to see an increase in our operating expenses as we fully turn on our motor production facility, hire the additional staff, and continue to build for the future. Our G&A expenses increased in Q3 as well, which includes noncash stock compensation expense of $2.1 million and nonrecurring expenses of $1.2 million related to Investor Relations and other professional fees. I would reference Table 2 in our shareholder letter that we issued today for additional breakdown of our non-GAAP operating results. We had interest income from our cash balance of $0.7 million for the quarter and recorded unrealized gains as GAAP requires us to record at fair value based on current market values from our short-term investments of $5.8 million, which brings us to net income of $1.6 million for the quarter. Now, shifting to our balance sheet. This is a reflection of our continued investment in growth and the momentum that has been building here. We ended the quarter with $64.3 million in cash, which included a $48.5 million raise in July at $9.70 a share. Subsequently, we raised an additional $72 million in gross proceeds at $15.46 per share off our ATM, giving us over $130 million in cash today. In addition, as of September 30, we have approximately $16.8 million in short-term investments. We've grown our inventory and prepaid inventory balances to over $10 million in preparation for our enterprise orders, the start of our motor and headset production, and the holiday push. We've grown our PP&E by $1.7 million during the quarter to purchase our motor equipment and related items. We closed the acquisition of Rotor Lab at the beginning of September and are currently working on our GAAP purchase price allocation related to that. Overall, our balance sheet is very strong and positioned to take full advantage of the growth that Allan is going to talk to you about. I'd like to thank our entire team, old and new, for their continued hard work and willingness to get things done. We look forward to a strong finish in 2025 and rolling that into 2026. I'll send it back to Allan. Thank you all.

Allan Evans, CEO

Thanks, Brian. It should be obvious by now that we're excited for Unusual Machines. We are extremely well positioned in the current domestic and global political landscape, and we generally continue to have favorable market conditions for the American drone subsegment outside maybe some of the very short-term hiccups given the government shutdown. We also have the capital to execute. I'm about to go into more detail, but I want everyone to note that my following comments are forward-looking and are in no way guaranteed. Let's start with an update on internal production. Development of our motor production has matched our expected timeline so far. Phase 1 of motor production is now fully operational. We've just started scaling production and expect to have thousands of motors shipped by the end of the month. As this grows, we're beginning to source material for our highly-automated production equipment that we expect to bring online through the second quarter of next year. Headset production is just starting to move forward. We're finalizing space and have already ordered the materials to produce 5,000 headsets domestically. Our internal expectation is that we'll start shipping headsets from our U.S. assembly facility in January of 2026. We have $130 million in cash. We have enough money to build out motor and headset production as well as scale supply chains to meet our customers' needs. As a general rule of thumb, we want to have at least 12 months of forward-looking revenue in cash to meet our working capital needs. So, our growth is not resource-constrained, and we'll be able to right-size our company regardless of how fast or big this marketplace requires us to be. This also provides us with enough extra capital to consider potential acquisitions if the right opportunity presents itself without having to under-resource our current plans. This moment of scaling with uncertainty is one reason why hardware is hard. As a component manufacturing supplier, we ask our customers to give us both forecasts and then purchase orders. It's typical for customers to give us forecasts that extend 12 to 18 months out, but purchase orders are generally only placed for material that they need delivered in the next six months. Our growth ultimately requires purchase orders. We're excited. We have $16 million in purchase orders, and we expect delivery on those purchase orders to occur through the second quarter of 2026. We also have forecasts past that that have us confident in our continued scaling past that run rate well into the second half of next year. For us to meet these demands, we have to place orders and provide forecasts to our vendors. Our supply chains outside of China are about six to eight months long, and that's the lead time on several critical components, not just one. So, this is causing us to and will continue to cause us to have to place large orders and put significant amounts of cash in deposits and other payment for material. This material management is critical to our company and is going to likely result in significant cash outlays over the next few quarters, and then we expect revenue and GAAP profits to catch up in the second half of 2026 as we reach a new larger revenue equilibrium. This uncertainty has been further complicated by the shutdown of the U.S. government. Our primary enterprise business model is B2B2G, and the shutdown has prevented our customers from receiving any additional orders. This, in turn, prevents them from placing orders with us. We see this as a competitive advantage for our company relative to our competitors for two reasons. First, we expect the Department of War and other government agencies to still want the drones and drone parts as soon as possible regardless of how long the shutdown lasts. This allows us to continue to build because we have the capital and then we'll be in a position where we are in stock when those customers place orders. Any of our undercapitalized competitors have to wait for the actual orders to come to their customers and then to them to even start their supply chains. So, this allows us to get further ahead every day the shutdown continues. Second, the shutdown in the government has stopped the SEC from processing S-1s for new IPOs. Most companies' numbers go stale in February. So, there's likely to be a massive backlog and a challenge in the IPO market until at least May of 2026. There are very likely several wonderful midsized companies that will have trouble with access to capital due to the combination of the shutdown preventing orders and the IPO market being inaccessible. This could create an opportunity for us to potentially make a larger acquisition at a reasonable value and further accelerate our business. Regardless of the shutdown and when it ends, we believe government demand is going to be very strong through 2026, and we are scaling as quickly as we can to capture as much of the emerging market as we are able to. To summarize, our third quarter was a standout performance in my book. We are well capitalized, growing the team and the facilities, and have started to see government orders materialize for our customers and ultimately for us. Even though we had a profitable quarter, our goal is to sustain positive cash flow, and we expect to need $30 million in annual revenues to get there. I believe this will happen in the latter half of 2026. Unusual Machines is at the corner where we think the market is maturing right now. Our business is capitalized and extremely healthy, and now we are aggressively pursuing growth. The U.S. drone market is about to explode, and we expect to fearlessly seize the opportunity. I want to say thank you again to our entire staff and all of our shareholders. And with that, I want to open up the call to questions.

Operator, Operator

Your first question for today is from Matthew Galinko with Maxim Group.

Allan Evans, CEO

Not sure if you're muted, Matt.

Operator, Operator

Matthew, your line is live.

Matthew Galinko, Analyst

Can you hear me now?

Allan Evans, CEO

Yes, sir.

Matthew Galinko, Analyst

Congrats on the strong quarter. Allan, you mentioned expecting to reach a new revenue equilibrium sometime in 2026. Given the current growth cycle for drones and domestic components, do you anticipate that 2027 will still be a growth year? I understand you are not providing guidance for 2027 yet, but if we are still in a growth cycle, will the working capital investment cycle extend beyond 2026?

Allan Evans, CEO

Yes. I believe everyone will strive to scale as quickly as possible in 2026, and the defense drone industry will require more drones from now until around 2030. Therefore, I expect working capital to continue to be invested ahead of revenues during this growth period. However, by the latter half of 2026, we should have a clearer understanding of what that growth entails. The next year appears to be a significant transition, moving from thousands to over 100,000 drones, followed by a more gradual increase to between 100,000 and 200,000. Currently, all signs point to rapid growth driven by market demand until 2028.

Matthew Galinko, Analyst

Got it. And maybe just one quick follow-up for me. Just given all the additions and ramp-up in production that we're talking about that's happening in pretty quick succession. I'm wondering if you could give us a kind of reset view on your operating expense run rate, excluding stock compensation, starting in the fourth quarter or first quarter of '26 that you have line of sight to?

Allan Evans, CEO

Yes. So, if you look in quarter 3, we put this in our shareholder letter. Our cash burn, which we try to pay attention to, is still $900,000, and that's without any of the added income from the investments or anything. We still really pay close attention to that. And I'm personally proud that we've kept it under $1 million every quarter for operating. Now, we might grow a little bit past that, and that will just come down to some of the GAAP elements that just when our customers receive material. But our goal is going to be to keep it down. And in quarter 4, and quarter 1, it will be a little bit variable just based on when our customers are able to accept product from when they can get it to the government. So, a little tough to project it just because the shutdown will affect the day-to-day stuff. But we try to keep it under $1 million every quarter. That's been our goal since we started.

Operator, Operator

Your next question is from Austin Bohlig with Needham.

Austin Bohlig, Analyst

Can you hear me?

Allan Evans, CEO

Yes.

Austin Bohlig, Analyst

All right. Allan and team, congrats on the nice quarter and especially the margin expansion. Super exciting. I guess my first question, guys, is I just want to dive into kind of what your guys' current capacity is at as maybe we enter 2026. Like, is there a way you guys could frame up like the revenue that you guys could capture, whether it's through like your internal capacity plus the contract manufacturing if we get a perfect strong scenario next year with this demand?

Allan Evans, CEO

Yes. I mean, this is a little speculative on my end because we keep scaling as we see demand, of course. Right now, we said we have $16 million in purchase orders, and we expect the holidays to be big for us. So, I would say between here and the end of Q2, everything we said suggests we plan without even being optimistic on delivering $20 million worth of stuff. I think if we got $100 million, $150 million worth of orders, we'd figure out how to get it done. More than that, we'll have to start to add space and equipment, and there's longer lead times on that on the CapEx. But I think you could see somewhere in the $100 million to $150 million range as being the capacity that we're scaling to and what we already have machines in for and CapEx for, and partnerships for. If we had indicators before the end of the year, we could bring in CapEx and exceed that. But we need those indicators here before the end of the year. And of course, if we had them, we'd share them with everybody.

Austin Bohlig, Analyst

Okay. No. Perfect, perfect. And then I just kind of had a question just on the consumer business. It was down kind of a little bit lower than what expected. Anything specific to kind of call out for that near-term weakness?

Allan Evans, CEO

Yes, a few points to consider. The uncertainty around summer tariffs led to some hesitance among consumers in the marketplace. We weren't concentrating on this issue in the same way, which resulted in some shipments early in the quarter due to a minor out-of-stock situation. I believe we would have been on track with our expectations had we not faced that stock issue related to GAAP rules. I anticipate a rebound this holiday season. There may be some fluctuations during this period, but I expect consumer activity to return to normal in quarter four.

Austin Bohlig, Analyst

Got you. Got you. And then my last question is just kind of around this $30 million annual run rate for you guys to reach breakeven. On a quarterly basis, is it fair then to assume that it's around like $7 million, $8 million? Or how should I think about the quarterly revenues you need to be breakeven?

Allan Evans, CEO

Yes. Yes, I would say, I'd figure $8 million a quarter with the margins that we've been able to move to, and we're there.

Operator, Operator

Your next question is from Josh Sullivan with Jones Trading.

Joshua Sullivan, Analyst

Congratulations on the quarter and the progress made with the strategy. I would like to follow up on the previous question regarding the $8 million. Can we achieve that target with the current enterprise mix, or does it require a significantly higher enterprise mix?

Allan Evans, CEO

Oh, I think it's going to be on the enterprise mix. So enterprise is going to grow much faster than retail. As long as it continues to even show up the way we're there, I feel pretty good about it. Hopefully, that answers the question. If it doesn't, ask it again, and I'll try to dig in better about it.

Joshua Sullivan, Analyst

And then just you talked a bit about the competitive advantage you guys have regardless of how long the shutdown lasts, which is great. But curious, is this just something you see from your vantage point? Or do customers see this? Is it helping build your reputation, awards, or even M&A opportunities that might be out there? I mean you talked a bit about the S-1 dynamic. Is this competitive advantage? Does it need to play out? Or is it now when people are coming to you?

Allan Evans, CEO

A combination thereof. So we can finance some inventory. So for our customers that want to be aggressive, we're willing to take a chance with them. And that gives them an advantage right now and us as a parts vendor, but it also builds relationships. And when you're a supplier, relationships last for ten years, and you don't lose spots very often. And so I think it's both a right now advantage in that we can help our customers gain the same edge on their competitors, even if they aren't as well financed. And in doing that, we're creating very long-term relationships with preferred vendors.

Joshua Sullivan, Analyst

Got it. And then the other dynamic is speed to market, and we talk about this big opportunity coming up here. Can you frame where you guys are relative to the competition and how you've been successful in winning these awards?

Allan Evans, CEO

Yes, we started earlier. I believe our messaging has been effective, and as far as I know, we're the only ones currently producing thousands of motors. Whenever we place orders in our component supply chain, it's for a minimum of 10,000 units. Therefore, when customers approach us for 15,000 units, we are able to deliver. We haven’t observed any of our competitors doing this for valuable components in the U.S. market, which gives us a significant advantage and helps us build long-term relationships with our suppliers. This means that when someone requires 500 units for a low-rate initial production run or similar needs, we can provide them immediately without disrupting our material flow. As they scale up, we are recognized as a trusted vendor. We're beginning to see the outcomes of our efforts from over a year ago when we launched our first flight controller, producing 10,000 units right from the start. This is creating a significant competitive advantage; even if you collaborate with another company on design, how can you quickly achieve 10,000 units? You would reach out to us.

Operator, Operator

Your next question for today is from Barry Sine with Litchfield Hills Research.

Barry Sine, Analyst

Lots of questions for you. So, I want to talk about the outlook for orders. You've talked about the confirmed purchase orders, but that's really a subset of what's out there and what you're likely to win. So, we've seen some of the announced customers that presumably there's a lot more wins that you've won on platforms. Can you talk about the part of the iceberg that's under the ocean that we don't see? What is out there that you've won or you've won a placement on a platform that we don't see, at least size-wise? I know you probably can't name the companies.

Allan Evans, CEO

Yes. So, I think there are several different pieces to this. First, there are government programs and long-term contracts being utilized by customers. There are some things being competed like PBAS, purpose-built attributable systems. They haven't awarded the final awards for it yet, but we have parts on, I think, every finalist. So that's an example of where we have forecasting if they win, but haven't seen purchase orders yet necessarily. When you look at the purchase orders we get, they are really only for the things they want in the next three to six months, and we're setting up inventory for the forecast. I think there's still some uncertainty because the Department of War hasn't finalized contracts, and they're still trying to figure it out. But my expectation is that what we've put out there is well under 50% of what I expect to see in demand. Where that falls exactly will depend on which of our customers win which contests, whether we're a smaller or larger portion of the bill of materials. But I'm very confident in where we're at going forward, and that's why we continue to scale. We know that when the government comes back, those will be awarded, and they'll still want the initial drones for those programs at the same time.

Barry Sine, Analyst

And then if we look at your product catalog, your hot seller seems to be motors. You seem to be selling a lot of motors. I guess, goggles, maybe second. Where do you see holes in your product line? For example, do you need to have more digital solutions? Along those lines, I had a good conversation with a new hire, Al Ducharme at Rampage, and he's got a pretty strong background there. So, what might we see product-wise in components with his fingerprints on this?

Allan Evans, CEO

Yes. We will begin outlining our product roadmap in the first quarter. Currently, our focus is on scaling for the FPV segment due to high demand. The initial expansion into other types of drones, even with limited technology advancements, will center around powertrain components such as motors, motor controllers, and batteries, which are ideal for delivery drones or aerial photography drones. Once we achieve scale, we will identify which customers are thriving and develop the technologies they require. There are several strong companies that excel in high-value solutions like Digital Lynx, Mobilicom, and Doodle Labs. We do not intend to compete with those building the western drone ecosystem but aim to complement them. After reaching scale and supplying components to our customers who operate at high volumes, we will follow their guidance on future directions and ensure we provide the necessary parts promptly.

Barry Sine, Analyst

So my ears perked up when you said the word batteries because I don't think you make your own batteries today. So that sounds like it might be a potential area of acquisition.

Allan Evans, CEO

Yes. I would say that when we look at powertrain, I think batteries is one of the things that we'd have to look at in the next year to see if we can be part of the solution there.

Barry Sine, Analyst

And then on the retail business, as you had a question before, kind of flattish sequential, although 3Q is never historically a big quarter, I don't believe. A couple of questions on that. First of all, some of that is actually enterprise where prospective customers are buying lots of units to try out before they place a large order. So, if you have any sense on that. And secondly, the other person I had a good conversation with at Rampage was Nate Kennedy, and he seems to have some ideas on growing that business. And I think I'm happy to see that because you guys are so focused on enterprise; it's nice to see somebody focusing back on where we started.

Allan Evans, CEO

Yes, we view our retail channel as a significant sales funnel, and we acknowledge that, as a small team, we are facing challenges due to the rapidly increasing demand for enterprise, leading us to make some compromises. To address this, we have brought in senior personnel to enhance our retail channel, especially this holiday season and beyond. The added challenges have posed some difficulty, but we remain excited about our brands and our future plans for retail. Our customers in this segment are outstanding, and I want to express our gratitude to every Rotor Riot and Fat Shark customer who attended Rampage. They are truly fantastic. We aim to serve that customer base even better as we continue to grow.

Barry Sine, Analyst

Okay. And Allan, my last question, you made three strategic investments during the quarter: Safe Pro, LightPath, Kopin. You proved that you're a great portfolio manager with the nice gain there. But from a strategic standpoint, could you talk about each of those briefly? Why did you make that investment? What do you see in them? And when might we see the benefits of those new partnerships show up on your income statement?

Allan Evans, CEO

Yes. Safe Pro was our first investment, a smaller initiative in collaboration with Ondas aimed at locating landmines, which adds value regardless of conflict. It's a strong use case for us. We wanted to verify the performance of FPV drones in this context. This investment was primarily driven by financial considerations since we aren't focusing heavily on developing specialized cameras for this purpose, but we do need to confirm that it works. Looking at LightPath, they are concentrating on non-germanium thermal cameras, and virtually all enterprise customers are looking for multispectral or thermal options. Sam recently made significant progress in Orlando, which is just 20 minutes away, generating substantial business. This investment positions us to expand into thermal cameras, although they are a lower priority in our development timeline. We anticipate collaborating on these by mid to late 2026, assuming we adhere to our roadmap. Regarding Kopin, they manufacture display panels and we're in the process of building headsets. I expect to have our headset assembly operational by January, and we are starting discussions on incorporating their panels, which we estimate will come to fruition by late 2026. Typically, new products take about 18 months to develop, so I wouldn't expect results any sooner.

Operator, Operator

Your next question for today is from John Roy with Water Tower Research.

John Marc Roy, Analyst

Allan, I wanted to discuss a little bit about the domestic motor and headset production. Kind of two twin questions here. One is, how do you expect to really turn this, what seems to be a reshoring competitive advantage into a long-term competitive advantage with production of those? And the second thing would be, how do you expect margins might ramp as you really put some more into production costs, etc.?

Allan Evans, CEO

We always set out and said that nothing we did could be more than 20% greater in cost than what came out of China. That's how we try to price. We think in doing that and building high-quality products, we can use things like automation to be competitively priced and keep those slots with customers through outstanding customer service and being local. It is also expensive to change suppliers. What I think we're going to see is a dip in margin, a little dip in margin as we ramp and figure out how to get these things working again. But I'm really proud of the whole team; we have demonstrated we can get to 39%, 40% margins. So, I think you might see a dip as we scale, but at even greater volumes, I expect us to be able to probably break through that 40% margin level and be really competitive. That's where I think this quarter, even with not huge numbers, we've done a really good job of refining and polishing what we were doing. We're not scaling problems; we're scaling solutions. That has me feeling confident that even though we'll run into some yield issues and other ripples in margins as we scale, we'll get back to it and probably exceed 40%.

John Marc Roy, Analyst

Cool. One last question from me, maybe a little bit broader one. How do you see the competitive landscape evolving, maybe a little longer term? We're hearing from some European companies that they expect to start doing U.S. manufacturing. Just curious as to how you might see the competitive landscape evolving.

Allan Evans, CEO

Yes. My personal belief is that in the deglobalization we're seeing right now as part of the macro trend, we're going to see regionalization. So in the same way people ask, hey, are we trying to sell in Europe? Not aggressively, no, because I think Europe is going to buy from Europe. There will be so much demand with all the GDP budgets in Europe increasing that will be there. Then, I think U.S. money will favor U.S. companies. I mean, it's taxpayer money when you want it to go to people that pay taxes and are other Americans. So I think that is in a tie; I think the local option wins. We just need to play for the tie and we'll win in North America, and we're really focused on North America rather than those other geographies for that reason. That's an assumption we're making as we move forward.

John Marc Roy, Analyst

Sounds good. Congrats on the quarter and talk to you soon.

Allan Evans, CEO

I really appreciate it. We also have a couple of questions from an analyst that came in via email, which I'll read and then answer. The first one. Can you please discuss how you expect the timing of major drone awards to interact with U.S. government shutdown dynamics versus looser budget spending requirements for drone purchases? What does reclassifying drones as munitions mean for UMAC's growth versus regular waste spending? How is growth appearing between acquisition officers and base combatant commanders? I think the major drone awards for the U.S. government shutdown, I really don't expect them, if the shutdown goes on much longer, to probably occur until early 2026. I see a lot of the overly allocated stuff of the looser, smaller buys occurring when the government gets back online because those are just easier. They require less oversight; there are fewer people to approve, someone's on vacation, etc. Reclassifying drones as munitions helps our growth in that it allows much smaller groups to buy drones without needing to track them. It allows our customers to sell $100,000 or $200,000 worth of drones to these base level buyers rather than having to be centralized and go through a really long process. I expect those looser spends to come online much faster when the government comes back and drive sort of fewer headlines, but a lot of the revenue in the category. Growth between acquisition officers and base combatant commanders seems to be opaque. I would say we will have to talk to our specific customers, and it feels like they are still trying to figure that out—what the ratio is or who is in charge of what. I think in another six months, we'll have a good idea there. The second question. Can you discuss the acceleration of customer interest post-AUSA? How does getting the 101st Airborne as a customer raise awareness, not just for UMAC, but also the importance of domestically sourced drone components? AUSA was a great event. We were able to go and see a bunch of our parts that were priced out on a wall with members of the armed services flying those drones, and we're really excited about it. One of the things I think it does is there's an initiative called SkyFoundry, where the Department of War, and I think the Army in particular, is considering spending several hundred million dollars—$200 million or $300 million—starting to build drones inside the military to understand them better. AUSA drives a lot of awareness not just for us, but for the importance of American-sourced components. It highlights that this is an important thing from a redundant supply chain perspective. It has been a real positive. It has also spotlighted that we don't have, like, just at-scale suppliers yet. There's a real need for that. The next question. What engineering approaches, materials or form factors are you most excited about regarding drone components? How do you expect those dynamics to influence your growth algorithm? I am currently most excited about doing the powertrain. I think we sit really well there and it can be complementary. I think batteries will have to look at as well; that will come into our growth algorithm. There may be some opportunities to move to cameras, like gimbaled cameras and ISR stuff if our customers want it, but I think that's a little further out. Putting this all together will put us in a position to continue to add new components and diversify our customer base, but also a more diverse portfolio to prevent concentration risk. What's awesome about where we are now is we're getting this growth without customer or product concentration. We're dynamic and aren't putting ourselves in a position where it could all come tumbling down. That's what I like the most about it. Those are the questions from the email. I think that covers all the questions.

Operator, Operator

We have reached the end of the question-and-answer session, and I will now turn the call over to Allan for closing remarks.

Allan Evans, CEO

Again, I would like to thank everybody for being on the call. I really appreciate it. We wouldn't be here without our customers, our shareholders, and people that support us. So, thank you. I wouldn't be here without the team. We had 30 people start Monday; they're building motors this week. Thank you for being part of the team to everybody with us since we started. Again, thank you to our team, and to Brian for being here. Brian, do the best. It was a great quarter. It was profitable. We're growing. Everything is set up for this to scale, and there are no roadblocks in our way. It's time to go. Thank you.

Operator, Operator

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.