Draganfly Inc. Q1 FY2026 earnings call

• Financial and Capital Highlights

  • Total Q1 2026 revenue grew 49% year-over-year, with the quarter closing a $50 million financing round 90% funded by long-only, tier-one investors, moving the company from micro-cap to near mid-cap market classification
  • The company ended the quarter with $147 million in cash, with no immediate need for additional financing for organic growth

• Strategic Customer Wins in Q1 2026

  • Secured an FPV drone order from the U.S. Army (an existing customer), and strategic international military orders for the Commander 3XL platform
  • Won a spot on a U.S. Air Force swarming technology project with partner Paladine AI
  • Secured a full fleet replacement order for heavy lift drones from a Fortune 50 telecom company for disaster response and cell tower repair
  • Delivered Outrider long-range heavy lift drones to Cochise County and other southern U.S. border counties for patrol, search and rescue, and surveillance

• Strategic Partnerships

  • Formed a strategic defense partnership with Prime Global Ordinance, the largest ordnance supplier to Ukraine, as their selected prime drone supplier; Prime Global Ordinance was also selected for the U.S. Drone Dominance munition program
  • Established a strategic defense partnership with Babcock, a large British prime contractor, to serve as the prime drone supplier for the Indo-Pacific region
  • Added two senior industry veterans to lead military sales, business development, and partnerships, scaling operations to align with production and R&D capacity

• Core Strategic Differentiators

  • The company pursues a selective, long-term strategy focusing on building a full interoperable, modular product line of multi-purpose drones that can support full concepts of operations with multiple payload types, rather than single-use single-purpose drones
  • All platforms are interoperable across diverse communication networks, support third-party payload integrations, and offer consistent maintenance, parts, and supply chain, addressing a key unmet need in the market
  • Manufacturing operations on both sides of the U.S.-Canada border create unique access and credibility for both North American and international opportunities

The transcript does not break out financial performance for separate product or business segments. Total company Q1 2026 revenue was $2.3 million, a 49.8% year-over-year increase from $1.5 million in Q1 2025, and a 20.9% quarter-over-quarter increase from $1.9 million in Q4 2025. Of total Q1 2026 revenue, $2.2 million came from product sales, with the remaining balance from drone services. Reported gross profit was $347.7 thousand, and adjusted gross profit (excluding a one-time non-cash inventory write-down of $105.8 thousand) was $453.6 thousand, for an adjusted gross margin of 19.6% (up from 17.5% adjusted gross margin in Q1 2025). Reported total comprehensive loss was $5.7 million, while adjusted comprehensive loss (excluding non-cash items) was $4.2 million, down from an adjusted loss of $8.3 million in Q4 2025. As of March 31, 2026, Dragonfly held $147 million in cash, with total assets of $161.1 million, working capital surplus of $154.4 million, and shareholders' equity of $155.8 million, with minimal debt on the balance sheet.

• Dragonfly does not provide explicit public guidance, but management confirms the company is comfortable hitting the current analyst consensus revenue for full year 2026
• The full year 2026 consensus is based only on already secured orders and contracts, and does not include potential revenue from large pending projects including the Canadian Minerva program, U.S. Drone Dominance program, or Ukraine-related purchases sponsored by third countries, which represent upside if secured
• Management expects strong revenue growth in coming quarters after the foundational progress made in Q1 2026

No explicit material operational failures or formal risk factors were discussed during the call. Management acknowledged that large pending defense contracts are not guaranteed, and that the company will only pursue additional financing if large M&A opportunities materialize, with any financing contingent on market conditions and maintaining accretive value for existing shareholders.

Q: How much traction has Dragonfly gained with Canadian military contracts after the recent budget cycle?

A: Dragonfly is deeply engaged at all levels of the Canadian Armed Forces and Department of National Defence, and is participating in all 4-5 major announced military drone programs. The company is well-positioned for these opportunities, will host exclusive private demonstrations at the upcoming CanSec conference, and benefits from limited competition in the Canadian market for domestic drone capability. Budgets for Canadian military rearmament are significant and growing.

Q: Will Dragonfly participate in Drone Dominance Gauntlet 2, after missing the final cut for Gauntlet 1?

A: Yes, Dragonfly will participate. The company was only able to compete on two of three challenges in Gauntlet 1 and narrowly missed down-selection. Management is confident Dragonfly’s operational experience, particularly from work supporting Ukraine, positions the company well for Gauntlet 2.

Q: Will Dragonfly need to raise additional capital, leading to further shareholder dilution?

A: With $147 million in cash on hand, no additional financing is needed for organic growth or existing order fulfillment. Management only would consider returning to the capital market to fund large, meaningful M&A transactions that would be accretive to revenue and EBITDA, and any transaction would be evaluated based on market conditions and dilution impact to existing shareholders. The company is currently progressing due diligence on a small number of targeted acquisitions that align with its interoperable product and supply chain strategy.

Q: How is Dragonfly positioned for growing U.S. military drone spending, and what are the largest near-term revenue opportunities?

A: Dragonfly is pursuing large formal RFPs like the Drone Dominance program and is confident it will win a fair share of these contracts. The largest near-term opportunity is streamlined direct purchasing by mid-level command (05/06 rank) personnel under Executive Order 44807, which will launch via closed military online marketplaces later this year. Dragonfly has already consistently won these smaller, direct purchases from special operations units in Q1 2026, building credibility that drives larger follow-on opportunities.

Q: What explains Dragonfly’s current market valuation discount to peer drone companies, and how will this gap close?

A: Management acknowledges the discount and views the stock as a strong buying opportunity. The discount stems from Dragonfly’s long-term, pragmatic strategy of building sustainable interoperable capabilities from the ground up, rather than chasing near-term quarterly revenue. It is only a matter of time before growing revenue catches up to the company’s strong market position, and management expects revenue will ultimately outpace many peer firms over the medium term.