Merlin, Inc. Q1 FY2026 earnings call

• Business Overview & Strategy

  • Merlin develops a certifiable, aircraft-agnostic autonomous flight AI system (the Merlin Pilot) designed to enable autonomous or augmented flight for any airframe and mission, creating compounding advantages across engineering, regulatory certification, and data via network effects.
  • The company's long-term goal is to become a leading new aerospace and defense prime (neoprime) focused on autonomous flight, built around the shared core Merlin Pilot software platform.
  • This is Merlin's first earnings call as a public company, following its recent business combination and additional capital raise.

• Operational & Certification Progress

  • The company has completed the first two major certification milestones (SOI 1 and SOI 2) with the New Zealand Civil Aviation Authority (CAA), in a concurrent validation program with the US FAA, and is currently working through the third milestone (SOI 3, software verification).
  • Merlin executed the world's first fully automated takeoffs on certification candidate aircraft in Q1 2026, completed on two different aircraft on two continents (US and New Zealand).
  • The company holds the prime position on the US SOCOM IDIQ contract for C-130J autonomous integration, with a $105 million contract ceiling. The company recently completed the Preliminary Design Review (PDR) for this program, with Critical Design Review (CDR) as the next major milestone.

• First Product Launch: Condor

  • Condor, Merlin's first commercial product, was announced alongside this earnings call. It brings certified augmented/autonomous autonomy to multi-crew large aircraft for both civil cargo and defense markets, working alongside existing human pilots to improve safety and productivity.
  • For civil cargo markets, Condor addresses large structural industry trends: global air cargo carries ~$8 trillion in annual goods by value, and the industry faces a projected cumulative pilot shortfall of nearly 30,000 in the US alone, creating demand for single-pilot and augmented operations. Merlin has already announced a collaboration with WorldStar Aviation, a leading freight aircraft lessor, to support commercial scaling.
  • For defense markets, Condor enables augmented and future single-pilot operations for large military transport aircraft like the C-130J, with applicability to multiple additional defense aircraft platforms.

• Financial Position

  • As of May 1, 2026, following a post-quarter-end private placement financing, Merlin holds $183 million in cash, cash equivalents, and short-term investments, with no outstanding debt. Management believes this capital provides sufficient runway to reach near-term certification and commercial milestones.

Merlin is an early-stage company with a single core software platform that is just launching its first product, Condor. For the first quarter of 2026, overall company revenue was approximately $1 million, representing a 15% year-over-year increase. Approximately 90%+ of Q1 2026 revenue was generated from task orders under the company's US SOCOM defense IDIQ contract for C-130J integration work. There are no other separate product segments with material revenue contribution as of Q1 2026, as Condor is still in pre-commercial development.

• Management did not provide specific numeric revenue or earnings guidance for full-year 2026, noting that near-term financial results are highly variable and dependent on the timing of regulatory certification milestones, defense program awards, and commercial adoption of Condor.
• Management confirmed that the company will maintain deliberate ongoing investment in R&D, engineering, certification, and commercial development ahead of revenue, to build long-term platform leverage and compounding competitive advantages.
• Management confirmed that with its current cash position, the company has sufficient capital runway to achieve all key near-term certification and commercial milestones without immediate near-term capital raising needs.

• All forward-looking statements are subject to material risks that could cause actual results to differ materially, including: delays in regulatory approval and certification timelines, unexpected competitive activity, limited capital availability, slower-than-expected technology development, and broader unfavorable macroeconomic and market conditions.
• Commercial adoption of Condor and future products depends on successful regulatory certification, which is a complex, demanding process that has never been completed for full takeoff-to-touchdown autonomous fixed-wing flight, and could experience unforeseen delays or failures.
• Revenue visibility is limited due to variable defense procurement cycles and commercial customer adoption timelines, which can shift revenue recognition materially from current expectations.

Q: With newly raised capital following the public combination, what is Merlin's strategic approach to M&A for inorganic growth?

A: Management confirms M&A is a core part of Merlin's strategy to become a leading new aerospace prime (neoprime), similar to how large legacy primes grew via acquisition over past decades. The company will pursue acquisitions that allow it to deploy its core autonomous flight system into existing products, programs, and customer contracts, accelerating time to market and expanding the reach of the Merlin Pilot platform. No specific acquisitions are currently announced.

Q: What milestones should investors watch for the C-130J IDIQ program for the rest of 2026?

A: Merlin recently completed the Preliminary Design Review (PDR) for the program, the first of two major design milestones. The next key milestone to watch is completion of the Critical Design Review (CDR), which will move the program closer to integration of the autonomy system onto the operational C-130J aircraft. Successful CDR completion will mark a major step toward the first flight of autonomy on an operational US Air Force fixed-wing aircraft.

Q: What framework guides Merlin's product roadmap after the launch of Condor? What can investors expect for future products?

A: All future products will adapt the shared core Merlin Pilot AI system to a new aircraft category, mission vertical, and customer set, following the company's four launch criteria: technical maturity on the aircraft category, clear customer value, defined regulatory requirements, and existing customer/ecosystem interest. Future product launches will also include strategic collaborations with key ecosystem partners (similar to the WorldStar Aviation partnership for Condor) to accelerate commercial adoption, and progress will be announced as milestones are achieved.

Q: What is Merlin's planned pricing model for Condor and the broader Merlin Pilot platform?

A: The company plans to use a two-part pricing model. The autonomy hardware integrated onto the aircraft will be sold at relatively low margins to drive adoption, while the core software will have high margins priced around shared value: customers pay a portion of the operating cost savings and efficiency gains delivered by the autonomy system, aligning Merlin's incentives with customer outcomes rather than charging a large upfront fixed cost. Pricing discussions with customers are currently ongoing.