Red Cat Holdings, Inc. Q4 FY2025 earnings call

Jeff Thompson discussed Blue Ops, Black Widow work in Ukraine, drone dominance. COO Chris Erickson talked about Ukraine office, testing systems, joint development agreement with Ukrainian partner. Factory expansion with increased square footage in multiple locations. Scaling production of Black Widow drones to 1,000 units a month by first half of 2026, and USB boat manufacturing expected in Q2 2026. Strengthening American manufacturing capabilities and supply chain security post NDAA Section 1709 implementation. Partnership with Hodgson Shipbuilding for maritime operations.

For the fourth quarter of 2025, revenue was $26.2 million, up $25.0 million year-over-year, and up $16.6 million sequentially. For the full year 2025, revenue was $40.7 million, up $25.1 million year-over-year. Gross margin for Q4 2025 was 4.2% vs 85% year-over-year and down 2.4% sequentially. Full year gross margin was 3.1% vs 332 basis points year-over-year. Operating expenses in 2025 were $67.8 million vs $32.9 million prior year. R&D expenses were $17.9 million vs $8.1 million prior year. Cash increased from $9.2 million at end of 2024 to $167.9 million at end of 2025. Inventory increased from $13.6 million to $30.4 million during 2025.

Not currently ready to offer official guidance. Want government contracts in hand before giving guidance. Mentioned a range of 100 to 170 million for 2026 but will update when contracts are in hand.

Geopolitical developments could affect international expansion plans. Changes in defense priorities or procurement policies could impact timing or scale of international opportunities. Potential changes in defense spending priorities as new administrations and congressional leadership evaluate budgets.

Q: Congrats on Q4 execution, any scenarios for 2026?

A: Range from 100-170 million, not ready to commit until contracts in hand.

Q: Ukraine opportunity, how many ISR drones replacing?

A: 350,000 ISR drones a year in Ukraine.

Q: Boat segment, RFP interest?

A: Uptick in Navy inquiries, RFPs from Gulf states, Variant 7 as counter solution.

Q: Full rate production contract, tranches?

A: Progressing with contracts, possibilities of immediate orders for Epic Fury.

Q: USV order in Q2, details?

A: Hoping to ship hulls 6-15 to customers quickly.

Q: Building to 1,000 drones a month before contracts?

A: Already doing that.