XTIA

• Post-Acquisition Transformation

  • Following the November 2025 acquisition of DroneNerds, XTI has transformed into a revenue-generating unmanned systems platform
  • Management has made meaningful progress reducing costs, improving operational alignment, and lowering cash burn in the first full quarter of combined operations
  • All non-DroneNerds spending is currently limited to focus on optimizing the DroneNerds core business, with continued cost cutting planned for Q2 2026 to align the cost structure with the current operating model

• Market Demand and Positioning

  • Broad-based demand is observed across enterprise and government end markets, including public safety, infrastructure, utilities, agriculture, education, surveying, mining, and energy
  • Growing industry demand for NDAA-compliant, domestically aligned drone solutions (driven by customer focus on secure supply chains and regulatory compliance) is a strong tailwind for the business
  • DroneNerds is the largest domestic U.S. enterprise drone distributor, with more than $100 million in 2024 revenue. The U.S. enterprise drone distribution and services market is highly fragmented, with more than 100 small regional resellers mostly operating below $5 million in annual revenue, creating significant consolidation opportunities
  • DroneNerds differentiates itself from traditional resellers by acting as a full solutions platform between manufacturers and enterprise customers, offering broad product inventory, repair infrastructure, training capacity, and end-to-end program support that smaller competitors cannot match

• Operational Pipeline

  • The enterprise B2B sales pipeline strengthened through Q1 2026, and momentum has continued into the second quarter
  • The company has expanded its enterprise direct sales channel and increased marketing investments focused on high-growth verticals to capture growing demand

• Full year 2026 revenue is guided to approximately $160 million or greater, with gross margins projected between 19% and 21%, and EBITDA margins projected between 9% and 10% (maintained from prior guidance)
• Positive and growing operating cash flow is expected to begin in the third quarter of 2026, with $2 million to $3 million of total positive cash flow expected for the full second half of 2026
• Quarterly performance will not be flat in the second half: revenue, EBITDA, and cash flow will grow sequentially through the year, with the fourth quarter expected to be the strongest quarter (in line with historical seasonality for DroneNerds) and the exit run rate at year-end to be reflective of ongoing performance
• Over the longer term, management expects gross and EBITDA margins to expand beyond the 2026 guided range, driven by a growing mix of higher-margin NDAA-compliant products and higher-margin services (repair, maintenance, training)
• The company expects to add $15 million to $17 million in cash during 2026

This is XTI Aerospace's first quarter with full consolidated operating results from DroneNerds, its acquired unmanned systems business. No separate segment-level financial results (absolute values or revenue contribution percentages) were disclosed in the provided transcript. The quarter ended with $15.2 million in unrestricted cash and cash equivalents, plus additional available liquidity under the company's asset-based lending facility. Adjusted EBITDA improved from negative $10 million in Q4 2025 to negative $5 million in Q1 2026.

No specific new risks or operational failures were discussed in the provided transcript. Management only noted that forward-looking statements are inherently subject to risks and uncertainties that could cause actual results to differ materially from projections, with additional risk information available in XTI's SEC filings.

Q: How does the second half 2026 EBITDA average compare to the exit year run rate investors should expect? / A: Management noted that quarterly performance will not be flat in the second half. Revenue, EBITDA, and cash flow will grow sequentially throughout the second half as cost efficiency initiatives take full effect. The fourth quarter performance is far more reflective of the ongoing run rate than the average for the entire second half, so extrapolating the full half average to a quarterly run rate would be inaccurate.

Q: Given the high fragmentation of the U.S. enterprise drone market and existing policy tailwinds, what is the outlook for organic and inorganic share growth over the next 2-3 years? / A: As the clear leading domestic player, DroneNerds is well positioned to capture consolidation opportunities. The overall market is growing more than 20% annually, so the business will deliver 20%+ top-line growth just from maintaining existing share, with additional upside from organic share gains and tuck-in acquisitions. Only a handful of acquisition targets are strategically attractive, and consolidation will also drive margin expansion as smaller competitors are absorbed.

Q: What gives management confidence that positive operating cash flow will be achieved in Q3 2026? / A: The company has already steadily reduced cash burn, cutting adjusted EBITDA losses from negative $10 million in Q4 2025 to negative $5 million in Q1 2026. Revenue will continue to ramp through the remainder of the year, margins will expand, and the company is continuing to cut excess costs. These combined trends will push cash flow positive by the third quarter as revenue growth and cost reduction cross over.

Q: How will the growing requirement for NDAA-compliant domestic drone products impact long-term margins? / A: DroneNerds already sells NDAA/Blue UAS compliant products today, and the market will only become easier to serve as OEM partners scale production. NDAA-compliant products have a better margin profile than legacy products, and the mix shift will benefit margins. Additionally, growing demand for related higher-margin services (repair, maintenance, training) will also drive margin expansion above the 2026 guided 19-21% range in future years.