Unusual Machines, Inc.

Hi, everyone. We'll be starting the webinar momentarily. Give us about one more minute. Thank you. Just waiting for more attendees to enter the room, everybody. So we'll be starting momentarily. okay good afternoon everyone and welcome to unusual machines first quarter 2025 earnings conference call and webcast with us today our unusual machines ceo alan evans and cfo brian hoff following today's remarks we will have a q a session during this call Management will make forward-looking statements, including statements that address unusual machines' expectations regarding the impact from tariffs, our future growth, our future performance, or operational results, including cash flows, future makeup of our enterprise and consumer sales, the expected performance of our new United States-based drone manufacturing facility, our ability to get more products listed on the Blue UAS Framework of the United States Department of Defense, and expectations on future acquisitions. 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 Form 10Q and Form 10K and the 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 at www.unusualmachines.com. Now let me hand the call over to CEO Alan and Evan. Please go ahead.

Thanks, everybody. I'm actually really excited about today's call. We have some prepared remarks covering our quarter, the results and some subsequent events. After Brian and I wrap up with our comments, we're going to be happy to take any questions in an open Q&A. I want to start by just acknowledging how awesome our whole team is. Like everybody keeps working hard and they're bringing some pretty creative solutions to a lot of challenges, like a really dynamic pricing environment with tariffs changing all the time. And just the culture and the quality of the workforce really, they blow me away. Really great people to work with. And I'm really confident with this group of being able to do some very interesting things going forward. the whole process really just doesn't seem to slow down for us. The first quarter was our highest revenue quarter of all time. And that's for the fourth consecutive quarter. So we keep hitting the marks. It's 59% growth over quarter one, 2024 on a pro forma basis. So we feel pretty good about that growth. And this was all done in like this really chaotic tariff backdrop with a T motor being sanctioned, which eliminated a very large Chinese motor company. And then, um, also with the Doge and some of the government stuff slowing down spending there. So the other really big news from all of this is we closed a substantial financing yesterday, about $40 million. Progress is fast. And for us, it's going even faster. And with everything going on, though, we still really want to focus on cash flow operations and growth. So to dive into it quickly, we started the quarter with $3.7 million in the bank. We finished the quarter with $5 million in the bank. And we subsequently raised $36.6 million after fees. Our cash position right now is more than $40 million. We're very comfortable with this. And aside for some of the capexes for the motor factory that we plan on going, we really are focused on continuing to keep our burn rate low. So for the quarter, we generated 2 million just over in sales at a 24% gross margin. Again, this is about a 59% increase over the pro forma from last year, which is pretty encouraging. The margin drop that we see here down to 24% is primarily due to tariff charges. And then the blend of enterprise has held steady at 13% of revenue. This surprised me and is to the upside because Doge and the government budget expenditures and the continuing resolution we thought would totally lock out the government market and really hinder our B2G growth. Growth in the quarter. So in general, our financials for this quarter signal positive growth pretty uniformly across the board. And this is a quarter that is very, very often a significantly down quarter for us coming out of quarter four in the holidays. So really overcoming cyclical nature. It's pretty great. I mentioned this last call. I'll mention it again. We're planning for aggressive growth this year. We really plan on going after it. And I'm sure that's why most of you are probably on this call and what you want to hear about. So I was going to hand this off to our CFO, Brian Hoff, who's done a great job to cover our financial results in more detail and leave you waiting until he finishes up for me to get you some of those forward-looking statements. With that, I'm going to hand the call over to Brian Hoff. Brian.

Thank you, Alan. Thank you to everyone joining in today for the call. As Alan mentioned, we started the year off great with $2 million in revenue for the first quarter, which was the 59% increase from the pro forma revenue from the first quarter of last year. We are very excited about this. The momentum did not slow down after the Q4 holiday push that we typically see. The team has done fantastic work in the first quarter here. The Q1 margins were at 24%, which, as we said, was a little lower, primarily from some of the tariff policy changes this quarter. And we're likely going to see some continued uncertainty in the Chinese tariffs in Q2 and moving forward. But on the same note, our team has been very active in finding alternative suppliers outside of China to try and offset some of these larger cost increases. Operating expenses have remained consistent over the past quarter. We did see an increase in non-cash stock-based compensation expense for this quarter of approximately 1.9 million. There was also some non-recurring expenses in Q1 for some professionals fees and public company expenses of about 0.3 million. We'll continue to put focus on growing our business. maintaining and increasing our margins and getting the cashflow positive as quickly as we possibly can. We've made tremendous shifts in our balance sheet position, as Alan has kind of mentioned as well, and expanding our cash. We ended this quarter with 5 million, which was led by the 2.4 million of cash exercises from warrants from our previous private placement. We're closely maintaining and watching our inventory levels while we're trying to minimize the tariff impact. And over in Q4, we have no debt and we're in a very strong position to push on our strategy of growth. We do expect to see our CapEx to grow this quarter as we started purchases toward motor factory equipment. And finally, as Alan discussed, and as we put out news recently, we completed our public offering in which we received net proceeds of $36.6 million of cash for 8 million shares of common stock. As our balance sheet says today, we have 24.8 million shares of common stock outstanding as of today. Again, from end of Q1, very excited about what is coming for Q2 and beyond for Unusual Machines. And I want to say thank you to our staff for having a tremendous quarter, our entire working team with the financing, and to our partners at Dominaria for helping complete it. I'll send it back over to Alan. Thank you all.