Draganfly Inc.

All right, I think to respect everybody's time, I think we will get started here. So, again, greetings and welcome to all the shareholders and stakeholders who are joining us on today's Dragonfly 2026 Q1 earnings call. My name is Roli Bustos, and I am the internal investor relations rep here at Dragonfly. We appreciate you, as always, joining us. We will start with our CEO and President Cameron Schell recapping the first quarter. Next, we'll do a more detailed financial review with our CFO, Paul Sunn. We will then conclude, as always, by addressing the pre-submitted questions that we have received. Though I know many of you, as always, anybody is welcome to reach out to me directly at investor.relations at dragonfly.com, and I'd be happy to have a conversation. I remind everyone that this presentation may include forward-looking information and statements. These statements are not guarantees of future performance or financial results, and undue reliance should not be placed on them. Any future events or financial results may differ from what might be discussed here. The company's results and statements are accurate as of today, May 11, 2026. We are under no obligation to update or renew these statements outside of material press release disclosure going forward. The full forward-looking disclaimer can be found on page 2 of this presentation and on the screen right now. So, Cam, if you're ready, please go ahead. Great.

Thanks, Roley, and really appreciate everybody's time and consideration in joining us on today's Q1 earnings call. So we'll start off with the financial highlights for Q1, 2026. So our revenue in Q1, 2026 was 2.3 million plus, which represents a 49% plus year over year increase and about $2.2 million in product sale. That's $347,761 of gross profit. And currently as of March 31, 2026, We have a cash balance of just over $147 million. So overall, we're very pleased with the quarter in terms of the year-over-year growth and sales, and we continue to take a very pragmatic approach on how we're scaling in to very particular customers that we're targeting to be our base over the next decade. To talk a little bit more specifically about the sales highlights for Q1, we had a number of significant sales, primarily into our military vertical. We did announce at the beginning of the quarter an order of FPV drones from the US Army. This was from an existing customer of ours. which we are continuing to build a very strong relationship with and we'll talk a little bit more about that later. We also secured a strategic international military orders for our Commander 3XLs. We also announced a project and a sale along with Paladine AI. who is on an Air Force contract right now regarding swarming technologies incorporating the use of Dragonfly drones. We announced the Fortune 50 telecom company purchasing Dragonfly heavy lift drones for disaster response. And this is actually for lifting cell towers up either for doing repairs or when systems are down or in emergency response situations. And, in fact, they're switching over their entire fleet from a Chinese fleet now actually into a Dragonfly fleet, in particular because of our heavy lift capability. And we also announced Dragonfly Outrider sales along with Cochise County and a number of other counties along the southern border, where we provided what we call our Outrider drone, which is a long-range heavy lift drone for doing patrols, search and rescue, personnel support, surveillance, and communication networking. So overall, a really important quarter for us in terms of delivering really important strategic imperatives to very, very select and specific customers that we've been targeting for quite some time. And that's going to continue to be our strategy. We really want to, we have the opportunity to be selective right now about who we're targeting into. And the reason that we're targeting those specific customers does lend into a larger strategy around how we're building out our capability and how eventually that VCHAT then leads to further and further advancements into our particular markets, which are designated somewhat differently from some of our comparables out there. Also, in terms of a financial highlight from Q1 was we did close a $50 million U.S. financing, and we're really pleased with the actual investors that came in to that fund. They were by far, I would say 90%, were long-only investors. very well known tier one funds that came into that. And so it really elevated us from that kind of micro cap market up into the small even beginning of the mid cap market. We also had new initiation of research on us from some great banks. We appreciate their support. And we look to continue to build those relationships. And as we move forward, while we're really well cashed up now, we do believe that in the far future, we will have the opportunity to finance at much higher levels as sales will demand that additional growth again. For the remainder of this year, though, we're not expecting that. Strategically, a number of things also unfolded for us in Q1. So we did bolster our military and defense capabilities by bringing on two gentlemen who now head up all of our military sales partnerships and initiatives in that regard and business development. Larry Thulein is now heading all of our military sales, and he's working along with Vic and Keith, who are both former Tier 1 operators. both come out of Deutsche Bank after their Tier 1 careers and have done just an incredible job in terms of helping us continue to scale our business development and sales operations, align that with our production capabilities, our R&D and our research capabilities, and I can definitely say that we're operating at new levels with individuals that we're very pleased to work with across many militaries throughout the world, in particular the Department of War right now. Dragonfly is uniquely positioned in that regard to support Canada's new $2 billion military commitment to Ukraine. Now, that's actually, since this slide was made, that's actually gone up to $3 billion. And as many of you will know, Canada has actually committed 5% over the next number of years of its GDP to rearm its military. Now that's a big number, like it's certainly not a big number compared to the DOD, or excuse me, the DOW and what they spend. But in terms of a mid-market country and what it's spending, it's now amongst the top military spenders in the world. A massive function of what they're doing is on autonomy, and in particular aerial and drone autonomy. And there's a very, very select few companies, you know, maybe one, maybe two in Canada that can meet this demand. So we're highly engaged at, I would say, probably every level of CAP, what they call Canadian Armed Forces, and DND at this time, and working extremely hard in order to progress the contracts that we've been working on with them over the last couple of years. Their requirements are coming out. They have an equivalent of what's known in the United States as drone dominance, the Million Drone Program. It'll be many more than a million drones. that are produced down in the States as part of that and subsequent programs. There's an equivalent program up in Canada which we're deeply embedded in as well. We also announced our strategic defense partnership with Prime Global Ordinance. And Global Ordinance is, as an example, the largest supplier of ordnance into the Ukraine. They have a strategic view that much of the drone market, at least the drone market they're dealing with, they view drones as an ordnance or as ammunition. And as such, they are really building a strategic focus in drones. And we're super pleased that they've chosen us as their prime supplier into this market. So we've got a couple of dozen major initiatives ongoing with them as well. And we have a very large presence, well, large presence for us anyway, at SoftWeave coming up in addition to a very large presence with Global Ordnance. It should be noted that Global Ordnance was just one of five companies that was selected for the drone dominance munition program as well. We also announced a strategic defense partnership in the Asia-Pacific region. This is with Babcock. And so Babcock is a large British prime who's very strong in the Indo-Pacific region. And so we are building very similar to what we're building with Global Ordinance, as a strategic relationship, as a prime drone supplier, not just for a number of reasons, but primarily because of our capabilities across multiple drone platforms. So a lot of departments, units, etc. are still defining what they are looking for in terms of their drone capability. And so what that means is that these primes need to be able to work with an organization that doesn't have necessarily, hey, this is our drone that we sell, it does ISR work, or this is our drone that we sell, and it does logistics work. They're really looking for an organization that has a capability across all these drone systems that's interoperable And that's turning out to be one of our major strategic advantages. It takes a little bit longer to implement that across many of these units because they're looking at it strategically rather than tactically, what can we get happening right now. But we're finding the benefit of it is gaining momentum quickly. Then a subsequent event which is worth noting is that we were selected by two additional units within the Department of War. All I could really say is that these are special operation But what's really important is that they're special operations types of units. And these are the types of units that are selecting the Dragonfly product. And they're selecting it for many reasons, not just because of the company's capability, but also the product performance and our flexibility across that entire product line. So we're thrilled on this. And that will have heavy bearing on exactly what our numbers will pan out for this year. So on that note, and I'm going to come back to talk a little bit about our strategy in a bit, I'm going to throw it over to Paul to actually talk about our results from this last – or from Q1.

Thanks, Ken. Thanks, everyone, for joining. Yeah, so I'll just take you through your comparisons for the first quarter of 26. So revenue for the first quarter, as Ken mentioned at the outset, was up 49.8% to $2.3 million, up from $1.5 million in the first quarter of 25%. First quarter revenue did comprise of $2.2 million of product sales with the balance coming from drone services. Gross profit, $347.7 thousand compared to $310.1 thousand in Q1 of last year. Q1 did have a one-time non-cash write-down of inventory of $105.8 thousand and otherwise would have been $453.6 thousand compared to the same period last year where there was a one-time Inventory write-down recovery of $38,700, making the adjusted gross profit of $271,400 last year. So taking all those things into account, adjusted gross margin for Q1 this year was 19.6% compared to last year's adjusted 17.5%. And, again, this was a result of products and service mix comparing the two quarters, but they were quite similar. Total comprehensive loss for the quarter was $5.7 million compared to a loss of $3.4 million in the same period last year. This quarter includes the non-cash change comprised of a fair value derivative liability gain of $1 million and that one-time inventory write-down that I mentioned of $105.8 million. It also included a share issuance cost of $2.4 million related to a derivative liability gain from the February financing and its treatment on the income statement versus it normally being treated on the balance sheet. So the loss would have otherwise been a comprehensive loss of 4.2 million versus an adjusted loss of 3.6 million in the same quarter of 25. The increase year over year is primarily due to higher office and miscellaneous cost, travel, and wages. Moving on to the next slide to look at the quarterly table. We obviously just went through the year-over-year comparison, so here we'll just do a quarter-over-quarter comparison with Q1 of this year and Q4 of last year. So revenue for Q1 increased by 20.9% to $2.3 million compared to the $1.9 million reported for Q4. The difference was mainly due to higher product sales. Gross margin percentage for Q1 was 15% compared to 4.5% in Q4 of last year. However, again, if we back out that one-time inventory write-down mentioned before, gross margin for Q1 was 19.6 compared to 17.2, adjusting non-cash items for the previous quarter being Q4. Total comprehensive loss for Q1, again, was 5.7 million compared to a comprehensive loss of 9.3 million for Q4 of 25. Again, you'll recall the the gain in fair value of derivative liability of $1 million, and the write-down of inventory of $105,000, plus that one-time share issuance cost on the P&L versus the balance sheet of $2.4 million. So, again, comprehensive loss for Q1 of this year was $4.2 million, comparing it to an adjusted loss of $8.3 million of Q4 last year. So the decrease quarter over quarter is primarily due to lower office and miscellaneous costs, in this case, comparing the two quarters. And then on the last page here, I think, just going through some balance sheet items, you can see our total assets increased from $101.3 million to $161.1 million, and that's largely due to an increase in cash. Working capital surplus as of March 31 was $154.4 million. versus the 95.2 million from the end of 2025. Shareholders' equity, very healthy, 155.8 million at quarter end, compared to 96.6 million at the end of last year. However, if we look at both working capital and shareholders' equity, it would have even been higher if we X'd out those non-cash fair value of derivative liability. But again, very healthy nevertheless. You can see we continue to have minimal debt. And as mentioned, our company's cash balance at the end of the quarter being March 31 was $147 million compared to the end of December, which was at $90.2 million, again, because of the February financing that Cam touched on earlier on. And with that, Cam, I'll pass it back to you.