Merlin, Inc.

Good day, everyone, and thank you for standing by. Welcome to Merlin Labs, Inc. Second Quarter 2026 Earnings Call and Business Update. At this time, all participants are in a listen-only mode. After the presentation, there will be a question-and-answer session. To ask a question, you will need to press star 1-1 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. Now it's my pleasure to hand the conference to Brian Elgar, Senior Vice President, Corporate Development and Investor Relations. Please proceed.

Thank you, Operator. Good afternoon, and welcome to Merlin's quarterly earnings call for the quarter-ended June 30, 2026. Joining me on the call today are Matt George, Merlin's founder and CEO, and Ryan Carrithers, our CFO. Momentarily, Matt will kick things off with a review of our recent achievements and a brief overview of Merlin and our objectives. He will then spend some time detailing the value proposition of the Merlin pilot and the market opportunity that we believe it represents. Matt will be referencing a number of industry and market statistics throughout his commentary. Reference sourcing material for these comments can be found in the appendix section of the investor presentation deck intended to accompany today's call. That deck can be found at investors.merlinlabs.com. Ryan will then take you through the financial results, our balance sheet position, and our financial expectations. Finally, Matt will have a few closing remarks before we start the Q&A session. Before we begin, a reminder that today's discussion will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties, and other factors that could cause our actual results, performance, or achievements to differ materially from what is expected or implied. Those factors include, among others, regulatory approval timelines, competitive dynamics, capital availability, technology development, and broader market conditions. For a complete discussion of risk factors, please see our most recent filings with the SEC. We undertake no obligation to update any forward-looking statements except as required by law. Today's discussion will also reference adjusted EBITDA, which is a non-GAAP financial measure. A reconciliation of adjusted EBITDA to net loss, the most directly comparable GAAP measure, is included in the earnings release, available on the Investors Relations section of our website at investors.merlinlabs.com. And with that, I'll hand the call over to Matt. Matt?

Thanks, Brian, and thank you all for joining us today for Merlin's second quarter 2026 earnings call. Before I hand things over to Ryan to walk you through the financials in detail, I want to spend some time talking to the results we've achieved, where we are as a business, and where we're going. We finished the quarter with $183.9 million in cash, cash equivalents, and short-term investments, and importantly, no debt. As Ryan will detail momentarily, we believe our balance sheet strength is one of our strongest advantages today because it allows us to continue hitting the milestones necessary to capture the opportunity I am about to describe. When we last spoke in May, we laid out a number of ways to measure our progress. We talked about key areas of focus in the near term, on our C-130J contract, building a go-to-market network for civil cargo, and advancing civil certification of our core AI processes and technology. In Q2, we delivered major milestones in all three categories. Early in the quarter, we announced completion of the Critical Design Review, or CDR, with our lead customer on the C-130J, moving us closer to deployment across the fleet. At Farm Bureau last month, we announced that Israeli Aerospace Industries, or IAI, and Merlin signed a non-binding MOU to advance the development, integration, and certification of AI-powered autonomy for commercial cargo aircraft. This expands our partner ecosystem and puts us on the path to serve approximately 2,400 aircraft in the global civil cargo market. And just last week, we announced the achievement of Stage of Involvement, or SOI, three with the Civil Aviation Authority of New Zealand under a bilateral aviation safety agreement with the Federal Aviation Administration here in the United States. Civil certification would be the first step towards opening up a global commercial market of more than 20,000 addressable aircraft for Merlin. These are the three areas of measurement with meaningful progress in all three. Double-clicking on each one of those milestones. First, completion of the CDR and the C-130J program. This is a real proof point of the compounding advantages we described last quarter, and it's exactly the kind of milestone we told you to watch for. The program's next milestone will be related to the integration work on the initial C-130J. Since completing CDR, we've been working with our customer and subcontractors to define the scope and timeline for future integration, ground testing, and flight testing. Next is our collaboration with IAI, one of aviation's largest providers of freight conversions. Merlin and IAI are working together to advance the development, integration, and certification of AI-powered autonomy for commercial cargo aircraft. This will be a phased engagement, including engineering collaboration, joint market exploration, regulatory preparation, and initial platform selection to lay the groundwork for a definitive commercial agreement and a structured path towards civil certification. Together with our previously announced collaboration with WorldStar, Merlin is systematically building the go-to-market engine for the adoption of autonomy by the global civil cargo market. And most recently, we announced the completion of SOI III with the Civil Aviation Authority of New Zealand in coordination with the Federal Aviation Administration under their bilateral aviation safety framework. Two critical components of the Merlin Pilot Autonomy Platform The flight control computer and the automated communication system software have been tested and verified against their requirements. To our knowledge, this is a first for large aircraft autonomy. Achieving SOI 3 represents an important certification milestone, demonstrating that our verification processes, testing evidence, traceability, and engineering controls are sufficiently mature to support certification. Separately, MERLIN successfully concluded an important certification issue paper with the Civil Aviation Authority of New Zealand addressing the use of AI and ML-based natural language processing with the MERLIN pilot, enabling voice-based interaction with air traffic control. This additional milestone establishes the regulator's requirement and an agreed path for demonstrating compliance for this novel capability. This reduces a key area of regulatory uncertainty and represents meaningful progress towards the introduction of AI into certified aviation, not only benefiting Merlin, but the industry as a whole. Each of these milestones tackles an independent challenge across commercial, technology, and certification, and that diversity is what makes them so important. Together, we believe these milestones represent meaningful evidence of progress towards our mission to build a certifiable autonomous core that is capable of safely and reliably flying any aircraft for any use case and monetizing the Merlin pilot. As we look to the future, I want to underscore the opportunities we see ahead. For the past 100 years, aviation has been built around human pilots. In the United States alone, more than $45 billion is spent each year to keep our pilots flying. We believe the next 100 years of aviation will be built around autonomy, and we currently sit at the inflection point of adoption. Merlin is building what we believe will be the operating system of record for the next century of aviation, physical AI for the sky. Our commercial traction, the technology progress and the certification milestones are all steps on that path. On last quarter's earnings call, we talked about the distinction between the Merlin Pilot and our products like Condor and I want to make sure the distinction is well understood. The Merlin Pilot is the core. It's the brain. It's the certifiable AI system designed to adapt any airframe and any mission and becomes more capable with each adaptation. Our products are created when we take that core brain and combine it with a specific airframe, mission, and customer. Everything starts with and scales from the same continuously improving core, the Merlin Pilot. So let's talk about what this combination actually delivers to a market need. We call it integrated autonomy that combines two things, flight autonomy with mission autonomy. Flight autonomy is what most people think of first. It's the aviate, navigate, communicate capabilities of most flying aircraft today. It means taking off, flying the airplane, communicating with air traffic control, and landing, all without the need for human intervention. Mission autonomy is different, but just as important. It's everything the aircraft needs to do to accomplish the job it was sent to do. The tasking, sensing, and decision-making specific to a cargo run, surveillance mission, or tactical resupply. We are building both. There are companies focusing on one or the other, but we believe our approach, one core brain, the Merlin pilot, performing integrated autonomy, has the potential to improve and reduce deployment costs with each airframe we adapt to compared to bespoke one-off systems where capabilities don't compare. I also want to be really clear about the landscape we are addressing, what this is, and just as importantly, what it's not. Today, we are targeting larger fixed-wing aircraft. We see opportunity in both crewed and uncrewed aircraft and, importantly, in existing inventory. The airplanes are already flying today. We are building the brain that will fly today's aircraft for decades to come and one that is also capable of flying the fleets of the future. Now, let's quantify the opportunity. While we plan to generate revenue by adapting and integrating the Merlin Pilot onto airframes, the business model is centered on a recurring revenue license fee for the Merlin Pilot. That license fee is designed to be value-based, depending on the use case, complexity, and needs of our customer. Let me share some data to help you better understand how we think about the opportunity and the value that the Merlin Pilot represents. Start with what we already have in hand, our existing program with the US Air Force on the C-130J, Starting first with SOCOM. Today, SOCOM has approximately 75 C-130Js in a couple different variants. This is part of the Air Force's 300-plus C-130Js, and at full deployment across all branches of the DOW and Allies, there are approximately 570 C-130J aircraft. We believe the C-130J airframe is a multibillion-dollar opportunity just by itself. Now, widen the lens. The broader U.S. defense inventory of fixed-wing aircraft is over 6,750 aircraft. Excluding China and Russia, global civil cargo represents another 2,400 aircraft and global passenger aircraft over 20,000 more. Add it all up, and that's an operating base of more than 29,000 aircraft before we even begin talking about future airframes. Over time, we believe autonomy will drive greater and greater value on the aircraft and the missions that are so important to our customers. Today, in just the United States, third-party sources report that more than $45 billion is spent annually on pilotage. The U.S. military spends over $22 billion on its six-wing pilots. Today, there are over 6,750 six-wing aircraft in our military inventory. Mathematically, this means the U.S. military currently spends about $3.3 million per plane per year on its pilots. On the U.S. civil side, the dollars spent per plane are remarkably similar at approximately $3.2 million per plane per year. With a U.S. commercial fleet of 7,400 planes, that equates to more than $24 billion being spent on U.S. commercial pilots. The value of what we are building with the Merlin pilot is tied to that spend, plus forecasted growth and diversification of the aviation industry against well-documented perennial shortfalls of new pilots being trained, and even fewer achieving the flight hours needed to become professional pilots. Put it all together, based on the assumptions and the market data we have described and factoring in future market growth, we estimate an annual TAM for Merlin of several billion dollars per year. That is what we are building towards. Of course, a large TAM doesn't mean much without a credible map to revenue, so let me quickly walk you through how we actually get there, starting with defense. For the Department of War, we believe our multi-year head start and the regulatory complexity of this domain provide meaningful competitive advantages. We've been putting in the work for five years, going from RFP through CDR. The next steps are relatively straightforward, integration, ground testing, and flight testing. Adoption across airframes isn't a serial process. It is parallel tracks running at the same time. Every branch and every platform we work with builds experience that we believe compresses the time to adoption for the next platform. Two more things worth knowing about the DOW. Their funding subsidizes a meaningful amount of our integration costs, and the DOW controls the pace of adoption and the installation schedule. That's a feature of working with this customer, not a bug. It's part of why the C-130J program has been de-risked the way it has. On the civil side, we have made considerable progress towards certification. We achieved SOI 3 by successfully testing and verifying our flight control computer and the automated communication system against their requirements. To our knowledge, Merlin Pilot is the first to reach this important milestone for large aircraft autonomy. And with that, I'll hand it over to Ryan to walk through the numbers.