XTI Aerospace, Inc. Common Stock

Good afternoon, and welcome to the XTI Aerospace first quarter 2026 earnings call. Joining us today from XTI Aerospace are Scott Pomeroy, Chief Executive Officer, Brooke Turk, Chief Financial Officer, and Jeremy Schneiderman, CEO of Drone Nerds. Before we begin, please note that certain statements made during today's call may be considered forward-looking statements within the meeting of federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Additional information regarding these risks and uncertainties can be found in the company's filings with the Securities and Exchange Commission. The forward-looking statements made today speak only as of today, and the company undertakes no obligation to update these statements except as required by law. In addition, during this call, we will make reference to certain non-GAAP financial measures. A reconciliation of these non-GAAP financial measures are available on the Investor Relations section of our website. Earlier today, the company posted its earnings news release, slide presentation, and prepared remarks to the investor relations section of its website. Today's session will be conducted as a live video-based earnings call. Scott Pomeroy, Brooke Turk, and Jeremy Schneiderman will be responding to questions from participants. The discussion today will focus on first quarter 2026 results. I will now turn the call over to Scott Pomeroy. Mr. Pomeroy, you may begin.

Great Thank you. Thanks everybody for joining us here this afternoon. Um, it's great to have you here as the moderator just pointed out. We did file earlier today. The along with the 10 Q, the earnings release. Uh, as well as the script as with last quarter. Our objective with that is really to avoid having to spend time on this call reading through the script and maximizing the time that we have to answer questions. So we hope that continues to be an effective mechanism and platform for you, and we'll continue to do that. We've gotten good feedback that it's helpful to carve out the time just for Q&A, so we intend to do that. Really, since the acquisition in November last year, we've continued the transformational journey of XTI. And we are now a revenue-generating unmanned systems platform. We're focused on operational execution, on margin improvement, and cash flow discipline. The first quarter of 2026 marks the first quarter that we've had the full operating performance of DroneNerds in our results. And we believe that we've demonstrated meaningful progress in reducing costs, improving operational alignment, and lowering our cash burn. That will continue throughout the balance of the year, but we're off to a good start. Based on our current operating plan, we continue to expect to achieve positive and growing cash flow from operations. throughout the balance of the year, starting in the third quarter as revenue scales and operating efficiencies improve. During the quarter, we continue to see broad-based demand across enterprise and government markets. That includes areas such as public safety, infrastructure, utilities, agriculture, education, surveying, mining, and energy customers. We also continue to benefit from the growing industry demand for NDAA compliant and domestically aligned drone solutions, as customers are increasingly focused on secure supply chains and regulatory compliance. Jeremy can provide more color on that as we continue with our conversation here today. Our enterprise B2B pipeline strengthened throughout the quarter, and the momentum has continued into the second quarter. Based on the current operating plan, we continue to expect full year 2026 revenue of approximately 160 million or greater with projected gross margins of between 19 and 21% and EBITDA margins of between 9 and 10%. We ended the quarter with about 15.2 million in unrestricted cash and cash equivalents, along with some substantial liquidity available under our asset-based lending arrangement. As we move through the remainder of 26, our priorities remain clear. It's about improving margins, strengthening liquidity, reducing cash burn, and continuing to build long-term shareholder value through disciplined execution. With that, let me turn it back over to the moderator.

Thank you. At this time, we will now open the floor for questions. If you would like to ask a question, please click on the Raise Hand button, which can be found on the black bar at the bottom of your screen. When it is your turn, you will receive a message on your screen from the host allowing you to talk, and then you will hear your name called. Please accept, unmute your audio, and ask your question. We will wait one moment to allow the queue to form. Our first question is a written submission. Our question is, how should investors think about the difference between average EBITDA generation during the second half of 2026 versus the EBITDA run rate the company expects to exit the year with?