XTI Aerospace (XTIA) Q1 2026 Earnings Transcript

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DATE

Thursday, May 14, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Scott Pomeroy
• Chief Financial Officer — Brooke Turk
• Chief Executive Officer, DroneNerds — Jeremy Schneiderman

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TAKEAWAYS

• Revenue Guidance -- Management expects full-year sales of approximately $160 million or greater, representing what they state is a meaningful step up due to the full inclusion of DroneNerds' operations.
• Gross Margin Projection -- Company projects gross margins for the year in the 19%-21% range, explicitly guiding for margin expansion alongside revenue growth.
• EBITDA Margin Expectation -- EBITDA margins are projected between 9%-10% for the year, with management indicating further improvement as the year progresses.
• Cash Position -- Ended the reporting period with $15.2 million in unrestricted cash and cash equivalents, providing liquidity alongside undrawn capacity on a $20 million asset-based lending facility.
• Asset-Based Lending Usage -- Company drew $4.8 million on a $20 million JPMorgan facility, with over $8 million in borrowing base remaining.
• EBITDA Improvement -- CFO Turk reported negative EBITDA improved from negative $10 million in Q4 2025 to negative $5 million in Q1 2026, driven by cost reductions and margin initiatives.
• Cash Flow Timing -- CEO Pomeroy guided to positive and growing operating cash flow beginning in the third quarter, based on margin improvement and revenue scaling.
• Seasonal Revenue Trend -- DroneNerds CEO Schneiderman noted Q1 is traditionally the slowest quarter, with a ramp up into Q4, identifying procurement cycles and vertical-specific seasonality as key drivers.
• Market Positioning -- DroneNerds holds the #1 domestic market share in U.S. enterprise drone distribution, with revenue exceeding $100 million and fragmented competition mostly below $5 million in annual sales per peer.
• Growth Strategy -- Management highlighted both organic growth and targeted M&A as avenues to gain share in a market growing at "20% plus," viewing consolidation as a lever for future margin expansion.
• Pipeline Momentum -- The B2B pipeline strengthened during the quarter and management stated this momentum continued into the subsequent period.
• International Reach -- DroneNerds has established partnerships and operations in Colombia, and has supplied technology to Poland and Israel, indicating a non-U.S. footprint.
• End-of-Year Cash Projection -- CFO Turk guided to year-end cash of $15 million to $17 million, reflecting both operational performance and expected borrowing base.
• Segment Focus -- Strategic investments in direct sales and marketing are targeting public safety and agriculture verticals, cited as experiencing pronounced growth and margin potential.
• NDAA and Regulatory Demand -- Management indicated customer demand is increasing for NDAA-compliant and domestically sourced drone solutions, supported by recent FCC regulatory changes.

SUMMARY

Management reiterated confidence in meeting or exceeding a $160 million revenue target, underpinned by improvements in gross and EBITDA margins during the period following the integration of DroneNerds. The company described a detailed operational approach to liquidity, noting stable cash levels and underutilized credit, while guiding toward positive operating cash flow by the third quarter. Strategic commentary addressed a fragmented U.S. commercial drone market, with several references to acquisition potential and the scalability of their current platform to dominate high-margin verticals. Expansion outside the U.S. and alignment with security-focused regulation were cited as elements supporting growth and differentiation from simple reseller models.

• The planned crossing of revenue growth and cost savings lines, as described by CFO Turk, "starting to reflect in our Q3 and Q4 results," pointing to a specific inflection point in profitability expectations.
• DroneNerds’ positioning between manufacturers and enterprises is described as providing full-suite hardware, software, sensor, and support solutions, which management contends are "pretty unmatched in the industry."
• CFO Turk indicated a material reduction in cash burn through ongoing cost control, aligning with projected operating cash flow improvements in the second half.
• Opportunistic M&A is described as additive to organic growth, with management claiming the competitive landscape is "ripe for consolidation, growth, and margin expansion."
• Schneiderman noted recent hiring and marketing investment into enterprise direct sales as enablers for capturing high-margin business, particularly in public safety and agriculture sectors.
• CEO Pomeroy suggested that the incremental margin profile from NDAA-compliant and domestically aligned solutions should improve as domestic suppliers scale and regulations incentivize secure sourcing.

INDUSTRY GLOSSARY

• NDAA: National Defense Authorization Act; in the drone industry, refers to compliance requirements mandating domestically sourced components to address cybersecurity and supply chain security concerns.
• Blue UAS: A U.S. Department of Defense program that approves secure and reliable unmanned aerial systems (UAS) for federal users.
• OEM: Original Equipment Manufacturer; in this context, refers to companies producing drones or components for XTI Aerospace's distribution.
• ABL: Asset-Based Lending; a credit facility secured by company assets, used here for working capital and liquidity management.

Full Conference Call Transcript

Operator: Good afternoon, and welcome to the XTI First Quarter 26 Earnings Call. Joining us today from XTI are Scott Pomeroy, chief executive officer, Brooke Turk, chief financial officer, and Jeremy Schneiderman, CEO of DroneNerds. Before we begin, please note that certain statements made during today's call may be considered forward-looking statements within the meaning 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. A 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 The discussion today will focus on first quarter 26 results.

I will now turn the call over to Scott Pomeroy. Mr. Pomeroy, you may begin.

Scott Pomeroy: Great. Thank you. Thanks, everybody, for joining us here this afternoon. it is 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, 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 will continue to do that. We have got good feedback. That it is helpful to carve out the time just for Q&A So we intend to do that.

Really, since the acquisition in November, we have continued the transformational journey, of XTI. And we are now a revenue generating unmanned systems platform. We are focused on operational execution, on margin improvement and cash flow discipline. The 2026 marks the first quarter that we have had the full operating performance of DroneNerds in our results. And we have believe that we have 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 are 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 continued to see broad based demand. in 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%-21% and EBITDA margins of between 9%-10%. 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 2026, our priorities remain clear. it is 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.

Operator: 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 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 1 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 2026 versus the EBITDA run rate the company expects to exit the year with.

Scott Pomeroy: Yeah. Great question. So as you know, we guided to second half of between 2 and 3 million of positive cash flow. I think the real key point there to keep in mind is that the quarter to quarter performance is not flat. We expect revenue and EBITDA to continue to grow. Throughout the second half of the year. And cost efficiencies and initiatives to continue to take effect. So you cannot really take the guidance of the full entire second half and extrapolate that into an average monthly or average quarter performance. The strength of the cash flows continues to grow as the year progresses.

So it is really you know, we are looking to a solid fourth quarter and end of fourth quarter as being much more reflective of what our ongoing run rate will be.

Operator: Next question is a written submission. Our question is, how should investors think about the seasonality and quarterly revenue cadence during 2026?

Scott Pomeroy: Jeremy, why do not you take that 1?

Jeremy Schneiderman: Well, first, thank you, everybody, for joining us today. To tell you a little bit his historically about DroneNerds, you know, first quarter has always traditionally been 1 of our slower quarters, and we always see an eventual ramp up into the fourth quarter for multiple reasons. You have procurement cycles, You have seasonality in agriculture. Public safety has different budget timelines. But historically, if you look at our business, fourth quarter is always our strongest quarter with that ramp up into fourth quarter. If you were to compare Q1 26 versus Q1 25, you would have to really look a little deeper into what happened in Q1 2025.

We had major supply constraints at the 2024 where we saw some of those sales move over into Q1 25. So if you were to look comparatively over the 2, it really would not be true indicative of what normal business would look like.

Scott Pomeroy: So Q1 was a little bit overstated Jeremy, of 2025 and Q4 understated. Correct. That demand delay.

Operator: Next question is a written submission. Our question is, DroneNerds is the largest US enterprise drone distributor. With a $100 million-plus in 2024 revenue. Third party research from Grand View, drone industry insights, and Fortune Business Insights sizes the US commercial drone market in the roughly $5 billion to $8 billion range today, growing double digits. With strong policy tailwinds from executive order 14 thousand FCC foreign UAS action, and DAO Drone Dominance. That implies DroneNerds holds roughly 1% to 1.5% share of the multibillion dollar high fragmented market. As the number 1 domestic player, how do you size the US enterprise drone distribution and services TAM, and how fragmented is the long tail behind you?

Scott Pomeroy: Jeremy, let me touch on that, and then we could also weigh in a little bit.

Jeremy Schneiderman: So we see the US enterprise drone distribution and services TAM as a multibillion dollar range. With our position at over a $100 million in revenue, we are the number 1 domestic player in the market, we see a market where the tail is about 100 plus regional resellers. Mostly that sub $5 million range. With very little infrastructure to deliver really robust solutions that we provide So we see that as a very opportunistic consolidation opportunity for us. And our position in the market is we are set up for success to capture it.

Operator: Good follow-up. Given that fragmentation, the policy environment, strategic capital, how should investors think about Drone Nerd's runway to consolidate share organically? And through tuck in M&A over the next 24 to 36 months.

Scott Pomeroy: Well, I think there is a couple ways that you know, we should be looking at that. Obviously, as Jeremy just outlined, those being the largest by orders of magnitude in the domestically here in the US with really no close second player, it sets the market up strategically for interesting consolidation opportunities. And so we will look to capitalize on that. It also suggests that with some internal investment, we can compete organically and take share. So if I look at the broad base of this industry, that is growing by any mechanism or by any forecast you want to look at it is growing at 20% plus.

So you have got a business that is going to grow at 20% plus just by keeping holding share. And then our ability to continue to consolidate and take share should add fuel to that growth rate. Over time. So we think these opportunities trade our direction. We will be opportunistic in looking at that. We do not we do not need to go out and consolidate 100 companies. There are a handful that make good sense for us. To consider. The rest of them, it is a competitive dynamic. it is also a potential for margin expansion as well as you eliminate some of those additional players that are in the market.

So we look at the entire landscape as it being ripe for consolidation, growth, and margin expansion.

Operator: Our next question comes from Robert Barrow. Robert, please unmute your line and ask your question. Robert, you may now unmute your line and ask your question. We are going to move to our next question. Our next question comes from Matthew Galinko with The Maxim Group. Matthew, please unmute your line and ask your question.

Analyst (Matthew Galinko): Hey. Good afternoon. Thanks for taking my question. I was hoping you could maybe touch on what your visibility into, you know, the next 9 months, 12 months is for revenue for DroneNerds and sort of how you build that forecast?

Scott Pomeroy: Thank you. Jeremy, maybe touch on that just a little bit as you look at your pipeline and your forward looking elements of it and maybe a generalization Yeah. We have not we have not given quarterly guidance. We have just given annual But you know, we have talked about the first quarter. Being the low watermark, the fourth quarter being the high watermark. Of the year, but maybe just some general commentary on that.

Jeremy Schneiderman: Yeah. Great question. Really, it is about how are we going to execute to hit the $160 million number that we have put out there. You know, what we do really, really well is serve the enterprise market. You know, we have increased our revenue year over year with very strategic investments focusing on that segment of our business. What we have done this year, and we have just started to implement, is increase our enterprise direct sales channel with investments into our sales team. We have made strategic investments into marketing specifically into those verticals. And with deep focus on specific verticals, like public safety, agriculture.

These are the verticals that we are really starting to see that hockey stick growth. And we know we need to be in the center of that With the recent FCC regulations that have passed, we have seen an uptick for NDA compliant products. We are well positioned to serve that market because if you look at kind of what we do, we are kind of the centerpiece for manufacturers to get to customers. With the NDA solutions, they are so much more complicated full suite of solutions to sell that we are making a heavy effort into making sure that we are capitalizing in that marketplace.

We are starting to see, as Scott mentioned, our pipeline is larger than it was year over year. Which is a good indication of what sales are going to be. We are going to continue to make those investments into those pro programs that is going to continue that shift into our highest margin segment of our business.

Operator: Our next question is a written submission. Our question is, why does management believe DroneNerds is differentiated versus a traditional drone reseller?

Scott Pomeroy: Jeremy, I am gonna keep coming to you. I think that is a good 1 for you to touch on.

Jeremy Schneiderman: Great question. So we do not we do not think of ourselves as a reseller, and I do not think the market does either. Right? A typical reseller is 1 that would just move boxes. We look at ourselves as a platform between manufacturers and the enterprise customer. And it comes down to different things that are kind of our secret sauce. Right? You know, our scale where we are in our scale the guy that is just a reseller moving simple box they do not have the plethora of inventory and the portfolio of products that we have. They do not have the repair infrastructure.

The training capacity, really what it takes to scale up the largest programs in the United States. A reseller is really good at selling 1 or 2 boxes. But if you want to stand up a large program there is a lot more to it than just buying the drone. You know, having the right selection of products to serve enterprises is 1 of our keys. We have got I always say we have the largest toolbox in the industry. To sell a full solution, you have to have the right hardware, the right software, the right sensor, ultimately, the right service to stand behind it. To stand up the large programs.

So we do not we do not see ourselves as your traditional reseller. We are much more sophisticated and pretty unmatched in the industry. Because of our scale.

Operator: Our next question is a written submission. Our question is, what gives management confidence that XTI can achieve positive cash flow in quarter 26?

Scott Pomeroy: Brooke, maybe you can take that 1.

Brooke Turk: Hi, everyone. Good to see everybody. Yeah. So we are at a really important inflection point at the company, this year. As you saw, we have been steadily decreasing our cash burn as we reflected in our EBITDA results, we came down from a negative $10 million EBITDA in Q4 25, and down to negative $5 million in, at the end of Q1 26. So, we continue to, ramp our revenue. It will continue to ramp throughout the rest of the year, and it is expanding our margin. For the rest of the year, and then we are continuing to tighten our belts and cut additional costs.

So what you are going to see is the lines are going to cross. And so as we continue to ramp up revenue and costs come down, you are going to see that starting to reflect in our Q3 and Q4 results.

Operator: Our next question is a written submission. Our question is, what progress has the company made on liquidity and balance sheet stability?

Scott Pomeroy: That sounds like a Brooke question. Brooke.

Brooke Turk: Sure does. Sure. Yes. So we ended the quarter with about $15.2 million in cash and cash equivalents. As you know, we stood up a $20 million ABL with JPMorgan in Q1. Of which we had drawn by the end of the quarter about $4.8 million down, and then that left us with a little over $8 million in borrowing base still to borrow against. So still strong liquidity available to us. So, you know, we guided that we will end the year at around, $15 to $17 million in cash. So we feel like the balance sheet is very stable. This year.

Operator: Our next question is a written submission. What gives management confidence that XTI can achieve positive cash flow quarter 26? Excuse me. We already asked that question. Our next question just asked.

Scott Pomeroy: Yes. Is that a trick?

Operator: This is a good time, I think, to prompt the audience. If anybody wants to raise their hand for 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. You will then hear your name called. Please accept, unmute your audio, and ask your question. We will wait another moment to allow the queue to form. Okay. Next question comes from Robert Barrow. Robert, please unmute your line and ask your question.

A: Guys, how are you doing? And girls, I am sorry.

Scott Pomeroy: Yeah. Good.

A: Is there, with Drone well, we have all invested what we can because we trust the company and we trust what you guys are doing. And the biggest question is besides the US government military, you work with other countries also? With drones?

Scott Pomeroy: Yeah. Jeremy, touch on that. I think it is a good question.

Jeremy Schneiderman: Great question. We do provide other parts of the world drones. We have strategic partnership in Colombia where we provide into Colombia. the Latin market is a significant market for us as well. And we have also supported Poland, with technology as well as Israel. So we are a global company.

Scott Pomeroy: Yep. Good. Thank you.

Operator: Our next question comes from Matthew Galinko. Matthew, please unmute your line and ask your question.

Scott Pomeroy: Hey, Matt. Matthew?

Analyst (Matthew Galinko): Hey. Thanks for taking my follow-up. Maybe I guess, looking a little bit past this year and into when it gets a little bit more complex to deliver NDAA and kind of qualify, you know, domestic source. Products. You know, how do you see that affecting your gross margin? And EBITDA margin over time? And, you know, should we expect to see some of the incremental value that you deliver in the margin and what time frame should we be thinking about for that?

Scott Pomeroy: Why do not you start that, Jeremy, and then I will I will pile on a little bit.

Jeremy Schneiderman: So I would say we are already selling NDAA products and Blue UAS products today. We have been since the since the Blue UAS program has started, So it is I think it is only going to get better. I do not think it is going to get more difficult. I think your question mentioned it is going to get more complicated. I think it is actually going to get easier in the future as our partners that are our OEMs that are providing this technology, you know, continue to scale up And what I would probably add to that Matt, is as that scale occurs, the margin profile is better.

Scott Pomeroy: for us with those newer NDAA compliant. Sellers, OEMs. So

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