AIRO Group (AIRO) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Nov. 12, 2026

CALL PARTICIPANTS

• Investor Relations - Jack Senft
• Executive Chairman - Dr. Chirinjeev Kathuria
• Chief Executive Officer - Captain Joseph Burns
• Chief Financial Officer - Dr. Mariya Pylypiv

TAKEAWAYS

• Revenue -- $17.5 million, representing 179% growth year over year driven by outperformance in the drone segment.
• Gross Margin -- 57%, increasing from 44% in the prior year period due to a more favorable revenue mix and higher-volume drone sales.
• Drone Backlog -- $200 million, including U.S. opportunities for the first time as of Nov. 5, 2026.
• Opportunity Pipeline -- $1.5 billion, encompassing all four business segments and reflecting management's visibility for the next 12 to 24 months.
• Cash Balance -- $37.8 million, as of Sept. 30, 2026, to fund ongoing growth and operational initiatives.
• Debt -- $1.2 million, as of Sept. 30, 2026.
• Accounts Receivable Collection -- $29.6 million, during the third quarter, primarily from payments for drone deliveries completed in prior periods.
• Line of Credit Repayment -- $5.5 million, related to the company's Sky-Watch operations.
• Full Year Revenue Guidance -- 15% to 25% growth, with management now expecting results to be at the lower end of that range.
• Full Year Adjusted EBITDA Guidance -- negative mid- to high-teen million dollars, with a quarterly cadence expected to track revenue levels.
• U.S. Backlog Proportion -- 25%, of the total drone backlog, with the majority of the total backlog expected to convert to revenue within the next 12 months.
• Manufacturing Capacity -- 100 airframes per month, at the Arizona facility to support expected U.S. and international volume.
• Vertiko Mobilite Collaboration -- $15 million to $20 million, estimated value for an initial deployment of 10 JC250 VTOL unmanned cargo drones in Canada.
• Research and Development Expense -- $7.9 million, increasing from $4.1 million in the third quarter of 2025 to support new aircraft development.
• Net Loss -- $12.0 million, compared to a net loss of $8.0 million in the prior year period.
• Adjusted EBITDA -- negative $7.5 million, improving from a loss of $8.0 million in the third quarter of 2025.
• Net Loss Per Share -- $0.38, for the third quarter on a basic and diluted basis.
• Production Timeline -- January 2027, when management expects the RQ-70 platform to enter production.
• Gross Margin Outlook -- low single-digit range compression, relative to 2025 as previously projected by management.

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RISKS

• Pylypiv stated, "revenue variability that is inherent in our business model" has led the company to guide toward the lower end of its full year revenue growth range.
• Pylypiv noted, "We have seen greater FX headwinds in the second half as expected," which has been incorporated into the updated full year outlook.
• Burns indicated the Training business "requires substantial investment to fully capitalize on its opportunities," as the company evaluates strategic options for the segment.

SUMMARY

AIRO Group Holdings, Inc. (NASDAQ:AIRO) reported a 179% increase in revenue for the third quarter, driven primarily by growth in its drone segment. Management highlighted the expansion of its drone backlog to $200 million, which now incorporates U.S. opportunities for the first time, and a total company opportunity pipeline of $1.5 billion. The company is currently executing a strategy focused on vertical integration and the expansion of its U.S. manufacturing presence to complement its established international operations. Management indicated that while investments in new aircraft platforms continue, the company maintains a disciplined approach to capital allocation and cost management as it works toward upcoming production milestones.

• CFO Pylypiv noted that while U.S. programs represent 25% of the current backlog, the company is "still in the early stages of capturing this opportunity" and sees substantial runway for growth.
• CEO Burns stated that the NATO Support and Procurement Agency agreement "enables participating NATO nations to procure the platform through a streamlined acquisition process," expanding the company's reach in allied defense markets.
• The company is increasing vertical integration by bringing imaging technology in-house through the Zentra camera suite, which management expects to enhance performance and long-term margin opportunities.
• CEO Burns highlighted that the company's "reverse focus" of moving from international markets into the U.S. is key to achieving a more robust and solid revenue mix over the long term.
• The Avionics and Electronics segment consolidated operations in Phoenix to drive synergies and support the U.S. drone business, despite near-term softness in the general aviation market.
• Management is evaluating strategic options for its flight crew training segment and expects to provide an update on this asset by the end of the year.
• CEO Burns explained that while Blue UAS certification is often not a strict requirement, the company pursues it as a default to validate manufacturing standards, supply chain compliance, and airframe performance.

INDUSTRY GLOSSARY

• Avionics: The electronic systems used on aircraft, including communications, navigation, and the display and management of multiple systems.
• Blue UAS: A list of Department of Defense-approved, NDAA-compliant unmanned aircraft systems for U.S. government procurement.
• eVTOL: Electric Vertical Takeoff and Landing aircraft that use electric power to hover, take off, and land vertically.
• ISR: Intelligence, Surveillance, and Reconnaissance, referring to the collection and analysis of information to support military or security operations.
• JC250/JX250: AIRO's proprietary vertical takeoff and landing unmanned aircraft platforms currently under development.
• NSPA: The NATO Support and Procurement Agency, which facilitates streamlined acquisition for NATO member nations.
• RQ-35/RQ-70: Specific models of AIRO's unmanned aircraft systems designed for surveillance and reconnaissance.
• VTOL: Vertical Takeoff and Landing, a capability that allows an aircraft to take off and land without a runway.
• Zentra: AIRO's in-house advanced imaging and sensor technology suite used for its drone platforms.

Full Conference Call Transcript

Operator: Thank you for standing by. My name is Eric, and I will be your conference moderator today. At this time, I would like to welcome everyone to the AIRO 3Q 2026 Earnings Call. [Operator Instructions] I would now like to turn the call over to Jack Senft, Investor Relations at AIRO. Please go ahead.

Jack Senft: Thank you, operator, and good morning. Welcome to the AIRO Group Holdings, Inc. Third Quarter 2026 Earnings Call. We appreciate you joining us today and look forward to sharing an update on our progress and performance. With me on the call are Dr. Chirinjeev Kathuria, our Executive Chairman; Captain Joseph Burns, our Chief Executive Officer; and Dr. Mariya Pylypiv, our Chief Financial Officer. Today's call will include forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including, but not limited to, statements relating to AIRO's 2026 outlook.

Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Forward-looking statements represent management's beliefs and assumptions only as of the date made. Information on factors that could affect the company's financial results is included in the company's most recent annual report on Form 10-K and other filings with the SEC from time to time. In addition to our prepared remarks, our earnings press release, SEC filings and a replay of today's call can be found on our Investor Relations website at investor.theairogroup.com. We have also posted our earnings presentation on the Investor Relations section of our website.

In addition, during today's call, we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Reconciliations between GAAP and non-GAAP financial measures and a discussion of the limitations of using non-GAAP measures versus their closest GAAP equivalent is available in our earnings release. Additionally, we plan to discuss drone segment backlog and opportunity pipeline, definitions of which can be found in our earnings release. With that, I'll turn the call over to our Executive Chairman, Dr. Chirinjeev Kathuria.

Chirinjeev Kathuria: Thanks, Jack, and thank you all for joining us today. AIRO delivered another strong quarter with results exceeding our expectations despite the anticipated sequential decline from the second quarter. Strong execution across the business and continued customer demand drove better-than-expected performance, reinforcing the momentum we're seeing across our portfolio. Looking ahead, and as Mariya will discuss in her section, we are reaffirming our full year revenue growth guidance of 15% to 25%, though now guiding towards the lower end of the range. We are also seeing solid growth in our drones backlog, growing to more than $200 million, including U.S. drone backlog. We also announced that our total opportunity pipeline across all 4 segments now sits at $1.5 billion.

On the U.S. side, AIRO secured its first U.S. orders for the RQ-35 and RQ-70, both important milestones as we continue expanding our presence in the U.S. market. We also continue to advance our broader product road map. The RQ-70 remains on track to enter production in January 2027, while development of the JC250 and the JX250 continues to progress. Combined with the RQ-35 and the Zentra camera suite, these programs support our strategy of building a more diversified, vertically integrated unmanned systems platform. Third quarter was another quarter of solid execution, and we believe the progress made during the period positions us well to continue expanding our customer base, diversifying our revenue streams and driving long-term growth.

With that, let me turn it over to Joe to discuss our strategy and operational highlights. Joe?

Joseph Burns: Thank you, Chirinjeev, and thank you all for joining us on today's earnings call. I'm pleased to report another strong quarter with results exceeding our expectations and reflecting solid execution across the business. As we discussed on prior calls, we anticipated third quarter results will be lower sequentially than the second quarter due to the timing of the program deliveries and the inherent variability of our business. Despite this expected sequential decline, third quarter performance exceeded our expectations, underscoring the strength of demand across our portfolio and our team's ability to execute. Based on our year-to-date performance and outlook for the remainder of 2026, we are reaffirming our previously issued full year revenue growth guidance of 15% to 25%.

Mariya will provide additional detail on our financial performance later in the call. Beyond this, we achieved several important strategic milestones that further strengthen our position in the U.S. market. First, the RQ-35 during the quarter was selected under the framework agreement with the NATO Support and Procurement Agency, or NSPA. This agreement enables participating NATO nations to procure the platform through a streamlined acquisition process, expanding our reach across allied defense markets and creating additional opportunities to support long-term international growth. Second, during the quarter, AIRO was selected to participate in Phase 2.5 of the Drone Dominance Program at Camp Grayling.

On top of that, we also secured our first U.S. orders for the RQ-35 and the RQ-70, significant milestone that validates both the platform and our broader growth strategy. Collectively, these achievements underscore the progress we are making to expand our market presence, deepen customer relationships and drive long-term growth. On the heavy cargo drone side, our wholly owned Canadian subsidiary entered into a strategic collaboration with Vertiko Mobilite to support the development of autonomous cargo logistics operations in Canada using the JC250 VTOL unmanned cargo drone. The LOI contemplates an initial deployment of 10 aircraft, which would represent an estimated value of approximately $15 million to $20 million based on current indicative pricing.

Initial operations are expected to focus on supporting logistics services for First Nations communities in Quebec. We believe this collaboration demonstrates the growing commercial potential of the JC250 platform. Now let me provide an update on our portfolio and strategic positioning. At AIRO, we continue to build a diverse and expanding portfolio of products and services with a focus on capturing opportunities across the evolving drone market. We are pursuing this growth through a combination of internal product development and strategic partnerships. A key priority for us is reducing quarterly variability by broadening both our domestic and international customer base.

For instance, with our RQ-35 platform now Blue UAS certified, we are already seeing the benefits of this achievement as demonstrated by our recently announced U.S. order. We believe this certification meaningfully enhances our position within the U.S. defense market and expect it to support additional opportunities in the quarters ahead. Developments such as these reinforce our confidence in the long-term growth trajectory of the business. Supporting our efforts to diversify the business and reduce revenue variability, we continue to expand our portfolio of products and capabilities. This includes the RQ-70, which remains on track to enter production in January '27 as well as the Zentra camera suite in our future JC250 and JX250 aircraft platforms.

As these products progress through development and commercialization, we expect them to broaden our addressable market, create additional revenue streams and contribute to a more balanced and predictable business over time. Our portfolio continues to evolve as we build a more integrated and differentiated UAS platform. The RQ-35 remains the foundation of that strategy. As a proven combat-tested system designed for ISR missions in contested environments, the platform has demonstrated strong performance and resilience in the field. Our product portfolio was recently strengthened with the addition of the Zentra camera suite.

By bringing advanced imaging and sensor technology in-house, AIRO has become increasingly vertically integrated, allowing us to control more of the mission-critical technology stack while enhancing performance, customer value and long-term margin opportunities. The combination of our aircraft platforms, embedded technology and proprietary sensor capabilities creates a more compelling offering and further differentiates AIRO in the market. Looking ahead, the next major step to our product road map is the RQ-70. Built on years of operational experience and lessons learned from the RQ-35 platform, the RQ-70 is designed to deliver significantly enhanced endurance, range and mission flexibility while leveraging our existing manufacturing footprint and supply chain.

Importantly, the program remains on track, and we are reaffirming our expectation to begin production in January '27, just a few months from now. Further on the horizon is the JC250 and JX250. On this front, we are still progressing towards first flight soon where the team has been ramping up the supply chain and assembling the vehicle. Of note, we are being very disciplined in moderating overall spending for this dual-use platform. Importantly, the addition of products such as the Zentra camera suite, the RQ-70 and the JC/JX250 platforms expands our addressable market and creates new opportunities to diversify our customer base across both defense and commercial end markets.

This diversification reduces reliance on any single customer, program or procurement cycle and supports a more consistent revenue profile over time. The combination of our aircraft platforms, embedded technologies and proprietary sensor capabilities creates a uniquely integrated solution set that enhances customer value and further differentiates AIRO in an increasingly competitive market. These new launches, combined with our already established product base, collectively demonstrate the progress we are making in building a more capable, integrated and diversified business. While there's still a significant work ahead, these developments represent important steps towards expanding our product ecosystem, increasing customer touch points and creating a more durable and less variable revenue profile over the long term. Turning to Avionics and Electronics.

Revenue was modestly lower year-over-year due to continued softness in the general aviation market. Despite these near-term headwinds, we continue to view this segment as a valuable strategic asset within AIRO. With our avionics operations and growing U.S. drone businesses now consolidated in Phoenix, we have established a stronger foundation for product development, operational efficiency and collaboration across the organization. We expect this closer alignment to begin generating meaningful synergies in the coming quarters. As we expand our Unmanned Systems portfolio, we also see increasing opportunities to leverage our in-house avionics capabilities across multiple platforms. This supports our long-term broader strategy of deeper vertical integration, greater supply chain control and long-term margin improvement.

Lastly, we continue to assess strategic options for our training business and anticipate providing an update by year-end. We view this segment as a valuable asset with meaningful long-term potential, but one that requires substantial investment to fully capitalize on its opportunities. As we evaluate the best path forward, our capital allocation and strategic priorities remain firmly focused on growing our unmanned systems platform and advancing our position in that market. Overall, we are encouraged by the progress we made during the third quarter, delivering results that exceeded expectations while continuing to advance several key strategic initiatives across the business.

From securing our first U.S. order and expanding our U.S. market presence to advancing the RQ-70 toward production and further integrating our technology stack through Zentra and our avionics capabilities, we continue to execute on our strategy of building a more diversified, vertically integrated and scalable platform. While we remain in the early stages of this journey, we believe these milestones validate our approach and strengthen our position for long-term growth. We also remain disciplined in our approach to capital allocation. We continue to evaluate inorganic opportunities that can enhance our capabilities and contribute to a more balanced and predictable revenue profile over time.

With a strong balance sheet, we have the flexibility to pursue strategic opportunities when they align with our long-term objectives and create value for shareholders. In closing, our focus remains unchanged, delivering mission-ready solutions, expanding our technological capabilities and positioning AIRO for sustainable growth. None of these would be possible without the dedication of our employees and leadership team. Their expertise, commitment and execution continue to be the foundation of our success. And as we strengthen the organization with additional talent, we believe AIRO is increasingly well positioned to capitalize on the opportunities ahead. With that, I will turn it over to Mariya, who will walk you through our financial results in more detail. Mariya?

Mariya Pylypiv: Thank you, Joe, and good morning, everyone. For the third quarter of 2026, revenue was $17.5 million compared to $6.3 million in the third quarter of 2025. This represents growth of nearly 180% year-over-year. Revenue for the quarter was ahead of expectations, driven by outperformance against expectations in our drone segment, partially offset by underperformance in avionics and training. Gross profit for the quarter was $9.9 million, representing a gross margin of 57% compared to a gross profit of $2.8 million and a gross margin of 44% in the prior year period. The year-over-year improvement was driven primarily by a more favorable revenue mix, including higher volume drone sales, which carry stronger margins.

Gross margin performance during the quarter was in line with our expectations. Operating loss for the quarter was $13.1 million versus a loss of $12 million in the third quarter of 2025. As a percentage of revenue, operating expense margin improved versus the same period last year, and we remain disciplined on costs while continuing to invest selectively in the infrastructure needed to support our growth. Our third quarter net loss was $12 million versus a net loss of $8 million in the third quarter 2025. Third quarter 2026 adjusted EBITDA was a loss of $7.5 million compared to a loss of $8 million in the prior year period.

Adjusted EBITDA margin improved substantially to negative 43% versus a negative 128% a year ago, reflecting strong revenue growth and improved operating leverage as we continue to scale the business. While we remain in investment mode, this performance demonstrates meaningful progress in our cost control efforts, improving our bottom line performance. We retain flexibility to adjust our spending pace up or down as conditions warrant. Right now, though, we believe the right path forward is deliberate efficient investment to put the required infrastructure in place to support our next phase of growth. Turning to cash flow and liquidity. As of September 30, we had $37.8 million of cash on the balance sheet and approximately $1.2 million of debt.

Cash generation during the quarter benefited from collection of nearly $30 million of accounts receivable, which was partially offset by the line of credit repayment of approximately $5.5 million related to Sky-Watch. We continue to maintain a strong balance sheet and believe we are well positioned to fund our ongoing growth and operational initiatives. As of November 5, 2026, our drone backlog exceeded $200 million, including U.S. opportunities, the majority expected to convert to revenue over the next 12 months. Our backlog represents business that we reasonably expect to recognize as revenue within the coming year, but we do see this as conservative estimate.

Note that we are including U.S. opportunities in the drone backlog for the first time this quarter in recognition of the ramp-up of our U.S. manufacturing efforts. While U.S. programs currently make up approximately 1/4 of our total backlog, we are still in the early stages of capturing this opportunity and see substantial runway for growth across both domestic and international markets. Beyond backlog, our pipeline continues to expand, reflecting increasing customer engagement across both U.S. and allied defense markets as well as growing interest in our expanding portfolio of drone solutions.

As of November 5, 2026, our total opportunity pipeline across all 4 segments stood at $1.5 billion, underscoring the significant long-term growth opportunities ahead and reinforcing our confidence in the demand environment discussed throughout today's call. Turning towards guidance. Based on our current visibility, we are reiterating our full year revenue growth guidance of 15% to 25% year-over-year, though we now expect to be at the lower end of the guidance range due to revenue variability that is inherent in our business model. Let me provide some additional context on our outlook. First, some orders we had originally expected to receive in 2026 have moved into 2027 as discussions evolve towards larger contract opportunities, resulting in longer procurement time lines.

And given the international nature of our business, foreign exchange remains a factor in our outlook. We have seen greater FX headwinds in the second half as expected and have incorporated that impact into our outlook and remain confident in our full year guidance range. We continue to anticipate modest gross margin compression relative to 2025, consistent with the low single-digit range we outlined previously. We continue to expect full year 2026 adjusted EBITDA in the negative mid- to high-teen millions with a quarterly cadence expected to broadly follow revenue. As we look ahead, we believe AIRO is entering an important phase of its evolution.

Over the past several quarters, we have focused on building the foundation for a larger and more diversified business through investments in new products, manufacturing capacity and vertical integration. Those efforts are beginning to take shape. With the RQ-70 approaching production, the rollout of Zentra camera suite and additional platforms such as the JC and JX250 advancing through development, we are steadily expanding both our product portfolio and our addressable market. Over time, we expect those initiatives to create a broader mix of revenue streams, improve visibility and reduce dependency on any single program or product. Fiscal 2026 remains an investment year as we position the company for its next stage of growth.

We're investing where we see the greatest long-term returns while remaining disciplined in how we deploy capital and manage costs. We believe the combination of growth investments and operational discipline positions AIRO well to capitalize on the opportunities ahead and deliver sustained value for shareholders. With that, operator, we're ready for questions.

Operator: [Operator Instructions] Your first question comes from the line of Brett Linzey with Mizuho.

Brett Linzey: I wanted to come back to the $1.5 billion total opportunity pipeline. I guess as you look across those opportunities, what is the win rate you're assuming or expecting going forward? And I guess what was historically observed? And then is there any way you can drill down on the composition of that -- that pipeline between the U.S. region and the international markets?

Mariya Pylypiv: Brett, thank you for the question. Right now, $1.5 billion has been -- as we discussed with backlog, we are not breaking out different segments of pipeline. But in terms of pipeline overall, it's a company-wide that includes products and opportunities we're chasing. From what we're seeing currently, we expect U.S. market volume to be equal to the rest of the world. And our growing pipeline is made up of the opportunities that we expect to reasonably convert to backlog. So if you think about the staging, that this is our visibility in the next 12 to 24 months.

Brett Linzey: Okay. Great. And then the $200 million of drone backlog is obviously substantial relative to the revenue base. As we think about converting that into revenue, how much additional manufacturing capacity do you need to serve and monetize that? Can the existing footprint support it at these levels? Is there a step-up in more investment? And then Mariya, if you could just clarify the high teens million dollars mix comment you made and what that pertains to?

Joseph Burns: Brett, it's Joe. I'll address the first part of the question, which is the capacity. We have spent the last several quarters building our factory capacity up so we could handle this volume of orders. For instance, in Arizona, we can produce 100 airframes per month. So the capacity is there to produce everything that we've discussed on the phone today.

Mariya Pylypiv: And then, Brett, in terms of conversion to -- with our backlog, our backlog right now includes U.S. opportunities, and therefore, it's harder to determine the win rate. However, we've seen a good conversion of our pipeline to backlog with our international markets. And therefore, our numbers are more conservative when we look into U.S. size opportunities.

Joseph Burns: And I'd like to reiterate too what Mariya said earlier about the U.S. size versus the international size. Obviously, we started out as an international company with our manufacturing in Denmark and have moved into the U.S., somewhat in reverse of most drone companies. We think that gives us a pretty amazing advantage for capturing areas outside of the U.S., but we're very excited with the U.S. order frame as we've been for the last, what, 9 months or so have been doing exceptional amount of demos for the U.S. government, getting our name out there and getting obviously the Blue UAS certification and securing our order stream.

So we're excited about the growth potential in the U.S. as well as the international.

Mariya Pylypiv: I think your comment was around the mid-teens. I was relating to our adjusted EBITDA guidance on a dollar basis that we will be tracking similar guidance that we've had so far.

Operator: Your next question comes from the line of Craig Irwin with ROTH Capital Partners.

Craig Irwin: First, I should say congratulations on the solid results this quarter. It's nice to see the healthy margins and the good revenue production. I wanted to ask specifically about the $54.5 million in orders booked this quarter. Can you maybe give us a breakdown of U.S. versus international in that mix? And then can you maybe comment about the contribution from the RQ-70? You did mention last quarter that it was a very small piece of the existing backlog. Your backlog has grown substantially. And I guess we're -- we're approaching the start of production there. And then any other color as far as other business lines that you might be able to offer us regarding these bookings this quarter?

Mariya Pylypiv: Craig, thank you for the question. We're currently not providing a breakdown per product or in more detail on the segments. However, roughly 75% of our backlog comes from international drone sales and about 25% is coming from expected U.S. deliveries.

Craig Irwin: Okay. Do you have...

Joseph Burns: Craig, I'm sorry, go ahead, Craig.

Craig Irwin: Sorry, Mariya, do you have a number for last quarter with the $163...

Mariya Pylypiv: We also were not breaking it down at that point.

Craig Irwin: Okay. And I apologize, Joe, I interrupted you.

Joseph Burns: No, no problem. I appreciate that. I just want to give a little color on the RQ-70. That is included in our first U.S. order. So we're excited about that opportunity. Clearly, we see the RQ-70 product line is a whole new differentiated product line for us where we can get out and really compete against some of the longer flying time, higher-end ISR platforms and compete in a very substantial and meaningful way against some of those that are out there. So I'm particularly very excited about the RQ-70 and what we're going to be able to do with that in the very near future.

Craig Irwin: Excellent. And then, Joe, I wanted to ask a little bit about the commercial opportunity for the AIRO, right? So the fire departments, police departments all across the country are looking for ways to do their -- to give their services to local communities in a more efficient manner. Fire departments could use intel to more appropriately fight wildfires or surveil different districts and then obviously look for lost people when they're hiking in the mountains or something. In police departments, drones will be a much easier and cheaper way to help bring in suspects, reduce risk to the population. What are you seeing as far as the opportunity there? And can you maybe update us on your engagement approach?

How do you see this market taking shape for AIRO Group?

Joseph Burns: Thanks for the question, Craig. It's a great one. Obviously, I'm excited about that, doing some part-time work in volunteer fire myself. So it's an area that touches home for me. We are in active discussions with several groups within fire at this point in time and also with police departments to expand our product coverage into the commercial market. And what that does, obviously, is it also sort of levels out our quarterly revenues as well. So we're excited about all those opportunities.

But you mentioned some of the key ones, right; lost -- lost people type of tracking identification, security support for large events, spotting wildfires, for instance, keeping the RQ-35 platform in the air continuously, rotating airframes for up to 3 hours per flight. Be able to spot wildfires is something that is -- that we've had a lot of agencies and civilian agencies actually discuss interest in these products. So it's exciting times for that. This fits right into the model as the traditional quadcopter sort of a short flight time duration has always been a little bit of a hindrance. And we know what we're capable of doing with, say, the RQ-35.

So it's a fantastic time to jump in, feet pull ahead, and we are having those discussions as we speak.

Craig Irwin: Okay. Excellent. And then last question, if I may. A couple of investors have asked about the impact of the JC and JX250 as far as profitability on the company or at least the spending impact on the profitability. So when I look at your R&D this year, you're tracking for roughly $30 million in R&D spend, up from less than $18 million last year. There's a material increase. I don't know if you're willing to break out roughly what portion of that R&D spend is for the JC and JX250s.

But would you expect fundamentally the business to be something that should be profitable, would be profitable with anticipated growth in 2027 if you weren't investing on some of these high potential longer-term platforms?

Mariya Pylypiv: Craig, thank you for the question. It's excellent. So I'm not -- we're not disclosing currently the breakdown between the segments. However, if we were to stop investing into JC and JXs, that would provide a significant reduction to our cash burn. Our current plan with JC and JXs is our first flight that we're actively progressing towards. And per plan, we are anticipating commercialization of those drones in the later half of 2027, which should significantly increase our product portfolio mix. We already have some LOIs that we disclosed and also contribute to overall revenue mix. I'm happy to answer any additional questions on this.

Craig Irwin: Congratulations on the progress.

Operator: Your next question comes from the line of Andre Madrid with U.S. Bancorp.

Will Cooper: This is Will Cooper on for Andre. I just want to ask about U.S. sales, both next year and beyond. What portion of revenue could U.S. ultimately represent long term with these new opportunities?

Mariya Pylypiv: Well, thank you for the question. So as we disclosed, currently in terms of our backlog of $200 million, about 25% is coming from U.S. However, we see a very meaningful sales opportunities in U.S. that are to convert to backlog and then the next step would be conversion to revenue. So that will be a significant portion of our sales opportunities going forward.

Joseph Burns: And this is Joe. Just -- the future in the U.S., obviously, as we've stated and industry is guiding towards is that the U.S. market is substantially about the same size as the international market combined. So for us, we do see a trend towards more of a 50-50 split in the long run between the U.S. and international orders, which makes our international piece so critical that a lot of the other companies have sort of just focused on the U.S. I think our reverse focus, as I mentioned earlier, about going from international into the U.S. is really key towards -- towards having a more solid and robust revenue mix overall.

Will Cooper: Great. That was very helpful. And kind of switching gears to the certification or Blue UAS certification for both the RQ-70 and the camera suite. What is the progress and time line look on those? And what key milestones need to be hit for those to achieve Blue UAS certification?

Joseph Burns: Sure. I'll take that one. So Blue UAS certification has been achieved as we had released several months ago for the RQ-35, which is incredibly helpful for getting into the U.S. marketplace. While it's typically not a hard and fast requirement, you need to do it as a default to sort of validate several things. Number 1, you validate the factories and produce the product according to standards in the U.S. You also validate the supply chain through the NDAA compliance of components. And then finally, you validate the actual airframe itself. So yes, we fully intend to certify the RQ-70 underneath the Blue certification program.

And to do that, obviously, we need to do -- we need to have the commercial version kind of rolling out to do that. So that is underway, and it's something that we anticipate having in time for some of these larger U.S. programs. You mentioned the Zentra camera suite. And while indeed, we produce our cameras in-house, the suite itself would not be Blue certified. That's really for an aircraft system, but it would be certified under NDAA compliance.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.

Joseph Burns: Thanks, everybody.

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