XTI Aerospace Q1 2026 Earnings Call - Drone Nerds Drives Margin Expansion and Cash Flow Inflection

Moderator, Call Moderator, XTI Aerospace: 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 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. 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.

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: Great. Thank you. Thanks everybody for joining us here this afternoon. It’s great to have you here. As the moderator just pointed out, we did file earlier today, 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. 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, we intend to do that.

Really since the acquisition in November last year, we’ve continued the transformational journey of XTI, 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 Drone Nerds in our results. We’ve 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, 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 continued 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 2026, 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.

Moderator, Call Moderator, XTI Aerospace: 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?

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: Great question. As you know, we guided to second half of between $2 million-$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. You can’t 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.

It’s really, you know, we’re looking to a solid fourth quarter and end of fourth quarter as being much more reflective of what our ongoing run rate will be.

Moderator, Call Moderator, XTI Aerospace: The next question is a written submission. Our question is: How should investors think about the seasonality and quarterly revenue cadence during 2026?

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: Jeremy, why don’t you take that one?

Jeremy Schneiderman, CEO of Drone Nerds, XTI Aerospace / Drone Nerds: Absolutely. Well, first, thank you everybody for joining us today. To tell you a little bit historically about Drone Nerds, you know, first quarter has always traditionally been one 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. 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 2026 versus Q1 2025, you’d have to really look a little bit deeper into what happened in Q1 2025. We had major supply constraints in the fourth quarter of 2024, where we saw some of those sales move over into Q1 2025.

If you were to look comparatively over the two, it really wouldn’t be true indicative of what normal business would look like.

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: Q1 was a little bit overstated, Jeremy, of 2025, and Q4 understated.

Jeremy Schneiderman, CEO of Drone Nerds, XTI Aerospace / Drone Nerds: Correct

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: In that demand delay.

Jeremy Schneiderman, CEO of Drone Nerds, XTI Aerospace / Drone Nerds: Absolutely.

Moderator, Call Moderator, XTI Aerospace: The next question is a written submission. Our question is: Drone Nerds is the largest U.S. enterprise drone distributor, with $100 million+ in 2024 revenue. Third-party research from Grand View, Drone Industry Insights, and Fortune Business Insights sizes the U.S. commercial drone market in roughly the $6 billion-$8 billion range today, growing double digits. With strong policy tailwinds from Executive Order 14307, FCC foreign UAS action, and DOD Drone Dominance, that implies Drone Nerds holds roughly 1%-1.5% share of the multi-billion dollar highly fragmented market. As the number 1 domestic player, how do you size the U.S. enterprise drone distribution and services TAM, and how fragmented is the long tail behind you?

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: Jeremy-

Jeremy Schneiderman, CEO of Drone Nerds, XTI Aerospace / Drone Nerds: So-

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: maybe touch on that, and then we could also, weigh in a little bit.

Jeremy Schneiderman, CEO of Drone Nerds, XTI Aerospace / Drone Nerds: Absolutely. We see the U.S. enterprise drone distribution and services TAM as a multi-billion dollar range. With our position at over $100 million in revenue, we, and being the number one domestic player in the market, we see a market where the tail is about 100+ regional resellers, mostly that sub $5 million range, with very little infrastructure to deliver really robust solutions that we provide. We see that as a very opportunistic consolidation opportunity for us. Our position in the market is we’re set up for success to capture it.

Moderator, Call Moderator, XTI Aerospace: The follow-up: Given that fragmentation, the policy environment and strategic capital, how should investors think about Drone Nerds’ runway to consolidate share organically and through tuck in M&A over the next 24 to 36 months?

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: Well, I think there’s a couple ways that, you know, we should be looking at that. Obviously, as Jeremy just outlined, those, you know, being the largest by orders of magnitude, domestically here in the U.S., with really no close second player, it sets the market up strategically for interesting consolidation opportunities. We will look to capitalize on that. It also suggests that with some internal investment, we can compete organically and take share. If I look at the broad base of this industry that’s growing by any, by any mechanism or by any forecast you wanna look at, it’s growing at 20% plus. You got a business that’s gonna grow at 20% plus just by keeping, holding share.

Our ability to continue to consolidate and take share should add fuel to that growth rate over time. We think these opportunities trade our direction. We’ll be opportunistic in looking at that. We don’t 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’s a competitive dynamic. It’s also a potential for margin expansion as well, as you eliminate some of those additional players that are in the market. We look at the entire landscape as it being ripe for consolidation growth and margin expansion.

Moderator, Call Moderator, XTI Aerospace: The 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. All right, we’re gonna 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.

Matthew Galinko, Analyst, Maxim Group: 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 Drone Nerds, and sort of how do you build that forecast? Thank you.

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: 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.

Jeremy Schneiderman, CEO of Drone Nerds, XTI Aerospace / Drone Nerds: Yeah.

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: We haven’t given quarterly guidance, we’ve just given annual. You know, we’ve talked about the first quarter being the low water mark, the fourth quarter being the high water mark of the year. Maybe just some general commentary on that.

Jeremy Schneiderman, CEO of Drone Nerds, XTI Aerospace / Drone Nerds: Great question. You know, really it’s about how are we going to execute to hit the $160 million that we’ve put out there. You know, what we do really, really well is serve the enterprise market. You know, we’ve increased our revenue year-over-year with very strategic investments focusing on that segment of our business. What we’ve done this year, and we’ve just started to implement, is increase our enterprise direct sales channel with investments into our sales team. We’ve 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’re really starting to see that hockey stick growth. And we know, you know, we need to be in the center of that.

With the recent FCC regulations that have passed, we’ve seen an uptick for NDAA compliant products. We’re well-positioned to serve that market because if you look at kind of what we do, we’re kind of the centerpiece for manufacturers to get to customers. With the NDAA solutions, they’re so much more complicated, full suite of solutions to sell that. We’re making a heavy effort into making sure that we are capitalizing in that marketplace. We’re 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 gonna be. We’re gonna continue to make those investments into those programs. That’s gonna continue that shift into our highest margin segment of our business.

Moderator, Call Moderator, XTI Aerospace: Our next question is a written submission. Our question is: Why does management believe Drone Nerds is differentiated versus a traditional drone reseller?

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: Jeremy, I’m gonna keep coming to you. I think that’s.

Jeremy Schneiderman, CEO of Drone Nerds, XTI Aerospace / Drone Nerds: Yeah

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: good one for you to touch on.

Jeremy Schneiderman, CEO of Drone Nerds, XTI Aerospace / Drone Nerds: Great question. We don’t think of ourselves as a reseller, and I don’t think the market does either, right? A typical reseller is one that would just move boxes. We look at us as we’re a platform between manufacturers and the enterprise customer. It comes down to four different things that are kind of like our secret sauce, right? You know, our scale. Where we are in our scale, the guy that’s just a reseller moving simple box, they don’t have the plethora of inventory and the portfolio of products that we have. They don’t have the repair infrastructure, the training capacity, really what it takes to scale up the largest programs in the U.S.

You know, a reseller is really good at selling one or two boxes, but if you wanna stand up a large program, there’s a lot more to it than just buying the drone. You know, having the right selection of products to serve enterprises, is one of our keys. You know, we’ve got You know, 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. We don’t see ourselves as your traditional reseller. We are much more sophisticated and, you know, pretty unmatched in the industry because of our scale.

Moderator, Call Moderator, XTI Aerospace: Our next question is a written submission. Our question is: What gives management confidence that XTI can achieve positive cash flow in quarter three, 2026?

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: Brooke, maybe you can take that one.

Brooke Turk, Chief Financial Officer, XTI Aerospace: All right. Hi everyone, good to see everybody. Yeah, we are at a really important inflection point at the company this year. As you saw, we’ve been steadily decreasing our cash burn as it we reflected in our EBITDA results. We came down from a negative $10 million EBITDA in Q4 2025, and down to negative $5 million at the end of Q1 2026. We continue to ramp our revenue. It’ll continue to ramp throughout the rest of the year. We’re expanding our margin for the rest of the year. We’re continuing to tighten our belts and cut additional costs. What you’re gonna see is the lines are gonna cross.

As we continue to ramp up revenue and costs come down, you’re gonna see that starting to reflect in our Q3 and Q4 results.

Moderator, Call Moderator, XTI Aerospace: Our next question is a written submission. Our question is: What progress has the company made on liquidity and balance sheet stability?

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: That sounds like a Brooke question. Brooke?

Brooke Turk, Chief Financial Officer, XTI Aerospace: Sure does. Sure, yeah. 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 JP Morgan 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. Still strong liquidity available to us. You know, we guided that we’ll end the year at around $15 million-$17 million in cash. We feel like the balance sheet is very stable this year.

Moderator, Call Moderator, XTI Aerospace: Our next question is a written submission. What gives management confidence that XTI can achieve positive cash flow in quarter three, 2026? Excuse me. We already asked that question. Our next question is.

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: I think we just asked. Yeah.

Moderator, Call Moderator, XTI Aerospace: Yes. Apologies.

Brooke Turk, Chief Financial Officer, XTI Aerospace: Okay. Is that a trick?

Moderator, Call Moderator, XTI Aerospace: 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 hear your name called. Please accept, unmute your audio, and ask your question. We’ll wait another moment to allow the queue to form. Okay. Our next question comes from Robert Barrow. Robert, please unmute your line and ask your question.

Robert Barrow, Investor / Analyst: Guys, how you doing? girls, I’m sorry.

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: Yeah. Go ahead

Robert Barrow, Investor / Analyst: With drone, well, we’ve all invested what we can because we trust the company and we trust what you guys are doing. Biggest question is, besides the U.S. government military, are you working with other countries also with drones?

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: Yeah. Jeremy, If you could, you touch on that.

Jeremy Schneiderman, CEO of Drone Nerds, XTI Aerospace / Drone Nerds: Yeah

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: good question.

Jeremy Schneiderman, CEO of Drone Nerds, XTI Aerospace / Drone Nerds: Great question. We do provide other parts of the world drones. We have a strategic partnership in Colombia where we provide, and to Colombia. The Latin, LATAM market is a significant market for us as well. We’ve also supported Poland with technology, as well as Israel. We are a global company.

Robert Barrow, Investor / Analyst: Yep. Good. All right. Thank you.

Moderator, Call Moderator, XTI Aerospace: Our next question comes from Matthew Galinko. Matthew, please unmute your line and ask your question.

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: Hey, Matt.

Jeremy Schneiderman, CEO of Drone Nerds, XTI Aerospace / Drone Nerds: Matthew?

Matthew Galinko, Analyst, Maxim Group: 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 kind of EBITDA margin over time? You know, should we expect to see some of the incremental value that you deliver in the margin? What timeframe should we be thinking about for that?

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: Why don’t you start that, Jeremy, and then I’ll pile on a little bit.

Jeremy Schneiderman, CEO of Drone Nerds, XTI Aerospace / Drone Nerds: Yeah. I would say we’re already selling NDAA products and Blue UAS products today. We have been since the Blue UAS program has started. It’s, I think it’s only gonna get better. I don’t think it’s gonna get more difficult. I think your question mentioned it’s gonna get more complicated. I think it’s actually gonna get easier in the future as our partners that are our OEMs that are providing this technology, you know, continue to scale up.

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: What I’d probably add to that, Matt, is as that scale occurs, the margin profile is better for us with those newer NDAA compliant sellers, OEMs. We expect the mix to work in our favor. Also, I think your question also implied the notion of some of these other services that we provide, and the enhancement of those services tends to drive margin up as well, which we would agree. Right now the services tends to be a quite a low % of our overall mix. As we see more in the area of repair, maintenance, training, et cetera, some of the areas that Jeremy talked to, we would expect margin to expand.

You know, the question behind the question is what do we believe about margins over time? You know, this is a business that can see a fairly, as a percentage, a fairly significant increase from where we are today. You know, it’s not infinite, but, you know, we can see better than the 19%-21% that we’ve guided to. We would expect that to be higher in future years.

Moderator, Call Moderator, XTI Aerospace: As a final reminder, 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 for one moment to allow the queue to form. Our final question will be a follow-up from Robert Barrow. Robert, please unmute your line and ask your question.

Robert Barrow, Investor / Analyst: Yeah. When it gets to $10 a share, can I get a vest like yours?

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: You know, I’d probably get you a vest sooner than that, Robert. I’m not gonna be greedy. I won’t wait till $10.

Robert Barrow, Investor / Analyst: I just figured I’d add a little lightheartedness to the whole thing.

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: Yeah. No, thank you very much.

Robert Barrow, Investor / Analyst: Yeah.

Scott Pomeroy, Chief Executive Officer, XTI Aerospace: Thank you. As the last question, you know, I do want to again reiterate our gratitude for you spending time with us here again this afternoon. Hopefully the, you know, the information is substantive, it’s on point, it’s clarifying. Our objective is to be transparent and forthcoming with both our performance, our current performance and our anticipated performance with the business. Our focus again as a business is really on the Drone Nerds platform, our unmanned systems platform. We think we’re extremely well-positioned as a company. Many of you may have heard, you know, my use of the predicate of Amazon.

I know it’s a bold statement, but I think it’s absolutely appropriate that Drone Nerds is the Amazon of the drone industry and the commercial and enterprise space. What does that mean at the end of the day? Well, what that means is, we understand all the demand signals that are out there. We know why people are buying, we know what they’re buying, we know what matters, we know what configurations matter to them. Then that kind of insight evidenced through the data gives us almost infinite ability to maneuver in the future. Whether that’s in the area of manufacturing or that’s in the area of really expanding ourselves into government work.

None of that is possible if we don’t have our base solid and solidified. Right now, our focus is squarely on ensuring that Drone Nerds is optimized fully. We will be opportunistic in other areas. We will limit any kind of spending that we’re doing right now on anything other than Drone Nerds. We’ll just simply allow the market to evolve around us as we enjoy the fruits of the labor here with Drone Nerds. We continue to see revenue growth, margin expansion, cash flow improvement. Once you have that base solidified, there’s a number of things you can do with the business. Until that’s, you know, until your house is in order, you can’t.

We’re, you know, we’re in the process of coming off of a longstanding development, a design and development business. We had to focus on radical cost reduction. We’re continuing that in through the second quarter as we realign our cost structure for the business that we are today. You’ll see that in the numbers as each quarter progresses. We anticipate, you know, very productive, very significant things for the company in the future. Thank you all for your support, for your continued interest in us. You know, we just invite all of you to keep taking a look at us, holding us accountable, and we’ll keep bringing you the information. Thanks.

Appreciate it. We will, we’ll talk to everyone either on the road or next quarter.

Moderator, Call Moderator, XTI Aerospace: This concludes today’s call. Thank you for joining us. You may now disconnect.