Unusual Machines(UMAC) - 2025 Q2 - Quarterly Results

Letter to Shareholders The letter highlights strong Q2 2025 operational and financial performance, a strengthened balance sheet, favorable regulatory impacts, and clear strategic priorities for future growth and profitability Operations Update The company achieved record Q2 2025 revenue and gross margins, driven by enterprise sales, while GAAP net loss was significantly impacted by non-cash equity compensation Q2 2025 Key Performance Indicators | Metric | Value | Note | | :--- | :--- | :--- | | Revenue | ~$2.12 million | 51% YoY increase, 5th consecutive record quarter | | Enterprise Sales | ~31% of Q2 Revenue | Key driver of growth | | Gross Margin | 37% | Highest quarterly margin to date | | GAAP Net Loss | ~$6.9 million | Driven mostly by equity compensation expenses | | Non-GAAP Adjusted Net Loss | ~$0.8 million | After non-cash and non-recurring adjustments | - The company expects the trend of increasing gross margins and enterprise sales to continue through 2025 and into 2026[3] Cash Position and Capital Structure The company significantly strengthened its balance sheet in Q2 with substantial cash from financings, maintaining zero debt and a diversified shareholder base Cash Position Change in Q2 2025 | Item | Amount (in millions) | | :--- | :--- | | Starting Cash (Q2) | $5.0 | | Financing Raised (Q2) | $40.0 | | Ending Cash (Q2) | $38.9 | | Subsequent Financing (Q3) | $48.7 | - The company's capitalization table now shows 30.2 million shares outstanding, with over $81 million in cash (including Q3 financing) and $0 in debt[5] - The company aims to achieve a positive cash flow in 2026[4] Regulatory Impacts The dynamic regulatory environment, including tariffs, is creating favorable market conditions for domestic drone companies, leading to increased enterprise interest and operational adjustments - Regulatory changes are creating market conditions that strongly favor domestic drone companies, leading to a major uptick in enterprise-side interest[7] - The company has adjusted to tariffs by increasing inventory orders to secure better component pricing and is pushing for onshoring to improve margins[6] - Management expects to see GAAP validation of the benefits from regulations in Q3 and Q4 as U.S. Government contracts are issued to its customers[7] Looking Ahead The company's forward-looking strategy focuses on aggressive revenue growth, scaling operations, and achieving positive cash flow by 2026 with a target annual revenue run rate - Strategic priorities are clearly defined as: * Grow Revenue: Aggressively invest in Rotor Riot, introduce more U.S. made components, and scale a new motor factory in Orlando * Grow the Company: Expand the team from 20 to 50 employees and add Fat Shark headset assembly to a new facility * Get to Cash Flow Positive: Target positive cash flow in 2026 with an estimated annual revenue run rate of $20-30 million[9] Second Quarter Financial Results This section details the company's strong Q2 and H1 2025 revenue growth and improved gross margins, alongside increased net losses primarily due to non-cash stock compensation, and a significantly strengthened cash position Financial Highlights Q2 2025 saw significant revenue growth and improved gross margins, though net loss increased due to substantial non-cash stock compensation, while the cash position dramatically strengthened Q2 & H1 2025 Financial Performance vs. 2024 | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 (Pro Forma) | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | $2.12 million | $1.41 million | +51% | $4.17 million | $2.52 million | +65% | | Gross Margin | 37% | N/A | N/A | 31% | N/A | N/A | | Loss from Operations | ($7.2 million) | ($1.6 million) | +350% | N/A | N/A | N/A | | Net Loss | ($6.9 million) | ($1.6 million) | +331% | N/A | N/A | N/A | | EPS | ($0.32) | ($0.16) | +100% | N/A | N/A | N/A | - The significant increase in loss from operations and net loss was primarily driven by a non-cash stock compensation expense of $5.5 million in Q2 2025, compared to just $0.4 million in Q2 2024[15] - Cash position increased dramatically to $38.9 million as of June 30, 2025, from $3.7 million as of December 31, 2024, mainly due to a public offering in May 2025[15] Financial Statements This section presents the company's Q2 2025 financial statements, detailing the reconciliation of GAAP to non-GAAP results, a strengthened balance sheet, increased operating and net losses due to expenses, and a significant cash increase from financing activities Reconciliation of GAAP to Non-GAAP Results The company provides a reconciliation of its GAAP net loss to a non-GAAP adjusted net loss to offer a clearer view of core operating results, adjusting for non-cash and non-recurring expenses Q2 2025 GAAP to Non-GAAP Net Loss Reconciliation | Description | Amount (in millions) | | :--- | :--- | | Net Loss (GAAP) | ($6.9) | | Non-cash stock compensation expense | $5.5 | | Non-recurring investor relations | $0.4 | | Non-recurring filing & legal fees | $0.2 | | Adjusted Net Loss (Non-GAAP) | ($0.8) | Consolidated Condensed Balance Sheets The balance sheet as of June 30, 2025, shows a substantial increase in financial strength compared to December 31, 2024, driven by a surge in cash and cash equivalents, leading to significantly higher stockholders' equity Balance Sheet Comparison (in millions) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $38.9 | $3.8 | | Total Current Assets | $42.2 | $6.1 | | Total Assets | $52.4 | $16.1 | | Total Liabilities | $1.1 | $1.3 | | Total Stockholders' Equity | $51.3 | $14.8 | Consolidated Condensed Statement of Operations For Q2 2025, revenues increased 51% YoY to $2.1 million, and gross margin nearly doubled, but a sharp rise in operating expenses, primarily General and Administrative costs, led to a significant operating and net loss Statement of Operations - Q2 Comparison (in thousands) | Line Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Revenues | $2,124 thousand | $1,411 thousand | | Gross Margin | $795 thousand | $388 thousand | | Total Operating Expenses | $7,985 thousand | $1,960 thousand | | Loss from Operations | ($7,190 thousand) | ($1,572 thousand) | | Net Loss | ($6,965 thousand) | ($1,612 thousand) | Consolidated Condensed Statement of Changes in Stockholders' Equity Stockholders' equity significantly increased from $14.8 million at the end of 2024 to $51.3 million by June 30, 2025, primarily driven by a public offering and warrant exercises, partially offset by net loss - Total stockholders' equity grew to $51.3 million as of June 30, 2025, a significant increase from $14.8 million at December 31, 2024[28] - Key activities impacting equity in H1 2025 included a public offering raising $36.5 million, warrant exercises adding $2.4 million, and stock compensation expense of $7.4 million, offset by a net loss of $10.2 million[28][30] Consolidated Condensed Statement of Cash Flows For H1 2025, the company used $3.9 million in cash from operating activities, but a substantial $39.3 million from financing activities led to a net increase in cash, bringing the balance to $38.9 million Cash Flow Summary - Six Months Ended June 30, 2025 | Cash Flow Activity | Amount (in millions) | | :--- | :--- | | Net Cash Used in Operating Activities | ($3.9) | | Net Cash Used in Investing Activities | ($0.3) | | Net Cash Provided by Financing Activities | $39.3 | | Net Increase in Cash | $35.2 | | Cash, End of Period | $38.9 |