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Image source: The Motley Fool. Thursday, Aug. 6, 2026 at 8:00 a.m. ET Senior Managing Director, Hayden IR - Brian Siegel President and Chief Executive Officer - Ben Wolff Chief Financial Officer - Trevor Thatcher Operator: Greetings. Welcome to the Palladyne AI Corp. Second Quarter 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Brian Siegel, Senior Managing Director, Hayden IR. Thank you, Brian. You may begin. Brian Siegel: Thank you, Nicole. Good morning, and welcome to Palladyne AI's Second Quarter 2026 Earnings Conference Call. Joining me on the call today are Ben Wolff, President and Chief Executive Officer; and Trevor Thatcher, Chief Financial Officer. Earlier this morning, Palladyne AI issued a press release announcing financial results for the second quarter ended June 30, 2026, along with the updated commentary regarding backlog and its reiterated 2026 revenue guidance. A copy of that release along with the accompanying financial tables is available on the Investor Relations section of Palladyne AI's website. Today's call will include prepared remarks from Ben and Trevor followed by a Q&A session. During today's call, management will make forward-looking statements within the meaning of the federal securities laws. These statements include, but are not limited to, statements regarding Palladyne's 2026 revenue guidance, expected backlog conversion, anticipated quarterly operating cash burn, product development milestones, commercialization time lines, defense program activity, potential customer adoption, market opportunities and future strategic positioning across aerospace, land and maritime domains. Forward-looking statements are based on current expectations, assumptions and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied. These risks and uncertainties include, among others, Palladyne AI's ability to execute on development programs, convert backlog into revenue, scale production, manage operating expenses, integrate acquired businesses, secure additional contracts, maintain liquidity and navigate evolving and commercial market conditions. These and other risk factors are described in detail in Palladyne AI's filings with the Securities and Exchange Commission, including its annual report on Form 10-K and subsequent filings. Palladyne takes -- undertakes no obligation to update any forward-looking statements, except as required by law. In addition, during the call, management will reference certain non-GAAP financial measures. In general, management will adjust for acquisition and other transaction-related expenses, stock-based compensation expense, noncash warrant income or expense that are mark-to-market quarterly based on changes in the company's stock price, expenses related to the change in contingent consideration liabilities associated with closed acquisitions and any tax impact these items may cause. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is included in this morning's press release. With that, I'll turn the call over to Ben. Benjamin Wolff: Thank you, Brian, and good morning, everyone. Thanks for joining us. Every quarter, we meet with our Board of Directors to review our prior quarter and year-to-date performance and to discuss, among other things, the businesses prospects, opportunities and challenges in the near, mid and long term. Prior to that meeting, I meet with the various leaders across the organization for a comprehensive review of the same topics at a business unit and division level. Our most recent Board meeting was last week, and I have to say, the most recent round of quarterly meetings validated the growing optimism I developed over the quarter. I'm feeling more bullish about our prospects than I have since I returned to the company almost 2.5 years ago. We are seeing meaningful traction across all parts of the business. Since I returned, we've built the 2 things that I believed we needed in order to deliver on our vision for making the United States defense industrial base more competitive, more capable and more responsive. The first is a new kind of autonomy, a decentralized embodied collaborative AI architecture that enables machines to operate on their own, work together and adapt in real time without being preprogrammed or relying on a constant connection to the cloud or relying on human direction and intervention. What I'm describing is the definition of true collaborative autonomy. What most others mean when they use these words is really nothing more than preprogrammed action where humans have made all of the decisions for the machines well in advance. The second is the ability to make the machines that can put that autonomy to work, which requires world-class aerospace engineering, low-cost next-generation avionics, precision manufacturing capabilities and ultimately complete weapon systems, including access to some of the most capable battle-proven layer munitions on the planet. Together, they will enable us and our customers to field affordable, attritable systems at scale that are designed from the ground up to leverage our decentralized embodied collaborative AI. These 2 objectives are closely aligned with our nation's priorities. The Department of War has made it abundantly clear that the United States needs both more intelligent autonomous systems and a stronger industrial base capable of designing, manufacturing and fielding them quickly and economically. We are focused on doing our part to answer that call. This quarter, we began to see every 1 of these pieces working together in a way that is showing up in revenue, customer activity and a number of opportunities in front of us. We still have much to do, but the business has meaningful momentum across the company. We generated record quarterly revenue of approximately $5.8 million, up 63% from $3.5 million in the first quarter. The growth was broad-based across our business units, and we expect continued growth through the second half as backlog converts to revenue and new contract awards and customer wins begin contributing. We ended the quarter with approximately $25 million of backlog, up from $17 million at the end of the first quarter, which means after taking into account our Q2 revenues, we booked roughly $13 million of new business during Q2. That backlog will not always necessarily increase every quarter. The timing of the bookings, the duration of contract performance and the timing of revenue recognition can all cause backlog to ebb and flow. But the current backlog and the level of new contract awards and customer engagement, give us good visibility into the second half. As a result, we are reaffirming our full year 2026 revenue guidance of $24 million to $27 million. We ended the quarter with approximately $44 million of cash on hand. Operating cash burn, including capital expenditures, was above our guided average quarterly rate primarily due to increased business development efforts, some nonrecurring CapEx and the expansion of our engineering team to support new business that will contribute to revenue in the second half of this year. We are also carrying infrastructure that our current revenue base has not fully utilized. This cash burn was offset by our prudent use of our ATM facility. We continue to expect operating cash burn of $32 million to $36 million for the full year, inclusive of CapEx, which means we expect operating cash burn to decline in the second half. The defense market is moving quickly towards affordable mass, large numbers of lower-cost autonomous systems that can be deployed and replaced without the economics of traditional weapons platforms. The Department of War is also pushing the industry to develop and field those systems faster than ever. Both trends are directly relevant to what we have built. For the most part, launching 1,000 drones today requires 1,000 soldiers. Other companies are attempting to solve this manpower challenge by automating multi drone launches that follow a preprogrammed flight path. But that doesn't really solve the challenge because most of these drones can't react to what's happening around them in real time. That still requires a soldier. Preprogrammed flight or what we call automated flight is not a substitute for human intelligence or human direction, but true autonomous flight can be. That's what we do, and it is essential to understand the distinction and how that distinction translates to real-world operations. We put real reasoning and decision-making abilities directly on the drone and then we enable multiple drones to collaborate in a manner such that the knowledge of each individual drone can be aggregated and used across the entire swarm. This is what we mean when we refer to true collaborative autonomy. And we don't just do this on Palladyne drones. We enable UAVs from different manufacturers to collaborate with any drones that are also running our SwarmOS software. We call our approach to Decentralized Embodied Collaborative Autonomy or DECA for short. The intelligence operates on the machines at the edge so they can coordinate and adapt without relying on a continuous connection to the cloud or from a remote operator. We proved this capability in the field under real operating conditions during the Army's Ivy Mass exercise in Q2. Soldiers from the Army's fourth infantry division used SwarmOS to command a mixed team of surveillance drones and our own Gremlin-X drone in a contested environment. One Army operator controlled the entire group of UAVs. In June, we announced that SwarmOS and Gremlin-X were awarded contracts by the Army under its Disruptive Applications Program. Following Ivy Mass, we were informed that certain contract options would be exercised for FY '27, and we were formally invited to additional exercises. That exercise and the future exercises are important steps for us because the software was and is being used by soldiers in an operational setting, not simply being demonstrated by our engineers in a controlled environment. This was not a demo in the traditional sense, rather it was a real-world exercise. A few moments ago, we issued a press release about our success at PC-C6, which was even larger and more complex than Ivy Mass. Turning to our business operations. I will start with our components business. BRAIN is our low-cost flight computer for autonomous air systems. It is built into our own Gremlin-X mini bomber drone, and it is being integrated on systems designed by us for our defense prime customers. During the quarter, we booked a follow-on order from a defense prime that was 5x larger than its prior order. The order covers more than 1,000 BRAIN FC1 units with an aggregate value of approximately $2.3 million. These units deliver the guidance, navigation and control for a new low-cost counter-UAS interceptor. As these systems gain traction with customers, we expect demand for BRAIN to grow with it, and we are expanding our domestic production capacity accordingly. And BRAIN, maybe just to start in building our own platforms like Gremlin-X and SwarmStrike as well as designing third-party systems, we have developed a range of other high-value subsystems and components, all made here in the U.S. We are now exploring the business case. We're supplying some of these components to other drone and missile manufacturers as well, but we will only do so where we have a unique competitive advantage and can deliver differentiated capability or performance or a cost advantage. We have no interest in being in a highly competitive commoditized or low-margin business, although there can be no doubt that as a nation, we need more UAV and missile components made here to reduce reliance on foreign sources. Our precision manufacturing business accounts for the balance of our components revenue. It machines and fabricate hardware for defense programs and industrial customers. This capability is strategically important because it allows us to produce components that are often in short supply and that impair our country's capacity to produce the volume of weapons that the Department of War is looking for. We also expect them to support the work required to bring IAI's loitering munitions into production in the United States when and as we develop customer demand. Our engineering services for UAVs, missiles, loitering munitions and spacecraft generate real revenues today and give us a seat at the table to educate and inform customers about the component and software solutions we offer that could give these customers and their products a competitive edge. During the quarter, we added engineers and moved into a larger facility to accommodate the increasing demand and utilization rates we are experiencing. Specifically, the additional capacity allows us to support existing and new third-party programs, continue developing our own products and manufacture and assemble BRAIN and Gremlin-X without 1 activity interrupting the other. SwarmOS also continues to mature and is increasingly being integrated with autonomous systems from other OEMs. An operator defines the mission, but the software allows the machines to respond to what is actually happening around them, coordinate with 1 another and adjust in real time. It is not tied to a single airframe or manufacturer, which is 1 reason the Army has asked us to deploy our software across multiple drone platforms. We are also extending the technology to integrate sensors from other domains, including sensors in space under the recently signed $4.2 million HANGTIME contract with the U.S. Air Force. Today, revenue relating to our DECA AI solutions still comes primarily from development, integration and trial contracts with the Department of War, but Formula's customer engagement is increasing and the software remains the foundation of our aerospace and defense strategy. Our Autonomous Systems portfolio combines that software with physical platforms. Gremlin-X is a reusable mini bomber design to deliver a kinetic effect for less than $1,000 per effect. We have prioritized development of this platform, which has advanced from TRL 6 to TRL 7 in just the past quarter. We're also evaluating a modular version that could support missions beyond Strike including potentially ISR and counter-UAS missions by making the payload module rather than having to field different airframes for different missions. SwarmStrike is our low-cost mini cruise missile designed to operate in coordinated groups using our IntelliSwarm product, which combines SwarmOS and BRAIN. With our ALRRM contract with the U.S. Navy, we are in the early stages of developing a low-cost air launched near hypersonic missile for use with the F-35. During the quarter, we were only -- we were 1 of only 14 companies invited to the Air Force's Relentless Wolfpack Industry Day, which focused on networked, autonomous weapon salvos. We had proposed SwarmStrike as an answer to the challenge, and we were the only small company invited to participate. This does not mean we will land a contract, but it shows the DOW recognizes our innovation and capabilities. Separately and importantly, a major Tier 1 defense prime included SwarmOS in its own Relentless Wolfpack proposal. Again, we don't know who will be down selected but this is great validation from a large industry partner. Major defense primes don't make these kinds of decisions lightly. I will now turn to our partnership with Israel Aerospace Industries or IAI. In June, we announced that Palladyne had entered into a partnership with Israel's largest defense prime. As part of that partnership, we secured the right to Americanize, manufacture and integrate IAI's HAROP, HARPY and Mini HARPY loitering munitions for the U.S. Department of War. These are large combat-proven systems, not small FPD drones. IAI pioneered the loitering munition category more than 40 years ago and today has a backlog across its business of more than $30 billion. HARPY and HAROP, which have been sold in numerous countries around the globe, are 10-foot wing span unmanned aircraft that are designed for long-range missions, extended loitering and the suppression and destruction with enemy air defenses. These are exactly the kind of systems that could potentially mitigate some of the aircraft losses our country has recently experienced in the Middle East. HARPY is designed to search for and attack any radar emitters. I personally am not aware of any other UAV of this size or class that has anti-radiation capabilities. HAROP has an electro-optical seeker allowing the HAROP to identify and engage a target with precision. Mini HARPY combines anti-radiation and electro-optical capabilities in a smaller system with shorter range and at a lower price point. These products have been used in combat and address missions that have become increasingly important as mobile air defense systems become more common and present our military with real targeting challenges. We believe the U.S. military has a meaningful capability gap in this area. As a nation, we typically counter these defenses by launching missiles for manned aircraft. I have been told, but have no way of independently confirming, that the current cost of striking 1 of these mobile or intermittent air defense systems can range from $10 million to $40 million. Our IAI systems can present an alternative at a small fraction of that price without risking human life or the cost of a manned aircraft. We believe that a successful U.S. program based on these IAI systems could ultimately amount to hundreds of millions and potentially even billions of dollars of revenue over time. IAI selected Palladyne based in large part on our engineering capabilities, our U.S. manufacturing capacity, our team and our autonomy software. Once there is a clear government demand signal and we begin to work to stand up domestic production, we believe initial units could be available in about 18 months. We also intend to integrate SwarmOS where appropriate. So these systems can coordinate their actions as part of a larger mission set rather than operate only as individual aircraft. That combination takes the mission capability to hold it up unlike anything else on the battlefield today. One more proof point worth mentioning is the caliber of people joining our team. This quarter, we added senior military advisers to our Defense Advisory Board, including retired Lieutenant General Sean Gainey, who ran U.S. Army Space and Missile Defense Command, led the operational command behind the Golden Dome and founded the U.S. military's joint counter-UAS office to be built. People with that kind of record don't lend their names to companies they don't believe in. He joined us precisely because he truly believes in our mission, our capabilities and our opportunity to make a real difference for our nation's war fighters. On the commercial and industrial side, we have sharpened our strategy with Palladyne IQ in 2 ways. First, we are focused on applications where autonomy addresses work that is difficult, dangerous, repetitive and hard to staff like surface preparation and corrosion treatment typically done by hand. A good example is our robotic work at an Air Force Logistics Center, which we expanded this quarter with an additional $2.9 million contract award, bringing the total for this program to more than $10.6 million to date. Second, we are shifting to a partner-led go-to-market strategy for IQ and Pilot rather than trying to sell and deploy every solution ourselves, and we are seeing encouraging interest from ecosystem partners. We are not ready to announce more today, but we expect to have more to share on both products over the next several quarters. I will finish with the opportunity pipeline. As of today, we have submitted proposals for more than 20 Department of War funding programs with an aggregate initial potential value of several hundred million dollars. The timing and probability vary significantly by program. Somewhat relatively near term, others are larger opportunities with longer [ ops ]. Of course, we will not win all of them, and we may not even win any of them. But the important point is that the number and size of the programs we are pursuing are materially greater than they were 6 months ago. We are increasingly getting shots on goal as the Department of War's requirements continue to evolve and begin to incorporate the types of capabilities we have been developing for years. To continue the analogy, we have been skating in front of the puck for a while now, and I believe we are just on the cusp of that strategy and focus paying off. We have a lot of work ahead of us and much of the opportunity I discussed still depends on successful execution and customer funding decisions. But the quarter showed progress in the areas that matter, revenue, contractually committed backlog, proving out our autonomy software with customers in the field, repeat component orders and a much larger opportunity pipeline. The pieces we assembled over the last 2 years are beginning to reinforce 1 another. That is why I'm increasingly confident that we are in the right place at the right time. With that, I will turn the call over to Trevor to walk through the financials and in more detail. Trevor? Trevor Thatcher: Thanks, Ben. I'll focus on our second quarter results, our liquidity position and our capital outlook. Revenue for the second quarter was $5.8 million, up 470% from $1 million a year ago and up 63% sequentially from the first quarter. Product revenue, which today comes primarily from our precision manufacturing business and our BRAIN avionics product was $2.7 million. Engineering Services revenue was $1.9 million, and AI product development contract revenue was $1.2 million, which accelerated near the end of the second quarter after the government shutdown suppressed revenue during the first quarter. Cost of revenue was $4.1 million and consolidated gross margin was approximately 29%. Similar to the first quarter, our margin reflects manufacturing utilization running well below full capacity and includes setup costs and investments related to new program wins that have not yet been covered by revenue. As these programs come online, we expect that these efforts will turn into a tailwind and as incremental volume runs through capacity we're already carrying. Research and development expense was $4.3 million, up from $3.1 million a year ago, reflecting continued investment in Gremlin-X and our AI software. General and administrative expense was $8.1 million, up from $4.2 million a year ago, driven by added head count from our November acquisitions, hiring to support new business opportunities and higher stock-based compensation expenses. Stock-based compensation expense was $2.3 million this quarter, up from $1.1 million a year ago, driven largely by executive equity awards approved by shareholders in June. This is a noncash expense and was a primary driver of the increased general and administrative expense and operating loss versus last year. Going into the third quarter, this expense will increase materially from the second quarter since we only recognized roughly 1 month worth of noncash expense in the second quarter related to the new awards. Sales and marketing expense was $2.3 million, up from $1.3 million a year ago, reflecting the expansion of business development efforts within our Palladyne Aerospace and Defense division as we pursue more opportunities with the Department of War. Operating loss for the quarter was $13.4 million compared to $8.1 million a year ago. Below the operating line, we recorded roughly $1.1 million of other income which includes $800,000 from a noncash gain on the revaluation of our warrant liabilities, together with interest income of $300,000. GAAP net loss was $12.3 million or $0.27 per diluted share compared to $7.5 million and $0.20 per diluted share a year ago. On a non-GAAP basis, which excludes the impact of warrant revaluation, stock-based compensation and the change in our contingent consideration liability, net loss was $10.8 million or $0.23 per diluted share compared to non-GAAP net loss of $6.4 million or $0.17 per diluted share in the prior year period. Turning to liquidity. We ended the quarter with $43.7 million in cash, cash equivalents and marketable securities, flat with the first quarter and down $3.4 million from the 2025 year-end balance. Operating cash burn, which we define as cash used in operations plus CapEx was $11.1 million during the quarter. This includes approximately $10.2 million of operating cash and $900,000 of CapEx. This is offset by approximately $10.8 million of net proceeds from our ATM program and $300,000 in interest income. During the first half of 2026, we raised $17.3 million in net proceeds under the ATM at an average price of $6.84 per share. We view the ATM as a flexible tool that we can deliberately use to expand our runway at a low cost of capital. As of June 30, we had approximately $24 million in remaining capacity under the program. Backlog ended the quarter at $24.6 million, an increase of 43%, driven by approximately $13 million of new contract awards during the quarter, partially offset by revenue recognized during the quarter. We expect a majority of our current backlog to convert to revenue over the next 12 to 18 months. Turning to guidance. We are reiterating our full year 2026 revenue guidance of $24 million to $27 million, which represents roughly 357% to 415% growth over 2025 revenue of $5.2 million, and we continue to expect organic growth across each part of the company. We're also reiterating our full year operating cash burn guidance of $32 million to $36 million or roughly $8 million to $9 million per quarter on average. We ran above that pace in the first half, although we offset most of that with funds raised via our ATM, and we expect operating cash burn to trend lower through the second half as revenue and margins ramp. Based on our liquidity position, our access to the ATM and our expected backlog conversion, we believe we are well positioned to execute our plan. Operator, we're now ready to take questions. Operator: [Operator Instructions] Our first question comes from Max Michaelis with Lake Street Capital Markets. Maxwell Michaelis: Congrats on the quarter. A couple for me, a bunch of different topics here. First, I want to touch on the IAI. You guys mentioned it, but my real question around that is kind of what sort of has been the progress being made on the Americanization progress -- I mean process. Have you identified any domestic manufacturing sites? Do you need that? Have you sort of been in any conversations -- preliminary conversations with U.S. government just around these systems and kind of getting your foot in the door on that end? Benjamin Wolff: Max, it's Ben. Thanks for the questions on IAI. So we have been very active. We just announced the deal, what, 7, 8 weeks ago, and we hit the ground running with kind of a full court press ticking down the list of every potential U.S. government customer that could be interested in the systems, and we have engaged now, I would say, with about half of those targets. And across the board, I would say that there is meaningful interest but interest is just the beginning. Then you have to get into the specifics and details about performance and capability and all of those kinds of things. But the bottom line is, we have yet to have anybody that we targeted to tell us that there's no interest. So we are extremely encouraged and feeling bullish about the opportunity set. In a lot of cases, there was the existing familiarity with these weapon systems, but obviously, no perception, but there was access to them here in the United States. So this is a -- we're not starting from a stopped position or a standstill position because these are battle proven weapon systems that the community is generally familiar with. In terms of your question about the facilities and our capacity to manufacture, we have a fair bit of manufacturing capacity in the space today. The real question is what kind of volumes might the government want and we could quickly outgrow our capability in terms of size and facilities. So we are in the process of identifying additional facilities, not that we would need to manufacture -- or not that we would need to build and construct because of the time lines associated with that. But we are developing a short list of currently available facilities that if the government were to say, let's go, we'd be ready to jump into. And hopefully, without a lot of modifications be ready to start standing up manufacturing in relatively near term. Maxwell Michaelis: Awesome. Makes sense. A couple more from me. Secondly, Gremlin-X advanced from TRL 6 to TRL 7 in the quarter. What was that specific milestone that got you there? And I guess, what is required to get you guys to TRL 8? Benjamin Wolff: Over the quarter, we did 5 different design reps. We've talked in the past, Max about how our team can move quickly. That was definitely moving quickly, 5 different design iterations, flying and testing in each instance. What got us over the hurdle was getting into the hands of customers and have the customers actually fly as intended, not us managing or demoing the systems, but actually having soldiers in the field using them under battlefield conditions. So we now feel -- we feel like we're in a great spot with that. One could argue whether we're at TRL 8 yet or not, but again, because we haven't been in live-fire actual battlefield conditions will hold off on making that announcement. But the bottom line is the systems performed as expected and ahead of schedule. Maxwell Michaelis: Perfect. Last 1 from me. I think you need $15 million to $18 million of revenue to sort of hit the guidance range for 2026 backlogs and around $25 million that's going to be converted over the next 12 to 18 months. I guess, sure what you guys can. But I mean, when we think about that last $15 million to $18 million in 2026, I mean, what percentage of that is already contracted to be shipped this year, if you could share? Benjamin Wolff: So when we talk about backlog, that number is contractually committed binding legal contracts. What is less certain is exactly the timing of deliveries hitting with milestones and all of that. So it is a little challenging for me, Max, to give you a straight answer on how much of that backlog will absolutely be delivered in '26 before the end of the year. What I can tell you is we are feeling -- based on everything that we see, that Trevor and I see in the business, we are confident in reiterating the guidance that we previously gave. Operator: Our next question comes from Mike Latimore with Northland Capital Markets. Mike Latimore: Great quarter. Great bookings. I guess on SwarmOS, can you talk a little bit about the exercises you're involved with and compare that to kind of some of the programs that are visible like swarm forage? What's the difference between the exercise you're involved in versus, say, the swarm forage program? What are the different requirements? What are the relative opportunities? Maybe just help us clarify that a little bit? Benjamin Wolff: Yes, sure. Thanks, Mike, and good talk to you. So the military is like -- it's a Hydra. I mean it's got lots of different groups doing lots of different things. And the DIU has a focus on trying to find and identify companies with products and technologies that could be useful to the military. And so they're kind of on their path that is a bit of a treasure hunt. And they frequently will stand up different kinds of competition, if you will, where they will throw out some specifications and requirements, say, to industry, can you meet these specifications and requirements. They'll do a bake off, they'll down select and then they'll give some money to actually develop a product into our technology, into what they're looking for based on the best criteria that they had to choose from. So that's 1 path of getting of a young or small or a new entrant company getting their products and technologies and audience in front of people at the Pentagon. There is another path. And that other path is to have a finished product that's ready to go, not still under development, and to get it in the hands of actual users in real-world exercises. And that is what we have just done with both Ivy Mass and with PC-C6. It is not a matter of having some really smart technologists and some business people take a look at a venture capital type of approach to developing a new product technology. Rather, it is actually getting product and technology in the hands of war fighters, let them get real-world experience with it and evaluate it, and then develop a report that says to the operating units and to the buyers and the acquisition people and the requirements writers, hey, this is something we've actually our hands on in the field. We've used it. And either we like it or we don't like it or here's where it can improve or whatever, they give a full written evaluation. So what we've just announced this morning with the press release right before this call and what we talked about in past press releases is our success at real-world battlefield condition exercises, not demos that we control. We do a training -- we're training the team that's going to be using or multiple teams. We give them the technology. We give them the drones and they go out like they're on the battlefield, they are in battlefield, and they do exercises using our products. And we have no ability to control it once it's in their hands. So it is not -- it's not a constrained set of environments. And these are generally soldiers that may or may not have any drone experience. They certainly don't have an experience with autonomous systems. And part of what we get evaluated on is can soldiers who got a lot of training or experience to actually learn it, how challenging is it? Can they use it? Can they accomplish the intended mission? And we have been gratified that at every turn and every exercise that we've been in, we've gotten great feedback that we're under-promising and over-delivering. We're doing -- we're delivering what we told them we would deliver, and that is resulting in getting embodied to more exercises with different and diverse groups of potential users. And it's -- I would say our reputation is spreading in a very organic way across different units. So a couple of different tasks that you can go. We have opted to go for the 1 that says, we're no longer in a kind of a bake-off. We're just in real-world execution. Does that make sense? Mike Latimore: Yes. Awesome. And then I guess as you look to the third quarter here, it seems like there could be a really heavy sweeps sort of period here. And I think takes us, talked about spending a lot of money kind of through fiscal year-end. I mean does it feel like this quarter could be another healthy bookings quarter or even better than the second, given that? Benjamin Wolff: It's premature. The -- when you talk about the cleanup money that's available, it's a little bit like watching a game of musical chairs. And everybody, we, our peers, everybody that's in the defense industry is hoping to go capture some of that, so much of it depends on who's actually got access to what capital, what that individual group's priorities are. So I'm hopeful, but I wouldn't yet say that I'm at the position of saying I have any degree of confidence in it because until it happens, you don't really know, meaning until the music stops, you don't know who's got the chair. Mike Latimore: Sure. Makes sense. I guess last 1 for me on IAI. They have those 3 products. Are there -- any sense of -- would a customer buy all 3? Is there more interest in 1? Just curious, any feelers there? Benjamin Wolff: Different customers have different use cases and missions. And so when you think about perhaps the -- what folks are trying to do to deal with longer range and longer distances, you are talking about the bigger platforms, the HAROP and the HARPY. If you were talking about perhaps launching from a vessel to try and destroy another vessel or launching from shore and you're not trying to go very far to hit a target, you might be talking about the Mini HARPY. There's just -- and you realize, I mean, every potential customer purchaser has their own specific reason to exist in their own mission and use case. So what is uncommon is to have a single customer say, "I need all 3," because that's just -- they generally are operating in different environments with different purposes. But if you want to talk about a customer being, let's say, the U.S. Army, sure, you can see the U.S. buying all 3, absolutely. But when you get down to specific groups, that's where the mission set bifurcates a bit. Operator: And our next question comes from Adam Samuelson with Jefferies. Adam Samuelson: I guess for me, I wanted to just hone in on the cash burn and outlook for the balance of the year. Obviously, you've got an outlook that has improved revenue, at least on average in the second half each quarter. How do we think about that scaling into the cash line versus -- margin versus working capital kind of other operating expenses? I'm just trying to think about the kind of base cash spend for underlying the business and how that can kind of scale into cash flow prospectively on greater revenues as we think about 2027? Benjamin Wolff: Trevor, do you want to respond to that? Trevor Thatcher: Yes. So I mean we talked about our reiterating our guidance for the year. And if you do the math, to hit those numbers in the back half, cash burn is about $12 million is what we're anticipating. There is some CapEx built into that, that we're going to use strategically there. And -- but we do see, with the revenue trending up and more margin dropping to the bottom of that cash flow does go down and that cash burn requirement goes down. So we have quite a bit of capacity, both from a manufacturing standpoint and from a product standpoint when we start getting into our AI software opportunities to be able to scale the business without having to add a lot of costs. So we're optimistic about seeing that trend down and still with some planned investment in the business being able to significantly get below what the trend has been in the first half and the second half. Adam Samuelson: Okay. And maybe just along those lines of the $24 million of backlog, can you share -- is there a proportion of that, that's actually software-related revenue or software licenses and so would presumably carry very high incremental gross margins? Benjamin Wolff: So the backlog composition that we see going forward is roughly -- and this is just kind of very rough, it's about 50% of product sales, which means our precision components and our avionics. Avionics are higher margin, the precision component's a little lower margin. And then roughly in the range of about 30% relating to our software. Now I don't want -- I want to caution you, most of the revenues that we have coming in from software right now relate to trial contracts and development contracts with the military that have not yet transitioned into high-volume licenses. But it does show that we've got a fair bit of software-related backlog. It is a good margin business, but it's not the kind of 85% margins that we will expect to be getting when we start just selling -- sending out copies of that software in high volume. And then the balance of our backlog is in the engineering services side of the business. Operator: Our next question comes from Brian Kinstlinger with Alliance Global Partners. Brian Kinstlinger: Great. With the successful results at Ivy Mass and PC-C6, can you talk about the next steps in the sales cycle as the end customer gets educated and see these positive results? And how should we think about these events turning into production orders? Benjamin Wolff: Yes, 2 different parts of it, their brand, because we've got the hardware and software that are being used in these exercises. As I -- you try and look at my cloudy crystal ball, what I believe will happen is, reports will be -- from each of these exercises will be aggregated and accumulated by the folks that are both writing requirements for new programs and contracts and also by the purchasers, the folks who actually spend the money. And as the need for -- on the software side, the need for autonomous solutions and swarming solutions continues to perkle up -- perk laid up, I think that we will wind up with ultimately having -- and I don't want to say ultimately, I don't think we're talking about years away, I think we're talking about months away, solicitations come out that start to define requirements that look a lot like what is being trialed in the field with our software. And so then the requirements come out, we respond and hopefully we get down selected and we wind up getting the contract. We have been asked about how we could retrofit our software on drones that have already been deployed to units in the field. And the numbers of drones that they're talking about are not small numbers, they're pretty sizable numbers, starts becoming logistics -- an interesting logistics question about how do you actually then get our software onto drones that are already in the field and distributed across a lot of people and a lot of users. And just because I've been asked -- or what we've been asked doesn't mean that's going to translate into a contract. But it shows you the kind of thought that's now going into trying to deliver this kind of capability on a broader base. So that's the software side. On the Gremlin-X side, I believe that in the relatively near term, we will probably start getting some inquiries about volumes that we could deliver both in terms of time and cost. And when I say volumes, I think it's going to -- my guess is it will start with relatively modest numbers, hundreds of units, not thousands. But I think that the awareness of the need for a mini bomber solution is now starting to spread. As you may recall, we originally submitted our mini bomber as a solution for 1 of the original drone dominance programs. We weren't selected because we submitted something that did not meet the requirements. As far as I know, we're the only ones who submitted a mini bomber type of solution for a low-cost per effect or cost per kill. And lo and behold, now we have a solicitation that comes out specifically for mini bombers. And so I think our message is resonating, and I think that as awareness of the cost-effective nature low-cost per effect that a mini bomber can deliver, I think there will be increasing demand and opportunities for that. So that's all to say I think we're just at the cusp of getting to the point where we can start seeing volume coming in the business on both the software and the drone side. Brian Kinstlinger: Great. I have 1 follow-up related to that. You highlighted you have 20 proposals submitted were several hundred million dollars. Can you speak to is this hardware mostly? Because it sounds like the software is a little bit further out in terms of procurement. Or maybe just characterize how that proposal activity kind of can be characterized? Benjamin Wolff: I think most of the biggest dollars there, Brian, are combined hardware and software solutions, meaning 1 of the things that we think makes our hardware solutions more compelling and attractive is because of the inherent capability of jointly developing the hardware and the software in tandem. We've talked about that's why we got back into the hardware business because having systems designed from the ground up that can be optimized from a sensor and compute perspective to be able to leverage our AI capabilities, delivers a whole different category of capabilities to war fighter. And I think -- I don't have numbers in front of me, Brian, but I think the vast majority of -- I shouldn't say vast majority, a majority of those numbers represented and -- reflected by what I mentioned in terms of size are combined complete systems that incorporate both our hardware and our software. Operator: Our next question comes from James Kisner with Water Tower Research. James Kisner: So I just wanted to talk a little more about PC-C6. Congrats again on that. Event's pretty rapidly there from the rehearsal to a larger event. Can you just say kind of what you learned from operating in that kind of faster, bigger environment in general or about SwarmOS. Benjamin Wolff: Some of the takeaways were -- that we really can get a single soldier to have the mental capacity to be able to focus on those things that really matter that's going on in battlefield environment and not have to try and micro manage the operations of each individual drone. We knew we could do it from a technology perspective, but until you have a soldier with limited experience with drones actually get their hands on it, you don't know that it really proves out. And we saw no limitations on the number of drones that we could fly or the number of drones that fairly inexperienced soldier could actually manage. So that, from a scaling perspective and from an overall capability perspective was extremely encouraging for us. Some of the things that we learned -- a little things like we learned that if comms is degraded or challenged, which is real-world experiences that our system worked as advertised. That sounds like a little thing, but given the fact that you never know what's going to happen to comms degradation on the battlefield, that was an important thing for us to not just be able to have demonstrated ourselves and be satisfied but to actually have the military see it in action. So that's -- it sounds like a small thing, but it's really a big deal. We learned a bit about how to best train new people to the system. We compressed the training time so that you have more people using the system faster. We got some good feedback about what they'd like to see on the user interface. And we were given a challenge again to integrate with Anduril's Lattice, and we were challenged to do that in a very short period of time, going for basically a standing position to 60 miles an hour with that, and we did that well. So a lot of great learnings that reinforced our assumptions, but you never know until you're in the field and giving it a try. Brian Kinstlinger: Yes, that's -- that 30 minutes time is pretty impressive. I guess more broadly, it seems like that hardware independent multivendor approach is resonating at PC-C6. Just as the Army moves towards these larger feed to autonomous systems, like how durable an advantage do you think it is that the vendor neutrality versus the kind of closed single platform ecosystem? Benjamin Wolff: The mantra at the Pentagon right now is certainly open architecture, not being trapped to beholden to any particular vendor contractor or system. And so I think it plays well. And then you get into the real-world applications, when you have a number of different units from a number of different divisions or even services that are all trying to collaborate and cooperate to accomplish a mission on the battlefield. As you know, I mean, you can see how many different vendors are providing drones to the military today. Lots of them, right? They're buying from a lot of different sources. Well, how do those drones communicate with 1 another, when you've got a Company A providing drones to this unit and Company B providing drilling some that unit, and we're really missing an opportunity to enable full across-the-board collaboration, our software enables that to happen. So I think it is a big deal. I don't think that the military will ever want it to be just 1 provider of that kind of capability for the reasons we just talked about. They don't want to be beholden to anybody. But we're there and we're doing it, and I think that gives us a lot of room to run with this software suite. Brian Kinstlinger: Last follow-up on that. I mean so you've now integrated a number of manufacturer's aircraft here, including Anduril. So is it fair to say like bringing a new platform on is getting faster and more repeatable at this point? If you could comment on that? Benjamin Wolff: Yes. We certainly have learned a lot along the way, but it really depends on the OEM themselves and the architecture for the drone that they've got. I mean we are in the process right now of integrating with our first fixed wing platform. Everything else has been a rotor platform. And we're learning a lot, the architecture on that drone is just different than what we've dealt with before. When you think about the altitude that those fly at and the sensors that they have and the compute they have, things are different. And so I wish it was as simple to say, "All right. Well, we used to do it in 2 weeks, and now we can get it down to 1 week." It's just not that easy because there's not a lot of consistency in the different components that all have to -- that our software has to touch and manage. So we're understanding a lot more about what questions to ask and what to get nailed down before we begin the process. But it's still -- it can range from 2 to 4 weeks and a couple of people doing it full time to get an integration done from our current knowledge. Operator: [Operator Instructions] Our next question comes from [ Ralph Weil ]. Unknown Analyst: Good results. Are you involved or trying to become involved at all in the Golden Dome program? And if so, which of your products would fit into that? And the second question would be, your STRATFI program is now, as you said, at $10.6 million. What is the potential market for that product that is used there? And what will your -- where will your capabilities be used? Benjamin Wolff: On Golden Dome, the primary focus for Golden Dome right now is on larger, more exquisite weapon systems to be able to intercept big things that are coming in, big weapons. There's certainly, I believe, will be an opportunity for us to talk about ways that we can deal with smaller enemy form factors, things like the smaller group on drones that may become problematic. But right now, I think the really big focus and the big dollars are, for example, trying to use space-based assets to take missiles out of the sky. That's not us. We don't play in that sector. But as kind of it trickles down and they start looking at more local and regional, effectively domes, where you're talking about dealing with the interception of smaller weapons that are coming in, I think we may have an opportunity to play there, but that's not Golden Dome's priority today. In terms of our STRATFI contract, that relates primarily to our IQ product, which is our industrial manufacturing artificial intelligence platform. I mentioned in my comments that, that is primarily focused on doing the kind of challenging work that humans have historically had to do because you are not able to automate it, things like doing paint stripping and surface preparation for large components on aircraft. That's the thing that we're doing with the Air Force right now. And if you look at the total market for that, not just military market, but the market for being able to substitute automated and autonomous machines for doing the kinds of dangerous and awful jobs that humans don't really want to do anyway but that have historically been too challenging to be able to automate. It is a very large TAM. I mean it is -- globally, it's billions of dollars. So it is a big market opportunity for us. Our focus now is on trying to go deep in individual verticals where we have gotten some success. So what we refer to as a land and expand approach, start off showing customers what we can do in a narrow targeted use case. And inevitably, as we're already seeing, they started asking questions about, well, now that I've seen that it can do this, can it do that and that and that and that. So that's our land and expand approach. We introduced the version 2 of the software at the beginning of this year. we've had great engagement with customers and systems integrators to do trials. And we expect to start seeing more placements of that software over the second half of this year. Operator: That does conclude our question-and-answer session. Thank you all for your participation today. This concludes today's teleconference. You may disconnect your lines, and have a wonderful day. 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Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Record quarterly revenue of approximately $5.8 million was driven by broad-based growth across business units and the conversion of backlog into revenue. The company's Decentralized Embodied Collaborative Autonomy (DECA) architecture differentiates its offerings by enabling machines to operate and adapt in real-time without constant cloud connectivity or human intervention. Strategic positioning is focused on addressing the Department of War's need for affordable, attritable systems at scale and a stronger domestic industrial base. The partnership with Israel Aerospace Industries (IAI) provides the right to Americanize and manufacture combat-proven loitering munitions, targeting a significant capability gap in the U.S. military. Operational momentum is supported by successful field exercises, such as the Army's Ivy Mass and PC-C6, where soldiers used SwarmOS and Gremlin-X in contested environments. Management is shifting to a partner-led go-to-market strategy for commercial products like Palladyne IQ to focus on high-value, dangerous, or repetitive industrial applications. Reiterated full-year 2026 revenue guidance of $24 million to $27 million assumes continued organic growth and successful backlog conversion in the second half. Operating cash burn is expected to decline in the second half of 2026 as revenue and margins ramp, following a period of increased investment in engineering and business development. The company expects a majority of its $24.6 million backlog to convert to revenue over the next 12 to 18 months, providing high visibility into near-term performance. Management anticipates that successful U.S. programs based on IAI loitering munitions could eventually generate hundreds of millions or billions of dollars in revenue. The opportunity pipeline includes proposals for over 20 Department of War programs with an aggregate initial potential value of several hundred million dollars. Gross margins of 29% reflect manufacturing utilization running well below full capacity and initial setup costs for new program wins. Stock-based compensation expense is expected to increase materially in the third quarter following the approval of new executive equity awards in June. The company utilizes an At-The-Market (ATM) facility as a flexible tool to manage liquidity and expand its runway at a low cost of capital. Execution risks remain regarding the timing of contract awards, the duration of performance, and the ability to scale domestic production for IAI systems. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management has engaged with approximately half of targeted U.S. government customers, reporting meaningful interest across the board. The company is identifying a short list of available domestic facilities to stand up manufacturing quickly once a clear government demand signal is received. The advancement was driven by five design iterations and successful operation by soldiers under battlefield conditions rather than controlled engineer demos. Management is holding off on claiming TRL 8 until the system is tested in live-fire, actual battlefield conditions. Backlog is roughly 50% product sales (precision components and avionics), 30% software-related (mostly development/trial contracts), and the balance in engineering services. Software margins are currently healthy but are expected to reach 85% levels only after transitioning to high-volume licensing. Exercises proved that a single, relatively inexperienced soldier can manage a swarm of drones without being overwhelmed by micro-management. The software demonstrated resilience in degraded communication environments and successfully integrated with third-party platforms like Anduril's Lattice in 30 minutes.

Interested in Palladyne AI Corp.? Here are five stocks we like better. Record revenue and backlog growth: Palladyne AI reported Q2 revenue of $5.8 million, up 63% sequentially and 470% year over year, while backlog increased 43% to $24.6 million. The company reaffirmed 2026 revenue guidance of $24 million to $27 million. Defense business gained momentum: New quarterly awards totaled about $13 million, including a $2.3 million BRAIN avionics order and a $4.2 million U.S. Air Force HANGTIME contract. SwarmOS and Gremlin-X also advanced through Army exercises and Gremlin-X reached technology readiness level 7. Investment drove wider losses and cash usage: Operating loss expanded to $13.4 million, while quarterly cash burn reached $11.1 million amid higher R&D, hiring, stock compensation and business-development spending. Palladyne ended June with $43.7 million in cash and securities and expects full-year cash burn of $32 million to $36 million. The Arms Race Has Gone Airborne: What Investors Need to Know Palladyne AI (NASDAQ:PDYN) reported second-quarter revenue of $5.8 million, a company record that rose 63% sequentially and 470% from a year earlier, as it cited growth across its precision manufacturing, avionics, engineering services and AI development activities. The company reaffirmed its 2026 revenue guidance of $24 million to $27 million and said it expects full-year operating cash burn, including capital expenditures, of $32 million to $36 million. Management said it expects cash burn to decline in the second half as revenue and margins increase. → Meta’s Earnings Drop Shows Wall Street Wants More Than Ad Growth Can Palladyne AI Live Up to the Hype? “The quarter showed progress in the areas that matter: revenue, contractually committed backlog, proving out our autonomy software with customers in the field, repeat component orders, and a much larger opportunity pipeline,” President and Chief Executive Officer Ben Wolff said on the company’s earnings call. Palladyne ended June with $24.6 million in backlog, up 43% from the prior quarter. Wolff said the company booked roughly $13 million in new business during the quarter after accounting for revenue recognized. Chief Financial Officer Trevor Thatcher said Palladyne expects a majority of current backlog to convert into revenue over the next 12 to 18 months. → 4 Oil and Gas ETF Plays as Prices Stay Sky-High Military Contract Fuels Growth in These 2 Autonomous Drone Stocks Thatcher said second-quarter product revenue was $2.7 million, primarily from precision manufacturing and the company’s BRAIN avionics product. Engineering services revenue totaled $1.9 million, while AI product-development contract revenue was $1.2 million and accelerated late in the quarter after government shutdown effects had suppressed first-quarter revenue. Consolidated gross margin was about 29%, with cost of revenue totaling $4.1 million. Thatcher said the margin reflected manufacturing utilization below full capacity as well as setup costs and investments for programs whose revenue has not yet begun. The company expects the capacity it is carrying to support margins as program volume rises. → Ulta's Growth Is Real, But So Are the Risks On backlog composition, Wolff said roughly half is associated with product sales, about 30% relates to software, and the remainder comes from engineering services. He cautioned that software-related revenue currently consists mainly of military trial and development contracts rather than high-volume software licenses. Research and development expense increased to $4.3 million from $3.1 million a year earlier, reflecting investment in Gremlin-X and AI software. General and administrative expense rose to $8.1 million from $4.2 million, driven by acquisition-related headcount, hiring for new opportunities and stock-based compensation. Stock-based compensation was $2.3 million, up from $1.1 million a year earlier, largely due to executive equity awards approved by shareholders in June. Thatcher said the expense will rise materially in the third quarter because only about one month of expense related to those awards was recognized in the second quarter. Sales and marketing expense rose to $2.3 million from $1.3 million as Palladyne expanded business-development efforts in its aerospace and defense operation. Operating loss was $13.4 million, compared with an $8.1 million loss a year earlier. GAAP net loss totaled $12.3 million, or $0.27 per diluted share, compared with $7.5 million, or $0.20 per diluted share, a year earlier. On a non-GAAP basis, net loss was $10.8 million, or $0.23 per diluted share, compared with a $6.4 million loss, or $0.17 per diluted share, in the prior-year period. The company ended the quarter with $43.7 million in cash equivalents and marketable securities. Operating cash burn, defined as cash used in operations plus capital expenditures, was $11.1 million in the quarter, including $10.2 million of operating cash use and $900,000 of capital expenditures. Palladyne received approximately $10.8 million in net proceeds from its at-the-market equity program during the quarter. During the first half, it raised $17.3 million through the program at an average share price of $6.84. As of June 30, it had about $24 million of remaining capacity under the program. Wolff highlighted field exercises involving the company’s SwarmOS autonomy software and Gremlin-X drone. During the U.S. Army’s Ivy Mass exercise, soldiers from the 4th Infantry Division used SwarmOS to command a mixed group of surveillance drones and Palladyne’s Gremlin-X in what the company described as a contested environment. The company said a single Army operator controlled the group of unmanned aerial vehicles. Palladyne also said SwarmOS and Gremlin-X received U.S. Army contracts under the Disruptive Applications Program. Following Ivy Mass, the company was informed that certain fiscal 2027 contract options would be exercised and that it had been invited to further exercises. During the call, Wolff said the company’s performance at the PCC6 exercise showed that relatively inexperienced soldiers could manage multiple drones without having to micromanage each platform. He said Palladyne also tested its system under degraded communications conditions, integrated with Anduril’s Lattice platform, and shortened training time for users. Gremlin-X advanced from technology readiness level 6 to level 7 during the quarter after five design iterations and field testing, according to Wolff. He said the platform has not yet been tested in live-fire, actual battlefield conditions. Palladyne received a follow-on BRAIN flight-computer order from a defense prime contractor covering more than 1,000 FC1 units and valued at about $2.3 million. The company signed a $4.2 million HANGTIME contract with the U.S. Air Force to extend its technology to integrate sensors from other domains, including space. Palladyne said it was among 14 companies invited to the Air Force’s Relentless Wolfpack Industry Day, where it proposed SwarmStrike, its low-cost mini cruise missile concept. Palladyne’s June partnership with Israel Aerospace Industries gives it rights to Americanize, manufacture and integrate IAI’s HAROP, HARPY and Mini HARPY loitering munitions for the U.S. Department of War, according to management. Wolff said Palladyne has engaged with roughly half of the U.S. government organizations it identified as potential customers and has encountered interest across those discussions. The company is developing a shortlist of available facilities that could support domestic manufacturing if government demand materializes. Management said initial units could be available in about 18 months once a clear government demand signal emerges and domestic production work begins. Wolff said the company could outgrow its current manufacturing footprint depending on the volume requested by the government. In its commercial and industrial business, Palladyne is focusing Palladyne IQ on difficult, repetitive or hazardous work, including surface preparation and corrosion treatment. The company’s robotic work at an Air Force logistics center received an additional $2.9 million award during the quarter, bringing the program’s total value to more than $10.6 million. Palladyne is also shifting IQ and Pilot to a partner-led go-to-market model rather than attempting to sell and deploy every solution directly. Wolff said the company expects to share more about both products in coming quarters. Looking ahead, Palladyne said it has submitted proposals for more than 20 Department of War funding programs with aggregate initial potential value in the several-hundred-million-dollar range. Management cautioned that timing and probabilities vary by program and that the company may not win the proposals. Palladyne AI Corp., a software company, focuses on delivering software that enhances the utility and functionality of third-party stationary and mobile robotic systems in the United States. Its Artificial Intelligence (AI)/ Machine Learning (ML) software platform enables robots to observe, learn, reason, and act in structured and unstructured environments. The company's software platform enables robotic systems to perceive their environment and quickly adapt to changing circumstances by generalizing from their experience using dynamic real-time operations without extensive programming and with minimal robot training. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Palladyne AI Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.

Revenue increased 470% year-over-year and 63% sequentially to $5.8 million, driven by both acquisitions and organic growth Backlog of $24.6 million as of June 30, 2026, net of revenue recognized, reflects approximately $13.0 million in new contract awards during the quarter Reiterates full-year 2026 revenue guidance of $24 million to $27 million (357% - 415% growth); expects sequential revenue growth in Q3 SALT LAKE CITY, August 06, 2026--(BUSINESS WIRE)--Palladyne AI Corp. (NASDAQ: PDYN and PDYNW) ("Palladyne AI" or "the Company"), a U.S.-based aerospace, defense and industrial technology company delivering embodied AI-powered collaborative autonomy solutions, advanced avionics, precision-manufactured components, UAVs, and advanced aerospace engineering services, today announced financial results for the second quarter ended June 30, 2026. Ben Wolff, President and Chief Executive Officer of Palladyne AI, commented: "The headline this quarter is the $13 million of new contract awards, and it is why we are comfortable reiterating guidance for the year. Backlog stands at nearly $25 million even after we recognized a record quarter of revenue, and it remains the number I watch most closely because it is the foundation the next several quarters are built on. "From a product standpoint, the milestone was executing Ivy Mass and hitting every objective we set for it. Ivy Mass was the first in a series of 4th Infantry Division exercises we were competitively selected for under the Army's Disruptive Applications program. Over the course of three weeks, we integrated SwarmOS with the Army's Next-Generation Command and Control prototype ecosystem. SwarmOS enabled us to operate drones from four different manufacturers, including our own Gremlin-X mini bomber, under a single operator. We also just completed another major DoW exercise in late July, and we have been invited to five more over the next 8 months, starting with Northern Strike, which is underway now. "We also signed our partnership with Israel Aerospace Industries (IAI) during the quarter, which gives us exclusive U.S. rights to Americanize, manufacture, integrate and market IAI’s HARPY, HAROP and Mini HARPY loitering munitions to the Department of War. These are long-range, battle-proven systems for suppressing and destroying enemy air defenses, and they fill a capability gap that the U.S. arsenal has today. I believe systems like these could not only reduce the kind of aircraft losses we have seen in recent operations in the Middle East, but also do it far more cost-effectively than current methods for eliminating enemy air defenses. Since signing, we have been working alongside IAI on the strategy and planning for bringing the Department of War on board with these systems, including Americanization requirements and manufacturing readiness. "Financially, every part of the business grew this quarter. Our operating cash burn1 ran higher than last quarter. That increase reflects two things: we are still early in scaling revenue against our cost base, and we made deliberate investments ahead of that ramp. We made some one-time capital expenditures, added business development and program management headcount in our Aerospace and Defense division to pursue and support Department of War work, and brought on additional engineers to support existing contracts and advance programs, including Gremlin-X. Those are costs we are taking on against contracts we can already see, and we expect quarterly cash usage to come down as revenue and margins ramp through the second half." Second Quarter 2026 Strategic and Operational Highlights Signed an exclusive partnership with IAI covering U.S. rights to the HARPY, HAROP and Mini HARPY long-range loitering munitions, with no upfront payment and up to ten years of exclusivity; Competitively selected for two U.S. Army contracts under the Disruptive Applications Broad Agency Announcement to operationally validate SwarmOS and Gremlin-X with 4th Infantry Division warfighters; Secured $2.6 million in orders for BRAIN flight computers from a defense prime, including a $2.3 million contract supporting a low-cost kinetic counter-UAS interceptor; Commenced previously announced $4.2 million Air Force Research Laboratory HANGTIME contract, integrating satellites into a coordinated sensor network for the first time; Received a $2.9 million U.S. Air Force STRATFI option exercise for the Palladyne IQ embodied AI architecture, bringing total program value to over $10.6 million; Demonstrated SwarmOS and Gremlin-X at the Army's Ivy Mass exercise, subsequently participated in an additional Department of War exercise in July, and have been invited to five more through March 2027; Selected as one of 14 companies invited to the AFRL Relentless Wolfpack Industry Day, and the only small cap in that group, on a submission combining SwarmStrike with SwarmOS. Second Quarter 2026 Financial Highlights (vs. second quarter 2025) Revenue increased 470% to $5.8 million compared to $1.0 million; Operating loss of ($13.4) million compared to ($8.1) million, mainly reflecting higher stock-based compensation and continued investment in Palladyne Aerospace and Defense; GAAP net loss and basic and diluted GAAP loss per share (EPS) of ($12.3) million and ($0.27), respectively, compared to ($7.5) million and ($0.20), respectively, in the prior year period Non-GAAP net loss and basic and diluted Non-GAAP EPS of ($10.8) million and ($0.23), compared to ($6.4) million and ($0.17) in the prior year period, respectively2; Cash, cash equivalents and marketable securities totaled $43.7 million as of June 30, 2026, roughly flat to March 31, 2026; and Backlog as of June 30, 2026 increased 43% during the quarter to $24.6 million, reflecting approximately $13.0 million in new contracts awarded, partially offset by revenue recognized during the quarter. Full Year 2026 Outlook Revenue: Palladyne AI is reiterating its guidance for $24.0 - $27.0 million, representing expected year-over-year growth of approximately 357% to 415% compared to 2025 revenue of $5.2 million. The Company expects growth to increase sequentially in Q3 as backlog converts, new contracts are awarded and performed, and commercial deployments expand. Backlog of $24.6 million as of June 30, 2026, reflects continued contract momentum during the quarter. Palladyne AI expects a majority of this backlog to be recognized as revenue over the next 12-18 months. Cash Burn: The Company reiterates its full-year 2026 expected operating cash burn of ($32.0) – ($36.0) million, or ($8.0) – ($9.0) million per quarter, on average. Second quarter operating cash burn primarily reflected strategic hiring in the Aerospace and Defense division, and roughly $0.9 million in capital expenditures. The Company expects cash burn to trend lower through the remainder of 2026 as revenue and margins ramp in the third and fourth quarters. Based on its liquidity position and expected backlog conversion, management believes it is well-positioned to execute its 2026 plan. Conference Call Palladyne AI will host a conference call today at 8:00 a.m. Eastern Time to discuss its financial and operational results, strategy and future opportunities. About Palladyne AI Palladyne AI is a U.S.-based technology company developing patented embodied artificial intelligence, collaborative autonomy solutions, advanced avionics, autonomous systems, advanced UAV engineering services, and precision-manufactured components for aerospace, defense and industrial markets. Palladyne AI delivers secure, American-developed and operated platforms designed to meet the stringent requirements of U.S. government and public-sector customers, including data sovereignty, security, and compliance. Palladyne AI’s embodied AI is designed to operate in complex, contested, and high-risk environments, enabling distributed tasking, human-on-the-loop decision-making, degraded-communications resilience, and multi-domain coordination. Its platform-agnostic autonomy stack combines real-time sensor fusion, adaptive AI models, and edge-native orchestration - without vendor lock-in - to support autonomous and collaborative systems across air, ground, maritime, and industrial domains where performance, resilience, and trust are paramount. For more information about Palladyne AI, including GuideTech and Palladyne Aerospace and Defense, please visit www.palladyneai.com/. Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding 2026 expected financial performance, including expected timing and amount of revenue; the amount and timing of backlog realization; the benefits of its AI software and other products and the markets for its products and services; cash usage; the pursuit of opportunities across U.S. government programs; the award and timing of new contracts and commercial deployments; and its ability to execute on its 2026 plan. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events, or results of operations, are forward-looking statements. These statements may be preceded by, followed by, or include the words "believes," "estimates," "expects," "projects," "forecasts," "may," "will," "should," "seeks," "plans," "scheduled," "anticipates," "intends" or "continue" or similar expressions. Such forward-looking statements involve risks and uncertainties that may cause actual events, results, or performance to differ materially from those indicated by such statements. These forward-looking statements are based on Palladyne AI’s management’s current expectations and beliefs, as well as a number of assumptions concerning future events. However, there can be no assurance that the events, results, or trends identified in these forward-looking statements will occur or be achieved. Forward-looking statements speak only as of the date they are made, and Palladyne AI is not under any obligation and expressly disclaims any obligation to update, alter or otherwise revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law. Readers should carefully review the statements set forth in the reports which Palladyne AI has filed or will file from time to time with the Securities and Exchange Commission (the "SEC"), in particular the risks and uncertainties set forth in the sections of those reports entitled "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements," for a description of risks facing Palladyne AI and that could cause actual events, results or performance to differ from those indicated in the forward-looking statements contained herein. The documents filed by Palladyne AI with the SEC may be obtained free of charge at the SEC’s website at www.sec.gov. PALLADYNE AI CORP.NON-GAAP FINANCIAL MEASURES(Unaudited) To supplement our financial statements presented in accordance with GAAP and to provide investors with additional information regarding our financial results, we have presented in this release non-GAAP net income (loss) and non-GAAP net income (loss) per share (non-GAAP EPS), each of which are non-GAAP financial measures. Non-GAAP net income (loss) and non-GAAP EPS are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly titled measures presented by other companies. We define non-GAAP net income (loss) as our GAAP measures of net income (loss) excluding the impacts of stock-based compensation expense, gain or loss on change in fair value of warrant liabilities, expenses related to business combinations and other non-recurring or non-operating expenses. We define non-GAAP EPS as non-GAAP net income (loss) divided by weighted average outstanding shares. The most directly comparable GAAP measures to non-GAAP net income (loss) and non-GAAP EPS are net income (loss) and EPS, respectively. We believe excluding the impact of the previously listed items in calculating non-GAAP net income (loss) and non-GAAP EPS can provide a useful measure for period-to-period comparisons of our core operating performance. We monitor, and have presented in this release, non-GAAP net income (loss) and non-GAAP EPS because they are each a key measure used by our management and board of directors to understand and evaluate our operating performance and to establish budgets. We believe non-GAAP net income (loss) and non-GAAP EPS help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we include in net income (loss) but not in non-GAAP net income (loss). Accordingly, we believe non-GAAP net income (loss) and non-GAAP EPS provide useful information to investors, analysts and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance. Non-GAAP net income (loss) and non-GAAP EPS are not prepared in accordance with GAAP and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of non-GAAP net income (loss) and non-GAAP EPS rather than net income (loss) and EPS, which is for each the most directly comparable financial measure calculated and presented in accordance with GAAP. In addition, the expenses and other items that we exclude in our calculations of non-GAAP net income (loss) and non-GAAP EPS may differ from the expenses and other items, if any, that other companies may exclude from non-GAAP net income (loss) and non-GAAP EPS when they report their operating results, limiting the usefulness of non-GAAP net income (loss) and non-GAAP EPS for comparative purposes. In addition, other companies may use other measures to evaluate their performance, all of which could reduce the usefulness of non-GAAP net income (loss) and non-GAAP EPS as tools for comparison. The following table reconciles non-GAAP net income (loss) to net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP (in thousands, except share and per share data): View source version on businesswire.com: https://www.businesswire.com/news/home/20260806302133/en/ Contacts Palladyne AI Investor Contact: Brian S. Siegel, IRC®, M.B.A.Senior Managing DirectorHayden IR - Chicago(346) 396-8696 (o)[email protected] [email protected] Palladyne AI Press Contact: Heath Meyer(858) [email protected]

This article first appeared on GuruFocus. Revenue: Record quarterly revenue of approximately $5.8 million, up 63% sequentially from $3.5 million in Q1 and up 470% from $1.0 million a year ago. Product Revenue: $2.7 million, primarily from precision manufacturing and Brain avionics. Engineering Services Revenue: $1.9 million. AI Product Development Contract Revenue: $1.2 million. Gross Margin: Consolidated gross margin of approximately 29%, reflecting manufacturing utilization below full capacity. Operating Loss: $13.4 million, compared to $8.1 million a year ago. Net Loss: $12.3 million, or $0.27 per diluted share, compared to $7.5 million, or $0.20 per diluted share, a year ago. Non-GAAP Net Loss: $10.8 million, or $0.23 per diluted share, compared to $6.4 million, or $0.17 per diluted share, in the prior year period. Cash Position: Ended the quarter with $43.7 million in cash equivalents and marketable securities. Operating Cash Burn: $11.1 million during the quarter, including $10.2 million of operating cash and $900,000 of CapEx. Backlog: $24.6 million at quarter-end, up 43% from $17 million at the end of Q1. Full-Year 2026 Revenue Guidance: Reiterated at $24 million to $27 million, representing roughly 357% to 415% growth over 2025 revenue of $5.2 million. Full-Year Operating Cash Burn Guidance: Reiterated at $32 million to $36 million. Warning! GuruFocus has detected 7 Warning Signs with PDYN. Is PDYN fairly valued? Test your thesis with our free DCF calculator. Release Date: August 06, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Record quarterly revenue of $5.8 million, up 63% sequentially and 470% year-over-year, with broad-based growth across business units. Backlog increased 43% to $24.6 million, driven by $13 million in new contract awards, providing good visibility into the second half. Successful field exercises (IV Mass and PCC6) validated SwarmOS and Gremlin X, leading to contract options for FY27 and invitations to additional exercises. Follow-on order from a defense prime for over 1,000 Brain FC-1 units, five times larger than the prior order, signaling growing demand for components. Partnership with IAI for loitering munitions (HEROP, HARPY, Mini-HARPY) opens a potential multi-hundred-million to billion-dollar revenue opportunity, with initial units possible in ~18 months. Expanding opportunity pipeline with proposals for over 20 Department of War funding programs, with aggregate initial potential value of several hundred million dollars. Gremlin X advanced from TRL-6 to TRL-7, and the company was one of only 14 invited to the Air Force's Relentless Wolf Pack Industry Day, with a major Tier 1 prime including SwarmOS in its proposal. Operating cash burn was above the guided average in Q2 at $11.1 million, though offset by ATM proceeds, with full-year guidance reiterated at $32-36 million. Gross margin remained low at 29% due to manufacturing underutilization and setup costs for new programs, which have not yet been covered by revenue. Operating loss widened to $13.4 million from $8.1 million a year ago, driven by higher G&A, R&D, and stock-based compensation expenses. Stock-based compensation expense is expected to increase materially in Q3, further pressuring non-GAAP profitability. The company faces significant uncertainty in converting its large opportunity pipeline into contracts, with management acknowledging they may not win any of the 20+ proposals. Revenue guidance of $24-27 million for 2026 implies a significant ramp in the second half, but the timing of backlog conversion is uncertain, and the company did not specify how much of the backlog will be recognized this year. The IAI partnership is still in early stages, with no government demand signal yet, and the company has not identified a specific manufacturing site, though it is developing a shortlist. Q: What progress has been made on the Americanization process for IAI's loitering munitions, and have you identified domestic manufacturing sites or engaged in preliminary conversations with the U.S. government? A: Ben Wolff, President and CEO, stated that the company has engaged with about half of its targeted potential government customers and has seen meaningful interest across the board, with no one indicating a lack of interest. He noted that there was pre-existing familiarity with these battle-proven systems, which helps. Regarding manufacturing, while the company has existing capacity, it is developing a shortlist of currently available facilities to quickly stand up domestic production if the government gives the go-ahead, aiming for initial units in about 18 months. Q: What specific milestone moved Gremlin X from TRL-6 to TRL-7, and what is required to reach TRL-8? A: Ben Wolff explained that the advancement was driven by five different design iterations and, crucially, by getting the system into the hands of soldiers who used it under real battlefield conditions during exercises like IV Mass and PCC6, rather than controlled demos. He noted the company is holding off on declaring TRL-8 until it has been tested in live-fire, actual battlefield conditions, but the systems performed as expected and ahead of schedule. Q: Can you clarify the difference between the exercises you're involved in, like IV Mass and PCC6, and programs like Swarm Forge? A: Ben Wolff distinguished between two paths: one is a "treasure hunt" approach like Swarm Forge, where the DIU holds bake-offs and down-selects companies to develop technology. The other path, which Palladyne has taken, involves fielding a finished product in real-world exercises with actual warfighters. He emphasized that at IV Mass and PCC6, soldiers used the technology without company control, providing written evaluations. This organic, real-world validation is leading to more invitations and a spreading reputation across different military units. Q: Given the potential for a heavy sweep of fiscal year-end funding, do you expect Q3 to be another healthy bookings quarter or even better than Q2? A: Ben Wolff was cautious, comparing the situation to a game of musical chairs. He stated it is premature to have confidence in a specific outcome, as it depends on which companies have access to capital and the priorities of individual groups. He is hopeful but not yet at a point of high confidence. Q: With the IAI partnership, would a customer buy all three products (HAROP, HARPY, Mini-HARPY), or is there more interest in one? A: Ben Wolff explained that different customers have different use cases and missions. Larger platforms like HAROP and HARPY are suited for longer-range missions, while Mini-HARPY is for shorter-range targets. He noted that while a large customer like the U.S. Army could potentially buy all three, specific groups within the military tend to have bifurcated mission sets that align with one or another platform. Q: How should we think about the cash burn outlook for the balance of the year, and how will it scale with greater revenues into 2027? A: Trevor Thatcher, CFO, reiterated the full-year cash burn guidance of $32 million to $36 million, implying roughly $12 million in the second half. He stated that as revenue trends up and margins improve, the cash burn requirement will decrease. The company has significant capacity from a manufacturing and product standpoint to scale without adding substantial costs, and they are optimistic about seeing the burn trend down in the second half. Q: Of the $24 million in backlog, what proportion is software-related revenue, which would carry very high incremental gross margins? A: Ben Wolff provided a rough breakdown: about 50% from product sales (precision components and avionics), roughly 30% from software, and the balance from engineering services. He cautioned that most software revenue currently comes from trial and development contracts with the military, which are good margin but not the 85% margins expected from high-volume software licenses in the future. Q: With the successful results at IV Mass and PCC6, what are the next steps in the sales cycle, and how should we think about these events turning into production orders? A: Ben Wolff explained that reports from these exercises will be aggregated by those writing requirements and purchasers. He expects solicitations that look like what was trialed to come out in months, not years. On the software side, there have been inquiries about retrofitting SwarmOS onto already-deployed drones. On the Gremlin X side, he expects inquiries about volumes, starting with hundreds of units, as awareness of the low-cost mini-bomber solution spreads. Q: You highlighted 20 proposals worth several hundred million dollars. Is this mostly hardware, or how should we characterize the proposal activity? A: Ben Wolff stated that the majority of the largest dollar opportunities are combined hardware and software solutions. He explained that the company's hardware solutions are more compelling because they are designed from the ground up to leverage their AI capabilities, delivering a different category of capabilities to the warfighter. Q: What did you learn from operating in the faster, bigger environment of PCC6, and how durable is the hardware-independent, multi-vendor approach? A: Ben Wolff highlighted key takeaways: a single soldier can manage multiple drones without micromanaging, the system worked as advertised under comms degradation, and they successfully integrated with Anduril's Lattice in a very short period. He emphasized that the Pentagon's mantra is open architecture, and since the military buys drones from many vendors, Palladyne's software enables cross-fleet collaboration, giving them a significant advantage and room to run. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Preliminary second quarter revenue expected to be approximately $5.8 million, up approximately 480% year over year and 66% sequentially Backlog grew to approximately $24.0 million from $17.3 million at the end of the first quarter Cash, cash equivalents and marketable securities remained roughly flat from the first quarter at approximately $44.0 million SALT LAKE CITY, July 08, 2026--(BUSINESS WIRE)--Palladyne AI (NASDAQ: PDYN) ("Palladyne AI" or "the Company"), a U.S.-based defense and industrial technology company delivering embodied AI-powered collaborative autonomy solutions, advanced avionics, precision-manufactured components, UAVs, and advanced aerospace engineering services, today announced preliminary financial results for its second fiscal quarter ended June 30, 2026. Ben Wolff, President and Chief Executive Officer of Palladyne AI, commented: "The second quarter was another quarter where we delivered on our stated plan. Revenue grew substantially again, both year over year and sequentially vs Q1, and we continued to win new business across all of our operations. "Our plan for this year has been straightforward from the start. We had spent years building the underlying autonomy technology. With the acquisitions we completed in November, we became a vertically integrated, autonomy-based defense technology company, with the engineering, manufacturing and program capability that laid the groundwork for what we announced on June 8. "That announcement, our partnership with Israel Aerospace Industries, the largest Israeli defense company and pioneer of the loitering munition category more than 40 years ago, was a major step forward for us. This partnership gives us exclusive U.S. rights to a family of combat-proven systems, the HARPY, HAROP and Mini HARPY, that fill gaps in the U.S. arsenal for which there is no direct domestic equivalent. Despite hundreds of millions of dollars invested by others in this space, no other company has replicated what this family of loitering munitions systems delivers, particularly when it comes to battle-tested capabilities to suppress and destroy enemy air defenses. This partnership, together with the battlefield exercises we participated in this past quarter with SwarmOS™ and Gremlin-X™ and the first large purchase of our BRAIN flight computer by a defense prime for use on a counter-UAS system, has given us even greater optimism about the long-term prospects for our aerospace and defense business." Second Quarter 2026 Preliminary Financial Highlights Revenue of approximately $5.8 million, an increase of approximately 480% compared to $1.0 million in the second quarter of 2025; Backlog of approximately $24.0 million as of June 30, 2026, up from $17.3 million as of March 31, 2026; Cash, cash equivalents and marketable securities of approximately $44.0 million as of June 30, 2026, roughly flat compared to March 31, 2026. Backlog and Contracted Demand As of June 30, 2026, backlog was approximately $24.0 million, up from $17.3 million as of March 31, 2026, reflecting approximately $12.5 million in new customer programs and contract awards secured across the Company’s operations during the quarter, net of revenue recognized. Backlog represents the total value of committed customer contracts and purchase orders. Palladyne AI expects a majority of this backlog to be recognized as revenue over the next 12 to 18 months. About Palladyne AI Palladyne AI is a U.S.-based technology company developing patented embodied artificial intelligence, collaborative autonomy solutions, advanced avionics, autonomous systems, advanced UAV engineering services, and precision-manufactured components for defense and industrial markets. Palladyne AI delivers secure, American-developed and operated platforms designed to meet the stringent requirements of U.S. government and public-sector customers, including data sovereignty, security, and compliance. Palladyne AI’s embodied AI is designed to operate in complex, contested, and high-risk environments, enabling distributed tasking, human-on-the-loop decision-making, degraded-communications resilience, and multi-domain coordination. Its platform-agnostic autonomy stack combines real-time sensor fusion, adaptive AI models, and edge-native orchestration, without vendor lock-in, to support autonomous and collaborative systems across air, ground, maritime, and industrial domains where performance, resilience, and trust are paramount. For more information about Palladyne AI, including GuideTech and Palladyne Aerospace and Defense, please visit www.palladyneai.com. Preliminary Results Disclaimer These preliminary financial results are based on management’s initial analysis of operations for the quarter ended June 30, 2026. The Company’s consolidated financial statements for the quarter ended June 30, 2026 are not yet available and remain subject to completion of financial closing procedures and potential final adjustments. As a result, actual results may differ from these preliminary estimates, and those differences may be material. The Company’s independent registered public accounting firm has not audited, reviewed, compiled or performed agreed-upon procedures with respect to this preliminary financial information. These estimates should not be viewed as a substitute for financial statements prepared in accordance with U.S. generally accepted accounting principles and are not necessarily indicative of future results. Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding the Company’s preliminary unaudited revenue for the quarter ended June 30, 2026; preliminary unaudited backlog and cash, cash equivalents and marketable securities as of June 30, 2026; the timing and amount of backlog conversion and revenue recognition; the Company’s plans, strategies and objectives; anticipated growth and operating scale; the expected benefits of the Company’s acquisition activity; the expected benefits of the Company’s strategic partnership with Israel Aerospace Industries and the potential impact on the Company’s long-term growth opportunity; potential future customer programs and contract awards; the capabilities or future capabilities of Palladyne AI’s and its strategic partners’ technology and related products; and the markets for the Company’s products and services. Forward-looking statements are inherently subject to risks, uncertainties, and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events, or results of operations, are forward-looking statements. These statements may be preceded by, followed by, or include the words "believes," "estimates," "expects," "projects," "forecasts," "may," "will," "should," "seeks," "plans," "scheduled," "anticipates," "intends" or "continue" or similar expressions. Such forward-looking statements involve risks and uncertainties that may cause actual events, results, or performance to differ materially from those indicated by such statements. These forward-looking statements are based on Palladyne AI’s management’s current expectations and beliefs, as well as a number of assumptions concerning future events. However, there can be no assurance that the events, results, or trends identified in these forward-looking statements will occur or be achieved. Forward-looking statements speak only as of the date they are made, and Palladyne AI is not under any obligation and expressly disclaims any obligation, to update, alter or otherwise revise any forward-looking statement, whether as a result of new information, future events, or otherwise, except as required by law. Readers should carefully review the statements set forth in the reports which Palladyne AI has filed or will file from time to time with the Securities and Exchange Commission (the "SEC"), in particular the risks and uncertainties set forth in the sections of those reports entitled "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements," for a description of risks facing Palladyne AI and that could cause actual events, results or performance to differ from those indicated in the forward-looking statements contained herein. The documents filed by Palladyne AI with the SEC may be obtained free of charge at the SEC’s website at www.sec.gov. View source version on businesswire.com: https://www.businesswire.com/news/home/20260708754654/en/ Contacts Palladyne AI Investor Contact: Brian S. Siegel, IRC®, M.B.A.Senior Managing DirectorHayden IR - Chicago(346) 396-8696 (o)[email protected] [email protected] Palladyne AI Press Contact: Heath Meyer(858) [email protected]

Image source: The Motley Fool. Tuesday, May 5, 2026 at 8 a.m. ET President & Chief Executive Officer — Benjamin Wolff Chief Financial Officer — Trevor Thatcher Investor Relations — Brian Siegel Operator: Greetings, and welcome to Palladyne AI First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Siegel with Hayden IR. Thank you. Please go ahead. Brian Siegel: Good morning, and welcome to Palladyne AI's First Quarter 2026 Earnings Conference Call. Joining me on the call today are Ben Wolff, President and Chief Executive Officer; and Trevor Thatcher, Chief Financial Officer. Earlier this morning, Palladyne issued a press release announcing financial results for the first quarter ended March 31, 2026, along with updated commentary regarding backlog and reiterated its 2026 revenue guidance. A copy of that release, along with the accompanying financial tables, is available on the IR section of Palladyne AI's website. Today's call will include prepared remarks from Ben and Trevor, followed by a question-and-answer session. During the call, management will make forward-looking statements within the meanings of the federal securities laws. These statements include, but are not limited to, statements regarding Palladyne's 2026 revenue guidance, expected backlog conversion, anticipated quarterly operating cash usage, product development milestones, commercialization timelines, defense program activity, potential customer adoption, market opportunities and future strategic positioning across aerospace, land and maritime domains. Forward-looking statements are based on current expectations, assumptions and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied. These risks and uncertainties include, among others, Palladyne AI's ability to execute on development programs, convert backlog into revenue, scale production, manage operating expenses, integrate acquired businesses, secure additional contracts, maintain liquidity and navigate evolving defense and commercial market conditions. These and other risk factors are described in detail in Palladyne AI's filings with the Securities and Exchange Commission, including its annual report on Form 10-K and subsequent filings. Palladyne undertakes no obligation to update any forward-looking statements, except as required by law. In addition, during this call, management will reference certain non-GAAP financial measures. In general, management will adjust for acquisition and other transaction-related expenses, stock-based compensation expense, noncash warrant income or expense that are marked to market quarterly based on changes in the company's stock price, expenses related to the change in contingent consideration liabilities associated with closed acquisitions and any tax impact these items may cause. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is included in this morning's press release. With that, I'll turn the call over to Ben. Benjamin Wolff: Thank you, Brian, and good morning, everyone. I want to cover 3 things this morning. First, I'll walk you through the first quarter's results. Second, I'll discuss what we accomplished operationally across the business in Q1. And third, I'll talk about what's on deck because the opportunity in front of us is larger and more concrete than it has ever been. Our revenue for the first quarter increased 107% year-over-year to $3.5 million, which was in line with our internal expectations. Having said that, revenue for the quarter could have been even better were it not for the federal government shutdown, which temporarily delayed program activity across several of our defense contracts. That work was not canceled and the contracts remain in place. The work simply shifted in timing, and it remains in backlog. I want to be clear about this because I know it will come up when we get to questions. The shutdown created a revenue timing issue, but not a demand issue. In short, the business performed as we internally expected. With respect to backlog, we entered Q1 with approximately $13.5 million, recognized $3.5 million in revenue during the quarter and exited with approximately $17 million. So we added approximately $7 million in new contract awards during the quarter, net of revenue recognized. That is a meaningful bookings number, and it gives you a sense of the activity level that doesn't show up in our reported revenues. That backlog provides us with good visibility into the revenue ramp ahead, and we are reiterating our full year 2026 revenue guidance of $24 million to $27 million, which implies approximately 357% to 415% growth compared to 2025. We expect revenue to grow sequentially each quarter with the growth rate accelerating in the second half of the year as backlog converts and new contracts are awarded. Our operating cash usage for the quarter came in modestly above our guided range of $8 million to $9 million on average per quarter. This was driven largely by 3 things. First, we began building inventory for BRAIN flight computer production for existing customers. That inventory build is not a cost issue, it is a working capital investment tied to near-term revenue, and we expect it to convert as we fulfill those orders. Second, we accelerated some hiring based on the strength of new opportunities we saw in the first quarter. And finally, we incurred costs in our manufacturing business to develop and produce first articles for some of our more recent contracts, but have not yet transitioned to full rate production in large part due to the government shutdown. Again, this is simply a timing issue. We expect quarterly cash usage to tend -- to trend toward and remain within the previously guided range as revenue and margins ramp through the remainder of the year. Liquidity as of March 31 was $43.7 million, and we believe we remain well positioned to execute our 2026 plan. Before I get into the operational highlights, I want to spend a few minutes on a topic that I think provides important context for everything else I'm going to say. There remains a lot of confusion in our industry about what our technology actually does and how it is different from what other companies are offering. I published 2 white papers with my co-Founder, Denis Garagic, during the quarter, specifically to address that confusion, and I want to walk you through the core ideas. The first paper is about what we call Decentralized Embodied Collaborative Autonomy, or DECA for short. The central point of that paper is pretty straightforward. Most software platforms that people associate with modern artificial intelligence lives in massive centralized data centers. They are optimized for thinking, analyzing data, recognizing patterns, generating language, supporting human decision-making, and they are very good at that. The challenge is that machines operating dynamic real-world physical environments cannot rely on that kind of centralized cloud-based intelligence. A drone can't wait for a round-trip comms link to a data center. A robot on a factory floor needs to react in fractions of a second. A missile system operating in a communications denied environment has to be self-sufficient. Nature actually solved this problem a long time ago. Think about how human intelligence works. At any moment, the human body is generating an enormous amount of sensory data from sight, sound, touch and our other sensors. Almost none of that ever reaches conscious thought. The vast majority of it is filtered, processed and acted upon locally, automatically by fast systems that operate far below the level of conscious reasoning. You don't think about how to keep your balance when you walk. You do not reason through catching a falling object. Those things happen automatically, locally in real time. And that architecture works because it has to work that way. There is no other way. The physics does not allow for anything else in a world where reaction time and energy efficiency are constrained. Our technology is modeled on that same biological principle. Intelligence lives on the machine. Perception is filtered locally, not centrally. Decisions are made predictively rather than reactively. Machines collaborate through decentralized interactions rather than waiting for instructions from a centralized controller. That is the essence of DECA, and that is what we have built into our products. The second paper applied to the SAE automotive autonomy framework developed by the auto industry for self-driving cars and applying that to drone autonomy and swarming. For reasons we did this -- the reasons we did this is that there is enormous confusion in the market about what autonomy and swarming actually mean. We recognize that all software is not the same. It has different purposes, uses, capabilities and compute requirements. Similarly, not all autonomy is the same and not all swarming is the same, but the same basic words are used to describe a myriad of different capabilities. We are changing that narrative. The paper walks through a clear taxonomy from basic remote control all the way up to what we call Oracle-Class Wolf Pack Swarming, which is decentralized, predictive, collaborative autonomy where the swarm is not just reacting to what it observes in the moment, but participating -- but anticipating what is likely to happen, positioning assets and allocating sensing resources in advance of events rather than in response to them. As far as I know, we are unique in having developed this capability, and we are actively working to bring it into the commercialized version of SwarmOS. Our current SwarmOS product already operates at the Wolf Pack Swarming level, which is genuinely different and more capable than what anyone else in this space is offering, regardless of how they describe their systems. Oracle-Class is the next step, and we are further along toward it than any competitor we are aware of. I encourage investors to read both papers. They are on our website. They're not long, and I think they will give you a much clearer framework for understanding what we are building and why we believe it is different and highly valuable. Now let me walk you through what actually happened in the business during the quarter. The most significant operational milestone of the quarter was a demonstration of true heterogeneous autonomous swarming. We flew Gremlin-X, our reusable mini bomber UAV platform, that was previously known as Project Banshee, running our IntelliSwarm product in a coordinated test swarm alongside multiple Red Cat platforms also running our SwarmOS autonomy software. I want to explain why this is different from what you typically hear described as drone swarming because the distinction matters a great deal. A lot of what's called swarming in our industry is really preprogrammed flight coordination, where the only function that happens automatically is collision avoidance. This is akin to lane-changing sensors on a modern car. Otherwise, the drone follows a script. If you have seen drone light shows, that is a form of swarming, but every drone knows exactly where it is supposed to be at every moment because someone programmed it that way in advance. If something unexpected happens, the system does not know what to do. What we demonstrated in Q1 is fundamentally different. Each drone running SwarmOS was perceiving its environment independently, reasoning independently about what to do, acting on its own judgment within the mission parameters and collaborating with other platforms in real time. There was no script, there was no centralized controller calling plays. It is the distributed adaptive intelligence that the Department of War says we need, but many thought was 5 to 10 years away at best. It is resilient in ways that preprogrammed systems simply are not, particularly in contested and communications degraded environments. What makes that kind of distributed autonomous operation deployable at scale is the hardware underneath it. During the quarter, we progressed the development of our BRAIN flight computer variants, including a scaled-down version of the commercialized X2 variant called FC1. BRAIN is the hardware that when combined with SwarmOS forms IntelliSwarm, a product deployable at scale across autonomous platforms. We recently received a $500,000 first order from a defense tech company for the BRAIN X2. Next, we expanded the Draganfly partnership during the quarter by conducting a lab simulation of SwarmOS running on Draganfly's commercial defense platform. The next step is to integrate SwarmOS into their drones and run flight tests. Q1 was also the quarter we established a real presence in the space domain through 2 separate engagements. Through our HANGTIME award with the U.S. Air Force Research Lab, or AFRL, we will integrate SwarmOS with a space-based satellite sensor grid, enabling UAVs to develop even better situational awareness. This is the first planned integration of our collaborative autonomy platform with space-based assets, demonstrating that our AI can leverage data from all domains, air, land, sea and space, to improve mission effectiveness. Separately, we secured a contract with Portal Space Systems to support development of next-generation maneuverable spacecraft platforms, providing navigation, guidance, spacecraft modeling, embedded software and avionics support. Portal is building spacecraft designed to reposition across orbits on compressed timelines with minimal ground intervention, a class of problem well suited to our edge native architecture. Looking ahead, we see opportunities to expand the partnership to include Palladyne's autonomy capabilities. Through Palladyne Aerospace and Defense, we secured a contract with a major U.S. defense prime contractor to deliver a mission-critical propulsion subsystem for an existing U.S. missile system program, and we expect that contract to contribute nearly $1 million in revenue this year. This is a validation of our precision manufacturing capabilities and continues to expand our footprint in long life cycle defense programs. This contract is an example of the government shutdown impacting our first quarter revenue as we are still waiting for the evaluation of our first article. On the industrial autonomy side of our business, we are in active deployment with our first IQ 2.0 customer with the initial robot system integration currently underway. This is a non-contact surface treatment application, and it is a use case where IQ's combination of teleoperation and simplified path planning addresses a real industrial problem that no robot manufacturer or AI company currently solves with an off-the-shelf product. The customers' operations offer what I would describe as a potential land-and-expand opportunity. The initial deployment is one robot. As the customer builds confidence in the system and experiences all that it can do, the natural progression is to add more robots and expand use cases. We think that is going to be the typical adoption pattern for IQ, and is -- it is consistent with how enterprise automation technology tends to scale in industrial environments. Matt Muta transitioned from the Board to an operating role during this past quarter, joining us as President of Commercial and Industrial. Matt has real experience building and scaling enterprise technology businesses and his focus will be on converting the IT pipeline into customers. We also received a new patent during the quarter supporting advanced swarming and decentralized autonomy architectures, and we filed 2 new patent applications related to our AI software products and technologies. Our intellectual property portfolio is growing alongside our product portfolio, which is important for the long-term defensibility of what we are building. Next, I want to spend a few minutes on the broader context because the environment we are operating in has changed significantly, and I think it is worth being explicit about what that means for us. The Department of War is committing an unprecedented amount of resources to autonomous systems, collaborative swarming, counter-UAS, long-range precision fires, hypersonics and missile defense. These are not abstract priorities, they are specific trackable programs and budget lines that we are actively engaged with. The Defense Innovation Unit has seen its budget grow substantially and its funding programs, specifically around multi-domain collaborative autonomy. PAE Fires, the Army's portfolio acquisition executive responsible for artillery, missile defense and sensor systems, oversees a set of programs spanning long-range precision weapons, hypersonic weapons, integrated air and missile defense and counter UAS, each of which represents a potential opportunity for our product and service lines. And Golden Dome, the administration's flagship missile defense initiative, is one of the largest single defense investment priorities in a generation. We are pursuing opportunities across these and other programs and budget lines for SwarmOS, BRAIN, IntelliSwarm, Gremlin-X, SwarmStrike and our engineering services and research and development groups, including the Mark XL program. I want to be honest about this, we are a relatively small company pursuing very large programs, and not every pursuit is going to result in a win, but the alignment between what the Department of War is prioritizing and what we have actually built has never been stronger, and this is the environment in which we are operating. One of the most meaningful near-term proof points for what I just described is our invitation to participate in Northern Strike 26-2. Northern Strike is a premier Department of War joint exercise hosted August 2 through August 14 at the National All-Domain Warfighting Center at Camp Grayling, Michigan, which was designed as the drone dominance -- which was designated as the drone dominance range in the recently enacted National Defense Authorization Act. It is a joint national training capability accredited exercise involving more than 9,000 participants operating across contested multi-domain environments. It serves as one of the most demanding operational validation environments available to emerging defense technology companies as well as a recognized gateway to operational programs of record. We will be demonstrating SwarmOS on 4 distinct UAV platforms from 4 different OEMs, including our own Gremlin-X, with each drone collaborating autonomously and managed by a single operator, by a single ATAC interface. The exercise will validate cross-platform swarm collaboration across multiple UAV classes and manufacturers, decentralized decision-making that is resilient to denied or degraded communications, real-time mission adaptation across dynamic conditions and significantly reduced operator burden relative to conventional approaches. For us, Northern Strike is also a direct engagement with military end users and acquisition stakeholders who influence programs of record, which is exactly where we need to demonstrate this technology. I also want to highlight something that happened just after quarter end, but that directly reflects the work we did throughout Q1 and before. GuideTech was selected as one of only 14 companies invited to participate in the AFRL Relentless Wolfpack Industry Day hosted by the Air Force in collaboration with the Doolittle Institute on April 28 and 29. We were the only company in that group that most people would describe as a small cap. Our inclusion reflects the maturity of what we have actually built. GuideTech's submission combines SwarmStrike, our internally developed low-cost cruise missile, with SwarmOS to deliver a networked collaborative autonomous weapon solution. We are targeting a cost of less than $150,000 per swarm strike, which means you can put 10 of them in the air for the price of a single conventional cruise missile and then network them through SwarmOS to combine the effects on targets simultaneously. That cost per effect argument is precisely what the Department of War is focused on right now. SwarmStrike has completed its initial flight test, and we are actively advancing the program through multiple government channels. Separately, and I want to be clear, this is a distinct development, a different defense prime participating in the same relentless Wolfpack cohort independently chose to incorporate SwarmOS into their own submission. They evaluated the platform on its merits and built it into their own hardware solution. We didn't arrange that. That is the beginning of the platform adoption story we have been working toward where SwarmOS becomes the autonomy layer that other companies build on, not just a product we sell directly. Taken together, Northern Strike and Relentless Wolfpack are not isolated events. They are evidence of something broader. The strategy is working. The products are being validated in real operational and acquisition context, and the market is beginning to recognize what we have built. That is what I want investors to take away from everything I have described today. Let me close by putting all of this in context of where we are in the progression. On our Q4 call, I described our strategy as crawl, walk and run progression, not as separate strategies, but as stages of maturation. I want to come back to that framework because I think it is the right lens for understanding Q1 and what comes after it. 2026 is the crawl year, as I said before. Crawl is about proving that the integrated model actually works at scale, converting backlog into revenue, executing live demos and trials and advancing development stage assets towards defined milestones. Our wins in the first quarter achieved all of these objectives, $7 million in new contract awards, a successful swarm demonstration across multiple platforms from different manufacturers, 2 new space engagements, active deployment of our first Commercial IQ customer, 2 white papers that established our intellectual framework on the public record, a Northern Strike invitation, a key patent issuance and 2 new patent applications. That is a lot of activity that progresses us towards our objectives. In 2027, we will walk. Walk is when proof becomes repeatable. We expect broader SwarmOS and IntelliSwarm integrations, more IQ wins, more BRAIN wins and expanded defense programs with multiple product-based revenue streams running concurrently. That is when growth starts to become more systemic and less dependent on individual contract timing. And then we run. Run is where the full vision becomes operational across aerospace and eventually land and sea, where IntelliSwarm enables larger and more complex distributed systems, where the autonomy and propulsion architectures we are developing today start to converge and where the revenue is systemic rather than episodic. In conclusion, we know what we are building. We know why it is different, and we believe the work we are doing in 2026 is laying the foundation for everything that follows. With that, I will turn it over to Trevor. Trevor Thatcher: Thanks, Ben. I'll focus on our first quarter results, liquidity position and capital outlook. Revenue from the first quarter of 2026 increased 107% to $3.5 million. compared to $1.7 million last year. The increase was due to the inclusion of post-acquisition revenues from the acquired companies. Within that $3.5 million, product revenue, which today is mainly derived from our manufacturing business, was $1.7 million. Engineering services revenue, which includes GuideTech, was $1.8 million. We did not recognize meaningful product development contract revenue this quarter, but we expect this will pick up beginning in the second quarter as awarded business turns into signed contracts as we execute on recently signed contracts and as our existing contracts get extended through contract options. This quarter represents the first full quarter of revenue flowing from the businesses acquired in November of 2025. Cost of revenue for the quarter was $2.5 million compared to $0.4 million in the prior year period. Consolidated gross margin for the quarter was approximately 30%, which reflects the current revenue mix. Product margins in our manufacturing business were compressed by low capacity utilization and first article costs. As utilization improves and revenue ramps, we expect manufacturing product margins to improve accordingly. Our software products, when they begin generating meaningful revenue, are expected to carry the highest margins in the portfolio, in line with typical software margin costs. The 30% consolidated figure is not representative of where we expect to be as revenue ramps and mix evolves. Research and development expense was $3.9 million compared to $2.9 million last year, reflecting continued investment in autonomy software, avionics and product development programs from both Palladyne and the acquired companies. As we've discussed in prior quarters, we are investing in Gremlin-X and SwarmStrike development, the former of which was a major focus during the quarter. We expect continued investment over the next couple of quarters to bring that platform closer to commercialization. General and administrative expense was $6.9 million compared to $4.2 million in the prior year period. This increase reflects the incremental scope of G&A and overhead functions from the acquired businesses as well as select hiring to drive and support growth. Sales and marketing expense was $1.9 million compared to $1.2 million last year, reflecting expanded marketing programs and business development efforts. Operating loss for the quarter was $11.9 million compared to $6.9 million in the prior year period. GAAP net loss for the first quarter was $12.6 million or $0.28 per share. On a non-GAAP basis, net loss for the first quarter was $10.2 million or $0.23 per share. The primary differences between GAAP and non-GAAP results were a $1 million noncash loss related to change in fair value of warrant liabilities this quarter, driven largely by the change in the price of our common stock and public warrants. In the year ago quarter, we saw a $29.2 million noncash gain from warrant liabilities, $1.2 million of stock-based compensation expense and $150,000 loss related to change in our contingent consideration liability. We believe excluding these items provides a clearer view of our underlying operating performance and cash usage. Turning to liquidity. As of March 31, we had $43.7 million in cash, cash equivalents and marketable securities. During the quarter, we incurred minimal CapEx and used approximately $10.2 million in operating cash, partially offset by $6.5 million in net proceeds from our ATM program. Backlog as of quarter end was $17 million, up from $13.5 million at the end of 2025, reflecting gross additions of $7 million, offset by this quarter's recognized revenue of $3.5 million. Ben has already announced that we are reiterating our full year 2026 revenue guidance of $24 million to $27 million. This outlook reflects the contribution of the businesses acquired in November, and we continue to expect organic growth across each part of the company on a full year comparable basis. We also continue to expect total CapEx and OpEx cash burn for the year to be in the range of $32 million to $36 million or approximately $8 million to $9 million per quarter on average for the remainder of the year. The increase from our 2025 run rate reflects ongoing OpEx investments in SwarmOS and IQ, bringing acquired programs to operational readiness and the incremental headcount costs I mentioned earlier. This also includes CapEx for our manufacturing business and the acquisition of several third-party drones to validate SwarmOS's collaborative swarming capabilities on new platforms. Based on our liquidity position and expected backlog conversion, we believe we are well positioned to execute our 2026 plan. Operator, we're now ready to take questions. Operator: [Operator Instructions] Our first question is coming from Michael Latimore of Northland Capital Markets. Mike Latimore: Congrats on the start to the year here. So Ben, I think you mentioned -- I just want to clarify that a defense prime is integrated to ROS. I want to just clarify that you said that? And if so, can you elaborate a little bit? Are you exclusive? Is this related to UAVs or is it multi-domain? Any particular end programs you're dealing with? Benjamin Wolff: So they have not actually done the integration yet. What I said was -- and the key takeaway is that on a major defense program where they are trying to become the prime on a contract award, they have included our autonomy software as an important element of that submission. So we would -- if they wind up winning that contract, we would wind up being a subcontractor to that prime. It does relate to machines that are flying as opposed to something that's in space or in -- on the sea or on land. So it is an aeronautical type of application. Mike Latimore: Okay. Interesting. Okay. And then maybe talk a little bit about just your manufacturing operations. What is the capacity utilization now? Where might that go by year-end? Benjamin Wolff: So right now, we think that we are roughly stated around 30% of our total utilization capability. So we have a lot of excess capacity that is not going to be able to produce significant more revenues and increase our margins. As Trevor referenced, we don't have to do a lot more in terms of additional investment to be able to drive a lot more revenue through those production facilities. Mike Latimore: Great. And then just last on gross margin. It sound -- sort of sounds like you feel like gross margin probably improves by year-end? Or is that the takeaway? Benjamin Wolff: No question. When you have these new start-up defense contracts where we're producing -- expecting to produce large volumes of particular components for aircraft and missile systems, one of the important milestones to unlock go-forward revenue is to produce a first article that gets evaluated for tolerance and precision, et cetera, and we have to get the government to approve that first article so then we can open up the gates on the high-volume manufacturing. That has been delayed on some of our key contracts. So when you look at our margins, as Trevor referenced, we have all of the costs incurred to develop that first article, but none of the revenue that associates with it. So when you look at our overall margins across manufacturing, it looks depressed this quarter because of that investment in getting to first article. Operator: The next question is coming from Greg Konrad of Jefferies. Greg Konrad: Maybe just to go back to a couple of things that you talked about. Just on the SwarmOS, I mean, you talked about that being on 4 platforms and kind of laid out the crawl walk scenario for the next 2 years. Can you maybe talk about just kind of next steps? And if you can just remind us on when you think about like autonomy software, like what is the monetization? How do you get paid and how we think about that kind of going forward? Benjamin Wolff: Sure. So we have -- I'm really delighted with the progress that we've had. When you and I have talked before, we've talked about the fact that our primary goal for '26 is to get different customers within the Pentagon to be able to understand that this technology exists that it works, that it's not just on PowerPoint and how differentiated it is from everything else that people talk about in terms of swarming and autonomy. I think we're hitting all the marks on that. And frankly, we're doing it even earlier in the year than I had expected us to do. So I think we're seeing great traction. We're actually out on an exercise right now, where we are operating in a real battlefield environment. And soldiers are telling us that this should be the standard platform going forward for collaborative autonomy and swarming. So we're getting great feedback. It's going really well. In terms of what our business model looks like, our expectation and what we've talked with government customers about is that our software will cost the government about 10% of the overall UAV platform cost. So if we're talking about $40,000 drone, our cost will be $4,000. If we're talking about $1 million drone, the cost for our software will be $100,000. And if you're talking about a $4,000 drone, the cost will be $400. That makes sense to the government, and it makes sense to us because when we talk about these larger, more exquisite drones that cost more, they have more sensor capabilities on them. They have longer duration in the air. They are far more capable. And the more capable the platform, the more value and utility our software brings to the battlefield. So it is really a value pricing proposition. It is a onetime upfront license fee. Most drones aren't expected to survive in the battlefield for longer than 1 year. So this is almost like a razor blade business in that we're continually selling more software on more drones. They get used, they get expended and the government buys more of them. Greg Konrad: And then just on the full year guidance, I mean, you called out some of the issues, including the government shutdown in Q1 and kind of how you expect that to ramp through the year. Thinking about like backlog and what's maybe not in backlog with expected awards, I mean, how do you think about visibility into year-end and some of the expected awards? How much is competitive versus just follow-ons and just kind of how you think about visibility for the rest of the year? Benjamin Wolff: So when you take a look at the $7 million of new contracts in the first quarter, obviously, if we just did that every quarter and if all of the revenue was coming in on kind of a very scheduled basis, 4 quarters' time $7 million, you've got $28 million. We believe that every quarter will increase and that -- consistent with our internal plan, we knew first quarter was going to be lower. We expect second quarter to be larger than first and so on and so forth throughout the rest of the year as we continue to build the business. And we executed on Trevor Thatcher: all 3 aspects of the business, the software side, the manufacturing side, the engineering services side and the drone hardware side included in that. So we believe that with what we have in backlog and with the go-gets that we have that are in the pipeline, we are highly confident at this point with where we -- with being able to hit that $24 million to $27 million guidance. Greg Konrad: And then maybe just last one for me. I mean you called out the award with Portal. How are you thinking about the space opportunity in general? I mean, how is that emerging and just kind of how you're thinking about that going forward? Benjamin Wolff: I think volume in space is going to be far more limited than what we look at terrestrially. But there's obviously much larger dollars on individual discrete efforts going into it. And so I think it is a very potentially large opportunity set for us, potentially lucrative. But to be candid, it is an area that we see as kind of a growth opportunity for us, but not something that we're putting anywhere near the kind of investment of effort and resources into the way we are on kind of terrestrial UAV efforts. So we are taking those opportunity sets and pursuing them on a more discrete basis. I'd say that's more of a rifle-shot approach, whereas what we're doing with trying to get our software anywhere and everywhere that it can be relevant on UAV, that's more of a scatter gun or a shotgun approach. In both cases, I think we're applying the appropriate amount of resources to realize the opportunity. I think space can be big. I think it will be longer duration to get too big than it is near term the way we are with terrestrial drones. Operator: Our next question is coming from Max Michaelis of Lake Street Capital Partners. Maxwell Michaelis: First one, I just want to go back to Draganfly. So you guys finished up a few successful flight simulations in the quarter. I think you mentioned you're going to be moving on to live flight tests. Kind of help us out with sort of a timeline, what it looks like in 2026, when you guys are going to start these flight tests and kind of when this becomes more of a -- I guess, not meaningful partnership, but when does this start to kind of turn into some revenue? Benjamin Wolff: So we're expecting to have some of our demonstrations on the Draganfly platform, I think, starting in this current quarter, in the second quarter. Certainly, I know we've got some plan for the third quarter where we're actually out with the government customers. I mean you know the drill with the defense contract. You have to show them that it works, that it exists. They then decide to go allocate dollars towards it, you negotiate a contract and you get an award. So I can't give you a prediction on when this becomes -- when that specific partnership results in revenue for us and Draganfly. But what I can tell you is our partnership with them is very important because they are one of the core platforms that we've identified has a unique capability set that with our software on it can show increased value to the government customer. So it's an important partnership for us, and we expect to be getting that integration done in this quarter, the second quarter and doing demonstrations for the government as soon as that integration is done. Maxwell Michaelis: Okay. And then last one for me. I don't think anybody has touched on sort of the commercial side of business with the IQ 2.0. I mean you talked about this customer that you're actively deploying with. I mean I'm assuming this initial deployment, you have a few systems in there, but does this customer have sort of the capacity to bring on -- to become a meaningful customer sometime in the future? Benjamin Wolff: So the important thing about this customer is, yes, to answer your question, they have the ability to scale to more machines with our software on it once they become delighted with what they see from the first installation. More importantly is this is the first time that we've had an active partnership with systems integrator, an indirect channel partner, if you will, and I mentioned on our prior call last quarter that one of the things we needed to figure out was how we create an attractive economic value proposition, both for ourselves, for our end customer, but also for the systems integrator because there -- as you know, there are some 1,800 systems integrators and maybe even more at this point across the United States. Getting them to be out selling for us was kind of a holy grail moment for us, and that happened in the first quarter. So we've got this partnership now with the first systems integrator. We've got several other discussions underway where we've been able to figure out how we talk about this product and the economic opportunity associated with it in a way that works for both the systems integrator and for us and the end customer. So the reason that's important is systems integrators obviously deal with a lot of different customers, and they can be an indirect channel to get our message out there more broadly. So that's what we're really excited about. Yes, the first deployment is going very well. I mentioned in my prepared remarks that it is about surface preparation. So think about doing things like sand blasting, sanding, grinding, those kinds of applications, even paint application on surfaces. Those are all the kinds of jobs that have historically required a human to do the job because of the variability associated with that kind of task. And we're showing the end user and the systems integrator how it can be done now with a robot on an automated basis using our IQ 2.0 software. Operator: The next question is coming from Brian Kinstlinger of Alliance Global Partners. Brian Kinstlinger: Can you quantify how much revenue was delayed due to the government shutdown? How would you characterize the procurement environment now? And then can you quantify TCV or bids outstanding in pipeline? Benjamin Wolff: So, I can't quantify what was the amount associated with the delay because it's frankly difficult, Brian, to know had we gotten first articles approved, how much would have actually been taken based -- in the quarter based on when that approval had happened. So I can't really quantify that. Again, I'll tell you, reiterate that even with the government shutdown, we actually achieved what our internal projections called for. And so I'd ask you to take that plus the guidance that we've given and assume we're going to ramp over the remaining 3 quarters to achieve what we expect to achieve. In terms of the pipeline, I can't quantify pipeline. I mean we obviously have internal numbers, but I don't want to throw that out there. The thing that we feel very solid about is backlog, which means it's contractually committed. I don't want to speculate beyond what's contractually committed. Brian Kinstlinger: Well, in one of the prior questions, you talked about needing something like $7 million of bookings per quarter. Maybe talk about what the sales cycle generally you're seeing right now? Is it months? Is it things you've been bidding on for a very long time? Just kind of help us understand what that sales cycle looks like? Benjamin Wolff: Yes, sure. So on the software side, we're seeing stuff that we had expected was a 12- to 18-month sales cycle, and we're seeing things now coming in, in less than 6 weeks. That might be an anomaly. It might just be the particular circumstances of those handful of different engagements that we've had. But we've landed some things that frankly surprised us with how quickly they came in. There are some other opportunities that we've been picking away at for 12 months now, and they still haven't come to fruition. I think the thing that is encouraging to me, though, without kind of changing my own expectations about the sales cycle is that we are definitely, particularly on the defense side, seeing money come in faster than what we -- or at least contracts come in faster than what we would have expected 3, 4 months ago. So I think it's very bullish. It doesn't have to take as long as it has historically taken. And stay tuned. We'll hopefully be announcing some additional contract wins that have come in faster than what we would have expected. Brian Kinstlinger: Great. Can you provide an update on the Red Cat partnership testing and integration? I think last quarter, it sounded like you were very close to signing a production agreement, but we didn't hear anything about that this -- on this call? I think I didn't. Benjamin Wolff: So -- Yes. So we have a solid partnership with them. We have -- I think we inked the new expanded partnership agreement, and we are out doing demonstrations with their drones. In some instances, Brian, those demonstrations are being done jointly with the Red Cat team. In other cases, we take their drones out and we are demonstrating our software on their drones and their team isn't necessarily needed to be there. So -- but the Red Cat drones are kind of a cornerstone of the demonstrations that we're doing for government customers. Sometimes, as I said, it's in collaboration and sometimes it's just we've been invited to something and we go do it. Brian Kinstlinger: So just to be clear, the economics are in place and the contracts in place for... Benjamin Wolff: Yes. Brian Kinstlinger: That determines your piece of the Red Cat sale and you can go-to-market now? Benjamin Wolff: That's correct. Brian Kinstlinger: Okay. Lastly, can you tell us how many shares did you sell in the ATM in the first quarter? It looks like you sold -- you raised $6.5 million. What was the average price of that? Or what were the shares? Benjamin Wolff: Trevor, do you have that information? Trevor Thatcher: Yes. We sold just under 890,000 shares. So if you do the math, it ends up being about $7.35 a share. Operator: [Operator Instructions] We're showing no additional phone questions at this time. Brian Siegel: We've got some questions from online. First one, there have been numerous expanded contracts with Air Force and other Department of War initiatives. These have been smaller scale thus far. How is the company positioning at this time to ramp production if a large purchase order is received? Benjamin Wolff: So yes, I think that the correct way to characterize the contracts that we're seeing with DoD both directly and through primes is they start small and then we do everything we can to try and expand them. The key is getting those first contracts inked and demonstrating what we can do and then having it grow from there. The question about ability to scale, I'll take that in 2 different parts. One is on the software side. Software is easy to scale. We've got the code. The product is locked, and it's just about pushing software onto whatever hardware platform is being used, and we can do that quickly. So there's a lot of opportunity to scale the software side. Responding to the manufacturing side of the business, I think in response to a question I was asked earlier, we're only at about 30% capacity on our manufacturing facilities. So there's a lot of room to scale there. And we rely on a lot of automation and advanced technologies in that business. So it does not require a lot of ramp-up of human personnel to be able to leverage that capacity that we have, that isn't being used at this moment. So I think we've got a ton of capacity without additional costs that gets incurred to be able to ramp up revenues significantly. So we feel like we're in very good shape on that front. Brian Siegel: Next question for IQ 2.0, can you help us understand what's behind the customer and the land-and-expand opportunity? And then in general, how many qualified opportunities or kind of what does the pipeline sit at today for this product? And how are some of those conversations progressing? Benjamin Wolff: So the -- I think I mentioned before that the surface prepped use case is what this first customer and the systems integrator is focused on. There are -- there is a massive amount of market need for automating that kind of task, whether you're talking about stripping corrosion or paint off of a part, whether you're talking about applying new surface treatment to the part to be ready for delivery to an end customer, whether it's painting or other types of prep. This is historically an area that has been very labor-intensive. And what we're seeing is that, that is a greenfield opportunity for automation, and just a tremendous amount of interest and therefore, demand in what we're doing. The pipeline, not backlog, but pipeline is filled with dozens of conversations that we are having. But again, we believe that on the IQ side of our house, historically, it has been a 12- to 18-month sales process. If you want to say historically, that's what we've historically thought it would be. The one that we're deploying now, I think, came together in about 8 weeks. So that's on the short side. But if our 12- to 18-month expectation is correct, and we just launched IQ 2.0 at the beginning of this year, we got some ground to cover. So our expectations are modest for '26. That's part of the crawl, walk, run approach that we've talked about. But we could be pleasantly surprised. I hope we're pleasantly surprised, and we'll see more like this first one that come in, in shorter than the 12- to 18-month time frame. Brian Siegel: Next question, and this kind of relates more to some of the things you said in the white papers. Recently, there was a Bloomberg article stating that Google is dropping out of the $100 million Pentagon prize challenge to create tech for voice controlled autonomous drone swarms. The article says OpenAI, Palantir and xAI are still competing. There's no mention of Palladyne for SwarmOS. Does this mean others have equally as good swarming technology and don't have to use Palladyne? Or should we be expecting some future growth as those companies need our SwarmOS? Benjamin Wolff: Yes, I think it's the latter. So let's break this down. The ability to give voice commands to a drone, while that certainly is easier than using joysticks, it is still a one soldier to one drone operating environment, and there's nothing collaborative about it between drones and there's nothing swarming about it. It certainly makes giving direction and manually managing multiple drones easier if you can just have a soldier say, do X, Y or Z without having to have your fingers and thumbs on joysticks and controllers. But that is -- that's like a Band-Aid on the problem. And so the great part about that program is the Pentagon is saying, "Hey, we want to put money and resources into trying to make this ease of operation a real focus of ours." They want to lighten the cognitive load on the operator. That's all great tailwinds for us because we have the ultimate solution to that. It's not about -- I mean, whether you're typing in a command or giving a verbal command, there's certainly some efficiency there. But that's just like the -- that's step one. We're at step 5 or 10 already where we are able to very, very easily with a very small amount of input, get a whole swarm of drones working collaboratively to achieve an objective or a mission. So I think back to the question, we are the endpoint that, that program ultimately wants to get to, and they're kind of looking at stop-gap measures. So that's very exciting to us. Brian Siegel: So that concludes the question-and-answer session from online. Operator, we can close out. Operator: Thank you. Ladies and gentlemen, this brings us to the end of today's teleconference. We would like to thank you for your participation and interest in Palladyne AI. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day. 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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Palladyne AI (PDYN) Q1 2026 Earnings Transcript was originally published by The Motley Fool

Revenue growth of 107% year-over-year was aligned with internal expectations despite a federal government shutdown that delayed defense contract activity. Management reported adding approximately $7 million in new contract awards during the quarter, which they noted as a meaningful bookings number that provides visibility into the upcoming revenue ramp. The company is positioning its 'Decentralized Embodied Collaborative Autonomy' (DECA) as a biological-model alternative to centralized, cloud-based AI that fails in communication-denied environments. Strategic focus has shifted toward 'Oracle-Class Wolf Pack Swarming,' where drones anticipate events and allocate resources predictively rather than reactively. The manufacturing segment is currently operating at approximately 30% capacity, providing significant headroom for high-margin production without requiring major capital investment. Management successfully demonstrated heterogeneous swarming, proving that SwarmOS can coordinate diverse platforms from different manufacturers without a centralized controller. Reiterated full-year 2026 revenue guidance of $24 million to $27 million, assuming an accelerated growth rate in the second half as backlog converts. The 'Crawl' phase of 2026 focuses on proving the integrated model and converting the $17 million backlog into recognized revenue. For government and defense customers, software monetization is modeled as a value-based license fee, targeted at approximately 10% of the total UAV platform cost. Anticipated sequential quarterly revenue growth is supported by the transition from first-article testing to full-rate production in defense programs. Quarterly cash usage is expected to trend back toward the $8 million to $9 million range as inventory builds for BRAIN flight computers convert to revenue. The federal government shutdown caused a revenue timing issue by delaying first-article evaluations for critical missile system propulsion contracts. Operating cash usage of $10.2 million was modestly above guidance due to strategic inventory builds and accelerated hiring for new opportunities. A major defense prime contractor independently integrated SwarmOS into their own program submission, validating the platform's 'autonomy layer' adoption strategy. The company secured its first space-domain engagements, including a contract with Portal Space Systems for maneuverable spacecraft avionics. Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management clarified that a major prime has included Palladyne's software in a bid for a significant aeronautical program, positioning the company as a key subcontractor. The integration is currently focused on flying machines rather than maritime or land-based domains. Margins were temporarily depressed by first-article costs and low capacity utilization (30%) in the manufacturing business. Management expects significant margin expansion as government approvals unlock high-volume production on existing contracts. The business model functions like a 'razor blade' strategy, as drones are often expendable with lifecycles under one year, requiring recurring software licenses. Pricing is tiered based on platform capability, ranging from $400 for low-cost drones to $4,000 for mid-range platforms and up to $100,000 for exquisite systems. The first IQ 2.0 deployment utilizes a systems integrator, which management views as a critical indirect channel to reach 1,800+ potential integrators. The sales cycle for commercial AI, while historically 12-18 months, saw a recent deal close in approximately 8 weeks. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here.

Revenue rose to $3.5 million in Q1 (up 107% YoY) and management reiterated full-year 2026 guidance of $24–$27 million, exiting the quarter with about $17 million of backlog after adding roughly $7 million in new contract awards; a federal shutdown caused timing delays but not cancellations. Margins and profitability remain pressured—consolidated gross margin was ~30% and operating loss was $11.9 million (GAAP net loss $12.6 million)—while the company used ~$10.2 million of operating cash in the quarter, raised $6.5 million via its ATM, holds $43.7 million of liquidity, and expects 2026 cash burn of $32–$36 million. Operationally Palladyne demonstrated "true heterogeneous autonomous swarming," advanced its BRAIN flight computer (including a $500,000 first order), pursued space-related work (AFRL HANGTIME, Portal), and is positioning software monetization as a platform layer priced at roughly 10% of UAV cost (SwarmStrike targeted at Interested in Palladyne AI Corp.? Here are five stocks we like better. The Arms Race Has Gone Airborne: What Investors Need to Know Palladyne AI (NASDAQ:PDYN) reported first-quarter fiscal 2026 revenue of $3.5 million, up 107% year-over-year, and reiterated its full-year 2026 revenue guidance of $24 million to $27 million as management pointed to a growing contract backlog and increased defense program activity. President and CEO Ben Wolff said first-quarter revenue rose to $3.5 million and was “in line with our internal expectations,” while noting that a federal government shutdown temporarily delayed activity across several defense contracts. Wolff emphasized the disruption was “a revenue timing issue but not a demand issue,” adding that the affected work was not canceled and “remains in backlog.” → Roblox Stock Slides to New Low as Safety Changes Weigh on Outlook Can Palladyne AI Live Up to the Hype? Chief Financial Officer Trevor Thatcher said the year-over-year increase was driven by the inclusion of post-acquisition revenue from businesses acquired in November 2025, marking the first full quarter with those contributions. Thatcher broke out revenue into $1.7 million of product revenue (primarily from the company’s manufacturing business) and $1.8 million of engineering services revenue, which includes GuideTech. Thatcher added Palladyne “did not recognize meaningful product development contract revenue” in the quarter, but said the company expects that category to “pick up beginning in the second quarter” as awarded business becomes signed contracts, recently signed work is executed, and existing contracts are extended through options. → The Real SpaceX Play: 5 Chip Stocks Powering the IPO Before It Launches Military Contract Fuels Growth in These 2 Autonomous Drone Stocks Wolff said Palladyne entered the quarter with about $13.5 million of backlog, recognized $3.5 million in revenue, and exited the quarter with about $17 million. He said the company added approximately $7 million in new contract awards during the quarter, net of revenue recognized, calling it “a meaningful bookings number.” Based on that visibility, Wolff reiterated the company’s 2026 revenue outlook of $24 million to $27 million, which he said implies “approximately 357%-415% growth compared to 2025.” He said the company expects sequential revenue growth each quarter, with acceleration in the second half as backlog converts and new awards are secured. → 3 Emerging Markets ETFs to Maximize Exposure to High-Potential Countries During the Q&A, Wolff said management was “highly confident” in the guidance given backlog and what he described as “go-gets” in the pipeline, though he declined to quantify pipeline totals beyond contractually committed backlog. Thatcher reported consolidated gross margin of approximately 30%, reflecting the quarter’s revenue mix. He said product margins in manufacturing were “compressed by low capacity utilization and first article costs,” and that margins should improve as utilization and revenue ramp. He added that software products are expected to carry the highest margins “when they begin generating meaningful revenue.” On expenses, Thatcher reported: R&D expense of $3.9 million, up from $2.9 million a year earlier, reflecting investment in autonomy software, avionics, and product development, including Gremlin-X and SwarmStrike. G&A expense of $6.9 million, up from $4.2 million, reflecting added overhead from acquired businesses and selective hiring. Sales and marketing expense of $1.9 million, up from $1.2 million, reflecting expanded marketing and business development. Operating loss was $11.9 million, compared to $6.9 million in the prior-year quarter. GAAP net loss was $12.6 million, or $0.28 per share, while non-GAAP net loss was $10.2 million, or $0.23 per share. Thatcher said a key difference between GAAP and non-GAAP results was a $1.0 million non-cash loss tied to changes in the fair value of warrant liabilities. Wolff said operating cash usage in the quarter came in “modestly above” the company’s guided range of $8 million to $9 million per quarter, driven by three factors: an inventory build for BRAIN flight computer production, accelerated hiring “based on the strength of new opportunities,” and manufacturing costs tied to first-article development that had not yet transitioned to full-rate production in part due to the shutdown. Thatcher said the company used approximately $10.2 million in operating cash during the quarter and raised $6.5 million in net proceeds through its ATM program. In response to an analyst question, Thatcher said the company sold “just under 890,000 shares” at an average price of about $7.35 per share. Liquidity at March 31 totaled $43.7 million in cash, cash equivalents, and marketable securities. Thatcher reiterated expected 2026 cash burn (CapEx and OpEx) of $32 million to $36 million, or approximately $8 million to $9 million per quarter on average for the remainder of the year. Wolff highlighted a first-quarter demonstration of “true heterogeneous autonomous swarming,” including a test flight of Gremlin-X (previously known as Project Banshee) running IntelliSwarm alongside multiple Red Cat platforms running SwarmOS. He contrasted the demonstration with what he described as pre-programmed coordination often labeled “swarming,” saying Palladyne’s approach involved independent perception and decentralized collaboration without scripts or a centralized controller. Wolff said the company progressed development of BRAIN flight computer variants, including a scaled-down version of the commercialized X2 called FC1, and noted a $500,000 first order from a defense tech company for the BRAIN X2. He also discussed partnerships and contracts, including lab simulation work with Draganfly and upcoming integration and flight testing. In the Q&A, Wolff said he expects demonstrations on the Draganfly platform to begin in the second quarter, with additional demonstrations planned for the third quarter with government customers. In the space domain, Wolff pointed to two engagements: work under the U.S. Air Force Research Lab’s HANGTIME award to integrate SwarmOS with a space-based satellite sensor grid, and a contract with Portal Space Systems to support maneuverable spacecraft development with navigation, guidance, modeling, embedded software, and avionics support. Wolff said Palladyne could potentially expand the Portal relationship to include autonomy capabilities over time, while later noting space efforts are being pursued with a “rifle shot approach” compared with the company’s broader focus on terrestrial UAV efforts. Wolff described an expanding set of defense priorities—such as collaborative autonomy, counter-UAS, missile defense, and long-range precision fires—as increasingly aligned with Palladyne’s offerings. He said Palladyne has been invited to participate in Northern Strike 26-2 in August, where the company plans to demonstrate SwarmOS on four distinct UAV platforms from four OEMs, including Gremlin-X, managed by a single operator through a single ATAK interface. Wolff also highlighted GuideTech’s selection for the Air Force Research Lab’s Relentless Wolfpack Industry Day shortly after quarter end, saying GuideTech’s submission combined SwarmStrike with SwarmOS. He said Palladyne is “targeting a cost of less than $150,000 per SwarmStrike,” and that SwarmStrike has completed its initial flight test. Wolff additionally said a separate defense prime in the same cohort independently chose to incorporate SwarmOS into its own submission, which he described as an early sign of SwarmOS becoming an autonomy layer that others build on. Asked about monetization, Wolff said Palladyne’s expectation is to price software at roughly 10% of the underlying UAV platform cost, structured as “a 1-time upfront license fee.” He said this approach has resonated with government customers and framed it as a “value pricing proposition.” On the commercial and industrial side, Wolff said Palladyne is in active deployment with its first IQ 2.0 customer on a non-contact surface treatment application, with initial integration underway. He characterized the deployment as a “land and expand opportunity,” beginning with one robot and expanding as confidence grows. He also said the quarter included the transition of Matt Muta from the board to an operating role as President of Commercial and Industrial, with a focus on converting the IQ pipeline into customers. Palladyne AI Corp., a software company, focuses on delivering software that enhances the utility and functionality of third-party stationary and mobile robotic systems in the United States. Its Artificial Intelligence (AI)/ Machine Learning (ML) software platform enables robots to observe, learn, reason, and act in structured and unstructured environments. The company's software platform enables robotic systems to perceive their environment and quickly adapt to changing circumstances by generalizing from their experience using dynamic real-time operations without extensive programming and with minimal robot training. The article "Palladyne AI Q1 Earnings Call Highlights" was originally published by MarketBeat.