Welcome to the Volatus Aerospace Q2 2025 Earnings Call. I am Danielle Gandy, Head of Marketing and Communications for Volatus Aerospace and the moderator for this call. Before we get started, just a reminder that we welcome your questions, and we'll be having a Q&A session at the end of the presentation. You are welcome to submit your questions at any time during the webinar by clicking on the Q&A box at the bottom of the webinar screen and typing in your questions. If we are unable to answer your questions today, we'll be happy to connect with you after the program. This presentation will be recorded and made available on our Investor website within 24 hours. I would also like to take a moment to point out that certain information set forth in this presentation contains forward-looking information, including future-oriented financial information and financial outlook, and actual results may differ materially. The risks, uncertainties, and other factors that could influence actual results are described in the presentation, in the press release, and in the MD&A filed with Canadian regulators. This presentation also contains non-IFRS measures, which are also outlined in the presentation. There is a full disclosure on page two of this presentation, which we encourage you to read and can be found on Volatus's Investor website at investor.volatusaerospace.com. The company considers the earnings call part of its routine disclosure to educate investors on information contained in the quarterly results and related MD&A. If you have any questions, please feel free to contact the Volatus Aerospace IR team at investorrelations@volatusaerospace.com. Now, with that, it is a great honor to introduce Glenn Lynch, CEO, and Abhinav Singhvi, CFO of Volatus Aerospace. Thanks, Danielle. Good afternoon, and thanks everyone for joining us for our Q2 Earnings Call. I'll begin with a snapshot of our financial performance this quarter. We delivered a revenue of $10.6 million, which represented a 49% increase year over year. This is reflecting a strong growth across both equipment and service sales. Our gross profit came in at $3.4 million, representing a 32% margin. This was consistent with our expectations, given the higher mix of equipment sales. On profitability, we made significant progress. Our adjusted EBITDA loss narrowed to just $276,000, an 85% improvement compared with last year. Our revenue mix remains well-balanced, with 52% from services that grew from 71% quarter over quarter and 48% from equipment, which more than doubled with 104% growth. Importantly, we ended the quarter with a solid financial foundation, approximately $20 million in cash, supported by strong institutional partners. Overall, Q2 was another step forward. Strong growth, improved profitability, and a balance sheet that positions us to execute on our strategy moving forward. Now, Abby is going to dive a little deeper into these financial slides a little later in our call. Next slide, Danielle. Thank you. Q2 was not only about financial progress. It was about building momentum in the business. On the execution side, we delivered about $5 million in ISR and public safety contracts, a clear sign that the demand for our solutions in the defense and security sectors is increasing. We also advanced on the regulatory front, securing multiple approvals for expanded remote operations. These approvals opened the door to new applications across defense, public safety, and industrial markets. At the same time, we continue to grow through strategic partnerships. Our OEM collaborations in Canada, the U.S., and Europe, spanning surveillance, heavy-lift cargo, and geospatial, position us to compete globally while building a Canadian sovereign capability. Underpinning all of this is our Operations Control Center. It gives us the ability to respond credibly and at scale to both Canadian and international RFPs. It's a real differentiator and a game changer for Volatus as the market grows. On slide 11, we're going to highlight how these efforts position us for long-term leadership. Our strategy is directly aligned with national priorities, supporting Canada's NATO readiness, Arctic sovereignty, and the push to strengthen domestic industrial capacity. We're also building sovereign capability by investing in design, production, and secure supply chains. This anchors drone manufacturing here in Canada and reduces our reliance on foreign sources. At the same time, regulatory tailwinds are working in our favor. Recent approvals and evolving regulatory framework are unlocking scalable remote operations, giving us a first-mover advantage. We're expanding our reach, both at home and abroad. Recent ISR training and heavy-lift engagements with NATO-aligned partners validate our credibility on the international stage. And finally, we're commercializing innovation, advancing AI-enabled software, counter-drone solutions, and new RPAS platforms that will shape the next phase of our growth. Taken together, these initiatives put us in a strong position not only to deliver results today, but also to develop sustainable leadership for the future. So that's it for me. Until the questions, I'm going to pass you over to Abby to take a closer look at our financial results for the quarter. Thank you, Glenn. On this slide, you'll see the financial summary of our quarterly result. Revenue came in at $10.6 million, up 49% year over year, with strong growth in both equipment and services. Equipment more than doubled, while services delivered strong gains, showing healthy demand across both our business lines. Gross was at $3.5 million, a 32% gross margin compared to 35% last year. The margin shift is largely due to a higher share of equipment in the mix, but this is a positive trend that reflects increased adoption in both commercial and defense segments. A loss from operations was $2.2 million, which included one-time merger-related costs, higher insurance, and severance expenses. We also restarted R&D spending on Condor XL on a pro forma basis. Though the loss narrowed to just over $680,000, a significant improvement from last year as synergies began to come through and continue to kick in, and most importantly, our Adjusted EBITDA improved by 85%, with the loss reduced to only $276,000. This demonstrates the progress we are making on our path to profitability, even as we reinvest in the growth of our business. On the next slide, we'll discuss more about the first half-yearly results. For the first six months, we delivered $16.3 million in top line, up 19% year over year. Growth was driven by equipment, which increased 47% as adoption continues to accelerate. Gross profit was $5.2 million, up from $4.7 million, with 32% gross margin holding steady despite the higher mix of equipment. Reported loss is $5.6 million compared to $4.5 million. This reflects higher personnel costs, including, as I discussed, the severance and asset depreciation. On a pro forma basis, loss narrowed to $2.4 million, a significant improvement from $5.4 million last year. That's a 57% gain in the profitability as the synergies begin to show up. We expect more benefits in the second half of the year as our IT and technology consolidation is completed. To give a brief on the expense perspective, we have successfully reduced the marketing and IT costs. R&D spending has been reactivated, and any travel increase you see here is mostly related to business development and investor relations activities. The key takeaway: at the half-year mark, we are delivering solid top-line growth, improving profitability on a pro forma basis, and also realizing cost synergies as we have expected during the merger last year. The next slide basically gives a snapshot of our revenue. The revenue growth has been consistent with Q2 coming in at $10.6 million. That's a 50% growth, as you could see on the graph, showing momentum we are building. Looking at the product mix on the right, we have seen healthy balance develop compared to the past year. In Q2 2024, services accounted for about two-thirds of our revenue, but this quarter, the mix has shifted to 52% services and 48% equipment. This shift is critical. It highlights the continued demand for our high-margin service business, while at the same time reflecting the strength of the equipment sales, particularly in commercial and defense applications. Together, they will create a balanced and scalable model as we grow in the future. The next slide gives you a snapshot on our gross profit of the business. In Q2, gross profit was $3.4 million, up from $2.5 million last year, an increase of over 30%. For the first half of the year, the gross profit totaled $5.2 million compared to $4.6 million, with a margin of 32%, which was as expected, so while the margins have dipped because of the product mix, the overall trend is very strong, and that's because we are growing gross profit consistently, maintaining margin stability, and scaling the business across all the verticals in a disciplined way, and the growth is not just coming from one geography, it's coming in a homogeneous way from Canada, the U.S., the U.K., and Europe, with our expansion in Norway last year. This concludes the review of the financial results for the quarter. Again, to summarize, we delivered strong revenue, continued improvement on our profitability, and a solid balance sheet to exit the quarter and the current state of the business. With that, we'd like to open for a Q&A. Thank you, Abby. We already got a question here. How is the collaboration with Ondas progressing? So we announced that, I think, just a few months ago. Ondas, the collaboration with Ondas has been ongoing for some time right now. Their capabilities are very focused in the industrial defense space, and we're working quite hard to continue to work with them to leverage opportunities that we see developing in the current geopolitical situation, both domestically in North America and abroad. It's early to give any specific details on that right now. So, we are often asked about your ability to finance an elephant. Can you discuss your access to debt or lines of credit where you land a heavy elephant or two? So the question is, what do we do when we catch the bus? And I'll let Abby answer that. It's a good question. And actually, there are two ways to answer it. One, as disclosed now, our balance sheet is strong. We have long-standing relationships at the same time with financial institutions and government-backed agencies. We do not specifically comment on any of the debt facilities which we have finalized or which are put in place. But we do have access to both traditional and modern instruments that can easily fund the elephants we are chasing, whether it be through project financing, through any credit facilities, or even if it's a customer milestone payment. So long answer to short question, but the answer is we are a step ahead, in that if we are able to catch the bus, we'll be in a position to immediately drive it. How are you seeing the OCC as a differentiating factor, especially for international markets? That's a great question. So if you have an opportunity to visit the Operations Control Center in Toronto, we do give tours fairly regularly. It's really. I want you to imagine the equivalent of a NASA or Houston Mission Control, but for drones. So really, what the OCC does is it gives us a scalable platform. We're actually able to operate drones remotely. We do them almost routinely now. On a daily basis, we're flying drones in Edmonton from Toronto. So it helps us with mobilization, demobilization on current projects where, instead of, imagine on our commercial projects, instead of spending money sending three trucks with three drones and six people, we send one truck with three drones and one person, all operating them remotely. As the drones are becoming larger and the regulatory enablement allows us to fly those larger and more capable drones, it actually gives us significant scalability. And I want you to imagine the difference now patrolling, let's say, 1,000 km of power line instead of 10 km of power line, and being able to do that with a field rep whose primary responsibility was the actual launch and recovery of the drones. So that'll continue to happen. The Operations Center, it's really an example of what's possible. Now, we have the ability also to deploy smaller Operations Control Centers. First of all, we have a remote operations control vehicle that can do almost everything we can in our Operations Control Center, but on a small scale. We also have a facility in Syracuse that, for example, allows us to scale our operations in the United States using a remote operations facility that's sovereign-based where it's required. So if a country requires sovereign-based capability, we literally take the technologies that we've learned here and deploy it on a smaller scale in those country locations. And where a country will allow us or where there's a regulatory mechanism that allows us to fly the drones from the centralized location, it reduces our cost and increases the gross margin on all of those projects. Can you also walk us through what the government timeline might look like in terms of issuing a budget? And then maybe talk a little bit about the RFPs and the proactive work you're doing in that arena? I can. There's a lot of theory out there right now as to when we're going to see the government publish its budget. I've heard everything from before Parliament opens in September because it's actually not sitting until later September. That one's a little hard to understand, right through to as late as November. The government actually does not have a firm deadline for the release of the budget. So at this moment in time, I think everybody's guess is as valid as mine is. But what we are seeing right now is policy statements coming from our government and the evidence that the government is doing what they need to do to set the groundwork. A lot of policy activity or a lot of budget activity is going on in the background. But I think you'll see the primary enablement for a lot of things happen after the budget is actually issued. In the meantime, what we're doing is not just responding to RFPs, but focusing, which we began last November, focusing on raising our presence, elevating our presence in Ottawa with the federal government, with the new government, the new ministers, and with organizations like the RCMP and Canadian Border. And we're doing that both through direct initiatives through our board members, some of which, as you may know, General Leslie, for example, is on our board. He's a former liberal minister, as well as being former head of the Canadian Army, I mean. And also, by using our lobby firm, we have engaged a lobby firm. It's publicly disclosed. It's David Pratt & Associates, former Minister of Defense under the Paul Martin government. They've been engaged with us since November. That's helping raise our profile on the defense and government side. And we're also taking the initiative of working with not just RFP responses, but also unsolicited proposals, giving the government ideas on what's possible so that we're part of that conversation. Linking into that, we have someone asking about the RCMP zone commander that was recently announced. Are you watching that? So we're watching it as close as we can. Obviously, the issue with RCMP is a lot of information is not public for reasons of security. So there's only a certain amount of information that's there. And as they've identified, it's a trial. So they're using, if I remember right, last I heard, they've borrowed some drones from the Canadian forces, and they're being deployed at selected locations. But for the most part, it's still a relatively small-scale solution to a large-scale problem. We have several questions. I'm going to try, and they're all more or less the same things. I'm going to try to pull them all together. Could you please provide a breakdown by industry that constitutes the $600 million pipeline that we've mentioned? And how much do you see Volatus realizing by the end of 2025? A little bit of projection questions there. Yeah. I don't think we're in a position really to make too many forward-looking statements, and I think it would be irresponsible to do so. The pipeline, while $600 million is disclosed, it's robust. Let's just say we're not just chasing elephants, but there's a lot of elephants, and they're very fast. The reality is, though, it's hard to predict when a lot of these things will come to pass or even if they will. The issue is the government makes a policy decision. Our Prime Minister has a direction that he's made very clear that I think has the support of most Canadians or certainly the majority of Canadians. The challenge is we still live in a bureaucratic system. Once it hits the bureaucracy, it's a little bit unknown because I don't think we've ever lived, certainly not in my adult lifetime, in times like this. So it's very difficult to predict how quickly things can move based on the will of our government and the inherent pace inside of the bureaucracy. So it remains to be seen. We're very optimistic. We're certainly making sure that we stay at the front of the line. But again, it's really difficult to forecast if and when these will change. If the budget, for example, comes out in late September, early October, it'll be much easier to make some forecasts. If it doesn't come out until November, a little less runway in 2024 or 2025 to be able to make those statements. And on top of that, there are pockets of funding available for emergency circumstances within the government and for modernization efforts within the government, so some repurposing. Volatus, as you may have read in our MD&A, we made a specific effort to extend our national standing offer with the Canadian government, which actually gives us a contracting mechanism to move quickly with opportunities for engagement. So to continue on that line of questioning, does the company have any operating line available if tomorrow a big contract is won? I guess I'm going to answer that simply. On a public disclosure basis, we typically don't comment on things that we're not using or that we haven't disclosed publicly. What I will say is the size of the contracts are potentially quite significant. If we were fortunate enough to be successful, that's back into the question of me asking Abby, what are we going to do when we catch the bus? Abby is well prepared to manage that circumstance. We have prepared ourselves both by strengthening our balance sheet, which was probably the most important thing, but also aligning ourselves with facilities that can help us absorb opportunities as they present themselves. We're very well positioned. It's simply a matter of closing the deals and getting them in the door, right? That's the challenge. We have another question. What is the size of these elephant contracts? Yeah. Well, they're bigger than a breadbox and smaller than a Boeing, but they're probably, I mean, if I'm honest, and I don't think this is just a statement for Volatus Aerospace, but for our industry. We have a government that's made five important statements. I think I'm going to count these out, right? Number one, our government's taken the position that we can give ourselves far more than any nation can take away. So the concept of us targeting both economic and security independence, basically not taking the United States for granted because I think we have. I mean, I think we've relied on the United States. We've been overly reliant, and it's quite reasonable that we have to step up to the plate and do our own job there. I think the government's made that commitment both in their policy statements, their positioning statements, but also in their commitments to increase our NATO spend, meeting our 2% this year, which is several years ahead of the original commitment. That's many billions of dollars that will be spent between here and March of next year. So we're obviously optimistic about that. The second part is the commitment to grow the NATO spending to 3.5% and ultimately 5% and our government's commitment there. So it means that whatever happens this year, this is a long-term commitment. Mélanie Joly has also made the comment. Minister Joly, forgive me, made the comment about developing Canadian capabilities and Canadian capacity. And one of the fields that she references is aerospace, and the government regularly talks about drones as part of aerospace. So we see very, very significant opportunities developing in those areas. And as a result of that, the size of the animals are bigger than we've ever seen as an industry before. Again, I can't comment too much on what we're chasing other than to say that it basically consumes the majority of my day from the time I get up until the time I go to bed at night, and I don't sleep very much. I can attest to that. So while it's a sleeper category right now, how do you see regulatory changes advancing B2B and B2C cargo? And I'm going to loop that in with some of the questions about some of the platforms we have, such as the Nautilus that we've talked about over the years and when the Condor will be operating commercially. So stay tuned for the Condor. We've announced it, obviously, with a purpose in mind. Remember, Volatus is a company that really focuses on commercialization. So stay tuned, follow us along. But what I will say is we're very committed not just to announcing technologies, but actually deploying those technologies commercially. So that's something hopefully everybody will stay tuned and watch us closely and see what's next. But in terms of what's happening in the cargo space, specifically Natilus, we're super excited about that. We follow it closely. It's running a little bit a couple of years behind what we originally expected. Realistically, Natilus will enter service in 2030 for us. Volatus has the first production delivery slot for that aircraft. For those that don't know, that's a 19,000 lbs cargo aircraft. It's got an 85 ft wingspan. It's powered by two Pratt & Whitney P26 engines. It's basically a full-size commercial remotely piloted aircraft that's intended to carry cargo, and it dramatically reduces the cost of cargo. Stay tuned in 2030 because that's when the aircraft is supposed to be ready. Aircraft programs on that scale are notorious for slipping. So no promises on 2030, just a promise that we're positioning ourselves there. In terms of the rest of the cargo market, we have probably more active files in cargo than Volatus had active files, period, two years ago. So cargo, there's a lot going on in that space, but it's still somewhat complex. And until the regulations come into play in November, there's limited things that we can do. So the technology, the evolving technology, the connection with the regulatory environment, all of those things are starting to come together. I think we'll start seeing more activity in the domestic cargo space with the use of our Canary drones. But I still think it's going to be a relatively small part of our revenue this year and probably a little bit growing next year, but more into the year after. More 2027 is where we'll start seeing any meaningful scaling. And this kind of ties into some of our operations and what we're trying to do in Africa. Can you speak a little bit to that? Are there still ongoing initiatives? Is there anywhere else in the world that we're operating today that you can speak to? So Africa's long been an interest. As a matter of fact, it's been disclosed in many of our investor decks. We're actively chasing business in Africa. Africa is a complex continent. It's massive, huge opportunities. I must admit, it was a primary focus of mine prior to the November election last year, and that's caused us to pivot to a lot more domestic opportunities. But we continue to drive our opportunities in Africa. So many of the countries, for example, that we would be chasing business would be countries like, for example, Guinea, Nigeria, Ghana, and others where there's a variety of opportunities that are open to our industry, and we're actively pursuing them either directly or through partners that we have in the region. Most of those are being supported out of our U.K. operation, mostly because of the convenience of time zones. We're also focused on the development in Southeast Asia. So a lot of what's happened where Minister Joly announced a desire for building sovereign capacity in Canada, that's not unique to Canada. The changing geopolitical situation has basically driven many countries to say, "Okay, well, we want to do business. We want to be friends with the United States." Southeast Asia, they kind of balance between the United States and China. But there's one thing that is consistent for everybody, and that's the desire to build a domestic ecosystem. And Volatus actually steps up to the plate in our consulting business to actually help with those types of projects. So we're actively pursuing projects in a number of places in the world, which I can't really quantify yet because, again, this is a rapidly changing world. All I can say is the opportunities continue to grow both in size, but also in scope. And we're pedaling hard. I have a question here that's asking about how we're engaging with the energy, mining, and transportation sectors and how you're growing and materializing new opportunities there. Energy, mining, and transportation. I'll kind of divide all those up. Energy is one of our biggest places. So our biggest sector is oil and gas. We're probably, if not the largest, certainly one of the largest oil and gas pipeline surveillance companies in Canada. We're also in the United States. We monitor pipeline right across Canada from Kitimat, BC, and Vancouver, right close to Montreal, and then from North Dakota all the way down to Houston, Texas. We're also involved in the power utility space. Funny enough, heavier in the United States, the majority of our power line inspections are. We call it T&D, tower and distribution inspections, are American-based, although we're growing in Canada right now. So a lot of emphasis to do more in Canada on that size. And in terms of the transportation sector, what did we have? We had energy, transportation. You had one other one. Mining. Mining. So, mining is a big one. We've actually had a couple of major mines visit our facility lately, and largely to look at the ability to provide remote surveillance in their facilities monitored from our remote operation center. So, growing sector for us. Our regulatory approvals in Canada right now give us a lot of flexibility to work around mines beyond visual line of sight, power lines beyond visual line of sight, railways, and much of Canada in low-risk airspace, for example, at night and lower altitudes. Those are all areas that we have the ability to scale quite quickly. But again, dialing it back to the desire to create trade and energy corridors, a seamless grid across Canada, the building pipelines, exploiting our natural resources in terms of our rare earths in Quebec and British Columbia and the Ring of Fire in Ontario. Every time they touch one of those things, it's an opportunity for Volatus. We have some questions about the Canary and whether or not that is being used by hospitals for transportation, or if there's any plans to expand. I'm going to make a bold statement on transportation because I think the question specifically is organs. Many of the live organ transplants that people read about, they are in fact moving live organs, but usually not to install in a patient. There's still a lot of research that's going on to determine the impact of transporting organs and blood using drones. Samples, lab tests, medical supplies, even medical isotopes, those are all things that are actually being carried on a more and more regular basis, but it's a little bit early for the organ program. As you know, when someone gifts their organs to someone, it's a very precious gift, and it has to be dealt with with the utmost care because there's not enough to serve all of the demand, and realistically, that means it's a very risk-controlled environment. Do you have any update on the head office move to Mirabel Airport? Working on it. So we actually have offices there. We will be participating in some events in September. Still fairly small, mostly because we've been fairly busy recently with a bunch of developments, but you'll be reading more about activities in Quebec as that information becomes public. But we are established. We have an office in Mirabel right now in the Innovation Center. Very small team there at the moment, but we will be continuing on that growth. Quebec represents a huge opportunity for Volatus. So this isn't just a move to Quebec for any reason other than the fact that it represents, I think it's approximately 23% of the population in Canada, the second largest forest other than the Boreal Forest in Canada. Of course, that's a big deal with wildfire, which is a major area of focus for us. All of the consequences of that with reforestation and whatnot, those are all topics that are worthy of our presence, especially in the province of Quebec. I think we have about 200 active mines in the project and one of the largest power utilities in North America with literally tens of thousands of km of power line that needs surveillance and a major commitment towards AI, which AI and electrification is putting more demand on an aging infrastructure. Climate change is endangering that infrastructure with more and more forest fires. We see Quebec as a significant area of growth force beyond the presence we already have with our Geomatics Center of Excellence in Quebec City. Can you provide any updates on the collaboration with Dragonfly? So we continue to explore opportunities with Dragonfly. Being a Canadian, I think being a Canadian manufacturer and our next-door neighbor, I think we'll see that collaboration grow over time. Both companies are putting work into that collaboration, but there's not really much I can say about it at this moment. Okay. Has Volatus's addressable market expanded in the past 12 months? If so, can you speak to what the size of the addressable market was thought to be a year ago versus today? Our total attainable market a year ago, we publicized about $1.8 billion that we were chasing. Abby, you might be in a better position to comment on this. Absolutely. So, well, a lot happened in the last 12 months. Specifically, with the merger with Drone Delivery Canada, we added the cargo and BVLOS because of the OCC. That alone is $15 billion of addressable market. And now with defense and Canada's NATO commitment opening up, that adds just from the defense addressable market, it's a $90 billion global market. So I would say a big largest opportunity opened up for us in the last 12 months. And the good thing is we are chasing those opportunities. So the answer is yes. The addressable market has expanded. Our capabilities have expanded. And the good thing is our ability to capture those markets has also expanded. And with the latest capitalization of the balance sheet, it has also enabled us to chase those markets. We finally finished all of our questions. One just came in. Can you give an update with regards to the Indian market? So yes, a lot happening at that market as well. One, we have partnership with Dronacharya to position Condor, specifically on the Indian market on the defense side, basically military supplies. That's an ongoing discussion and happening right now between Dronacharya, us, and the partners. And the second thing is with India getting on the sanction list with the U.S., that's again opening up an entirely different market opportunities. So the market, it's a big market. We are trying to position ourselves in that market from the supplier perspective and the vice versa is happening at the same time. Are there any M&A plans with the cash on the balance sheet now? What should we expect? So Volatus has long been an acquisitive company, but our first priority is to strengthen our operations that support organic growth. That said, we're very active in reviewing opportunities where acquisitions could be accretive, whether by adding technology, customer channels, or geographic reach. So too early to tell what opportunities may develop there right now, but we certainly remain active in that space. Thank you. All right. We are done with all of our questions today. Thank you, everyone, for joining us. Just a reminder that this call was recorded and will be made available within 24 hours after today, and it'll be on our investor site at investor.volatusaerospace.com. If you have any other questions, please reach out to us at investorrelations@volatusaerospace.com. Thank you, everyone.