0001628280-26-032121
SEC filingRevenue surged 849% to $15.5M driven by U.S. Army SRR drone deliveries, but operating losses widened on heavy R&D and G&A investment.
For the three months ended March 31, 2026, Red Cat Holdings reported consolidated revenues of $15.5 million, compared to $1.6 million in the same period of 2025, representing an increase of 849%. The dramatic growth was primarily attributable to scaled drone deliveries to the U.S. Army under the SRR program. Gross profit swung from a loss of $0.8 million in the prior year to a profit of $2.0 million, yielding a gross margin of 13% versus (52)% in 2025. The improvement was driven by higher revenue and lower inventory write-offs.
Operating expenses increased 152% to $29.3 million. Research and development costs rose 132% to $8.0 million, reflecting increased investment in engineering personnel, prototype development, and testing for new drone platforms. Sales and marketing expenses grew 38% to $4.6 million, driven by higher payroll costs from team expansion. General and administrative expenses surged 243% to $16.7 million, primarily due to higher headcount and stock-based compensation as the company scaled corporate and compliance functions. Total stock-based compensation rose 201% to $4.8 million.
Other income (expense) improved significantly, from a $10.6 million expense in the prior period to $0.8 million income in the current period, driven by a lower fair value loss on convertible notes ($0.9 million vs $10.7 million) and higher interest income ($1.3 million vs $0.1 million).
Net cash used in operating activities increased to $31.9 million from $15.9 million, driven by inventory purchases for the SRR program ramp, partially offset by accounts receivable collections. Investing activities used $6.8 million, up from $0.3 million, due to higher property and equipment purchases. Financing activities provided $2.8 million, down from $14.7 million, as proceeds from warrant exercises ($2.8 million) partially replaced the prior year's $15.0 million in convertible note proceeds. At March 31, 2026, the company held $131.9 million in cash, with total current assets of $209.7 million and current liabilities of $19.1 million, resulting in net working capital of $190.6 million.
Management did not provide explicit forward guidance in this MD&A section. However, the strategic focus on scaling deliveries under the U.S. Army SRR program is the clear revenue driver. The significant increase in R&D spending signals continued investment in new and enhanced drone platforms. The heavy cash burn from operations and inventory build suggests the company is prioritizing production ramp and market share capture. No specific outlook or revenue targets were disclosed.
As of March 31, 2026, Red Cat's cash and cash equivalents totaled $131.9M, a decrease of $35.9M from December 31, 2025, primarily due to operating cash outflows of $31.9M and capex of $6.8M. Total debt is minimal at $0.4M (a demand note), with all convertible notes ($4.5M) converted or extinguished during the quarter. Working capital stands at $190.6M, providing ample liquidity. Total assets of $281.9M include $50.5M in inventory (net), $31.5M goodwill, and $12.5M intangible assets. Shareholders' equity is $238.7M, reflecting accumulated deficit of $223.4M.
Operating lease liabilities total $13.4M, with future undiscounted lease payments of $22.8M (weighted-average term 5.04 years). The company has contingent acquisition consideration payable of $12.0M for the Apium acquisition, including a $1.0M holdback and earnouts. There are no disclosed purchase commitments for inventory or capacity. The company is engaged in legal proceedings (Autonodyne and shareholder actions) with no loss contingencies recorded.
No share buybacks or dividends were declared or paid. Capex for the quarter was $6.8M (43.9% of revenue), primarily for equipment and leasehold improvements. Net debt decreased by $4.5M due to conversion/extinguishment of convertible notes. The company raised significant equity in prior periods ($30M, $46.8M, $172.5M in 2025) but no new equity issuances in Q1 2026 except for share-based compensation and warrant exercises.
Red Cat operates as a single reportable segment. The CODM (CEO) evaluates performance on a consolidated net loss basis. Significant segment expenses include cost of goods sold ($13.5M), R&D ($8.0M), and sales & marketing ($4.6M) for the quarter. Geographic or customer concentration is disclosed: Customer A accounted for 56% of revenue and 50% of receivables; Customer B for 19% of revenue. No further breakdown is provided.
Operating cash flow (CFO) of -$31.9M was significantly worse than the net loss of -$26.6M, indicating negative cash conversion. The primary driver was a massive inventory build of $27.1M and a prepaid inventory increase of $5.2M, which consumed cash. Accounts receivable provided a $15.6M inflow, partially offsetting the inventory drag. Stock-based compensation ($4.8M) and depreciation/amortization ($0.8M) were the main non-cash add-backs, but were insufficient to overcome working capital outflows.
Capital expenditure intensity rose sharply to $6.8M (from $0.3M), reflecting investment in property and equipment. Free cash flow (CFO minus capex) was -$38.7M, with no capital returns (no share repurchases or dividends). Financing activities provided only $2.8M, primarily from warrant exercises ($2.8M) and stock option exercises ($0.2M), compared to $14.7M in the prior year from convertible note issuance. The company ended the period with $131.9M in cash, down from $167.9M at the start.
Anomalies: The large inventory build and prepaid inventory suggest either supply chain stocking or production ramp-up. The gain on extinguishment of convertible notes ($0.3M) and fair value adjustment ($0.9M) are non-cash items that do not affect cash flow quality.