XTIA · XTI Aerospace, Inc.

Drone Nerds Integration Defines Continuing Operations

Q1 FY2026 marks the first full quarter in which Drone Nerds contributes to XTI Aerospace’s continuing operations, following its November 2025 acquisition. Revenue of $27.7M — up from $484K in Q1 FY2025 — reflects this structural shift: the prior-year period contained no Drone Nerds activity, and the Inpixon Business is now reported as discontinued operations. As a result, virtually all continuing revenue stems from the UAS solutions platform, including hardware distribution, training, repair, and lifecycle support across more than 50 OEMs.

Gross Margin Reflects Operational Drivers, Not Structural Shift

Operating Performance Anchored in Strategic Investment

Operating income was ($10.4M), essentially unchanged from ($10.4M) in Q1 FY2025. This stability occurs despite significantly higher revenue, underscoring that the company remains in a pre-commercial, investment-heavy phase for its unmanned platform development initiatives. Management explicitly notes that operating cash flows will continue to be influenced by ‘the pace of investment in the development of unmanned platforms for defense and commercial applications’ — confirming that near-term losses reflect deliberate capital allocation, not deteriorating execution.

Cash Flow Improvement Signals Underlying Economics

Net cash used in operating activities improved to ($10.5M) from ($15.2M) year-over-year — a meaningful reduction despite the larger revenue base. This improvement supports management’s characterization of Drone Nerds as historically EBITDA-profitable and suggests its underlying economics are beginning to offset legacy burn. Capital expenditures remained modest at $131K, reinforcing disciplined near-term spending.

Liquidity Strategy Remains Focused and Unchanged

The Company’s liquidity strategy continues to center on maintaining sufficient operating capital to support both its enterprise drone distribution business and ongoing unmanned platform development. Management states liquidity is supported by cash on hand, operating cash flows from the UAS platform, and availability under its asset-based revolving credit facility — with no reference to warrant proceeds, undrawn facilities, or specific cash balances beyond what is disclosed in the financial statements.