Earnings call transcript: AIRO Group Q2 2025 sees stock surge post-earnings

AIRO Group Holdings Inc. (market cap: $569 million) reported its second-quarter 2025 earnings, showcasing a significant turnaround in financial performance. The company posted a revenue of $24.6 million, marking a 151% increase year-over-year, and an EPS of $0.30. Following the announcement, AIRO’s stock surged 11.59% in pre-market trading, reflecting investor optimism. Analysts maintain a Strong Buy consensus with price targets ranging from $26 to $35.

Want deeper insights? InvestingPro offers 10+ additional expert tips for AIRO, including valuable information about the company’s growth prospects and financial health.

Key Takeaways

• Revenue increased by 151% year-over-year to $24.6 million.
• Net income improved from a loss of $5.6 million in Q2 2024 to a profit of $5.9 million.
• The stock price rose 11.59% in pre-market trading, reaching $24.26.
• The company unveiled a new medium-lift cargo drone and expanded its U.S. manufacturing facility.

Company Performance

AIRO Group Holdings demonstrated a strong performance in Q2 2025, transitioning from a net loss in the previous year to profitability. This improvement is attributed to increased demand for its drone platforms and expansion efforts in key markets. The company maintains impressive gross profit margins of 66.8% and operates with a moderate debt-to-equity ratio of 0.09, showcasing efficient operations and prudent financial management. The company’s focus on innovation and strategic partnerships has positioned it well within the growing aerospace and defense industry.

Financial Highlights

• Revenue: $24.6 million, up 151% year-over-year.
• Gross Profit: $15 million, increased from $5.8 million.
• Net Income: $5.9 million, compared to a net loss of $5.6 million in Q2 2024.
• EBITDA: $18.9 million, marking a record quarter.
• Cash and Cash Equivalents: $40.3 million as of June 30, 2025.

Earnings vs. Forecast

AIRO’s earnings per share of $0.30 surpassed market expectations, contributing to the positive market reaction. This performance marks a significant improvement compared to previous quarters, highlighting the company’s successful execution of its strategic initiatives.

Market Reaction

Following the earnings announcement, AIRO’s stock experienced a notable 11.59% increase in pre-market trading, reaching $24.26. This surge reflects investor confidence in the company’s growth trajectory and strategic direction. According to InvestingPro analysis, the stock generally trades with high price volatility and is currently trading near its Fair Value. The stock’s movement positions it closer to its 52-week high of $39.07, indicating strong market sentiment.

Outlook & Guidance

Looking forward, AIRO Group aims to complete Blue UAS certification, expand drone production in the U.S., and accelerate strategic partnerships. The company has approximately $200 million in bookings in progress and anticipates positive momentum in the second half of 2025.

Executive Commentary

Dr. Chiranjeev Khathuria, Executive Chairman, stated, "We are building Arrow for the long term. We have the right markets, the right model, and the right team, and we’re just getting started." CEO Joe Burns added, "Arrow is a purpose-built company designed to drive innovation and support emerging markets."

Risks and Challenges

• Supply Chain Issues: Potential disruptions could impact production timelines.
• Market Saturation: Increased competition in the drone industry may pressure market share.
• Geopolitical Tensions: Changes in defense budgets or international relations could affect demand.
• Regulatory Hurdles: Obtaining necessary certifications and approvals may delay product launches.

Q&A

During the earnings call, analysts inquired about the demand for tactical drones and the company’s focus on NATO and U.S. defense markets. Executives emphasized their ongoing efforts to expand manufacturing capabilities and partnerships, particularly with Joby Aviation.

Full transcript - AIRO Group Holdings Inc (AIRO) Q2 2025:

Kate, Conference Operator: Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to Arrow Q2 twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session.

Thank you. I would now like to turn the call over to Dan Jensen, Executive Vice President of Investor Relations. Please go ahead.

Dan Jensen, Executive Vice President of Investor Relations, Arrow Group Holdings: Thank you, operator, and good morning, everyone. Welcome to Arrow Group Holdings Incorporated second quarter twenty twenty five earnings call, our first as a publicly traded company. We appreciate you joining us today and look forward to sharing an update on our progress and performance. With me on the call are Doctor. Chiranjeev Khathuria, our Executive Chairman Captain Joe Burns, our Chief Executive Officer and Doctor.

Maria Pilipiv, our Chief Financial Officer. Replay information for today’s call can be found in our earnings press release issued earlier this morning. Today’s call will include forward looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including but not limited to statements relating to estimates and forecasts of financial and performance metrics, the intended use of proceeds from Arrow’s IPO, the development, expected capabilities, potential customers and regulatory approval of the Jaunt cargo drone, Arrow’s operational landscapes, demand for Arrow’s systems and products, Arrow’s plans for a manufacturing and engineering development facility, expectations concerning future products and developments, the market acceptance and opportunity of Arrow’s products and services and other statements that are not historical fact. In addition to our prepared remarks, our earnings press release, SEC filings and a replay of today’s call can be found on our Investor Relations website at investor.thearrogroup.com. Forward looking statements involve known and unknown risks and uncertainties that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward looking statements.

Forward looking statements represent our management’s beliefs and assumptions only as of the date made. Information on factors that could affect the company’s financial results is included in its filing with the SEC from time to time, including the section titled Risk Factors in the company’s final prospectus filed with the SEC on 06/16/2025, and the company’s upcoming quarterly report on Form 10 Q for the quarter ended 06/30/2025. In addition, during today’s call, we will discuss non GAAP financial measures. These non GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Reconciliations between GAAP and non GAAP financial measures and a discussion of the limitations of using non GAAP measures versus their closest GAAP equivalent is available in our earnings release.

With that, I’ll turn the call over to our Executive Chairman, Doctor. Chiranjeev Khathuria.

Dr. Chiranjeev Khathuria, Executive Chairman, Arrow Group Holdings: Thank you, Dan, and thank you all for joining us. Today marks an exciting milestone, not just our first earnings call as a public company, but an opportunity to formally introduce Arrow to the investment community and share the foundations of who we are, what we’ve built, and where we’re going. In a few minutes, Joe will share the progress from the quarter and more recently, and Maria will cover our financials. But first, a little bit about Aero Group. We built an integrated aerospace and defense platform to serve the future of mobility, security, and training across high growth markets.

Our mission is to deliver disruptive, dual use technologies through unmanned systems, pilot training, avionics, and electric ear mobility, segments that are individually compelling and collectively transformative. Our platform is structured around four synergistic business segments. Drones delivering fully autonomous GPS denied unmanned aerial systems for military and commercial ISR missions. Avionics, a twenty year heritage business through Aspen Avionics, delivering over 14,000 systems with patented displays, sensors, and cockpit integration for both manned and unmanned aircraft. Training elite military and commercial pilot training with a focus on close air support, ISR, and adversary air missions.

We are a trusted contractor under the DoD’s 5,700,000,000.0 CAF and CAS IDIQ. Electric Ear Mobility, pioneering Evital’s and hybrid cargo drone solutions through our Jaunt Ear Mobility brand, using our patented slow rotor compound technology for safe, efficient and scalable flight. We currently operate across nine locations with over a 151 employees, 61,000 square feet of operational space, and maintain ISO 9,001 and AS 9,100 certifications. We are strategically located to serve both US and international defense markets. With headquarters in Albuquerque, New Mexico and major operations in Denmark and Montreal, where we can deliver directly into NATO without navigating ITAR constraints, providing a structural advantage in cross border logistics and responsiveness.

This is a differentiated model. Our businesses aren’t just adjacent, but deeply integrated, sharing technologies, supply chains, and operational capabilities. This creates a tangible advantage in cost structure, speed to market, and platform development. This interconnected structure enables several key advantages. One, shared r and d and manufacturing capabilities across drone and Yves Vitol platforms.

Two, cross segment technology applications such as avionics, which are developed in house and are being deployed across unmanned systems and advanced aircraft. Three, training infrastructure that supports our own fleet and serves as a proving ground for next gen platforms. And four, supply chain overlap and cost synergies, enhancing margin potential as we scale. Across the board, our technologies are real, proven and deployed. Take our RQ35 Hedron, a battle tested micro ISR drone with NATO grade capabilities.

With over 500 missions per unit and operations in GPS denied high threat environments, it has become a critical ISR asset for modern militaries. Backed by 200,000,000 NATO aligned bookings in progress and AS 9,100 certified facilities, this segment is scaling rapidly to meet global demand due to geopolitical events and increased defense spending. In avionics, our Aspen avionics business provides the cockpit infrastructure for both manned and unmanned systems. With twenty years of flight heritage and strong OEM relationships, Aspen enhances safety and interoperability while supporting development of future military and civilian platforms. Our training division is another major differentiator with ten years of sustained support to U.

S. And allied defense contractors, Including participation in the $5,700,000,000 Combat Air Force Commercial Air Service, IDIQ program, Aero delivers elite closed air support and ISR training through our coastal defense brand. We operate six wing aircraft and modified systems from two dedicated U. S. Training centers and maintain a top secret facility clearance, an important barrier to entry that reinforces our trusted status.

Finally, in electric gear mobility, we’re advancing a hybrid drone and ease of it all strategy via our Jaunt Air Mobility subsidiary. Earlier this quarter, we unveiled a new middle mile cargo drone at EAA Air Adventures Oshkosh and expanded into Quebec’s YMX innovation zone, a forward leaning hub for advanced air mobility innovation. With our patented slow rotor technology, our system combines the vertical lift of a helicopter with the cruise efficiency of a fixed wing aircraft. With this integrated platform as our key to long term value creation, where we’re targeting a 315,000,000,000 total addressable market across all our business lines, We’re already seeing robust adoption. Our 2024 revenues grew to $86,900,000 up from $43,300,000 in 2023 and $17,100,000 in 2022.

We also have strong visibility with a $200,000,000 plus bookings in progress. Our recent IPO is a natural next step in our evolution, which enhances our financial flexibility, elevates our brand with global customers and positions us to accelerate execution across our pipeline. Most importantly, it strengthens our ability to innovate, scale, and deliver for our stakeholders. We are building Arrow for the long term. We have the right markets, the right model, and the right team, and we’re just getting started.

With that, I’ll hand the call over to our CEO, Joe Burns.

Joe Burns, Chief Executive Officer, Arrow Group Holdings: Thank you, Chiranjeev. It’s a pleasure to be with you all today. I’d like to echo Chiranjeev’s enthusiasm as this is a proud moment for the Arrow team, and I’m grateful to be speaking to you all today on our first earnings call as a public company. Arrow had an excellent second quarter. We made important progress across all segments, advanced key strategic initiatives and strengthened our operational foundation as we entered life as a public company.

Let me walk you through the progress in each of our core businesses. Starting with Drones, our flagship RQ35 Hedren platform continues to gain traction globally. This quarter, we announced a new U. S. Manufacturing and engineering facility to support domestic demand, enable Blue UAS certification and fulfill Buy American requirements.

The HETR has now been deployed in more than 500 missions, many in high threat GPS and comms denied environments where its electronic warfare resistance, extended range and elite optics deliver outside battlefield value. With strong interest from NATO aligned nations, this is a high margin, high growth business that we will look to expand further. We delivered over US75 million dollars in drone related revenue in 2024, representing 167% growth, and our backlog here remains robust. We’re also advancing our drones as a service model, offering ISR, cargo and emergency response capabilities for enterprise and defense customers. In parallel, we’re building out Aerolink, a proprietary drone communication and data platform, which we view as a long term infrastructure asset across autonomous flight operations.

In training, we recently completed a specialized ninety day naval special warfare deployment and continue to operate under multiple IDIQs with the U. S. Department of Defense. We deliver elite close air support and ISR training through our coastal defense brand using a fleet of NATO certified aircraft and maintain a top secret facility clearance, a meaningful differentiator in this space that should not be overlooked. We’re an active bidder on the USD 1,600,000,000.0 close air support segment of CAF CAS contract and have a reliable, low cost, high utilization model that makes us a compelling alternative to traditional adversary air providers.

We believe the growth opportunity in training is not only durable but accelerates our access to broader defense contracts and serves as a valuable R and D test bed across the platform. In electric air mobility, when we unveiled a new medium lift cargo drone EAA AirVenture Oshkosh capable of carrying two fifty to 500 pounds over 200 miles. The subscale platform is built on our patented slowed rotor compound technology, providing the vertical lift of a helicopter and the cruise efficiency of a fixed wing aircraft. The cargo platform is set for commercialization in 2027, and we’ve already secured regulatory engagement and site access in Canada’s YMX Innovation Zone, which offers a faster certification path and comparable programs in The United States. This cargo first strategy derisks our road map to passenger EV toll and opens use cases in military logistics, medical delivery and last mile air freight.

Finally, avionics continues to be the heartbeat of interoperability across Arrow. Aspen Avionics has delivered more than 14,000 systems to date, and we’re actively advancing development of next generation displays, sensors and GPS solutions for both manned and unmanned aircraft. The open architecture of our systems and their proven integration of drones, training aircraft and future eVTOL platforms creates a feedback loop of innovation that is core to our strategy. We’re also pursuing upgrades that reduce installation costs and enhance flight safety, contributing to strong OEM and aftermarket demand. Aspen is an asset light, cash generative business with a long runway for margin expansion and category leadership.

Taken together, these milestones reinforce what Era represents: operational execution, technological differentiation and a clear path to long term growth. As we look ahead, we are entering a period of strong momentum and rising demand across our core markets. Naval defense spending is accelerating with a heightened focus on autonomy, ISR and rapid response capabilities. U. S.

Customers are seeking domestic solutions with field proven reliability and production flexibility, and commercial and civil air mobility infrastructure is beginning to mature, particularly in areas where cargo delivery precedes passenger applications. Let me dive a little deeper into this. NATO defense budgets are expanding with an increasing share allocated to autonomous and unmanned systems. Only 23 of the 32 member countries currently meet the 2% GDP defense spend target, and there’s a strong momentum to raise this to three percent or higher. Meanwhile, The U.

S. Has pushed for a 5% target from its allies. That shift alone creates a long term multi $100,000,000,000 opportunity across our core verticals. Our addressable market is estimated at USD $315,000,000,000, spanning ISR drones, pilot training, avionics upgrades and air mobility solutions. And our platform is built not just to access that market but to expand into it quickly and credibly.

In 2024, we’ve delivered $86,900,000 in revenue, up from $43,300,000 in 2023 and $17,100,000 in 2022. That’s 126% CAGR driven by real world adoption of our technology and disciplined execution across the business. We enter our public life with bookings in progress of exceeding USD 200,000,000, supported by strong international defense demand and near term U. S. Opportunities.

We recently announced plans to expand our U. S. Footprint by adding a new manufacturing and engineering development facility dedicated to producing our flagship drone product, the RQ35 Hedron, here in The U. S. This new site will enable Arrow to scale production efficiently, compete for American made defense and commercial opportunities and serve as a hub for future innovation in both commercial and military markets.

As part of our U. S. Expansion plans, we are currently in the process of Blue UAS certification, which will enable us to manufacture and sell the RQ35 Hedron to the Department of Defense. We conservatively estimate that the full process to take six months, but recent announcements by the Department of Defense expect to significantly expedite this time line. We’ve already completed the framework process and are near complete with the foundry and on ramp stages.

We anticipate obtaining certification as soon as this year, and are eager to begin selling our battle proven drone platform to the U. S. Military. In the 2025, our priorities are clear: complete Blue UAS certification and expand U. S.

Drone production convert backlog to revenue with continued program delivery accelerate strategic partnerships, particularly in training and air mobility maintain disciplined investment across research and development, manufacturing and certification and finally, to deliver on the promise of our public listing with consistent execution and transparency. With that, I’ll turn the call over to Maria to walk through the financials.

Dr. Maria Pilipiv, Chief Financial Officer, Arrow Group Holdings: Thank you, Joe, and good morning, everyone. For the 2025, revenue was 24,600,000.0, an increase of 151% compared to USD 9,800,000.0 in the prior year period. Growth was driven by continued execution across our core segments, drone, training and avionics, as we expand existing contracts and begin to scale with platforms. Gross profit for the quarter was 15,000,000, up from 5,800,000.0 last year. Gross margin was 61.2%, reflecting a favorable product mix and disciplined operational execution.

We reported net income of US5.9 million dollars compared to a net loss of USD 5,600,000.0 in Q2 twenty twenty four. The second quarter EBITDA was USD 18,900,000.0, a record for Aero. Adjusted EBITDA was USD 4,700,000.0 compared to USD 600,000.0 in the prior year quarter. We continue to remain focused on execution as we invest in innovation, infrastructure and growth. On a segment basis, we continue to see significant revenue growth in drones driven by increasing interest for our RQ35 Hadron platform.

Given recent announcements around accelerating drone deployment, particularly in The US, we have strategically decided to focus capital on scaling our drone business in response to growing market demand. For training, we recorded high revenues due to specific government contract related to ground target vehicles. We also believe there are opportunities to grow our training revenues by acquiring additional aircraft to conduct new programs. For avionics, we experienced softer sales given the strategic decision to delay investments for in r and d and higher margin products for the general aviation and multi engine aircraft market, while prioritizing resources towards our drone segment. However, we expect to resume investments in both our training and new earnings businesses, now that we have completed our initial public offering.

Looking ahead, we expect positive momentum headed into the second half of this year due to increased defense spending globally, particularly for drones and drone related technologies. Turning to free cash flow and liquidity, we reported positive net income for Q2 twenty twenty five, which was affected by non cash adjustments related to debt extinguishment and fair value adjustments of considered consideration and warrant liabilities. Free cash flow were also impacted by increases in working capital related to growing our business. As of 06/30/2025, we had USD 40,300,000.0 in cash and cash equivalents. Following our IPO, we have significantly reduced our total debt and have positioned our balance sheet to support continued execution and growth.

Finally, I want to briefly discuss the visibility we have across our drones and training businesses, which will contribute significant revenues in the years to come. As we have mentioned before, we have a line of sight to approximately $200,000,000 of native bookings in progress, which will be converted into revenue over the next eighteen months. Commercial agreements with individual native member countries, many of which we have strong relationships through demonstrating the high performance of our r t 35 hEDRAN. We continue to see strong demand for our drone platform and believe there are significant opportunities to grow our bookings by expanding into unserved markets, introducing new drone products and services, and improving upon our existing platform. On the training side, we have been selected as one of seven companies for the 5,700,000,000.0 IDHU contract to provide pilot training services for various branches of the US military.

Specifically, we are focused on $1,600,000,000 of the contracts related to closed air support services. Looking forward, we remain focused on scaling our operations, converting our bookings to revenue and driving long term shareholder value. With that, I’ll turn it back to Joe.

Joe Burns, Chief Executive Officer, Arrow Group Holdings: Thank you, Maria. I want to leave with a few closing thoughts. Arrow is a purpose built company designed to drive innovation and support emerging markets. We’re serving real customers and real world requirements in markets where reliability, performance and trust are nonnegotiable. We’ve built a platform that is both agile and scalable, and we’re executing a strategy that combines near term performance with long term vision.

Our public debut marks the beginning of a new chapter, but our mission remains the same: deliver the technologies, systems and training that define the future of aerospace and defense. Thank you again for joining us today, and we look forward to keeping you updated on our progress quarters ahead. With that, operator, we are ready for questions.

Kate, Conference Operator: Your first question comes from the line of Colin Canfield with Cantor. Your line is open.

Colin Canfield, Analyst, Cantor: Hey, thank you for the question. Maybe going through the qualified drone pipeline, if you could just kind of talk about how you see demand shaping up in The U. S. Versus Europe. I appreciate the blue U.

Certification commentary, but where do you think kind of demand signals are the strongest in terms of the next incremental orders as we look forward? Thank you.

: Thanks, Colin. And maybe, Joe, if you want to take that.

Joe Burns, Chief Executive Officer, Arrow Group Holdings: Hey, Colin. Good morning. So, you know, demand signals, to answer your second question first, highest demand has been, I think, we’ve seen so far for small and medium class tactical drones, primarily for ISR, which is intelligence, surveillance and reconnaissance missions, particularly from the NATO expansion orders and other allied defense programs. Europe so far continues to lead the current revenue contributions, but The U. S.

Demand is accelerating, and we’ve sold our units to both Asia Pacific as well as North America. But the pipeline does remain strong. We have active bookings across NATO customers, other European defense agencies and some new U. S. Defense opportunities.

We’ve seen incremental inbound interest from U. S. Agencies following the DoD’s Slide 10 announcement about drones. And Europe continues to lead the current revenue, as I mentioned, U. S.

Demand is accelerating. And we’ve also sold units into Asia Pacific as well as North America.

Colin Canfield, Analyst, Cantor: Got it. And then maybe focusing on avionics, if you could just talk a little bit about the growth engine there, specifically maybe talking through kind of how we should think about, the partnership with Joby, as well as by extension of the relationship with l three Harris as we kind of think about not just selling into, like, scaling platforms, right, but the concept of of doing more kind of, like, prime outsourcing type work as as we get through the next kind of years and few years of growth?

Joe Burns, Chief Executive Officer, Arrow Group Holdings: Sure. You know, our Avionics growth is is being driven by both the OEM integration that is, selling to brand new manufacturing and new platforms, as well as retrofit. We’ve traditionally sold bulk of our equipment into retrofit programs. And we are, as you referenced, working with Joby Aviation. We had an announcement on that earlier this week.

That really positions us as a trusted outsourcing partner for mission critical avionics systems, and it opens opportunities in larger defense and advanced air mobility markets as well beyond just the Joby positioning.

Colin Canfield, Analyst, Cantor: Got it. And then maybe, Maria, if you could talk through the working capital building blocks through the year and kind of how we should think about the split of working capital consumption versus production in the next kind of six months?

Dr. Maria Pilipiv, Chief Financial Officer, Arrow Group Holdings: So our working capital needs are expected to increase in the second half of the year, and it’s just due to a higher cost receivable from around q three and q four for SkyWest deliveries. And we will expect inventory buildup to support drone and avionics production for our new facility. The management of our accounts payable will be aligned with supply terms and cash inflows.

Colin Canfield, Analyst, Cantor: Got it. Thank you.

Kate, Conference Operator: Your next question comes from the line of Andre Metrieve with BTIG. Your line is open.

Andre Metrieve, Analyst, BTIG: Hey, good morning, guys. How are you? Good. Know, with the strong second quarter performance, I guess just how should we think about things trending through the balance of the year more broadly? Can you provide any outlook update or anything?

: Sure. Andre, I think we can have maybe Joe and Maria. Joe gave on the earnings his earnings call what he thinks are the priorities. And, Joe, if you wanna take that and then maybe followed by Maria, just Joe in general.

Joe Burns, Chief Executive Officer, Arrow Group Holdings: Sure. I mean, we’re going to be putting near term CapEx. It’s very targeted right now. And the largest of our investments are going to go to our new manufacturing facility, which is gonna serve for US drone manufacturing and US engineering hub for that as well. We have other spend, though, directed to facility upgrades.

We’re looking at new tooling for for drones drone production and, and also sending money into our selective, you know, dollars into the training division to really qualify for for more and more of the IDIQ task workers. And that that would be aircraft that are NATO certified and allow us to operate with more vigor into some of these IDIQs. Most of the gross investment is still going to be reflected in R and D rather than large scale assets. It allows us flexibility to scale to meet the backlog of demand. We’re continuing to target investments in some core areas with drones, midsized models for DoD applications, and then obviously to become blue UAS certified to meet the compliance for that.

On the avionics side, we’re gonna spend invest into systems that really put us into higher end general aviation and multi engine platforms. And we also, as as referenced earlier, have secured a a a contract for a large EVT EVTOL OEM. Then the electric air mobility side, it’s really about focusing on our cargo platform, our hybrid cargo drive, and that would be the development certification of that. So those all kinda lead into hopefully, that that answers some of your question, Andre.

Andre Metrieve, Analyst, BTIG: Yeah. And then I think, Maria, did you wanna maybe add on actual financial targets that we should be kinda be thinking about? I mean

Dr. Maria Pilipiv, Chief Financial Officer, Arrow Group Holdings: Andre, currently, we’re not giving guidance in terms of the for the market with our financial. Cool.

Andre Metrieve, Analyst, BTIG: Yeah. Yeah. No problem. And then I guess just anything on on the the build out at sorry.

Joe Burns, Chief Executive Officer, Arrow Group Holdings: There’s a feedback I I got.

Andre Metrieve, Analyst, BTIG: You know, with the build out at the Phoenix facility, I mean, how many drones do you reckon you could actually produce this year? And how are things progressing currently? And is there any possibility that Blue UAS certification might be able to pull to the left a bit?

Joe Burns, Chief Executive Officer, Arrow Group Holdings: It’s a great question. So a lot of the Blue US certification depends on what sort of the new process is. I think everybody on the phone is aware there was an announcement here about a month ago about revamping the whole process to streamline it. So there’s always that possibility. We certainly would welcome any changes that could pull it into the left just a little bit.

But, you know, you mentioned the Phoenix facility, and we just we just announced a 10 q that we we just secure Phoenix facility to allow us the space. Our intention is to to make that both an AS 9,100 facility. That does take some time. We’ve done it before with our other processes in our other facilities, but we will make that an AS 9,100. And and it allows us to manufacture, at least a majority of the airframe for drone production in The United States so we could sell within The United States as well.

This will help us with the compliance for US mandates and further support all that Blue UAS. So we have already started the Blue UAS process, and we are underway with sort of the framework around that. And then bringing the manufacturing here should help us expand into that area quite a bit. So it depends on what the new compliance matrix looks like. We know what the old one is, and we think this one will be even a little bit more flexible than that.

: Andrew, just to give you a summary of what Joe and Maria were talking about, I think you saw our results were better than expected. And a lot of that is driven by the geopolitical macro environment that Joe spoke about with increase in NATO spending to 5%, new executive order and The U. S. Beginning to focus on building out their drone capabilities. And as you mentioned, are focusing up our facilities, increasing our manufacturing capabilities in The U.

S. So I think we’re very well positioned you know, going forward to grow all the segments of

Kate, Conference Operator: our

: business. I think, you know, our q two was you know, our performance was better than expected based on the global, geopolitical and macro aspects of where we are and our performance of our HQ 35 drone business. And now we’re continuing to really build for the future. And as, you know, we as Joe mentioned, I know our priorities are also strategic partnerships for training and air mobility focusing on the John Cargo.

Andre Metrieve, Analyst, BTIG: Got it. Got it, Kieran. You’re very, very helpful. And then one more really quick question if I could just squeeze in. Can you just give an update, on the exact number of nations that you are currently selling to or in the process of trying to work with?

Dr. Chiranjeev Khathuria, Executive Chairman, Arrow Group Holdings: Joe or Maria? As mentioned

Joe Burns, Chief Executive Officer, Arrow Group Holdings: yeah. I’ll I’ll start, then I’ll let Maria. But as mentioned earlier, we there are 32 NATO countries right now, and and we are selling our r q 35 directly into those NATO countries. Approximately twenty, twenty five of them are, you know, upping their their contribution level for their GDP into into producing and and and and acquiring more aircraft. So we’ve got we’ve announced there are public there have been public announcements about multiple countries already.

I’m not sure of the detail, 100 that we’re allowed to get into because some of the stuff is is is classified. And and once the governments release information, we certainly can talk about it, and we’ll have related. But there are multiple NATO countries that we’re currently involved in. Maria, do you wanna talk about any more of that?

Dr. Maria Pilipiv, Chief Financial Officer, Arrow Group Holdings: I would just add that outside of native countries, we are focusing on Asia Pacific. We already started selling there as well as looking to North America. We’ve got an order from North America, and we’re actively working on increasing the demand here, especially having a facility in US.

Andre Metrieve, Analyst, BTIG: Got it. Got it. Very helpful. I’ll I’ll leave it there. Thanks.

Kate, Conference Operator: Thanks, Your next question comes from the line of Colin Canfield with Cantor. Your line is open.

Colin Canfield, Analyst, Cantor: Hey, just one quick follow-up. Maybe talk through you mentioned Avionics is a growth engine for the business. Maybe kind of talk through how you think about TNSS versus GPS and essentially how the team is participating or how the team thinks about Alt P and T as as kind of a a driver of both the OE side of that, demand algorithm as well as the retrofit side of it?

Dr. Chiranjeev Khathuria, Executive Chairman, Arrow Group Holdings: Thank you.

Joe Burns, Chief Executive Officer, Arrow Group Holdings: Do you wanna repeat Thanks, Colin. I could yeah. I’ll field that one. So, you know, GNSS actually, GPS is sort of The US branded name run by the US DOD for the original navigation technologies. GNS is sort of the global, award for for GPS amongst other systems that are out there, Galileo, Baidu, etcetera.

So, we we have multi constellation receiver set that can pretty much look at every NAV signal that’s available, so we have a a broadened horizon. It’s a great question because as we see right now in in the Ukraine conflict and in our operations there, you know, the entire country of Ukraine is pretty much either jammed or spoofed from GPS. So alternative signals are really important. We have one of the few products that can actually navigate through that system in that that that challenged environment without any real issues on our airframe. So having that capability, and that is truly alternative PNT, as we call it.

So PNT stands for position navigation and timing for those on the phone that weren’t sure of that. But we’re very, very engaged in that through through high level engagements with the US government as well as foreign agencies and have a technology that can receive multiple receiver sets. And as with anything that’s jammed or spoofed, the more satellites and constellations you look at, you have a better chance of getting a good solid signal. In our current GPS receiver set. It’s really a true GNS receiver set where it actually looks at multiple constellations.

So we’ve got a fantastic product. We’ve proven in battlefield deployments that we can fly through a lot of those types of environments. So really excited about the future in that because it is where we see all sorts of signaling going. So we’re in a good strong position to be able to build products that can really kind of look through all the noise and give you good navigation and timing signals.

Colin Canfield, Analyst, Cantor: Got it. Great color. Thank you.

Kate, Conference Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.

Dr. Chiranjeev Khathuria, Executive Chairman, Arrow Group Holdings: Thank you.

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