Greetings, and welcome to the Red Cat quarterly earnings. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Ankit Hira, Investor Relations. Thank you, Ankit. You may begin.

Good afternoon, and welcome to Red Cat's Fourth Quarter and Full Year 2025 Earnings Call. Joining us are Red Cat's CEO, Jeff Thompson; COO, Chris Ericson; and CFO, Christian Morrison. Please note that certain information discussed on the call today will include forward-looking statements for our future events and Red Cat's business strategy and future financial and operating performance. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict and may cause actual results to differ materially from those stated or implied by those statements. Certain risks, uncertainties and assumptions are discussed in Red Cat's SEC filings, including its most recent annual report on Form 10-K and other SEC filings. These forward-looking statements reflect management's beliefs, estimates and predictions as of the date of this live broadcast, March 18, 2026, and Red Cat undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. In addition, our comments on the call today will contain references to non-GAAP financial measures such as adjusted EBITDA and key business metrics. Non-GAAP measures should be viewed in addition to and not as an alternative for the company's reported GAAP results. A reconciliation of these non-GAAP measures to their most directly comparable GAAP measures as well as definitions of the key business metrics referenced and management's reasons for including the non-GAAP measures and key business metrics referenced may be found in the press release. Finally, I would like to remind everyone that this call will be recorded and made available for replay via link available on the Investor Relations section of the company's website at ir.redcatholdings.com. With that, I'll now turn the call over to Jeff.

Thanks, Ankit. Good afternoon, and thank you for joining Red Cat's Q4 2025 Earnings Call. I'm going to let Chris Ericson, our COO; and Chris Morrison, our CFO, discuss last year's extraordinary Q4 results, which annualized would be over $100 million. I am going to cover Blue Ops, Black Widow work in Ukraine, drone dominance and guidance. A year ago on the same call, we announced our new mission, Maritime USVs. We found a management dream team in the early summer to build this division. The new team spent many weeks in Europe to learn how these boats were so successful against the Russian Navy. By August, we had preliminary designs. And by December, we had a boat in the water driving autonomously and out-of-the-box ATAC capable. We found a boat factory in Georgia, signed a lease for 155,000 square feet. That factory just went operational approximately 1 month ago, and we'll have full rate production tooling later this month. We believe and are confident that they can build over 100-plus USVs in 2026 as we ramp up production capability to thousands. Blue Ops is a strategic and important part of Red Cat's family of systems. It opens the rest of the globe for Red Cat. Our family of systems was limited to 30% of earth. With our new Variant 7 and other hulls, we can now launch from 100% of the globe. We believe that our Blue Ops USVs can keep our war fighters out of harm's way and make them more lethal. We believe Blue Ops could be very helpful in Venezuela, in the USVIs, the Gulf of America, Cuba and urgently in the Strait of Hormuz. Blue Ops demonstrated partners on Innovation Day that was timely. We demonstrated short-range and long-range counter drone capability. For short range,…

Thank you, Jeff, and good afternoon, everyone. With that intro, I'll skip ahead a little bit and talk about the most interesting part of my script. Yes, I just returned from Ukraine yesterday. My first overarching impression is that I was in awe of the spirit of resiliency of the Ukrainian people. They continue to show how David could stand up to Goliath, and my favorite retort to that comment was only comparable if David wasn't given a sling and rocks. We have now established an office in Kyiv and have a fabulous team. We are building the business and relationships to most effectively, one, test our equipment at the front and obtain true feedback; two, identify new product and integration partners with battle-proven technology; and three, use this knowledge to increase the efficacy of our unmanned systems. I'm happy to report that we have tested multiple systems at the front and proven that our tech works and works really well. This has now resulted with Red Cat receiving a letter of request from Ukrainian forces to provide our systems to begin replacing the use of Chinese-made ISR drones. Black Widow's compact rugged design and secure communications architecture has proven invaluable in real-world deployments, which will contribute directly to mission success for our defense customers. And finally, this past week, we entered into a joint development agreement with a Ukrainian state-owned partner to bring new battle-proven technology to our USVs. This agreement is a huge step forward as we are the first nongovernmental entity to successfully enter into this type of deal, which will enable the future transfer of battle-proven technology to us and our allies. So let's change directions a little bit and talk about how the factory is the weapon. We have quickly learned through current global conflicts…

Thank you, Chris. I'm pleased to present Red Cat's financial performance for the fourth quarter and full year 2025, which represents a transformational period in our company's growth trajectory. For the fourth quarter of 2025, revenue was $26.2 million, up $25.0 million year-over-year and up $16.6 million (sic) [ $15.6 million ] sequentially as deliveries accelerated. This growth was driven by robust defense and government customer demand, our expanded program wins and our ability to rapidly scale production for mission-critical requirements. Gross margin was 4.2%, up 85% year-over-year and down 2.4% sequentially, reflecting mix and ramp dynamics typical of our growth phase. For the full year 2025, revenue was $40.7 million, up $25.1 million year-over-year. Gross margin was 3.1%, up 332 basis points year-over-year, partially driven by scale benefits and manufacturing improvements. Gross margin can be volatile on a quarter-to-quarter basis due to revenue levels that include fixed costs reflected in our cost of goods sold and investments in productions that are not yet at scale. We are continuously implementing more efficient processes and procedures that will enable us to capitalize on the expected increased demand and growth. Our ability to deliver and perform has remained strong alongside our focus on rapidly scaling operations, reflecting our disciplined approach to cost management and the premium value of our American-made secure drone platforms. Operating expenses in 2025 were $67.8 million compared to $32.9 million in the prior year. This increase in operation -- in operating expenses were focused, planned and deliberate to enable us for the accelerated growth we experienced in 2025 and more importantly, for further growth expansion going forward. We increased our headcount by 85%, which primarily included increased engineers and corporate headquarter functional positions. Research and development expenses were $17.9 million compared to $8.1 million in the prior year.…

[Operator Instructions] Our first question comes from the line of Austin Bohlig with Needham.

Congrats on the solid Q4 execution, guys, and it seems like the pipeline is really strong. Understanding you guys aren't giving kind of formal guidance, which I think is prudent, there seems to be a ton of tailwinds, everything from SRR to this bold opportunity, drone dominance now with this really unique opportunity in Ukraine. Any way you can give us some kind of different scenarios on what 2026 could look like?

Yes. And we don't want to get ahead of our skis again. But I mean, there's a range from all of you out there between $100 million and $170 million, very wild -- crazy goalposts right now. We're fine. We're very comfortable in the top half of that, but we're not ready to commit to it until we get contracts in hand to give our official guidance.

Okay. No, that's fair. And then just wanted to dive into this new Ukraine opportunity. This seems pretty incremental. Do you guys have any idea of like how many you could be potentially replacing?

Yes. Well, let me -- I'm going to have Chris Ericson answer that because he just got back last night, and he was in the room when they notified us.

Yes. So we were there with the war fighters and the guys who are collecting all the data there, and they came back and I asked them the question, they said 350,000 ISR drones a year, Chinese ISR drones is what they're going through a year on the Ukraine front, a massive number.

Wow, wow. So a big opportunity there. I guess kind of lastly for me and more just kind of want to touch on all businesses, the boat segment. Obviously, what's going on in Hormuz. Have you guys noticed any sort of increase in maybe RFP or interest just given the heightened conflict in the waterways or anything you could talk about there?

Yes. So Austin, you were at Innovation Day and 2 days later, the war started. And our biz dev team, all of our different teams have been getting stuff coming at us in every which way and direction some people calling, asking panic questions, what can we get here and now? As things calm down a little bit, it looks like there's going to be some pretty massive RFPs coming out of the Gulf states. They won't take as long as traditional RFPs. We're seeing an uptick in some Navy inquiries that were at Innovation Day. We are hearing a lot about counter. People want counter. As I explained in my prepared comments, the Variant 7 has a great counter configuration with the ACS Bullfrog, which can take down FPVs and also can take down Shahed's at close range. And that combined with the Aeon's Zeus is something we're going very quickly at, and they're ramping very rapidly to be able to be a great solution, a counter solution for the Shahed's. And they also don't require a pilot like a lot of the Ukrainian solutions to take down a Shahed. So a lot of great tech coming out of Ukraine for counter Shahed's, but we think that we can also help dramatically in the Strait of Hormuz. And you got to remember, this is -- everyone is talking about how this is so urgent right now in the Strait, but we believe that the Strait is going to need to be protected for not years, forever from now on. No longer is it going to be acceptable for the world to be held hostage by that one gap in small area there between the Persian Gulf and the Gulf of Oman. So we think this is a very long-term solution is to not have billion ships escorting tankers. We prefer to do it -- we prefer to do it with 30 or 40 USVs, 10, 20 on each side and/or doing port protection being close to the shore of Iran to make sure that nothing is coming out with our counter capabilities.

Well guys, keep up the great work.

Our next question comes from the line of Mike Latimore with Northland.

Sorry, I'm in an airport, so it might be a little bit noisy. I apologize. So I guess -- yes, congrats on the strong year. That was great. As you think about the full rate production contract, is that something that you would anticipate getting sort of one main order? Or would there be separate tranches over there?

Are you talking for the Black Widow with the SRR program?

Yes, sorry. Yes, exactly.

Yes. Okay. Because there's a -- we're going into full rate production, hopefully very soon with the boats also. So yes, great question. So as Austin alluded to earlier, there's an influx of orders related to Epic Fury. We're expecting, and again, not going to give dates to have our new OTA full rate production contract any day. We -- there is some possibilities of getting some immediate orders for Epic Fury, which might delay a week or 2 the other contract. But we're progressing the ship every month still for SRR and things are looking fantastic with the SRR program with their funding and now with Epic Fury and a lot of other needs that we're hearing out of the Department of War for Black Widows.

Excellent. And I think you -- in your prepared remarks, you talked about anticipating an order for the USV in the second quarter, I believe. I guess can you give a little more color there in terms of type of customer region, that sort of thing?

I'm sorry, I don't know which order in the second quarter you heard.

I thought you said something about a USV -- or anticipating a USV order in the second quarter. No?

No, we did not say that, but we are hoping -- people are very interested in our USVs. There's a lot of urgency around our USVs right now. We were previously going to use our first 15 for demos only. And now we're going to -- hull # 6, which is just coming out now today. Hull #6 from 15 are now going to be hopefully shipped to customers as quickly as we can make them.

Excellent. And last thing on -- you talked about getting to 1,000 drones a month. Would you sort of start building to that rate even before having the contracts?

We're there. We're doing that now.

Our next question comes from Ashok Kumar with ThinkEquity. Looks like we lost Ashok there. I don't see any more questions. And with that, I'll pass it back to management.

Great. Well, thanks, everybody, for coming on. We had about 400 people on this call today. A lot of exciting stuff happening across the globe. Chris Ericson's great news that we'll be working very hard on quickly and scaling to help fulfill all the things that are going on. Again, we will not be waiting for an official quarterly call to update people on guidance. As soon as we have our contracts in hand, we will get that information out to the market. We're very excited. We still believe that every quarter is going to be a record going forward, and we're excited to get back to work. Thanks again.

Thank you, everyone.

This concludes today's webinar. You may disconnect at this time. Thank you, everyone, for your participation.