On Wednesday, Swarmer (NASDAQ:SWMR) discussed first-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

Swarmer completed its first quarter of 2026 as a public company, having successfully conducted its IPO and expanded its leadership team.

The company is focused on software solutions for unmanned systems, emphasizing interoperability and scalable autonomy, with over 100,000 combat missions conducted in Ukraine.

Swarmer's revenue model is tied to customer deployments and software activation timelines, leading to potential fluctuations in reported revenue.

The company announced a $2.86 million contract with NASA Bureau, with potential upgrades worth an additional $10.4 million, and expanded into Japan with Rakuten Group as a distributor.

Operational expenses increased due to IPO-related costs and investment in engineering and product development, resulting in a net loss of $4.5 million for the quarter.

Swarmer aims to expand its geographic footprint and deepen integration with partners, with a focus on developing a deployable end-to-end drone interceptor kit.

Swarmer's cash position improved to $23.5 million post-IPO, and the company plans to prioritize investment in engineering and strategic growth initiatives.

Full Transcript

OPERATOR

Good morning and welcome to The Swarmer Inc. First quarter 2026 earnings conference call. Joining us for today's presentation are the company's president and U.S. CEO Alex Fink, CFO Brooks Ensign, and global CEO Serge Kubrienko. At this time, all participants are in a listen only mode. Following management's remarks, we will open the call for questions. Before we begin, I want to remind everyone that today's call will include forward looking statements within the meaning of the federal securities laws. These statements include, among others, statements regarding Swarmware strategy, market opportunity, customer engagement, product development, technology integrations, expansion into new markets, future revenue opportunities, expected customer mix, potential deployments, and the anticipated benefits of the Company's relationships, Memoranda of Understanding, partnerships and commercial initiatives. Forward looking statements are based on current expectations and assumptions are subject to risks and uncertainties that can cause actual results to differ materially. Additional information about factors that can cause actual results to differ is included in the Company's earnings release issued today and in the Company's filings with the securities and Exchange Commission, including the risk factors described. This conference call is being webcast and a recording will be made available for replay on the Company's investor relations website. In addition to the webcast, the Company has posted a press release of the Company's results, which could also be found on the investor relations website. I will now turn the call over to Swarmer's President and US CEO Alex Fink for his comments. Sir, please proceed.

Alex Fink (President and U.S. CEO)

Thank you. Welcome everyone and thank you for joining us on SSwarmer's first earnings call as a public company. The first quarter of 2026 marked a major milestone for SSwarmer. We completed our initial public offering, strengthened our leadership team, and put in place the resources needed to support the next phase of our growth. More importantly, we continued to build momentum around what we believe is a fundamental shift and how unmanned systems are deployed and operated globally. At a high level, the global defense landscape is undergoing a structural transformation. Advances in artificial intelligence, autonomy and low cost unmanned platforms are shaping how modern conflicts are fought as these systems proliferate by the millions. The limiting factor is no longer hardware. It is the ability to coordinate, control and scale those systems effectively. That is the problem. SSwarmer is built There are three core challenges that drone operators face today. First, coordinating large numbers of unmanned systems across multiple domains. Second, enabling those systems to make reliable decisions in real time, especially in contested environments and third, maintaining performance when communications are degraded or denied, SSwarmer operates, at what we describe as the intelligence layer. This is the software that allows large numbers of unmanned systems to to function as a cohesive and resilient force. We are not a drone manufacturer and we are not dependent on any single hardware platform. Our goal is to enable interoperability and scalable autonomy across a wide range of systems. What differentiates Swarmer is that our software is not theoretical. It is built and validated in real world operational environments. Since April of 2024, our platform has been used in more than 100,000 combat missions in Ukraine across nearly 50 military units. These missions generate continuous streams of telemetry, sensor data and operational feedback. We use that data to refine performance, improve resilience and accelerate learning across the platform. This compounding feedback loop is extremely difficult to replicate outside of real world conditions and it is a key driver of our long term advantage. From an operator's perspective, the outcome is straightforward. One operator can effectively control large numbers of autonomous systems in real time. That is what enables scale. As deployment volumes continue to rise globally, that capability becomes increasingly essential. During the first quarter, we continue to see growing engagement for manufacturers developing next generation unmanned platforms. These programs are increasingly designed for higher volumes, lower cost systems and some distributed operating models that shift aligns directly with SSwarmer's architecture, and capabilities. Before going further, I want to briefly address our reported financial results because context here is important. As with many platform software companies operating alongside hardware manufacturers, revenue recognition in our business is tied to production and deployment timelines rather than contract execution. Our revenue model is generally tied to to customer deployments and activation timelines. As a result, reported revenue may fluctuate between periods based on production and fielding schedules, even as underlying platform adoption and customer engagement continue to expand. That dynamic creates timing gap in reported results, but it also reflects our shift towards significantly larger deployment opportunities over time. The more relevant indicator for our business is the scale potential of the platforms we support rather than short term revenue. At the same time, the market itself is evolving quickly. Earlier in our life cycle, a portion of our revenue was tied to legacy platform types, that have become less relevant as operational requirements have changed over the past year. We have deliberately shifted our focus towards next generation higher volume platform including first person view class systems and emerging interceptor architectures. Newer programs are moving through development and early production and we are finding the right partners in these spaces. This morning we announced.

OPERATOR

Okay, sir. You might be good.

Alex Fink (President and U.S. CEO)

At the same time, the market itself is evolving quickly. Earlier in our life cycle, A portion of our revenue was tied to legacy platform types that have become less relevant as operational requirements have changed over the past year. We have deliberately shifted our focus towards next generation higher volume platforms including first person view class systems that were awarded a 2.86 million dollar contract from NASA Bureau, a key of the drone producer. Under the contract, our battle-proven technology will be used on board SkyKnight Quadcopter bombers and other UAVs. The contract also includes optional upgrades that the customer can install which would add an additional 10.4 million if fully executed. These are the types of opportunities that we are beginning to realize and we are ensuring that we are positioning the business to capture them. We are also expanding our geographic footprint. While we have historically been focused on Eastern Europe because of the strong demand, last week we announced our expansion into Japan with support from Rakuten Group. Rakuten is one of the largest and best known companies in Japan and it agreed to sign on as our exclusive distributor in this market. This marks an important step in extending Swarmer's presence into one of the world's most advanced robotics and technology markets. Through this collaboration, we are introducing our Autonomy platform into Japan's unmanned systems ecosystem and supporting a range of potential applications, planning, defense infrastructure and industrial use cases. In connection with that effort, we recently completed the successful demonstration of an autonomous seek and hit operation using attritable, 8 inch drones. This type of validation is an important early step as we engage with partners and customers in the region. Taken together, these developments highlight the growing demand for our platform and the operating leverage embedded in our model. We are not only converting opportunities into initial deployments, but also structuring agreements with meaningful expansion potential while simultaneously opening new strategic markets. On the product side, our recently announced collaboration with Himera strengthens the performance and resilience of our Autonomy platform. By integrating their battlefield proven jam resistant communications into our next generation Autonomy stack, we're embedding a reliable backbone for multi vehicle operations in contested environments. More broadly, this reflects our strategy to unify sensing, communication, coordination and execution into a single interoperable system, making it easier for customers to deploy scalable, reliable autonomy across air, ground and maritime domains. We also announced yesterday that we are developing a deployable end to end drone interceptor kit. This is an important step in our product development as we are seeing an urgent demand for rapid interceptor solutions across the globe. As part of this initiative we are partnering with XDrone, Nordadynamics and Caradac Technologies. XDrone has delivered more than 70,000 drone systems to the front lines in Ukraine and has battle proven designs of both drones and interceptors. NORDA provides thermal guidance capabilities and their software has been used on more than 60,000 drones. Keradag provides sensing technology for incoming threats and has also delivered thousands of systems to the front lines already. Woma's role is to integrate these components into a unified autonomy and coordination layer. We believe that partial solutions like a radar by itself or an interceptor by itself are not the right way to protect critical infrastructure at scale. We are working to unify these battle tested technologies to create an end to end solution that can be deployed quickly and we believe that swarmit's platform can be the glue that binds these parts together put together. We believe that our approach to all of these partnerships will allow Swarming to succeed in the long run and be the de facto embedded software across multiple programs and platform types. From an operational standpoint, the first quarter was a period of intentional investment. We incurred material one time costs associated with our public listing and we increased spending in engineering and product developments as well. These investments are focused on expanding our ability to integrate with different hardware platforms and operate effectively across a broader set of environments and mission profiles. We also recently strengthened our leadership team with the addition of Mihailo Nestor as our Chief Product Officer. Mihailo brings meaningful experience scaling complex technology platforms, most recently at Kiev Star Group Ltd, which is a part of the Global Telecommunication Group Veon lpd. During his tenure he built and led the product organization responsible for large scale digital platforms and services used by know that he, will play an important role in advancing our product roadmap as we look ahead. We believe that due to the long procurement cycle typical of the defense sector, revenue is a trailing indicator. Internally, we'll monitor several indicators of progress including platform integrations, partner integrations, adoption within programs, and progression from development towards production and deployment. We look forward to sharing updates on these when we can. Looking ahead, our focus remains on expanding adoption, deepening integration with leading partners and supporting programs as they move into larger scale fielding. As these initiatives mature, we believe Swarmer can become a foundational software layer for autonomous and collaborative systems and support long term growth as deployment volumes increase across multiple domains. We are still early on the journey, but we are encouraged by the momentum we are seeing and the opportunities ahead. With that, I will turn it over to Brooks to walk through the financials in more detail.

Brooks Ensign (Chief Financial Officer)

Thank you Alex and good morning everyone. I will now review our results for the quarter. Revenue in the first quarter of 2026 was $20,325 compared to $110,704 in Q1 2025. The decline primarily reflects the wind down of residual service related deferred revenue associated with the company's historically largest customer in Ukraine. The company does not expect future revenue from this customer and is focused on expanding engagements with higher volume customers in Ukraine and international markets. The Company's revenue model is generally tied to customer deployment and software activation timelines. Revenue associated with software licenses is typically recognized upon activation, while a portion related to ongoing support and service obligations is deferred and recognized over the applicable service period. As a result, reported revenue in any given period may fluctuate based on customer production and deployment schedules as programs transition from development into broader fielding. Gross loss, for the first quarter of 2026 was 19,599 compared to gross profit of 65,162 in the first quarter of 2025, driven primarily by lower revenue during the period. Operating expenses for the first quarter of 2026 were $4.5 million compared to 800,000 in Q1 2025. As Alex mentioned, operating expenses increased primarily due to higher consulting and professional services expenses associated with becoming a public company, together with increased investment in engineering and product development initiatives. While certain public company transition costs incurred during the quarter were non recurring, we expect to continue investing in engineering, product development and strategic growth initiatives as we scale the business Net loss for the first quarter 2026 was $4.5 million compared to $0.7 million in the first quarter of 2025, primarily reflecting higher operating expenses. Turning to the balance sheet cash and Cash equivalents at March 31, 2026 totaled $2$3.5 million, compared to $9.3 million at December 31, 2025. The increase primarily reflects gross proceeds of approximately $17.3 million from the Company's IPO, together with approximately $3.5 million in gross proceeds from the sale of Series A1 Convertible Preferred Stock. And with that, we'll turn the call over to the operator for questions. Operator

OPERATOR

thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press Star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. One moment please. While we poll for your questions, our first questions come from the line of Alex Furman with Lucid Capital Markets. Please proceed with your questions.

Alex Furman (Equity Analyst)

Great. Thanks very much for taking my question, and congratulations on the successful listing recently wanted to ask about stand, it looks like about a $2.9 million award for the 16,000 software license, but then an option to upgrade the licenses for over $10 million. That's, that's almost five times increase in revenue if these licenses are upgraded. Can you help us understand what that upgrade would entail and what needs to happen in order for that upgrade to be exercised?

Alex Fink (President and U.S. CEO)

Sure. So the customer chose to install our full autonomy stack, the Swarmer platform, on a portion of their drones and our base operating system, Swarmer OS on everything else that they manufacture. And they have the option later on, even after those drones are deployed, to upgrade any drone with Swarmer OS on it to the full autonomy stack. So the Swarmer OS includes basic functionality like proper encryption,, security, secure messaging between the drones, video streaming to multiple viewers, etc. But it does not include any autonomy. The autonomy they are starting out with putting us on a portion of the drones on specific models, but they have the option to enable it everywhere essentially once their end user sees it in action and chooses to have it in every single drone deployed.

Alex Furman (Equity Analyst)

Okay, that's really helpful, appreciate that. And then interceptor system,, that seems like something that's obviously very high in demand right now. What kind of a timeline do you expect this collaboration to take? When could that start to actually be becoming deployable?

Alex Fink (President and U.S. CEO)

Let me start from the demand side, because we're absolutely seeing demand from multiple places around the globe. But the problem that we're seeing is that all the countries that need site-defense solutions, that need interceptors, probably wouldn't be able to actually use an interceptor if they bought one, because an interception process requires multiple steps. You need to be able to detect the threat, you need to be able to coordinate that information and transfer information about the target and where it's heading to the interception system. And then if you don't have interceptor pilots, which most countries around the world don't, you need to actually have a software system that guides that interceptor to the target and tracks it and actually terminates it. So all of these things need to work in concert with each other and we need to have this end to end solution. Ukraine right now has these partial solutions that are integrated manually by highly competent, highly trained, very experienced people. Most places don't have that. So we think that for Ukraine as well it would be useful. But for every other country around the world, it would be necessary to just provide a solution that works end to end, that starts with the detection method and ends with the target being terminated with all the steps in between being coordinated with a single software stack. So that's what we're building here to enable that and to be able to protect critical infrastructure around the west and around all the countries that we want to help. But for that to happen, we need to coordinate multiple players together. That's why you're seeing the detection company that we are working with, Caradag. That's why you're seeing the interceptor company itself, Edge Drone and norda, which provides thermal guidance for at least some of these scenarios. So the timeline, we will have to obviously work with these partners to see the complexity of the integration. My personal estimate would be that it's a matter of somewhere between two and four months, but it could be more complex or simpler, depending on what's under the hood and depending on how initial tests go. Obviously, when it comes to deploying something like this, you need to test it. You cannot just look at the software and estimate the integration. So we will update everyone as this progresses regarding the actual timeline, when we have a more precise estimate.

Alex Furman (Equity Analyst)

Okay, that's really exciting. Thanks for the update on that. And then lastly, you've got more than $20 million of cash on the balance sheet now following the IPO. You know, not a ton of operational expenses (OPEX) here. How do you prioritize investing in M and A versus Capex versus potentially adding more headcount?

Alex Fink (President and U.S. CEO)

Our goal was always to move as fast as possible and to create tools that help the war fighter and to have the greatest impact that we can on the battlefield to help the good guys win. So whatever allows us to move faster and achieve these goals is probably what's going to get the priority specifically. Am I audible now? You're audible. Yes. Okay, I apologize for that. So I think that primarily OPEX would be where we would be investing and hiring more engineers, especially on the integration side to work with more hardware. But all of the above, we need to move fast. We need to get this thing to work. We need it to be useful for the warfighter, and we need it to be deployed and scaled as quickly as possible. Okay.

Alex Furman (Equity Analyst)

Appreciate the insight. Thank you very much.

OPERATOR

Thank you. Our next question has come from the line of Michael Lattimore with Northland Capital Markets. Please proceed with your questions.

Michael Lattimore (Equity Analyst)

All right, Good morning. Congrats on being public here. You know, as you ramp over time, I assume this is a software model, so we should think of gross margins being, you know, 70% plus as you scale over time. Is that fair assessment?

Brooks Ensign (Chief Financial Officer)

Brooks, do you want to take this one? Yes, certainly that is a fair assessment, we have some service obligations for the revenue and some implementation. But yes, that, that is a reasonable estimation.

Michael Lattimore (Equity Analyst)

Okay, and then how do you price this? Is it like a percent of overall system value or like just more color on how price. how you price it.

Alex Fink (President and U.S. CEO)

Right. So it is to some extent a work in progress because the market itself is evolving. So we chose a per-unit licensing model because we see the volume of units being manufactured in this market going up exponentially. And so we think that that is the best way to scale along with the market. But what is the price per unit? That is definitely. It depends on the amount of effort of integrating this particular class of device. It depends on how scalable that class of device is. So for higher volume manufacturing, perhaps the prices could be slightly lower. For something that is manufactured in very low volume overall, like very large fixed wing loans, for example, the prices need to be higher because it's a large integration investment that only gets amortized over a small number of units. So it would be ideal if we could always just charge a certain percentage of the bill of materials,. But that is likely unrealistic. So we will try to figure out what pricing makes sense on a case by case basis.

Michael Lattimore (Equity Analyst)

And you've had a number of nice customer and partner announcements, I guess. Are those the main ones that should be generating revenue here or do you have several that are unannounced? I'm guessing there's plenty of companies that don't want to announce projects ahead of time.

Alex Fink (President and U.S. CEO)

There are certainly companies that don't want to announce projects ahead of time. And as I mentioned in the introduction to this, the announcements and the revenue tends to be a trailing indicator. So the work that you're seeing out in public right now typically reflects work that we've done more between three and nine months ago. So in many cases the pipeline is quite deep and we're looking forward to sharing more information when we're able to about what's next.

Michael Lattimore (Equity Analyst)

Great. And just last one for me, impressive that you guys have had 100,000 combat missions,. Can you get a little bit more detail on those missions? Maybe you know how many drones were in operation per mission? Were they kinetic strikes or surveillance? Yeah, just one more color on that would be great.

Alex Fink (President and U.S. CEO)

So we need to be somewhat careful and only expose things that we were authorized to expose. So I think that we've shared previously that the first combat mission started in April 2024. Initially it was relatively simple. Operations like multi drone reconnaissance or mining started with 3, grew to somewhere between 8 and 10. But these were relatively large drones early on, and the types of autonomy that were run in these missions also vary. So early on, we had a lot of engagements that were semi autonomous where we would control the drones on the way to the target area. More autonomous missions where we would control recon drones to send a video feed of the target area back to an operator. The operator would paint the targets on the screen, and then we would control the attack drones that engage the target. And in fact, we would also decide which attack drone takes which target. That was not a decision for the operator to make. That was a decision for the drones that are in the target. I'm sorry, was I audible for the last part of this? The last 15 seconds was not. Okay, I apologize. This conference system is creating some issues. So, yes, we would determine which attack drone engages which target because that information is more available in the target area and better made based on who has the highest probability of hitting it. These are the missions that are primarily running now, but we are progressing along with the hardware. When we integrate new hardware, new types of mission templates become available.

Michael Lattimore (Equity Analyst)

Okay, great. Thanks very much.

OPERATOR

Thank you so much. We have reached the end of our question and answer session. With that, I'd like to turn the call back over to Alex Fink for any closing comments.

Alex Fink (President and U.S. CEO)

Thanks, everyone, for joining us today. As a reminder, you can find out more about our company, receive additional updates, and learn about upcoming events from the investor relations section of our website. We look forward to updating you on the exciting progress we are making in defense and technology markets. Finally, I'd like to thank our employees, partners, and shareholders for their continued support. Operator.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.