Palladyne AI (PDYN) Q2 FY26 earnings call: guidance and Q&A

What progress has been made on Americanizing IAI systems, including identifying domestic manufacturing sites and engaging with the U.S. government?

Management has engaged with about half of potential U.S. government customers, finding meaningful interest. They are identifying currently available facilities for manufacturing to quickly scale if demand materializes, avoiding the long timelines of new construction. The battle-proven nature of IAI systems means there's pre-existing familiarity.

“We have engaged now with the U.S. government I would say with about half of those targets. And across the board, I would say that there is meaningful interest, but interest is just the beginning.”

asked by Max McEllis · answered by Unknown Speaker

What specific milestone led to Gremlin X advancing from TRL 6 to TRL 7, and what is required to reach TRL 8?

The advancement was due to five design iterations, flying and testing, culminating in customers (soldiers) successfully flying the system as intended under battlefield conditions. TRL 8 would require live-fire, actual battlefield conditions, which they haven't experienced yet.

“What got us over the hurdle was getting into the hands of customers and have the customers actually fly it as intended successfully. not as managing or demoing the systems, but actually having soldiers in the field, using them under battlefield conditions.”

asked by Max McEllis · answered by Unknown Speaker

Given the $15-$18 million revenue needed to hit 2026 guidance and the $25 million backlog converting over 12-18 months, what percentage of the remaining 2026 revenue is already contracted for this year?

Management stated that backlog is contractually committed, but the exact timing of deliveries is less certain. They reiterated confidence in the full-year guidance based on current business visibility, but could not provide a precise percentage of backlog converting within 2026.

“What I can tell you is we are feeling, based on everything that we see that Trevor and I see, in the business, we are confident in reiterating the guidance that we previously gave.”

asked by Max McEllis · answered by Unknown Speaker

How do the Swarm OS exercises compare to programs like Swarm Forge, in terms of requirements and opportunities?

Management explained that DIU programs like Swarm Forge are 'treasure hunts' for new tech, involving bake-offs and development funding. Their approach with Swarm OS is different: getting a finished product into the hands of warfighters for real-world exercises (IVMAS, PCC6) to get direct evaluation and feedback, rather than controlled demos. This organic spread of reputation leads to invitations to more exercises.

“Rather it is actually getting your product and technology in the hands of war fighters, let them get real world experience with it and evaluate it. And then develop a report that says to the, operating units and to the buyers and the acquisition people and the requirements riders, hey, this is something we've actually got our hands on in the field.”

asked by Mike Latimore · answered by Unknown Speaker

How will the improved revenue outlook in H2 translate to cash flow, considering margins and working capital, and how will the business scale into cash flow with greater revenues?

Management expects cash burn to be about $12 million in H2 to hit full-year guidance, including some CapEx. They anticipate cash burn to trend down as revenue increases and margins improve, leveraging existing manufacturing capacity and AI software opportunities without significant additional costs.

“Cash burns about 12 million is what we're anticipating. There is some CapEx built into that that we're going to use strategically there. But we do see with the revenue trending up and more margin dropping to the bottom that that cash flow does go down and and that cash burn requirement goes down”

asked by Adam Samuelson · answered by Trevor Thatcher

What were the key learnings from operating in the PCC6 environment, particularly regarding SwarmOS?

Learnings included confirming that a single soldier can manage multiple drones without micromanagement, even with limited experience, and that the system works as advertised under degraded comms. They also improved training time, received feedback on the user interface, and successfully integrated with Anduril's Lattice in a short timeframe.

“We knew we could do it from a technology perspective, but until you have a soldier with limited experience with drones actually get their hands on it, you don't know that it really proves out. And we saw no limitations on the number of drones that we could fly or the number of drones that a fairly inexperienced soldier could actually manage.”

asked by James Kisner · answered by Unknown Speaker