Unusual Machines (NYSEAMERICAN:UMAC) used its fourth-quarter earnings call to outline what management described as a major transition in 2025, shifting from an online retail business toward U.S.-based production of drone components and enterprise sales. Executives also pointed to what they see as a supply-constrained domestic drone market through 2027, driven by regulatory changes and rising government procurement programs.
2025 revenue doubled as enterprise mix rose
CEO Allan Evans said the company generated approximately $11.2 million in revenue in 2025, representing 101% year-over-year growth. Fourth-quarter revenue was approximately $4.9 million, which Evans said was the company’s seventh consecutive quarter of record revenue and represented 133% sequential growth.
Margins improved, though management expects near-term volatility
CFO Brian Hoff said gross margin increased from 24% in Q1 to approximately 36% in Q4, and was 35% for full-year 2025. Evans said the company’s Q4 gross margin exceeded internal expectations.
At the same time, Hoff said management expects margin “fluctuation and decline” in future quarters based on product mix and as the company continues to scale manufacturing, add team members, and invest in process improvements. In Q&A, Evans described the dynamic as partly timing-related: operational scaling occurs first, revenue often follows with a delay, and the gross margin impact can be delayed further until product ships. Evans said he would still expect “our worst gross margins” during the Q1–Q2 timeframe given the volume of new hires and new processes brought online.
Operating expense growth and balance sheet expansion
Hoff said operating expenses increased to $29 million in 2025 from $18.5 million in 2024. He attributed the increase to growth investments, including a large non-cash stock compensation expense of $15.6 million, headcount expansion, systems work, investor relations outreach, and additional facilities.
On liquidity, Evans said the company raised $157.8 million through equity financings during 2025 and ended the year with $103.3 million in cash as part of $157.4 million in total working capital, compared with $3.7 million in cash at the start of 2025. Hoff said the company ended 2025 with about $103 million in cash, over $15 million in inventory including prepaid inventory, and an investment portfolio that contributed to interest income and gains. He said the company had no debt.
Hoff also noted that the figures discussed were “unaudited and subject to change,” with audits expected to be completed in the next few days. The company expects to file its Form 10-K for the year ended December 31, 2025 “in the coming days,” according to investor relations remarks on the call.
Management sees a supply-constrained market and cites policy tailwinds
Looking ahead, Evans said the company believes 2026 will be a year of “rapid growth” for the U.S. drone ecosystem and that it is positioned as a supply chain leader for components for small drones. He characterized the current market as supply constrained, with demand outstripping supply “this year and deep into 2027.”
Evans attributed the imbalance to two broad forces:
- Legislative and regulatory actions that he said have removed foreign competition while domestic capacity is still developing. He cited T-Motor being added to the Entity List in early 2025, tariffs increasing costs for imported goods, and an FCC ban on new licenses for foreign-made drones and drone parts that took effect in late December 2025.
- Government procurement momentum tied to lessons from international conflicts and what he described as the Department of Defense driving demand for drones and a domestic supply chain able to support surge requirements.
Evans said the U.S. small-drone market is about $10 billion annually and suggested that represents roughly a $3 billion to $5 billion addressable market for parts if the market stays flat. He said the FCC action was unexpected and has created what he called a “huge marketplace vacuum” in consumer and enterprise segments. He also said the FCC changes could create at least a $3 billion non-defense components marketplace that will require domestic solutions within the next three to five years, significantly expanding the company’s addressable opportunity.
Production scaling plans and Drone Dominance opportunity
Evans and Hoff described continued scaling of operations and production capacity. Evans said the company grew headcount from 19 to 38 in Q3 2025 and expanded facilities from 6,900 square feet to 62,500 square feet by the end of 2025. In Q4, the company grew from 38 employees to 81, and Evans said it has since grown to over 140 employees.
Operationally, Evans said the company started motor production at some scale in November and is now producing about 15,000 motors per month, with output increasing as efficiencies improve. He said the company added a second and third shift at its motor factory and started a second shift at a flexible production facility used for kitting and other customer support work.
On new products, Evans said Unusual Machines produced its first U.S.-made Fat Shark headsets in January and is scaling toward a run rate of 100 headsets per shift per day, which he expects to reach sometime in April. He said battery pack production is expected to come online in the second half of 2026, along with installation of a high-volume automated motor production line that he said should lift output to well over 100,000 motors per month. He also said the company anticipates manufacturing cameras in the U.S. by the end of 2026.
In Q&A, Evans said the automated motor line capital expenditures have already been made, and the company is targeting having it in-house around July, with a gradual ramp and an expectation of running at “reasonable scale” by Q4.
Evans also discussed the Department of Defense’s Drone Dominance Program, saying the government plans to buy 90,000 low-cost drones in 2026 and 250,000 drones in 2027. He said that program alone represents about a $90 million component opportunity for the company in 2026 and roughly a $250 million component opportunity in 2027.
As of the call, Evans said Unusual Machines had about $12 million in outstanding purchase orders it was working to fulfill, with about $9 million tied to programs other than Drone Dominance. He added that more than half of the first 11 announced Drone Dominance winners were already customers “in some form or fashion,” though he said few had placed full program orders yet and that mix could range from “one part” to a larger portion of its portfolio.
When asked about prioritizing customers in a constrained supply environment, Evans said the company is trying not to “pick winners” and aims to build capacity to support the eventual winners of Drone Dominance phase two. He also said the company is focused on building sustained customer relationships rather than using the tight market to increase pricing.
Regarding retail, Evans said the business is no longer the priority for significant growth, but it remains important as a sales funnel—allowing customers to buy parts for R&D and later scale orders for production.
About Unusual Machines (NYSEAMERICAN:UMAC)
Unusual Machines, Inc designs, manufactures, and sells ultra-low latency video goggles for drone pilots. It operates a drone-focused e-commerce marketplace. The company serves drone pilots, hobbyists, and recreational services. The company was formerly known as AerocarveUS Corporation and changed its name to Unusual Machines, Inc in July 2022. Unusual Machines, Inc was incorporated in 2019 and is based in Orlando, Florida.
