Volatus Aerospace Inc. ($FLT)

All right. It's 8 a.m. Welcome to the Valatus Aerospace Earnings Call. I am Danielle Ganni, Head of Global Trading Strategy and Business Development for Volatus Aerospace and the moderator for this call. Before we get started, just a reminder that we welcome your questions, and we'll be having a Q&A session at the end of this present [indiscernible]. This presentation will be recorded and made available on our investor website within 24 hours. I would also like to take a moment to point out that certain information set forth in this presentation contains forward-looking information, including future-oriented financial information and financial outlook, and actual results may differ materially. The risks, uncertainties and other factors that could influence actual results are described in the presentation, in the press release and in our MD&A filed with Canadian regulators. This presentation also contains non-IFRS measures, which are also outlined in the presentation. There is a full disclosure on Page 2 of this presentation, which we encourage you to read and can be found on Volatus' Investors website at investor.volatusaerospace.com. The company considers the earnings call part of its routine disclosure to educate investors on information contained in the quarterly results and related MD&A. And if you have any questions, feel free to contact the Volatus Aerospace IR team at [email protected]. Now that the housekeeping is that, it is honored to introduce Glenn Lynch, CEO; and Avin Osicki, CFO of Volatus Aerospace.

Thank you, Danielle, and welcome, everybody. Thanks for joining us here today. We'll kick off right away. My name is Glenn Lynch. I'm the CEO of Volatus. Please forgive my voice. Let me start with how to think about Volatus today. We're building an integrated aerospace and defense platform. That means we're combining drones, piloted aviation, manufacturing, software and training into one operating model. The simplest way to think about the business is in 3 parts. First, defense and security. That includes ISR drones, counter UAS or counter drone capability through SKYDRA, NATO training and sovereign manufacturing. Second, Aerial Intelligence Services, which is our operating backbone. This includes inspection, mapping and surveillance work for utilities, energy and infrastructure. Third is our equipment, cargo and training, which includes drone sales, cargo platforms, supporting infrastructure and operating training. What really matters is that this is not a single product company. It's a platform with multiple revenue streams that all reinforce one another. In fiscal 2025, we delivered $34 million of revenue, which was a growth of 26% year-over-year. We maintained about a 32% gross margin and finished the year with just over $41 million in cash. We our defense business grow to 25% of our revenue, that's important because it shows our business is naturally aligning with where Canada and our NATO partners are investing. That's autonomy, sovereign capability and domestic industrial capacity. So this slide really sets the foundation. Validus is evolving into an integrated Canadian aerospace and defense platform with operations that span Canada, the United States and the United Kingdom. So let's take a minute and I'll give you a quick update on what we actually got accomplished in 2025. On the Defense side, this was really a year where we moved from proving we could enter the market to proving we could execute. We delivered multiple ISR systems. That's the defense drones that we're talking about, it's to nato customers and importantly, receive repeat orders. In defense, repeat orders are what really tell you that the capability is working in real operations. We also secured a $9 million training contract with the NATO all -- thanks to Danielle and her team and renewed our national master offer with the government of Canada, which keeps us positioned across all federal UAV service categories. On the commercial side, we continued building stable contracted revenue. We signed a major multiyear utility program and expanded our beyond visual line of sight medical delivery work supported offshore wind logistics and continued our work in environmental programs like aerial reformation. From a technology standpoint, we strengthened our platform -- we added the V100 200 and 300 ISR aircraft. Those are our medium altitude long and during the stones, the IP portfolio we purchased later last year. We advanced our Condor XR XL Heavy Lift program, launched SkyDra, our counter drone software and began establishing our Mirabel manufacturing facility. And from a capital market standpoint, we finished the year with the strongest balance sheet in our history, $41 million in cash. And shortly thereafter, we completed our graduation to the Toronto Stock Exchange main Board. When you step back, these aren't isolated milestones. What they really show is a company building scale, building sovereign capability and positioning itself to participate in the long-term defense industrial cycle that we now see emerging in Canada and among allied nations. This slide really shows 1 of the biggest shifts that's happening inside of Validus. Just 2 years ago, defense was about 5% of our revenue. In 2025, it reached about 25%. I -- if you think about it, that's a major change in our business, and we still believe that we're in the early stages of that growth. There are a few reasons for that. First, we now have real proof points. We have native contracts, repeat ISR orders and growing training platforms are growing, I guess, I should say, programs. So this is no longer about where we think we can go. This is an operating defense business today. Second, the environment around us has changed. I think everybody is seeing that structural change. Canada's defense industrial strategy and Natal commitments are creating a long-term demand cycle and demand signal around autonomy, ISR and sovereign manufacturing. These are exactly the areas where Validus has been building capability. And our objective is extremely clear, we want to be recognized as 1 of the Canadian industrial champions in this sector, a company that can actually deliver capability, not just develop technology. So third, our model as it is today goes well beyond just selling the aircraft. We deliver integrated capability, that's the ISR platforms, our long endurance systems our heavy lift logistic drones, the Condor XL, specifically and our training and sustainment. That matters because sustainment creates long-term reoccurring revenue relationships. Mirabel is an extremely important part and a growing role in our -- in the Volatus story. We're building a manufacturing capability in Canada, which positions us exactly where the defense industrial strategy is trying to build domestic strength, trusted Canadian suppliers with export potential to nato and allies. So the takeaway is really this. Defense is becoming a core growth engine for Volatus, and we believe we're positioning ourselves to participate meaningfully in Canada's push to rebuild its next generation of aerospace and defense industrial champions. This slide, before I pass it over to Abby highlights an important evolution in our counter drone strategy. With Skytra, we intentionally moved upstream. From just products and hardware, we're now focused on the policy planning and operational readiness level. That was really the original objective. The concept was to help shape how organizations think about counter drone readiness, not just what equipment they buy. Sky DRA is our operational planning and simulation platform. It allows defense organizations, airports and critical infrastructure operators to plan scenarios, train teams and develop response frameworks before they ever deploy hardware. Strategically, this matters because defense is increasingly software-driven and governments, including through the defense industrial strategy, are putting more emphasis on preparedness, integration and operational capability. From an investor standpoint, it also introduces 3 important things for us: reoccurring software revenue stronger pull-through for our hardware programs and access to a much larger counter-drone readiness market. So while Skydra is a new product, new in our commercialization, it's an extremely important first step. It shows we're not just building drones. We're building capability at the policy planning and operational level of counter-drone strategies. So with that, I'm going to pass it over to Abhinav now, and he will walk you through our 2025 financials.

Thank you, Glenn, and good morning, everyone. I will walk you through our fiscal year 2025 financial results, which represent the first full year following the merger with Drone Delivery Canada and Volati in 2024. Starting with the top line. Equipment and Services revenue came in at $34.2 million, up 26% from $27 million in fiscal year 2024. The big driver was equipment sales and that part of the business more than ever. up 16%, largely tied to our defense sector at handset. On the service side, revenue was down slightly, and it's really the timing of awards and execution, not the demand. We are already seeing the normalization. There has been 2 major service contracts that were awarded due to starting 2025, but started in tail end of Q1 of 2026. On margins, -- gross profit increased $11 million, and margins remained stable at 32% despite the higher mix of equipment and defense sales. On operating performance -- this was the first full year post merger. So we're seeing the impact of that. We invested heavily in people, up 45% IT integration costs were up 40%, and we restarted and restated R&D, particularly around development of defense technology. So yes, operating loss increased to $14.9 million, but that's most -- but that's more likely and very much planned investment. Importantly, these are front-loaded investments to support scale especially in the development of different technology in the given geopolitical situation we are in. At the EBITDA level, we are at about 7.2 million in -- but on a pro forma basis, including the full year of Drug Delivery Canada, that's actually a 25% improvement. So overall, I would frame 2025 as a bill year strong revenue growth, deliberate investments and a clear shift in where the business is heading. Next slide highlights the revenue growth, mix and the geography of the business. We ended the year with 26% growth, and defense now makes up 25% of our total revenue, highest in the company history and we have a type scratch the surface. That's an important number because structurally, we are seeing a move towards 60% to 65% in defense revenue over time. Looking at the quarterly revenue, we can see the ramp-up. Growth excepted through year with Q2 and Q3 showcasing the stock longer step up, particularly equipment deliveries and ramp-up in Defense. Q4 remained stable, indicating a baseline run rate normalization. On the mix side, equipment is now about 48% of revenue, up significantly from 29% last year. Services at 52%, still showcasing a meaningful base, and that's indeed equipment gets us in the door, especially in the defense, sustainment revenue [ destiny ] 60% of the defense contract and is driven by training, maintenance and software solution all being provided in house by Volati as we scale. Services is what drives recurring revenue and margin over time. Geographically, Canada did $19.3 million in revenue, a 10% increase, showcasing a stable and foundational market, and this does not include any defense activities. With the launch of defense industry strategy in 2026. This will change the mix and the growth materially as we scale in 2026 and 2027. Europe and U.K. saw a revenue of $10 million, up 244% primary growth engine being defense and U.S. was stable at $4.9 million, with a 13% marginal drop temporarily due to soften, which are factors beyond our control. Critically entering 2026, we have established a $20 million of annual recurring revenue equivalent of revenue run rate, providing visibility and stability. So directionally, we are moving from more transactional project-wise revenue to more predictable contracted revenue stream and platform revenue as skill and defense. That key shift is -- that's a key shift for us. Moving on to balance sheet and let equity. 2025 represents a step-up change in the financial strength. Daniel, previous slide. Thank you. Turning to balance sheet, 2025 represent a step-up change in financial strength of the company. We ended up the year with total assets of $93 million, up from $58 million, current assets of $48 million, up from $11 million and cash of $41 million compared to just $2 million the prior year. This reflects a $39 million increase in cash, primarily driven by the financing activities align with our growth strategy and the confidence investors have shown in our ability to execute. From a cash standpoint, operating cash flow improved to about $7.5 million versus $12.4 million last year. Investing was about $71.7 million as we continue to build out capabilities in 2026 and financing was about $48.6 million, which enables a significant shift. This positioned us for strongest balance sheet in company history, sufficient capital to support defense programs, manufacturing scale up, especially the Mirabell facility and global expansion. We have moved from a capital extantposition to capital-enabled growth platform with liquidity aligned to our strategic road map. That brings us towards end of the 1 presentation. Happy to take any questions.

[Operator Instructions] So you shared Defense is the fastest growing segment. Can you give us the breakdown of revenue from defense versus commercial and product and services versus equipment?

I can take that question, Daniel. So on the overall breakdown, we are not breaking down defense versus equipment, specifically and the commercial side, specifically to preserve the margin visibility because it's a competitive space. And the breakdown showcases the visibility in the margin from each segment, and it goes against the company. So that's the only reason it's not been disclosed. On the shift side, 48% of the revenue came from overall equipment that includes both commercial and defense. -- and 52% came from services contracts.

What is your cost position after paying the EDC loan? And how is your standing with EDC impacted by the covenant reach?

Sure. So $41 million cash year-end is after repayment of the AC, which is a scheduled repayment of ADC loan -- the covenant impact the omni breach did not impact anything with TDC needed the relationship, not the timing of the payment. ADCC payout is over the 4 years, the timing hasn't changed. We had the approval from the EDC already. We were aware of the breach, and they were comfortable as well. It was just mere a formality and the accounting disclosures on the financial statements.

Could you provide a status update to Mirabel and timing of commercialization of that facility? Also at a high level, how are government conversations going with respect to the defense industrial strategy and FLT's positioning within it?

I'll take that one, Danielle. So Mirabel is a core focus for us right now. Officially, we're hoping to launch the facility with some form of an opening early to mid-June. There's a lot of work being done in the facility right now. We're launching a total of 5 programs over the course of this year. manufacturing will actually begin within the next few weeks on the first program with some deliveries off of that program expected by probably early summer. I would say from a revenue standpoint, we don't expect the facility to be really contributing majorly to the revenue in the company before entering 2027. There will be some revenues in '26, but it's very early stage in the production, particularly as we complete the flight test articles and demonstration aircraft for the larger mail platforms. But hiring is ongoing. They're working very aggressively. Lukas has transitioned to a full-time role now right now leading that initiative. So we're ramping up as quickly as we possibly can. In terms of conversations with the government, we're working very aggressively. We're attending pretty much every defense-related conference right now across the country. We're involved actively with the Canadian Army and some of their strategic planning. We're involved in their Minerva initiative -- we're involved in ideas challenges right now, which are some of the programs that are competitive programs that have been opened up by the government. And to be honest with you, I think what's really important is for people to understand that the defense industrial strategy, while it was several months delayed. I think we are expecting it to kick in a little earlier this year. The reality is, as with most things, it was worth the wait. So it did appear, but it's fairly newly minted as they stand up the defense investment agency and work through some of the legislative issues that allow the DIA to be able to execute with lower floors on their ceilings expediting the procurement process. But much of what we expect to see in 2026 is government investment in the industrial infrastructure of the country. So while there's an $80 billion demand signal, the reality is that demand signal could not be likely deployed across all of Canada right now because our defense infrastructures just simply isn't there. Over the history of Canada, most of the defense spending that was occurring, about $0.75 of every $1, $0.70 to $0.75 was actually leaving Canada. So right now, the defense industrial strategy has created, first of all, a dedicated investment into the Canadian defense industry. That's really the most important number to watch this year is $6.6 billion, which will show up in the form of non-dilutive financing and early programs within the government. If you think about it, because of where we are, it's not likely that the government would turn around and buy $100 million of drones from a Canadian manufacturer, first of all, because the drones haven't been produced in Canada until very recently. When I say that, I mean it had a large operating scale, and because the military will go through a procurement typically of a smaller number. They go through the procurement and testing cycle and then they start entering into program type revenues, which I would expect more to start happening in 2027. But that's not to say we won't see revenues this year, but I think a lot of the things that you'll see is the deployment of capital, investing in the defense industrial strategy -- or excuse me, in the defense industrial base, which will allow us to repatriate much of the defense spending that's leaving Canada right now. And a key point I want to make, particularly for people that are looking at what the strategy really means. The way of Volatus sees it is the defense industrial strategy is not really a a trade protectionist type mechanism. What it really is, is a reinvestment and future investment in the Canadian defense industry. And by strengthening our defense industry it really makes Canada a stronger partner for the United States and for our Allied nations around the world. It allows us to contribute in a more meaningful way, particularly in areas like Arctic, but just overall. It opens the door to collaboration, cooperative relationships, joint venture, co-development of technology. So I think that's probably the most important thing that we should look at. So I know that's a long-winded answer to a relatively short question, but suffice it to say that we are doing our absolute best and remain engaged and increasing our profile within the Canadian government and the defense and the Canadian armed forces.

Well, it then, to go back to Mirabel, what does it -- what will Mirabel look like at a full run rate?

Abinav, do you want to take that one?

Sure, absolutely. I can take that. So -- the 53,000 square feet, it's a perimeter secured at full run rate and full scale initially, when we launched it, the plan was on technology that has been expanded to 4 different technologies now, including the Borealis project. So at full scale, that the capacity of that facility is $250 million.

Okay. And when do we hear more about Borealis?

We waited to Phase 1. So we got down selected from 200 companies to 25. We have already made submission to fish 2 as well. I believe by end of Q2 by mid of Q2, we are expecting the results of Phase 2 to come out -- that will lead to 12 companies in Phase III. Phase III is filleting and demos with the armed forces on the field. And the proposed plan is by end of the year, the government has 1 year, so I would say, until end of April next year to complete Phase III, but we are seeing the much faster movement, so we can expect the end of the year that should conclude.

With the new margin platforming, what would be a reasonable revenue ballpark for the company to reach breakeven?

So $60 million annualized revenue is breaking even. It could be a little faster as well because we need to remember 1 thing. We have ramped up the R&D. But once the technology is out, the R&D also goes down that because now it's on the maintenance of the technology rather than significant investment. The defense software technologies the team is working on. That's a big investment that's going in parallel to the platform, which is hardening the platforms for the Arctic. And once these are ready, the R&D goes down and the -- and basically that also improves the margin profile as it keeps scaling.

Can you refresh us on your M&A strategy? And what are your key areas of focus to fill out your product suite?

Absolutely. So our strategy is still anchored around central thesis of vertical integration, Canadian control aerospace and platform. We are looking in both commercial and the defense segment at the same time on the defense, it's always proprietary technology and IP, something that's proven and works in the operational field -- and of course, it's going to be proven technology and inbounds with existing contracts with the different NATO and NATO partners. On the commercial side, it's operational consolidation that we keep doing it. And specifically on the energy side, in U.S., Canada, we're not just looking for adding on revenue because -- our intent is integrating the platform and immediately realizing the synergy. It's 1 company, 1 direction. That's the intent. It's not a holdco structure. So we look for synergies. We look for integration, and it's broad-based technology, contracts, customer base, geography and people. With the domestic battery partnership that you announced in the MD&A solve the supply chain issue rising from the Middle East situation going on right now?

I'll take that, Abhi. So supply chain is a major discussion for us right now because back to the defense industrial strategy, if we attempted to spend all that money in Canada, the supply chain is somewhat limited for that. very much similar to the United States. There's been, I would say, an overreliance on international markets for supplying a lot of the supply chain and of course, the instability, the geopolitical instability that's existing is certainly rattled supply chain. So there's no question about that. So I believe that 1 of the strongest motivators for companies like Volatus to establish these partnerships like this one, like, for example, what we announced a few days ago with Sentinel R&D is all about strengthening the domestic supply chain within Canada to create a sovereign IP and a dependable supply chain as we kind of build together. So most definitely, I believe that the partnership with Volta Explorer will have real value for us. And in the months and years ahead. The other key advantage is -- remember, Canada has a unique operating environment. I bring it back to the Arctic. It's an area that Canada has some -- some real understanding as well as real demand, a real opportunity for us to contribute around Arctic security to our Natal partners and companies like Volta Explore have the ability to work with us on batteries that are more functional in those cold weather type operations. So most definitely, I would say that's a mitigating factor, not just against the instability in the Middle East. -- but in terms of reinforcing the industrial base in Canada.

So talking about that supply chain, what percentage of the done supply chain is currently from Canada and do you imagine that looking like in 1 to 2 years?

Major focus for Velatis, right? We're our first focus, we're trying to align our strategy very much with the the build, partner, buy strategy that exists in the defense industrial strategy. That was the government's signaling, but it's also a practical business strategy. The simple reality is we can't buy everything from Canada, that doesn't exist here yet. And I don't think that any nation can or should build everything. That said, we want to buy as much as we possibly can from Canada, and we're not buying from Canada -- we either partner with our allied companies from Allied nations. And if we can't do that, then ultimately, we default to a buy situation. So the procurement system in Canada and the procurement system of Volatus is very similar on the supply chain. If we buy it -- if we can buy it in Canada, we will -- if we can't buy it in Canada, we work with allied suppliers to ultimately see if we can relocate or license technologies and what not to be built in Canada. And where that doesn't work, we simply buy from trusted partners of which we have many in -- across the allied nations.

And can you provide a more detailed information on the MOU with Sentinel R&D? And is this the first in the way of Kinetic strike capability how did Sentinel's manufacturing expertise fit or synergize with the Mirabel facility.

So Sentinel is a very interesting company. Kather, CEO, I had a good opportunity to understand the vision that's driving that company, very, very talented new business in Canada. Two things that were really interesting with our partnership with them. First of all, they've got some unique capabilities and some kind of, I would say, unique manufacturing processes on the composite side, which ultimately are things that can benefit Volatus in some of our other programs. everything in Volatus is all about, do we build it ourselves or do we buy it from somewhere else, which is ultimately a time and cost, speed and cost issue that we evaluate as a normal course of business. So definitely, the composite side is one. The second thing is, we were actually in the process of looking to develop our own counter UAS and strike capable platform. To meet really the demands of the Canadian armed forces and the demand signals we're seeing out of programs like Minerva, for example. And what we realized is this was a company that had developed a very, very interesting platform that was mature and actually had the opportunity to go and view it in operation. What they didn't have was a strong integration in autonomy on their own or, of course, autonomy is a major focus for Volatus. So by partnering with Sentinel, that gave Sentinel an opportunity to add significant horsepower both on the commercialization side, but also on the manufacturing and integration side. So they produce the airframes, Validus integrates the technologies. And does the final assembly and testing of the aircraft in our facility in Quebec, which allowed us to introduce that platform to the market very, very quickly and ultimately use the combined strengths of the company, the tremendous performance of their Reckon platform with the evolving capabilities of our autonomy stack. So we expect that to be a -- certainly, it's an exciting partnership. I think it will grow over time. And it's an example of the kind of innovation that's already happening right here in Canada. And our goal is not just to develop but on our own, but to become a valued partner across the supply chain in Canada as well.

Can we speak to the share price in the general stock market at this time? And when do we intend to start to see growth for Velatisin for our investors? I know this is a question that gets asked every single day.

I would just answer. I think I can't comment on the stock price, unfortunately. But the company owned by the management. We haven't sold a single share in the last 7 years despite the run. So -- and we believe that's -- we believe in the story, we believe with the company's had it, and we still believe that's cheap. I would say on the stock price, we have 5 different analysts covering us. Most of them on the call here. Rocoff, Joluka Greg MacDonald, Austin, Benoit, I would say as having -- teaching out to them directly or leading to their research hippo, all have done a fantastic job. So I think that will give much deeper understanding on the company and where the stock is centered.

Thank you,. And we talk a little bit more about Skydra. Are we looking at paying customers yet? Or are we still in the demo evaluation phase looking with prospects?

So very much the product has just recently launched. So in terms of long-term contracts, it's not there yet, but the sales pipeline is building and the product is being demonstrated actively to interested parties.

And you discussed the significance of becoming a Canadian champion or getting that designation to the -- for us and for anyone who's going after that position?

So interestingly enough, the designation striving to become recognized as the Canadian industrial champion. It's 1 of those things that -- if you are not named a champion, the entire exercise of going through the process is nothing but good, right? We elevate our visibility with key stakeholders in the government and defense industry. But basically, it's a preferential treatment is what they're expecting. So it's where the government will ultimately lean on a preferred basis, some kind of preapproved suppliers that they've developed a relationship with. We understand that there's some guidance coming out on the defense industrial or the Canadian champions, in the -- not near or not-too-distant future. I don't think it's -- it would be responsible for us to comment too much until that document comes out.

With the tariff headwinds in the U.S. and the Made America sentiment, are you deemphasizing the U.S. market in the near future? Or how are you going after that market?

So Volatus has a -- we have an office in Syracuse, New York. We've just recently opened when I say recently, I think it's within the last few weeks, we've operationalized a new aviation hub out of Tulsa, Oklahoma area. So no, we have not deemphasized the U.S. market. The reality is a lot of the regulatory changes with the FCC restrictions that came in January were a little bit of a surprise to the entire industry. And what we faced in the United States as well as what we faced here in Canada, is an underdeveloped supply chain. Now there's some extraordinary companies that are out there moving very quickly to fill in void I use an example of Mac unusual machines. They're working. They're a company that's focused on developing the component supply chain in Canada. So those things are moving quickly. But as that supply chain is developing, it does compromise the speed with which our equipment sales business, for example, is capable of moving. So while I won't say deemphasized I would say we've recognized the dynamics, and we're adapting to the market conditioning. So a lot of our sales team, we continue to expand our sales team, but we also expand the breadth of what they're selling so that they're involved in our services business as well as our defense business and our commercial activities as well. The United States is -- I mean, borders our shared border is never going to allow that relationship to be permanently damaged in my personal opinion, and notwithstanding stresses that exist right now. The simple reality is these circumstances, we believe will pass. And in the meantime, what we need to do is focus on making Canada a stronger partner. And that's -- I think that's the way the company ultimately or the way Volatus is approaching it at the moment.

Can you provide an update on the D4 relationship?

Yes, that's an exciting one. So Dufour has 2 primary platforms right now that have the ARO 30, which is a 30-kilogram drawn, I believe, don't quote me on that, because I may be off on the wait a little bit. But -- that's their identical platforms other than their scale, that's actively being flown now at our test site in Ontario. We'll be demonstrating or at least showcasing the Newport platform at the up-and-coming Kansa event in Ottawa, the Canadian defense event. So it's moving along. I would say the ARO 200, which is really the large-scale commercial aircraft, that will be ready to start entering service in early 2027, possibly Q4 of this year. But I would say our relationship with Dufour is continuing to evolve. Our teams are now integrated -- we're not just an operator of the technology, but we're an active feedback loop, combining our engineering feedback with theirs to make sure that the product evolves. We're quite excited to start showcasing that with our own offering. And ultimately, that's another relationship that opens the door to continued manufacturing in Canada because ultimately, due for is developing their technologies. They're doing a brilliant job, but they're not built for scale manufacturing where, of course, we are in Mirabel.

And to move that over to the side there, how does Montreal rank as an aerospace aviation hub? And what does that mean for your supply chain planning?

So we oftentimes talk about the underdeveloped supply chain. And that's very true when we're talking about our space in remotely piloted aircraft systems, which is really kind of a nascent there are an industry rocketing out of the nascent phase for all kinds of reasons that everybody else is reading in the newspaper. But Montreal is 1 of the top 3 aerospace clusters in the world, which is 1 of the primary reasons that we developed the manufacturing facility there. Basically, we have Seattle, Talos and Montreal. One of the only cities in the world where they build pretty much every part of an airplane, not necessarily every part of same airplane, but every part of an airplane. So fairly robust supply chain, a lot of knowledge base in the area, and that's the primary reason we're there. There's a bit of a trade-off Montreal is built for programs like Bombardier and Airbus, which means large-scale multiyear programs. So oftentimes in the early stages of the type of programs that we're doing -- they're smaller scale manufacturing, which sometimes that's not ideal tapping into the supply chain in the region. But as we scale, it will become increasingly important.

Please update us on the unusual machines that you mentioned just a little bit ago and the rate with Gala?

So again, until we moved into kind of a larger scale manufacturing and we understand the outcome of some of the current trade negotiations that are going on between Canada and the United States. It's really tough for us to comment on that. As you probably detected by the tone of my comments earlier, I'm quite fond of Alan and his team at UMAC -- and certainly, we see a future working forward with them, whether that's in our Canadian manufacturing or ultimately, we continuously keep the door open to manufacturing in other markets, including the United States. But it's a bit early right now to determine what that will look like on a commercial basis. Long term other than to say the relationship is extremely important to us.

Had you described to everyone here, what are the major challenges to producing grows for Arctic surveillance and how your hardware and software strategy addresses this?

So that's a great question. The Arctic is something -- most Canadians understand cold, but they don't understand if we're living in places like Toronto and Montreal, even Calgary and Edmonton, where they're a little closer to the nature of what we're discussing. Unless you're living in 1 of the northern communities in Canada, understanding the true elements that we have to deal with, the environment that we can deal with it. And we're not just talking, it's easy to understand extreme cold temperature cycles. But we have other things up there, right? If you scooped up all of the wonderful Canadians that live in the north and you drop them into a city like Kingston, you still have a high vacancy rate. So population is highly scattered across the north and small communities supported at the moment only by the Canadian Rangers, which are kind of untold heroes, in my opinion, in Canada. But basically, the Arctic, we have other considerations. We have very limited terrestrial communication, meaning the communities or thousands of miles apart or thousands of kilometers apart, in some cases. So there's no self-own towers running down the highway because there's no highway. We have a limited number of satellites because the limited number of people that live there. So that creates some limitations. It's an environment where if you think about it, in kind of most of the area that all of us on this call would live in, the risk of losing command and control link between an operator and a pilot is a remote possibility. That's something we prepare for from a safety standpoint. The way we look at the Arctic other than just the environmental things that everybody can think about, right, extreme cold weather and so on. The other issue up there is the loss of communication has to be treated as a potentially daily probability. This means that to operate in the Arctic, not only do we have to adapt the airframe for the cold temperatures and the icing conditions and various things that can live up there. We also have to make sure that the autonomy capability, the autonomous capability of the platform allows an autonomy split it into -- there's the autonomy that operates the aircraft itself. And then there's the mission autonomy that says, why am I here and what am I supposed to be doing? So the platform has to be able to function in an environment, where command and control is lost. It has a job to do and the recovery could be far away. Funny enough, the regulatory environment because of the Arctic allows us to do a lot more than we can do in Southern Aerospace. But still, it's an extremely challenging environment that I feel like there's only a very small handful of countries in the world that understand that Canada is 1 of them.

Absolutely. So we've hit the end of our questions. I just want to thank the people who may comment supporting Volatus throughout the Q&A. I'd like to finish this up with the final thoughts. What do you want our investors to lead this presentation with an Abhinav Singhvi because I always to wonder the best everybody does such a good job. Glenn, do you want to start?

No. I think Abby should start this one.

Okay. Go for it happen. So -- if you look at 2025, we had a transformational year for the company, right? First year after the rindeliveryca indicating the team, we grew the revenue by 26%, improved the pro forma EBITDA profile by 25%. I think the most important thing was improving the balance sheet and enabling the balance sheet to capture larger defense contracts. I think that was a step change that happened for us. but I'm actually more excited about what isn't in the rearview mirror, but what -- where exactly we are headed and where we are headed right now is we have $20 million of ARR -- our defense business has grown to 25% already. We have a clear line of sight in the near future, it will be almost 60% to 65% of the business. We are manufacturing severing platforms at Mirabel. Europe is growing, and we're just getting started in Canaan the defense side, right, with the defense industry strategy. and we have capital to execute. Volatis will not be, I would say, just a hardware company as we are growing and the way we are growing with the restated R&D capabilities, deliberate focus on the different stack technology, both in hardware and the software capabilities. I think that's going to be a game changer for us. That's when the margin expansion lives. That's where the recurring revenue model lives. And the TCS becomes very simple, build for Canada, Canadian aerospace and defense platform. And these are the things where exactly what defense organizations are actually wanting. So we are aligning the company with the different signals with the demand or the pull demand we are seeing in the defense organization and building a full stack platform. That makes us very sticky with different customers in long term.

So I would say a couple of things. First of all, as much as we're talking defense understand that our team is working on protecting critical infrastructure like pipelines and power lines on a daily basis is right now, and that continues to be a huge focus. I think Abby said it pretty well on the company. I just want to take a minute and talk about the environment. This is a transformational moment for the Canadian defense industry. And in fact, for defense for the defense industry globally for that matter as the the increase in spending that we're seeing across NATO just as an example, is unprecedented right now. And I think that Canada is having a unique time. I mean we talk an awful lot about Canada. One thing I want to acknowledge the fact is how Volatus is global in nature. We've got staff across the United States, U.K., Norway, Latin America. And those people, I don't ever want to underestimate the efforts and the contributions that they're making to Polatis, but the reality is we're in a very unique position in Canada because of our proximity to the United States because of the impact of some of the global trade REIT set that's happening, the environmental changes, which have some really healthy spin-offs as well. Regardless of people's political views, the simple reality is a strong Canada is a stronger world. And Volatus is uniquely positioned, I would say, in the RPS world to be able to take advantage of this changing environment. But also, I would encourage everybody listening to this call. to really take a look at the Canadian defense sector. For the first time in our history, we have an industrial strategy, which is a long-term demand signal. It's fully funded under the budget in Canada. -- the priorities have been identified. The government pillar priorities have been very, very clearly articulated and a desire to build in and repatriating a lot of that investment to develop the Canadian defense infrastructure. This is transformational for our country. Strong demand signals well-funded reduces risk, reduce risk, give the opportunity for markets to reevaluate companies. It reduces the cost of capital, which allows companies to accelerate their execution. This is an extremely exciting time for Canada. I encourage everybody to do what they can to support regardless of which side of the fence or what color ties people were, it's important as Canadians right now that we succeed in this initiative with the defense industrial strategy, and we all have to get behind making that happen because there's nothing but good things that come from Canada with a strong and sovereign defense capability. So with that, I think I'll wind it up by saying thank you, everybody, for being here. Thank you for your continued support of Volatus Aerospace, and it's time for us to get back to work.

Excellent. And this recording will be made available to everyone within 24 hours. So stay in -- and thank you, everyone, for attending today.

Thank you all. Bye.