Volatus Aerospace Inc. (FLT) Earnings Call Transcript & Summary

So good morning, everyone, and welcome to the Volatus Aerospace Earnings Call. My name is Kristina Davis, the VP of Corporate Affairs and Strategy, and I am today's moderator. 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 the presentation. [Operator Instructions] And if we're unable to answer your questions today, we'll be happy to connect with you after the program. This presentation will be recorded, and made available on our Investor website within 24 hours. I'd 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 you're seeing now, which we encourage you to read and can be found on Volatus' investor 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. If you have any questions, please feel free to contact Volatus Aerospace IR team at investorrelations@volatusaerospace.com. So now that's done, it's an honor to introduce Glen Lynch, CEO; and Abhi Singhvi, CFO of Volatus Aerospace. I'll let you both take it away.

Thanks, Kristina. Good morning, everyone, and thank you for joining us for Volatus Aerospace Q2 2026 Business Update and Earnings Call. We've got a lot to cover this morning, but we'll keep the presentation focused. Abhi will begin with the financial results for the quarter, including revenue margins, our cost structure and the balance sheet. And then I'll take you through the operating and strategic developments across the business, particularly focused on Mirabel, defense, autonomy and the programs we're pursuing for the balance of the year. We recognize that the financial results do not yet reflect the level of growth we are building the company to deliver. So an important part of today's discussion will be connecting the investments we've made to the opportunities they're intended to support. We'll finish by opening the call for questions. And with that, I'll turn it over to Abhi.

Thanks, Glen. Let me take everyone through the financial performance of the quarter. Revenue was $8.4 million, up 49.5% sequentially from Q1. We are pleased with the sequential recovery, but we also recognize that the result was below where we want the business to be at this stage of its development. One important factor was $2.6 million of contracted defense revenue that was not delivered in the quarter due to the continuous supply chain impact around batteries and is now expected to be completed in the second half of this year. The important distinction is that it was a timing issue on a signed business rather than any cancellation or loss of demand. Gross margin was 29% for the quarter. The quarter-over-quarter growth movements reflect the timing and mix of the project-based deliveries, including a greater contribution from defense-related programs. Given the project-based nature of our business, we believe the 6 months and trailing performance provides a better view of the underlying economics than any individual quarter, which we will discuss in the upcoming slide in detail. We ended June with strong balance sheet, giving us substantially greater financial flexibility. This flexibility allows us to support production, inventory requirements, continue investing in our proprietary technology platform and pursue larger programs where the ability -- where we have the ability to carry working capital through a multiyear delivery cycle in an important competitive consideration. The next slide highlights basically the overall chart on a quarterly basis. This chart gives us the best context for the quarter as well. Revenue increased almost 50% sequentially from $5.6 million to $8.4 million, but was also down 20% over Q2 of last year, and we don't want to minimize that. The largest single factor was the $2.6 million of contracted defense revenue that moved into the second half. It's -- as I mentioned, it's a signed business, not a cancellation or lost customer. And we currently expect -- and we are -- right now, we are on time and on schedule on the delivery in the upcoming months. The other thing I would like to point out is the revenue mix. Services and training represented 57% of Q2 revenue, while product and equipment represented 43%. We continue to want both sides of the business. Services provide continuity and stronger recurring economics. Products, defense systems and technology gives us access to much larger program opportunities. Our challenge now is getting those large programs to convert quickly enough that the revenue begins to catch up with the capability we have built now. That's what the second half of this year is all about. Let me shed some -- spend a minute on the margin. Gross margin was 29.3% in the quarter compared to 35% in Q1 and 32% in second quarter of last year. The primary driver of the movement was delivery mix and certain impact of the increasing fuel prices. Importantly, we did not see material deterioration in pricing or underlying cost economics. The movement was predominantly a function of what was delivered within the quarter. That's why I think the first half yearly number provides a better indication of the underlying margin profile. For the 6 months, gross margin was 31.6% compared to 31.9% in the same period of last year, essentially stable year-over-year. So while the quarterly margin moved by 260 basis points, the first half of the year margin movement was only 30 basis points. Our long-term objective remains to have a gross margin of between 35% and 40% range. This -- we see 3 principal drivers towards this range. One, greater scale and operating leverage across our defense program. Second is a contribution from higher proprietary platform and program revenue as commercialization progresses. And lastly, is the continued growth in the services and training business. The revenue mix on the right supports that strategy. Services and training represented 56% for the first half of the year, product represented 44%. That's within the 55% to 60% services mix we have been working towards. That matters because services generally provides greater revenue continuity and stronger margins, while the equipment and defense side of the business gives us access to substantially larger program opportunities. Over time, we believe the combination of these 2 is more important than either one of them independently. So the takeaway on the margin is the quarter was affected by mix and program timing. First half margins remained essentially stable year-over-year as defense program moved from early stage deliveries into production scale, as proprietary technology contributes more revenue for us. And the services revenue grows, we believe there's a path back towards a 35% to 40% margin objective. The important point is that the investment we are making in defense are intended to create that scale and operating leverage. Let me spend some more time on here because we recognize that this is probably one of the most important questions for shareholders today. Adjusted EBITDA loss was $4.35 million in the quarter compared to approximately $0.3 million a year ago. That's an increase, and we are not dismissing it. The central issue is timing. Over the past 12 months, we are deliberately building capacity ahead of the revenue. The largest increase was personnel, particularly engineering, defense and technical talent. We have invested in V-Cortex AI and other proprietary technology platforms. We have opened up Mirabel. We have expanded the system, compliance and infrastructure required to compete for larger defense programs. We have materially increased our engagement with Canadian NATO and allied procurement organizations. Much of that spending has to occur before defense customer -- before a defense award production program. We cannot build the engineering organization after we are expected to deliver. We cannot begin the security clearances, quality and manufacturing processes after customers require them. And we cannot establish sovereign production capacity after the procurement starts. So there is a timing gap between the investment and the revenue. The responsibility on management now is to close that gap. A number of that initial build-out costs are behind us. And much of the organizational capacity we need now are in place. So the second half is increasing about those utilization, conversion and operating leverage rather than simply continuing to add infrastructure. Let me close the financial section with balance sheet because this gives us the capacity to execute on the strategy we had just described. We ended up June with $59.2 million in cash, approximately $64 million in working capital and total assets of almost $119 million, with shareholders' equity of approximately $87 million. The result is the strongest balance sheet in the company's history, and importantly, a substantially stronger financial foundation from which we execute. But the important point isn't simply about the capital we have. It's about what that capital allows us to do. Our priorities are discipline, support manufacturing capacity as demand scales, continuing the development and commercialization of our defense and autonomous systems, maintain strategic flexibility and provide the working capital capacity required to pursue larger government and commercial programs. And the last point is particularly important. For larger multiyear programs, financial capacity can itself be a part of a qualification process. Customer need confidence, not only in our technology and manufacturing capability, but also in our ability to support inventory, production and working capital across the long-term delivery cycles. Our financial position today materially strengthens our ability to compete on those opportunities. And that connects directly to the investment profile I discussed on the previous slide. We have built the people, technology and manufacturing capability required for the next stage of the development of our business, and we now have the financial capacity to support that infrastructure as we scale revenue against it. The balance sheet gives us the ability to execute this strategy from a position of strength, but having capital does not reduce our focus on cost discipline. The objective is not to consume that capital, building an ever larger cost base. The objective is to use to support programs, production, working capital and selective investment that can generate meaningful returns. And as we move forward, investors should expect increasing cost discipline around the relationship between incremental investment and identified revenue opportunities. With this, I will hand back to Glen.

Thanks, Abhi. The reason I wanted to start my portion here is that this slide helps connect the financial investments you've just seen with what we've actually built. Over the first half, we opened Mirabel. We launched our V-Cortex AI autonomy suite. We secured a new NATO-aligned training business. We expanded our engagement with Ukraine and allied defense partners, and we strengthened the balance sheet sufficiently to pursue much larger programs. Those capabilities and developments haven't yet translated into the level of revenue that we ultimately expect from them, but the capability is now substantially in place. So we're moving from a period that was heavily weighted towards building the foundation into one that's increasingly focused on converting that foundation into contract production and revenue. Mirabel is perhaps the clearest example of the investment we've made ahead of the market. We now have 53,000 square feet of dedicated manufacturing and systems integration capacity, but the key point isn't the building. It's what the facility qualifies us to compete for. We're already producing our docking stations there. We're actually shipping. For reference, I think we took possession of the facility on February 26. So I'm quite pleased with the progress that's happening there. We're preparing additional aircraft and systems for production. And Mirabel gives us a Canadian manufacturing base, where we can integrate both our own technologies and the licensed technologies that we've been announcing from international partners. We're also progressing the federal security and defense facility approval processes for both Mirabel and our operations control center. It is particularly important to understand because the increasing sensitivity of defense program require not only the technology, but the secure facilities, controlled processes and the ability to operate within government security frameworks. That's precisely why we've invested ahead of revenue. As Canada shifts towards sovereign defense production, domestic manufacturing capability is becoming an increasingly important part of winning the program, and Mirabel gives us that capacity today. Wildfire is a good example of how we're using the same infrastructure and technology across more than one end market. This initiative is developed quickly from conversations with senior levels of government around Canada's need for a more persistent national wildfire capability. The opportunity is to combine technologies we're already developing or integrating. That includes our long endurance, intelligence aircraft, rapid response autonomous aircraft, our operations control center and our sovereign Canadian manufacturing, all into one national operating system. So rather than being a completely separate R&D initiative, it uses many of the same capabilities that we're investing in for defense. In the case of wildfire, the objective is simple. We want to see the fire sooner, we want to understand them better and we want to respond faster. We're engaging actively with government on what that capability could look like. For investors, the important point is that the infrastructure we're building for defense has potential applications across all major national resilience programs as well. This gives you a sense of the architecture. At the intelligence layer, the long endurance aircraft can provide persistent surveillance over very large areas. That feeds information into an operations center where data can be fused, analyzed and acted on. And then the autonomous aircraft can potentially provide rapid response, including operation during periods at day, night and reduced visibility where conventional assets may be constrained. We're not proposing to replace Canada's existing wildfire aviation infrastructure. We're proposing an autonomous layer that can make the overall system more persistent and more responsive. And importantly, we're trying -- or rather not trying to invent every component ourselves. We're working with leading international technology partners, integrating our own proven systems around our own operations, our autonomy and our Canadian manufacturing capability. That partner and integrate model is going to be increasingly important across both our wildfire and defense strategies. This is the proprietary technology layer underneath that strategy. V-Cortex is becoming the common autonomy and intelligence architecture across multiple platforms. SKYDRA gives us a proprietary Counter-UAS software product and platform and our first recurring software model. Condor addresses heavy lift, and the V-Series gives us long endurance aircraft that can increasingly be manufactured and integrated at Mirabel. The distinction we're trying to create is important. We don't want Volatus to simply be a reseller of someone else's drone. But equally, we don't believe we need to invent every airframe, sensor or propulsion system ourselves. The model is to own the high-value intellectual property where it differentiates us and most particularly around autonomy, guidance, integration and operations and then combine best-of-breed technology from strong partners. That's how we believe we can move faster while keeping the highest value element of the system inside of Volatus, and it provides us an important context for the R&D investments that you're seeing in the financial statements. I'm going to spend a few extra minutes on this slide because I think it's one of the most important for investors to understand. Just as a bit of a preamble, our commercial business is continuing to move forward. I want to make that point because we're talking a lot about defense here. We continue to build our services, training and equipment and technology businesses, and that is and will remain an important part of Volatus. But a significant portion of the investment that we are seeing today is focused on defense. And the reason is pretty straightforward. The scale of the opportunity developing in defense is materially different from what existed even 12 months ago. We've been investing in the people, the technology, the manufacturing capability, security infrastructure and the relationships required to participate in that market as it develops. Canada has now moved from beyond simply announcing a defense industrial strategy. Now we're beginning to see institutional structure and procurement mechanisms being put in place to execute it. It certainly doesn't mean that defense procurement is moving as quickly today as either the Prime Minister, industry or the military would like. It certainly isn't there yet. But the process is moving, and we believe there's important catalysts immediately ahead. The Defense Investment Agency is already operating today. However, for the moment, it remains a special operating agency within Public Services and Procurement Canada. The government's stated intention is to establish it as a stand-alone entity, specifically to consolidate procurement activity, reduce duplication and most importantly, accelerate military acquisition. Our expectation is that this will be one of the most important pieces of legislation addressed when Parliament returns this fall, potentially in the late September or early October period is what we're expecting. So while the revenue impact of the transformation is still ahead of us, the architecture required to create that procurement velocity is increasingly being put in place today. And for Volatus, we're not standing on the sidelines waiting for that to happen. Our level of engagement with the Canadian Armed Forces, the Defense Investment Agency, and the broader defense ecosystem has increased dramatically. Over the past year, we've deliberately built and continue to strengthen a dedicated defense team spanning military engagement, business development, engineering, autonomy, manufacturing and strategic partnerships. That matters because we're not simply monitoring these activities as they develop, we're actively participating. We're engaging in the qualification processes, participating in industry briefings and technical sessions, responding to emerging military requirements, developing Canadian and international partnerships around specific capability gaps and we're aligning our own technology, manufacturing and operating capabilities to the actual programs that are beginning to move through the system. So when we talk about the various initiatives in the next couple of minutes and the allied opportunities, these aren't simply examples of markets we might enter. These are initiatives where our team is already engaging today. That's an important distinction because it means the investment we're making in defense is not simply on a view that government spending will eventually increase. It's based on direct engagement with the military, direct participation in the emerging procurement mechanisms and a growing understanding of where specific requirements are heading. Our objective is to be positioned at every stage, from military engagement to qualification, through prototyping and testing to production, integration and operational support, and that's the environment in which the specific programs that I'm about to discuss are now emerging. So now I'll talk specifically about what's happening. So the Defense Drone Initiative is one of the most important. The DDI is creating a prequalified marketplace of Canadian suppliers that can respond quickly to military requirements across uncrewed systems, digital enablers, integration, training and innovation. We completed our Request for Supplier Arrangement Submission yesterday actually, and we expect the first qualified supplier list to be issued in early September. That matters because a number of the sequence -- or subsequent procurements are expected to flow through that marketplace. MINERVA, I think most people have heard about it by now. It's another significant opportunity. The Canadian Army is pursuing requirements across reconnaissance and surveillance, target acquisition, strike, drop capable systems and Arctic operations. That potential -- or the potential volumes for these programs are meaningful, and the procurement activity is already beginning. There's also a separate light UAS competition that's already underway to rapidly equip the Army with tactical ISR capabilities. And then there's the Canadian Deep Precision Strike. The near-term requirement is expected to emphasize speed, acquiring or partnering around mature allied technologies that can be fielded quickly, and the longer-term strategy is to increase sovereign Canadian content in areas such as autonomy, navigation, propulsion, electronic warfare, resilience and open systems architecture. This is particularly well aligned with our strategy. We can grew -- we can bring rather proven international technology into Canada quickly, integrate our own autonomy and guidance capabilities and progressively increase Canadian manufacturing and intellectual property. Counter-UAS and interceptor programs are following the same model. Our contributions can include the Seeker tracker technology, the assured navigation, autonomy and guidance and systems integration, while our partners contribute other elements of the system. Build with Ukraine is another example. Canada is actively supporting the transfer of battle-proven Ukrainian technologies into Canadian production. Mirabel gives us the infrastructure to participate in that strategy, and this opportunity extends well beyond Canada. We recently advanced through Phase 2 process for U.S. SOCOM's Modular Kinetic Lethal Drone program and submitted a full prototype proposal. No award has been made and the decision remains pending, but advancing to that stage demonstrates that the capabilities we're building are relevant not only in Canada but with allied customers as well. So the strategy is becoming particularly clear: build the critical IP where we can differentiate, partner with proven Canadian and allied technologies where that accelerates deployment and use Mirabel as the sovereign manufacturing and integration platform that brings those capabilities together. The important point is that the investments we've made are increasingly aligned with the procurement activity that's now moving from strategy into acquisition. So when I bring all of this together, our focus for the balance of the year is execution. We have contracted defense revenue scheduled for delivery. We have new Canadian procurement pathways opening. We have a larger NATO and allied opportunities in development. And we have Mirabel is now operational. We have proprietary technologies that are moving closer to commercialization, and the foundation we've been investing in is increasingly in place. Now the objective is to put more volume through that infrastructure, convert more of the pipeline into programs and create operating leverage as the revenue scales. We continue to expect meaningful revenue growth for fiscal 2026, and we believe the combination of our balance sheet, sovereign manufacturing capability, proprietary technology and increasingly strong position in defense gives us a very different opportunity set than we even had 12 months ago. The business is entering a period where capability and capacity we've built can increasingly translate into scale. The first half was an important investment period for Volatus. We strengthened the balance sheet. We opened Mirabel and we advanced our proprietary technologies. We materially expanded our position in defense and autonomy. The financial results are beginning to reflect some of the investment ahead of the revenue, but the environment that we're operating in is also developing very rapidly, particularly in Canadian and allied defense. We believe that we've positioned Volatus to participate in that opportunity from a position of real capability, not simply an aspiration. So our focus now is converting that position into larger programs, revenue growth and improved leverage. With that, I really appreciate your patience. And Abhi and I'd be happy to take any questions.

Thanks, Glen and Abhi. So we've got a lot of great questions rolling in. We have about 20 minutes. So maybe I'll just kick off and share some of these with you both, Glen and Abhi, and whichever one of you wants to jump in. So the first one about Mirabel. Could you remind us what its annual capacity potential is and how you envision scaling up production growth in 2027 and beyond?

So the factory has been designed right now. Our best estimate at the moment is about $250 million worth of revenue. Some of that depends on the business mix that goes through the facility. So currently, we've started the production of our docking system, which really has as much of a commercial impact as it does in defense. For example, we have a couple of units that have been shipped out to Western Canada right now for deployment -- in standby deployment in various areas in wildfire, which is obviously topical today. And we have several other platforms that will enter production over the next few months, but that represents probably about 35% to 40% of the footprint in that facility. Right now, the challenge that we're working through with the Canadian military is the acknowledgment that an adaptable manufacturing -- or adaptable, scalable manufacturing capability is actually a national sovereignty capability. And what I really mean with that is if I think about what the Commander of the Army actually said to me at a trade event over the last year, he said the objective is to flood the Canadian Army with drones. So in other words, to get the tools into the hands of our war fighters and then sustain them. But at the push of a button, to be able to move from, let's say, a hypothetical 10,000 drones a year to 10,000 drones a month. That's obviously building capacity and capability ahead of conflict. So doing that presents an interesting challenge, not just for developing the system, but also putting the proper financial structure in place to finance that through government investment. And the reason being, you could say, well, if you use 10% of the capacity to support the military, you can sell that capacity to other organizations around the world, NATO partners or commercial interest. The problem is what do you do when the military says, "We need to 10x that production today." And that's the interesting challenge. That's the one that we're working our way through with government agencies at the moment because you can't simply postpone everybody's order when the military says we need it. So we need the government to invest in the capacity and in things like holding supply chain components as a strategic reserve because the supply chain in Canada, and for that matter around all of the allied nations, is underdeveloped when it comes particularly to the small attritable drones. Those are the problems that we're solving inside of that facility. So a lot of its capacity depends on whether we're dedicating more floor space to the larger systems or to the smaller attritable, I would say, lower value but high-volume systems. And right now, that's an evolving landscape with the government.

So changing topics just slightly, but are you seeing signs of interest in cargo delivery? You mentioned the potential for commercial use of the Condor this year. Could that be cargo?

So most certainly. Actually, a couple of the platforms. So the Condor has the ability to carry up to 180 kilograms. So it's an interesting platform. Again, a lot of what we're seeing is if you look at the defense side, it's not just potentially delivering cargo, but it has the potential application for things like CASEVAC because it allows us to reduce force depletement while we're moving wounded soldiers from the frontline to somewhere into a safer territory. It's also for frontline supply. It's for remote community delivery, but that's not just for the Condor. Recently, we announced our partnership with Singular Aircraft in Spain with the Flyox. And while we've presented that aircraft because it was originally purpose-built as a water bomber, but the aircraft right now is flying in Africa for dropping larger payloads. So there's -- the aircraft can be reconfigured to remove the fire suppressant and water bladders and replace it with cargo and hydraulic doors that allow you to deliver the cargo into remote areas, whether that be for disaster recovery, emergency management or actually just critical medical supply deliveries and those sorts of things. We also have some other platforms right now that we're using on programs, which we have announced for lifting heavy loads onto the top of wind turbines. That's another one. And then one more that I would say doesn't get quite enough attention by me is the recent approval or prevalidated declaration of our Canary, which is the aircraft that's doing the cargo deliveries in and out of the Edmonton Airport. Recently, we achieved the first prevalidated declaration for a complete remotely piloted aircraft system. What that -- what was particularly unique with that is that our aircraft had its own onboard detect-and-avoid system, which means it wasn't dependent on ground-based radar for the avoidance of uncooperative aircraft traffic. So we've made a lot of progress in that area. And ultimately, I mean, again, I'm speaking an awful lot about defense, but we have a lot of programs going on right now to develop that capability, particularly in areas like Northern Canada where it's becoming possible under the new regulatory environment and with the new technologies that are coming online now.

So a question just kind of to delve a little bit deeper in those recent announcements about KH and Singular. So the question is, could you please connect the dots for us as to the strategic relationship between these 2 announcements and your overall strategy with respect to wildfire support, response to civil emergencies as well as the supply of equipment and materials using the Singular Aircraft platform?

So I've touched a little bit on the capabilities of converting the aircraft for cargo delivery, but let's talk about the various places. I'm going to be frank. This is the wildfire capabilities that we -- that we've introduced have been something that we've been interested in introducing since 2022. The problem was the regulatory environment and the maturity of the technologies was not there. Singular Aircraft is a company that I've been following very, very closely with their technologies. And the idea now is that Canada provides almost the perfect operating theater to introduce those aircraft into manufacturing, higher volume manufacturing and support of a country that has a growing problem that we all recognize, that being wildfires. So the problem with wildfires, if I think about where we were earlier this year, there's a point where we had more than 1,000 wildfires burning and only 300 aircraft in the air. So mathematically, we're defeated before we start. During a recent tour where we had the Minister of Defense, many people listening may have seen the LinkedIn post, where we had Minister McGuinty and General Molstad in our facility. And part way through the visit Minister McGuinty actually stopped me and said, "Glen, tell me how you can use autonomous aircraft to address the growing problem with wildfires?" And that sparked a real acceleration through this process because, of course, we've lined up a lot of the components, but really, there was clearly a political interest and a national requirement to introduce those services. So there's a couple of things. What we've introduced and what we're proposing to the governments right now is not to replace the current water bomber fleet or to, in any way, do anything but reinforce the brave wildfire fighters that are out there fighting the fight every day to protect Canada. But realistically, there's no way that 300 assets can compete with 100 wildfires or 1,000 wildfires, I mean. So basically, our proposal is to say we need better information, we need to be able to address -- we need to be able to identify the high-risk areas, we need to be able to identify ignition more quickly and address it immediately so that we can potentially reduce the number of fires that we actually have to employ the wildfire fighters and the heavy water bombers on. Secondly, there's a lot of limitations for -- to protect the pilots and the people that are working on where and when you can operate the water bombers, for example, night operations, whereas the technologies that we've introduced, they allow us to provide consistent -- or persistent surveillance and intelligence over the wide areas that are considered high risk, identify an ignition, monitor that while we dispatch a larger remotely operated or remote piloted autonomous water bomber, which is the Flyox, to go and deliver a 1,500-liter load of fire suppressant or water right on that early ignition phase. Hopefully, again, attacking an early -- getting to it early means that we can reduce the number of fires that ultimately have to be fought, so to speak. The second thing is, though, we have the ability to continue to fight the fires around the clock because the remotely piloted technologies aren't limited by daytime operations. So the concept is persistence, and we'll engage with satellite information to know where the high-risk areas are, then move to the persistent surveillance drones that allow us to track that, identify the problem sooner and monitor that. And then deploy the technologies quickly that can address the fires while they're small and in an early stage before they have the opportunity to grow. And I think one of the big questions a couple of people have said is, why didn't we just step out there and announce that? A lot of it is just being careful also as to how much we announce. There's that balance between what we say publicly in terms of keeping our investors informed and ultimately, the same information that makes it to our investors, makes it to every one of our potential competitors as well. So there's a balancing act there. The key point that's most important is that this has been received very well, not just in the federal level, but on a provincial level. Now whether we can convert that into large orders or not, that remains to be seen. But I will say we're seeing real engagement in the proposals.

Great. Thanks, Glen. Another question. Can you provide more color on the $2.6 million defense contract that shifted out of Q2 and your confidence around delivery in the second half?

So supply chain, I mentioned it earlier, supply chain in North America is underdeveloped. We have a very high demand on the supply chain, given the conflicts that are happening in other parts in the world, the geopolitical tensions that are there and also all of the trade uncertainties creates imbalance all over the place. That being said, I would say at this point, our confidence level is extremely high that we'll continue to develop -- to deliver those on time. I think we've overcome the problem with that supply chain issue. So now it's just continuing to deliver. I mean realistically, the best sign is if it was anything other than a supply chain problem, it probably would have given us contract problems, but the entire ecosystem is aware of the supply chain challenges that exist. So confidence level for delivery in Q3, and it could trail into Q4 possibly. But I would say the confidence level right now is very high.