Executive Summary

Q1 FY2025 delivered materially improved unit economics: gross margin expanded to 58.5% (from 50.2% YoY) on lower operating expenses (-27.9%), but total revenue declined 6% YoY to $3.65M due to sensor seasonality and SaaS wind-down .
Bottom line was driven by a non‑cash $7.78M gain from revaluing warrant liabilities; net income was $7.06M, while core operations still posted a $1.00M operating loss .
Mix shifted decisively toward drones: drone revenue nearly doubled (+98% YoY) to $2.23M, offsetting weaker sensors in the quarter .
Liquidity improved modestly (cash $3.78M), but the company remains under going‑concern uncertainty; a funding agreement with Alpha provides potential quarterly financing, and the convertible note was in default as of 3/31/25 with $0.56M outstanding principal .
No formal numerical guidance or earnings call; management emphasized “streamlining operations” and prioritizing higher‑margin products as the strategic path forward .

What Went Well and What Went Wrong

What Went Well
- Gross margin expansion and cost discipline: gross margin rose to 58.5% and operating expenses fell 27.9% YoY to $3.14M .
- Strong drone momentum: drone revenue grew 98.4% YoY to $2.23M as the mix shifted to higher‑margin products .
- Management focus and tone: “streamline operations, sharpen our commercial focus, and prioritize higher-margin product lines” with “reduced cash burn” and a “healthier… foundation” (CEO Bill Irby) .
What Went Wrong
- Top‑line softness: total revenue declined 6% YoY to $3.65M on sensor seasonality and strategic SaaS reduction .
- Core profitability: operating loss was still $1.00M despite improvement; net income was largely non‑cash warrant valuation gains .
- Balance sheet risk: going‑concern doubt persists; the Alpha convertible note was in default at quarter‑end and ongoing financing needs remain .

Financial Results

Headline P&L vs recent quarters (oldest → newest)

Metric	Q3 2024	Q4 2024	Q1 2025
Revenue ($)	$3,284,984	$2,820,808 (computed from FY $13,392,777 − 9M $10,571,969 )	$3,649,410
Operating Expenses ($)	$3,495,427	N/A	$3,136,363
Operating Income (Loss) ($)	$(1,861,160)	N/A	$(1,002,545)
Net Income (Loss) ($)	$(3,459,754)	N/A	$7,060,039
Diluted EPS ($)	$(16.03)	N/A	$(0.09)

YoY and sequential drivers (Q1 2025 vs Q1 2024; and vs Q4 2024)

Revenue: $3.65M vs $3.89M YoY (−6%) on sensor seasonality/SaaS exit; sequentially above Q4’s $2.82M .
Opex: $3.14M vs $4.35M YoY (−27.9%), reflecting “disciplined cost reductions” .
Net income: $7.06M vs $(6.32)M YoY, primarily due to $7.78M non‑cash warrant revaluation gain .

Margins (YoY view)

Metric	Q1 2024	Q1 2025
Gross Margin %	50.2%	58.5%

EPS detail (Q1 2025)

Basic EPS: $0.51; Diluted EPS: $(0.09) reflecting anti‑dilutive impact of securities and the warrant liability revaluation .

Segment revenue mix (Q1 2025 vs Q1 2024)

Segment	Q1 2024 ($)	Q1 2025 ($)
Drones	$1,146,612	$2,233,409
Sensors	$2,633,540	$1,416,001
SaaS	$114,295	$0
Total	$3,894,447	$3,649,410

Geographic revenue mix (Q1 2025 vs Q1 2024)

Region	Q1 2024 ($)	Q1 2025 ($)
North America	$1,481,439	$800,031
Latin America	$357,457	$374,624
EMEA	$1,692,569	$2,234,738
Asia Pacific	$337,341	$187,224
Other	$25,641	$52,793
Total	$3,894,447	$3,649,410

Cash and liquidity

Cash: $3.78M; Operating cash flow: $(1.29)M; Working capital: $5.38M .
Convertible note: $0.56M outstanding principal at 3/31/25; note in default; Alpha funding agreement provides potential quarterly financing for 12 months (amounts/timing subject to agreement) .

KPIs and notable items

Drone sales revenue +98.4% YoY to $2.23M .
Non‑cash warrant liability fair‑value gain: $7.78M (warrant liability fell to $8.62M from $16.40M) .
Cash burn improved YoY; OpEx down 27.9% YoY .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Company guidance	FY2025	N/A	No formal numerical guidance provided; qualitative focus on higher‑margin products, innovation, market expansion	Maintained qualitative only

Earnings Call Themes & Trends

(No Q1’25 earnings call transcript located.)

Topic	Previous Mentions (Q3 2024)	FY 2024 Update (Mar 31, 2025)	Q1 2025	Trend
Cost actions/OpEx	Opex down vs 2023; focus on integration and reduced consulting	FY24 OpEx reduced by $6.8M YoY	OpEx −27.9% YoY; operating loss improved	Improving
Product mix (Drones vs Sensors)	Drones up, sensors facing seasonality/price actions	Highlighted large eBee and sensor orders; poised for growth	Drones +98% YoY; sensors seasonality pressured revenue	Mix shift to drones
Government/Defense opportunity	Blue UAS/TAC positioning; GSA MAS	Reinforced defense/government focus	Continued emphasis on higher‑margin products and market expansion	Positive
SaaS strategy	SaaS de‑emphasis; subscriptions run‑off	Measure ceased operations (12/31/2024)	SaaS $0 in Q1’25	Winding down
Liquidity/financing	Working capital deficit and financing actions	Cash $3.6M; raised ~$15.3M in 2024; going‑concern noted	Cash $3.78M; Alpha funding agreement; note in default at 3/31/25	Watchlist
Supply chain/tariffs	Inflation/supply chain/tariff headwinds noted	Similar risks reiterated	Risks persist (inflation/supply chain)	Persistent risk

Management Commentary

“We delivered a significantly improved financial performance marked by strong gross margin improvement and a meaningful reduction in operating expenses…[and] prioritize higher-margin product lines… positioning AgEagle for disciplined growth and long-term shareholder value creation.” – CEO Bill Irby .
Drivers of YoY revenue decline: “decreased sensor sales primarily related to expected seasonality” and “not renewing software subscriptions” (SaaS) .
Net income uplift was “primarily attributable to the gain on change in fair value of our outstanding warrant liabilities” .

Q&A Highlights

No earnings call transcript available for Q1 2025 in our document search; no Q&A to report [ListDocuments returned 0 earnings-call-transcript for period].

Estimates Context

Wall Street consensus (S&P Global) for Q1 2025 EPS and revenue: not available (no estimates returned for EPS/revenue for Q1 2025 via S&P Global query). Values were queried from S&P Global and none were available for this period.

Additional Q1 2025‑Period Press Releases (context)

Corporate update and FY2024 results: highlights three record product orders and substantial FY OpEx reductions; cash $3.6M at year‑end .
Notices and operations updates (e.g., NYSE American non‑compliance, product demos, sales appointments) were issued through April–May 2025, but no numerical Q2 guidance was provided .

Key Takeaways for Investors

Underlying operations improved but remain loss‑making: operating loss narrowed to $(1.0)M; net income was non‑cash warrant revaluation driven. Focus on operating metrics and cash generation, not GAAP net income this quarter .
Mix shift toward drones is tangible and accretive: drones +98% YoY with margin expansion to 58.5%, suggesting strategy to prioritize higher‑margin lines is working .
Liquidity and financing are central to the near‑term thesis: cash $3.78M; going‑concern risk persists; Alpha funding agreement and warrant dynamics are key near‑term catalysts/risks .
Sensors likely rebound seasonally later in the year; EMEA strength was notable in Q1 (EMEA $2.23M vs $1.69M YoY), partially offsetting North America softness .
No formal guidance or call leaves limited visibility; watch subsequent 8‑Ks/pressers for defense/government traction and ISO/Blue UAS‑related wins to translate into sustained drones revenue .
Risk‑reward hinges on execution (drone pipeline conversion, cost discipline) versus financing/supply‑chain risks articulated in filings .

References to documents and filings:

Q1 2025 press release (May 16, 2025) .
8‑K Item 2.02 and exhibit (May 16, 2025) .
Q1 2025 10‑Q (filed May 15, 2025) – financial statements, MD&A, segment/geographic detail, liquidity .
FY2024 10‑K (filed Mar 31, 2025) – annual totals and risk context .
Corporate update/FY2024 press release and 8‑K (Mar 31, 2025) .
Q3 2024 10‑Q (filed Nov 19, 2024) – prior quarter benchmark .

AgEagle Aerial Systems Inc. (UAVS)·Q1 2025 Earnings Summary