Unusual Machines, Inc. (UMAC)·Q2 2024 Earnings Summary

Executive Summary

• First full quarter as a public company with $1.41M in revenue and 28% gross margin; net loss was $1.61M ($0.16/sh). YoY revenue grew from zero (pre-acquisition), while Q1-to-Q2 revenue increased to $1.41M from ~$0.62M implied by YTD figures .
• Retail (B2C) drove results; management says they are “ahead of pace” to reach ≥$5M 2024 retail revenue. Enterprise momentum building: Brave 7 flight controller approved on DIU’s Blue UAS Framework; management expects defense component sales to contribute in 2H24 (Q3/Q4), potentially with contracts before the U.S. gov’t FY-end (9/30). These are prospective catalysts .
• Cash fell from $3.2M on 3/31 to $2.2M on 6/30 driven by one-time IPO/acquisition costs, inventory build, and baseline operations. OpEx run-rate revised to ~$450k/quarter (from $400k) and interest at ~$80k/quarter; inventory reduction from $2.7M (inventory + prepaid) to ≤$2.0M targeted over nine months to cut burn .
• No Q2 earnings call transcript available; 8‑K shareholder letter and 10‑Q provided disclosures. S&P Global consensus estimates were unavailable at the time of analysis; therefore no quantified beat/miss vs Street is shown .

What Went Well and What Went Wrong

What Went Well

• B2C retail momentum and margin delivery: $1.41M Q2 revenue with 28% gross margin; YTD gross margin 29%. Management says they’re ahead of pace for ≥$5M 2024 retail revenue .
• Defense/enterprise traction: Began selling NDAA-compliant components; Brave 7 got DIU approval for Blue UAS Framework. Management expects potential government contracts before 9/30 and revenue contribution in Q3/Q4 2024 .
• Liquidity and working capital: $2.22M cash at 6/30 and net working capital of ~$4.19M; management highlights inventory optimization plan to reduce cash burn over next nine months .

What Went Wrong

• Losses widened on public company and integration costs: Q2 operating loss $(1.57)M and net loss $(1.61)M vs $(0.44)M net loss in Q2’23; stock comp, IPO/legal, transition and integration costs cited as drivers .
• Internal controls: Management concluded disclosure controls were not effective due to a material weakness (segregation of duties and control design deficiencies); remediation underway (consultants, staff hires, ERP implementation) .
• Leverage and financing overhang: Promissory note increased to $4.0M at 8% after working capital adjustment; maturity Nov 30, 2025. Company may need to raise/refinance/extend or convert (on default) to address the note at maturity .

Financial Results

Income Statement snapshot (YoY and QoQ)

Notes: Q1 2024 values are derived from YTD vs Q2 where indicated; EPS for Q1 not provided in filings .

Balance sheet & cash KPIs

Operating cash bridge (management disclosure, Q2)

Estimates vs Actuals (Q2 2024)

Note: Wall Street consensus from S&P Global was unavailable at the time of analysis; UMAC’s limited coverage/new listing likely constrains reported estimates .

Segments and KPIs

• Segment reporting: One reportable segment post acquisitions; mix is primarily B2C retail through Rotor Riot, plus Fat Shark B2B wholesale. No segment P&L disaggregation provided .
• Operational KPIs highlighted by management: Retail revenue cadence (ahead of ≥$5M 2024 target), 28% Q2 gross margin, DIU Blue UAS listing for Brave 7, and inventory/prepaid inventory reduction plan to ≤$2.0M over nine months .

Guidance Changes

Earnings Call Themes & Trends

Note: No Q2 2024 earnings call transcript available; themes from shareholder letter and 10‑Q.

Management Commentary

• “We are currently ahead of our pace to hit the target for 2024 of $5M or better in retail revenue.”
• “We have started to sell NDAA-compliant drone components… we received approval… for inclusion of our U.S made Brave 7 flight controller on the Blue UAS Framework… expect potential contracts prior to the government fiscal year end on September 30th.”
• “Our rough estimate of operating expenses of $400k per quarter was low and we have amended it to $450k per quarter… [and] interest expense… approximately $80k per quarter… plan on limiting our cash burn by reducing our current inventory and prepaid inventory of $2.7M to $2.0M or less over the next nine months.”
• “The increase in net loss primarily relates to stock compensation expense… closing the IPO… and the increased operations and sales and marketing expenses… This was partially offset by generating gross margin…” .

Q&A Highlights

• No Q2 2024 earnings call/Q&A published; management addressed investor questions via shareholder letter (cash burn drivers, inventory strategy, defense pipeline timing, working capital adjustment and note revision). See Table 1 cash bridge and guidance commentary .

Estimates Context

• Street consensus (S&P Global) for Q2 2024 revenue and EPS was unavailable at time of analysis; given UMAC’s early public listing and micro-cap profile, formal coverage appears limited, and our access to S&P Global estimates data was unavailable at query time. As such, we do not present quantified beat/miss vs consensus here .

Key Takeaways for Investors

• Retail execution is on plan (or better): Q2 delivered $1.41M at 28% GM; management indicates ≥$5M FY retail revenue is tracking ahead of pace—supportive for near-term revenue momentum .
• Defense is the swing factor: Brave 7’s Blue UAS listing and DIU engagement could unlock Q3/Q4 revenue; contract timing around the 9/30 gov’t fiscal year-end is a potential catalyst for the stock .
• Cash discipline matters: Revised OpEx (~$450k/qtr), inventory reduction targets, and ~$80k/qtr interest expense frame the cash runway; watch progress on inventory turns and gross margin mix to limit burn .
• Financing overhang: $4.0M 8% note (maturing 11/30/25) will need addressing via capital raise/refi/extension; absent improved operating cash flow, financing events are likely in 12–18 months .
• Governance/risk: Material weakness in internal controls is being remediated; validation of control effectiveness is an important milestone for institutional confidence .
• Valuation driver setup: Near-term stock reaction hinges on evidence of enterprise/defense orders, retail growth continuity into 2H, and visible progress on burn reduction; the narrative improves quickly with defense wins and cash discipline .

Sources: Q2 2024 8‑K shareholder letter and exhibits ; Q2 2024 10‑Q (financial statements, MD&A, controls) .