Executive Summary
Red Cat Holdings reported its QQ1 2025 results with revenue of approximately $2.78 million, representing a 59% year-over-year increase per management commentary, and a record backlog of approximately $13.0 million. The quarter featured accelerated development and scale-up activity around the Red Cat Family of Systems (Edge 130 Blue, Teal 2, Teal 3, and FANG) as the company pivots to a multi-product portfolio designed to reduce investment risk and broaden revenue streams. Management emphasized that the negative gross margin of Q1 was driven entirely by the final delivery of SRR prototype work and is not indicative of the product sales mix going forward, with a pathway to significantly higher margins once mass production ramps (targetting up to 50% product margins for Teal 3 under mass production).
Management signaled a strategic transition to calendar year reporting beginning January 2025, with 2025 revenue guidance of $50 million to $55 million articulated in the call, assuming SRR or NATO program wins are not included. The company also disclosed an $8 million debt facility to support near-term production ramp and working capital, alongside a stated objective to scale Teal 3 production and to achieve AS9100 certification in 2025. The guidance underscores a constructive view on the core demand for its Edge 130 Blue and Teal 3 platforms, while SRR-related prospects remain a meaningful source of uncertainty and potential upside or downside depending on timing of Army down-select announcements. Investors should monitor the SRR/NATO cadence, the ramp of the Teal 3 platform, the cadence of Edge 130 Blue orders (including the recent LOI-driven momentum), and the company’s progress toward margin expansion and cash flow improvement as production scales.
Key Performance Indicators
QoQ: -55.99% | YoY:-29.37%
QoQ: -140.16% | YoY:-140.26%
QoQ: -50.96% | YoY:-69.48%
QoQ: -75.56% | YoY:-118.55%
QoQ: -78.57% | YoY:-70.00%
Key Insights
Revenue (Q1 2025): $2.78 million; YoY growth (per management): +59%; QoQ change (Q4 2024 to Q1 2025): -55.99% across the quarter; Gross margin: -17% of revenue; Gross profit: -$0.483 million; Operating loss: -$7.727 million; EBITDA: -$7.160 million; Net income: -$12.416 million; EPS: -$0.17; Cash flow from operations (CFO): -$2.349 million; Free cash flow: -$2.449 million; Ending cash: $7.733 million; Total debt: $2.071 million; Net debt: -$5.661 million (net cash position); Backlog: $13.0 milli...
Financial Highlights
Revenue (Q1 2025): $2.78 million; YoY growth (per management): +59%; QoQ change (Q4 2024 to Q1 2025): -55.99% across the quarter; Gross margin: -17% of revenue; Gross profit: -$0.483 million; Operating loss: -$7.727 million; EBITDA: -$7.160 million; Net income: -$12.416 million; EPS: -$0.17; Cash flow from operations (CFO): -$2.349 million; Free cash flow: -$2.449 million; Ending cash: $7.733 million; Total debt: $2.071 million; Net debt: -$5.661 million (net cash position); Backlog: $13.0 million; Bookings mix expectation: roughly half Edge 130 Blue (FlightWave Edge 130 Blue) and rest Teal 3, Teal 2, FPV/FANG mix (per management commentary); Transition to calendar year reporting underway; Capex: approximately $0.099 million; R&D Spend: $1.626 million; SG&A: $5.525 million.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
2.78M |
-29.37% |
-55.99% |
| Gross Profit |
-483.39K |
-140.26% |
-140.16% |
| Operating Income |
-7.73M |
-69.48% |
-50.96% |
| Net Income |
-12.42M |
-118.55% |
-75.56% |
| EPS |
-0.17 |
-70.00% |
-78.57% |
Key Financial Ratios
operatingProfitMargin
-278%
operatingCashFlowPerShare
$-0.03
freeCashFlowPerShare
$-0.03
Management Commentary
Management themes and quotes from the QQ1 2025 earnings call:
- Strategy and portfolio: 'We launched the Red Cat Family of Systems, expanding from one product to three' and 'we are no longer a one product company' as the core strategic framing. Jeff Thompson highlighted the Edge 130 Blue, Teal 2, and FANG as the core three-system family aligned to Pentagon and multi-environment use cases.
- Backlog and demand: 'record backlog of $13 million' underscoring visibility and near-term production opportunities, with roughly half of backlog attributed to FlightWave Edge 130 Blue.
- Margin trajectory: Leah Lunger noted the Q1 gross margin was driven by SRR prototype deliveries and is not representative of product sales; she anticipated 'we rapidly get to 50% margin' under mass production for Teal 3.
- Financing and liquidity: Jeff Thompson announced an 'approximately $8 million' debt facility with six months no repayment and warrants (~30% coverage) to bolster near-term production and prepayments, supporting the calendar-year transition and potential large-scale contracts.
- Guidance and SRR uncertainty: Management reinforced that SRR and NATO programs are not included in the 2025 revenue guidance; they expect potential SRR news in the coming weeks and indicated that revenue could still grow meaningfully without SRR, contingent on continued demand for Edge 130 Blue and Teal 3.
- Operational execution: Comments highlighted ongoing manufacturing retooling, quality systems (AS9100) and a manufacturing ramp plan for higher-volume Teal 3 production in 2025 to enable margin expansion and scale commercial revenue.
We have a record backlog of $13 million.
— Jeff Thompson
We anticipate product margins to reach up to 50% under mass production.
— Leah Lunger
Forward Guidance
Outlook hinges on two major drivers: (1) SRR/NATO program timing and awards, and (2) execution of the Teal 3 production ramp targeting gross margins up to 50% once mass production is achieved. The company guided for 2025 revenue of $50–$55 million excluding SRR or NATO programs, implying a material uplift versus QQ1 quarterly levels if production scales with the Teal 3 ramp and Edge 130 Blue fulfillment. Management emphasized backlog liquidity (backlog of $13 million) and LOI-driven demand for Edge 130 Blue as a near-term driver. The 8% debt facility provides balance-sheet flexibility through early 2025, with warrants potentially adding roughly $4.9 million in proceeds if exercised. Key factors investors should monitor include: (a) timing and outcome of SRR down-selection and NATO-related orders; (b) the pace of Edge 130 Blue and Teal 3 production ramp and related gross margins; (c) realization of prepayments and milestone payments from potential large production contracts; and (d) execution risk during the calendar-year transition (accounting, reporting, and related vendor/contract management). If SRR timing slips or NATO opportunities delay, upside is likely to come from accelerated production and a faster ramp in Teal 3 margins, while downside risk remains tied to any delay in major defense contracts or weaker than expected demand for the Edge 130 Blue and Teal 3 platforms.