Quotes & highlights from our earnings materials

We reported second quarter results last week. We encourage investors and other stakeholders to review the full set of materials, which includes the earnings release, the Form 10-Q, the investor presentation, and the earnings call, all available at investors.merlinlabs.com. What follows is a set of highlights drawn from those materials that we think are particularly useful for understanding Merlin’s goals, our progress against them, and our financial performance in the quarter.

Key quotes from the call

Matthew George, Founder and Chief Executive Officer

Balance sheet strength

“We believe our balance sheet strength is one of our strongest advantages today - because it allows us to continue hitting the milestones necessary to capture [Merlin’s] opportunity.”

A SOI 3 first in large-aircraft autonomy

“... Recently, we announced the completion of SOI 3... Two critical components of the Merlin Pilot autonomy platform: the Flight Control Computer and the Automated Communication System software, [now] have been tested and verified against their requirements. To our knowledge, this is a first for large-aircraft autonomy.”

Physical AI

“Merlin is building what we believe will be the Operating System of Record for the Next Century of Aviation - physical AI for the sky.”

Our market

“I want to be really clear about [our] landscape... we are targeting larger fixed-wing aircraft. We see opportunity in both crewed and uncrewed aircraft... the airplanes are already flying today... We believe the C-130J airframe is a multi-billion dollar opportunity just by itself.”

Our business model

“While we plan to generate revenue by adapting and integrating the Merlin Pilot onto airframes, the business model is centered on a recurring revenue license fee for the Merlin Pilot.”

Our advantage in defense

“For the Department of Defense, we believe our multi-year head start and the regulatory complexity of this domain provide meaningful competitive advantages. We have been putting in the work for five years, going from RFP through CDR. The next steps are relatively straightforward: Integration, Ground Testing, and Flight Testing.”

How progress compounds

“Adoption across airframes isn’t a serial process, it is parallel tracks running at the same time. Every branch and every platform we work with builds experience that we believe compresses the time to adoption for the next platforms.”

Ryan Carrithers, Chief Financial Officer

Balance sheet growth

“Our balance sheet has strengthened significantly, and we consider it a strategic advantage. Merlin ended the second quarter with One Hundred Eighty-Three point Nine million dollars in cash, cash equivalents and short-term investments, and no debt. That’s up Sixty point Eight million dollars compared to first quarter twenty-twenty six.”

Runway into fiscal 2028

“We believe these resources position us well to build on our operational progress and pursue the opportunities Matt just outlined... As I said last quarter, we believe Merlin’s financial runway extends beyond our near-term certification and commercial milestones. More specifically, based on our current operating plan assumptions, we believe our existing resources are sufficient to fund our growth into fiscal 2028.”

Near-term revenue

“In the near term, our revenue will be tied to our progress on the C-130J IDIQ contract with U.S. SOCOM, where we’re now advancing into the Integration phase, the second of our three revenue phases.”

How we will monetize

“We expect this same three-phase model to apply across every airframe and customer we work with, defense and civil alike... In Adaptation, we’re paid to adapt Merlin Pilot to a customer’s specific airframe and requirements. In Integration, we work with a growing network of partners, including Worldstar Aviation and IAI, to physically integrate our solution onto the aircraft… In Licensing, we collect a recurring license fee for the life of the software, which we expect to receive over the remaining operational lifetime of the airframe.”

The market we are building toward

On the call, Matt detailed the value proposition of the Merlin Pilot and the market opportunity that we believe it represents, referencing a number of industry and market statistics, sourcing for which can be found in the Appendix of the investor presentation deck at investors.merlinlabs.com. The graphic below illustrates the data cited on the call.

Other highlights from the quarter

• Completion of the Critical Design Review on the C-130J program with our lead customer, announced early in the quarter.

• Work underway with our customer and subcontractors to define the scope and timeline for integration, ground testing. and flight testing on the initial C-130J.

• A non-binding memorandum of understanding with Israel Aerospace Industries, announced at Farnborough, to advance development, integration, and certification of AI-powered autonomy for commercial cargo aircraft.

• Stage of Involvement 3 achieved with the Civil Aviation Authority of New Zealand, under a Bilateral Aviation Safety Agreement with the FAA.

• A certification issue paper concluded with the New Zealand authority addressing AI and machine learning based natural language processing within Merlin Pilot, which establishes the regulator’s requirements and an agreed path for demonstrating compliance.

• Second quarter revenue of $2.2 million, up $1.2 million from the first quarter, with the substantial majority recognized under our defense IDIQ structure as task orders were funded and work was performed.

• GAAP net loss of $58.4 million, an improvement of $32.0 million from the first quarter, driven primarily by non-cash items.

• Adjusted EBITDA loss of $27.8 million, compared with $23.3 million in the first quarter.

• Cash, cash equivalents, and short-term investments of $183.9 million and no debt, up $60.8 million from the first quarter.

• Cash used in operations of $27.3 million and capital expenditures of $1.6 million in the quarter.

• The C-130J program now advancing into Integration, the second of the three revenue phases we apply to each airframe and customer.

The milestones we have asked investors to watch remain progress on our contract with U.S. SOCOM, expansion of our go-to-market partnerships across defense and civil aviation, and new engagements on emerging mission sets and programs.

Forward-Looking Statements

This post contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding program milestones and execution timelines, civil certification progression including for novel AI and machine learning based functionality within Merlin Pilot, the development and performance of commercial partnerships, estimates of Merlin’s total addressable market and of the aircraft base and spending associated with it, the structure and timing of revenue across adaptation, integration and licensing phases, the sufficiency of capital resources to fund operations and milestones, and anticipated operating investment and research and development spending levels. Forward-looking statements can be identified by words such as anticipate, believe, estimate, expect, forecast, intend, may, plan, potential, project, target and will, and similar terms. These forward-looking statements are based on our current expectations, assumptions, and projections about future events and trends. These forward-looking statements are neither promises nor guarantees, but involve known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by the forward-looking statements, including without limitation the risks and uncertainties detailed under the section entitled “Risk Factors” of our final prospectus, dated May 13, 2026, filed with the SEC on May 13, 2026, and our subsequently filed Quarterly Reports on Form 10-Q, which are available from the SEC. Except as required by applicable law, we undertake no obligation to update any of these forward-looking statements after the date of this press release.