Merlin, Inc. — Third Quarter 2026 Earnings Summary

Financial Performance:

• Total revenue for the third quarter ended September 30, 2026, was $3.5 million, compared to $2.2 million in the second quarter of 2026.
• GAAP net income for the third quarter was $73.8 million, a reversal from a net loss of $58.4 million in the second quarter of 2026.
• Adjusted EBITDA loss for the third quarter was $24.1 million, an improvement from an Adjusted EBITDA loss of $27.8 million in the second quarter of 2026.
• Cash, cash equivalents, and short-term investments totaled $161.6 million as of September 30, 2026, down from $183.9 million at June 30, 2026.
• The company reported no debt as of September 30, 2026, compared to long-term debt of $19.2 million (current) and $12.8 million (non-current) as of December 31, 2025.
• Revenue for the nine months ended September 30, 2026, was $6.7 million, compared to $5.9 million in the same period of 2025.
• GAAP net loss for the nine months ended September 30, 2026, was $75.0 million, compared to a net loss of $55.7 million in the same period of 2025.
• Adjusted EBITDA loss for the nine months ended September 30, 2026, was $75.3 million, compared to a loss of $34.1 million in the same period of 2025.
• Gross loss for the third quarter was $1.8 million, compared to a gross loss of $2.0 million in the second quarter of 2026.
• Operating expenses for the third quarter were $29.7 million, compared to $14.6 million in the second quarter of 2026.
• Research and development expenses for the third quarter were $14.7 million, compared to $8.2 million in the second quarter of 2026.
• General and administrative expenses for the third quarter were $12.9 million, compared to $6.1 million in the second quarter of 2026.
• Change in fair value of warrant liabilities contributed $103.6 million in other income for the third quarter.

Guidance and Future Outlook:

• Merlin is planning for 2027 and expects to bring 2027 operating expenses meaningfully below 2026 levels.
• The company intends to concentrate investment on programs and customers with funded work and a clear path to revenue.
• The objective is to establish a lower, more focused cost base that preserves the balance sheet and funds the plan into 2029 without depending on capital raises.
• Management aims to ensure the company meets opportunities from current contracts and the broader market potential detailed in the previous quarter.

Business Segments and Product Lines:

• Awarded a new $8.9 million task order from U.S. Special Operations Command (USSOCOM) for the next phase of the C-130J autonomy program, moving the program into its integration phase.
• Selected by U.S. Africa Command (USAFRICOM) for the initial phase of its Autonomous Casualty Evacuation (CASEVAC) Industry Technology Challenge, receiving a $500,000 contract to fund a demonstration of Merlin Pilot™ on a Cessna 208B Grand Caravan.
• Participated as an invited guest in the kickoff event for the Texas Department of Transportation's Electric Vertical Takeoff and Landing (eVTOL) Integration Pilot Program (eIPP) in early September 2026.
• The C-130J autonomy program with USSOCOM has a total IDIQ contract ceiling value exceeding $100 million.

Market and Competitive Landscape:

• Merlin is advancing American leadership in autonomous aviation by solving national security challenges through safe, reliable autonomy.
• The company targets the global C-130J fleet, including hundreds of aircraft, for future production revenue.
• Merlin Pilot is proven through hundreds of autonomous flights from test facilities across the globe.

Risks and Challenges:

• Risks include the ability to execute defense program obligations, performance and scalability of Merlin Pilot, and dependence on U.S. government contracts subject to budget priority changes or terminations.
• Challenges include the ability to convert identified pipeline into contracted revenue, finalizing the 2027 operating plan, and the risk that cash resources may be insufficient to fund the operating plan.
• The company faces competition from established aerospace and defense companies and other autonomous systems developers.
• Risks also include the accuracy of market size estimates, the history of net losses, and the ability to attract and retain key personnel.

Management Commentary and Tone:

• CEO Matt George stated that the new USSOCOM task order moves the C-130J program into integration, laying the groundwork for future flight demonstrations and production revenue.
• Management emphasized that every new program builds on previous work, citing a "compounding advantage" paired with disciplined capital use as meaningful progress toward autonomy.
• George noted the imperative to advance Merlin Pilot while demonstrating discipline in investments to meet current contract opportunities and broader market potential.

Other Key Points:

• The company holds $161.6 million in cash, cash equivalents, and short-term investments with no debt as of September 30, 2026.
• Series A Preferred Stock dividends and accretion for the third quarter were $8.1 million.
• A live webcast of the earnings call was hosted on November 12, 2026, with a replay available on the investor relations website.
• The company has $100 million+ in total IDIQ contract ceiling value under its C-130J autonomy program with USSOCOM.