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$DPRO Q3 2026 earnings: Draganfly builds cash and inventory, but its quarterly sales shrink Draganfly, a Canadian maker of commercial and military drones, raised more cash and tripled its warehouse stock while quarterly sales shrank. Third-quarter revenue slipped 5% from a year ago to CAD 2 million, and an inventory write-down cut gross margin to 6%. At the same time, quarterly operating expenses more than doubled to CAD 14 million, which widened the net loss. • Third-quarter revenue: 𝐂𝐀𝐃 𝟐.𝟎𝟓𝐌 (-5.0% from a year ago) • Gross margin: 𝟔.𝟑% (19.5% a year ago (24.2% excluding inventory write-downs, by our math)) • Nine-month operating cash burn: 𝐂𝐀𝐃 𝟑𝟕.𝟑𝐌 (CAD 14.1M burned a year ago) • Ending cash and cash equivalents: 𝐂𝐀𝐃 𝟏𝟐𝟖.𝟔𝐌 (CAD 69.9M a year ago) ⚖️ 𝐕𝐞𝐫𝐝𝐢𝐜𝐭: 🔴 Bearish The story got worse because ramping up staff, factories, and inventory has multiplied cash burn without yet bringing in the large defense orders the business was built for. In its compensation footnotes, Draganfly assessed zero odds of meeting its 2026 executive performance goals and called the revenue target for its newly acquired Skip Dynamix fixed-wing unit unlikely for this year. On the positive side, CAD 76 million of net financing over nine months lifted cash to CAD 129 million, giving the company several years of funding. The question now is whether the CAD 8 million of finished drones sitting in the warehouse was built for imminent military deliveries or in anticipation of orders that are still delayed. If large government contracts close, those finished goods will turn into revenue quickly; if orders stay near CAD 2 million a quarter, aging stock will bring more write-downs. Fourth-quarter product shipments and inventory allowances will settle it. Full article with charts - link in bio 🐂 𝐁𝐮𝐥𝐥 𝐂𝐚𝐬𝐞 🟢🟢 𝐅𝐢𝐧𝐚𝐧𝐜𝐢𝐧𝐠 𝐋𝐢𝐟𝐭𝐬 𝐂𝐚𝐬𝐡 𝐀𝐛𝐨𝐯𝐞 𝐂𝐀𝐃 𝟏𝟐𝟖 𝐌𝐢𝐥𝐥𝐢𝐨𝐧 Draganfly, a Canadian maker of commercial and military drones, built its largest cash reserve on record during the first nine months of 2026. The company raised CAD 68.3 million in February and another CAD 14.2 million in a September private placement. After share issue costs and warrant exercises, financing activities brought in CAD 76.0 million of net cash. That capital leaves the drone maker with CAD 128.6 million in cash and cash equivalents at the end of September, up 84% from a year ago against CAD 1.8 million in lease liabilities. The cash pile also earned CAD 1.1 million of interest income in the third quarter alone, which covered more than half of the quarter's cost of goods sold. What to watch: quarterly operating cash burn over the next two quarters. A slower burn rate would let Draganfly fund its factory expansion without selling more shares. 🟢 𝐈𝐧𝐯𝐞𝐧𝐭𝐨𝐫𝐲 𝐚𝐧𝐝 𝐒𝐮𝐩𝐩𝐥𝐢𝐞𝐫 𝐃𝐞𝐩𝐨𝐬𝐢𝐭𝐬 𝐓𝐫𝐢𝐩𝐥𝐞 𝐀𝐡𝐞𝐚𝐝 𝐨𝐟 𝐎𝐫𝐝𝐞𝐫𝐬 Draganfly spent heavily over the first nine months of 2026 to stock its warehouses with completed drones and components. Total inventory more than tripled from the end of December to CAD 12.4 million, and quadrupled from CAD 2.9 million a year earlier. Management also increased vendor deposits, which are "amounts required to be prepaid in order for vendors to manufacture or supply goods". • Finished goods inventory: CAD 8.1 million, up 264% from CAD 2.2 million in December • Raw materials inventory: CAD 4.1 million, up 163% from CAD 1.6 million in December • Prepaid vendor deposits: CAD 7.5 million, up 87% from CAD 4.0 million in December Building CAD 8.1 million of finished drones shows the company has hardware ready to ship if government customers place volume orders. Because third-quarter product sales were CAD 1.6 million, the warehouse now holds about five quarters of sales at the current pace. What to watch: finished goods shipments in the fourth quarter. A drop in finished goods paired with higher product revenue would prove Draganfly built these drones for firm customer orders. 🐻 𝐁𝐞𝐚𝐫 𝐂𝐚𝐬𝐞 🔴🔴 𝐓𝐡𝐢𝐫𝐝-𝐐𝐮𝐚𝐫𝐭𝐞𝐫 𝐒𝐚𝐥𝐞𝐬 𝐅𝐞𝐥𝐥 𝐚𝐧𝐝 𝐈𝐧𝐭𝐞𝐫𝐧𝐚𝐥 𝐓𝐚𝐫𝐠𝐞𝐭𝐬 𝐌𝐢𝐬𝐬𝐞𝐝 After growing revenue by 35.9% from a year ago during the first half of 2026 by our math, Draganfly's top line shrank in the third quarter. Total revenue fell 5.0% from a year ago to CAD 2.05 million. Hardware sales slipped 0.6% to CAD 1.61 million, while service revenue dropped 18.3% to CAD 0.44 million. The company's own compensation accounting cuts against any hope for a fourth-quarter revenue breakout. In April, the board granted chief executive Cameron Chell 1.27 million performance stock units tied to hitting three goals in 2026: a USD 400 million market value for 90 days, budgeted financing, and budgeted annual revenue. All three goals must be met for the first tranche to vest at the end of fiscal 2026. At the end of September, Draganfly cut the vesting odds on that 2026 award from 50% to zero because "the targets will not be met for this vest". What to watch: fourth-quarter product revenue in the full-year report. Another quarter near CAD 2 million would confirm that large defense trials have not yet turned into volume contracts. 🔴🔴 𝐎𝐩𝐞𝐫𝐚𝐭𝐢𝐧𝐠 𝐄𝐱𝐩𝐞𝐧𝐬𝐞𝐬 𝐚𝐧𝐝 𝐂𝐚𝐬𝐡 𝐁𝐮𝐫𝐧 𝐌𝐨𝐫𝐞 𝐓𝐡𝐚𝐧 𝐃𝐨𝐮𝐛𝐥𝐞𝐝 While third-quarter sales slipped below CAD 2.1 million, Draganfly's overhead costs more than doubled. Total operating expenses jumped 154.0% from a year ago to CAD 13.58 million, which widened the quarterly operating loss from CAD 4.93 million to CAD 13.45 million. Every major expense line expanded as a share of revenue. • Employee and management pay: CAD 5.55 million, up 156.6 percentage points of revenue from a year ago by our math • Office and miscellaneous costs: CAD 3.55 million, up 111.6 percentage points of revenue by our math • Share-based compensation: CAD 1.65 million, up 58.5 percentage points of revenue by our math • Nine-month operating cash burn: CAD 37.26 million, up 163.6% from CAD 14.14 million a year ago Spending on research, travel, and legal fees also more than doubled in the quarter. Combined with CAD 13.50 million tied up in inventory and supplier deposits, operations consumed over CAD 4.1 million of cash per month during the first nine months of 2026. What to watch: employee and office expenses in the fourth quarter. If quarterly overhead stays above CAD 13 million without a jump in sales, annual cash burn will top CAD 50 million. 🔴 𝐒𝐤𝐢𝐩 𝐃𝐲𝐧𝐚𝐦𝐢𝐱 𝐀𝐜𝐪𝐮𝐢𝐬𝐢𝐭𝐢𝐨𝐧 𝐀𝐝𝐝𝐞𝐝 𝐙𝐞𝐫𝐨 𝐑𝐞𝐯𝐞𝐧𝐮𝐞 𝐢𝐧 𝐐𝟑 On June 9, 2026, Draganfly paid USD 2.52 million (CAD 3.52 million) in cash to buy the assets of Skip Dynamix, "a company that had developed a fixed wing drone". Management bought the business "to diversify its drone offering and add a kind of drone not previously produced by the Company", booking CAD 3.01 million of the price as goodwill. Between the June closing date and September 30, Skip Dynamix generated zero revenue and a net loss of CAD 181,446. Even if Draganfly had owned the business since January 1, nine-month revenue from the unit would have been just CAD 41,083. As part of the deal, the two founders received a second tranche of warrants that vest only if Skip Dynamix records USD 1.5 million of revenue by December 31, 2026. Draganfly booked zero expense for those performance warrants in the third quarter because "it is not more likely than not that the revenue threshold will be met at this time". What to watch: goodwill impairment testing in the fourth-quarter annual audit. Continued zero sales from fixed-wing drones would put the CAD 3.01 million goodwill balance at risk of a write-down. 🔴 𝐈𝐧𝐯𝐞𝐧𝐭𝐨𝐫𝐲 𝐖𝐫𝐢𝐭𝐞-𝐃𝐨𝐰𝐧𝐬 𝐂𝐮𝐭 𝐆𝐫𝐨𝐬𝐬 𝐌𝐚𝐫𝐠𝐢𝐧 𝐭𝐨 𝟔% Draganfly's reported gross profit fell 69.4% from a year ago to CAD 128,957 in the third quarter, pulling gross margin down 13.2 percentage points to 6.3%. Cost of sales rose 13.2 percentage points of revenue to 93.7% because the company recorded a CAD 366,609 allowance for obsolete and slow-moving inventory, up from CAD 43,337 a year earlier. By our math, that inventory write-down took 17.9 percentage points off the third-quarter gross margin, compared with a 2.0-point drag in the prior year. Excluding the obsolescence charge in both periods, underlying gross margin rose to 24.2% from 21.5% a year ago by our math. However, writing down CAD 516,112 of stock over the first nine months while tripling warehouse inventory raises the risk of future write-offs. What to watch: inventory obsolescence charges in the fourth-quarter audit. Another large write-down would show that parts of the CAD 8.1 million finished goods stockpile are aging before customers buy them. 👓 𝐎𝐭𝐡𝐞𝐫 𝐓𝐡𝐞𝐦𝐞𝐬 𝐒𝐡𝐚𝐫𝐞 𝐂𝐨𝐮𝐧𝐭 𝐑𝐨𝐬𝐞 𝟖𝟏% 𝐅𝐫𝐨𝐦 𝐍𝐞𝐰 𝐄𝐪𝐮𝐢𝐭𝐲 𝐈𝐬𝐬𝐮𝐚𝐧𝐜𝐞𝐬 Funding the CAD 128.6 million cash balance required heavy share issuance that expanded the equity base. Draganfly's weighted average share count rose 80.9% from a year ago to 37.2 million in the third quarter, while ending shares reached 39.1 million alongside 5.8 million warrants and 1.7 million restricted share units. The higher share count kept per-share net loss growth to 40.0% even as total net loss rose 148.2%. — • — • — 💲 𝐎𝐭𝐡𝐞𝐫 𝐊𝐏𝐈𝐬 𝐂𝐮𝐬𝐭𝐨𝐦𝐞𝐫 𝐝𝐞𝐩𝐨𝐬𝐢𝐭𝐬 𝐚𝐧𝐝 𝐝𝐞𝐟𝐞𝐫𝐫𝐞𝐝 𝐫𝐞𝐯𝐞𝐧𝐮𝐞 (𝟐𝟔𝐐𝟑): 𝐂𝐀𝐃 𝟑𝟎𝟑,𝟓𝟓𝟖 ⇘ decelerating Advance payments from customers shrank by more than half over the first nine months of 2026. Customer deposits for hardware orders fell 58.2% from December to CAD 174,611, while deferred revenue — cash customers have paid for services not yet delivered — fell 38.5% to CAD 128,947. Together, advance customer balances dropped 51.6% by our math. 𝐄𝐪𝐮𝐢𝐩𝐦𝐞𝐧𝐭 𝐚𝐧𝐝 𝐫𝐢𝐠𝐡𝐭-𝐨𝐟-𝐮𝐬𝐞 𝐥𝐞𝐚𝐬𝐞 𝐚𝐬𝐬𝐞𝐭𝐬 (𝟐𝟔𝐐𝟑): 𝐂𝐀𝐃 𝟑.𝟖𝟗 𝐦𝐢𝐥𝐥𝐢𝐨𝐧 ⇗ accelerating Draganfly expanded its physical footprint and plant equipment during the first nine months of 2026. Net equipment nearly doubled from December to CAD 2.23 million after CAD 1.38 million of additions, mostly furniture and machinery. Right-of-use assets — leased facilities recorded on the balance sheet — jumped more than sevenfold from CAD 0.23 million to CAD 1.67 million. 𝐍𝐨𝐧-𝐜𝐮𝐫𝐫𝐞𝐧𝐭 𝐚𝐬𝐬𝐞𝐭𝐬 𝐛𝐲 𝐠𝐞𝐨𝐠𝐫𝐚𝐩𝐡𝐲 (𝟐𝟔𝐐𝟑): 𝐂𝐀𝐃 𝟕.𝟔𝟏 𝐦𝐢𝐥𝐥𝐢𝐨𝐧 ⇗ accelerating Long-term operating assets grew nearly fivefold from CAD 1.53 million in December, split evenly between the United States and Canada. United States non-current assets increased almost sevenfold from CAD 0.55 million at year-end to CAD 3.80 million in September, reflecting the June acquisition of Skip Dynamix and new facility leases, while Canadian long-term assets reached CAD 3.80 million. — • — • — ❓ 𝐊𝐞𝐲 𝐐𝐮𝐞𝐬𝐭𝐢𝐨𝐧𝐬 𝐖𝐡𝐚𝐭 𝐚𝐫𝐞 𝐭𝐡𝐞 𝐐𝟑 𝐬𝐚𝐥𝐞𝐬 𝐛𝐲 𝐜𝐮𝐬𝐭𝐨𝐦𝐞𝐫 𝐜𝐨𝐮𝐧𝐭𝐫𝐲? Note 17 of the supplied financial statements cuts off right at the geographic revenue table. In the third quarter of 2025, Canadian customers accounted for 99.7% of revenue while United States sales were just CAD 6,852. Investors need the geographic split to see if US defense work has started billing. 𝐖𝐡𝐢𝐜𝐡 𝐩𝐫𝐨𝐝𝐮𝐜𝐭𝐬 𝐝𝐫𝐨𝐯𝐞 𝐭𝐡𝐞 𝐂𝐀𝐃 𝟑𝟔𝟕,𝟎𝟎𝟎 𝐢𝐧𝐯𝐞𝐧𝐭𝐨𝐫𝐲 𝐰𝐫𝐢𝐭𝐞-𝐝𝐨𝐰𝐧? Draganfly took a CAD 366,609 charge for obsolete and slow-moving inventory in the third quarter while growing finished goods by 264% since December to CAD 8.13 million. Management should clarify which drone models were written down and how much of the remaining finished stock carries firm orders. 𝐖𝐡𝐞𝐧 𝐰𝐢𝐥𝐥 𝐒𝐤𝐢𝐩 𝐃𝐲𝐧𝐚𝐦𝐢𝐱 𝐫𝐞𝐜𝐨𝐫𝐝 𝐢𝐭𝐬 𝐟𝐢𝐫𝐬𝐭 𝐟𝐢𝐱𝐞𝐝-𝐰𝐢𝐧𝐠 𝐬𝐚𝐥𝐞? Draganfly paid USD 2.52 million in cash for Skip Dynamix in June, but the unit produced zero revenue through September and will likely miss its USD 1.5 million year-end revenue target. Investors need a timeline for commercial fixed-wing deliveries to judge the CAD 3.01 million goodwill balance. 𝐖𝐡𝐚𝐭 𝐝𝐫𝐨𝐯𝐞 𝐭𝐡𝐞 𝐂𝐀𝐃 𝟖.𝟐 𝐦𝐢𝐥𝐥𝐢𝐨𝐧 𝐣𝐮𝐦𝐩 𝐢𝐧 𝐪𝐮𝐚𝐫𝐭𝐞𝐫𝐥𝐲 𝐨𝐯𝐞𝐫𝐡𝐞𝐚𝐝? Third-quarter employee expenses rose by CAD 3.08 million and office costs rose by CAD 2.22 million from a year ago, even as revenue fell 5.0%. Because the filing package omitted the full management discussion text, management should break down headcount additions versus one-time marketing or consulting bills.