US Drone Parts Maker Sees 59% YOY Rise in Q1/25 Revenue

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Unusual Machines Inc. (UMAC:NYSE.American) began this year solidly, increasing revenue and further progressing on its strategic initiatives, it announced in a news release.

"[The company] delivered stronger-than-expected Q1/25 results, significantly outperforming both our estimates and consensus expectations," wrote Barry Sine, Litchfield Hills Research analyst, in a May 9 research report.

The drone and drone components manufacturer generated US$2.05 million (US$2.05M) in revenue from sales during Q1/25, representing a 59% year-over-year increase, the release indicated. Enterprise sales accounted for about 15% of this first quarter's total. Sine pointed out that while business-to-business sales stayed about the same quarter over quarter, retail sales jumped 45%.

Unusual Machines ended the first quarter with no debt and US$5M in cash versus US$3.7M in Q4/24. Since Q1/25 ended, the company raised US$40M in a public financing announced on May 7. The manufacturer will use part of these funds on building its domestic drone motor factory in Orlando, Florida, as well as on operations. According to Chief Executive Officer Allan Evans, most of the funds will remain in the bank, earning interest and bolstering the balance sheet.

Further, Allan pointed out, this extra cash affords UMAC a competitive advantage given that its enterprise customers want their suppliers to have financial stability and strength. The same holds true for UMAC's materials suppliers.

Unusual Machines' Q1/25 gross margin was 24%, lower than expected because the company had placed larger inventory orders in light of paused U.S. tariffs. Gross margin should improve in Q2/25, Evans said, because "we have already transitioned our supply chains and are accelerating our domestic production and procurement of components. That said, some of its new suppliers raised their costs.

During Q1/25, UMAC narrowed its EBITDA loss to US$1.04M. "This reflects UMAC's ongoing investment in its growth infrastructure while still achieving relatively strong topline results despite the challenging tariff environment," Sine wrote.

UMAC's Q1/25 loss from operations was US$3.3M, compared to US$1.3M in Q1/24.

U.S. Domestic Supplier

Based in Florida, Unusual Machines manufactures drones and drone components in the U.S. It now produces parts that collectively account for 64% of the value of a midsized drone, noted Sine, "positioning it to capture higher-margin opportunities as domestic production scales."

The company sells its products through a couple of brands. Fat Shark specializes in first-person view (FPV) ultralow latency video goggles for drone pilots. Rotor Riot is an e-commerce platform through which UMAC retails small, acrobatic FPV drones and equipment to consumers.

UMAC is well-positioned to capitalize on certain industry trends. One is the growing use of drones in military applications. Another is future uncertainty about tariff policies.

"With a changing regulatory environment, Unusual Machines seeks to be a dominant component supplier to the fast-growing multibillion-dollar U.S. drone industry and the global defense business," Evans said in the release.

Sector Keep Expanding

The global drone components market is forecasted to continue expanding. Specifically, it is expected to see an 11.4% compound annual growth rate (CAGR) through 2028, according to Tech Sci Research. Increases in the number of industries using drones and in the various applications of drones will continue to fuel the market's "robust growth."

North America is the largest buyer of drone components. China is the world's largest producer of essential drone parts, reported the Center for Strategic and International Studies.

Technical Analyst Clive Maund, in his review of UMAC on May 7, recommended it as an immediate Strong Buy. 

When it comes to the world's drone motors market, however, North America dominates production, Future Market Insights pointed out in a January report. Last year, the continent had a 40%, or US$966.2 million (US$966.2M), share of the US$2.4 billion (US$2.4B) global market, according to Cognitive Market Research.

Through 2032, the North American market is projected to see an 18.7% CAGR. For the U.S., the CAGR is an estimated 18.5%, for Canada, 19.5% and for Mexico, 19.2%.

In comparison, during the same forecast period, the CAGR for the global drone motors market is 16.8%, indicating "unprecedented growth" to US$16B, according to Cognitive. One driver will be ongoing technological advancements with respect to these motors. Another will be escalating demand for high-performance motors that can fly longer, can perform better and/or can withstand the stress of continuous operation.

The Catalyst: Scaling Up

Unusual Machines aims to continue growing revenue, Evans said in the release. Plans include investing in and expanding Rotor Riot, introducing more U.S.-made components at competitive prices and taking advantage of tariffs.

According to Sine, "Given the cash position, limited cash burn, improving revenues and diversified shareholder base, we believe the company is in a very strong position to grow quickly throughout 2025."

The goal is to move toward and become cash flow positive, which Evans estimates will take US$15–20M in annualized revenues to reach this point. He forecasts it will happen in about four to six quarters, depending on how the enterprise market shakes out and what tariff policies turn out to be, in H2/25.

"The company is in a great position to capitalize on enterprise sales and take advantage of the regulatory environment and macroeconomic factors to rapidly scale," Evans added.

Sine noted some upcoming events that could catalyze UMAC. Passage is expected soon of the U.S. Department of Defense's roughly US$1 trillion budget for fiscal year 2026. Also, it is anticipated that in the upcoming National Defense Authorization Act a substantial amount of funds will be earmarked for drone-related technologies. Both of these are expected to result in increased drone parts sales for UMAC.

Its 17,000-square-foot drone motor manufacturing facility in Orlando is due to be up and running in about September. The company has ordered equipment for it and is in the final stages of negotiating terms of the lease.

"The facility will serve as a key enabler for ramping up production to meet both defense and commercial demand," wrote Sine.

Return Potential Exceeds 200%

Litchfield Hills Analyst Sine has a Buy rating on Unusual Machines and a price target reflecting a potential 272% return, he noted in his May 9 report. He highlighted the drone company's solid Q1/25 topline performance, exceptionally strong balance sheet, expanding manufacturing abilities, and near-term catalysts.

The company is well-positioned to capitalize on the expanding DOD's defense budget and on continuing demand for domestic drones and drone parts, he wrote. Looking to the rest of 2025, Sine expects increased retail sales, by about 15% YOY, and enterprise sales.

"Our updated model forecasts modest EBITDA losses of US$4.7M through Q3/26, with the company reaching EBITDA positive in Q4/26," Sine wrote. "This represents a slightly more conservative outlook compared to management's projection."

Technical Analyst Clive Maund, in his review of UMAC on May 7, recommended it as an immediate Strong Buy. Now setting a base, with momentum trending upward, the stock is expected to move up with the closing of the previously announced, already fully subscribed, financing.

"This rapid completion of a big funding is a clear sign of confidence in the company and is thus construed as bullish," Maund wrote.

Ownership and Share Structure

According to Refinitiv, seven insiders own 8.38% of Unusual Machines. They are CEO Evans, Chief Financial Officer Brian Hoff, Chief Operating Officer Andrew Camden, and all four directors.

Numerous institutional investors, including The Vanguard Group and BlackRock Institutional Trust Co.,  collectively hold 3.52%. The rest is in retail.

Unusual Machines has 24.83 million (24.83M) outstanding shares and 22.75M free float traded shares. Its market cap is US$133.59M. Its 52-week range is US$1.02–23.62 per share.