Merlin, Inc. Common Stock Q2 Earnings Call Highlights

Key Points

• Second-quarter revenue rose to approximately $2.2 million, up $1.2 million sequentially, while Merlin ended the quarter with $183.9 million in cash and short-term investments and no debt. The company expects second-half 2026 revenue of $4 million to $6 million if planned milestones are achieved.
• Merlin completed the critical design review for its C-130J autonomy program, moving the project toward integration and flight testing. The company expects meaningful C-130J revenue from the next phase in 2027.
• Merlin advanced its commercial and regulatory efforts by signing a non-binding cargo-aircraft partnership with Israel Aerospace Industries and reaching SOI 3 certification progress with New Zealand’s aviation regulator, including validation of key autonomy components.

Merlin, Inc. Common Stock NASDAQ: MRLN reported second-quarter revenue of approximately $2.2 million as the aviation-autonomy company advanced its C-130J program, expanded its commercial cargo partnerships and reached a certification milestone with New Zealand’s aviation regulator.

Revenue for the quarter ended June 30, 2026 increased by $1.2 million from the first quarter, with the substantial majority recognized under the company’s defense indefinite-delivery, indefinite-quantity, or IDIQ, contract structure as task orders were funded and work was completed, Chief Financial Officer Ryan Carrithers said.

Merlin ended the quarter with $183.9 million in cash equivalents and short-term investments and no debt, up $60.8 million from the prior quarter. The company said it believes its available resources are sufficient to fund its growth plans into fiscal 2028 based on its current operating assumptions.

C-130J Program Moves Toward Integration

Founder and Chief Executive Officer Matt George said Merlin completed the critical design review, or CDR, for its C-130J program with its lead customer during the quarter. The milestone moves the program toward integration, ground testing and flight testing on an initial aircraft.

The company is working with its customer and subcontractors to define the scope and timeline for future integration work. Carrithers said Merlin expects “meaningful revenue” from the next phase of the C-130J program in 2027, though the company did not provide revenue guidance for that year.

For the second half of 2026, Carrithers said Merlin expects revenue of between $4 million and $6 million if it achieves its planned milestones.

George said the initial integration of the Merlin Pilot autonomy system onto a C-130J will require substantial work and capital, as it represents the move from an initial capability to deployment on a large U.S. Air Force aircraft. He said the company expects the lessons learned from integrating on the C-130J to support work on other large, multi-engine turbine aircraft.

Merlin’s revenue model consists of three phases: adapting its Merlin Pilot software to a customer’s airframe and requirements, integrating the system onto an aircraft, and collecting recurring licensing fees over the remaining operational life of the airframe. Carrithers said pricing in each phase depends on the complexity of the work and the value delivered to the customer.

Commercial Cargo and Certification Progress

At the Farnborough air show, Merlin and Israel Aerospace Industries signed a non-binding memorandum of understanding to pursue the development, integration and certification of AI-powered autonomy for commercial cargo aircraft. The planned engagement includes engineering collaboration, market exploration, regulatory preparation and selection of an initial aircraft platform, according to George.

Merlin said the relationship with IAI, along with its previously announced collaboration with World Star Aviation, is intended to build a go-to-market network for the global civil cargo market. George said the commercial cargo opportunity represents approximately 2,400 aircraft globally.

The company also announced it achieved stage of involvement 3, or SOI 3, with the Civil Aviation Authority of New Zealand under a bilateral aviation safety agreement with the Federal Aviation Administration. Merlin said two components of its platform—the flight control computer and automated communication system software—were tested and verified against applicable requirements.

George said the company believes this was the first such milestone for large-aircraft autonomy. The SOI 3 designation indicates that Merlin’s verification processes, testing evidence, traceability and engineering controls have reached a level of maturity intended to support certification.

Separately, Merlin concluded a certification issue paper with the New Zealand regulator addressing the use of artificial intelligence and machine learning-based natural language processing for voice-based interaction with air traffic control. George said the agreement established the regulator’s requirements and a path for demonstrating compliance for the capability.

Financial Results and Spending Plans

On a GAAP basis, Merlin recorded a net loss of approximately $58.4 million in the second quarter, compared with a loss that was $32 million higher in the first quarter. Carrithers said the improvement was primarily driven by non-cash changes in the fair value of warrants and convertible promissory notes, as well as one-time charges associated with the company’s first-quarter business combination.

Adjusted EBITDA was a loss of $27.8 million, compared with an adjusted EBITDA loss of $23.3 million in the preceding quarter. Carrithers attributed the increased loss to investments in engineering, certification and program execution.

• Cash flow from operations was negative $27.3 million, compared with negative $23.6 million in the first quarter.
• Capital expenditures totaled approximately $1.6 million, down from approximately $2.2 million in the prior quarter.
• Merlin said it expects second-half adjusted EBITDA to be flat to modestly improved from the first half as certain nonrecurring external costs conclude and hiring slows.

George said Merlin is focused on larger fixed-wing aircraft, including both crewed and uncrewed platforms, with an emphasis on aircraft already in service. He described the Merlin Pilot as the company’s core certifiable AI system, which it intends to adapt across airframes and missions rather than develop separate one-off systems.

The company estimates that its addressable market includes more than 29,000 aircraft when combining U.S. defense fixed-wing inventory, global civil cargo aircraft and global passenger aircraft. George said Merlin believes the C-130J platform alone represents a multibillion-dollar opportunity, while noting that the company’s path to broader adoption depends on continued integration, testing, certification and customer progress.

About Merlin, Inc. Common Stock (NASDAQ:MRLN)

Merlin Inc is focused on developing autonomous flight software for legacy and next-generation airborne systems. Its aircraft-agnostic, AI-based software supports takeoff-to-landing autonomous operations for military and civil aviation programs. The company aims to build an AI-based operating software platform intended to support autonomous flight operations across a range of aircraft types.

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