Prepared remarks
Good day, and welcome to Palladyne AI's Strategic Update Conference Call and Webcast. Please note, this conference is being recorded. I will now turn the call over to Brian Siegel, Senior Managing Director of Hayden Investor Relations.
Thank you, operator. Today, I'm joined by Ben Wolff, Palladyne AI's President and Chief Executive Officer; and Trevor Thatcher, Palladyne's Chief Financial Officer. On this call, Ben will discuss the details of the strategic transformation announced in this morning's press release, followed by a Q&A. Any forward-looking statements made during today's prepared remarks or in the question-and-answer session, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results in the future to differ materially from those discussed on today's call. These risks and uncertainties include, but are not limited to, specific risks and uncertainties disclosed in Palladyne AI's periodic SEC filings. The company assumes no obligation to update any forward-looking statements or to update the factors that may cause actual results to differ materially from those that are discussed on today's call. Please note that today's press release and this presentation will be available on the Investor Relations page of Palladyne AI's website. They have also been filed on Form 8-K with the SEC. Now I'd like to turn the call over to Ben to discuss this morning's exciting news in more detail.
Thank you, Brian. Good afternoon, and thanks for joining us. Today is a pivotal moment for Palladyne AI, an American company that integrates artificial intelligence with the physical world. We develop embodied AI systems that not only analyze data but also sense, decide, and act in real time. Our goal is to be America's primary multiplier, serving both the Department of War and industrial clients. Today, I'll discuss how our acquisitions of GuideTech and Crucis, the latter referred to as Crucis in this presentation, along with the launch of Palladyne Defense, position us as a fully integrated AI and defense technology company. Before we begin, a reminder that today's presentation contains forward-looking statements with accompanying risks and uncertainties outlined in our SEC filings. Now, let's begin the strategic review. Most people view AI as something confined to data centers, where algorithms analyze information and provide insights.
Embodied AI breaks this concept, as it represents intelligence that functions in the real world. We equip physical systems to sense, decide, and act in real time. The distinction between analytical intelligence and operational intelligence is where the next wave of capabilities will be developed. The Department of War has emphasized that the future advantage lies not solely in analytics but in autonomous systems capable of performing missions in complex environments. This is the world Palladyne is striving to create. Before this transformation, Palladyne AI was a dedicated embodied AI firm focused on software that provides autonomy to physical systems. Our two main products, Palladyne IQ and Palladyne Pilot, form the basis of our capabilities. Palladyne IQ drives robotics automation, enabling intelligent operations for commercial and industrial robots. Pilot offers enhanced autonomous cooperation for unmanned systems, starting with aerial platforms and later expanding to unmanned ground, space, and maritime systems, remaining a key commercial product.
For defense and public safety, we have rebranded the pilot version as SwarmOS, specifically tailored for collaborative missions and swarming behaviors. Together, IQ and Pilot enhance our commercial reach, while SwarmOS positions us to lead in national security, creating a single integrated embodied AI ecosystem that serves both sectors. Palladyne has undergone significant evolution marked by four key inflection points, each informed by previous experiences. Initially, we focused on robotics, designing and constructing advanced machinery. We then integrated software into these systems, embedding decision-making capabilities. In our third phase, we shifted toward software development exclusively, creating an intelligence framework applicable to various platforms. Now, we enter our fourth phase, combining artificial intelligence, aerospace design, and American manufacturing into a unified defense business.
This development transforms Palladyne from merely an AI company into a redefined mid-tier defense technology organization. With the completion of these acquisitions, we officially launched Palladyne Defense, dedicated to embodied AI for national security, encompassing defense and public safety initiatives. Palladyne Defense embodies ethical autonomy, cost-efficient operational capability, and precision-driven design, all produced in the U.S. Every system we develop adheres to a core principle of human oversight while minimizing cognitive load, allowing both humans and machines to excel in their respective tasks. This represents intelligence that safeguards national interests through deliberate control and precision. The acquisition of GuideTech and Crucis marks our transition from a pure software innovator to a purpose-built, vertically integrated defense technology enterprise, fully aligned with priorities established by the White House and the Department of War in recent months.
Our approach seamlessly integrates AI intelligence, aerospace design, and U.S. manufacturing. For the Department of War, this signifies a partner capable of designing, prototyping, and producing more than just software. GuideTech contributes specialized engineering skills and rapid optimization of aerospace platform designs, while Crucis offers certified manufacturing capacity for key programs like the F-35 and Tomahawk. When combined with SwarmOS, they form Palladyne Defense, an American powerhouse characterized by speed and intelligent design. We are not operating in isolation. The landscape has fundamentally shifted, and the Department of War is redefining priorities around three critical trends that resonate with our offerings and drive demand for our solutions. Firstly, there's an emphasis on cost-effectiveness. The focus is shifting away from sheer size or complexity towards maximizing operational impact per dollar spent.
Secondly, reshoring and sovereignty are paramount; the National Defense Industrial Strategy advocates for revitalizing U.S. manufacturing and supply chain resilience. Crucis plays a vital role in this national resurgence as a certified manufacturer supporting both legacy and next-gen initiatives. Lastly, the integration of AI in mission systems is gaining momentum, moving from theoretical applications to essential operational requirements with autonomous systems. These trends define the new rules of readiness and shape the demand that Palladyne Defense is designed to fulfill. So, why does Palladyne Defense exist? It aims to address a structural gap in the market that neither startups nor large corporations currently meet. Startups often innovate rapidly but struggle with scalability, certification, and sustained readiness. Conversely, large firms can scale effectively but may lag in responding to emerging threats and rapid iteration demands.
The Department of War seeks an agile, vertically integrated American defense company capable of design, production, and delivery of advanced autonomous capabilities swiftly and effectively. This is the niche Palladyne Defense aims to occupy, bridging the gap between nimbleness and bureaucratic responsiveness. In essence, we are the new mid-tier prime for this era, engineered for embodied AI, rapid capability delivery, and American manufacturing. Palladyne Defense revolves around three core competencies. First is SwarmOS, our embodied AI and autonomy system for defense and public safety missions, delivering decision-making intelligence for the coordination of unmanned systems. Second is GuideTech, specializing in aerospace design, avionics, and cost-efficient systems. Their expertise allows for the rapid transformation of concepts into working prototypes in less than six months, a significant reduction compared to traditional timelines.
Third is Crucis, a certified U.S. manufacturer capable of quick scaling and currently supplying major defense initiatives. Collectively, these entities assist both large primes and defense tech startups in meeting the evolving demands of the Department of War. Together, we believe our synergistic capabilities can exponentially enhance Palladyne Defense, providing an integrated stack of AI, engineering, components, and American manufacturing, aligning perfectly with the Department of War's requests. GuideTech serves as the engineering nucleus of Palladyne Defense, composed of experienced engineers from missile, space, and unmanned sectors adept at designing and iterating swiftly. They are already contributing avionic solutions and design support to various defense contractors, proving their value in the field. For the Department of War, GuideTech’s speed and adaptability align well with modernization initiatives for heightened prototyping and deployment of unmanned and autonomous systems.
Moreover, GuideTech employs a continuous design cycle, facilitating the journey from concept to initial production within an integrated team, which is vital for meeting the Department's fast-paced modernization goals. Palladyne Defense is now equipped to respond swiftly with our AI BRAIN, engineering capabilities, and a manufacturing base that empowers us to outpace many competitors. BRAIN, our mission-grade avionics architecture, offers legacy flight computer performance at a fraction of the cost, making it ideal for attritable and autonomous systems. It is not merely theoretical; it's being integrated into operational systems. BRAIN is modular, programmable, and fully compatible with SwarmOS, ensuring that our AI decision-making capabilities are integrated directly within the airframe. Following that, we have Banshee, a low-cost, reusable precision loitering munition showcasing how embodied AI can revolutionize mission economics.
Unlike hobby drones or converted quadcopters, Banshee is specifically designed for tactical and strategic operations, achieving multiple objectives similar to larger platforms but at a much lower cost. We plan to incorporate SwarmOS and BRAIN into Banshee, facilitating coordinated actions, targeted sharing, and precision execution. This design directly addresses the Department of War's modernization goals of effectiveness and scalable autonomous systems. Next, we will discuss SwarmStrike, which builds on this philosophy for more complex mission capabilities. It is an intelligent loitering system that delivers cruise missile range while keeping costs significantly lower. SwarmStrike can operate alone or in teams with autonomous onboard capabilities for self-coordination and adaptive targeting. This exemplifies how our technologies can scale from tactical to strategic applications while managing costs and complexity.
We are also developing a near hypersonic long-range mass strike vehicle for the U.S. Navy. GuideTech's value transcends being just an acquisition; it is the core engineering hub behind our defense components and underpins IntelliSwarm, our future embodiment of autonomy architecture. IntelliSwarm builds on SwarmOS, incorporating specific capabilities needed for national security. When combined with BRAIN, we create a unified intelligent autonomy system that integrates AI, sensors, and avionics into one operating layer. IntelliSwarm will play a unifying role across all our defense products, utilizing the same AI that drives our intelligence, flight, and combat functions. Meanwhile, Pilot, our commercial autonomy product, remains focused on areas that don’t require the advanced features of SwarmOS. The second pillar of Palladyne Defense is Crucis, our new manufacturing entity. Crucis is a certified U.S.-based manufacturer aligned with major defense programs, building components for platforms like F-16, F-35, Tomahawk, Harpoon, and Bradley.
It’s working with clients such as Lockheed and Boeing, maintains an 18-month backlog exceeding $10 million, and is expanding to support both Palladyne Defense projects and broader defense primes. Crucis has AS9100 certification and is geared for precision manufacturing. The acquisition aligns with national strategies for reshoring production, securing supply chains, and ensuring that essential components are made in America. Crucis's value stems not just from its current capabilities but from its potential for future growth; it has the infrastructure and workforce to expand from precision machining into full system integration. Our combined R&D and logistical space now spans over 100,000 square feet, enabling us to transition ideas from design to production internally and function as a surge provider for the Department of War’s modernization initiatives. Crucis completes our integration of AI, engineering, and U.S. manufacturing under one roof, connecting certified American production to programs like the F-35 and F-16.
We will also explore how we apply Palladyne IQ on the shop floor to enhance productivity and quality, transforming our factories into smarter operations as we grow. This strategy aligns with the Department of War’s industrial modernization strategies to boost American resilience and reduce lead times. This overview illustrates how all the components—SwarmOS, GuideTech, and Crucis—will function together as one cohesive Palladyne Defense entity. Practically, we aim to support large prime contractors rather than compete with them directly. We offer software, avionics, components, complete systems, and design capacity, maximizing our opportunities along the value chain, and we prioritize building proprietary systems only when clear capability gaps exist. This model aligns perfectly with the Department of War's focus on cost-effective, autonomous capabilities that can be rapidly deployed, all rooted in a solid American industrial base.
Financially, these acquisitions are smart, poised for leverage with high growth potential. By 2026, we expect combined revenues from these acquisitions to exceed three times our projected 2024 revenue of about $8 million, with positive adjusted EBITDA contributions. Importantly, we have a growing backlog of over $10 million, which includes ongoing contracts with the U.S. Air Force and Navy. The total investment in these two transactions is roughly $31 million, encompassing stock, cash, equipment and real estate debt, along with a potential earn-out of up to $25 million within five years if revenues related to GuideTech exceed $71 million. Moreover, we'll allocate $5 million over the next year and a half to advance Banshee and SwarmStrike to higher technology readiness levels, aiming to access a more substantial revenue stream while maintaining a lean capital structure. Now, let’s discuss the operational framework moving forward.
With the completion of our acquisitions, Palladyne AI will function through two focused businesses guided by a shared autonomy foundation. Palladyne Defense merges SwarmOS, GuideTech, and Crucis, positioning us to deliver mission autonomy, aerospace design, new offerings, and U.S. manufacturing under one streamlined entity. Meanwhile, Palladyne Commercial will continue expanding IQ and Pilot across sectors like manufacturing, logistics, and aerospace, serving as our vital commercial opportunity. To clarify, defense is an extension of our platform, not a replacement for our commercial operations. Each focused business is strategically significant, powered by a common autonomy engine. In summary, Palladyne AI governs strategy, resources, and our unified autonomy platform. Palladyne Defense encapsulates SwarmOS, GuideTech, and Crucis for defense, government, and public safety clients, while Palladyne Commercial scales IQ and Pilot for industrial automation.
One platform, two focused businesses, each with distinct strengths and target markets. Before concluding, I want to return to where I see much of our long-term potential, which resides in Palladyne IQ. IQ, our original AI platform, is the backbone of our embodied AI ecosystem designed for managing intricate multi-robot environments and driving Pilot for unmanned applications. It provides an intelligence layer to enhance industrial and operational efficiency, focusing on enabling robotics and automated systems in manufacturing, logistics, and infrastructure to perceive, reason, and adapt dynamically. IQ is designed to be hardware-agnostic and suitable enterprise-wide, allowing customers to standardize a single intelligence layer across multiple facilities and robotic types. Our business model is appealing, relying on software licensing and services that can grow as customers deploy more robots and production lines.
Finally, I want to reinforce that we are operating from a robust financial position. As of September 30, we had $57.1 million in cash and equivalents, having utilized about $6.3 million in operating expenses. This financial discipline provides us with the leeway to integrate GuideTech and Crucis successfully while furthering our autonomy products. Additionally, we've secured a new U.S. patent encompassing vital aspects of our embodied AI and autonomous coordination capabilities, which directly support SwarmOS and enhance our position in edge autonomy. Simultaneously, we continue advancing current programs and pursuing new development work. For instance, we believe we are well-positioned for an upcoming Department of War contract, strengthening our existing relationship with Red Cat and initiating collaboration with Draganfly, reflecting the type of strategic ecosystem engagement we plan to encourage.
We have also bolstered our leadership team to prioritize defense and national security initiatives, welcoming retired Lieutenant General Twitty to our Board; he previously led significant U.S. Army operations. Doug Dynes has taken on the role of President of Palladyne Defense, bringing experience as a former Presidential appointee and National Security Adviser, and retired Major General Lee Levy, who formerly commanded the Air Force Sustainment Center, will serve as Vice Chairman of Palladyne Defense. Their expertise complements that of retired Admiral Olson, the first Navy Seal to achieve a 3-star Admiral rank and previously Head of SOCOM. Looking ahead, we are on track for 2026, anticipating a substantial increase in customer engagement across our portfolio. In summary, our investment strategy is founded on five pillars: technological leadership with our robust autonomy framework built for embodied AI at scale, vertical integration across AI software, avionics, systems engineering, and U.S. manufacturing in one cohesive stack, two growth engines in the commercial sector and a defense-focused business, financial stability with roughly $50 million post-acquisitions, and strategic timing as our structure and technology align with the Department of War’s priorities for quickly deployable and cost-effective autonomous capabilities.
This visual slide encapsulates our structure. On the left, Palladyne Defense, with SwarmOS, BRAIN Avionics, Banshee, SwarmStrike, and the IntelliSwarm framework powering AI-driven mission systems. On the right, Palladyne Commercial, with IQ and Pilot facilitating industrial automation across manufacturing, logistics, and infrastructure. Both sectors share the same AI core, ensuring that innovations in one area accelerate progress in the other. Before we conclude, I will share a brief video to help illustrate our vision. In summary, I hope you come away from today's call with the understanding that Palladyne AI is now a fully integrated autonomy company serving national security customers through Palladyne Defense and industrial customers through Palladyne Commercial, all powered by embodied AI. Our technology is advanced. Our structure is aligned with the national security priorities, and our financial position gives us the runway to execute on near-term deployments.
We're building an American company designed for this moment, one platform, two businesses and a significant opportunity ahead of us. Palladyne AI, America's cross-domain force multiplier. Thank you. Operator, we can open the floor for questions.
Questions and answers
Our first question comes from Brian Kinstlinger from Alliance Global Partners.
Congrats on your transactions. In terms of BRAIN hardware from GuideTech, how much of that revenue is commercial versus government? Do they go-to-market as a prime generally or a subcontractor? And then maybe can you quantify the sales cycle, including the design win phase?
Thank you for your question, Brian. Their customers are currently all in the defense sector. They have also explored opportunities in the space arena, which I believe offers significant potential, although it is not directly related to the Department of Defense. Currently, BRAIN sales are focused on supplying other prime contractors who are incorporating BRAIN into their aviation or aerospace platforms. To secure that business, it must be part of a design win that eventually leads to the entire system being sold to a defense customer, such as the Department of Defense or one of its branches. This has been their focus for the past couple of years, and they have made substantial progress in that area.
Great. And then prior to the GuideTech acquisition, did your drone partners have another third party they use for edge compute system. And so now the value is the drone manufacturer can come to you with one solution as opposed to using a variety of suppliers?
So it is very common in the smaller drone space to have either NVIDIA or Qualcomm boards that are being used on those platforms. And today, our SwarmOS software is being implemented on both NVIDIA and Qualcomm boards. Depending on the size of the platform of the aviation or, I should say, aerospace platform, depending on what the mission capabilities are that are required, you might see the BRAIN being a supplement to an NVIDIA or Qualcomm board or in lieu of an NVIDIA or Qualcomm board. It just depends on what the mission requirements are. But yes, you can think of us as being a vendor now for that avionics or guidance a navigation system that gets put onto a new type of weapon system.
Great. And then is there anything you can share in terms of either installed base, the number of partners GuideTech has? Just any kind of information to help understand average deal size, how to think about their customer base?
I hope to be able to give you more details after the first quarter. We're not at a point today that we're prepared to start talking about all of those details, Brian. But I think after the first quarter, we'll have some more information for you.
Two more points. First, could you explain how Crucis addresses manufacturing concerns that potential customers may have regarding your capacity to manage large programs? Also, can you discuss the types of components they are currently manufacturing and who their main customers are? I believe you mentioned the F-15 and some vehicles.
Yes, no problem. So whenever you talk about producing systems at scale, one of the concerns that potential customers have is, okay, great, you've got a good concept. Now can you actually execute on it? Can you produce it at scale because we're going to be a big customer. We want to buy a lot of these. We don't want to just buy a few. And that has always been a challenge for startups is to figure out how do you go from not just prototype and into first commercial article, but how do you scale it to volume, which is the kind of volume that the Department of War is going to look for. We decided to not try and reinvent the wheel, not try and go through all the aches and pains of scaling up manufacturing on our own, but to acquire two companies that were trusted and well proven, have been around for a long time, had adopted new innovative technologies to be able to have higher margins than the industry average and that could produce some of the most complex challenging parts and components that were needed by the aerospace industry. That is one of the things that I think startups and younger companies get criticized for is how are you really going to produce at scale. And so we decided to nip that in the bud in one fell swoop and be able to provide this consolidated vertically integrated package to our customers.
My last question is, can you talk about how opportunities with your two drone partners, Red Cat and Draganfly are tracking? I'm sure the government shutdown isn't helping, but maybe from a high level, talk about the procurement and the opportunities.
I believe both companies are making significant strides with opportunities involving the Department of War and various services. We have been working with Red Cat for a longer period compared to Draganfly, which is a more recent partnership. Draganfly offers airframes designed for different mission sets than those of Red Cat. We are very enthusiastic about our software that enables collaboration among platforms from different manufacturers, allowing them to communicate and provide the warfighter with enhanced information in the field. This is a capability that the Department of War has emphasized. Our engagement with Draganfly is just beginning, as we only announced it a few weeks ago. We anticipate mirroring the successful approach we've taken with Red Cat by meeting jointly with customers to discuss the capabilities of our basic air platform, emphasizing its superiority for specific mission sets, and educating Department of War clients on the potential of integrating collaborative autonomy through our SwarmOS platform.
It’s more than just securing a design win; after securing a partnership with customers like Red Cat or Draganfly, we must also persuade the Department of War of the value in investing in the additional capabilities we offer. Fortunately, Pete Hegseth frequently highlights swarming and collaborative autonomy capabilities when discussing drones, positioning us favorably in this space.
Our next question comes from Michael Latimore with Northland Capital Markets.
Congratulations on the transactions. Did you mention that a couple of the main customers for your acquisitions are the Air Force and Navy, or are those the two primary end customers? I understand you sell to the primes, but do they ultimately fall into those two categories?
So we actually have direct contracts with the Air Force and with the Navy, where they are funding the development of capabilities that they want to deploy. So those are direct contracts. That's not where we're acting as a sub to somebody else.
Interesting. And then as you think about the kind of revenue composition here, are we going to see sort of one revenue line? Or are you going to have hardware, software services? Just trying to think about how that will look.
Yes, I expect that we will clearly articulate what component sales, what services, and what software sales are as we continue to sort through that.
And how quickly can you get SwarmOS kind of embedded into the GuideTech development cycle and product lines there?
Well, it can't happen fast enough. But since we just closed the deal today, I can tell you it's not happening immediately. However, if you look at what we did in getting it onto the NVIDIA board and with Qualcomm, that process took a couple of weeks. Our engineering team started discussing today what the pathway looks like to make that happen. I haven't received an update on that conversation yet, but I believe it won't be overly challenging or time-consuming.
And then I think at the end there, you mentioned you're potentially expecting a Department of War contract award. I guess just what product category is that in? Or any more detail there?
That will still relate to the SwarmOS capabilities. I don't want to say more about it than that because it's premature. But bottom line is we've got some good momentum with the Department of War following on the backside of some of the existing contracts that we have.
And just last one. It seems like GuideTech is able to produce key systems in much more cost effectively. Can you just provide a little more detail on how they do that? Why are they so much more cost effective?
Yes. When the company was founded about 10 or 12 years ago by individuals from Raytheon Missile Systems, they invested significantly in developing their own internal software systems. These tools are transforming aerospace design and engineering. They can move from concept to working prototype in under six months. For instance, with SwarmStrike, they achieved their first flight just 4.5 months after the initial concept was developed. This rapid progress is largely due to the internal software tools they have created. I believe the key strengths of GuideTech are its people and these internal software systems that enable faster design conception and validation compared to the rest of the industry. This efficiency is a major factor in their success with customers in the defense prime market.
Our next question comes from James Kisner with Water Tower.
This is James. Can you hear me?
Yes, I can hear you. Thank you, James.
Congrats on the transaction. I just wanted to double-click a little bit on the vertical integration and sort of the benefits of that and sort of the why behind the transaction. I think you said that it helps your scaling, but are there other benefits here like time-to-market or integration technology or maybe even some margin stacking that's eliminated that also are rationales for these ready transactions?
Here's the way I think about it. The ability to control your destiny on both the hardware and software side to evolve them in tandem so that you can optimize both is something that you don't get the benefit of if you're just providing hardware or just providing software. You can think of a couple of great examples that I use as an analogy here. If you thought about Steve Jobs trying to come up with the iPhone and all, he was going to produce the hardware, not the software, it wouldn't be the hit product that it became. Vice versa, if he was only focused on software, not hardware, it may not have become the hit product it was. Take it into something that's a little more current. Think of the Tesla cars. If Elon had said, I'm going to build the frame and the physical instantiation of the vehicle, but I'm going to farm out the AI and the software to somebody else, it would not have been an optimized car that attracted the millions of customers that they have today. What we see in our opportunity set going forward is in those cases where there are gaps of capability that we think the Department of War wants, we now are bringing together our software and the hardware and the avionics and the components altogether vertically integrated, so that we can go faster in a way that demonstrates enhanced capabilities so that we can beat our near-peer competitors worldwide to the punch.
Very helpful. Just one other follow-up. I mean the shutdown, obviously just ended and you're kind of early commercialization, but have you seen any change in the tender conversations in the last couple of days, anything to report there? That's all I have.
I have been pleasantly surprised that there hasn't been any delay in getting people reengaged now that they are back at work. It feels like a switch has been flipped, and those we are working with in our specific areas have quickly resumed their previous engagement levels. While I can't speak for the entire Department of War or the government as a whole, I am very pleased to see almost immediate reengagement, picking up right where we left off.
Just a quick modeling question. Is there any seasonality that you see in the two businesses you're acquiring? I know often there's some seasonality in defense, especially with awards, but I'm not sure if there is on the revenue generation from your business.
We have not seen seasonality that I'm aware of. I think that as you get towards the new budget cycle, that can always impact things when you're talking about the U.S. government as a customer. But I do not believe that either of these businesses have seen significant issues as a result of that. The slowdown resulting from the shutdown of the government definitely impacted the ability, for example, when you're asking a government customer to approve a first design or a first product and they're no longer in the seat to approve it. That created a delay, and you saw that across the sector. But just in terms of normal seasonality, I don't see anything there, Brian.
I will now turn the floor back over to Brian Siegel for any questions from our webcast audience.
Thanks, Juan. I got a couple here. The first one is earlier this year, you described a roughly 12- to 18-month sales cycle and suggested you'd have more visibility in the back half of the year. I'm wondering whether the acquisitions along with the creation of Palladyne Defense have improved that visibility. Are you seeing any signs that these moves could shorten the sales cycle?
So the 12- to 18-month sales cycle was primarily focused on the commercial side of our IQ sales. And I don't see any change there. And certainly, these two acquisitions don't really impact that. I do think what these acquisitions do is they give us more avenues to monetize our SwarmOS swarming software, a lot more customers that we can now tap into relationships that we can build and expand on. And so it's too early for me to say whether I think the sales cycle for that product on the defense side will be shorter, but I do know it increases significantly our shots on goal.
One other question is, will you need to expand sales staff as you grow, let's say, over the next 6 to 12 months?
We plan to proceed with that, as it has already been budgeted, regardless of the acquisitions. One advantage of these acquisitions is that they come with their own business development initiatives, which we will enhance. As I noted earlier, Doug Dynes will lead our defense business, focusing primarily on revenue generation for that sector. He has excellent relationships, and we will be assembling a team to support him. Ultimately, as I have mentioned before, as we gain more insight into what influences customer decisions, we will allocate additional resources to attract more customers. However, we won't simply invest heavily in marketing and sales until we have identified effective strategies and understand what works.
One last question. It's about the commercial business. When will the next version of IQ become available? And is it being tested currently at customer or potential customer facilities?
We are testing the V2 of IQ in our own facilities now. As soon as we believe we've got it debugged and completely ready to go, then we will start placing it with customers. So we're not quite there yet. A lot of that, as I mentioned in my prior comments in past quarters or in our press releases, was focused on improving the user interface. User interface is never as easy as just putting a wrapper on the piece of candy. It actually requires integration with the way the software works, but we've never had an issue with the functionality of V1. What we had was an issue with the ease of use and making it so that we truly can have folks that are not software engineers able to interact with it and train robots the way very expensive computer programmers and software engineers typically do. So remember, our whole focus with IQ is to democratize the ability to program and manage industrial robots and to allow people that may only have a high school education to be able to do the kind of job that historically has taken people that are $225,000 or $250,000 a year graduate students that are able to do. So I think that we're close, and we're going through all the testing internally right now internally to make sure that it will be satisfactory for our customers when we release it out into the wild.
Great. That's all the questions from the webcast. Juan, you can close out the call.
Ladies and gentlemen, this now concludes our question-and-answer session and does conclude today's teleconference as well. We thank you for your participation. Please disconnect your lines, and have a wonderful day.