AeroVironment, Inc. 2027 Q1 Earnings Call

Please go ahead. Thank you and good afternoon, ladies and gentlemen.

Welcome to AV's first quarter fiscal year 2027 earnings call. My name is Denise Pacioni, Head of Investor Relations for AV. Before we begin, please note that certain information presented on this call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve many risks and uncertainties that could cause actual results to differ materially from our expectations. Further information on these risks and uncertainties is contained in the company's 10-K and other filings with the SEC, in particular in the risk factors and forward-looking statement portions of such filings. Copies are available from the SEC or on the AeroVironment website, www.avinc.com, or from our investor relations team.

This afternoon, we also filed a slide presentation with our earnings release and posted the presentation to the investor section of our website under Events and Presentations. The content of this conference call contains time-sensitive information that is accurate only as of today, September 9, 2026. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. Joining me today from AV are Chairman, President, and Chief Executive Officer, Mr. Wahid Nawabi, and Executive Vice President and Chief Financial Officer, Mr. Sean Woodward. We will now begin with remarks from Wahid Nawabi.

Wahid? Thank you, Denise. Welcome everyone to our first quarter fiscal year 2027 earnings conference call.

I will begin today's call by summarizing our quarterly performance, followed by Sean, who will review our financial results in greater detail. After this, Sean, Denise, and I will take your questions. I am pleased to report excellent first-quarter results across several key financial performance metrics that meet or exceeded our expectations. AV reported first-quarter revenues of $480 million, with record-setting funded backlog of $1.5 billion, as well as adjusted EBITDA of nearly $46 million and bookings of $683 million. These results reflect our focus on capturing key growth opportunities and our ability to execute with excellence. Building on our success from fiscal year 2026, we believe our first-quarter results have positioned us well to deliver an even greater and stronger fiscal year 2027.

Before discussing the details of our strong results, let me first highlight some key achievements from the first quarter. First, we won several key contracts on franchise programs during the quarter that contributed to $683 million in bookings. These wins add to a strong bookings pipeline for both this fiscal year and beyond. Second, our funded backlog grew to a record $1.5 billion, which is 37% higher than the same period last year. Third, we achieved record first-quarter revenue of $480 million. Fourth, we continue to advance our manufacturing capacity expansion plans across several of our platforms and products to support our strong growth over the next several years.

With a strong quarter behind us and positive momentum carrying us into the second quarter, we are reaffirming our fiscal year 2027 revenue guidance of between $2.125 billion and $2.225 billion, and adjusted EBITDA guidance for fiscal year 2027 of between $305 million and $325 million. Both of our business segments are progressing well toward their fiscal year 2027 growth goals, supported by key domestic and international program wins and increased backlog and revenue contributions. During the first quarter, our Autonomous Systems segment contributed $346 million, or 72% of the total company revenue. Our Space, Cyber and Directed Energy segment contributed $134.5 million in revenue or 28% of the total company revenue, consistent with our plans for the quarter. Both segments contributed to the 25% increase in funded backlog from the prior quarter due to very strong order flow and several source wins.

Our total funded backlog now stands at $1.5 billion. Strong contract wins across multiple programs in both segments, particularly in counter-UAS, positions us for a record fiscal year 2027 and supports our progress towards long-term growth goals. I would like to now walk you through some significant achievements since our last earnings call in each of our four main product areas, which are multi-mission ISR, precision strike, counter-UAS, and space and advanced technologies. Starting first with our multi-mission ISR product area. As we had mentioned on our last call, AV's P550 was selected for the U.S. Army's LRR program at the beginning of the first quarter with an award of $117 million. Successful integration into the U.S. Army's Next Generation Command and Control System, or NGC2, and strong performance during recent field tests position the P550 as another key franchise program expected to drive future growth.

We anticipate the LRR program to be a $1 billion program over the next few years. Also, during the quarter, AV was awarded a $30 million contract to deliver Puma AE and Puma LE systems for Germany's Larus airborne reconnaissance program. This award represents one of the most significant European Puma procurements to date. In addition to these wins from our small UAS product line, our Jump 20 and JUMP 20-X continue to make headway in AV's Group 3 or medium UAS offering. For example, our Jump 20 recently received an MQ-31A military designation from the Italian Ministry of Defense, formally recognizing AV Jump 20 as an official military capability. This is a critical next step in the procurement process, enabling the Italian Army to accept deliveries of Jump 20 and recognizing it as an element of its formal military inventory.

With this recent announcement, JUMP 20 and JUMP 20-X have now won several international programs of record just over the last 12 months alone. Turning now to Precision Strike. We continue to see progress and momentum across several of our platforms within Precision Strike. Our comprehensive family of one-way attack, loitering munitions, and launched effects products has the ability to meet our customers' immediate needs while remaining adaptable to future requirements. Our recent Switchblade 400 award under the U.S. Army's Low Altitude Stalking and Strike Coordinates, or LASSO program, is an example of AV's ability to quickly adapt our proven capabilities to meet new customer program requirements. Leveraging capabilities from both the Switchblade 300 and 600, AV Switchblade 400 is now a key solution set within the U.S. Army's LASSO program. Also, during the quarter, AV received a $51 million U.S.

Army contract for Switchblade 600 in support of a lethal Unmanned Systems IDIQ. Taken together, these two awards position AV as a long-term partner to the U.S. Army. With 20-plus brigade combat teams and 180-plus soldiers trained, these awards also reflect the U.S. Army's confidence in our solutions and our ability to deliver mission-critical capabilities at speed. Looking ahead, we are also seeing strong demand signals for our one-way attack solution, Red Dragon, and increased international demand in loitering munitions. Turning now to our counter-UAS portfolio. We are extremely excited about the progress we have made this past quarter with our multilayered counter-UAS defensive systems. Both Titan and LOCUST systems received several awards this past quarter, which are strategic to the long-term growth of these franchise products.

Just recently, we announced two significant wins for our market-leading counter-UAS directed energy platform called LOCUST. As you recall, AV was awarded a landmark contract valued at nearly $465 million for the U.S. Army's Enduring High Energy Laser, or EHEL program, in late August. This award represents the first-ever production contract for direct energy systems in U.S. military history. This is a defining moment, not only for our company, but also for our customers, our country, and the advancements of laser weapons technology as a critical tool in modern warfare. Following this announcement, we also announced our first international order for our LOCUST directed energy counter-UAS laser weapon system as a direct commercial sale. This order underscores the growing global demand for scaled high energy laser weapon systems.

As global threats continue to evolve and as asymmetric economics persist on the modern battlefield, directed energy has emerged as an increasingly important, cost-effective solution for countering high volume, low-cost drone attacks. At under $10 per shot, LOCUST redefines the cost balance between offensive and defensive systems and provides the war fighter with an essentially unlimited magazine. We see these landmark awards as demonstrating the growing demand for LOCUST, both in the United States and internationally, and positions AV as a leader for the rapidly expanding directed energy market. Building our momentum from these awards, we anticipate a growing pipeline of opportunities for our LOCUST laser weapon systems, both domestically and abroad, and look forward to sharing additional award progress with you in the coming quarters.