Q4 2025 AeroVironment Inc Earnings Call
Okay.
Speaker Change: Good day, and thank you for standing by welcome to Aerovironment <unk> fourth quarter and full fiscal year 2025 earnings conference call. After the speaker's presentation there'll be a question and answer session to ask a question. During this session you will need to press star one one on your telephone please be advised that today's conference is being record.
Speaker Change: I would now like to hand, the conference over to your Speaker today director of Investor Relations, Denise Scratchy Oney.
Speaker Change: Thank you and good afternoon, ladies and gentlemen, welcome to Aerovironment sport quarter and full fiscal year 2025 earnings call. My name is Denise Paciotti director of Investor Relations for Aerovironment.
Speaker Change: 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.
Speaker Change: Further information on these risks and uncertainties contained in the company's 10-K and other filings with the SEC in particular in the risk factors and forward looking statements portions of such filings.
Speaker Change: These are available from the SEC on the Aerovironment web site or from our Investor Relations team.
Speaker Change: This afternoon, we also filed a slide presentation with our earnings release and posted a presentation to the investors 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 June 24, 2025. The company undertakes no obligation to update any forward looking.
Speaker Change: Statements, whether as a result of new information future events or otherwise.
Speaker Change: Joining me today from Arrow environment, our chairman, President and Chief Executive Officer, Mr. Wahid, Milwaukee, and Executive Vice President and Chief Financial Officer, Mr. Kevin Mcdonald, We will now begin with remarks from Wahid don't Nobody Wahid.
Speaker Change: Thank you Denise.
Speaker Change: Welcome everyone to our fourth quarter and fiscal year 2025 earnings conference call.
I will start by summarizing our quarterly and full year performance, followed by Kevin who will review our financial results in greater detail and provide guidance for fiscal year 2026, I will then provide a summary of our key messages and finally, Kevin Denise and I will take your questions.
Speaker Change: Please be aware that our fourth quarter and fiscal year 2025 financial results do not include any financial activity from Blue Halo acquisition.
Speaker Change: For pre closing deal and integration related expenses.
Speaker Change: I'm pleased to report that once again, we have achieved another record fourth quarter and full year results exceeding our expectations, while positioning us for even greater long term profitable growth.
Speaker Change: We had an incredible year marked by robust demand for our innovative solutions, which enabled us to achieve double digit organic revenue growth and significant increase in profitability.
Speaker Change: Our investments in all business segments helped drive demand for our products, which led to key domestic and international wins and enabled us to launch three new groundbreaking products. This year, namely the <unk> hundred 50, <unk> jumped 20 X and the Red Dragon.
Now I would like to highlight our key messages for fiscal year 2025, which are included on slide number three of our earnings presentation.
Speaker Change: First we achieved a record fiscal year revenue of $821 million, which is 14% higher than the prior year period and record fourth quarter revenues of $275 million, which is 40% higher than prior year period.
Speaker Change: Second in fiscal year 2025, we secured $1 $2 billion in total bookings underscoring the robust demand for our innovative and battle proven solutions.
Speaker Change: Third we ended fiscal year 'twenty, five with funded backlog of $726 million, which is 82% higher than the prior fiscal year.
Speaker Change: Fourth we closed our acquisition of Blue Halo further strengthening our industry leading position as the next generation defense Tech Pride with in all domain portfolio of innovative solutions across air land Sea space and cyber.
Speaker Change: And fifth.
Speaker Change: We are confident.
Speaker Change: Is better positioned than ever as a result of important company milestones we achieved throughout the fiscal year and we are setting our fiscal year 'twenty six revenue guidance between $1 9 billion to $1 2 billion.
Speaker Change: Let me be clear and a growing and evolving market Avs 50, plus years of proven track record of delivering next generation solutions with a proven ability to manufacture at scale remain key differentiator that sets us apart.
Speaker Change: We've been working side by side with our customers and the battlefield to help define and deliver solutions, which are shaped by real world threats. They face.
Speaker Change: Over the past decade alone we have invested nearly $2 billion in R&D to develop disruptive software defined hardware solutions.
Speaker Change: And we believe we remain extremely well positioned to meet our customers' rising demands by delivering them the best in class solutions align with their needs.
Speaker Change: As an example, this past fiscal year, we introduced three significant new products that are directly aligned to our customers' highest priorities.
Speaker Change: The first is our new group to AI, driven autonomous UAS the P $5, 50, which leverages our modular open system approach.
Speaker Change: Second we unveiled our jumped 20 X, which is a vertical takeoff and landing or VTOL medium on crude aircraft system or UAS engineered to revolutionize shipboard UAS operations.
Speaker Change: With an advanced heavy fuel engine and fully autonomous takeoff and landing on a moving small battleship jumped 20 ex enhances operational flexibility simplifies refueling logistics and ensures mission adaptability across diverse maritime and expeditionary environments.
Speaker Change: And finally, we introduced our new one way attack drone solution Red Dragon, which is a fully autonomous capable GPS denied one way attack UAS that directly ties to the needs of our U S Department of defense customers.
Speaker Change: As demand for new and existing solutions continues to rise we remain confident in our robust manufacturing capacity to scale at affordable cost to meet our customers' urgent needs.
Speaker Change: We are confident that we're well positioned for strong organic growth in fiscal year 2026 and beyond.
Speaker Change: With that now I would like to provide updates on each of our three business segments, starting with loitering munition systems or LMS.
Speaker Change: Yeah.
Speaker Change: Our LMS segment continues to drive expansive growth for the company.
Speaker Change: <unk> revenues for the fourth quarter rose, 87% to $138 million and for the full fiscal year revenues of $352 million were 83% hires.
Speaker Change: Fiscal year twenty-five reiterated the importance and effectiveness of all our switchblade family of solutions.
Speaker Change: For this fiscal year, we secured a total of $477 million and funded contract awards.
Speaker Change: We also secured the single largest award and our 54 year history with a five year sole source Army IQ contract for Switchblade products and services valued at nearly $1 billion.
Speaker Change: International demand for Switchblade products also remains strong there are now eight countries that have placed firm initial orders and an additional eight allies actively engaged in the foreign military sales process.
Speaker Change: International demand for Switchblade products also remains strong there are now eight countries that have placed firm initial orders and an additional eight allies actively engaged in the foreign military sales process.
Speaker Change: With demand for Switchblade on the rise we remain active in our manufacturing facility expansion efforts in Utah and expect to have initial production capability by the end of this fiscal year.
Speaker Change: This new production facility will enable us to support more than $1 billion in annual Switchblade revenues.
Speaker Change: Now onto our <unk> systems segment or U S.
Speaker Change: Our U S segment posted fourth quarter revenues of $113 million, which is higher than the prior year period by nearly 9%.
Speaker Change: For the full fiscal year revenues were slightly lower than the same period last year at $382 million.
Speaker Change: The Puma AE OAS, a multibillion dollar product franchise for AAV remains a profitable and sustainable growth driver for the company.
Speaker Change: As I mentioned earlier, we introduced our new <unk> hundred 50, UAS this past fiscal year.
Speaker Change: Our <unk> hundred 50 will continue to lead the entire small UAS industry with many unique features and we're expanding our manufacturing capacity in anticipation of increased demand.
Speaker Change: As we noted last quarter, the department of Defense announced two programs with over $1 billion in value.
Speaker Change: We're confident our <unk> 50 solution will compete effectively and when key contracts.
Speaker Change: <unk> three medium UAS jumped 20 has gained significant traction, particularly in the international marketplace.
Speaker Change: Most recently, we secured a $46 million contract with the Italian Ministry of Defense.
Speaker Change: Maritime efforts on the jumped 20 X are progressing and we anticipate strong interest and demand for this in the near future.
Speaker Change: Additionally, our uncoated ground vehicle or UAV business received a contract to deliver 41, new GBS to the German <unk>.
Speaker Change: Federal armed forces with deliveries scheduled for the summer of 2025 through 2027.
This represents one of the largest UGG awards in our company's history.
Speaker Change: We remain confident in our USS segments long term outlook due to market growth key contract wins and expanding international opportunities.
Speaker Change: Moving now to our <unk> segment <unk>.
Speaker Change: <unk> continues to develop industry, leading next generation solutions and is driving force behind is the driving force behind our latest one way attack drone Red Dragon.
Speaker Change: Revenues for the fourth quarter rose, 24% to $24 million.
Speaker Change: For the full fiscal year revenues were $87 million.
Speaker Change: Which was 14% higher than the prior year period.
Speaker Change: As stated earlier Red Dragon is a fully autonomous capable software defined uncouth aircraft system that can operate in high threat GPS denied and communication degraded environments.
Speaker Change: This cutting edge solution includes avs Evercore autonomous flight software suite.
Speaker Change: The Spider edge perception system, which we believe are the most advanced technologies and the battlefield today.
Speaker Change: Rick Dragon provides critical advantages to war fighters. It is designed to be mass produced affordably and can be deployed across land and sea.
Speaker Change: Red Dragon is now part of our precision strike and counter UAS group under our autonomous systems segment.
Speaker Change: Maccready works continues to push the boundaries on leading edge technologies, and we anticipate many more solutions from this group in the future.
Speaker Change: With an excellent fiscal year 'twenty five behind US we are now setting our sights on further growth as a combined company for fiscal year 2026 and beyond.
Speaker Change: Having successfully completed the largest acquisition in our company's history.
Speaker Change: With the addition of Hulu Halo.
Speaker Change: Our position as the Premier Defense Tech leader.
Speaker Change: We're now better equipped to provide our nation and our allies around the world with new and disruptive solutions they need.
Speaker Change: Our integrated capabilities across every domain, including air land Sea space and cyber as well as our innovation engine, coupled with the ability to scale positions us to address the emerging global priorities and meet rising demand.
Speaker Change: As an example recently the U S department of defense or reiterated the importance our solutions and capabilities play and National defense strategy from precision fires and loading munitions autonomous counter UAS.
Speaker Change: And two space technologies, cyber cyber security solutions and advanced munitions.
Speaker Change: As we look ahead and to better align with customer missions and our financial reporting structure.
Speaker Change: Starting in fiscal year 2026, we will operate under two distinct business segments.
Speaker Change: The first is autonomous systems, which encompasses <unk> systems or group one through three UAS.
Speaker Change: Precision strike in one way or tax systems, including Switchblade loitering munitions and Red Dragon.
Speaker Change: A defensive systems or counter UAS solutions that use both radio frequency sensors and advanced electronic warfare capabilities.
Speaker Change: Ground and maritime robotic solutions and Mccreedy works, the company's innovation engine, where autonomy AI and advanced platform technologies converge to deliver next generation capabilities.
Speaker Change: Okay.
Speaker Change: The second segment is space cyber and directed energy, which encompasses space technologies.
Speaker Change: Directed energy solutions.
Speaker Change: Fiber solutions and mission services.
Speaker Change: By adding space technologies counter UAS, directed energy electronic warfare, and cyber solutions to our cutting edge and battle proven offerings, we have expanded our growth opportunity in a market fueled by strong tailwind and now offer a comprehensive set of solutions across all domains air land.
Speaker Change: C space and cyber.
Speaker Change: With more than 50000 platforms already fielded and performing and high demand environment.
Speaker Change: Now exports systems to more than 100 allies around the world.
Speaker Change: Since the close of Blue Halo acquisition, we've been working tirelessly on integration and we're very excited to finally be one team.
Speaker Change: With that I would like to now turn the call over to Kevin Mcdonnell for a review of our fourth quarter and full year financials. Kevin. Thank you Wahid today I will be reviewing the highlights of our fourth quarter performance during which I will occasionally refer to both our press release and earnings presentation available on our website just.
Speaker Change: A reminder, that we closed our blue Halo acquisition on May one so the results for Q4 and FY 'twenty five do not include any financial activity from Blue Halo, except pre closing deal and integration expenses.
Speaker Change: We ended a record year with a record quarter in terms of revenue and adjusted EBITDA. This is the third consecutive year, we've met or exceeded our initial annual revenue and adjusted EBITDA guidance. This has been a challenge. This has been challenging in terms of quarterly year over year comparisons, but its gratifying to end the year with a strong fourth quarter.
Speaker Change: <unk> and achieve our annual goals are.
Speaker Change: I will briefly comment on our results for the quarter and the year and spend a bit more time, providing some guidance for FY 'twenty six since the financial landscape of the company will change significantly as.
Speaker Change: Wahid mentioned in his remarks, we ended the year with a record 275 million of revenue in the fourth quarter, which represented 40% to 40% increase over the prior year. This completed a record year at $821 million in revenue, which represents 14% growth. Despite the challenges of reduced revenues to recur.
Speaker Change: Jim.
Jim: Ukraine revenues in FY 'twenty, five end up being at 18% of total revenue for the year and 12% of revenue in the quarter, we expect <unk> revenue to be less than 5% in FY 'twenty. Six however, it should be noted that we continue to receive orders for upgrades to their Puma fleet and for Switchblade.
Speaker Change: It's interesting to note.
Speaker Change: That 52% of the company's revenues were from international customers of which a little over 24% came from non Ukraine European customers.
Speaker Change: <unk> continue to demonstrate a strong international franchise for our Puma Switchblade and jumped 20 product lines. In fact, we received orders from eight countries for switchblade products with nearly a quarter billion dollars in FY 'twenty five and the jumped 20 received nearly $100 million of orders in the fourth quarter alone from which over half came from international customers.
Speaker Change: As Wahid mentioned LMS ended the year strong with $138 3 million of revenue in the quarter of which about 80% came from Switchblade 600 product.
Speaker Change: <unk> had a strong quarter at $112 6 million, which represented 9% year over year growth led by revenues from Puma products represented over 50% of the USF revenue and it jumped 20, almost 20% of the total segment revenue.
Speaker Change: In terms of adjusted EBITDA slides 13, and 14 of our earnings presentation show. The reconciliation of GAAP gross margins to adjusted gross margins and net income to adjusted EBITDA.
Speaker Change: Adjusted EBITDA for Q4 was $61 6 million up from last year's Q4 of $22 2 million driven by higher revenue higher gross margins and lower investments in R&D spending partially offset by higher SG&A expenses full.
Speaker Change: Full year adjusted EBITDA was $146 4 million, which is 17 eight set of revenue and a 15% increase in EBITDA over FY 'twenty four.
Speaker Change: In terms of the fourth quarter consolidated GAAP gross margins finished at 36%, which is lower than the fourth quarter last year, primarily due to a $4 $6 million negative impact due to a noncash accelerated intangible amortization expenses related to our <unk> business.
Speaker Change: Fourth quarter adjusted gross margins were 39% a decrease from the 40% for the same period last year.
Speaker Change: A change in sales mix and lower service margin.
Speaker Change: Adjusted product gross margins were flat while service gross margins were down 8%, primarily due to service mix.
Speaker Change: Full year fiscal 2025 gross margins were at 41, 2% versus 41, 5% in fiscal 2024, while adjusted product gross margins improved year over year from 43, 3% to 43, 8% the 6% decline in adjusted service gross margins resulted.
Speaker Change: The slight decline in overall adjusted gross margins.
Speaker Change: Moving to operating expenses reported GAAP SG&A for the quarter was $43 $3 million, but this includes $5 6 million for deal and integration costs $2 1 million for a legal accrual and <unk> 8 million of intangible amortization net of these items SG&A for the quarter was $34 8 million.
Speaker Change: <unk> to $32 7 million for the prior year in the same period, a 6% increase for fiscal 2025 SG&A net of these same types of adjustments was $133 million versus $107 3 million in FY 'twenty, four or 16% of revenue in FY 'twenty, five and 15% of revenue in <unk>.
Speaker Change: By 2000 and for the increased SG&A as largely was driven by increased global sales footprint and more importantly increased bid and proposal activity.
Speaker Change: R&D expense for the fourth quarter was $25 million or 9% of revenue compared to $35 million or 18% of revenue in the prior year. The large year over year reduction in R&D was a result of the <unk> flight testing, which occurred in Q4 of FY 'twenty four.
Speaker Change: Total R&D spend for 2025 ended at 12% of total revenue and within the 12% 13% range of our initial guidance.
Speaker Change: Now turning to GAAP earnings in the fourth quarter. The company generated net income of $16 7 million versus net income of $6 million recorded in the same period last year. The increase in net income of $10 6 million can be attributed to a $36 $3 million increase income from ongoing business activities.
Speaker Change: Offset by nonrecurring expense from $18 $4 million goodwill.
Speaker Change: Goodwill impairment in the UGG business of $5 $2 million increase in deal and integration expenses and a $2 $1 million legal accrual.
Speaker Change: For the full year the company generated net income of $43 6 million versus net income of $59 7 million in FY 'twenty for the decrease in net income of 16 million can be attributed to additional income from normal business activities of 21 seven.
Speaker Change: $7 million more than offset by the $18 $4 million goodwill impairment 17, $2 million increase in deal integration costs, and a $2 $1 million legal accrual.
Speaker Change: Slide 12 shows the reconciliation of GAAP and adjusted or non-GAAP diluted EPS. The company posted adjusted earnings per diluted share of $1 61 for the fourth quarter of fiscal 2025 versus <unk> 43 diluted share for the fourth quarter of fiscal 2024.
Speaker Change: Moving to the balance sheet at the close of the fourth quarter, our total cash and investments amounted to $72 5 million in line with the same amount at the end of the third quarter of fiscal 2025 and.
Speaker Change: UN billed receivables increased $60 million during the fourth quarter. The increase is largely attributed to the LMS business as a volume in process switched places reached record levels contract definitive <unk> acceptance testing is scheduled in new payment terms of unfavorably impacted the near term working capital and we expect favorable improvements these working capital balances in early FY <unk>.
Speaker Change: <unk> six.
Speaker Change: I should note that after the quarter ended as part of the Blue Halo transaction at closing, we paid off the acquired company's debt and transaction expenses, which totaled $925 million utilizing our $700 million loan facility and part of our $350 million revolving credit facility.
Speaker Change: Turning now to backlog our funded backlog at the end of the fourth quarter of fiscal 2025 finished at a record $726 6 million.
Speaker Change: Thanks to a record $1 2 billion in bookings in fiscal 2025.
Speaker Change: Finally, I would like to discuss our reporting structure going forward and provide you our FY 'twenty six guidance. That's why he'd mentioned earlier <unk> will now operate under two reporting segments.
Speaker Change: These descriptions as well as the pro forma FY 'twenty five information for each segment can be found on slide 10 of the presentation.
Speaker Change: Total pro forma revenue for 2025 was approximately $1 7 billion for the combined businesses.
Speaker Change: Our first segment autonomous systems are excess will be led by Tracy Stephens, and importantly that avs and crude systems segment.
Speaker Change: Our next segment is basically the legacy <unk> business, adding and counter UAS RF maritime robotics, and electronic warfare businesses from legacy Blue Halo. The total pro forma FY 'twenty five revenue for access segment is just over $1 billion.
Speaker Change: Our second segment is space cyber directed energy or C. D E and is led by trip Ferguson, who formerly was the chief operating officer for Blue Halo, the pro forma FY 'twenty five revenue for the SCD segment is $646 million.
Speaker Change: Starting in the first quarter of fiscal 2026, our earnings results will include disaggregated revenue performance for each of the revenue categories listed on slide 10 under the two product segments.
Speaker Change: Now into fiscal 2026 guidance on page eight of the presentation. We provide fiscal 2020 guidance inclusive of the recent acquisition of Blue Halo was closed may one 2025, given this shift in our financial model, we are giving more color on the guidance for the year fiscal year revenue is expected to be.
Speaker Change: Queen $1 9 billion, and 2 billion adjusted EBITDA between $300 million and $320 million and non-GAAP adjusted EPS between $2 80 and $3 <unk>.
Speaker Change: Mid point of our revenue guidance range represents nearly 15% growth over the pro forma FY 'twenty five results.
Speaker Change: Our visibility to the midpoint of the revenue guidance range is at 70%, which is higher at the higher end of our historical range at this point during the year.
Speaker Change: We expect adjusted gross margins in the range of 29% to 31% adjusted gross margins for the first half of fiscal of the fiscal year should be in the high 20% range moving toward the low 30% as the as throughout the year R&D spend is expected in the range of 6% to 7% of revenue and.
Speaker Change: Blue Halo, Eric deal integration expenses should be in the range of $40 million to $45 million of which approximately $20 million as it related to deal closing costs.
Speaker Change: The revenue for the year should break down to roughly 45% for the first half of the year at 55% for the second half.
Speaker Change: Overall, adjusted EBITDA percentage of revenue for the year is approximately 16% at the midpoint of the guidance range. This should trend by quarter from 10% to 12% in Q1 trending up to the high teens in the third and fourth quarters as we start to realize synergies are high higher proportion of product sales and increased revenue levels.
Speaker Change: Slide 10 further breaks down the expected fiscal 2026 revenue by business segment Autonomous systems fiscal year revenue is expected to be between one two and $1 4 billion, representing over 20% growth versus pro forma FY 'twenty five.
Speaker Change: As space Cyber and directed energy fiscal year, 2026 revenue expected to be between $700 million and 900 billion, representing double digit growth versus pro forma FY 'twenty five.
Speaker Change: Like to close by echoing <unk> remarks, we are very well aligned with the USDA priorities and those of its allies and are excited about our prospects now I would like to turn things back to what <unk>.
Speaker Change: Thanks, Kevin before turning the call over for questions I would like to reiterate the incredible positive momentum we've achieved while entering fiscal year 2026.
Speaker Change: First we achieved record fiscal year 'twenty, five revenues of $821 million, which is 14% higher than the prior year period and record fourth quarter revenues of $275 million.
Speaker Change: Which is 40% higher than the prior year period.
Speaker Change: Second in fiscal year 'twenty, five we secured $1 2 billion and total bookings underscoring the robust demand for our innovative and battle proven solutions.
Speaker Change: Third we ended fiscal year 'twenty, five with funded backlog of $726 million, which is 82% higher than the prior fiscal year.
Speaker Change: Fourth we closed our acquisition of Blue halos further strengthening our industry, leading position as the Nextgen defense Tech Prime with in all domain portfolio of innovative solutions across air land Sea space, and cyber well aligned to our customers' highest priorities.
Speaker Change: And fifth.
Speaker Change: We are confident <unk> is better positioned than ever as a result of important company milestones we achieved throughout the fiscal year and we are setting our fiscal year 'twenty six revenue guidance between $1 9 billion and $2 billion.
Speaker Change: Our decades worth of investing in autonomous systems has paved the way for our industry and we will continue to lead with best in class solutions that are aligned to our customers' needs.
Speaker Change: We are encouraged by the current administration's ambition for deploying defensive assets, our warfighters desperately need and we stand ready to deliver as we have always done.
Speaker Change: We're honored to support the most critical defense missions of our nation at this pivotal moment.
Speaker Change: I want to thank our employees shareholders and customers for their continued commitment to a vision and our mission.
Speaker Change: We would not be in the position where today without them.
Speaker Change: Together with Blue Halo, we're poised to seize these incredible opportunities ahead of us and we're excited to realize the benefits from adding their capabilities across space technologies counter UAS directed energy electronic warfare, and cyber solutions to <unk> existing robust portfolio.
Speaker Change: And with that Kevin Denise and I will now take your questions.
Speaker Change: Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby what we compile the Q&A roster, we respectfully ask that callers limit themselves to two questions and return to the queue to ask additional questions.
Louie Dipalma: Our first question comes from Louie Dipalma with William Blair You May proceed.
Louie Dipalma: While he'd Kevin and Denise good afternoon, and congrats on closing the major acquisition.
Louie Dipalma: Thank you Lori Thank you Louis.
Louie Dipalma: Fair Wahid, the the fourth quarter demonstrated pretty robust.
Speaker Change: Switchblade growth can you discuss your view of.
Speaker Change: The army is announcement of their transformation initiatives that came out last month and the report that the army wants to outfit combat divisions with more than 1000 drones and can you discuss that in the context of.
Speaker Change: How the army has already ordered thousands of.
Speaker Change: Switchblades from Aerovironment.
Speaker Change: The <unk> in the past and so do you view this army transformation initiative as <unk>, Inc.
Speaker Change: Incremental to what.
Speaker Change: You have already provided for them.
Speaker Change: Thanks.
Speaker Change: Thank you Louis.
Speaker Change: Yes first of all we are very very <unk>.
Speaker Change: Pleased with the results that we delivered on our fourth quarter setting another record for the quarter as well as for the year at not only in our overall business, but as you mentioned and unloading munition I mean that business is growing rapidly.
Speaker Change: And on fourth quarter, we grow over.
Speaker Change: Over 83% as you saw and the another key figure that's really important is that throughout fiscal year 2025.
Speaker Change: Not only do we booked a record $1 $2 billion worth of new orders funded that partnered funded bookings, but the LMS business our segment alone booked close to $477 million in contract awards.
Speaker Change: It's a variety of mix of customers some for the U S. Army some part of the replicate our initiative of the U S. The Pentagon international customers about eight of them, so far and all of that means that we have tremendous momentum with our LMS business going forward, we expect that business to continue to grow specific to your quest.
Speaker Change: Related to the U S Army's robotics or transformation General George has made a very clear statement and so has the secretary of the army AD that they would like to shift and modernize the U S Army and there is significant potential upside in the key areas that they would like to modernize and transform.
Speaker Change: Army at one of them is related to <unk>.
Speaker Change: Loitering munitions draw.
Speaker Change: Drones counter UAS counter drones directed energy.
Speaker Change: And.
Speaker Change: RF jamming capabilities, such as our tightened solution set from Blue Halo. So if you look at the priorities of the USD and its U S Army.
Speaker Change: <unk> is positioned incredibly well not only do we represent more than two thirds or three quarters of the U S duties priorities and the Army's priorities. We also are very unique because we have the capabilities that we can deliver today, we have that we have the production capacity to deliver it to make them and produce them at scale, which we have done in the.
Speaker Change: Past and our systems are battle tested and proven so Mike, but so the short answer is yes, we expect additional incremental opportunities details of that is not well known yet, but I think the momentum is very much on our on our back and I think the loitering munition business going to continue to grow.
Speaker Change: But also includes counter UAS and the army transformation that's right.
Speaker Change: Great that makes sense and in another question you guys discussed.
Speaker Change: The very strong foreign military sales pipeline and how I think you are shipping the switchblade to eight countries in Europe. You are involved in negotiations with another eight and some investors are wondering.
Speaker Change: Was there a write down in the the unfunded backlog and.
Speaker Change: Was that write down related to foreign.
Speaker Change: Foreign military sales and the.
Speaker Change: Different policies under the new administration.
Speaker Change: At no. Louis the answer is no. We did not have any write downs related to our LMS business or Fms sales.
Speaker Change: And our on our financials this quarter at all the LMS business is doing great. We have a lot of momentum behind it we continue to work with more and more countries and allies, who want to get.
Speaker Change: Switchblade to enter their hands of their war fighters and I believe the opportunity is just the beginning and that trend is going to continue over several years in the future. We're positioned very very well, but no write downs related to <unk> business in the fourth quarter, while the unfunded backlog converts to funded backlog during the period. So that's right.
Speaker Change: Okay.
Speaker Change: And investors were just wondering on a sequential basis.
Speaker Change: The total backlog, adding funded unfunded went down.
Speaker Change: Significantly and so was there any any write downs and in terms of or was just everything.
Speaker Change: Which is unfunded converted two to fund it in and then there was the revenue.
Speaker Change: Burn associated with the backlog.
Speaker Change: No I mean like I said, it really just was a conversion of the unfunded to funded orders during the period.
Speaker Change: And revenue and if you know Louis can recall earlier this last fiscal year, we had a nearly $1 billion sole source <unk> for the U S Army that I mentioned in my remarks, and when as the U S. Army places orders firm funded orders against that it converts from unfunded.
Speaker Change: To funded backlog and so that dynamic has been occurring for the last few years and we explained specifically that multiyear IQ Award for you from the US Army for a nearly $1 billion of specifically intended to achieve that because they would like to make sure that we easily can put things on contract and convert them into fund.
Speaker Change: Backlog and we're going to continue to see more orders in the future for loading munitions in fiscal year 2026.
Speaker Change: Okay.
Speaker Change: Great.
Speaker Change: One last one if I may.
Speaker Change: Has.
Speaker Change: Is there still.
Speaker Change: A significant market opportunity for the <unk>.
Speaker Change: <unk> can you just discuss the broad market opportunity for both.
Speaker Change: <unk> hundred 50, and the Red Dragon, which I don't think have generated any any revenue for you yet, but they seem to have significant potential for.
Speaker Change: Fiscal 'twenty six.
Speaker Change: Yes, so first about the.
Speaker Change: <unk> hundred 50, as I mentioned in the remarks, we introduced three groundbreaking products two of which you just mentioned and the third one is the jumped 20 ex group III UAS on <unk> hundred 50.
Speaker Change: We expect that product to do extremely well, we're positioned really well the U S Army as announced multiple programs at these two one of which were expected to be down selected and received that order for.
Speaker Change: Essentially the next two quarters.
Speaker Change: And Thats, our LR are program of record potentially which is worth about $1 billion by itself.
Speaker Change: Besides that the international demand for <unk> hundred 50 has been tremendous so far there is a lot of neat theres a lot of interest in it and we expect to book our first initial order most likely from international customer.
Speaker Change: This first quarter or the next quarter after that so we expect the <unk> hundred 50 to do very well. It is a very large market. There there is a growing demand and.
Speaker Change: Let me just remind everyone again that the <unk> hundred 50 is an incredibly capable.
Speaker Change: Solution. It is incredibly disruptive the economics of it.
Speaker Change: Multi payloads and multi mission aspect of its features is uniquely positioned to be a very competitive offering. So we feel very good about the <unk> hundred 50.
Speaker Change: In regards to the Red Dragon, we actually do have some revenue.
Speaker Change: Part of our liquidity work, so far but in the future it will be reflected as part of our segment one.
Speaker Change: I described under the precision munitions and fires. So we do have initial revenue, but that product is expected to do really well at long term. It's just at the earliest stages. It is a capability that is highly differentiated.
Speaker Change: And it's there is a lot of interest in that capability not only domestically, but also internationally. So we feel actually really strongly really well as I mentioned on my remarks, and all of our three new products that we launched we believe that in the next two years two to three years. These products will generate hundreds and hundreds of millions of dollars if not $1 billion plus.
Speaker Change: Backlog for our company to execute against going forward.
Wahid Milwaukee: That's excellent. Thanks, Thanks Wahid thanks.
Kevin: Kevin Thank you Luis.
Kevin: Thank you.
Speaker Change: Our next question comes from Greg Konrad with Jefferies. You May proceed.
Speaker Change: Good evening.
Speaker Change: Hi, Greg Hi, Greg.
Speaker Change: Maybe just to start with a clarification on the revenue guidance, if I look at the bottom end of autonomous and space. It adds to the one nine but if you look at the upper end autonomous at one four space cyber at 0.8, it adds to $2 2 billion is that conservative.
Speaker Change: <unk> is there any type of intercompany elimination, just kind of what drives that lower and lower than the two segments.
Speaker Change: These are obviously ranges of potential outcomes.
Speaker Change: We don't operate with large programs of record so.
Speaker Change: If things go the right way there'll be at the higher end of the ranges.
Speaker Change: And just in business in general some areas go better than others and others over Formula underperformed. So yeah, there's obviously opportunity to hit them. Both at the higher end of the range, but in terms of the total we've taken some judgment on the totals.
Speaker Change: Okay and then.
Speaker Change: It's been a little bit less than two months of ownership with Blue Halo I mean.
Speaker Change: The guidance excludes some of the potential expenses and the amortization did you include anything in the way of either revenue synergies or cost synergies in terms of the 26 outlook.
Speaker Change: We as we put in the S. Four we had some cost synergies projected.
Speaker Change: We will be able to achieve those but obviously you don't get the full benefit of those until for the full year and as I said in my remarks.
Speaker Change: <unk> will begin to realize that throughout the year and kind of hit our original $10 million target for the first year.
Speaker Change: In some ways, we have some revenue synergies, but it's going to take some time for those to fully play out before we can put those into our to our forecasts and guidance and things like that so we're still early days here, but theres lots of opportunity lots of excitement about the things we can do together.
Speaker Change: But we haven't had a chance to start monetizing that in our forecast.
Speaker Change: Okay, and then maybe just last one for me in terms of the 70% visibility coming into the year. I think you mentioned that's above where you typically guide can you maybe talk about the drivers of that Blue Halo have higher visibility did you take a more conservative.
Speaker Change: Route in terms of guidance of what kind of drives that higher visibility into 26 at 70%.
Speaker Change: Well the visibility is similar between the two the two segments.
Speaker Change: There is.
Speaker Change: When you look at the <unk>.
Speaker Change: Space Cyber and directed energy segment.
Speaker Change: Particularly on the cyber side, they operate off of longer term contracts with task orders. So there is somewhat more visibility on those it's not reselling every quarter for them. So they have ongoing relationships there that.
Speaker Change: Forecast them in our in our revenue, but other than that it's <unk>.
Speaker Change: Pretty much the same but very similar in terms of percentage of visibility.
Speaker Change: Thank you.
Greg Konrad: Thank you Greg.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Peter Arment with Baird You May proceed.
Speaker Change: Yes, good afternoon Wahid, Kevin Denise.
Speaker Change: Theater Wahid Peter Hay.
Speaker Change: Hey, guys.
Speaker Change: Just kind of focusing on the guidance I guess in the individual segments. When you look at autonomous.
Speaker Change: The year over year kind of growth range is quite wide from the kind of the pro forma number that you provided 14% on the lower end and 33% of the hiring Wahid is.
Speaker Change: Is it is it just assumptions around what potential island mass volumes can be it's switchblade or maybe first first orders for <unk> hundred 50, <unk> what are some of the kind of key drivers that affect the lower end of the range than the higher end of the range.
Speaker Change: Really Peter it has to do primarily with the U S deal with D contracting and timing of these contracts and awards that drives a lot of that range.
Speaker Change: The spread of the range and so we already we have the capacity as a company we've been at.
Speaker Change: One of the key Differentiators that we have is our ability to turnaround and convert backlog or orders into revenue that is one of our key competitive differentiators and also have the ability to scale quickly and produce at mass and volumes, but however, we can't really predict effectively which is really difficult.
Speaker Change: The entire industry is how does the USD with the funding and budgets at the congressional approvals and all of that works out its plays out and eventually makes it into a contract to us. So those those are the primary reasons for the range of outcomes and the spread of that range within.
Speaker Change: Essentially both segments, but more more acutely into our autonomous systems segment overall, we feel very strong because if the timing of congressional approval of the budgets and the signing of the President's budgets in the Dod.
Speaker Change: Converting it into contracts happens.
Speaker Change: Finally manner, where we could have a significantly strong year, but it is too early to predict that and we're just getting started what we really want to work on is long term.
Speaker Change: Consistent.
Speaker Change: Digit profitable growth, which is.
Speaker Change: <unk>, a great position to be for us given the backlog and it was an opportunity that we've developed.
Speaker Change: Yes, that's helpful color and then just.
Speaker Change: On you mentioned the budget's just have you had a chance to.
Speaker Change: To evaluate kind of some of the key blue Halo.
Speaker Change: Portfolio programs.
Speaker Change: How they've stood up under the budgets I know the directed energy solutions in the scar program, certainly I've gotten a lot of attention recently.
Speaker Change: Absolutely so.
Speaker Change: <unk> purpose built our company from the ground up to.
Speaker Change: To be ready for this moment I call it.
Speaker Change: This is our moment, we have an incredible opportunity in front of us.
Speaker Change: We represent more than two thirds of the secretary of defense priorities.
Speaker Change: If you look at any documents from Congress from the National Defense strategy from the administration or from the Pentagon you will see an hour up from almost pretty almost all the services.
Speaker Change: And the co comps you will see that the categories that we play in and we lead and we have the ability to deliver and scale. Our categories that is important to national security and what are those drones counter drones directed energy laser communications space Communications.
Speaker Change: Electronic warfare.
Speaker Change: All of these are things that and one we attack. These are the categories that we in many cases invented or we're the leader in and so we're positioned very very well in those categories and I think that.
Speaker Change: We have many years of very strong potential performance and value creation opportunity here in front of us.
Speaker Change: I appreciate that.
Speaker Change: I'll jump back into queue. Thanks <unk>.
Peter Arment: Welcome Peter.
Speaker Change: Thank you.
Speaker Change: Our next question comes from.
Speaker Change: Ken Herbert with RBC capital markets you May proceed.
Speaker Change: Hi, Kevin <unk> on for Ken Herbert Congrats on the closing to Hilo routes.
Speaker Change: Doug will further into the FY 'twenty six outlook, how much of the revenue is stemming from the organic legacy.
Speaker Change: <unk> versus <unk>.
Speaker Change: If you could give some color there.
Speaker Change: Well I think we tried to provide the pro forma.
Speaker Change: In the guidance. So you can see on that I think at slide 10, We show the Pie chart with the different revenue levels for the different product group and those are the pro forma.
Speaker Change: By 'twenty five revenues for each of those groupings. So anything the all of the growth that we're forecasting is off of those pro forma revenues and so.
Speaker Change: Youre looking at over 20% growth.
Speaker Change: So the midpoint of the autonomous systems group and over double digit for the space Cyber and directed energy group.
Speaker Change: Okay. That's helpful. And then maybe just as a follow up can you maybe discuss the profitability across the two segments. You guys had previously you used to give with either an adjusted operating income or gross profit across the two should they be about the same or is there a different way to kind of think about each of them.
Speaker Change: Well.
Speaker Change: I think we're not really giving guidance on the breakout of the say adjust EBITDA those that will be reported on a quarterly basis for each of the segments, but I would say as I said on my remarks.
Speaker Change: The access segment is very.
Speaker Change: Similar to the to the existing <unk> business in terms of its profitability profile. So that's one that's one half I'm, giving you.
Speaker Change: Sure.
Speaker Change: Fair enough and then maybe if I could just ask one more just in terms of the free cash outlook for the year I don't think a solar as part of the guide should we assume that it's maybe similar similar to two two points. One five I can appreciate that there's always moving pieces here.
Speaker Change: Well, we definitely have some opportunities on the working capital front as I outlined in the script and we're we're very hopeful that we actually generate some cash and working capital.
Speaker Change: This year, we do have a fair amount of capital expenditures expected for the year.
Speaker Change: We're looking for a positive cash conversion this year versus last year.
Speaker Change: Okay, and that's all because of the fact that we're growing and we're making sure that we invest in the areas that allows us to continue to grow and capitalize on these up very large opportunities in the future.
Speaker Change: We are deliberately investing in as you could see from our track record the areas that we invested whether it's R&D or capital have actually panned out and delivered incredible good value.
Speaker Change: <unk>.
Speaker Change: And created value for our company. So I think we want to continue to do that because we're in a very very good position to capitalize on these opportunities.
Speaker Change: So I hope I can with you.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Andre <unk> with BTG you May proceed.
Speaker Change: Hey, Rohit, Kevin Denise how are you guys. Thanks for taking my question.
Speaker Change: Hello there.
Speaker Change: We're seeing now it's looking like NATO might move to 5% GDP spending pledge.
Speaker Change: Given how much of a sizeable portion of sales international's, becoming specifically amongst NATO customers I mean, what's your initial assessment on what the impact of this 5% pledged could be if it does get moved through.
Speaker Change: Andre that's excellent excellent point in question are we believe that as we mentioned on my remarks and in Kevins remarks.
Speaker Change: We already do quite a lot of business internationally.
Speaker Change: And we continue to see more and more demand for our systems.
Speaker Change: Primarily in Europe, but beyond Europe, even in Asia Pacific as well.
Speaker Change: World. Unfortunately is not a safer place.
Speaker Change: <unk>.
Speaker Change: We all wish.
Speaker Change: There's lots of challenges there's lots of conflicts.
Speaker Change: The recent wars and attacks you have seen is basically put an exclamation mark of what you can do with the type of capabilities that we're the leader in and all of that equates into a very very large.
Speaker Change: Seismic shifts in demand and opportunity for us internationally, it's going to take some time, we're going to continue to invest in being more present in Europe.
Speaker Change: As you know we already have a subsidiary in Germany, we have a legal entity as well and other parts of Europe, but we want to continue to expand there to capitalize on this the reason why we feel more even bullish on this is because we are uniquely positioned to be able to deliver most of these countries want to spend these dollars quickly because they lack these capabilities today.
Speaker Change: And mass and volume our systems, our battle proven and tested they work they have seen it.
Speaker Change: Effective effectiveness and they trust our company and delivering these systems for decades, and so I think we're incredibly positioned well to be able to capitalize on this opportunity because we can deliver at scale and we are trusted and of our solutions do work. So I think that's going to be a trend youre going to continue to see in essentially all of our products not just on <unk>.
Speaker Change: Loitering munitions, but are non lethal drones on our counter UAS solution set on our direct energy solutions, even our space communication technologies has incredible opportunities ahead of it and the space domain.
Speaker Change: Globally and internationally, especially with European countries.
Speaker Change: Got it got it Super helpful.
Wahid Milwaukee: I guess, the Red Dragon Wahid I know we've spoken on this one.
Wahid Milwaukee: But could you maybe just break down a little bit more about what that Tam looks like I know with Switchblade you guys have approval to solid 50, Allied nations, but I remember our conversation. It seems like those same restrictions are not imposed on red Dragon given the itr regulations at play I mean, maybe just provide some more detail possible.
Speaker Change: Sure. So as you all know we introduced Red Dragon just a few couple of months ago. We do believe that it's a category that we are the lead player.
Wahid Milwaukee: That is growing incredibly fast as part of these our one way attack drones.
Wahid Milwaukee: And autonomous and autonomy autonomy capable solution set and a degraded GPS environment, our integrated communication environment is going to be very key.
Wahid Milwaukee: We believe the market for that is well over $1 billion.
Wahid Milwaukee: The data is quite difficult to get but we can I can tell you that this market. The one way attack drone category should be equal if not bigger than even the loitering munitions as a whole so.
Wahid Milwaukee: We believe that this product is going to continue to expand and you are correct.
Wahid Milwaukee: The foundational level of the Red Dragon solution set is a commercially developed product on our own IRA AD that we do not have <unk> restrictions.
Wahid Milwaukee: Obviously, if we were to put specific payloads or communication devices and it would become subject to that but internationally, we could export the base unit quite easily and it is designed to be modular worthy payload and warhead could be actually even integrated outside U S with a domestic supplier internationally and we feel very good about it it's going to take.
Wahid Milwaukee: Some time, but we believe that that product is going to be a significant driver of growth for us in the long run.
Speaker Change: Got it got it that's super helpful. I'll leave it there to two thanks so much.
Speaker Change: Thank you Andre.
Wahid Milwaukee: Thank you.
Speaker Change: Our next question comes from Peter <unk> with Alembic Global you May proceed.
Speaker Change: Hey, good afternoon guys.
Speaker Change: Hello.
Speaker Change: I guess just go down to Capex route.
Speaker Change: 6% to 8% guidance on the cloud build out.
Speaker Change: Is that a one time one term one year type of thing should we expect capex to go back to the kind of at 2% to 3% range in the future. After this cloud build out.
Speaker Change: So that just that node meant to that it includes cloud.
Speaker Change: Capital capitalization, it's not all cloud build out its really the normal range of.
Speaker Change: Facilities.
Speaker Change: Equipment for manufacturing and to a certain extent software systems and things like that so that includes all of that.
Speaker Change: We expect it to probably trend down over time, but at the same time, we have a tremendous opportunities in front of us so I'm not going to make any predictions at this point in time, yes. So P J.
Speaker Change: Just to Echo what Kevin said, we have several several very serious large growth potential opportunities in front of us.
Speaker Change: Let me just name a couple of the MS Space Communications. This space force is really really behind and upgrading the entire satellite command and control and communication network that the U S. Relies on we have won that program of record it's worth about a $1 $7 billion program funded through the congressional budget documents we can.
Speaker Change: Ex scaled out and expedite deliveries and the fiscal year 'twenty and beyond that's one loitering munition is another one we're building another factory to increase capacity up to $1 billion in production at Red Dragon is another category that we believe that we're going to have significant upside coming in the next.
Speaker Change: A few years.
Speaker Change: And then just to name a few other ones in the directed energy space counter UAS. We are the leading player globally and we know that we have significant needs in our country and around the world protecting.
Speaker Change: Critical infrastructure.
Speaker Change: Refineries airports nuclear.
Speaker Change: At nuclear power plants are military bases.
Embassies you name. It there is an enormous opportunity for us and we have the leading solution that is deployed and it's effective in the field. So these are just some examples of areas that we see tremendous upside and potential opportunity for ourselves and so we have made the decision that we want to increase because we see that this will play a significant.
Speaker Change: On a roll and delivering more value to our shareholders and our company in the long run.
Speaker Change: Okay fair enough I appreciate it.
Louis: One last one for me just coming back to Louis' question on the backlog.
Louis: So you generated $275 million in revenue this quarter right.
Louis: Total backlog declined by a little under $700 million.
Speaker Change: So the math just indicates there is little over 400 million kind of unaccounted for it seems like you're just kind of fell out of backlog I think that's what people are trying to kind of figure out there and any can you give us any sense of what was going on.
Speaker Change: The year over year number.
Speaker Change: Well no no program no programs or counsel nothing was canceled.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: So Pete I think what Youre looking I am not sure exactly what number youre looking at but our backlog is significantly higher at the end of this fiscal year relative to fiscal year 'twenty for number one a significant increase.
Speaker Change: Because we booked over $1 $2 billion throughout the year and we recognized $821 million in revenue. So that increase helped as well the unfunded backlog, which is that idea IQ that I mentioned has converted to funded backlog that you might be looking at the number there, but we will be glad to.
Speaker Change: Explain the details more our funded backlog from Q3 to Q4 slightly decreased slightly not much because we also booked a lot of orders in Q4, which essentially again backfill the revenue that we shipped in the quarter.
Speaker Change: Yes fair enough, we can take it offline thanks guys.
Speaker Change: Wonderful thank you.
Speaker Change: Thank you and as a reminder to ask a question. Please press star one on your telephone. Our next question comes from Jonathan <unk> with Stifel. You May proceed.
Jonathan: Hey, good evening, Thanks for taking my question.
Speaker Change: Hi, John.
Speaker Change: On our booking trends are through <unk>.
Speaker Change: So we haven't had an update on that since you announced the transaction now over six months ago, maybe can you help us comment on one of the things there are going better or.
Speaker Change: Less than what you expected and then.
Speaker Change: You mentioned space side for direct to energy will lag autonomous systems sales growth.
Speaker Change: To keep up on bookings this year.
Speaker Change: Jonathan So we actually feel pretty strong and solid about our expectations for the blue hit the previous or the op.
Speaker Change: <unk> Blue Halo business and their ability to book orders, we have very similar trends within the Blue Halo.
Speaker Change: <unk> former businesses traditional businesses compared to the <unk>.
Speaker Change: Only difference I would say is that some of their business related to the cyber and Intel are long contracts, where a lot of the business is actually.
Speaker Change: Selling very high highly differentiated.
Speaker Change: Engineering.
Speaker Change: Bob.
Speaker Change: Sort of content to customers.
Speaker Change: The growth in that business really has to do with how we scale.
Speaker Change: Employees and engineers and people. So it doesn't have these significant higher growth like the rest of our products business. That's one unique different difference on the other hand. They also are looking at very large large strategic wins and program and bookings that could be very large large.
Speaker Change: Step function growth opportunities. So for example in this space.
Speaker Change: Communications space operations, where we have a huge potential there laser comms is another one directed energy is another one.
Speaker Change: <unk> warfare as well as counter UAS are tightened solution set is another one and the trends in the market is such that these are very specific areas that the U S duty needs a lot of help.
Speaker Change: So the short answer is yes, we expect.
Speaker Change: Blue Halo business to actually grow.
Speaker Change: And there is opportunities for significant booking increases going beyond fiscal 'twenty five there as well.
Speaker Change: Okay.
Speaker Change: But back to Pete's question on the Capex I really love the enthusiasm we have for lots of opportunities to increase and invest in these really exciting areas are those on which are in the future or are you already accelerating capex plans. This year because it does seem like your guided capex is higher than what you are.
Speaker Change: Yes for the combined business.
Jonathan: That is correct Jonathan.
Speaker Change: We have already initiated some increases in capex and fourth quarter. Most of that is going to show up in our financials in fiscal year 'twenty six thats why the percentages are higher in 'twenty six and it's related to both of our businesses in lots of different products as I mentioned the areas our space communication directed energy.
Speaker Change: Our UAS loitering munition at one way attack those are the key areas and also unmanned systems is another area that we're investing to scale, primarily because we see opportunities coming our way.
Speaker Change: Let's keep in mind that one of the reasons why you've been able to actually capitalize on the growth in these opportunities is that our ability to be able to deliver quickly and have the production capacity. We are uniquely qualified in this area than other competitors, who are either in the prototype stage or very early even trying to build a facility to make.
Speaker Change: Initial low rate.
Speaker Change: Great initial production, we're not in that category, we are battle proven systems with capacity today that that Mr scale. Even further so those are the areas Jonathan that we expect that to continue to grow obviously, we don't expect that to stay forever, but we will only provide you figures for the fiscal 'twenty six and we will provide more color as we go forward and beyond fiscal 'twenty six.
Speaker Change: Thank you.
Speaker Change: I do ask some clarification on the unfunded backlog.
Speaker Change: During the year they move the purchasing of the Switchblade from one purchasing group to another to PEO soldier.
Speaker Change: We're now all of our Switchblade.
Speaker Change: Our orders are coming through so the <unk> contract was with the prior purchasing groups and that expired actually on the last day of the year and they did not renew that one because not everything is going to be going through the PEO soldier group program up from from here on out so there'll be likely increasing that that IQ.
Speaker Change: Sure.
Speaker Change: Okay.
Speaker Change: <unk>.
Denise Paciotti: I would now like to turn the call back over to Denise for any closing remarks.
Denise Paciotti: Thank you once again for joining today's conference call and for your interest in Aerovironment. As a reminder, an archived version of this call SEC filings and relevant news can be found under the investors section of our website. We hope you enjoy the rest of your evening and we look forward to speaking with you again following next quarter's results.
Denise Paciotti: Thank you. This concludes the conference. Thank you for your participation you may now disconnect.
Denise Paciotti: Okay.
Denise Paciotti: [music].
Denise Paciotti: Okay.