Q1 2026 AeroVironment Inc Earnings Call

Question and answer session to ask a question during the session you will need to press star one one on your telephone. Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today director of Investor Relations Denise Patchy Oni. Please go ahead.

Thank you and good afternoon, ladies and gentlemen, welcome to Aerovironment <unk> first quarter fiscal year 2020 earnings call. My name is Denise Paciotti director of Investor Relations for Aerovironment.

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 statements portions of such filings copies are available from the SEC on the Aerovironment website Www Dot a V I N C dot com or from our Investor Relations team.

Good day and thank you for standing by. Welcome to Arrow environments, first quarter, and fiscal year 2026 earnings conference call. After the speaker's presentation, there will be a question and answer session to ask a question during the session. You will need to press star 1, 1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, director of investor relations, Denise pacione, please go ahead.

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.

Thank you and good afternoon, ladies and gentlemen. Welcome to a environment's first quarter fiscal year 2026 earnings call. My name is Denise, pacione, director of investor relations for a environment.

Content of this conference call contains time sensitive information that is accurate only as of today September nine 2025. The company undertakes no obligation to update any forward looking statements, whether as a result of new information future events or otherwise.

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.

Joining me today from Air environment, Our Chairman, President and Chief Executive Officer, Mr. Wahid, New lobby and executive Vice President and Chief Financial Officer, Mr. Kevin Mcdonald, We will now begin with remarks from Wahid Wahid.

Why do you.

Thank you Denise.

Welcome everyone to our first quarter fiscal year 2026 earnings conference call.

Further information on these risks and uncertainties is contained in the company's 10-K and other filings with the FCC, in particular, the risk factors and forward-looking statement portions of such filings. Copies are available from the FCC on the AeroVironment website, www.avc.com, or from our investor relations team.

I'll start by summarizing our quarterly performance, followed by Kevin who will review our financial results in greater detail and then discuss guidance for fiscal year 2026.

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.

After this Kevin Denise and I will take your questions.

I am pleased to report a very strong start to our fiscal year with excellent first quarter financial results setting New records for the company.

The content of this conference. Call contains time-sensitive information. That is accurate only. As of today, September 9th, 2025 the company undertakes. No, obligation to update any forward-looking statements. Whether as a result of new information, future events or otherwise,

We are better positioned than ever to drive industry, leading organic revenue growth and profitability.

Our acquisition of Blue Hills has created significant new growth opportunities in critical areas that are aligned with our customers' highest priorities and our integration efforts are progressing ahead of plan.

Joining me today from are environment, are chairman president and chief executive officer, Mr. Whitehead, Novi and Executive. Vice President, and Chief Financial Officer. Mr. Kevin McDonald. We will now begin with remarks from Wahid nawabi Wahid.

Thank you, Denise.

Our first quarter results benefited from programs tied to this acquisition and we look forward to building on that momentum in the coming quarters.

I'll start by summarizing our quarterly performance, followed by Kevin who will review our financial results in Greater detail and then discuss guidance for fiscal year 2026.

Now, let me summarize the key messages for the first quarter of fiscal year 2026, which are included on slide number three of our earnings presentation.

After this, Kevin, Denise, and I will take your questions.

I'm pleased to report a very strong start to our fiscal year with excellent first quarter financial results, setting new records for the company.

As a reminder, this was the first quarter, where our results are inclusive of our recent blue Halo acquisition.

We are better positioned than ever to drive industry-leading. Organic Revenue, growth, and profitability.

First we achieved another record first quarter with revenue of nearly $455 million.

Second bookings for the first quarter reached nearly $400 million.

Our acquisition of Blue Halo, has created significant new growth opportunities, and critical areas that are aligned with our customers highest priorities and our integration efforts are progressing ahead of plan.

And our funded backlog grew to $1 1 billion.

Unfunded backlog is now at $3 $1 billion.

Our first quarter results benefited from programs tied to this acquisition, and we look forward to building on that momentum in the coming quarters.

Third we introduced several innovative solutions and counter UAS space Communications and directed energy among other areas that are directly aligned to our customers' urgent priorities and represent multibillion dollar market opportunities over the next several years.

Now, let me summarize, the key messages for the first quarter of fiscal year 2026 which are included on slide. Number 3 of our earnings presentation,

As a reminder, this is the first quarter where our results are inclusive of our recent Blue Halo acquisition.

And fourth we're maintaining our fiscal year 2026 guidance with revenues between $1 9 billion and $2 billion.

First, we achieved another record first quarter with revenue of nearly 455 million.

Second bookings, for the first quarter. Reach nearly $400 million.

Overall <unk> is uniquely positioned as a leading defense spec prime with our innovative product offerings, along with the experience and capacity necessary to scale manufacturing on an expedited timeline.

And our funded backlog grew to 1.1 billion.

Unfunded backlog is now at $3.1 billion.

This is what is required for the urgent national security priorities of our nation.

Third, we introduced several innovative solutions in counter UAS.

Our allies around the globe.

We have worked very hard throughout the past few years to position <unk> for Sunshine historic set of opportunities.

Space communication and directed energy, among other areas, are directly aligned to our customers' urgent priorities and represent multi-billion-dollar market opportunities over the next several years.

Since our last earnings call, we announced several key program wins and milestone achievements.

For example, yesterday, we announced a nearly $240 million award for our long haul space laser communications terminals that will be delivered over the next three and a half years with options for additional systems.

And forth. We're maintaining our fiscal year 2026 Guidance with revenue between 1.9 billion and 2 billion dollars.

To put this in perspective, we expect the laser communication is going to be one of the most important aspect of warfare and the space domain and represents a multibillion dollar opportunity for ABB.

Overall AB is uniquely positioned as a leading defense stack Prime with our Innovative product offerings along with the experience and capacity necessary to scale manufacturing on an expedited timeline.

This is what is required for the Urgent National Security, priorities of our nation and our allies around the globe.

ABB is clearly leading the industry in this critical area and technology.

We have worked very hard throughout the past few years to position us for such a historic set of opportunities.

Yeah.

Our technology allows the secure transfer of high bandwidth data and the most challenging space environments at the fastest rates and across very long distances than any other current capability on the market.

Since our last earnings call, we announced several key program wins and milestones.

This is a strategic and critical milestone for our customers and we're now excited to move it from development into full rate production.

For example, yesterday, we announced that nearly 240 million award for our Long Haul space. Laser Communications terminals, that will be delivered over the next 3 and a half years with options for additional systems.

To put this in perspective, we expect the laser communication.

Is going to be.

With our decades of proven track record.

He is well positioned to efficiently scale, our laser call manufacturing to capture growing demand in this multibillion dollar new market.

aware in the space domain and represents a multi-billion dollar opportunity for AB.

A is clearly leading the industry in this critical area and Technology.

In addition, <unk> was also recently awarded a $95 million contract to further the development and scale manufacturing of our freedom Eagle, one or SD Wan for long range kinetic interceptor program for the U S Army.

Our technology allows the secure transfer of high bandwidth data in the most challenging space environments at the fastest rates and across very long distances than any other current capability on the market.

Dismissal is designed to deliver extended range higher altitude and all weather performance against a broad set of emerging threats.

This is a strategic and critical milestone for our customers, and we're now excited to move it from development into full-rate production.

<unk> <unk> missile addresses a much broader set of requirements are much affordable price points than anything available on the market today.

Our nation needs capability, such as SD Wan to affordably defend our nation against such emerging threats.

With our Decades of proven track record a is well positioned to efficiently scale, our lasercom manufacturing to capture growing demand in this multi-billion dollar New Market.

This award enables <unk> to enter and disrupt a multibillion dollar missile defense market.

The U S Army considers our innovative SD Wan solution, the leading capability in this critical area.

In addition, add was also recently awarded a 95 million contract to further development and scale manufacturing of our freedom Eagle 1 or se1 for long-range kinetic Interceptor program for the US Army.

We're looking forward to sharing future progress with you on SD Wan and our next generation counter UAS muscle efforts in the coming quarters.

Dismissal is designed to deliver extended range higher altitudes and all weather performance against a broad set of emerging threats.

Another key achievement in the first quarter was the recent delivery of two of our counter UAS Infantry squad vehicle mounted Locust laser weapon system under the U S. Army's multi purpose high energy laser program or App health.

KBS F1 missile addresses, a much broader set of requirements at much affordable. Price points than anything available on the market today.

Our nation needs capabilities. Such as AP1 to affordably defend our nation against such emerging threats.

this award enables AB

We're set to deliver two additional joint light tactical vehicles, or GL Tvs mounted Locust laser weapon systems next month for the second increment of the Amp Health program.

to enter and disrupt the multi-billion dollar missile defense market.

The U.S. Army considers our innovative SE1 solutions the leading capability in this critical area.

These deliveries Mark a major milestone in the U S. Army's objective of operationalized in directed energy capabilities to defend against the emerging proliferation of drone warfare.

We're looking forward to sharing future progress with you on SE1 and our next-generation counter-UAS missile efforts in the coming quarters.

Okay.

Our Lucas laser weapon system use of directed energy is a critical emerging technology that is key to defending against group one through four drones and in the future will enable defense against hypersonic missiles.

Another key achievement in the first quarter was the recent delivery of two of our counter UAS infantry squad vehicle-mounted Locust laser weapon systems under the U.S. Army's Multi-Purpose High Energy Laser program or AMPEL.

Cruise missiles, and other project out at much lower and affordable costs.

We also see this emerging market exceeding several billion dollars in the coming years and is ahead of most if not all industry players to scale and capture a significant portion of this very large opportunity.

We're set to deliver 2 additional Joint Light Tactical Vehicles (JLTVs) mounted with Locust laser weapon systems next month for the second increment of the AMP Health Program.

These deliveries mark a major milestone in the U.S. Army's objective of operationalizing direct and energy capabilities to defend against the emerging proliferation of drone warfare.

And finally, we delivered multiple <unk> $5 50 grew two UAS systems, along with training to the U S Army for the long range reconnaissance or L, a or our program of record.

For assistant low cost reliable ISR at the edge of the battlefield represents a shift in defense strategy around the globe.

Our Locus laser weapon system, use of directed energy, is a critical emerging technology that is key to defending against Groups 1 through 4 drones, and in the future, it will enable defense against hypersonic missiles.

And we believe our P. By 50 performance specifications meet the U S Army program requirements better than any other competitor solution on the market.

This program of record represents approximately $1 billion in value over the next five years.

Is very well prepared to execute and deliver on it.

The successful adoption of our <unk> with the U S. Army <unk> program should also lead to more international adoption of this capability by our allies in the coming years.

We've experienced such a trend with our other global franchises such as the Raven.

Puma and Switchblade.

We look forward to continued progress with the significant program of record.

In addition to these significant program wins and milestone achievements last week, when we unveiled a halo.

A software platform and ecosystem that is hardware agnostic and unifies, our suite of mission ready software tools and offerings.

Avi Halo clearly demonstrates the depth and breadth of our AI powered software ecosystem for our end markets.

At launch the software modules include our multi domain command and control and.

Intelligence analysis synthetic training and autonomous targeting.

Avi Halo blends the best of both legacy AAV and Blue Halo software solutions and offers our customers a comprehensive mission ready suite of AI powered software tools that empowers warfighters to dominate the mission of the mission across air land Sea space and cyber domains.

Capability by our allies in the coming years.

We've experienced such a trend with our other global franchises, such as The Raven.

Puma and switchblade.

We look forward to continued progress with the significant improvement record.

In addition to these significant.

Last week, when we unveiled a halo.

A software platform and ecosystem that is hardware agnostic and unifies our suite of mission-ready software, tools, and offerings.

We're excited to share more details over the coming months about how the Halo software enhances the speed autonomy modularity and interoperability of our offerings to address growing market needs.

A halo clearly demonstrates the depth and breadth of our AI-powered software ecosystem for our end markets.

As the industry continues to grow and demand for our customer driven solutions increases we are focused on leveraging our strategic partnerships to unlock new opportunities for both.

At launch, the software modules include our multi-domain command and control intelligence analysis, synthetic training, and autonomous targeting.

Both domestically and abroad.

Since our last earnings call, we have announced several key partnerships that will advance our long term growth objectives and broadened our exposure in new areas.

First we announced a strategic partnership with Sierra Nevada Corporation for limited area of Defense architecture under the Golden Dome for America initiatives.

A Halo Blends the best of both Legacy Ave and Blue Halo software solutions and offers our customers that comprehensive mission-ready suite of AI-powered software tools that empower warfighters to dominate the mission across air, land, sea, space, and cyber domains.

This partnership focus is on integrating and aligning existing open architecture solutions using passive and active sensing radiofrequency directed energy kinetic energy electronic warfare, and cyber solutions and addresses the complete kill chain to neutralize.

Group one two for unmanned aerial systems advanced cruise missiles, and other next generation aerial threats.

With our broad suite of technological solutions.

<unk> is uniquely positioned to help protect our nation by implementing a cost effective solution for sovereign missile defense.

Second we signed a memorandum of understanding in Denmark for expanding airport utilization for medium UAS training.

Demonstrations and customer integration activities and the region.

And finally, we announced an expanded partnership with the Dutch Ministry of defense to modernize and expand their Puma fleet, highlighting the rising demand for adaptable mission ready uncouth systems across NATO.

Yeah.

In summary, we're currently pursuing more than 20 different programs of record, which exceed $20 billion in potential value over the next five years.

Included in these programs are <unk> light and medium.

One way of attack.

<unk>.

Our our laser communications.

And GCM.

H M F and additional options with our star space program among several others.

As we pursue these significant opportunities and programs ahead. We're also focused on managing the business efficiently. During this period of high growth and capacity expansion.

This past quarter, we successfully raised more than $1 $5 billion through equity and convertible debt.

Funds will use to pay down debt from the acquisition of Blue Halo and the balance will be used to help support the company's growth, including necessary production capacity expansion.

As we've discussed over the past year. Our current facilities are capable of scaling manufacturing to meet rising demand through at least fiscal year 2027.

We're making progress on our new state of the art manufacturing facility in Salt Lake City, Utah, which will allow us to considerably increase our manufacturing capacity for demand beyond fiscal year 2027.

Yes.

As part of our distributed approach to manufacturing for resiliency and risk diversification. We now have manufacturing sites operating across 12 different states.

Now I would like to provide brief updates on our two business segments.

Our first segment autonomous systems achieved revenues.

For the first quarter of $285 million.

This segment continues to remain a strong growth driver for the company as demand continues to increase for our family of UAS solutions, such as Puma P $5 50 and jumped 20.

We anticipate further growth in our position precision strike and counter UAS group for our Switchblade family of products.

Through a dragon one we attack drone.

As well as from our RF counter UAS solution Titan and our next generation counter UAS missile defense system SD Wan.

Now onto our second segment space, cyber and directed energy or <unk> segment.

Yeah.

Our SCV segment posted first quarter revenues of $169 million.

Our space technologies, and directed energy solutions will continue to drive growth in this segment and for the company.

As I mentioned earlier, we announced yesterday, a $240 million contract award for our long haul space laser communication system.

In addition to anticipated revenue growth from this area, we are confident that our badger phased array solution.

And our counter UAS directed energy solutions Lucas will be key growth drivers for this segment in the future.

Let me conclude my comments with the following.

With the acquisition and successful integration of Blue Halo.

We have significantly expanded our cutting edge and battle proven portfolio to include space technologies.

Counter UAS directed energy electronic warfare and cyber solutions.

We have broadened our growth opportunity and a demand fueled market. This has been a deliberate part of our long term strategy.

Our high volume manufacturing expertise and capacity in these critical areas is also another key differentiator that is unrivaled in the industry.

<unk> installed base of more than 42 platforms, <unk> and performing and high demand environment across multiple domains is another aspect of our competitive differentiators.

And finally, our track record of exporting and supporting solutions to more than 100 allies around the world sets us further apart than any other player in this industry.

We have worked hard to position our company for success.

And we're very excited to help our nation and allies across the globe.

AEP stands ready to continue executing and delivering on our promise to our key stakeholders. So they can proceed with certainty.

With that I would like to now turn the call over to Kevin Mcdonald for a review of our fourth quarter and full year financials.

Fiscal year 2027.

Kevin. Thank you Wahid today I'll be reviewing the highlights of our first quarter performance.

As part of our distributed approach to manufacturing for resiliency and risk diversification.

We now have manufacturing sites operating across 12 different states.

Now, I would like to provide brief updates on our two business segments.

Our first segment, autonomous systems, achieved revenues.

For the first quarter of 285 million.

I will occasionally refer to both our press release and earnings presentation available on our website.

The second continues to remain a strong growth driver for the company. As demand continues to increase for our family of UAS solutions, such as Puma P550 and Jump 20.

We anticipate further growth in our position: precision strike and counter-UAS program group for our Switchblade family products.

Just to remind you that we closed our blue Halo acquisition on May one so our results for Q1 and projected FY 'twenty six include the financial activity from Novo.

Red Dragon 1, we attacked a drone, as well as from our RF counter-UAS solution tightened, and our next generation counter U.S. missile defense system, FE1.

Now, on to our second segment, Space Cyber and Directed Energy, or FCD segment.

I'll briefly comment on our results for the quarter, then turn to guidance for the remainder of FY 'twenty six.

In summary, we are very pleased with the results of the new <unk> on all metrics delivering solid top line and EBITDA growth as Wahid mentioned, our equity and debt raised in July position us well for growth with over $700 million of cash and investments on the balance sheet.

But to be honest.

I also mentioned his remarks, we started the year with $454 7 million of revenue in the first quarter, which represents a 140% increase over the prior year as reported or an 18% increase in pro forma revenue basis.

The acquisition of Wil Halo, our regional revenue mix has shifted towards the increase in domestic revenue for Q1, 78% of our revenue came from domestic customers at 22% from international customers in the first quarter, Ukraine represented 8% of revenue the rest of Europe represented another 6% of revenue.

So the remainder of FY, 26.

Spectra <unk> revenue to remain between the five 8% of total revenue in FY 'twenty two.

In summary, we are very pleased with the results of the new AV on all metrics, delivering solid Top Line and Ava dog growth. As why mentioned our equity and debt raise in July position us? Well, for growth with over 700 million dollars of cash and Investments on the balance sheet.

When compared to pro forma revenue for the first quarter of FY 'twenty five several of our products realized tremendous growth.

<unk> thousand 600 product at over 200% revenue growth <unk> had over six X revenue growth our Lucas directed energy counter UAS systems also had buybacks pro forma revenue growth.

Let's meet up behind. He also mentions remarks. We started the year with $454.7 million of revenue in the first quarter, which represents a 140% increase over the prior year as reported, or an 18% increase on a performance of revenue basis.

Titan revenues nearly double a reflection of this Brexit our counter UAF RF business and finally value of advanced RF satellite ground station grew nearly 40% notably.

Since the acquisition of Blue Halo, our regional revenue mix has shifted towards an increase in domestic revenue. In Q1, 78% of our revenue came from domestic customers, while 22% came from international customers.

Were awarded.

We received an award for $70 billion of for an additional battery units in the quarter and this is part of a larger order we expect to receive in Q2.

In the first quarter, Ukraine represented 8% of revenue, while the rest of Europe accounted for another 6% of revenue. We expect our train revenues to remain between 5% and 8% of total revenue for FY 2026.

As mentioned on prior earnings call <unk> is now operating under two reported segments.

One of our systems are ASF that space cyber threats and energy our FTE.

<unk> ended the quarter was strong with 285 billion in revenue, which represented a 22% increase over FY 'twenty five pro forma revenues.

When compared to the performance of revenue for the first quarter of fy2, sell all of our products realized tremendous growth. So 6.600 product had over 200% Revenue growth, jumped 20 had over 6X Revenue growth, our Locust directed energy, 10.0 uas. This is also had 5x proformer Revenue growth,

Of the total in the quarter about 35% came from Switzerland 600 product.

15% came from Houma products, 9% from <unk>, 307% from counter UAF, RF and 6% from 20 <unk>.

Titan revenues nearly doubled, reflecting the strength of our counter UAS RF business. Finally, Badger, the advanced RS satellite ground station, grew nearly 40%.

<unk> ended the quarter with $169 million in revenue, which represented a 12% increase over pro forma FY 'twenty five.

Notably, we were awarded, we received an award for 70 million of for an additional battery and it's in the quarter and it's this is part of a larger order. We expect received. Thank you too.

The total for the quarter approximately 90% came from Badger's satellite ground station, 12% from locus directed energy counter UAS systems at 12% from our advanced R&D businesses, which focuses on research development testing and evaluating emerging technologies to ensure their effectiveness.

As mentioned on the prior earnings call, A is now operating under two reporting segments: Autonomous Systems, or AXS, which includes Space Cyber, and Direct Energy, or FCBE.

Axf end of the quarter was strong with $285 million in revenues, which represented a 22% increase over FY 25 for former revenues.

<unk> transitioned to the Warfighter.

In terms of adjusted EBITDA slides 10, and 11 on our earnings presentation sort of a reconciliation of GAAP gross margin to adjusted gross margins and net income to adjusted EBITDA.

Of the total in the quarter, about 35% came from the switch from the 600 product. 15% came from Puma products, 9% from Switchblade 300, 7% from Counter UAS RF, and 6% from Jump 20.

Adjusted EBITDA in Q1 was $56 6 million up from last year's Q1 of $37 2 million as reported primarily due to the incremental look at the results.

Stpe ended the quarter with $169 million in revenue, which represented a 12% increase over performance in FY25.

EBITDA as a percentage of revenue ended at 12, 4% of revenue, which was in line with our expectations. We continue to forecast full year adjusted EBITDA at 16% of revenue.

Moving to gross margins in the first quarter consolidated GAAP gross margin finished at 21% versus 43% in the prior year. The decrease in GAAP gross margins can be attributed to the higher service mix of 31% of revenues versus 16% in the prior year plus the increase of intangible amortization and other noncash.

Of the total for the quarter, approximately 19% came from Badger satellite ground stations, 12% from Locust directed energy counter-UAS systems, and 12% from our Advanced R&D businesses, which focus on research, development, testing, and evaluating emerging technologies to ensure their effectiveness.

Accounting expenses of $33 7 million over FY 'twenty five.

First year first quarter adjusted gross margins were 29% versus 41, 5% in the first quarter FY 'twenty five.

As noted the business landscape of the combined New company has changed significantly with a higher service mix and several products at early stages of maturation. We believe adjusted gross margins to continue to improve throughout the year ending up in the mid <unk> by Q4 with an average for the year in the low <unk>.

Moving onto operating expenses.

Ported GAAP SG&A for the quarter was $131 3 million versus $33 8 million in the prior year.

Net of intangible amortization and deal and integration costs adjusted SG&A was $65 2 million versus $32 7 million in the prior year. The increase was largely result of the combination with the available.

As a percentage of revenue adjusted SG&A in the quarter was 14, 3% of revenue versus 17, 3% in FY 'twenty.

Again, these SG&A levels represent a shift in the business model and we expect to end the year and in the 11% to 13% range as we begin to realize synergies and achieve higher revenue.

Other.

Accounting expenses of 30?

Plus margin 29% in the first quarter.

The landscape of the combined new company has changed significantly, with a higher service mix and several products at early stages of maturation. We believe adjusted gross margins will continue to improve throughout the year, ending up in the mid-30s by Q4, with an average for the year in the low 30s.

R&D expense for the first quarter was $33 1 million or seven 3% of revenue compared to the $24 6 million or 13% of revenue in the prior year again. This is a shift in the business model and we expect R&D as a percentage of revenue to end the year at between 6% to 7% revenue range.

Now turning to GAAP earnings.

In the first quarter the company generated a net loss of $57 4 million versus net income of $21 2 million and recorded the same period last year. The decrease in net income of $88 5 million can be attributed to increased intangible amortization and other noncash purchase accounting expenses of $74 9 million for the Blue Hills acquisition.

Question name for the quarter was $131.3 million versus $33.8 million in the prior year.

Net of intangible amortization, deal and integration cost adjusted SGNA was $65.2 million versus $32.7 million in the prior year. The increase is largely a result of the combination that was available.

<unk> plus another $23 7 million of deal and integration.

$2 7 million of deal and integration costs. In addition.

As a percentage of revenue, adjusted SG&A for the quarter was 14.3% of revenue, compared to 17.3% in FY20.

Interest and other income expense increased $14 6 million year over year.

This was offset by the additional $6 $3 million of income from operating activities and a decrease of a decrease in taxes of $68 7 million.

Again, news signaled levels represent a shift in the business model, and we expect to end the year in the 11% to 13% range as we begin to realize synergies and achieve higher revenue.

Slide 12 shows the reconciliation of GAAP and adjusted or non-GAAP diluted EPS. The company posted adjusted earnings per diluted share of <unk> 32 for the first quarter fiscal 2026 versus <unk> 89 per.

The diluted share for the first quarter of fiscal 2025.

Our, the expense for the first quarter was 33.1 million or 7.3% of Revenue compared to the 24.6% of Revenue in the prior year. Again this is a shift in the business model and expect R&D as a percentage of revenues to end the year at between 6 and 7% for Revenue range.

Moving to the balance sheet.

The close of the first quarter, our total cash and investments amounted to $722 million as most of you know we completed a $1 7 billion dollar financing during the first quarter of which approximately 950 million used to pay down the depth of our blue Hazel acquisition.

We have we now have a completely new balance sheet as a result of the Taylor transaction.

Sequentially many of our balances are not comparable to prior periods for instance, our overtime revenue recognition has increased from 41% to 75% of revenue year over year driving the unbilled receivables.

Now turning the Gap earnings and the first quarter of the company generated a net loss of 57.4 million versus net income of 21.2 million recorded in the same period last year. The decrease in net income of 88.5 million can be attributed to increased intangible amortization. Other non-cash purchases accounting expenses of 74.9 million for the Blue Halo acquisition. Plus another 23.7 million of deal and integration 23.7 million of deals.

With that said Unbilled receivables continue at a higher level than we are targeting we have been negatively affected by the alignment of the contracting officers.

Switchblade product. This transition has been completed and we expect unbilled to be down significantly in the next quarter.

This was offset by an initial $6.3 million of income from operating activities and a decrease in taxes of $16.7 million.

Turning to backlog our funded backlog at the end of the first quarter of fiscal 2026 finished at $1 1 billion.

Funded backlog grew to $3 $1 billion at the end of Q1.

Slide 12 shows the reconciliation of gas and adjusted or non-gaap for the DPS, the company posted adjusted earnings per diluted share of 32 cents for the first quarter. But that's the 2026 versus 89 cents per share for the first quarter of this plus 2025

I should note that we include in our visibility.

Visibility of unexpected relatively long term contracts, which we expect to report during the fiscal year, but which have not been funded as of this date given this the visibility to the midpoint of our revenue guidance range of 82%.

moving to the balance sheet at the close of the first quarter or total cache is at the amount of 70022 million. As most of, you know, we completed a 1.7 billion financing during the first quarter of which approximately 950 million used to pay down the debt on the blue handle acquisition.

We expect that our unfunded backlog to continue to grow to grow significantly during the second quarter due to the recently announced contracts and new contracts in the pipeline.

Finally, I would like to provide you with our updated FY <unk> guidance.

On page six of the presentation, we provide fiscal 2026 guidance.

We now have a completely new balance sheet as a result of the Blue Halo transaction. Consequently, many of our balances are not comparable to the prior period. For instance, our overtime revenue recognition has increased from 41% to 75% of revenues year-over-year, driving up unbilled and seasonal.

Fiscal year revenue is still expected to between $1 92 billion adjusted EBITDA remains between $300 million and $320 million.

non-GAAP adjusted EPS is now projected to be between $3 60.

With that said, I'm billed receivables. Continue at a higher level than we are targeting. We have been negatively affected by the alignment of the Contracting officers, for our switchblade products. This transition has been completed and we expect unbilled to be down significantly in the next quarter.

$3 $73, 7% due to the refinancing of our debt.

The midpoint of our revenue guidance range represents nearly 15% growth over the pro forma FY 'twenty five so as.

As mentioned previously our visibility to the midpoint revenue guidance range of the 82%, which is higher than at the higher end of historical range at this point during the year.

Turning to backlog, our funded backlog at the end of the first quarter of fiscal 2026 finished, at 1.1 billion dollars unfunded backlog groups at 3.1 billion at the end of q1.

I should note that we include this in our visibility.

I'd like to close by echoing <unk> remarks, we are very well aligned with the U S. D O W priorities and those are the allies and are excited about our prospects now I would like to turn things back to I E.

Visibility from expected management long-term contracts, which we expect to perform during the fiscal year but which have not been funded as of this date. Given this, the visibility to the midpoint of our revenue guidance range is 82%.

Thanks, Kevin.

Before turning the call over for questions I'd like to reiterate all of the positive momentum we have entering our second quarter of fiscal year 2026.

We expect our unfunded backlog to continue to grow significantly during the second quarter due to the recently announced contracts and new contracts in the pipeline.

Finally, I would like to provide you with our updated FY 46 guidance.

First we achieved another record first quarter with revenues of nearly $455 million.

On page 6 of the presentation, we provide fiscal 2026 guidance.

Second bookings for the first quarter reached nearly $400 million and our funded backlog grew to $1 1 billion.

Fiscal year revenue is still expected to be between 1.9 and 2 billion adjusted, even though it remains between 300 million and 320 million.

Unfunded backlog is now at $3 1 billion.

Third we introduced several innovative solutions and counter UAS space Communications and direct energy among other areas that are directly aligned to our customers' urgent priorities and represent multibillion dollar market opportunities over the next several years.

But not a non-gaap adjusted EPS is now protected to be between $3.60 and $3.77 due to the refinancing of our debt.

The midpoint of our revenue guidance range represents nearly 15% growth over the performance in FY2. So,

And fourth we're maintaining our fiscal year 2026 guidance with revenue between $1 9 billion and $2 billion.

As mentioned previously, our visibility to the midpoint of Remedy guidance range is at $827, which is higher than the higher end of the historical range at this point during the year.

Our strong first quarter results underscore the confidence we have in the future of baby and our ability to reshape the future of defense.

I’d like to close by echoing Lane while he makes his remarks. We are very well aligned with the U.S. priorities, and those are the allies that are excited about our prospects. Now, I’d like to turn things back to my team.

Thanks. Kevin.

Our integrated capabilities across every domain of modern warfare combined with our enhanced innovation and ability to scale strengthens our ability to address emerging global priorities.

Before turning the call over for questions, I'd like to reiterate all the positive momentum we have as we enter our second quarter of fiscal year 2026.

We stand ready and committed to deliver just as we've always done.

First, we achieved another record for the quarter with revenues of nearly $4.555 billion.

With strong support on both sides of the Ireland Congress the current administration and our customers. We're confident that <unk> will not be negatively affected should Congress failed to pass a budget, resulting in a continuing resolution.

Second bookings for the first quarter reached nearly $400 million and are funded backlog groups to $1.1 billion. Unfunded backlog is now at $3.1 billion.

The support power solutions and the urgency behind the need for our products gives us confidence that we will remain a high priority in either scenario.

Third, we introduced several innovative solutions and counter uas space Communications and Direct Energy among other areas that are directly aligned to our customers urgent, priorities and represent multi-billion dollar market opportunities over the next several years.

Additionally, we have significant momentum internationally with our allies, where our ability to deliver battle proven solutions quickly at scale is certainly a competitive advantage.

And forth. We're maintaining our fiscal year 2026 Guidance with revenue between 1.9 billion and 2 billion dollars.

I want to thank our employees shareholders and customers for their continued commitment to <unk> and our mission.

A strong first quarter results, underscore the confidence, we have in the future of ab and our ability to reshape the future of the fence.

We're honored to support the most critical defense missions at this pivotal moment and we are ready to seize the tremendous opportunities ahead.

And with that Kevin Denise and I will now take your questions.

Our integrated capabilities across every domain of Modern Warfare combined, with our enhanced Innovation and ability to scale strengthens, our ability to address emerging Global priorities.

We stand ready and committed to deliver just as we've always done.

Thank you.

As a reminder to ask a question you will need to press star one on your telephone. Please standby, while we compile the Q&A roster, we respectfully ask that callers limit themselves to one question and return to the queue to ask additional questions.

With strong support on both sides of the island Congress, the current administration and our customers were confident that ad will not be negatively affected.

Should Congress fail to pass. A budget. Resulting. In a continuing resolution.

Our first question comes from Ken Herbert with RBC you May proceed.

The support for our solutions, in the urgency behind the need for our products, gives us confidence that we will remain a high priority in either scenario.

Yeah.

Yes, hi, good morning, or good afternoon, Wahid, Kevin and Denise really nice results.

Maybe the next out Wahid, Yeah, maybe why he just to start off obviously.

Scale is certainly a competitive advantage.

Obviously, good revenues you didn't change the full year outlook I think you've obviously got better visibility at the 82% then you've had at this point in prior years.

I want to thank our employees shareholders, and customers for their continued commitment to a and our mission.

Can you just talk about some of the puts and takes as we think about the one nine versus 2 billion full year revenue outlook, and how youre thinking about risk of of the guidance on the topline and an opportunity to ABL outperformed that this year. Thank you.

We're honored to support the most critical defense missions at the spirit of the moment, and we're ready to seize the tremendous opportunities ahead.

And with that, Kevin, Denise, and I will now take your questions.

Thank you Kevin Yes, we're very pleased with the results I am very pleased also with the integration of Blue Halo with Abbvie.

As you know this is no easy feat and this is a very large undertaking combining two of the best of breed companies, creating a $2 billion enterprise that addresses all of the key areas of our defense priorities, both domestically internationally with our allies in terms of our guidance, we feel very good about our first quarter results.

Thank you as a reminder, to ask a question. You will need to press star 1, 1 on your telephone, please stand by we compile the Q&A roster. We respectfully ask that callers limit themselves to 1, question and return to the queue to ask additional questions.

Our first question comes from Ken Herbert with RBC. You may proceed.

It is first quarter, we've got three more quarters to go.

Yeah, hi, good morning. Good afternoon. Uh, Waheed Kevin and Denise, uh, really nice results. Um, maybe that wahed.

Budgets for the year are not totally set there is a potential for a continuing resolution, which we don't believe that it's going to affect our fiscal year, but in order for us to perform above and beyond that it is still a lot more questions left and so given all of those reasons also some of these contract timing is really critical because the USDA.

Speaker: .

It is going through a lot of changes and transformation and many of their services.

And given all of that we believe that we're on track again, it's going to be a fantastic year with record revenues and profitability nearly $2 billion in revenues and $300 million worth of adjusted EBITDA, We're going to need is the poster child of what our defense Tech company and that plan should look like and we're pleased that we've achieved.

Yeah. Maybe why he just to start off? Um, obviously good revenues. You didn't change the full year outlook. Um, I think you know you've obviously got better visibility at the 82% than you've had at this point in prior years. Can you just talk about some of the puts and takes as we think about the $1.9 billion versus $2 billion full year revenue outlook and how you're thinking about the risk of the guidance on the top line and an opportunity?

Maybe I'll I'll perform that this year. Thank you.

There is also we have so far and we look forward to updating in future.

Great. Thanks, Mohit I'll stick to one.

No problem. Thank you Ken.

Our next question comes from Anthony Valentini with Goldman Sachs. You May proceed.

Hey, guys. Thank you for the question.

I'm curious are you guys seeing increased competition now that there is an emphasis on the <unk>.

Unleashing of American drone dominance.

And how do you think price will be impacted over time by competition like you guys on your switchblades, specifically I think you guys have talked about low hundreds of thousands of dollars.

Thank you Ken yes. We're very pleased with the results. I'm very pleased. Also with the integration of Blue Halo with a uh, as you know, this is no easy feat. And this is a very large undertaking, combining 2 of The Best of great companies. Creating a 2 billion dollar Enterprise that addresses. All the key areas of our defense priorities, both domestically internationally with our allies, in terms of our guidance, we feel very good about our first quarter results, but it is first quarter. We've got 3, more quarters to go, uh, the budgets for the year are not totally set. There's a potential for a continuing resolution, which we don't believe that it's going to affect our fiscal year, but in order for us to perform above and beyond that, it's still a lot more questions left. And so given all those reasons, also, some of these contract timing is really critical because the US DOD is going to a lot of changes and transformation and many of their services. Um, and given all that, we believe that we're on track again.

As the price there if theres more competition over time is there a risk that that price is going to go down and margins will suffer.

Anthony and thank you for that question.

Great to talk to you again.

Obviously, the focus of the U S for the American drone dominance is really important and we support it and we're very pleased with that.

Again, that's going to be a fantastic year with record revenues and profitability nearly 2 billion dollars in revenues and 300 million dollar worth of adjusted Eva. We're going to be the the post of child of w a defense tech company in the front should look like and we're pleased uh that we've achieved the results we have so far and we look forward to updating you in future.

We are used to competition and competitors ever since I've been with this company for over a decade and a half it is not new to us.

Thanks. Bye. Don't stick to 1.

No problem. Thank you Ken.

We've had the drone and Saturday with the commercial drone industry was going on we've had that with our small UAS theres been doubts about that our performance for decades.

Our next question comes from Anthony Valentini with Goldman Sachs, he may proceed.

He has continued decades and decades to be able to deliver and prosper and stay as the leader in the spot market.

That tells me is that actually the focus on this market in the amount of growth that there is it's actually attracting more and more investments of course, but also attention with our customers. So it's a good sign that the usu. He believes that we've got a scale and we've got to grow but we really feel strong about our portfolio. There are several several key.

Hey guys, thank you for the question. Um, I'm curious. Are you guys seeing increased competition? Now that there's an emphasis on, um, you know, the unleashing of American drone dominance and how do you think, um, price will be impacted over time by competition? Like, you guys, you know, on your switch blades, you know specifically, um I think you guys have talked about you know, low hundreds of thousands of dollars. Um, as the price there, if there's more competition over time, is there risk that, um, that price is going to go down? And, you know, margins will will suffer thanks.

Competitive differentiators that enables us to actually lead and continue to stay as the leader.

Um, Anthony, thank you for that.

And as there are no shortcuts in this business.

One thing to say that we can somebody can do it actually doing it and delivering it at scale, it's a very very high bar.

I want to remind everybody that our systems are used by the tens of thousands globally, we have scaled.

Ah repeatedly multiple times in our history.

And we have a unique competitive advantage in terms of having the manufacturing capacity.

To produce these things at urgent and very short cycles based on the demand and urgency and priority of our U S duty and our allies that is a clear clear advantage for us.

Question. And, uh, great to talk to you again. Obviously, that focus of the US for the American drone dominance, uh, is really important and we support it and we're very pleased with that. Uh, we are used to composition in competitors. Ever since I've been with this company for over a decade and a half, it is not new to us. Um, we've had the Drone Insanity, when the commercial drone industry was going on. We've had that, with our small uas, there's been doubts about that, uh, our performance for decades Ave has continued decades and decades to be able to deliver and prosper and

Amongst many other things and we look forward to that so while we always take competitors seriously.

Very confident about the best in class solutions that we've got in our track record and the positioning that we have in the marketplace.

I mean, we've always we've always provided a very cost efficient product and a lot of.

The competition a lot of that is about the value versus alternative so unmanned solutions provide incredible value a lot of the pressure was probably come more on the low end of the market than at our categories, which as you know group two and above.

Great. Thank you guys so much.

Youre welcome Anthony.

Our next question comes from Louie Dipalma with William Blair You May proceed.

Good afternoon, Wahid, Kevin and Denise.

Hey, Louie either.

Us in this business. Um, it's 1 thing to say that we can somebody can do it actually doing it and delivering it at scale. It's a very, very high bar. Um, I want to remind everybody that our systems are used by the tens of thousands globally. We have scaled repeatedly multiple times in our history and we have a unique competitive advantage in terms of having them manufacturing capacity to produce these things at Urgent and very short Cycles.

Hi, you announced.

The Avi Halo unified software platform last week.

Can you talk about how your software integrates with.

Based on the demand, urgency, and priority where U.S. Duty and our allies are concerned, that is a clear advantage for AV, among many other things. We look forward to that. So while we always take competitors seriously.

Third party <unk>.

<unk> providers. In addition to the EV portfolio of systems, and secondly is there the potential that your software platform.

We're very confident about the best-in-class solutions that we've got in our track record and the positioning that we have in the marketplace.

Can be open to third party software developers such that others can build.

Applications on top of your software similar to how.

I mean, we've always, we've always provided a very cost efficient product and a lot of, you know, the competition is a lot of that is about the value versus Alternatives. So unmanned Solutions, provide incredible value. A lot of the pressure would probably come more on the low end of the market than at our categories, which is, you know, group 2 and above

Talent here has there there may have been smart system, and it's becoming a platform in and you have this command and control system that seems to have a lot of similarities there or the command and control for that.

Great. Thank you guys so much.

You're welcome, Anthony.

Our next question comes from Louie De Palma with William Blair. You may proceed.

The suas and C U E S and your account your pure.

Good afternoon, Wahid, Kevin, and Denise.

Your laser systems et cetera. Thanks.

Hey Louie. Hello. Hi there.

You're welcome Louise of course.

Avi Halo software, which we just announced is really <unk>.

Hi. Um, you announced the, the AV Halo unified software platform last week, can you talk about how

Great example of how we brought the best of both World from Abb's portfolio of software solutions as well as Blue Halo software solutions into one cohesive.

your software integrates with

Cohesive.

Umbrella of an ecosystem and platform that allows us to deliver and innovate in the lots and lots of different areas of the entire market.

There is certainly a major major need in a market opportunity.

For companies like <unk>, and others to try to help simplify and integrate and inter operate all these systems together, that's precisely what Eva halos strategy and product roadmap and.

Our value proposition is all set to be.

In regards to your first question, yes, we already today.

Third-party Hardware providers in addition to the the AV portfolio of of systems and and secondly is there the potential that your software platform um can be open to third-party software developers. Such that others can build applications on top of your software similar to how like talents here has their their Maven smart system and it's becoming a platform. And and you have this command and control system, that seems to have a lot of similarities there for the command and control for

Enable third party.

Devices.

The SUAS and CUAS and your count, your laser systems, etc. Thanks.

Third party platforms hardware systems to actually integrate and be interoperable with a halo and many many other sub systems or modules.

Ingo A&D handle is going to be an umbrella brand with lots and lots of different tools and applications underneath it.

de los software which is just announced is really a great example of how we brought the best of the Both Worlds, from a portfolio of software Solutions, as well as blue Halos, software Solutions into 1

And we continue to invest in that so that's definitely a yes for that in terms of allowing other third party companies to develop software as an API and open platform absolutely. Yes, that's the case as well in fact, we already have some solutions that we provide to our customers to our small UAS and were already munis.

Cohesive umbrella of an ecosystem and platform that allows us to deliver and innovate. And lots, and lots of different areas of the entire Market.

<unk>, which uses third party apps as a software that is plug and play into our system and so the last thing I want to mention is that we've developed.

Avi Halo ecosystem from the ground up.

Based on the expertise that we have on the edge of the battlefield, but all of the platforms and tens of thousands of systems that we make out there and all the different domains that gives us a unique competitive advantage because it's much much harder to do the seed to the command and control connectivity interoperability at a lower level at the edge of the battlefield than and it suggests represented.

Um, there's certainly a major, major need and a market opportunity for companies like Ave and others to try to help simplify, integrate, and interoperate all these systems together. That's precisely what Ave Halo's strategy, product roadmap, and value proposition are all set to be. In regard to your first question, yes, we are already today.

Enable third-party, uh, devices.

The graphical user interface at the high levels of <unk>.

High level gets a lot of limelight and a lot of hype, but the real value on the hard work is how you entered connected subsystems and an open modular architecture approach and Thats precisely how we built a software platform that we've got we're going to continue to invest in it.

Uh, to to third-party platforms hardware systems to actually integrate and be interoperable with AV Halo and many, many other subsystems or modules of ABDO. A Halo is going to be an umbrella brand with lots, and lots of different tools and applications underneath it.

Software Department of our Engineering Department has the largest department within our entire innovation groups and so we intend to continue to invest invest invest area and innovate and deliver more capability and that's why our solutions are always been known as software defined platforms and I'm glad you asked the question poorly.

Um, we continue to invest in that. So that's definitely a yes for that in terms of allowing other third-party companies to develop software as an API and open platform. Absolutely true. Yes, that's the case as well. In fact, we already have some solutions that we provide to our customers, to our small UAS and our loading munitions.

Which uses third-party apps as software that is plug-and-play into our system. And so the last thing I want to mention is that we've developed.

Thanks for the extensive.

Answer Wahid and I will save the rest of my questions for Albuquerque. Thanks.

Thanks, everyone.

Wonderful, we'll look forward to seeing you there.

Thank you. Our next question comes from Jan Engelberg with Baird You May proceed.

Good afternoon, Kevin and underneath.

Congrats on a really strong set of results.

With the Blue Hydro now form part of the group.

Kind of a big domestic presence.

I just wanted to sort of.

I have a sense of the affordability of the blue Halo product offerings.

I am just given sort of what.

Europe is client spend and sort of there.

And sort of lack of industrial base to do things themselves, but just look at things like like sort of the local system space capabilities that you now have a if you could just talk more but more about that and then just a small addition, but.

With the.

And a lot of hype. But the real value in the hard work is how you interconnect the subsystems in an open modular architecture approach. And that's precisely how we built the software platform that we've got. We're going to continue to invest in it. The Software Department of our Engineering Department is the largest department within our entire Innovation Groups. And so we intend to continue to invest in this area and innovate and deliver more capability. And that's why our solutions have always been known as software-defined platforms. And I'm glad you asked that question.

Red Dragon now.

Being placed on the.

Thanks really extensive.

You asked cleared less in August does that sort of imply that it can be exported to meaningfully or is that near term more of a domestic opportunity. Thank you.

Answer: Why? He? And I will save the rest of my questions for Albuquerque. So, thanks everyone.

Wonderful! We'll look forward to seeing you there, Louis.

Sure.

So really the blue Halo solutions that brings tremendous complementary capabilities to <unk> and as I mentioned earlier that in the space domain obviously.

Thank you. Our next question comes from Jan Engelbrecht with shared, you may proceed

Goodbye. When you've given, and underneath, um,

Large one five plus billion dollars program of record that we won with a space for us.

Congrats on a really strong set of results. I guess with the blue highlighter, and also in part of the group, and maybe a big domestic presence.

As you know.

Uh, I just want to sort of...

Quarterly advanced innovation.

I have a sense of the exploitability of the Blue Halo. Chronic offerings.

And state of the art capability in the phase the range, then you're going to see some of that hopefully if you can come to our open house in Albuquerque later next month.

Just given sort of.

what Europe is playing to spend and sort of

So we're the leader in that and Thats, a very large program. The logo system, which I mentioned is the leading directed energy powder have drawn or counter UAS solution in the market today.

We delivered our first batch of systems to the U S. Army, we continued to deliver some more mounted on a moving mobile J LTV as I mentioned.

Their Frank into the black of industrial barriers to do things themselves to just look at things like like sort of the Locust system space capabilities, that you now have. Uh if you could just talk more about more about that and then just a small addition. But uh with with the uh, red dragon now

And it is going to be a very large multibillion dollar market and we believe that the counter UAS directed energy solution, but lasers, which is the low cost platform as an example.

Uh, being placed on the blue, um, users list in August is that sort of implied that it can be exported immediately or is that near-term more of a domestic um opportunity. Thank you.

Sure. Um,

There is a multibillion dollar long term opportunity for the company and we're the leader in that space clearly.

Lastly, I'd mentioned also the Titan RF solutions, we're already.

Getting a lot of orders for international customers for that it's one of the best performing solutions out there in the market and that market is multi billions of dollars over the next decade as well so.

So really the Blue Halo solutions, that brings tremendous complimentary capabilities to Ave. And as I mentioned earlier that in the space domain obviously you know the large 1.5 plus billion dollar program of record that we've won with the space force.

Absolutely agree with you that the Blue Halos solution set is incredibly complementary to our solution set. They are growing we are winning a lot of opportunities and programs that we are positioned for a lot more and in being a part of the blue Halo certified product, which you saw our one of our products absolutely allows us to actually sell internationally easier and also the USD.

A, you know, incredibly advanced innovation and state-of-the-art capability in the phase arrays, and you're going to see some of that. Hopefully, if you get to come to our open house in Albuquerque later next month. So, we're the leader on that, and that's a very large program, the local system, which I mentioned.

Is the leading directed energy counter drone or counter uis solution in the market today.

And other government agencies can buy easily because of the certification and so that's another great progress for our company and our at our teams and we're very pleased with the progress we're making so far.

Great. Thank you that's very helpful and as a quick follow up in terms of Golden Derm wherever you can see by the great program win and Ges with legend terminal.

Uh, we delivered our first batch of systems to the US Army, we continue to deliver some more mounted on a moving mobile jltv. As I mentioned, and it is going to be a very large multi-billion dollar market. We believe that the counter uas directed Energy Solution, but lasers which is the Locust platform as an example.

Are you sort of seem to have no competition really and we've seen.

It's a multi-billion dollar, long-term opportunity for the company, and we're the leader in that space clearly.

In lower orbit sort of the problems that vendors are experiencing on the optical terminal.

Is that.

So I mean, when you're still considering that Golden dome opportunity given that it's going to have a bit more latency than the satellites in low Earth orbit and I guess a follow on is there any willingness to move down into that orbit, just given sort of the delays that.

And lastly, I'll mention also the Titan RF Solutions. We're already getting a lot of orders from international customers for that. It's one of the best performing solutions out there in the market, and that market is multi-billions of dollars over the next decade as well. So,

Vendors have seen MPW assay program. Thank you I'll leave it there up yes, Im glad you brought that up because our solution for the laser comps and phased arrays.

Addresses both of those two key areas that you mentioned.

Absolutely agree with you that as we start to think about the Golden dome initiatives and.

And objective.

The ability to communicate and space by itself.

Absolutely agree with you. That the blue Halos solution set is incredibly complimentary to our solution set. They're growing. We're winning a lot of opportunities and programs. We're positioned for a lot more. And then being that part of the Blue Halo, uh, certified product, which you saw are, are 1 of our products. Absolutely allows us to actually sell International easier and also the US DOD and other government agencies can buy easily because of the certification. And so that's another great progress for our company and our ship and our teams. And we're very pleased with the with the progress we're making so far.

We learned very very convincingly in Ukraine, we all the world is learn that RF communication is not.

Savings in <unk>.

Secure it is not immune it can be jammed.

Same thing as to all the satellites that we have in this space, whether it's commercial satellites or military satellite national security satellites.

Great, thanks for it very helpful this and it's a quick follow up in terms of golden dome. Whoever you see like that great program win in geo with Leisure terminals. Um, where you sort of seemed to have no competition, uh, really? Um, and we've seen, uh, in low earth, orbit sort of the problems that, um, vendors are experiencing on the optical terminals.

Um, is that?

<unk> are susceptible to the same jamming issues because they talk to systems on the ground and talk to each other so laser communications, which where they currently are.

Undeniable industry leader technologically as well as product maturity wise is the clinical way of the future satellites to be able to communicate and talk to them and so we offer that capability.

Still. I mean, would you still consider that a golden dome opportunity, given that it's going to have a bit more latency than the satellites in network orbit and I guess I follow on, is there any willingness to move down into that orbit? Just given sort of the delays, that, um, vendors have seen, and that pwsa program. Thank you. I'll leave it there. Um, yes, I'm glad you brought that up because our solution for the laser comes and plays the race.

Absolutely, we can do that not only for the geosynchronous satellites, but for meal and Leo satellites as well in fact, we have a product a separate product.

Addresses, both of those 2 key areas that you mentioned um absolutely agree with you that as we start to think about the golden dome initiative.

Our phase III product set called Panther that is a smaller system that allows us to offer that to international allies and many other customers for Leo and MEO satellites as well.

By itself.

So that's why I said that that market is a multibillion dollar market, which we believe is just at its infancy.

And we've got a leading pole position and as we continue to execute on our strategy I think we're going to see a lot of growth in that area and a lot of more attention and focus on the USD and a lot of commercial companies as well our customers as well.

You know, we learned very, very convincingly in Ukraine. All the world has learned that RF communication is not safe and insecure. It is not immune; it can be jammed.

Perfect. Thank you.

Youre welcome.

Yeah.

Thank you.

Our next question comes from Jonathan <unk> with Stifel. You May proceed.

Hey, good afternoon, Wahid, Kevin and Denise Thank you for taking the question.

Thank you Jonathan.

Maybe just on funded backlog.

You had disclosed back in November that Blue Halo had about $600 million of funded backlog.

So when I add that and what you have on April 30th it.

It seems like maybe a little bit lower than what we'd expected. So can you confirm number one.

The accounting change.

<unk>.

When you merge that end of June.

Just got a question that maybe something that dropped out and what I was hoping you could confirm that that is not the case. Thank you.

The same thing is true, all the satellites that we have in the space, whether it's commercial satellites or military satellite national security satellites, they are susceptible to the same jamming issues because they talk to systems on the ground and they talk to each other. So, laser Communications, which we're the currently the the undeniable industry leader technologically as well as product maturity, wise is the critical way of the future of satellites, to be able to communicate and talk to them. And so, we offer that capability and absolutely, we can do that, not only for the geosynchronous satellites, but for Meo and Leo satellites as well. In fact, we have a product, a separate product in our phase, every product that called the panther that is a smaller system that allows us to offer that to International allies. Many other customers for Leo and Neo satellites as well. And so that's why I said that that market is a multi-billion dollar market which we believe is just that its infancy.

I don't know where the $600 million comes from but at the beginning of the period.

And we've got a leading pole position, and as we continue to execute on our strategy, I think we're going to see a lot of growth in that area and a lot more attention and focus from the U.S. and a lot of commercial companies and customers as well.

Well I don't have a blue halos the current SCE division had about.

Perfect, thank you. We should

You welcome.

Just over 300 increase that during the quarter of backlog funded backlog.

Thank you.

Just to add to that Jonathan.

Our next question comes from Jonathan Sigmund with Stifel. You may proceed.

We have won and booked quite a lot of really significant.

Good, Kevin, and Denise. Thank you for taking the question.

Funded contracts that allows our customers to add dollars to it some of that Jonathan is related to the fact that a lot of the funding that has been authorized authorized and approved by Congress as well as by the President, Florida Department as part of the additional.

Thank you, Jonathan.

Uh, maybe just on fun.

Backlog.

Funding sources that theyre getting that money hasnt transitions, yet and been released to the services and the program executive offices.

Authorized put task orders against that so what we have is a great situation were in this quarter next quarter Q2, and Q3, we expect to book an enormous amount of funded orders and foreign contracts against those large unfunded existing obligations and so.

You're disclosed back in November that Blue Halo had about 600 million of funded backlog. Um, so when I add that in to what you had on April 30th, um, it seems like maybe it's a little bit lower than what we expected. So can you confirm number 1 to the accounting change? Uh, when when you, when you merge that in, uh, just there got a question that maybe, um, something that dropped out and wanted was hoping you could confirm that is not the case. Thank you.

I don't know where the $600 million comes from, but at the beginning of the period, uh,

In general our funded backlog.

Which was roughly about $1 1 billion.

Well, I don't have a Blue Halo. The current SCGE division had about.

The unfunded part is much much bigger it's almost three times bigger and we can and we're going to see more bookings and task orders to come in this quarter next quarter to keep building on that momentum that we've got and stops yes. I mean, we think contract signings in the second quarter. I mean, we have the evidence of the laser contract, we just signed could be well over $1 billion of protein too.

And then in the second quarter.

So we're going to wait to see a lot of momentum already in this quarter, which we have some time left so we're very optimistic.

Alright, we'll look forward to seeing it. Thank you for your time.

You're welcome Jonathan.

Our next question comes from Greg Konrad with Jefferies. You May proceed.

Good afternoon.

Maybe kind of following up on that question I mean in the script you called out 20 programs.

<unk> billion over the next five years can you maybe talk about how much of that is competitive versus follow on and you know when you think out the next maybe six months what are some of the larger decisions within that pipeline that you expect to be made in a competitive way.

You know, just over 300 and increase that during the quarter of back box funded back box. Yeah. Just to add to that Jonathan. You know, we have 1 and booked quite a lot of really significant unfunded contracts that allows our customers to add dollars to it. Some of that Jonathan is related to the fact that a lot of the funding that has been authorized, authorized and approved by Congress, as well as by the president, for the Department, as part of the uh, additional um, funding sources that they're getting that money hasn't transitioned yet and been released to the services and the program Executive offices to authorize, or put task orders against it. So, what we have is a great situation where in the next this quarter or next quarter Q2 and Q3 we expect to book an enormous amount of funded orders and firm contracts against those large unfunded existing uh, obligations and so

In general, our funded backlog.

Which was roughly about $1.1 billion.

Sure so.

Greg as you know.

We haven't shared such statistics in the past and I intentionally wanted to share that to emphasize the fact that we're a different company today and the opportunities in front of us are massive literally massive.

The unfunded part is much, much bigger. It's almost three times bigger, and we can—we're going to see more bookings and task orders come in this quarter and next quarter to keep building on that momentum that we've got in stops. Yeah, I mean, we think contract signings in the second quarter—I mean, we have the evidence of the laser contract we just signed, you know, could be well over a billion.

<unk>.

They 20 plus programs that were.

And approaching 2 billion in the, in the second quarter. So we we see a lot of momentum already in this quarter which uh, you know, we have some time left. So we're very optimistic.

Chinese thing and we're pursuing or actively engaged in.

Right? We look forward to seeing it. Thank you for the time.

And majority of those cases, if not all or one of the top contenders for those programs were very very.

Confident that many of those programs over the next several years.

It's going to convert into some sort of a backlog and demand for our solutions number one number two look you could look at our track record we have a very high win rates the timing of those contracts and selection process may change slightly because of the way that the U S <unk> and the funding and the congressional budget work, but overall, we have a very high win rate.

When we engage in opportunities.

So.

We don't expect it to be 100% of course, but there's going to be more competition, but the magnitude of programs and the quality of the and the size of these programs that we're going after.

Quite remarkably significant and we're very pleased with that encourages me.

We haven't shared such statistics in the past, and I intentionally wanted to share that to emphasize the fact that we are a different company today. The opportunities in front of us are massive, literally massive. There are 20-plus programs that were...

As a member of this team does that we've worked really hard to get here and I think we've got a lot of great years ahead of us.

Chasing and were pursuing were actively engaged in.

I think the emphasis has shifted to more off the shelf proven capabilities companies that can scale.

Is that kind of part of the formula but it also means they may pick other more than one vendor for some of these programs because they want to kind of hedge their bets on the scalability.

Okay, and I guess, just as a follow up I mean that part seems to kind of fit what we're hearing about maybe how golden dome is awarded I mean, you called it out a couple of times in the script, but how do you think about award timing or decisions tied to that program.

And just given the accelerated schedule in.

How much of that opportunity is maybe tied to Goldman dome.

Yes, so we're not really.

Counting Golden Dome, specifically as part of that was 20 programs, maybe some parts of its very small parts of but not much. This these two programs that I'm, referring to as well.

And the majority of those cases, that's not all. We're one of the top contenders for those programs. We're very, very confident that many of those programs over the next several years are going to convert into some sort of a backlog and demand for our solutions. Number one. Number two, look, you can look at our track record. We have a very high win rate. The timing of those contracts and the selection process may change slightly because of the way that the U.S. DOD and the funding and the Congressional budgets work. But overall, we have a very high win rate when we engage in opportunities. And so, we don't expect it to be 100%, of course, but there's going to be more competition. But the magnitude of programs and the quality of these, and the size of these programs that we're going after is quite remarkably significant. And we're very pleased with that. It encourages me as a member of this team, is that we've worked really hard to get here.

These are things that we've been pursuing well before the Golden Dome was even announced.

And so Golden dome.

Obviously adds to that does not subtract from it and it is not inclusive of that number one number two we really believe that we've got a very compelling solution that the U S Department of defense and our National security agencies, and the and the President and the department can actually implement very quickly.

I think we've got a lot of great years ahead of us. And I, I think the emphasis is shifted to more off-the-shelf proven capabilities, companies that can scale uh as as the kind of part of the formula. But it also means they may pick other more than 1 vendor for some of these programs because they want to kind of hedge their bets on the scalability, right?

No R&D cost.

These are systems that we've already developed and a lot of folks are talking about space in <unk>.

Missiles in the space.

Satellites and space. This is about our homeland and how we protect critical sites on our homeland tempt to rain and the solutions that we've developed that really addresses the emerging threats against drones and hypersonic missiles.

And I guess just as a follow-up, I mean that, you know, Parts seems to kind of fit what we're hearing about maybe how Golden Dome is awarded. I mean, you called it out a couple of times in the script, but how do you think about award timing or decisions? You know, tied to that program, just given the accelerated schedule and, you know, how much of that opportunity is maybe tied to Golden Dome?

yeah, so we're not really, uh,

Cruise missiles and Icbms, we've got the solution set today not only the hardware platforms, but also the software solutions that can Samsung that can actually identify them and then also to actually integrate it and I'll, probably few different systems within our existing customer footprints.

Counting golden dome specifically as part of those 20 programs, maybe some parts of it. It's very small parts of it. It's not much this, these 20 programs that I'm referring to is, well, we these are things that we've been pursuing well before the golden dome was even announced

To work as an interoperable integrated system. So we've invested quite a lot of energy last several months.

To architect that solution set and that's why we made the public announcement with our partner.

See our Nevada Corporation, and we're looking forward to actually engaging with the government we are engaged with them today.

Uh, and so the golden dome obviously adds to that, does not subtract from it, and that is not inclusive of that number. Number two, we really believe that we have got a very compelling solution that the U.S. Department of Defense, our national security agencies, the President, and the Department can actually implement very quickly at almost no cost.

R&D cost.

Obviously getting weaker.

Spooled up on that.

We really wish the opportunity that we will have an opportunity to actually discussed this with them and show them. What we can do right away and we go as far as I am confident that I think it was a chance we can implement a solution of our site. This calendar year. This calendar year and so we feel very good about.

These are systems that we've already developed and a lot of folks are talking about space and missiles in the space and, and, and satellites in space.

Okay. Thank you.

You're welcome Greg.

Our next question comes from Andre Madrid with BTG you May proceed.

Hey, good afternoon, everyone. Thanks for taking my question.

Hi, Andre.

On <unk> I know you mentioned last quarter that a decision would likely be released within the next three to six months.

This is about our homeland and how we protect critical sites on our homeland and the solutions that we've developed, that really addresses the emerging threats against drones and Hypersonic missiles and uh you know uh cruise missiles and icbms. We've got the solution set today, not only the hardware platforms, but also the software solutions that can sense them, that can actually identify them. And then also, to actually integrate and operate a few different systems within our existing customer footprints.

Is that kind of is that still on the cards right now.

To work as an interoperable integrated system. So we've invested quite a lot of energy last several months.

Should we should we expect.

You know kind of a decision.

Now imminently.

Up I do Andre I mean, we're talking to the program office of the U S Army very very regularly.

Very impressed and happy with our solution set we believe that our solution meets the.

The U S Army's requirements for the LNR program better than any other solution on the market.

We also know that the most likely will down select to two and as Kevin said earlier that they would keep at least two vendors.

To architect that solution set. And that's why we made the Public Announcement with our partner, uh, see how the Nevada Corporation. And we're looking forward to actually engaging with the government. We are engaged with them today, there are obviously getting re, uh, spooled up on that and that we really wish the opportunity that we will have an opportunity to actually discuss this with them and show them what we can do right away and we go as far as you know I'm confident that if they give us a chance we can Implement a solution at a site this calendar year, this calendar year and so we feel very good about it.

Thank you.

You're welcome, Greg.

Sort of warm and engaged in this.

Development.

We have ramped up manufacturing was ready to go we've been getting ready because we know that the U S. Army has a furniture urgent need persistent low cost ISR at the edge of the battlefield and different theaters is incredibly important and we've got one of the most affordable low cost solutions out there.

Our next question comes from Andre Madrid with BTIG. You may proceed.

Hey, good afternoon everyone. Thanks for taking my question.

Hi Andre. Hi Andre

Um, on LRR, I know you mentioned last quarter that a decision would likely be released within the next 3 to 6 months. Um.

And the <unk> hundred 50 deliveries on that quite well, so I am hoping that the announcements will come sooner or it was still within that time frame that I mentioned three to six months, we're very close to getting to that three month period, it's not actually hasn't been three months, yet, but we're looking forward to it and I believe that the army will make some kind of an announcement quite soon.

You know, kind of a decision.

now imminently,

Got it got it that's helpful and I guess sticking on <unk> and <unk> hundred 50.

You mentioned the international opportunity, that's President I guess, just how big is that on a relative basis.

And then kind of in that same.

Mindset, you mentioned that you could potentially see the first <unk> hundred 50 order as early as this past quarter. So I just wanted to see if there is any update there.

Yes, so we do hope that we receive an order there is definitely opportunities on our pipeline both domestically internationally beyond the U S Army for the <unk> hundred 50 as.

As I have said that.

The <unk> hundred 50, and my personal opinion is going to be another product that is going to be similar and consistent to the other product franchises that we already have the success of the <unk> hundred 50 with the U S Army as part of the LR program will translate most likely will translate into a global franchise product.

Um, I do. Andre, I mean, we're talking to the program office of the U.S. Army very, very regularly. Um, they're very impressed and happy with our solution set. We believe that our solution meets the U.S. Army's requirements for the LRR program better than any other solution on the market. Uh, we also know that they most likely will down-select to two, and as Kevin said earlier, they would keep at least two vendors sort of warm and engaged in this development. Uh, we have ramped up manufacturing. We're ready to go. We've been getting ready because we know that the U.S. Army has an urgent, urgent need for persistent low-cost ISR at the edge of the battlefield, and in different theaters it is incredibly important. And we've got one of the most affordable local solutions out there, and the P550 delivers on that quite well. So, I'm hoping that the announcements will come sooner. You know, we're still within that time frame that I mentioned.

Similar to Puma Switchblade 300, Switchblade 600.

3 to 6 months—we're very close to getting to that 3-month period. It hasn't actually even been 3 months yet, but we're looking forward to it. I believe that the Army will make some kind of an announcement by Q2.

Raven and many other products that we have and so I already know that we're engaged with multiple countries many of them would love to.

Procure <unk> hundred 50, we ramping up manufacturing for that reason and we expect we hope to actually update you in the next quarter or so with some success stories and some wins on some awards.

Got it, got it, that's helpful. And I guess sticking on LR and P550, um, you mentioned the international opportunity that's present. I guess just how big is that on a relative basis, um, and then kind of in that same...

Awesome Wahid I appreciate the color I'll I'll step away and.

Mindset. You mentioned that you could potentially see the first P550 order as early as this past quarter, so I just wanted to see if there's any update there.

Leave it open to the rest of the queue. Thanks, so much.

Thank you Andre.

Our next question comes from Colin Canfield with Cantor Fitzgerald you May proceed.

Hey, Thank you for the question.

Could you maybe just walk us through the cash flow bridge for the rest of the year and essentially kind of how should we think about normalized working capital balances for the business, maybe as a magnitude in terms of total dollars or as a percentage of revenue. Thank you.

Yeah. So, we do hope that we receive an order. There are definitely opportunities in our pipeline, both domestically and internationally, beyond the U.S. Army, for the P550. As I said, the P550, in my personal opinion, is going to be another product that is going to be similar and consistent with the other product franchises that we already have.

Well as I said I mean, I think there is opportunity on the balance sheet, particularly in the Unbilled receivables area.

Our goal is to be.

Cash flow positive and perhaps some cash conversion this year versus last year.

The success of the p550 with the US Army, as part of the LR program will translate most, likely will translate into a global franchise product franchise, similar to Puma switchblade, 300 switch blade, 600, uh, Raven, and many other products that we have. And so, I already know that we're engaged with multiple countries. Many of them would love to, uh,

And we feel that we're positioned now the only caveat to that is as we as we.

Look at our plans for growth we're facing.

Procure P550. We’re ramping up manufacturing for that reason, and we expect to actually update you in the next quarter or so with some successful reasons, some wins, and some awards.

<unk>.

Situations, where several of our products may need to ramp up here and as I said earlier that the USDA is putting a premium on manufacturers you can scale up so it's kind of a balancing act between cash generation of that but we do feel comfortable with.

Awesome. Well, he'd appreciate the color. I'll, uh, I'll step away and, uh, leave it open to the rest of the queue. Thanks so much.

Thank you, Andre.

Our next question comes from Colin Canfield with K Rich Gerald. You may proceed.

With the cash flow cash.

Cash flow statements from working capital that we could offset any increases in the capex.

Well it should be in line with our guidance, but if it goes up a little above that.

Would probably be offset by working capital improvement.

Hey, thank you for the question. Could you make this a walk us through the Cash Flow Bridge for the rest of the year? And essentially, kind of, how should we think about normalized working capital, balances for the business? You know, maybe is a a magnitude in terms of total dollars or as a percentage of Revenue. Thank you.

Got it.

Normalized do you like in terms of kind of ex growth environment.

Is there like a proxy for.

How large the account should be.

Okay rough rough kind of sense.

Well, as I said, I mean, I think there's opportunity on the balance sheet, particularly in the unbilled receivable area. Um, you know, our goal is to be...

How long the <unk>.

Abundant or but.

No just like how much working capital should go on to the balance sheet.

Just how much how much.

For the year, all set and done it shouldn't go much higher than it is right now.

Okay. Thank you I appreciate the color.

Youre welcome Colin.

Our next question comes from Trevor Walsh with citizens you May proceed.

Great. Thanks for taking the questions I wanted to just follow up on the $240 million award for the laser terminals understand its a three year delivery period can you, maybe just give us a rough.

Cash flow positive and, and to have some cash conversion this year versus last year. Um, and we, we feel that we're position of that. Now, the only caveat to that is as we as we, um, you know, look at our, our plans for growth, we're, we're basing, you know, uh, situation, where several of our products may need to ramp up here. And as I said earlier, the, the US coz is putting the premium on manufacturers who can scale up. So we it's kind of a balancing act between cash generation and that, but we do feel comfortable with with the

Framework for how that revenue will probably flow over the over the course of that and then just kind of what the.

What kind of upside opportunities something similar that deal or just timing of that potential upside just again I know you're not specifics, but just from a general outlook. Thanks.

Cash from cash flow statements from working capital that we could offset any increases in the CapEx. Well, it should be in line with our guidance, but if it goes up a little above that, it would probably be offset by where the capital improvement.

Got it. I just like to normalize. Do you like, in terms of kind of cross-environment, is there like a kind of proxy for...

Sure Trevor So we consider that award.

How large should the account be?

Like a rough, rough kind of sense.

A landmark event for us for multiple reasons number one it's a very large contract.

How long the unfunded or what?

Number two.

It's the technology of the future that is going to make a huge impact in our entire space domain.

No, just like how, how much working capital should go into the balance sheet. Like, just how much, how much, how much?

As a whole for the country.

For the year, all said and done, it shouldn't go much higher than it is right now.

And where we are the best in the world in that category. Our technology is second to none there is nobody that can actually do it better than us in this area and I expect this to actually goes to our customer is very motivated to go past.

Okay, thank you.

Go ahead.

You're welcome, Colin.

You may proceed.

And obviously with the funding is to do a couple of things one is to finish the development and the first article of the system and also the second one is to actually transition it to initial rate low production and prepare for full rate production, which will happen a year later.

Well over a year later, so that's exactly what we're working on we're very bullish on that I think the market for laser communication is huge.

Okay.

Great. Hey team, thanks for taking the questions. Um, wanted to just follow up on the 240 million dollar award for the laser terminals. Uh, understand its I got a 3 year delivery period. Can you maybe just give us a rough uh, framework for how that Revenue will probably flow, uh, over the over the course of that and then just kind of what the, um, what the kind of upside opportunities. It's something similar to that deal or just timing of that, uh, potential upside just again, I know you just not specifics, but just from a, a general Outlook, thanks.

There's two reasons for that number one there's lots and lots of satellites in space that is going to require.

This mechanism of communication RF communication as I said earlier is basically compromise them, all and compromised already satellites need to communicate to the ground into each other we've got the secret sauce on the technology to do it we've got pole position in the market. We've got a solution that works in the customer's mob and <expletive>.

More and more satellites come online the need for this is going to become more and more evident and so its a groundbreaking event for us and we feel very good about that from a long term. So I think that's going to be a significant growth driver over the next several years beyond just fiscal 'twenty six for us once we transition from low rate production to full rate production and.

Employment of the systems out in the space.

Great. Thanks, Thanks for the color I'd really appreciate it.

Youre welcome Robert.

Our next question comes from Austin, Moeller with Canaccord Genuity you May proceed.

Sure, Trevor. So we consider that award a, um, a landmark event for us, for multiple reasons. Number 1 is a very large contract, uh, number 2. It's the, it's the technology of the future that is going to make a huge impact in our entire space domain, uh, as a whole for the country. Um, and uh, we're, uh, we're the best in the world in that category our technology is second to none. There's nobody that can actually do it better than us in this area and I expect this to actually go. So our customers very motivated to go fast. Um it obviously we uh the the the funding is to do a couple of things 1 is to finish the development and the first article of the system and also the second 1 is to actually transition it to initial rate, low production and prepare for a full rate production which will happen a year later, um, well over a year later. So that's exactly what we're working on. Uh, we're very bullish on that. I think the market for laser communication.

Hi, Good afternoon, Wahid, Kevin and Denise. So just my first question just looking through the budget and the congressional drafts of the budget. There was about $68 million in there for a launch effects, which is I guess, what they renamed <unk>.

And I presume that does not include Fms to Ukraine, correct, Thats, just purely army stockpiling.

That is that is also my understanding Austin that the $68 million thats in the budget for launch. The fact is all it's only for the U S. Domestic consumption of the different very variance of their launch effects because launch effects comes in.

Small medium and different sizes.

And different effects.

It's only for the domestic U S dod's not for the <unk> customers and demand.

Is huge, um, you know, there's 2 reasons for that number 1, there's lots and lots of satellites in space that is going to require this this mechanism of communication, RF communication. As I said earlier, is is basically compromisable and compromised already satellites need to communicate to the ground and to each other. We've got the secret sauce and the technology to do it. We've got the pole position in the market. We've got a solution that works and the customers love and as more and more satellites come on line. The need for this is going to become more and more evident and so it's a groundbreaking event for us and we feel very good about that for the long term. So I think it's going to be a significant growth driver over the next several years Beyond just fiscal 26 for us. Once we transition from low rate, production to full rate production and deployment of the systems out in space.

Okay and could you just go into a little bit of detail on the energy requirements for Locust on an amp Hal or D. <unk> platform mobile ground vehicle versus the energy budget, that's available for our fixed and placement or on a navy ship for example.

Great. Thanks for the colorway. He really appreciates it.

You're welcome.

Our next question comes from Austin Mueller with Kenakore Genuity. You may proceed.

Yes, so Austin, that's another area I'm glad you brought this up because our directed energy low cost laser system.

Solid Chinese to solve the problem the readmission problem of how do you detect and defeat a group one or two or three drone or a fast moving missile and the way to do what most people are trying to add more energy and pump more energy at the target.

Hi, good afternoon Waheed, Kevin and Denise. Uh, so just my first question, just looking through the, the budget in the Congressional, drafts of the budget. There's about 68 million in there for launched effects, which is, I guess, what they renamed Elms. Uh, and I presume that does not include FMS to Ukraine. Correct. That's just purely Army stock filing.

But if youre not firing correctly as a target and accurately.

Essentially useless. So that you can make it as big as you like it isn't going to be affected.

The secret sauce to our solution is that we have the best technology when it comes to actually delivering those bolt ons in the laser at the right.

Um, that is, that is also my understanding Austin, that the 68 million dollars that's in the budget for launch. The fact is all it's only for the US domestic consumption of the different various variants of the launch effects because launch effects comes in small medium and different sizes uh, in different effects. Um, it's only for the domestic USD needs not for the FMS customers in demand.

Since of the target.

And actually identifying the target classifying it and then pointing to laser directly whether you want to actually defeat the target and make it come off from the fall in the ground and so that secret sauce is very very unique to <unk> core competency and expertise and that's why our solution doesn't require a lot of power we are roughly about 12.

Okay. And could you just go into a little bit of detail on the energy requirements for Locust on an ampel, or de deem shore-adjacent platform, mobile ground vehicle versus the energy budget that's available for a fixed placement or on a Navy ship, for example.

Kilowatts, 615% to 20 kilowatt system and we have plans to go higher.

Uh, yeah. So, Austin. That's another area. I'm glad you brought this up because our directed energy Locust laser system...

<unk> and other systems are much much more expensive much bulkier and bigger and less.

Mobile and maneuverable with our system has been installed as I said on the call.

Remarks that we have installed it and we delivered it to the U S Army on <unk>, TV, and we're going to deliver more of them U S. Army is very pleased with our system, it's performing really well on various test admissions.

Um, Solid tries to solve the problem. The real mission problem of how do you detect and defeat a group of 1, 2, or 3 drones or a fast-moving missile. And the way you do it, most people are trying to add more energy and pump more energy at the target.

And we believe that this is a market that we're just scratching the surface today.

Uh, but if you're not firing correctly at the target and accurately, it's essentially useless. So, you can make it as big as you like. It ain't going to be effective.

And I believe it's going to be a very large part of the counter UAS counter hypersonic missile defense system, including the Golden Girls. So it has multiple applications in the market for various missions and.

The secret sauce to our solution is that we have the best technology when it comes to actually delivering those phones and the laser at the right points of the target.

We're actually quite encouraged and enthused by that.

That's very interesting thank you for the detail.

Youre welcome Austin.

Our next question comes from Austin Bohlig with Needham You May proceed.

Hi, Thanks for taking my question and congrats on the solid results guys.

My question is thank you otherwise the guidance forward.

Yeah Michael.

My question has to deal with the full year guidance I think you guys have.

The status and prior questions, but if I'm understanding you right with all of the big funding that was in the OLED.

Ben.

Allocated to specific departments is it fair to assume that none of that is baked into your current guidance so might leave some room for upside.

Systems are much much more expensive, much bulkier and bigger and less um mobile and maneuverable. Our system can be has been installed as I said on the call on my remarks that we've installed it. And we delivered it to the US Army on a jltv and we're going to deliver more of that US. Army is very pleased with our system. It's performing really well on various tests and missions and we believe that this is a market that we're just scratching the surface today.

Occurring contracts flow over the next couple quarters.

So to answer some of that is baked in but not all of it and the reason for that is because it's a it's.

It's a very fluid.

And I believe it's going to be a very large part of the counter UAS and counter hypersonic missile defense system, including the Golden Girls. So it has multiple applications in the market for various missions, and we're actually quite encouraged and induced by that.

Sort of timing in the market.

Those funding of the OLED.

That's very interesting. Thank you for the details.

You're welcome, Austin.

And then as I said at all hit all the accounts within our customers' CIS.

Systems for adjunctive able to contract that out now.

Our next question comes from Austin, bowling with Nem. You may proceed.

How long it takes to do that.

It really matters as to how much we can deliver these this year, primarily because of how much time, we're going to have left in the year to be able to execute against it there's only so much.

Hi. Thanks for taking my question, and congrats on the solid results, guys. Um, my question is with you guys this 4 years.

Planning and at risk that we can go given the situation that we're in right now so for that reason I would say, we feel very strong about our current guidance.

Some of that will be the dollars.

Is baked into our guidance on guidance and our expectations and some of it is not and then the everyday that goes by by the budget is not being approved or a continuing resolution going forward or the dollar amount they're hitting their accounts.

Yeah. Um, my question has to deal with the full year guidance. And I think you guys have, um, discussed this in prior questions, but if I'm understanding you right, with all of this big funding that was in the OBB, um, has yet to be allocated to specific departments, is it fair to assume that none of that is baked into your current guidance? So, my...

Needs something to upside if if current contracts flow over the next couple quarters.

It could actually it actually adds more risk for that not to happen this year, but it will happen in the following year, regardless, we're going to have a great year, and we're going to most likely going to finish the year strong with a very strong pipeline in <unk> bookings that can set us up for even more success beyond fiscal 'twenty six.

Got it just a quick follow up like with <unk>.

So to us that some of that is baked in but not all of it. And the reason for that is because it's a, it's a very fluid, uh, sort of timing in the market, uh, those funding of the OBD, uh, as as I said in all hit, all the accounts within our customers.

All of that funding that you guys are including in your current guidance, like which which technologies or products is that focused more on the UAS side counter UAS would just love some color on.

Systems for them to be able to contact that out. Now how long it takes?

Austin so.

It is so difficult to just named one particular product or technology that we have relative to the priorities of the defense.

To do that really matters as to how much we can deliver this year, primarily because of how much time we have left in the year to be able to execute against it. There's only so much.

Im a very firm believer that.

The prospects for growth and prosperity for ABB has never been better.

And we're going to have a fantastic year this year, and we're positioned and poised to grow even more beyond this fiscal year.

There is money and their funding and there is need urgent requirements for drones for loitering munitions for counter UAS RF for lasers for the Golden Dome for software solutions that we have is our <unk>.

Therefore, our tightened family of RF Jammers, Theres money for space laser communication and meet for that and also for phased arrays and scar and Badger systems that we have I think the opportunity set for us both domestically internationally has never been better and we worked hard over the last decade.

Strong, with a very strong pipeline environment and bookings, that can set us up for even more success beyond personal 26.

Got it. Um, just a quick follow-up, like, within, uh, of that funding that you guys are, including in your current guidance like which, which Technologies or products is that focused in? Is that more on the uas side, counter uas? We just love some color there.

To position ourselves.

Um, often. So

For this type of an opportunity that really is remarkably unique in my view and so we're very pleased with the execution of our team I am pleased with our results and how we put the investments we've made in the best we've made.

It is so difficult to just name one particular product or technology that we have relative to the priorities of the defense. I am a very firm believer that.

And the company, we have built to position ourselves and that we look forward to.

Updating you in the quarters to come.

Awesome. Thank you guys best of luck.

Thank you. Thank you.

Thank you I would now like to turn the conference back to Denise for any closing remarks.

Thank you once again for joining today's conference call and for your interest in Aerovironment. As a reminder, an archive version of this call SEC filings and relevant needs 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.

Thank you. This concludes today's conference call you may now disconnect.

the prospects for growth and prosperity for ab has never been better and we're going to have a fantastic year this year and we're positioned in poised to grow even more beyond the fiscal year. Uh there is money and there's funding and there's need urgent requirements for drones for loitering Munitions for counter uas, RF for lasers for the golden dome for software solutions that we have as our av Halo is therefore, our Titan, family of our Jammers, there's money for, uh, space laser communication and needs for that, and also, for phase to raise and Scar, and Badger systems that we have. I think the opportunity is just for us. Both domestically internationally has never been better. And, you know, we've worked hard over the last decade to position ourselves.

For this type of an opportunity that really is a remarkably unique in my view. Um, and so we're very pleased with the execution of our team, uh, pleased with our results and how we put Investments we've made and the best we've made. Um, and the company we've built to position ourselves and we look forward to

Updating you in the quarters to come.

Awesome. Well, thank you guys best of luck.

Thank you. Thank you.

Thank you. I would now like to turn the conference back to Denise for any closing remarks.

Thank you once again for joining today's conference call and for your interest in our environment. As a reminder, an archived version of this call, along with filings and relevant news, can be found under the investor 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.

Thank you. This concludes today's conference call. You may now disconnect.