AeroVironment (AVAV) Q4 2025 Earnings Transcript
Key Takeaways
Image source: The Motley Fool. DATETuesday, June 24, 2025, at 4:30 p. EDTCALL PARTICIPANTSChairman, President, and Chief Executive — Wahid NawabiExecutive Vice President and Chief Financial Officer — Kevin McDonnellDirector...
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June 25, 2025
09:29 AM
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DATETuesday, June 24, 2025, at 4:30 p
EDTCALL PARTICIPANTSChairman, President, and Chief Executive — Wahid NawabiExecutive Vice President and Chief Financial Officer — Kevin McDonnellDirector of Investor Relations — Denise PaccioliNeed a quote from one of our analysts. [ tected]TAKEAWAYSRevenue: Total revenue reached $821 million for FY2025, up 14% compared to the prior year period, and $275 million for the fourth quarter of fiscal year 2025, up 40% in the quarter
Bookings: Bookings for fiscal year 2025 totaled $1. 2 billion, demonstrating significant demand for core offerings
Funded Backlog: FY2025 with a funded backlog of $726 million, 82% higher than the prior fiscal year
Segment Performance: Loitering Munitions Systems revenue rose 87% to $138 million in Q4 FY2025 and 83% to $352 million for FY2025; UXS fourth quarter revenue was $113 million, up nearly 9% in the quarter; McCready Works revenue increased 24% to $24 million in Q4 FY2025
Switchblade Portfolio: Secured a nearly $1 billion five-year U
Army IDIQ sole-source contract in FY2025, the largest in company history
International Penetration: 52% of revenue was international in FY2025, with non-Ukraine European customers accounting for over 24% of total revenue
Adjusted EBITDA: Adjusted EBITDA was $61. 6 million (up from $22. 2 million) in Q4 FY2025, and $146. 4 million for fiscal year 2025, representing 17. 8% of revenue (15% increase in adjusted EBITDA over FY24)
GAAP Net Income: GAAP net income was $16. 7 million in Q4 FY2025, $10. 6 million higher than the prior year quarter; full-year GAAP net income was $43. 6 million for FY2025, down $16 million due to an $18. 4 million goodwill impairment, $17. 2 million higher deal integration costs, and a $2. 1 million legal accrual
Adjusted EPS: Adjusted diluted EPS was $1. 61 for the fourth quarter of fiscal 2025, compared to $0. 43 for the same period in fiscal 2024
Blue Halo Acquisition: Acquisition closed May 1, $925 million in debt paid via $700 million loan and partial use of $350 million revolving credit line; forma FY2025 revenue for the combined entity was apximately $1
FY26 Revenue and Guidance: Revenue guidance for FY2026 is $1. 9 billion–$2 billion, adjusted EBITDA is $300 million–$320 million for FY2026, and adjusted EPS $2. 8–$3; visibility to midpoint is 70%
Gross Margins: FY2025 gross margins were 41. 2% (GAAP), down slightly from 41. 5% in FY2024; adjusted gross margin was 39% in Q4 FY2025, with duct margins flat and service margins down 8% in the quarter due to mix changes
Operating Expenses: SG&A in Q4 FY2025 (net of deal/integration/legal/amortization) was $34. 8 million, up 6% compared to the prior year period
R&D expense in Q4 FY2025 was $25 million, or 9% of revenue in the quarter (down from 18% of total revenue in the prior year)
Cash and Investments: quarter with $72. 5 million, unchanged from prior quarter; Unbilled receivables increased $60 million during Q4 FY2025, largely attributed to LMS in-cess volume during the quarter
FY26 Segment Guidance: Autonomous Systems revenue is $1. 2 billion–$1. 4 billion for FY2026 (over 20% growth for the Autonomous Systems segment in FY2026 versus forma FY2025); Space Cyber and Directed Energy $700 million–$900 million (double-digit organic revenue growth for FY2025)
SUMMARYManagement confirmed that the fourth quarter and full-year results exclude Blue Halo’s financials, except pre-closing deal and integration expenses
Order intake for Switchblade ducts included $250 million from eight countries in FY2025, and more than half of JUMP 20’s nearly $100 million in Q4 FY2025 orders were from international customers
Department of Defense remains a primary growth driver, with new gram awards, such as the $1 billion IDIQ, and increases in manufacturing capacity planned to support greater than $1 billion in annual Switchblade revenue
Wahid Nawabi said, "We are confident AV is better positioned than ever," and issued initial FY2026 revenue guidance of $1. 9 billion–$2 billion
Nawabi also said there were no write-downs related to our LMS or FMS sales in the quarter
P550 is expected to win a U
Army LRR gram of record decision within the next two quarters ing Q4 FY2025; the initial international P550 order may be booked in Q1 or Q2 FY2026
Red Dragon generated initial revenue at McCready Works and may see significant long-term growth, benefiting from fewer ITAR export restrictions on base units
Adjusted gross margins for FY2026 are forecast in the 29%–31% range
Higher SG&A and CapEx spending are expected to support expanded global operations and duction scaling, with plans for another manufacturing facility for Switchblade
Integration of Blue Halo is underway
Synergies are jected at $10 million in FY2026, with initial cost benefits weighted toward the back half of FY26
Ukraine contributed 18% of FY2025 revenue but is expected to fall below 5% in FY2026, counterbalanced by further non-Ukrainian international growth
INDUSTRY GLOSSARYID/IQ (Indefinite Dery/Indefinite Quantity): A government contract vehicle that vides for an indefinite quantity of supplies or services during a fixed period
UXS: Refers to uncrewed systems segment, encompassing unmanned aerial and ground vehicles
Switchblade: AeroVironment’s family of loitering munition systems, including Switchblade 300 and 600, used for precision strike missions
JUMP 20: A vertical takeoff and landing medium uncrewed aircraft system (MUAS) designed for shipboard and land operations
IRAD: Internal Re and Development; funded by the company to create new nologies or ducts
ITAR (International Traffic in Arms Regulations): U
Regulations controlling the export of defense and military-related nologies
Army’s gram Executive Office responsible for equipping soldiers with combat systems, including unmanned systems
Full Conference Call TranscriptOperator: Good day, and thank you for standing by
Welcome to AeroVironment's Fourth Quarter and Full Fiscal Year 2025 Earnings Conference Call
After the speakers' presentation, there will be a question-and-answer session
To ask a question during the session, you will need to press star 11 on your telephone
Please be advised that today's conference is being recorded
I would now to hand the conference over to your speaker today, Director of Investor Relations, Denise Paccioli
Denise Paccioli: Thank you, and good afternoon, ladies and gentlemen
Welcome to AeroVironment's Fourth Quarter and Full Fiscal Year 2025 earnings call
My name is Denise Paccioli, 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 in the company's 10-Ks and other filings with the SEC, in particular, in the Risk and Forward-Looking Statements portions of such filings
Copies are available from the SEC, on the AeroVironment website, or from our Investor Relations team
This afternoon, we also filed a slide presentation with our earnings release and posted the presentation to the Investors section of our website under Events and Presentations
The content of this conference call contains time-sensitive information that is accurate only as of today, 06/24/2025
The company undertakes no obligation to any forward-looking statements whether as a result of new information, future events, or otherwise
Joining me today from AeroVironment are Chairman, President, and Chief Executive, Mr
Wahid Nawabi, and Executive Vice President and Chief Financial Officer, Mr
We will now begin with remarks from Wahid Nawabi
Wahid Nawabi: Thank you, Denise
Welcome, everyone, to our fourth quarter and fiscal year 2025 earnings conference call
I will start by summarizing our quarterly and full-year performance, ed by Kevin, who will review our financial results in greater detail and vide guidance for fiscal year 2026
I will then vide a summary of our key messages, and finally, Kevin, Denise, and I will take your questions
Please be aware that our fourth quarter and fiscal year 2025 financial results do not include any financial activity from the Blue Halo acquisition, except for pre-closing deal and integration-related expenses
I'm pleased to report that once again, we have achieved another record fourth quarter and full-year results, exceeding our expectations while positioning us for even greater long-term fitable growth
We had an incredible year, marked by robust demand for our innovative solutions, which enabled us to achieve double-digit organic revenue growth and a significant increase in fitability
Our investments in all segments helped drive demand for our ducts, which led to key domestic and international wins and enabled us to launch three new ground ducts this year, namely the P550, the JUMP 20X, and the Red Dragon
Now I would to highlight our key messages for fiscal year 2025, which are included on slide number three of our earnings presentation
First, we achieved record fiscal year revenue of $821 million, which is 14% higher than the prior year period, and record fourth quarter revenues of $275 million, which is 40% higher than the prior year period
Second, in fiscal year 2025, we secured $1. 2 billion in total bookings, underscoring the robust demand for our innovative and battle-ven solutions
Third, we fiscal year 2025 with a funded backlog of $726 million, which is 82% higher than the prior fiscal year
Fourth, we closed our acquisition of Blue Halo, further strengthening our industry-leading position as the next-generation defense prime, with an all-domain portfolio of innovative solutions across air, land, sea, space, and cyber
And fifth, we are confident AV is better positioned than ever as a result of important company milestones we achieved throughout the fiscal year, and we're setting our fiscal year 2026 revenue guidance between $1. 9 billion to $2 billion
In a growing and evolving market, AV's fifty-plus years of ven track record of dering next-generation solutions, with a ven ability to manufacture at scale, remain key differentiators that set us apart
We've been working side by side with our customers and the battlefields to help define and der solutions, which are shaped by real-world threats they face
Over the past decade alone, we have invested nearly $2 billion in R&D to develop disruptive software-defined hardware solutions, and we believe we remain extremely well-positioned to meet our customers' rising demands by dering them the best-in-class solutions aligned with their needs
As an example, this past fiscal year, we introduced three significant new ducts that are directly aligned to our customers' highest priorities
The first is our new group two AI-driven autonomous UAS, the P550, which leverages a modular open system apach
Second, we unveiled our JUMP 20X, which is a vertical takeoff and landing or VTOL medium uncrewed aircraft system or MUAS, engineered to revolutionize shipboard UAS operations
With an advanced heavy fuel engine and fully autonomous takeoff and landing on a moving small battleship, Jump 20X enhances operational flexibility, simplifies refueling logistics, and ensures mission adaptability across diverse maritime and expeditionary environments
And finally, we introduced our new one-way attack drone solution, Red Dragon, which is a fully autonomous capable GPS-denied one-way attack UAS that directly ties to the needs of our US Department of Defense customers
As demand for our new and existing solutions continues to rise, we remain confident in our robust manufacturing capacity to scale at affordable costs to meet our customers' urgent needs
We are confident that we're well-positioned for strong organic growth in fiscal year 2026 and beyond
With that, now I would to vide on each of our three segments, starting with Loitering Munitions Systems or LMS
Our LMS segment continues to drive expansive growth for the company
LMS revenues for the fourth quarter rose 87% to $138 million, and for the full fiscal year, revenues of $352 million were 83% higher
Fiscal year '25 reiterated the importance and effectiveness of all our Switchblade family of solutions
This fiscal year, we secured a total of $477 million in funded contract awards
We also secured the single largest award in our fifty-four-year history with a five-year sole-source Army IDIQ contract for Switchblade ducts and services valued at nearly $1 billion
International demand for our Switchblade ducts also remained strong
There are now eight countries that have placed firm initial orders and an additional eight allies actively engaged in the foreign military sales cess
With demand for Switchblades on the rise, we remain active in our manufacturing facility expansion efforts in Utah and expect to have initial duction capability by the end of this fiscal year
This new duction facility will enable us to support more than $1 billion in annual Switchblade revenues
Now on to our uncooled systems segment or UX
Our UXS segment posted fourth quarter revenues of $113 million, which is higher than the prior year period by nearly 9%
For the full fiscal year, revenues were slightly lower than the same period last year, at $382 million
The Puma AE UAS, a multibillion-dollar duct franchise for AV, remains a fitable and sustainable growth driver for the company
As I mentioned earlier, we introduced our new P550 UAS this past fiscal year
Our P550 will continue to lead the entire small UAS industry with many unique features, and we're expanding our manufacturing capacity in anticipation of increased demand
As we noted last quarter, the Department of Defense announced two grams worth over $1 billion in value
We're confident our P550 solution will compete effectively and win key contracts
Our Group three medium UAS, JUMP 20, has gained significant traction, particularly in the international marketplace
Most recently, we secured a $46 million contract with the Italian Ministry of Defense
Maritime efforts on the JUMP-20X are gressing, and we anticipate strong interest and demand for this in the near future
Additionally, our uncrewed ground vehicle or UGV received a contract to der 41 UGVs to the German federal armed forces, with deries scheduled for the summer of 2025 through 2027
This represents one of the largest UGV awards in our company's history
We remain confident in our UxS segment's long-term outlook due to market growth, key contract wins, and expanding international opportunities
Moving now to our McCready Works segment, McCready Works continues to develop industry-leading next-generation solutions and i.
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