AeroVironment Inc
For the period ended Aug 2, 2025. Filed Sep 10, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Aug 2, 2025 · Filed Sep 10, 2025
AVAV$112.76+10.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-01-25; filed 2025-03-05.
0001558370-25-002198
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-08-02; filed 2025-09-10.
0001558370-25-011973
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 91 previous paragraphs and 55 current paragraphs.
21 unchanged; 18 reworded; 14 added; 50 removed; 2 previous and 2 current paragraphs rearranged.
Tables are not compared: 17 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (14)
Current report
For the three months ended July 27, 2024, favorable cumulative catch-up adjustments of $0.8 million were primarily due to final cost adjustments on 11 contracts, which individually were not material. For the same period, unfavorable cumulative catch-up adjustments of $0.3 million were primarily related to higher than expected costs on 10 contracts, which individually were not material.
Current report
As part of our annual goodwill impairment and identifiable asset test during the fiscal quarter ended April 30, 2025, we determined the carrying value of the Unmanned Ground Vehicles (“UGV”) reporting unit exceeded its fair value due to a decrease in forecasted results of the UGV reporting unit resulting from reduced probability and delays of obtaining certain opportunities as well as an increase in forecast expenditures to support operational decisions identified during the fiscal quarter ended April 30, 2025. These changes in estimates resulted in the recognition of a goodwill impairment charge of $18.4 million during the three months ended April 30, 2025 in the UGV reporting unit. We determined that it was more likely than not that the fair value of our other reporting units were more than their carrying values as of the annual goodwill impairment test date. As such, during the most recent annual impairment test during the fourth quarter of fiscal year 2025, the estimated fair value of all reporting units, other than UGV, substantially exceeded their carrying value. As of August 2, 2025, we have not identified any events or circumstances that could trigger an impairment review prior to the Company’s annual impairment test, including taking into account the reporting units identified from the BlueHalo acquisition on May 1, 2025.
Current report
Revenue. Revenue for the three months ended August 2, 2025 was $454.7 million, as compared to $189.5 million for the three months ended July 27, 2024, representing an increase of $265.2 million, or 140%. The increase in revenue was due to an increase in product revenue of $154.0 million and an increase in service revenue of $111.2 million. The increase in product revenue was primarily due to the $123.7 million of product revenue resulting from our acquisition of BlueHalo in May 2025. Legacy AV product revenue included in the AxS segment increased by $30.3 million driven by an increase in LMS products due to increased global demand for our Switchblade products associated with the current global
Current report
conflicts as well as U.S. D.o.D. resupply, partially offset by a decrease in SUAS due to a decrease in international sales. The increase in service revenue was primarily due to the $111.5 million service revenue resulting from our acquisition of BlueHalo. Legacy AV service revenue, included in the AxS segment remained consistent as training and repairs service revenue decreased $2.0 million driven by the decrease in SUAS product sales, partially offset by an increase of $1.8 million in customer funded R&D and engineering services driven by an increase in contractor-owned, contractor-operated (“COCO”) demand. Proportion of service revenue to product revenue is expected to remain higher following the acquisition of BlueHalo.
Current report
Autonomous Systems
Current report
Revenue. AxS revenue for the three months ended August 2, 2025 was $285.3 million, as compared to $189.5 million for the three months ended July 27, 2024, representing an increase of $95.8 million, or 51%. The increase in revenue was due to an increase in product and service revenues of $81.2 million and $14.6 million, respectively. The increase in product revenue was primarily due to the $50.9 million of product revenue resulting from our acquisition of BlueHalo. Legacy AV product revenue included in the AxS segment increased by $30.3 million driven by an increase in LMS products due to increased global demand for our Switchblade products associated with the current global conflicts as well as U.S. D.o.D. resupply, partially offset by a decrease in SUAS due to a decrease in international sales. The increase in service revenue was primarily due to the $10.6 million of service revenue resulting from our acquisition of BlueHalo. Legacy AV service revenue, included in the AxS segment remained consistent as training and repairs service revenue decreased $2.0 million driven by the decrease in SUAS product sales, partially offset by an increase of $1.8 million in customer funded R&D and engineering services driven by an increase in COCO demand.
Current report
AxS Segment adjusted EBITDA. AxS segment adjusted EBITDA for the three months August 2, 2025 was $52.8 million, as compared to $37.1 million for the three months ended July 27, 2024, representing an increase of $16.0 million, or 42%. The increase in AxS segment adjusted EBITDA was primarily due to an increase in revenue of $95.8 million. The increase in AxS segment adjusted EBITDA was partially offset by an increase in adjusted cost of sales of $68.6 million, adjusted SG&A of $5.3 million primarily due employee related costs driven by the increased headcount, and R&D of $5.2 million. The increase in adjusted cost of sales was primarily due to an increase of approximately $37 million associated with the recently acquired BlueHalo product lines, an increase of approximately $16 million due to mix shift to a higher proportion of lower margin products driven by the increase in Switchblade production and approximately $16 million due to the increase in sales volume.
Current report
Space, Cyber and Directed Energy
Current report
Revenue. SCDE revenue for the three months ended August 2, 2025 was $169.4 million, as compared to $0 for the three months ended July 27, 2024. The SCDE segment consists of business units obtained in the BlueHalo acquisition on May 1, 2025, and the increase in revenue is a result of the acquisition.
Current report
SCDE Segment adjusted EBITDA. SCDE segment adjusted EBITDA for the three months August 2, 2025 was $3.8 million, as compared to $0 for the three months ended July 27, 2024, representing an increase of $3.8 million, or 100%. The SCDE segment consists of business units obtained in the BlueHalo acquisition on May 1, 2025, and the increase in segment adjusted EBITDA is a result of the acquisition.
Current report
On October 4, 2024, we amended the Credit Agreement to increase the Revolving Facility to $200 million, and the Term Loan Facility was repaid in full and removed from the Credit Agreement. Borrowings under the Credit Agreement may be used for working capital and other general corporate purposes, including acquisitions that meet certain parameters. In February 2025, we borrowed $15.0 million under the Revolving Facility. In May 2025, in connection with the consummation of the BlueHalo Acquisition, the Company entered into a Fourth Amendment to Credit Agreement with BofA NA, the administrative agent and the swingline lender, JPM, U.S. Bank, Citibank, BMO, Citizens and RBC. The Amended Credit Agreement provides for an aggregate $700.0 million term loan and an aggregate $350.0 million revolving credit facility. Upon effectiveness of the Amended Credit Agreement, we drew $225.0 million from the amended Revolving Facility and the full $700,000,000 of the Term Loan Facility. The proceeds from the Term Loan Facility and the Revolving Facility were used to repay certain outstanding indebtedness of BlueHalo and to pay for certain related transaction costs. In June 2025, we drew an additional $10.0 million under the Revolving Facility.
Current report
In July 2025, we issued 4,057,460 shares of common stock at a public offering price of $248.00 per share (the “Common Stock Offering”) and issued $747,500,000 aggregate principal amount of 0% convertible senior notes due 2030 (the “Notes Offering”). The aggregate net proceeds from the Common Stock Offering and the Notes Offering, after deducting underwriting discounts and debt and equity issuance costs, was approximately $1.70 billion. The Company used approximately $965.3 million of the net proceeds from the Common Stock Offering and the Notes Offering to repay indebtedness under the Term Loan Facility and outstanding borrowings under the Revolving Credit Facility, and the remainder is expected to be used for general corporate purposes, including to increase manufacturing capacity.
Current report
Due to the OBBBA, which allows R&D expenditures to be deducted, we expect our cash taxes paid for U.S. federal income taxes to be significantly reduced for the fiscal year ending April 30, 2026.
Current report
Cash Provided by (Used in) Financing Activities. Net cash provided by financing activities increased by $1,659.4 million to $1,645.4 million for the three months ended August 2, 2025, as compared to net cash used in financing activities of $(14.0) million for the three months ended July 27, 2024. The increase in net cash provided by financing activities was primarily due to proceeds from issuance of common shares of $968.5 million, net of underwriter costs and proceeds from the issuance of Notes of $726.9 million, net of underwriter costs. Part of the proceeds were used to repay the outstanding balances of the Term Loan Facility and Revolving Facility drawn in conjunction with the acquisition of BlueHalo.
Removed paragraphs (50)
Previous report
We recognize revenue in accordance with ASU 2014-09,Revenue from Contracts with Customers (“ASC 606”). ASC 606 requires revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which we expect to be entitled in exchange for those goods or services.
Previous report
Revenue for LMS product deliveries, customization of UGV transport vehicles and customer-funded research and development contracts is recognized over time as costs are incurred. Contract services revenue is for the provision of services, including repairs and maintenance, training, engineering design, development and prototyping activities, and technical support services. Contract services revenue, including ISR services, is recognized over time as services are rendered. We elected the right to invoice practical expedient in which if an entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date, such as flight hours for ISR services, the entity may recognize revenue in the amount to which the entity has a right to invoice. Training services are recognized over time using an output method based on days of training completed. For performance obligations satisfied over time, revenue is generally recognized using costs incurred to date relative to total estimated costs at completion to measure progress. Incurred costs represent work performed, which correspond with, and
Previous report
thereby best depict, transfer of control to the customer. Contract costs include labor, materials, subcontractors’ costs, other direct costs, and indirect costs applicable on government and commercial contracts.
Previous report
For performance obligations which are not satisfied over time per the aforementioned criteria above, revenue is recognized at the point in time in which each performance obligation is fully satisfied. Our Uncrewed Systems product sales revenue is primarily composed of revenue recognized on contracts for the delivery of UxS systems and spare parts, respectively. Revenue is recognized at the point in time when control transfers to the customer, which generally occurs when title and risk of loss have passed to the customer.
Previous report
For the three months ended January 25, 2025, favorable cumulative catch-up adjustments of $10.3 million were primarily due to cost adjustments on three contracts. During the three months ended January 25, 2025, the Company revised its estimates of the total expected costs to complete three LMS contracts. The aggregate impact of these adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was an increase to revenue of approximately $9.6 million. For the same period, unfavorable cumulative catch-up adjustments of $1.2 million were primarily related to higher than expected costs on 23 contracts, which individually were not material.
Previous report
For the three months ended January 27, 2024, favorable cumulative catch-up adjustments of $4.5 million were primarily due to cost adjustments on three contracts. During the three months ended January 27, 2024, we revised our estimates of the total expected costs to complete an LMS contract. The aggregate impact of these adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was an increase to revenue of approximately $3.6 million. For the same period, unfavorable cumulative catch-up adjustments of $0.1 million were primarily related to higher than expected costs on three contracts, which individually were not material.
Previous report
For the nine months ended January 27, 2024, favorable cumulative catch-up adjustments of $6.5 million were primarily due to cost adjustments on 17 contracts. During the nine months ended January 27, 2024, we revised our estimates of the total expected costs to complete an LMS contract. The aggregate impact of these adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was an increase to revenue of approximately $1.4 million. For the same period, unfavorable cumulative catch-up adjustments of $1.5 million were primarily related to higher than expected costs on eight contracts, which individually were not material.
Previous report
Subsequent to the performance of our annual goodwill impairment test for fiscal year 2023, in May 2023 a trigger event was identified that indicated that the carrying value of the MUAS reporting unit exceeded its fair value. Specifically, we received notification that we were not down selected for a U.S. D.o.D. program of record which resulted in a significant decrease in the projected future cash flows of the MUAS reporting unit. As a result, we updated our estimates of long-term future cash flows to reflect lower revenue and profitability growth rate expectations used in the valuation of the MUAS reporting unit. These changes in estimates, resulted in the recognition of a goodwill impairment charge of $156.0 million in the MUAS reporting unit during the fiscal year ended April 30, 2023.
Previous report
As of January 25, 2025, our MUAS reporting unit had a goodwill balance of $135.8 million. The estimated fair value of the MUAS reporting unit does not substantially exceed its carrying value due to the impairment recorded during the fourth quarter ended April 30, 2023. The fair value of the MUAS reporting unit exceeded its carrying value by 10% as of January 28, 2024, the date of the most recent annual goodwill impairment test. Fair value determinations utilized in the quantitative goodwill impairment test require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors. Estimating the fair value of individual reporting units requires us to make assumptions and estimates regarding future plans, as well as industry, economic, and regulatory conditions. These assumptions and estimates include estimated future annual net cash flows, income tax rates, discount rates, growth rates, and other market factors. Estimated future annual net cash flows based in part upon our ability to obtain contracts from the U.S. D.o.D. and foreign allied nations and negotiate the estimated pricing are considered the most significant, sensitive assumptions. If current expectations of future growth rates and margins are not met, if market factors outside of our control, such as discount rates, income tax rates, or inflation, change, or if management’s expectations or plans otherwise change, including updates to long-term operating plans, then MUAS may become impaired in the future. Accordingly, the MUAS reporting unit is considered at an increased risk of failing future quantitative goodwill impairment tests. The intangibles included in the MUAS reporting unit of $10.9 million as of January 25, 2025 will also be evaluated for potential impairment during the fourth quarter impairment test. During the most recent annual impairment test during the fourth quarter of fiscal year 2024, the estimated fair value of all reporting units, other than MUAS, substantially exceeded their carrying value. As of January 25, 2025, we have not identified any events or circumstances that could trigger an impairment review prior to the Company’s annual impairment test.
Previous report
We have identified three reportable segments, Uncrewed Systems (“UxS”), Loitering Munitions Systems (“LMS”) and MacCready Works (“MW”). The UxS segment consists of our SUAS, including our Tomahawk acquisition, MUAS and UGV product lines. The LMS segment consists of our renamed existing tactical missile systems product lines. The MW segment consists of our MacCready Works products and services and the development of High Altitude Pseudo-Satellite systems (“HAPS”). The following tables (in thousands) set forth our segment revenue and segment adjusted gross margin for the periods indicated. Prior period segment information has been revised to align with the new segment measure of profitability. Segment adjusted gross margin is defined as gross margin before intangible amortization expense including amortization of purchase accounting adjustments. All corporate and headquarter expenses are allocated to the reportable segments.
Previous report
We recorded intangible amortization expense and other purchase accounting adjustments in the following categories on the accompanying unaudited condensed consolidated statements of operations:
Previous report
Revenue. Revenue for the three months ended January 25, 2025 was $167.6 million, as compared to $186.6 million for the three months ended January 27, 2024, representing a decrease of $18.9 million, or 10%. The decrease in revenue was due to a decrease in product revenue of $16.2 million and a decrease in service revenue of $2.8 million. The decrease in product revenue was primarily due to a decrease in product deliveries of our UxS products of $46.7 million primarily due to a decrease in international sales to Ukraine. The decrease was partially offset by an increase of $28.9 million from the production of our Switchblade products primarily driven by increased global demand for our Switchblade products associated with the current global conflicts as well as U.S. D.o.D. resupply and an increase in product deliveries of our MW products of $1.7 million due to the shift from development to early production of certain new products. The decrease in service revenue was due to a decrease of $1.6 million of training and repairs service revenue driven by the decrease in UxS product sales and a decrease of $1.2 million in customer funded R&D and engineering services driven by a decrease in development programs in part due to delays in the establishment of the government fiscal year 2024 budget. The January 2025 Southern California high winds, fires and resulting blackouts and shutdowns negatively impacted revenue for the three months ended January 25, 2025. The increase in the LMS product revenues as compared to the prior year period is expected to continue for the remainder of the fiscal year ending April 30, 2025.
Previous report
Loitering Munitions Systems
Previous report
Revenue. LMS revenue for the three months ended January 25, 2025 was $83.9 million, as compared to $57.7 million for the three months ended January 27, 2024, representing an increase of $26.2 million, or 45%. The increase in revenue was due to an increase in product revenue of $28.9 million, partially offset by a decrease in service revenue of $2.6 million. The increase in product revenue was primarily due to increased production of our LMS systems primarily due to increased global demand for our loitering munitions systems associated with the current global conflicts as well as U.S. D.o.D. resupply. The decrease in service revenue was primarily due to decreases in customer-funded R&D activities primarily associated with the shift from development to production of certain Switchblade products.
Previous report
LMS Segment adjusted gross margin. LMS segment adjusted gross margin for the three months January 25, 2025 was $33.0 million, as compared to $18.0 million for the three months ended January 27, 2024, representing an increase of $15.0 million, or 83%. The increase in LMS segment adjusted gross margin was primarily due to an increase in revenue of $26.2 million, partially offset by an increase in adjusted cost of sales of $11.2 million. The increase in adjusted cost of sales was primarily due to an increase in sales volume of approximately $18 million, partially offset by a mix shift of approximately $7 million to related primarily to the definitization of LMS contracts. LMS is operating under multiple unpriced change orders, or UCO's, for which we recognize revenue based upon estimates of the final price negotiations. In the period these contracts are definitized a cumulative catch-up revenue adjustment may be recorded.
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Uncrewed Systems
Previous report
Revenue. UxS revenue for the three months ended January 25, 2025 was $63.8 million, as compared to $113.3 million for the three months ended January 27, 2024, representing a decrease of $49.5 million, or 44%. The decrease in revenue was due to a decrease in product revenue of $46.7 million and a decrease in service revenue of $2.9 million. The decrease in product revenue was primarily due to $46.7 million of decreased international sales of our UxS family of systems, most significantly sales to Ukraine. The decrease in service revenue was primarily due to a decrease of $1.9 million of customer-funded R&D and engineering services.
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UxS Segment adjusted gross margin. UxS segment adjusted gross margin for the three months January 25, 2025 was $29.4 million, as compared to $50.1 million for the three months ended January 27, 2024, representing a decrease of $20.7 million, or 41%. The decrease in UxS segment adjusted gross margin was primarily due to a decrease in revenue of $49.5 million, partially offset by a decrease of $28.8 million in adjusted cost of sales. The decrease in adjusted cost of sales was primarily due to a decrease in sales volume of approximately $29 million. Adjusted cost of sales is defined as cost of sales before intangible amortization expense including amortization of purchase accounting adjustments.
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MacCready Works
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Revenue. MW revenue for the three months ended January 25, 2025 was $19.9 million, as compared to $15.6 million for the three months ended January 27, 2024, representing an increase of $4.3 million, or 28%. The increase in revenue was due to an increase in service revenue of $2.7 million and an increase in product revenue of $1.6 million. The increase in service revenue was primarily due to an increase of $2.7 million in customer funded R&D and engineering services efforts primarily due to HAPS return to flight services. The increase in product revenue was primarily driven by the shift from development to production of certain new product lines.
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MW Segment adjusted gross margin. MW segment adjusted gross margin for the three months January 25, 2025 was $4.5 million, as compared to $3.3 million for the three months ended January 27, 2024, representing an increase of $1.2 million or 36%. The increase in MW adjusted gross margin was primarily due to an increase in revenue of $4.3 million, partially offset by an increase in adjusted cost of sales of $3.1 million. The increase in adjusted cost of sales was primarily due to an increase in sales volume of approximately $3 million.
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Nine Months Ended January 25, 2025 Compared to Nine Months Ended January 27, 2024
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The following tables (in thousands) sets forth our revenue, gross margin and adjusted gross margin generated by each reporting segment for the periods indicated. Adjusted margin is defined as gross margin before intangible amortization, amortization of purchase accounting adjustments. All corporate and headquarter expenses are allocated to the reportable segments.
Previous report
Revenue. Revenue for the nine months ended January 25, 2025 was $545.6 million, as compared to $519.7 million for the nine months ended January 27,2024, representing an increase of $25.8 million, or 5%. The increase in revenue was due to an increase in product revenue of $29.3 million, partially offset by a decrease in service revenue of $3.5 million. The increase in product revenue was primarily due to an increase of $98.7 million from the production of our Switchblade products, driven by increased global demand for our LMS associated with the current global conflicts as well as U.S. D.o.D. resupply and a cumulative catch-up revenue adjustment for the definitization of LMS contracts of $9.9 million. The increase was partially offset by a decrease of $69.4 million of product deliveries of our UxS products, primarily due to a decrease in international sales to Ukraine. The decrease in service revenue was primarily due to a decrease of $1.9 million in customer funded R&D and engineering services due to a decrease in development programs in part due to delays in the establishment of the government fiscal year 2024 budget and a decrease of $1.6 million in training and repair services primarily due to the decrease in UxS product revenue. The January 2025 Southern California high winds, fires and resulting blackouts and shutdowns negatively impacted revenue for the three months ended January
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25, 2025. The increase in the LMS product revenues as compared to the prior year period is expected to continue for the remainder of the fiscal year ending April 30, 2025.
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Cost of Sales. Cost of sales for the nine months ended January 25, 2025 was $327.3 million, as compared to $311.4 million for the nine months ended January 27, 2024, representing an increase of $15.9 million, or 5%. The increase in cost of sales was a result of an increase in product cost of sales of $13.4 million, partially offset by a decrease in service costs of sales of $2.4 million. The increase in product costs of sales was primarily due to an increase of approximately $16 million associated with the increase in product revenue, partially offset by approximately $3 million due to a mix shift related primarily to the definitization of LMS contracts. The increase in service cost of sales was primarily due to an increase in mix shift of approximately $5 million due to a higher proportion of fixed asset allocated costs, partially offset by a decrease of approximately $3 million associated with the decrease in service revenue. Cost of sales for the nine months ended January 25, 2025 included $11.1 million of intangible amortization and other related non-cash purchase accounting expenses as compared to $9.6 million for the nine months ended January 27, 2024. As a percentage of revenue, cost of sales remained consistent at 60% resulting in gross margin remaining consistent at 40%.
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Selling, General and Administrative**.**SG&A expense for the nine months ended January 25, 2025 was $115.5 million, or 21% of revenue, as compared to SG&A expense of $79.8 million, or 15% of revenue, for the nine months ended January 27, 2024. The increase in SG&A expense was primarily due to an increase of $12.0 million in acquisition related expenses, $11.3 million of sales and marketing expense primarily driven by an increase in bid and proposal efforts and an increase of $9.0 million in employee related expenses primarily driven by an increase in average headcount to support our growth and expansion of our global business development team. Sales and marketing expense includes commissions on certain direct commercial sales to international customers, and an increase in revenue results in an increase in commission expense.
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Research and Development. R&D expense for the nine months ended January 25, 2025 was $75.8 million, or 14% of revenue, as compared to R&D expense of $62.6 million, or 12% of revenue, for the nine months ended January 27,2024. The increase was primarily due to an increase in development activities regarding enhanced capabilities for our products, development of new product lines and support for our acquired businesses.
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Interest Expense, net. Interest expense, net for the nine months ended January 25, 2025 was $1.2 million compared to $4.1 million for the nine months ended January 27,2024. The decrease in interest expense, net was primarily due to lower average outstanding balances on our debt facility.
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Other Income, net. Other income, net, for the nine months ended January 25, 2025 was $0.8 million compared to other loss, net of $(3.0) million for the nine months ended January 27, 2024. The increase was primarily due to net unrealized gains associated with the fair market value of our equity security investments.
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Provision for Income Taxes. Our effective income tax rate was 2.5% for the nine months ended January 25, 2025, as compared to 6.3% for the nine months ended January 27, 2024. The decrease in our effective income tax rate was primarily due to an increase in FDII deductions and excess tax benefits from the vesting of equity awards. The effective income tax rate for the nine months ended January 25, 2025 was primarily impacted by expected federal R&D tax credits and FDII deductions and excess tax benefits from equity awards.
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Equity Method Investment Income (Loss), net of Tax. Equity method investment income, net of tax for the nine months ended January 25, 2025 was $1.1 million as compared to equity method investment loss, net of tax of $(1.5) million for the nine months ended January 27,2024.
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Loitering Munitions Systems
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Revenue. LMS revenue for the nine months ended January 25, 2025 was $213.6 million, as compared to $118.8 million for the nine months ended January 25, 2025, representing an increase of $94.8 million, or 80%. The increase in revenue was due to an increase in product revenue of $98.7 million, partially offset by a decrease in service revenue of $3.9 million. The increase in product revenue was primarily due to increased production of our LMS systems primarily due to increased global demand for our loitering munitions systems associated with the current global conflicts as well as U.S. D.o.D. resupply and a cumulative catch-up revenue adjustment for the definitization of LMS contracts of $9.9 million. The decrease in service revenue was primarily due to decreases in customer-funded R&D activities primarily associated with the shift from development to production of certain Switchblade products.
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LMS Segment adjusted gross margin. LMS segment adjusted gross margin for the nine months January 25, 2025 was $76.4 million, as compared to $39.6 million for the nine months ended January 27, 2024, representing an increase of $36.8 million, or 93%. The increase in LMS segment adjusted gross margin was primarily due to an increase in revenue of $94.8 million, inclusive of the cumulative catch-up revenue adjustment of $9.9 million, partially offset by an increase in adjusted cost of sales of $58.0 million. The increase in adjusted cost of sales was primarily due to an increase in sales volume of approximately $62 million, partially offset by mix shift of approximately $4 million related primarily to the definitization of LMS contracts. LMS is operating under multiple unpriced change orders, or UCO's, for which we recognize revenue based upon estimates of the final price negotiations. In the period these contracts are definitized a cumulative catch-up revenue adjustment may be recorded.
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Uncrewed Systems
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Revenue. UxS revenue for the nine months ended January 25, 2025 was $269.1 million, as compared to $344.3 million for the nine months ended January 27, 2024, representing a decrease of $75.2 million, or 22%. The decrease in revenue was due to a decrease in product revenue of $69.4 million and a decrease in service revenue of $5.7 million. The decrease in product revenue was primarily due to $69.4 million of decreased international sales of our SUAS family of systems, significantly sales to Ukraine. The decrease in service revenue was primarily due to a decrease of $4.8 million of customer funded R&D and engineering services primarily due to the completion of certain MUAS contracts during the nine months ended January 27, 2024.
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UxS Segment adjusted gross margin. UxS segment adjusted gross margin for the nine months January 25, 2025 was $138.0 million, as compared to $166.1 million for the nine months ended January 27, 2024, representing a decrease of
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$28.1 million, or 17%. The decrease in UxS segment adjusted gross margin was primarily due to a decrease in revenue of $75.2 million, partially offset by a decrease of $47.1 million in adjusted cost of sales. The decrease in adjusted cost of sales was due to a decrease in sales volume of approximately $40 million and by a mix shift of approximately $7 million primarily due to primarily due to a higher proportion of international products sales. Adjusted cost of sales is defined as cost of sales before intangible amortization expense including amortization of purchase accounting adjustments.
Previous report
MacCready Works
Showing the first 40 of 50 passages. Open the source sections for the rest.
Reworded paragraphs (18)
Previous wording
We review cost performance, estimates-to-complete and variable consideration at least quarterly and in many cases more frequently. Adjustments to original estimates for a contract’s revenue, estimated costs at completion and estimated profit or loss are often required as work progresses under a contract, as experience is gained and as more information is obtained, even though the scope of work required under the contract may not change, or if contract modifications, including the finalization of undefinitized contract actions, occur. The impact of revisions in estimate of completion and variable consideration for all types of contracts are recognized on a cumulative catch-up basis in the period in which the revisions are made. Changes in variable consideration associated with the finalization of undefinitized contract actions could result in cumulative catch up adjustments to revenue that could be material. During the three and nine months ended January 25, 2025 and January 27, 2024, changes in accounting estimates on contracts recognized using the over time method are presented below. Amounts representing contract change orders or claims are included in revenue if the order or claim meets the criteria of a contract or contract modification in accordance with ASC 606. Incentives or penalties and awards applicable to performance on contracts are considered in estimating revenue and profit rates, and are recorded when there is sufficient information to assess anticipated contract performance.
Current wording
Adjustments to original estimates for a contract’s revenue, estimated costs at completion and estimated profit or loss are often required as work progresses under a contract, as experience is gained and as more information is obtained, even though the scope of work required under the contract may not change, or if contract modifications, including the finalization of undefinitized contract actions, occur. The impact of revisions in estimate of completion and variable consideration for all types of contracts are recognized on a cumulative catch-up basis in the period in which the revisions are made. Changes in variable consideration associated with the finalization of undefinitized contract actions could result in cumulative catch up adjustments to revenue that could be material. During the three months ended August 2, 2025 and July 27, 2024, changes in accounting estimates on contracts recognized using the over time method are presented below. Amounts representing contract change orders or claims are included in revenue if the order or claim meets the criteria of a contract or contract modification in accordance with ASU 2014-09, Revenue from Contracts with Customers (“ASC 606”).
Previous wording
For the nine months ended January 25, 2025, favorable cumulative catch-up adjustments of $11.6 million were primarily due to cost adjustments on four contracts. During the nine months ended January 25, 2025, we definitized certain LMS undefinitized contract actions. The aggregate impact of these cumulative catch-up revenue adjustments for the contract definitization was an increase to revenue of approximately $9.9 million. The remaining adjustments individually were not material. For the same period, unfavorable cumulative catch-up adjustments of $2.1 million were primarily related to higher than expected costs on 30 contracts, which individually were not material.
Current wording
For the three months ended August 2, 2025, favorable cumulative catch-up adjustments of $2.3 million were primarily due to cost adjustments on 13 contracts, which individually were not material. For the same period, unfavorable cumulative catch-up adjustments of $6.5 million were primarily related to higher than expected costs on 13 contracts, which individually were not material.
Previous wording
Cost of Sales. Cost of sales for the three months ended January 25, 2025 was $104.4 million, as compared to $119.3 million for the three months ended January 27, 2024, representing a decrease of $14.9 million, or 12%. The decrease in cost of sales was a result of a decrease in product cost of sales of $18.5 million, partially offset by an increase in service costs of sales of $3.6 million. The decrease in product costs of sales was primarily due to a decrease of approximately $10 million associated with the decrease in product revenue and approximately $8 million due to mix shift related primarily to the definitization of LMS contracts. The increase in service cost of sales was primarily due to an increase of approximately $5 million associated with a higher proportion of fixed asset allocated costs, partially offset by a decrease of approximately $2 million associated with the decrease in service revenue. Cost of sales for the three months ended January 25, 2025 included $3.7 million of intangible amortization and other related non-cash purchase accounting expenses as compared to $4.0 million for the three months ended January 27, 2024. As a percentage of revenue, cost of sales decreased from 64% to 62% primarily due to the definitization of LMS contracts, resulting in gross margin increasing from 36% to 38%.
Current wording
Cost of Sales. Cost of sales for the three months ended August 2, 2025 was $359.6 million, as compared to $108.0 million for the three months ended July 27, 2024, representing an increase of $251.6 million, or 233%. The increase in cost of sales was a result of an increase in product cost of sales of $145.2 million and an increase in service costs of sales of $106.4 million. The increase in product costs of sales was primarily due to an increase of approximately $83 million associated with the recently acquired BlueHalo product lines and an increase of approximately $29 million intangible amortization related to the BlueHalo acquisition. For legacy AV business, product cost of sales increased $33.1 million. The increase in legacy product costs of sales was primarily due to an increase of approximately $17 million due to mix shift to a higher proportion of lower margin products driven by the increase in Switchblade production and approximately $16 million due to the increase in sales volume. The increase in service cost of sales was primarily due to an increase of approximately $100 million associated with the BlueHalo acquisition and an increase of approximately $5 million intangible amortization related to the BlueHalo acquisition. Cost of sales for the three months ended August 2, 2025 included $37.4 million of intangible amortization and other related non-cash purchase accounting expenses as compared to $3.7 million for the three months ended July 27, 2024. As a percentage of revenue, cost of sales increased from 57% to 79% primarily due to increased amortization and other non-cash purchase accounting expenses and an increase in the proportion of service revenue resulting from the effect of the BlueHalo acquisition, resulting in gross margin decreasing from 43% to 21%.
Previous wording
Selling, General and Administrative**.**SG&A expense for the three months ended January 25, 2025 was $43.8 million, or 26% of revenue, as compared to SG&A expense of $27.8 million, or 15% of revenue, for the three months ended January 27, 2024. The increase in SG&A expense was primarily due to an increase of $10.1 million in acquisition related expenses related to the BlueHalo merger and an increase of $2.5 million of sales and marketing expense primarily driven by an increase in bid and proposal efforts. Sales and marketing expense includes commissions on certain direct commercial sales to international customers, and an increase in revenue results in an increase in commission expense.
Current wording
Selling, General and Administrative**.**SG&A expense for the three months ended August 2, 2025 was $131.3 million, or 29% of revenue, as compared to SG&A expense of $33.8 million, or 18% of revenue, for the three months ended July 27, 2024. The increase in SG&A expense was primarily due to an increase of $41.2 million of intangible amortization expense related to the BlueHalo acquisition, an increase of $23.7 million of acquisition related expenses related to the BlueHalo acquisition and an increase of $14.7 million of employee related expenses related to the increase in headcount.
Previous wording
Research and Development. R&D expense for the three months ended January 25, 2025 was $22.5 million, or 13% of revenue, as compared to R&D expense of $25.1 million, or 13% of revenue, for the three months ended January 27, 2024. The decrease was primarily due to an acceleration of R&D activity in the second quarter of fiscal year 2025.
Current wording
Research and Development. R&D expense for the three months ended August 2, 2025 was $33.1 million, or 7% of revenue, as compared to R&D expense of $24.6 million, or 13% of revenue, for the three months ended July 27, 2024. The increase was primarily related to the BlueHalo acquisition. R&D expense is expected to continue to be 7% to 8% of revenue.
Previous wording
Interest Expense, net. Interest expense, net for the three months ended January 25, 2025 was $0.2 million compared to interest expense, net of $0.1 million for the three months ended January 27, 2024.
Current wording
Interest Expense, net. Interest expense, net for the three months ended August 2, 2025 was $17.4 million compared to interest expense, net of $0.2 million for the three months ended July 27, 2024. The increase was driven by the interest expense related to the Term Loan and Revolver Facility obtained on May 1, 2025 in conjunction with the BlueHalo acquisition and the unamortized debt issuance costs allocated to the Term Loan Facility of $6.7 million, which were expensed upon repayment of the Term Loan Facility in July using the proceeds from the Notes and common stock issuances in July 2025.
Previous wording
Other Income, net. Other income, net, for the three months ended January 25, 2025 was $1.0 million as compared to other expense, net of $1.0 million for the three months ended January 27, 2024.
Current wording
Other Income, net. Other income, net, for the three months ended August 2, 2025 was $2.4 million as compared to other expense, net of $0.2 million for the three months ended July 27, 2024. The increase was driven by unrealized gains in equity security investments.
Previous wording
(Benefit from) Provision for Income Taxes. Our effective income tax rate was 25.6% for the three months ended January 25, 2025, as compared to 8.3% for the three months ended January 27, 2024. The increase in our effective income tax rate was primarily due to an increase in FDII deductions and excess tax benefits from equity awards. The effective income tax rate for the three months ended January 25, 2025 was primarily impacted by expected federal R&D tax credits and FDII deductions and excess tax benefits from equity awards.
Current wording
(Benefit from) Provision for Income Taxes. Our effective income tax rate was 18.0% for the three months ended August 2, 2025, as compared to 6.6% for the three months ended July 27, 2024. The increase in our effective income tax rate was primarily due to an increase in federal R&D tax credits, a decrease in FDII deductions, partially offset by an increase non-deductible acquisition related expenses combined with the net loss before income taxes for the quarter. The effective
Previous wording
Equity Method Investment Loss, net of Tax. Equity method investment loss, net of tax for the three months ended January 25, 2025 was $0 as compared to equity method investment loss, net of tax of $0.1 million for the three months ended January 27, 2024.
Current wording
Equity Method Investment Income, net of Tax. Equity method investment income, net of tax for the three months ended August 2, 2025 was $1.8 as compared $0.1 million for the three months ended July 27, 2024.
Previous wording
Consistent with ASC 606, we define funded backlog as remaining performance obligations under firm orders for which funding is currently appropriated to us under a customer contract. As of January 25, 2025, our funded backlog was approximately $763.5 million, as compared to $400.2 million as of April 30, 2024. The Department of the Army issued a stop-work order on certain existing U.S. government contracts, previously awarded to us for foreign military sales funded by the U.S. government via foreign military financing. As of January 25, 2025, funded backlog included approximately $13 million impacted by the stop-work order.
Current wording
Consistent with ASC 606, we define funded backlog as remaining performance obligations under firm orders for which funding is currently appropriated to us under a customer contract. As of August 2, 2025, our funded backlog was approximately $1,066.4 million, as compared to $726.6 million as of April 30, 2025.
Previous wording
In addition to our funded backlog, we also had unfunded backlog of $1,429.9 million as of January 25, 2025. Unfunded backlog does not meet the definition of a performance obligation under ASC 606. We define unfunded backlog as the total remaining potential order amounts under cost reimbursable and fixed price contracts with (i) multiple one-year options and IDIQ contracts, or (ii) incremental funding. Unfunded backlog does not obligate the customer to purchase goods or services. There can be no assurance that unfunded backlog will result in any orders in any particular period, if at all. Management believes that unfunded backlog does not provide a reliable measure of future estimated revenue under our contracts.
Current wording
In addition to our funded backlog, we also had unfunded backlog of $3,092.1 million as of August 2, 2025. Unfunded backlog does not meet the definition of a performance obligation under ASC 606. We define unfunded backlog as the total remaining potential order amounts under cost reimbursable and FFP contracts with (i) multiple one-year options and indefinite delivery, indefinite quantity (“IDIQ”) contracts, or (ii) incremental funding. Unfunded backlog does not obligate the customer to purchase goods or services. There can be no assurance that unfunded backlog will result in any orders in any particular period, if at all.
Previous wording
On February 19, 2021, in connection with the consummation of the Arcturus Acquisition, we entered into the Credit Agreement for (i) the Revolving Facility, and (ii) the Term Loan Facility, and together with the Revolving Credit Facility, the “Credit Facilities.” The Term Loan Facility required payment of 5% of the outstanding obligations in each of the first four loan years, consisting of three quarterly payments of 1.25% each, with the remaining outstanding principal amount of the Term Loan Facility due and payable on the final maturity date. Proceeds from the Term Loan Facility were used in part to finance a portion of the cash consideration for the Arcturus Acquisition. On October 4, 2024, we amended the Credit Facility agreement to increase the Revolving Facility to $200 million, and the Term Loan Facility was fully repaid in full and removed from the Amended Credit Facility. Our ability to borrow under the Revolving Facility is reduced by outstanding letters of credit of $9.5 million as of January 25, 2025. As of January 25, 2025, approximately $165.5 million was available under the Revolving Facility. On February 26, 2025, we borrowed an additional $15.0 million under the Revolving Facility. Borrowings under the Revolving Facility may be used for working capital and other general corporate purposes, including acquisitions that meet certain parameters. Refer to Note 9—Debt to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details. In addition, Telerob has a line of credit of €7.0 million ($7.3 million) available for issuing letters of credit of which €0.4 million ($0.4 million) was outstanding as of January 25, 2025.
Current wording
Our ability to borrow under the Revolving Facility is reduced by outstanding letters of credit of $11.9 million as of August 2, 2025. As of August 2, 2025, approximately $338.1 million was available under the Revolving Facility. Refer to Note 9—Debt to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details. In addition, Telerob has a line of credit of €7.0 million ($8.1 million) available for issuing letters of credit of which €2.3 million ($2.7 million) was outstanding as of August 2, 2025.
Previous wording
We anticipate funding our normal recurring trade payables, accrued expenses, ongoing R&D costs and obligations under the Credit Facilities through our existing working capital and funds provided by operating activities including those provided by our acquisitions. The majority of our purchase obligations are pursuant to funded contractual arrangements with our customers. We believe that our existing cash, cash equivalents, cash provided by operating activities and other financing sources will be sufficient to meet our anticipated working capital, capital expenditure requirements, future obligations related to the acquisitions and obligations under the Credit Facilities during the next twelve months. There can be no assurance, however, that our business will continue to generate cash flow at current levels. If we are unable to generate sufficient cash flow from operations, then we may be required to sell assets, reduce capital expenditures or draw on our Credit Facilities. We anticipate that existing sources of liquidity, Credit Facilities, and cash flows from operations will be sufficient to satisfy our cash needs for the foreseeable future.
Current wording
We anticipate funding our normal recurring trade payables, accrued expenses, ongoing R&D costs and obligations under the Credit Facilities through our existing working capital and funds provided by operating activities including those provided by our acquisition. The majority of our purchase obligations are pursuant to funded contractual arrangements with our customers. We believe that our existing cash, cash equivalents, cash provided by operating activities and other financing sources will be sufficient to meet our anticipated working capital, capital expenditure requirements, and future
Previous wording
Our primary recurring liquidity needs are for financing working capital, investing in capital expenditures, supporting product development efforts, introducing new products and enhancing existing products, marketing acceptance and adoption of our products and services, and possible acquisition of entities or strategic assets, including expenses related to the BlueHalo transaction. Our future capital requirements, to a certain extent, are also subject to general conditions in or affecting the defense industry and are subject to general economic, political, financial, competitive, legislative and regulatory factors that are beyond our control. Moreover, to the extent that existing cash, cash equivalents, cash from operations, and cash from our Credit Facilities are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing, subject to the limitations specified in our Credit Facility agreement. In addition, we may also need to seek additional equity funding or debt financing if we become a party to any agreement or letter of intent for potential investments in, or acquisitions of, businesses, services or technologies.
Current wording
Our primary recurring liquidity needs are for financing working capital, investing in capital expenditures, supporting product development efforts, introducing new products and enhancing existing products, marketing acceptance and adoption of our products and services, and possible acquisitions of entities or strategic assets. Our future capital requirements, to a certain extent, are also subject to general conditions in or affecting the defense industry and are subject to general economic, political, financial, competitive, legislative and regulatory factors that are beyond our control. Moreover, to the extent that existing cash, cash equivalents, cash from operations, and cash from our Credit Facilities are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing, subject to the limitations specified in the Amended Credit Facility Agreement. In addition, we may also need to seek additional equity funding or debt financing if we become a party to any agreement or letter of intent for potential investments in, or acquisitions of, businesses, services or technologies.
Previous wording
Our working capital requirements vary by contract type. On cost-plus-fee programs, we typically bill our incurred costs and fees monthly as work progresses, and therefore working capital investment is minimal. On fixed-price contracts, we typically are paid as we deliver products, and working capital is needed to fund labor and expenses incurred during the lead time from contract award until contract deliveries begin.
Current wording
Our working capital requirements vary by contract type. On Cost Plus and T&M contracts, we typically bill our incurred costs and fees monthly as work progresses, and therefore working capital investment is minimal. On FFP contracts, we typically are paid as we deliver products, and working capital is needed to fund labor and expenses incurred during the lead time from contract award until contract deliveries begin. Certain contract have negotiated progress payments, which facilitates billing and collection as work is completed.
Previous wording
The following table provides our cash flow data for the nine months ended January 25, 2025 and January 27, 2024(in thousands):
Current wording
The following table provides our cash flow data for the three months ended August 2, 2025 and July 27, 2024(in thousands):
Previous wording
Cash (Used in) Provided by Operating Activities. Net cash used in operating activities for the nine months ended January 25, 2025 increased by $28.0 million to $(1.1) million, as compared to net cash provided by operating activities of $27.0 million for the nine months ended January 27, 2024. The decrease in net cash provided by operating activities was primarily due to a decrease in net income of $26.7 million and a decrease in non-cash expenses of $7.2 million primarily due to a decrease in reserve for inventory excess and obsolescence, partially offset by an increase in depreciation and amortization, partially offset by an increase in cash as a result of changes in operating assets and liabilities of $5.9 million, largely related to inventories and unbilled receivables and retentions, partially offset by accounts receivable, due to year over year timing differences.
Current wording
Cash (Used in) Provided by Operating Activities. Net cash used in operating activities for the three months ended August 2, 2025 increased by $152.1 million to ($123.7) million, as compared to net cash provided by operating activities of $28.4 million for the three months ended July 27, 2024. The increase in net cash used in operating activities was primarily due to a decrease in cash as a result of changes in operating assets and liabilities of $157.8 million, largely related to increases in accounts receivable, unbilled receivables and retentions and decreases in accounts payable due to year over year timing differences as well as increases in inventory to meet demand. The increase in cash used in operating activities was also driven by a decrease in net income of $88.5 million, partially offset by an increase in depreciation and amortization of $94.2 million, largely due to the intangibles and acquired property and equipment from the BlueHalo acquisition.
Previous wording
Cash Used in Investing Activities. Net cash used in investing activities decreased by $24.8 million to $16.6 million for the nine months ended January 25, 2025, as compared to $41.4 million for the nine months ended January 27, 2024. The
Current wording
Cash Used in Investing Activities. Net cash used in investing activities increased by $870.0 million to $876.6 million for the three months ended August 2, 2025, as compared to $6.6 million for the three months ended July 27, 2024. The increase in net cash used in investing activities was primarily due to the cash consideration for the acquisition of BlueHalo, net of cash acquired of $844.6 million.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
income tax rate for the three months ended August 2, 2025 was primarily impacted by expected federal R&D tax credits, excess tax benefits from equity awards, and non-deductible acquisition related expenses.
Current report — wording carried from elsewhere
obligations related to the acquisition during the next twelve months. There can be no assurance, however, that our business will continue to generate cash flow at current levels. If we are unable to generate sufficient cash flow from operations, then we may be required to sell assets, reduce capital expenditures or draw on our Credit Facilities. We anticipate that existing sources of liquidity, Credit Facilities, and cash flows from operations will be sufficient to satisfy our cash needs for the foreseeable future.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
For the nine months ended January 25, 2025 and January 27, 2024, favorable and unfavorable cumulative catch-up adjustments included in revenue were as follows (in thousands):
Previous report — wording carried elsewhere
Gross Margin. Gross margin is equal to revenue minus cost of sales.