Thank you, and good afternoon, ladies and gentlemen. Welcome to AV's Fourth Quarter and Full Fiscal Year 26 Earnings Call.

My name is Denise Pacioni, Head of Investor Relations for AV. Before we begin, please note that certain information presented on this call contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 2 thousand.

These statements involve many risks and uncertainties that could cause results to differ materially from our expectations. Further information on these risks and uncertainties is contained in the company's 10 ks and other filings with the SEC in particular, in the risk factors and forward looking statement portions of such filings.

Copies are available from the SEC, on the AeroVironment website www.avinc.com, or from our investor relations team. This afternoon, we also filed a slide presentation with our earnings release and posted the presentation to the 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 06/29/2026. The company undertakes no obligation to update any forward looking statements whether as a result of new information, future events, or otherwise.

Joining me today from AV are Chairman, President, and Chief Executive Mr. Wahid Nawabi and executive vice president and Chief Financial Officer, Mr.

Sean T. Woodward, We will now begin with remarks from Wahid Nawabi.

Wahid?

Thank you, Denise. Welcome, everyone, to our fourth quarter and full fiscal year 26 earnings conference call.

Will begin by summarizing our quarterly and full year performance, followed by Sean, who will review our financial results in greater detail and then discuss guidance for fiscal year 2027. After this, Sean, Denise, and I will take your questions.

I am pleased to report record fourth quarter results across several key financial performance metrics. Delivering AV's strongest financial performance to date.

We reported fourth quarter revenues of nearly $642 million with increased funded backlog of $1.2 billion Strong adjusted EBITDA of $140 million and bookings of $572 million. For the full fiscal year, we delivered revenue of nearly $2 billion ahead of our most recent quarterly guidance and in line with our initial guidance from about a year ago and bookings of $2.7 billion.

Full year adjusted EBITDA of $286 million came in above the high end of our most recent guidance range. And non GAAP EPS was $3.31 per share well above the higher end of our guidance.

With demand for our solutions continuing to rise, our work over the past year has positioned AV as a stronger, more resilient, and diversified company. Before outlining several opportunities and key growth drivers, that will help us reach our strategic goals for fiscal year 27 and beyond, let me first cover some key highlights from the fourth quarter and full fiscal year 26.

First, we achieved record fourth quarter revenue of $642 million and record full year revenue of nearly $2 billion. Organic revenue growth for the quarter was 30% and 30% for the full fiscal year.

Second, we delivered strong fourth quarter adjusted EBITDA of $140 million or 22% of revenue, on higher sales volume demonstrating AV's profitability potential with increased volume. Third, we developed and launched several new products, won several key program awards, and made strong software advancements that will strategically facilitate growth for AV into the future.

Fourth, we successfully diversified our portfolio with the transformational acquisition of Blue Halo, nearly doubling in size and adding additional capabilities in counter UAS platforms, space technologies, cyber and advanced solutions. And fifth, looking ahead, we are establishing fiscal year 27 revenue guidance to between $2.13 billion and $2.23 billion.

Adjusted EBITDA guidance for fiscal year 27 is set between $305 million and $325 million Our confidence in fiscal year 27 is grounded in the momentum we built this past year and the significant wins we have achieved across our platforms. In lethal drones, we introduced several new products including Switchblade 400, and Mayhem 10.

Our new 1 way attack solution, Red Dragon, was awarded several contracts and we are preparing to bring additional Switchblade production online at our Salt Lake City facility at the beginning of next calendar year. Our nonlethal drones reached several successful milestones as well.

AVP550 was selected for the US Army's long range reconnaissance program. JUMP 20X secured multiple contract awards and Vapor CLE won a significant award for the US Army's medium range reconnaissance program.

In counter-UAS, orders for our Titan family of RF detect and defeat systems more than doubled this year. While demand for this differentiated solution continues to rise.

And our Locust laser weapon system achieved a series of key milestones that are setting the stage for significant future contract awards. These wins reflect the core strengths that set AV apart from others.

We believe there are several important differentiating factors that best position AV to capture a significant portion of the rising demand in our served markets. We have a strong installed base that is unrivaled across several of our product.

For decades, our customers have confidently relied on AV to deliver best in class solutions. While giving them an advantage over our adversaries.

Our solutions are battle proven in today's critical conflicts, This dependability, along with our ability to quickly scale manufacturing, differentiates us from many of our competitors, especially new entrants. In fiscal year 27, we are investing additional capital to further increase our manufacturing capacity across several products and platforms to meet anticipated rising demand.

We are sensing strong customer indications that our solutions will receive significant contract wins in the next 12 to 24 months. AV is very well positioned for these unprecedented levels of demand in our served markets.

Now I will turn to segment performance for the quarter and full fiscal year. Our autonomous systems segment or AXS continues to drive revenue growth for the company.

During the fourth quarter, AXS contributed $492 million or 76% of total company revenue. And for the full fiscal year, AXS contributed $1.3 billion or 69% of total company revenue.

This is a strong validation that our solutions are well positioned for the current needs of our nations and our allies across the globe. Our Group 1, 2, 3 uncrewed aircraft systems operating group won several key awards during the quarter and made progress on several key initiatives.

For example, AV's Vapor 55 CLE unmanned helicopter was awarded a nearly $15 million US Army company level UAS directed requirement tranche 2 contract. This is a significant win and we believe it opens the door for additional future long term awards for the medium-range reconnaissance program.

Just after the quarter closed, our P550 group 2 drone was awarded a $117 million contract by the US Army under the long range reconnaissance or LRR program. We believe that these 2 key contract wins will help set AV up for future contract awards on large program of record within the US Army.

In addition to these successes, our group 3 medium UAS solutions, namely Jump 20 and Jump 20X, continue to make significant strides both operationally and with new demand. Our Jump 20X successfully demonstrated 2 special missions in Yuma, Arizona.

And is deployed in support of operation Epic Fury. Our Precision Strike in Defense Systems operating group continues to drive growth for the company.

During the quarter, our Loading Munitions team made significant progress in several strategic areas of the company. For example, the Switchblade 400 received a key award from the US Army for its Low Altitude Stalking and Strike Ordnance, or LASSO program.

Built specifically for this program, the Switchblade 400 combines the contact attributes of our Switchblade 300 with the warhead capabilities of a Switchblade 600. Also during the quarter, we debuted our latest multi role Launched Effects system, AV's Mayhem 10, which is built on the foundation and success of our Switchblade family of products.

Designed for the US Army's Launched Effects program of record, Mayhem 10 has the ability to fly autonomously and has a versatile forward payload option that can accommodate lethal and non lethal payloads. up to 10 pounds.

Our Mayhem 10 addresses a significant capability gap for the US Army. It can be launched from the ground in maritime conditions or from a manned or unmanned aircraft.

These unique features positions Mayhem 10 as a very compelling solution for the future needs of our customers. Slightly over a year ago, we announced our 1 way solution, Red Dragon.

Red Dragon most recently received a $17 million production contract for the U. S.

Army during the fourth quarter. We anticipate significant increased demand for this product and are expanding production levels to ensure we can meet our customers' anticipated needs.

Progress continues on our Salt Lake City manufacturing facility, which has the potential to produce more than $2 billion worth of switchblades or other AV products per year. We are on track to begin production in the spring of calendar year 27.

As a reminder, 2 of our counter UAS products we acquired with Blue Halo reside in this operating group. Our RF jamming detect and defeat family of counter-UAS solution, Titan, continues to play a critical role in the company's growth.

In fact, Titan sales more than doubled this past fiscal year on a pro forma basis. We expanded production rates during the fourth quarter and anticipate demand for this product to rise through 2027 and beyond.

In addition to this counter UAS offering, we are also making progress on our Freedom Eagle-1 or FE-1 program with the US Army. Which as you may recall, was awarded a $96 million contract last fall for the US Army's long range kinetic intercept program.

We are progressing on that development contract and moving toward flight test in approximately 12 months. This program represents close to $1 billion of market opportunity for AV over the next several years.

with an even larger opportunity in the years that follow. We are among 1 of the very few new missile producers in the last 30 years.

And are confident that our cost effective solution will be well received by our customers. The momentum behind this program is building.

With Congress increasing funding to accelerate production due to a gap in low cost missile production. Given these demand signals, this past quarter, we announced efforts to expand our manufacturing facility in Huntsville, Alabama to scale production of this groundbreaking capability in anticipation of increased demand.

We are also seeing increased traction in our space, cyber, and directed energy segment, which represents an important new phase of AV's multidomain growth strategy. The segment reported revenues of $150 million for the quarter, and $619 million for the full fiscal year.

Despite some near term disruptions during the third and fourth quarter, due to the government shutdown and SCAR contract termination for convenience, we remain very optimistic about several opportunities within this segment. Including directed energy counter UAS, long haul laser communications, space technologies, and other advanced solutions.

During the fourth quarter, our Locust directed energy counter UAS platform achieved several key milestones. As global threats continue to evolve, directed energy has emerged as an essential and cost effective solution for countering high-volume, low-cost drone attacks.

At under $10 per shot, Locust flips the cost advantage between offensive and defensive systems and provides the warfighter with an unlimited magazine. We believe our Locust directed energy solution is a game changing capability which is at the very early stages of a large and strong market adoption cycle.

Building on this foundation, we introduced LOCUS X-3 during the fourth quarter. 1 of the critical differentiators that sets LOCUS apart is that its modularity allows detection in defeat while on the move onboard a ground vehicle or ship.

The precision with our ability to pin and track is what makes LOCUS as accurate when targeting adversarial drones. In parallel, a demonstration aboard the USS George H.

W. Bush validated LOCUS in an operational maritime environment.

During this exercise, our LOCUS system was able to shoot down incoming drones with a 100% success rate. Showing that our laser weapon systems can protect ships against drone threats.

This is an unprecedented level of success with such laser weapon systems on real maritime operations. Our Army and Navy need this capability desperately, we are aggressively expanding its manufacturing capacity to meet this demand.

Additionally, in early May, the FAA cleared the way for directed energy systems such as our LOCUS to operate in domestic national airspace to protect critical assets in the homeland. The LOCUS laser weapon system is included in our offering to the US Department of Defense as part of the nation's Golden Dome program.

Our proposed system called HaloShield includes other AV counter UAS solutions such as Titan-SV and Titan 4, to work in conjunction with Locus, as well as our AV_Halo software ecosystem to protect critical assets from drone threats which includes swarming attack scenarios. We look forward to providing additional updates on this important initiative.

We are confident our Locust laser weapon system provides a solution for our customers on the modern battlefield. We recently announced a $30 million investment to significantly expand manufacturing operations in our Albuquerque, New Mexico facility.

We are preparing to transition LOCUS to full rate production this year and we expect significant demand for this product line on several fronts. In addition to counter UAS, we have also made strides with our long haul laser communication terminals.

it is worth highlighting that we were awarded a $240 million contract last fall for our long haul laser communication terminals. 1 of the largest awards on record.

These terminals will be deployed on orbit for critical national security missions. Subsequent to the quarter closing, the U.

S. Department of Defense selected AV for a $43 million contract through its test resource management center to integrate our phased array next generation telemetry hypersonic emitter receiver or PANTHER product.

On DoD's Skyrange platforms. The award reflects our growing strategic position within the DoD.

Looking ahead, we intend to invest in our badger and wasp phased array antenna technology platforms, by developing a more commercialized solution that will compete on the U.S. Space Force's upcoming program as well as look to broaden our offering to other commercial customers.

This past quarter, our Cyber and Mission Solutions business received a $20 million contract to advance ceramic materials research for the U.S. Air Force and Space Force.

The $20 million contract represents a vital investment in technologies that will preserve America's advantage across air and space domains by advancing next generation ceramic materials and manufacturing processes that enhance mission readiness, extend operational endurance, and strengthen the technological superiority of the air and space forces. In addition, this group also received a $25 million award from the Air Force Research Laboratory.

To mature human health and performance technologies for warfighter readiness. We are continuing to expand our AV_Halo software platform and recently announced 2 new modules.

AV_Halo Instinct which provides an autonomous software framework and AV_Halo detect which delivers autonomous RF detection in contested environments. Today, they enable our customers to deliver synchronized autonomy faster decision making, and more effective mission execution.

We remain highly confident that continuing to invest in our leading platforms is the best path to keeping our advantages in our dynamic industry and to drive long term value creation. Before turning the call over to Sean, let me summarize with the following comments.

We delivered record financial performance in fiscal year 26. With strong revenue growth expanding profitability, and increased backlog demonstrating the strength and scalability of our business.

Demand across our portfolio remains robust. Supported by a growing pipeline of awards, and $2.7 billion total year to date bookings.

positioning us for continued growth in fiscal year 27 and beyond. And we continue to invest in our highly differentiated solutions which enables us to continue our strong growth and value creation trajectory.

With that, I would like to now turn the call over to Sean T. Woodward for a review of our fourth quarter and full fiscal year 26 financials.

Sean?

Thank you, Wahid. Before I turn to our results, I want to address the incremental goodwill impairment charge of $89 million and the related restated third quarter 26 results which we disclosed last week.

This was an incremental charge related to the termination for convenience of the scar program. This was a noncash charge and had no impact on previously reported current assets current liabilities, revenues, cash used in operating activities, or our non GAAP adjusted EBITDA or adjusted EPS measures.

In addition, it does not relate to updated estimates of the long term cash flows used in the goodwill impairment analysis. Full year results we are discussing today reflect the corrected impairment.

In connection with the restatement, we identified a material weakness in our internal control, related to the preparation and review of the goodwill impairment analysis. We have implemented enhanced controls and review procedures to strengthen this process.

Now I will walk you through our fourth quarter and full year performance and fiscal 27 outlook. Referring to our press release and earnings presentation available on our website.

I will briefly comment on our results for the quarter and then turn to guidance for fiscal year 2027. Fourth quarter revenue reached a record $642 million representing 31% organic growth year over year.

Our strongest quarterly growth rate of the year. And a 30% year-over-year increase on a pro forma basis.

This performance was driven by exceptional demand across several of our key franchises. Including Switchblade loitering munitions, Titan counter UAS, Red Dragon 1 way attack, and Jump 20 group 3 tactical systems.

With nearly $2 billion of revenue in fiscal year 26, AV remains 1 of the largest and most profitable defense technology companies. Our leadership rests on a diversified portfolio of proven systems manufacturing excellence, and next generation capabilities.

Turning to the quarter 4 results. We secured bookings totaling $572 million in new authorized contract value.

Our book to bill ratio for the fourth quarter was 0.9x, reflecting the exceptional quarter 4 revenue performance partially offset by some timing delays anticipated large program awards. While our trailing 12 months of book to bill ratio stands at 1.4x.

Funded backlog closed at 1.2 billion unfunded backlog at 1.5 billion which now excludes SCAR contract values following the contract termination for convenience announced in March. Slides 7 and 8 of the earnings presentation shows the fourth quarter and full year revenue by operating group for each of our 2 segments.

Compared to pro forma fiscal year 25 revenue. The autonomous systems or AXS segment recognized 492 million in revenue, in the quarter, which represented a 49% increase over fiscal year 25.

pro forma revenues. The Precision Strike and Defensive Systems operating group led with $333 million in revenue in the fourth quarter.

Which represented an 80% increase over fiscal year 25 pro forma revenues. Driven by strong sales in our Loitering Munition Switchblade family 1 way attack Red Dragon, and counter UAS RF Titan products.

Uncrewed Aircraft Systems operating group grew 17% year-over-year. Led by 20X, Puma, and P550.

The space, cyber, and directed energy segments generated $150 million in the fourth quarter revenue, down 8% pro forma year over year. Reflecting the SCAR termination in March and the US government funding delays that disproportionately affect the Cyber Mission Solutions operating group.

Within the segment, the space and directed energy operating group, sales grew 23% year-over-year. Driven by strong demand for LOCUS directed energy counter UAS systems.

SCAR related revenue was $31 million during fourth quarter. Totaling a hundred and 21 million for full fiscal year 2026.

Cyber and mission solutions revenue declined 26% pro forma, Primarily due to discontinued programs and funding delays from the government shutdown. Moving on to gross margins.

Slide 14 shows the adjusted product and service gross margins, including reconciliations to GAAP gross margin. Fourth quarter overall adjusted gross margins were 34%, the highest quarter of full fiscal year 2026.

And 37 basis points above the quarter 2 low. Demonstrating strong sequential trajectory.

This is lower than 40% in the fourth quarter of fiscal year 25. As noted on prior earnings calls, the business composition of the combined new company has changed significantly.

With higher service mix, increased flexibly-priced contracts, and several products in the early stages of maturity. Quarter 4 adjusted product gross margins were solid at 44%, due to the strong finish of the year in terms of sales volume,, whereas quarter 4 adjusted service gross margins were lower at 2%.

The reason for the decline in quarter 4 service margins was related to our cyber and mission solutions business in which a service contract funding was delayed. And within our precision strike and defensive systems business, which experienced a 1-time forward loss and EAC revision related to a legacy Blue Halo contract following the organizational indirect rate alignment tied to our integration strategy.

Full year fiscal 26 adjusted gross margin landed at 30%, in line with our original guidance. Moving on to operating expenses.

Adjusted SG&A, which excludes intangible amortization and deal and integration costs, were 72 million versus 37 million the prior year. The increase is largely the result of the combination with Blue Halo.

As a percentage of revenue, adjusted SG&A in the quarter was 11% of revenue, versus 13% fiscal year 2025. Full year fiscal 26 adjusted SG&A was 13% of revenue down from 17% in fiscal year 2025.

And in line with our projection reflecting Blue Halo synergy realization and operating leverage at scale. Quarter 4 R&D expense was $31 million or 5% of revenue.

Compared to $25 million or 9% in the prior year. Full year fiscal 26 R&D totaled 6% of revenue.

Down from 12% in fiscal year 2025. As projected.

In terms of adjusted EBITDA, Slide 15 of our earnings presentation shows the reconciliation of GAAP net income to adjusted EBITDA. Quarter 4 adjusted EBITDA reached $140 million or 22% of revenue.

More than doubling from $62 million in the prior year quarter. Driven by Blue Halo accretion and strong organic growth.

This represents significant margin expansion from 11% in Q3. Full year fiscal 26 adjusted EBITDA totaled $286 million exceeding the high end of our revised guidance range.

with a 14% margin. AXS segment adjusted EBITDA was $289 million for the full fiscal year 2026.

with a 21% adjusted EBITDA margin reflecting strong revenue and gross margin contributions. This was partially offset by SCDE segment adjusted EBITDA, which was negative $3 million following lower revenue and the resulting under absorption of fixed costs in both the space scar program and the cyber mission solutions business.

Now turning to non GAAP earnings per share. Slides 13 and 16 show the reconciliation of GAAP and adjusted or non GAAP diluted EPS.

Adjusted EPS reached $1.08 in Q4, up from $1.61 in the prior year quarter. Full year fiscal 26 adjusted EPS was $3.31 above the high end of our guidance range.

And compared to $3.28 fiscal year 2025. Moving to the balance sheet.

At the close of the fourth quarter, our total cash and investments amounted to $713 million a $65 million increase versus Q3 of fiscal year 26. AV total debt composed solely of zero coupon convertible notes was 748 million.

And a net leverage ratio of 1.2x of adjusted EBITDA. Cash flow rebounded in quarter 4 with $73 million of free cash flow driven by strong operating performance throughout the quarter.

This marks AV's first positive free cash flow quarter since quarter 1 of fiscal year 25. During fiscal year 26, working capital needs scaled with revenue growth, and our cash conversion cycle was extended.

In part by the acceptance testing process of our Switchblade products. During quarter 4 of fiscal year 26, we worked closely with the US government to streamline the Switchblade acceptance process.

We believe this procedural improvement will shorten our cash conversion cycle and improve working capital efficiency going forward. Turning now to backlog.

Funded backlog totaled $1.2 billion at quarter end. With $869 million or 73% attributable to the AXS segment.

And 314 million or 27% to the SCDE segment. Unfunded backlog finished the year at 1.5 billion which now excludes $1.5 billion related to the SCAR program.

With 1.25 billion or 86% attributable to SCDE and 209 million or 14% to AXS. it is important to note that our unfunded backlog figures exclude ceiling values from sole source IDIQ contracts.

Such as the remaining balance of the $990 million US army switchblade contract and the remaining balance on the 2027/2028 guidance. Before I walk through the numbers, I want to emphasize that we manage our business on a full year basis.

Given the nature of our contracts, award timing, and customer acceptance testing can create significant quarterly variability that does not reflect the underlying business performance. We encourage investors to focus on our full year guidance and multiyear trajectory rather than quarter to quarter fluctuations.

I also want to frame our fiscal 27 outlook in the context of deliberate strategic investments we are making to capture long term market expansion. We are accelerating commercialization across our product portfolio.

Expanding international sales capacity, and building production infrastructure to meet rising global demand for autonomous systems. We expect that these investments will drive revenue, and EBITDA growth of approximately 10% year-over-year.

With that context, on slide 9, of the earnings presentation, we provide our fiscal year 27 guidance. As Wahid mentioned in his remarks, 2027 revenue is expected to be between $2.13 billion and $2.23 billion or 10% growth at the midpoint of our fiscal year 26 results.

This excludes any SCAR related revenue. Adjusted EBITDA is expected to be between $305 million and $325 million and non GAAP adjusted EPS between $3.02 and $3.34.

Near term non GAAP adjusted EPS remains relatively flat year over year due to the higher anticipated depreciation and cloud amortization expense from the significant capital deployed in fiscal years 26 and 2027. Depreciation and cloud amortization expense is projected to increase by approximately $37 million or 77% year-over-year.

A few details on the revenue cadence adjusted EBITDA profile, along with non GAAP EPS distribution. We expect revenue to be stronger in the second half of fiscal 27 as we anticipate increased booking and order activity prior to the current government fiscal year end.

We are planning on our approximate 45/55 revenue split between first half and second half. Given we anticipate the uptick in orders to come through the latter part of the summer, we anticipate revenue in the first quarter to be 45% of the total revenues for the first half.

Following this revenue cadence, we expect adjusted EBITDA to be 1/3 first half and 2/3 second half of the year. This is similar to the fiscal year 26 results from a distribution perspective.

We anticipate first quarter adjusted EBITDA to be 1/3 of first half totals. Reflecting improved sales mix and higher sales volume in the back half of the year.

Non GAAP EPS is anticipated to be a 25/75 first-half/second-half distribution. This reflects the adjusted EBITDA profile and the impacts of depreciation expense.

First quarter non GAAP EPS is expected to be 25% of first half's total. To accelerate these efforts, we are investing between 7% to 9% of revenue in research and development.

And 12% to 14% of revenue in CapEx. Primarily focused on production capacity expansion.

Adjusted SG&A expenses are projected at 14% to 16% of revenue. The year over year increase in adjusted SG&A as a percentage of revenue reflects strategic investments in sales and business development resources to support our expanding international footprint and commercial pipeline.

As well as infrastructure to scale the combined organization. In summary, fiscal 26 was a milestone year.

We achieved nearly 2 billion in revenue, exceeded our revised adjusted EBITDA guidance, and demonstrated the power of our diversified portfolio. With 31% organic growth in Q4.

As we enter fiscal 27, we believe we have strong momentum across our product lines. And a robust $2.7 billion of total backlog.

We expect that the production capacity and R&D investments we are making this year will position us to scale with the accelerating global demand for our lethal and non lethal drones. Along with our suite of counter UAS solutions.

Markets where we hold leading positions and where we see multiyear tailwinds driven by the evolving threat environment. Now I would like to turn things back to Wahid.

Thanks, Sean. We are encouraged by the strong level of funding for our opportunities and priorities in the defense budget.

That said, the timing of that funding particularly given the reconciliation process, remains uncertain. As a result, our revenue guidance reflects that we are not assuming funding arrives early in the government fiscal year 2027.

As stated earlier, we are initiating our fiscal year 2027 revenue guidance of between $2.13 billion and $2.23 billion with adjusted EBITDA guidance between $305 million and $325 million and adjusted EPS $3.02 and $3.34 per share. In closing, we are very pleased with several results from this past quarter and the full fiscal year 2026.

We delivered a record fourth quarter and a solid fiscal year capping a transformational year for AV. We secured a series of marquee program wins including LASSO, LRR, MRR, LRKI, and received several additional orders for franchise programs such as Red Dragon, and long haul laser communications.

Each representing opportunities that could be more than a half billion dollars in revenue for AV over time. We remain focused on execution, including advancing a more commercially oriented approach across the portfolio while aggressively expanding capacity and scaling manufacturing to meet a growing demand that will drive profitability.

Taken together, record financial results a pipeline of significant and growing opportunities, and the manufacturing capacity to deliver on them. The long term opportunity for growth and value creation has never been stronger for AV.

We hope you will join us at our Investor Day on July 8 where we will outline our growth priorities and long term goals in greater detail. I would like to thank our employees, shareholders, and customers for their continued commitment to AV and our mission.

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

Hey. Good afternoon, guys, and thank you.

Maybe 1 positive question and 1 just cleaning up item question. So I guess on as we Wahid, as you talked about counter UAS, it is 1 of your 4 growth pillars.

Maybe can you size the business today and how you think about the growth profile of that? You mentioned Locust achieving key milestones.

And then just to clean up, can you just touch on the goodwill impairment? You disclosed the additional you restated it last week.

How do we think about the $1.2 billion left on the balance sheet? And if you could help bridge us as we look forward to 2027 as it relates to scar.

Thanks.

Thank you, Sheila and good afternoon. First of all, I will take the first half of that question, and then the second 1, I will yield it to Sean to respond to.

In terms of the, our counter UAS strategy and business and growth prospects, Today, we are in the early stages of this counter UAS adoption cycle. We have a very crisp and clean strategy on a layered defense approach to counter UAS or defending against drones.

We do not believe just in 1 solution set or 1 technology. We have a multilayered solution set and approach to it.

First, we offer the world's 1 of the world's best RF jamming and detect systems. Called the Titan series of solutions.

That business doubled over last year, and it continues to grow. And I think we are early stages of adoption on that.

Would say it is roughly about a couple of hundred million dollars business in the counter UAS in general for us as a company in fiscal 26. The second layer of defense for us is our directed energy solution, which is literally on its early, early inception phases of adoption.

We are aggressively expanding manufacturing and we believe that directed energy is going to be a significant portion of the market opportunity for counter UAS globally. The cost and economics of it basically flips in the in favor of defensive systems against drones, and that gives The US a major and our allies a major advantage.

And lastly, we also have been awarded a contract, as I mentioned on my remarks, for our Freedom Eagle-1, which is a kinetic defeat system. it is a category of missile that is a significant gap, not only in the US Army, which this program is starting at, but in our entire military.

Our entire military has a gap in a size of a missile that can actually take down group 1 through 3 drones cost effectively at way, way less, a fraction of the cost of standard missiles. Most missiles that are being used today are in the millions of dollars.

This is gonna be targeted to be in $150 thousand a copy. When we are done with it.

And we are making significant progress on that. And congress is asking us to accelerate that.

So I strongly believe if you recall, Sheila, 4-5 years ago, our loitering munition business was a small business. You know?

Small, low double digit numbers, a $10 million, $20 million, $30 million business. And we are now at about a $500 million business, roughly in that in terms of growth.

It will not surprise me in the next 3 to 5 years that our directed energy and our counter UAS business would be equally as large, if not 2 to 3 times bigger. That opportunity is ours to have We are executing on all those 3 fronts, We are making significant progress.

Our customers are very happy with our solutions. And we are looking forward to updating you on our progress in the future.

And Sheila related to your second question around the impairment and the goodwill, let me just highlight a few points related to that. First, the impairment was related to the previously announced stop work order and termination for convenience on the SCAR Badger program.

The impairment did not result from changes in the cash flow projections of the space reporting unit. The impairment did not result from any new events additional negative business trends.

The additional impairment was filed due to an error in the Q3 calculation, in which an estimated allocation of goodwill associated with the acquired tax asset attributes were not included in the measurement of goodwill impairment for the space reporting unit. As disclosed in our 8 k, we filed with the SEC.

The error was detected by management. A third party accounting firm was engaged to prepare the Q3 goodwill impairment analysis The error in the third quarter by the third party was identified by management, detected, and corrected in the fourth quarter.

Additional internal controls have been implemented and were executed in Q4 to prevent this potential for future errors. These controls will need to be tested for additional quarters in order to remediate the SOX control error.

Related to the overall goodwill in the space and cyber directed energy business, it is $1.2 billion, and the remaining of that is $291 million associated with the space business unit specifically. Thank you.

Yeah. Thanks very much, and good afternoon.

Wanted to clarify a little bit about what you said about the timing of revenue and referencing the reconciliation. I guess, which reconciliation were you referring to?

And if it is I think there is a fair amount of funding in last year's reconciliation and that could kind of proceed from here and probably started to become helpful in the last quarter. And to what extent are you depending on another reconciliation bill to drive expectations for this year.

For fiscal 27?

Good afternoon, Seth, and thank you for the question. So generally speaking, as you know, the government fiscal year 27 starts in October.

And we currently, based on all the indicators that we see, we are assuming that there is going to be a continuing resolution and a full defense budget will not be passed, on time at the beginning or before the beginning of the next government fiscal year. The best estimates that we have put together based on industry and our own experts inside the company is that probably we will see a budget approved sometime in December or January of next calendar year.

And so if that were to happen, the customers accounts and the services US Army, Navy, Air Force, etcetera, they are probably not gonna see those dollars until March. Time frame, roughly.

And so which means that there is going to be a delay in the government fiscal year 27 budget, which there is significant dollars. Significant.

When I say that significant, it is unprecedented amount of dollars. For the type of systems that we make and we are positioned for.

So from now until literally this year, we are going to be living off of our current very strong backlog. But also the funding dollars that have been approved before that is making its way into contracts and acquisition and awards up until, the end of this calendar year.

We still expect a growth year, And if the situation were to change, positively, obviously, we will update you. And our goal is to be as close to the PIN as possible given the information that we have.

And again, we strongly believe that the long term prospects for growth is strong. that is why we are investing in our manufacturing capacity expansion.

On several products. Half a dozen of our products are scaling significantly.

Because we know that these capabilities are needed desperately and we know that our military is very pleased with our systems. And we are going to get a fair share of that spend over the next 12 to 24 months.

However, the timing of that is not very certain in the next 3 to 4 months. Got it.

And then maybe just a follow-up, the investments. That you mentioned, it is a pretty significant step up in CapEx and I think we you talked about some of the drivers of that.

Where do you expect free cash flow to come in for the year?

Yeah, great question. Significant investment we are making in fiscal year 2027 CapEx, between 12% to 14% of our revenue.

that is going to be really in production capacity growth CapEx. We believe that is gonna help fund the Salt Lake City facility as Wahid mentioned.

Our Huntsville facility build out. there is additional expansion in Albuquerque.

As well as in Dayton, Ohio. So multiple production capacity sites being expanded to support our long term revenue growth potential From a free cash flow perspective, we are not expecting fiscal year 27 to be positive on free cash flow.

Given the amount of CapEx that we are planning on spending during the year.

Wahid, Sean, and Denise, there have been many discussions regarding the Department of Defense looking to quadruple production of exquisite missile systems such as the PAC-3 and TAD and precision strike missile and others I mean, you have been ramping capacity at your Salt Lake City facility. Does the Switchblade or even the Freedom Eagle have the potential to be excluded as part of this exquisite missile system category.

And related to this, 2 years ago, you won the $990 million Switchblade 600 IDIQ. Do you view the Switchblade production as or should it be increasing, like, with or without that category of exquisite missile systems?

Thanks.

Thank you, Louie. Obviously, we feel very bullish and very optimistic about all of our lethal call it drones and missile solutions.

That includes the Switchblade family products, Switchblade 300, 600, 400, and Mayhem 10. It also includes our Red Dragon 1-way attack.

It also includes our Freedom Eagle-1. So overall, I feel quite bullish that this category irrespective of exquisite or nonexquisite, is going to get significant funding, number 1.

Number 2, the categories that we are in these are the categories that is going to get probably the highest percentage of growth. Of funding.

Compared to the previous years because they are starting with much smaller numbers. In dollar sense.

And for that specific reason, we are actually expanding manufacturing in literally all 3 of those product families. We are significantly expanding the manufacturing of our loitering munitions, as you know, in our Salt Lake City facility.

that is an additional $2 billion worth of production capacity a year. And that is going to come online at the beginning of next calendar year, basically, this winter.

Second, we are expanding aggressively. We already expanded, but continue to expand further the Red Dragon family of 1 way to attack drones.

We have secured several contracts, and we expect a lot more contracts and awards on that in the next 12 months. And lastly, our Freedom Eagle-1, as I mentioned, we have already secured about a $100 million worth of contract awards.

From the US Army to accelerate that program, and Congress actually added more money to that. To accelerate it even further.

And we are working diligently not only to accelerate the development and testing of that capability, but also to actually expand manufacturing with the investments we are making on Huntsville Alabama facility. That facility is specifically targeted to produce the FE-1 platform.

And, I feel very good about it because our product is meeting all of our customers' requirements so far, and it is doing very well. So overall, Louie, whether exquisite or nonexquisite, I really do not know which way it is gonna go.

But I would argue that this category of our systems is going to get a significant amount of funding over the next several years not just next year, but it is going to continue to grow and be a bigger portion of the pie of the spend for the US government on missiles in general because they are way more effective in lots of different missions than the current traditional solutions that are out there. Which we still need as a nation.

Because they are generally just depleted heavily. But our category is gonna do really well, in my view.

Definitely. So you are confident of the that there will be funding for the production ramp like, regardless of the characterization and that some investors believe that there is almost a competition between like, the high end missiles versus the low end missiles And we are just looking for a sense of, you know, what is your visibility in terms of the increase in CapEx and having like, production orders associated with that increase in CapEx.

Yeah. So a significant portion of our meaningful portion of our, I should say, of our CapEx spend this year is on expanding production capacity across all of our platforms.

And, obviously, our lethal drone category, which I just described, is a very sizable portion of that portfolio. So we are investing aggressively in this area because we expect the category to grow.

I do not believe that they large, exquisite, expensive missiles is genuinely competing for dollars related to the loitering munition or 1 way attack drones. This is an expanded category and new sets of missions that really did not exist before the Ukraine conflict and the conflict in the initiative, Epic Sentry.

So I do not think that we are going to suffer from lack of funding in these categories because the government is investing or buying more of the acquisitive missiles. Our nation and our allies across the globe need more of all of these things.

Because the inventories are depleted, and The US capabilities are desperately needed to expand and grow in these categories significant. Thank you.

Hey. Good afternoon, everyone.

Thanks for taking my question. Hi, Andre.

Maybe, Sean, maybe this 1 might be best tailored for you. I mean, just can you call out what organic growth is implied in the FY 27 outlook?

I mean, you know, maybe put a little bit differently, how much is, you know, ESA ES Aero expected to contribute?

Sure. Thanks for that question.

So overall, we are expecting, at the midpoint of our guidance range, about 10% year over year growth. We do not really provide breakdowns below that, but overall, we are expecting 10% year over year growth.

ES Aero contributed from the time of acquisition to the end of fiscal year 26 around $20 million to fiscal year 26 totals. Got it.

Got it. that is helpful.

And then I wanted to dive a little bit deeper into cyber and mission systems. It seemed like in the quarter, there were some funding delays.

You know, that was flat quarter over quarter down year over year. You know, I guess when we think about the long term prospects of this business, you know, when might things start to turn around?

And, I guess, what are your expectations for longer term?

So, Andre, I will take that question. Look.

We when we acquired Blue Halo a year ago, approximately a year ago, we were really, really the main thesis for the acquisition was the majority of the portfolio that we are making significant progress. And but we also care about the cybersecurity business because it gives us a lot of advantages in the marketplace and has synergies with the rest of our products.

That business over the last year has been affected significantly by 2 things. The government shutdown that we had because a lot of that is basically employees that are being deployed on-site with our customers.

As well as the fact that the government had a DODGE effect, if you recall, the beginning of the year there was a significant impact on that in terms of reduction on government service in general. We believe that we have a very compelling solution set there.

That business is a business that we would like to continue to grow We do believe that the market is now sort of stabilized. And we expect that business to grow slowly.

It is not considered the highest growth area of our portfolio. But that is the beauty of our business.

We have diversified our portfolio and our business significantly over the last 24 months or so. We do not rely on a single customer, single program.

Single product, single business unit. To for us to be able to achieve our growth and our value creation targets.

We remain very bullish on this. Our portfolio is robust.

We are in the right categories. Of the defense budget and the national defense strategy priorities.

Our allies need it. We have got a track record of success.

We know how to do this, and we are going to continue to do as we have been doing before. So if you look at our track record over the last decade, you will see that while our portfolio keeps evolving, we tend to be able to deliver on our promises and our plans successfully over time really well.

Thank you.

Hey. Good afternoon.

Just given the various platforms that you are in the process of ramping aggressively, do you feel like the supply chain is prepared to support that level of growth? Just curious where you see the biggest potential bottlenecks today, or are there any changes that you have made from a supply chain perspective to support your production ramp?

Thanks.

Thank you, Michael. The short answer is absolutely yes.

We are not only just expanding our manufacturing footprint ourselves, part of the CapEx investment and initiative that we have within the company this year to significantly ramp up several platforms in the multiples in terms of growth targets at capacity wise is to work with our suppliers to expand the number of suppliers and also help our suppliers increase their throughput. And we have made significant progress, number 1, over the last several years.

B, we are continuing to keep investing in that and actually addressing those sort of bottlenecks and areas that needs more attention and more expansion. But I must add the following comment.

Relative to our competitors in the market, we are 1 of the best when it comes to this because we have got 2 decades of track record of success knowing how to scale production effectively reliably, and profitably. We have done that over and over and over again by tens of thousands of units.

A year so far. And that is unmatched in the entire industry.

While we focus on expansion and growing our industrial base and working with our suppliers, we are way above and shoulder ahead of our competitors in this area. it is actually 1 of our competitive advantages against almost everyone in the marketplace.

So you know, it is always gonna be a challenge because we are growing. And we have got a large supply base, and we have a diversified portfolio.

But we do way better than all of our competitors in this area, in my opinion. And I think we are gonna continue to focus on that and keep growing our gap in this area.

against our peers. Great.

And then maybe following up on the Space segment. Could you talk about the impact of the growing number of satellite constellations that are being and are expected to be deployed over the coming years.

I am just wondering if there is opportunities for AV to perhaps act as a merchant supplier into these satellite programs like optical comms or other components. Is there any way to frame that satellite opportunity over the longer term?

Absolutely, Michael. That is certainly an area, as I mentioned on my remarks, earlier, that we are quite bullish on our space and cybersecurity business in general.

And the reason is because we are at still early stages of a very large adoption cycle. With some highly, highly differentiated technological solutions.

Right? Technologically, our phase arrays is unmatched, really, in the industry.

So is our optical laser communication terminals. That we have demonstrated the ability to do way better than anyone else, and we have secured a quarter of $1 billion contract last this past fiscal year.

I believe that business is very early and it is infancy. The vast, vast majority, if not all of the satellite that we have in LEO, MEO, and geosynchronous orbits.

Around Earth are going to get upgraded with the capability of long haul laser optical communication. That is an expertise that AV is uniquely qualified and is a significant player in the market.

it is just that the market is still early. And we believe that as the adoption continues, that we are gonna do better and better as the time goes by.

B, related to the merchant supplier to many of these programs, yes, we are actually actively looking at those things. Those programs.

And we are engaged with multiple partners to be able to actually provide some systems there. And some capabilities to our customers.

it is a little bit early, but as we make progress, and some of these are sensitive programs as well, And I am not in a position to be able to talk very openly about it, but we are making very good progress. And I believe that we are we are on the right track.

Thank you.

Wahid, the unmanned segment has always had a lot of foreign military sales activity. Could you give us the latest kind of what you are seeing from a bookings environment, particularly given that we are seeing a lot of volatility around U.

S. Domestic kind of timing of budgets.

How are things looking from an FMS perspective?

Good afternoon, Peter. And, absolutely, very positive in my view.

As you said, you have known us for a long time, and our international franchises for these products is a significant portion of our revenue generation and value creation strategy. it is been part of our strategy to continue to win programs domestically and then expand internationally.

We have done extremely well on our non lethal drones category. Over the last decade or 2.

And then last 3 to 4 years, we have really expanded the switchblade category significantly. But the rest of our portfolio, things such as our 1 way attack drones, and our FE1 platform and our Locust laser weapon systems, and even, I would say, our P550 and our Titan series even.

We have significant potential for growth in terms of the both DCS and FMS spend and opportunities internationally. 1 of the key areas that we are investing in fiscal 27 in terms of SG&A is international expansion to have better presence in these markets based on requests and signals that we are getting from specific countries around the world.

I recently returned from a trip from Asia Pacific. And the demand for our solution is quite, quite compelling and strong.

And we need to keep investing in this expanding our presence to be able to support those customers And I think that is gonna start to pay dividends over the next several years for AV quite handsomely.

Got it. And just as a follow-up, Sean, on the 2-thirds of adjusted EBITDA on the second half of the year, could you just give us a little more color on that?

Is that just volume and mix? Or is there anything else to call out on that?

Thanks again.

Yes. Thanks, Peter.

Yes. The second half of the year, we are expecting 2-thirds of our total adjusted EBITDA As the sales volume picks up in the back half of the year, the volume and the mix should be more favorable resulting in a higher adjusted EBITDA than in the back half.

Similar to what we had in fiscal year 2026. Thank you.

Thank you, Wahid, Sean and Denise. Maybe just on margins, can you help us bridge fiscal 27 versus 2026?

I know there is fair amounts of puts and takes and appreciate you calling out the changes in SG&A and IRAD. But any other color you can give on that would be helpful.

Thank you.

Sure, Jonathan. Yeah, so overall, we are expecting next year's adjusted EBITDA between $305 million and $325 million which is essentially 14.5% at the midpoint.

Similar to our fiscal year 2026 ending results. But we are able to increase the overall R&D investment between 7% to 9% and SG&A between 14% to 16%.

That increased investment is gonna come from improved adjusted gross margins from our product sales and overall services mix that we are going to have in fiscal year 2027. Our next question is from Peter Skibitski with Alembic Global.

Hey, good afternoon, guys. Hi, Peter.

Alright. I guess, first, for Sean, can you quantify for us the impact?

You said you took a 1-time charge on a Blue Halo contract in fourth quarter. It was a negative EAC adjustment.

I guess it was a services contract. I do not know if it was Titan or something else, but if you could quantify that, that would be great.

Sure. Yes.

There was a 1-time adjustment in 2 parts of the business. Our CMS business had a contract that was not awarded, and we had expenses incurred that we posted in fiscal year 26.

And then there was a indirect rate realignment that took place, which has resulted in a forward loss and onetime EAC adjustment in our Precision Strike and Defensive Systems business. Those are onetime only events.

Thank you.

Thank you for taking the question. First 1 for Wahid.

It just wondering if you could give us sort of an overview and some context for the Q4 result in Precision Strike. It seems like tone had been over the last few quarters that some of these contracts might have been languishing in the contracting process in the government's hands.

Just wanted to sort of assess that. Where we stand in terms of the sort of throughput And then, also, maybe you could dig into that customer acceptance testing part.

Some of the improvements there. And is that applicable across all blocks in SKUs of Switchblade or even the entire portfolio?

And then 1 follow-up.

Sure. Thanks, Clarke.

So our PRECISION STRIDE and defensive systems really is 1 of the shining, sort of business groups or groups of businesses that we have that is performing incredibly well, not only in fiscal 26, we expect it to perform really well in 2027 as well. We believe that, again, our momentum in this area is very strong.

You heard Sean earlier talk about the different sole source IDIQ contracts that we have, the tune of about a billion dollars each. The government still has options to actually either extend the time frame of those contracts or increase the ceiling of those contracts to make room for more awards as a result of that.

In 1 of them, we are getting close to, like, 2/3 or 3/4 of fulfilled, so to speak. But the government has options, and we know that our solutions are working and our customers are happy with them, and they want us to keep continuing to build Another indicator that is really important is that last fiscal year, US Army also funded us to actually increase the production.

Of our Switchblade 600 Block 1 And we are now at the historic levels of production of that product, We have the capacity to produce literally several thousands of those a year. Now.

And so we are prepared to you know, get these contracts, and then convert these contracts into revenue as soon as we get them as we ramp it up production. Besides loitering ammunition, though, I must say also that I feel very bullish on our Red Dragon family of 1-way attack.

That is much earlier in its adoption cycle. We are also ramping that up and we have won several contracts this year.

This past year. And so I expect that to continue to grow, and it would not surprise me if that was a very significant portion of the revenue of that category over the next couple of years.

Because it is the capability and the mission sets that the Red Dragon family of 1 way attack long haul, product addresses. Is quite unique and compelling.

And then lastly, our Freedom Eagle-1, it is really at its infancy. We are just developing the product, going through testing, and Congress has even funded it to expand and accelerate the rate of testing and development and expansion, which we are actively doing.

So in all 3 of those categories, we expect growth and we expect adoption to continue, and the government funding, as well as international allies to continue to buy more of those for us. I believe you are gonna continue to see positive announcements and results from us in the several months ahead of us in the future.

Thank you.

Yeah. Hi.

Thanks for the questions. I guess for Sean, congrats on the appointment to the CFO role.

I know you are not a newcomer to AV, but now that you have been in the CFO role for a little bit now, what have been some of your early learnings? And are there any areas or anything we should expect to be different under your leadership?

Yeah. Thanks for the question.

Yeah. As you mentioned, I have been here for, 16 years, so I know the company very well.

Been very fortunate to be able to take this opportunity. Worked well with Wahid for the last decade plus, very closely, and I am really excited for this opportunity.

I plan on continuing with our growth projections and growth momentum. Assisting Wahid and our new chief operating officer, Robert, on making decisions on our capital investments and research and development and what markets we are going after and continue with our overall expansion efforts.

Over the years to come. Thank you.

Great. Hey, team.

Thanks for taking the question. Wahid, maybe for you.

You mentioned Mayhem 10 in your prepared remarks. Could you maybe just give us a little bit of a you know, double-click there around how that product is going to be differentiated from Switchblade in terms of, I guess, maybe the opportunity set that you are going after?

And do you it sounded like you were that was designed specifically for an army contract, but I would imagine other components probably have a need there. So and then I guess along with that, is the ramp, that you saw in Red Dragon maybe similar to what we could expect from Mayhem 10 as you kind of, again, push that out to market?

Thank you.

Sure. Thank you, Trevor.

So as you know or you may have noticed in my remarks, Mayhem 10 is built on the foundation of our Switchblade portfolio and product line. It is really the next generation capability but it is purpose built just like the other Switchblades that we have introduced in the past.

For a specific requirement and program for the US Army and other customers that we have had. US Army has a program called Launched Effects.

And in the Launched Effects, the idea here is that while Switchblade 300 and 600 are what is referred to as a weapon system or a loitering munition for dismounted troops on the go. This Mayhem 10 allows it to be actually integrated on all other types of platform.

Unmanned airplanes, manned airplanes, helicopters, and ground vehicles. And even ships.

So we have designed this product to be essentially very compliant with a common launch tube that US Army refers to as a common launch tube that essentially enables them to mount this to any of their platforms as a weapon system. That opens up a whole new area of opportunities for us in the loitering munition category.

And then we purpose-designed this for that. for that In addition to that, it has a few other features that, you know, you can have different payloads, whether it is lethal or nonlethal.

For other types of missions inside the product too. I do believe that we are positioned well.

We are focused on that Launched Effects program. We are engaged with US Army.

But I do agree with you that there is beyond the US Army, there is applications and demand for this. And a need for this.

With lots of other customers. Both domestically and internationally.

It is a little bit early. it is really dependent on the US Army's pace of progress on that program.

But we are very focused on it like we have always been on other programs, and we are going to continue to update you on our progress. On the other product you mentioned, Red Dragon, we are ramping that up.

And I do believe that Mayhem 10 hopefully, as we get down selected and if we get down selected over the next several months, to make progress. I mean, we have prepared ourselves for these scenarios.

We constantly work that as part of our strategy and our execution plans for operations. And our factories are very capable of switching between different models if we have to based on customer demand.

And that is that is inherent to our product design philosophy and our manufacturing readiness programs. Thank you.

Thank you. Good afternoon.

Good afternoon, Kevin.

I know quarter to quarter, super lumpy, but if I am doing the math right, it implies first quarter will be down year over year. Anything specific behind that?

Yes, Kevin, thanks for the question. We try to provide that level of color in our prepared remarks.

We have the stop work on SCAR is leaving around a $30 million hole as well as some of the order timings coming through later this summer that we expect to ramp up the back half of fiscal year 2027. So we are just taking our time to really think through what the distribution of revenue will look like given the lack of the SCAR revenues coming through in the first half there.

Thank you.

Hey. Thanks very much, and good evening.

So as you are looking at the blue halo portfolio, I guess, what products are you most excited about? And how do you expect I guess, demand for those products to ramp over the next several years?

What are you what are you really looking for?

Thanks, Brian. So you know, for me, it is always very difficult to pick favorites between our products.

I consider them like, you know, our kids. And, it is really hard to do a favoritism towards 1 or the other because they all have their own unique value propositions and position in the market.

But if you were to ask me in terms of real potential for game changing capabilities, Blue Halo already has contributing significantly, for example, to our RF jamming and detect systems and the counter UAS category with our Titan series. That is 1 of the fastest growing products in our entire portfolio.

As a combined entity, and it is 1 of our more profitable products. If not the most profitable product lines that we have.

So Blue Halo has done a fantastic job on that. Very close second to that would be the Locust laser weapon systems.

The LOCUS laser weapon system is at the infancy, as I said on my remarks, of its adoption cycle. I personally believe that is a billion to a multibillion dollar market opportunity over the next 5+ years.

And I think that we are at a cusp of that inflection point this year. there is a very important program of record that the US Army has called EHEL or enduring high energy lasers.

And we are anticipating a decision on that. We are competing on that program.

it is supposed to be, based on the Army's announcements, about a $5 billion program in size total. And they have so far indicated that they are going to announce that and, award that in the next few months.

That is going to be an inflection point because it is the first of its kind program record in the US Department of Defenses basically, on a production level laser weapon system. And it is a holy grail.

it is a whole new category that is going to be created as a result of it. And we all know the threats and the kind of demand that there is for defending against drones at low cost and with unlimited magazine.

And I would also point out 2 other things real quick. Our laser communication terminals is 1 of the best, if not the best in the world.

And we are the leader in that space. that is also in its infancy.

And then lastly, the Freedom Eagle-1. We are now entering a new category that AV historically has never played truly being a follow-on, prime missile producer.

And we are ramping that up today this year. We are investing significant dollars on production and manufacturing.

And we are aggressively tackling the testing and validation phase because the US Army is pushing us really hard to go faster. And we are.

And it is gonna be at an unprecedented like, sort of speed. Of from the time that we started this program until we are going to get to production.

it is nearly 2 years or so. that is unprecedented in missile categories.

In the history of the department. And so we are pleased with that because I think it opens up a whole new category for us in the long run.

And I am really bullish about that as well. So you could see it is really difficult to pick which 1 is gonna be best.

They all have their own strong profiles of value creation, and we are very happy with them. Thank you.

Hi. Wahid and Sean.

So just my first question here, I understand you think that the regular defense budget probably will not be passed until into the new calendar year. But if the up to $350 billion reconciliation bill is passed before the midterms.

And we see more demand from a contracting perspective for uncrewed aircraft systems product sales in the mix how should we be thinking about the gross margin potential that we could see in the fiscal year if that if that occurs?

So good afternoon, Austin. Thank you for the question.

And you have actually caught something really important in this discussion, which is besides the regular budget, there is also a reconciliation bill in front of congress, which has dollar amounts In the billions of dollars as you mentioned. For primarily a lot of the categories that we are the leader or 1 of the key players in the market.

And providers in the market. So the range of outcomes there, Austin, is very wide.

And quite favorable in many ways. But it is really hard to count on the timing of that.

The best indicators that we have that is also gonna be delayed given the election cycle and given how the Congress is engaging themselves in the bills and in the approval of the budgets. So we are cautiously optimistic Long term, we are gonna do really well.

You know? But first quarter, second quarter, it is really hard to predict that because really difficult to know exactly when these budgets are gonna pass.

So we are not really assuming that some of that is going to come through. If that situation changes, positively, of course, we are gonna update you.

And it will have a positive impact We believe that it should and it could have a positive impact, both on top line revenue and on the profitability profile, because we are you know, producing these things And our margin profile on these are really good and our pricing is quite competitive in the market. And so I we look forward to, hopefully, your being right and that scenario coming to fruition and keeping you guys updated.

Thank you.

And this will conclude the Q&A I will turn the call back to Denise for final comments. Thank you once again for joining today's conference call, and for your interest in AV.

As a reminder, an archived version of this call, SEC 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.