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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals a strong backlog conversion to funded orders, significant market opportunities for new products, and strategic alignment with defense priorities. Despite some ambiguity in backlog details, positive cash outlook and growth potential in new segments support a positive sentiment. The lowered EBITDA guidance is offset by optimistic revenue and EPS projections, and the BlueHalo acquisition is expected to enhance market opportunities. Overall, the positive elements outweigh the concerns, suggesting a positive stock price movement.
Revenue Record fiscal year revenue of $821 million, which is 14% higher than the prior year period; and record fourth quarter revenues of $275 million, which is 40% higher than prior year period. The increase was driven by robust demand for innovative solutions and double-digit organic revenue growth.
Bookings Secured $1.2 billion in total bookings for fiscal year 2025, underscoring the robust demand for innovative and battle-proven solutions.
Backlog Ended fiscal year 2025 with funded backlog of $726 million, which is 82% higher than the prior fiscal year. This increase reflects strong demand and record bookings.
Loitering Munition Systems (LMS) Revenue LMS revenues for the fourth quarter rose 87% to $138 million, and for the full fiscal year revenues of $352 million were 83% higher. Growth was driven by the Switchblade family of solutions and a $1 billion 5-year sole-source Army IDIQ contract.
Uncrewed Systems (UxS) Revenue UxS segment posted fourth quarter revenues of $113 million, which is higher than the prior year period by nearly 9%. For the full fiscal year, revenues were slightly lower than the same period last year at $382 million. The Puma AE UAS and JUMP 20 contributed significantly to revenue.
MacCready Works Revenue Revenues for the fourth quarter rose 24% to $24 million. For the full fiscal year, revenues were $87 million, which was 14% higher than the prior year period. Growth was driven by the development of next-generation solutions like the Red Dragon.
Adjusted EBITDA Adjusted EBITDA for Q4 was $61.6 million, up from last year's Q4 of $22.2 million, driven by higher revenue, higher gross margins, and lower R&D spending. Full year adjusted EBITDA was $146.4 million, a 15% increase over FY '24.
Gross Margins Consolidated GAAP gross margins for Q4 were 36%, lower than the prior year due to noncash accelerated intangible amortization expenses. Adjusted gross margins for Q4 were 39%, down from 40% last year due to a change in sales mix and lower service margins. Full year gross margins were 41.2%, slightly down from 41.5% in FY '24.
SG&A Expenses SG&A for the quarter was $34.8 million (net of adjustments), compared to $32.7 million in the prior year, a 6% increase. For fiscal 2025, SG&A was $133 million, up from $107.3 million in FY '24, driven by increased global sales footprint and bid and proposal activity.
R&D Expenses R&D expense for the fourth quarter was $25 million or 9% of revenue, compared to $35 million or 18% of revenue in the prior year. Total R&D spend for 2025 was 12% of total revenue, within the 12%-13% range of initial guidance.
Net Income Net income for Q4 was $16.7 million, up from $6 million in the prior year. Full year net income was $43.6 million, down from $59.7 million in FY '24, impacted by goodwill impairment, deal integration costs, and legal accruals.
International Revenue 52% of the company's revenues were from international customers, with over 24% from non-Ukraine European customers. Orders for Switchblade products and JUMP 20 contributed significantly to international revenue.
P550: A new Group 2 AI-driven autonomous UAS leveraging a modular open-system approach.
JUMP 20-X: A vertical takeoff and landing medium uncrewed aircraft system designed for shipboard operations with advanced heavy-fuel engine and autonomous capabilities.
Red Dragon: A fully autonomous-capable, GPS-denied one-way attack UAS designed for U.S. Department of Defense needs.
BlueHalo acquisition: Acquisition of BlueHalo to strengthen position in defense technology across air, land, sea, space, and cyber domains.
International expansion: Secured orders from 8 countries for Switchblade products and a $46 million contract with the Italian Ministry of Defense for JUMP 20.
Manufacturing capacity: Expanding manufacturing facilities in Utah to support over $1 billion in annual Switchblade revenues.
Segment realignment: Reorganized into two segments: Autonomous Systems and Space, Cyber & Directed Energy for better alignment with customer missions.
Revenue guidance: Set fiscal year 2026 revenue guidance between $1.9 billion and $2 billion, representing significant growth.
Focus on innovation: Invested nearly $2 billion in R&D over the past decade to develop disruptive software-defined hardware solutions.
Reduced Revenues to Ukraine: Ukraine revenues in FY '25 were 18% of total revenue for the year and 12% of revenue in the quarter. It is expected to be less than 5% in FY '26, indicating a significant decline in revenue from this region.
Working Capital Challenges: Unbilled receivables increased by $60 million during the fourth quarter, attributed to the LMS business. Contract definitizations, testing schedules, and new payment terms have unfavorably impacted near-term working capital.
Integration Costs for BlueHalo Acquisition: The company incurred $40 million to $45 million in BlueHalo deal integration expenses, including $20 million related to deal closing costs, which could strain financial resources.
Gross Margin Pressure: Adjusted gross margins are expected to remain at 29% to 31%, with lower margins in the first half of fiscal 2026 due to product mix and integration costs.
Legal Accrual Costs: A $2.1 million legal accrual was recorded, adding to operational expenses.
Goodwill Impairment: An $18.4 million goodwill impairment in the UGV business negatively impacted net income.
R&D Spending Reduction: R&D expenses were reduced to 12% of total revenue in FY '25, down from 18% in the prior year, potentially impacting future innovation.
Dependence on International Markets: 52% of revenues were from international customers, with a significant portion from non-Ukraine European customers. This reliance on international markets could pose risks due to geopolitical or economic uncertainties.
Manufacturing Expansion Risks: The company is expanding its manufacturing facility in Utah to support more than $1 billion in annual Switchblade revenues, which could face delays or cost overruns.
Product Launches: Introduced three new products: P550, JUMP 20-X, and Red Dragon, aligned with customer priorities and market demands.
Acquisition: Completed the acquisition of BlueHalo, enhancing capabilities across air, land, sea, space, and cyber domains.
Segment Realignment: Starting FY 2026, the company will operate under two segments: Autonomous Systems and Space, Cyber & Directed Energy, to better align with customer missions.
Revenue Guidance FY 2026: Projected revenue between $1.9 billion and $2 billion, representing nearly 15% growth over pro forma FY 2025 results.
Adjusted EBITDA FY 2026: Expected to be between $300 million and $320 million, with a margin of approximately 16% of revenue.
Segment Revenue Projections FY 2026: Autonomous Systems: $1.2 billion to $1.4 billion (20% growth); Space, Cyber & Directed Energy: $700 million to $900 million (double-digit growth).
Gross Margins FY 2026: Adjusted gross margins expected to remain at 29% to 31%, with improvement in the second half of the year.
R&D Expenses FY 2026: Expected to remain at 6% to 7% of revenue.
Revenue Distribution FY 2026: 45% of revenue expected in the first half of the year, 55% in the second half.
Manufacturing Expansion: New production facility in Utah to support more than $1 billion in annual Switchblade revenues, with initial production capability by the end of FY 2026.
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The earnings call summary and Q&A indicate strong growth prospects with new contracts, international expansion, and a positive outlook for key segments like Autonomous Systems. Despite some backlog and guidance uncertainties, management's optimism about future orders and strategic positioning suggests a favorable short-term stock reaction. The expansion of production capacity and favorable international policies further support a positive sentiment.
The earnings call summary indicates strong financial performance and optimistic guidance, with expected record revenues and profitability. The Q&A section reveals confidence in the company's competitive position, product portfolio, and market opportunities, such as the Golden Dome initiative and international demand for BlueHalo products. Despite some uncertainties in budget finalizations and contract timings, the overall sentiment is positive, supported by growth potential and strategic initiatives. The lack of specific guidance details is a minor concern but not enough to overshadow the positive outlook.
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