AeroVironment, Inc.

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

Thank you and good afternoon, ladies and gentlemen. Welcome to AeroVironment's first quarter fiscal year 2026 earnings call. My name is Denise Paccioni, Director of Investor Relations for AeroVironment. Before we begin, please note that certain information presented on this call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve many risks and uncertainties that could cause actual results to differ materially from our expectations. Further information on these risks and uncertainties is contained in the company's 10-K and other filings with the SEC, in particular in the risk factors and forward-looking statement portions of such filings. Copies are available from the SEC on the Air Environment 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 investor 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, September 9th, 2025. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. Joining me today from Arrow Environment are Chairman, President, and Chief Executive Officer, Mr. Waheed Nawabi, and Executive Vice President and Chief Financial Officer, Mr. Kevin McDonald. We will now begin with remarks from Waheed Nawabi. Waheed?

Thank you, Denise. Welcome, everyone, to our first quarter fiscal year 2026 earnings conference call. I'll start by summarizing our quarterly performance, followed by Kevin, who will review our financial results in greater detail and then discuss guidance for fiscal year 2026. After this, Kevin, Denise, and I will take your questions. I'm pleased to report a very strong start to our fiscal year with excellent first quarter financial results, setting new records for the company. We are better positioned than ever to drive industry-leading organic revenue growth and profitability. Our acquisition of Blue Halo has created significant new growth opportunities in critical areas that are aligned with our customers' highest priorities, and our integration efforts are progressing ahead of plan. Our first quarter results benefited from programs tied to this acquisition, and we look forward to building on that momentum in the coming quarters. Now, let me summarize the key messages for the first quarter of fiscal year 2026, which are included on slide number three of our earnings presentation. As a reminder, this is the first quarter where our results are inclusive of our recent Blue Halo acquisition. First, we achieved another record first quarter with revenue of nearly $455 million. Second, bookings for the first quarter reached nearly $400 million. and our funded backlog grew to $1.1 billion. Unfunded backlog is now at $3.1 billion. Third, we introduced several innovative solutions in counter UAS, space communications, and direct energy, among other areas that are directly aligned to our customers' urgent priorities and represent multi-billion dollar market opportunities over the next several years. And four, we're maintaining our fiscal year 2026 guidance with revenue between $1.9 billion and $2 billion. Overall, AB is uniquely positioned as a leading defense tech prime with our innovative product offerings, along with the experience and capacity necessary to scale manufacturing on an expedited timeline. This is what is required for the urgent national security priorities of our nation and our allies around the globe. We have worked very hard throughout the past few years to position AB for such a historic set of opportunities. Since our last earnings call, we announced several key program wins and milestone achievements. For example, yesterday we announced a nearly $240 million award for our long-haul space laser communications terminals that will be delivered over the next three and a half years with options for additional systems. To put this in perspective, we expect the laser communication is going to be one of the most important aspects of warfare in the space domain and represents a multi-billion dollar opportunity for AV. AV is clearly leading the industry in this critical area and technology. Our technology allows the secure transfer of high bandwidth data in the most challenging space environments at the fastest rates and across very long distances than any other current capability on the market. This is a strategic and critical milestone for our customers, and we're now excited to move it from development into full-rate production. With our decades of proven track record, AV is well positioned to efficiently scale our laser comm manufacturing to capture growing demand in this multibillion-dollar new market. In addition, AV was also recently awarded a $95 million contract to further the development and scale manufacturing of our Freedom Eagle 1, or FE1, for long-range kinetic interceptor program for the U.S. Army. This missile is designed to deliver extended range, higher altitude, and all-weather performance against a broad set of emerging threats. AV's FE1 missile addresses a much broader set of requirements at much affordable price points than anything available on the market today. Our nation needs capabilities such as FE1 to affordably defend our nation against such emerging threats. This award enables AB to enter and disrupt a multibillion-dollar missile defense market. The U.S. Army considers our innovative FE-1 solution the leading capability in this critical area. We're looking forward to sharing future progress with you on FE-1 and our next-generation counter-UAS missile efforts in the coming quarters. Another key achievement in the first quarter was the recent delivery of two of our Counter UAS Infantry Squad Vehicle Mounted Locust Laser Weapon System under the U.S. Army's Multipurpose High Energy Laser Program, or ANTHEL. We're set to deliver two additional Joint Light Tactical Vehicles, or JLTVs, Mounted Locust Laser Weapon Systems next month for the second increment of the ANTHEL program. These deliveries mark a major milestone in the U.S. Army's objective of operationalizing directed energy capabilities to defend against the emerging proliferation of drone warfare. Our LOCUS laser weapon system use of directed energy is a critical emerging technology that is key to defending against Group 1 through 4 drones and in the future will enable defense against hypersonic missiles, cruise missiles, and other projectiles at much lower and affordable costs. We also see this emerging market exceeding several billion dollars in the coming years, and AV is ahead of most, if not all, industry players to scale and capture a significant portion of this very large opportunity. And finally, we delivered multiple P550 Route 2 UAS systems along with training to the U.S. Army for the Long Range Reconnaissance, or LRR, program of record. Persistent, low-cost, reliable ISR at the edge of the battlefield represents a shift in defense strategy around the globe, and we believe our P550's performance specifications meet the U.S. Army's program requirements better than any other competitor solution on the market. This program of record represents approximately $1 billion in value over the next five years, and AD is very well prepared to execute and deliver on it. The successful adoption of our P550 with the U.S. Army's LRR program should also lead to more international adoption of this capability by our allies in the coming years. We've experienced such a trend with our other global franchises, such as the Raven,