AEVEX Corp. Class A

Hello, everyone. Thank you for joining us and welcome to AVEX First Quarter 2026 Earnings Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Jason Gursky, Vice President of Investor Relations. Please go ahead.

Thank you for joining AVEX's first quarter 2026 earnings conference call. I'm Jason Gursky, Vice President of Investor Relations, and I'm pleased to welcome you here today. Joining me on the call are Brian Radin, Executive Chairman, Roger Wells, the company's Chief Executive Officer, and Todd Booth, AVEX's Chief Financial Officer. Before we begin, please note that on this call, certain information presented contains forward-looking statements, including our 2026 outlook, backlog, total addressable market opportunity, production ramp-up, growth, and M&A strategy, and capital allocation priorities. Our forward-looking statements are based on current expectations, forecasts, and assumptions, and involve risks and uncertainties. These risks are described in AVAX's reports filed with the SEC, including our IPO perspectives. I'd also like to note that we will discuss a number of non-GAAP financial measures on this call. Our earnings press release and presentation, which are also published earlier today and can be found on the investor section of the company's website, contain a reconciliation of any non-GAAP financial measure to the most directly comparable GAAP measure. The content of this conference call contains time-sensitive information that is accurate as of only today, May 20th, 2026. The company undertakes no obligation to make any revision to any forward-looking statements contained in our remarks today, or to update them to reflect the events or circumstances occurring after this conference call. And with that, I'd like to turn the call over to Brian for some opening remarks.

Thanks, Jason. Good afternoon, and thank you for joining our first earnings call as a publicly traded company. Before we get into this quarter's details, I want to take a moment to express my sincere gratitude to the people who made this milestone possible. When we founded Avex, we believed a small dedicated team could take on tough challenges and deliver meaningful capabilities to those who rely on us. Today, as I look across this company, I'm incredibly proud that we have grown into a thriving organization built on agility, innovation, and trust. To our employees, thank you. Your talent, determination, and commitment to our mission are the foundation of everything we've achieved and the culture that will drive game-changing results for years to come. To our customers and partners, we are grateful for your trust. Your missions inspire us and your feedback pushes us to constantly evolve and work on the best available solutions. To our suppliers, thank you for standing with us as we've scaled, adapted, and prepared for this next chapter. Your reliability and collaboration play a vital role in our success. And to our new shareholders, welcome. We're excited to have you join us as we continue building on our strong foundation. Our IPO marked an important step forward, one that strengthens our ability to invest, expand, and accelerate our growth over the long term. As I reflect on the current environment, it's clear we've built just the right company for just the right time. Defense planners are calling for a stronger industrial base for autonomous systems. for innovative agile companies that can both respond to rapidly evolving operational requirements and produce at scale, and for new acquisition battlefield tested solutions gain the advantage. For AVEX, these priorities are in our DNA. We are also seeing bipartisan support and broad agreement that our forces need substantially more of the capabilities we produce and increased funding to bring them into the field. Affordable autonomous systems like ours are now among the most effective solutions, which we believe creates durable demand. Our most recent proof point of our position in the market is our $18.5 million contract award from the U.S. Air Force for delivery of autonomous aircraft for one-way attack missions that we announced last week. These additively manufactured Group 3 systems include our AI-enabled CompassX autonomy stack and are designed for affordability and mission effectiveness. That's a formula that works and a model we believe we can replicate and scale. This is an exciting time for Avex, and we intend to continue to be a leader through this transformational period for our industry. The results you'll hear from Roger today are early evidence of this alignment between our strategy our technology, and where the market is headed. With that, I'll hand the call over to our CEO, Roger Wells, who will walk through our first quarter results and share more about the momentum we're seeing across the business. Over to you, Roger.

Thanks, Brian, and good afternoon, everyone. It's a pleasure to welcome you to Avex's first earnings call as a public company. I'm excited to be here, and I want to begin by thanking our employees for their unwavering commitment to supporting the critical mission needs of our customers. And to our newest shareholders following the IPO, thank you for your confidence in our vision and in the work ahead. Before reviewing our first quarter results, I'd like to take a moment to reintroduce AVEX to those getting to know us and to outline the priorities we're focused on over the next 12 months. Please turn to slide three. Avex develops and produces combat-proven autonomous systems that provide the US and its allies a meaningful competitive edge on the battlefield. To date, we've delivered over 6,200 systems, and we currently have orders to deliver over 3,900 units in 2026 alone. Our focus is straightforward, solve complex operational challenges through daily innovation while maintaining a relentless commitment to cost-effective solutions, high-volume manufacturing, and consistent delivery on timelines that are operationally relevant. Let's go to slide four. We do all of this from two complimentary operating segments. Tactical Systems focuses on autonomous unmanned systems in both the air and maritime domains, as well as our differentiated mission autonomy software and technology stack, CompassX. Global Solutions delivers operationally focused services, including manned aircraft modifications that act as a force multiplier. Both segments are deeply embedded with our customers, helping us anticipate the needs and invest appropriately, whether through internal research and development to accelerate new capabilities or through capacity to help ensure timely delivery of mission critical assets. Please turn to slide five. At this point, demand for what AVEX produces is robust and growing. Autonomous systems are becoming more important to the strategy and tactics of the U.S. Department of War. and they are increasingly important to our international allies and partners. The fiscal year 27 presidential budget projects meaningfully higher spending across the very categories we serve, including UAVs and USVs with over 50 billion in requested appropriations. The chart on the right-hand side of this slide reflects our view of the market before those incremental dollars flow through, which suggests upward bias on our total addressable market and growth rates. As the DOW's Defense Autonomous Warfare Group, the DOG, finalizes plans for the billions requested for autonomous systems, we expect additional clarity and opportunity. We think this further validates our belief that we are in a global defense super cycle where autonomous unmanned systems similar to those provided by AVEX will be in high demand and part of every major conflict in the future. Our goal is straightforward, grow in line or faster than the markets we serve by continuing to innovate and scaling efficiently as volumes rise. Let's go to slide six. Autonomous systems are rapidly proliferating across the modern battlefield and AVEX is positioned with a portfolio of proven systems across both air and surface domains. Importantly, our platforms are backed by an internally developed and differentiated mission autonomy technology stack. This lets our systems operate in contested environments while offering a competitive edge in the market. Beyond platforms, our advanced deployment architectures include in-theater additive manufacturing designed to deliver next-generation capability forward, accelerate fielding timelines, and enable real-time adaptation in contested logistics environments where traditional supply chains cannot reach. Please turn to slide seven. We have customers across the military services, the intelligence and special operations community, and a growing base of international allies. These customers are engaged in complex mission in the most contested environments, and we're proud of these partnerships and of the tangible impact our systems have in real-world missions. Moving quickly to slide eight, I really like this slide, as I think it does a good job of describing our alignment with our customers and our differentiation from others in the market. The DOW, as many of you know, is prioritizing open architectures, reduced vendor lock, scalability, and proven performance. AVEX checks each one of these boxes. Our platforms are modular, interoperable, and battle-proven, helping us be highly competitive and to win new programs and awards. Now let's go to slide nine. At the center of what we do is our CompassX navigation and autonomy ecosystem, which includes Compass Core, our integrated hardware and software architecture. This is then paired with AI-powered vision-based navigation, AI-driven mission planning and control, resilient positioning, and advanced mapping capabilities. Importantly, all of this is done by employing a modular open systems approach, or MOSA, that allows us to quickly and affordably plug and play leading and domain-specific payloads, software, and systems into our product. This way, our customers can get the most advanced solutions available on the market. And in our view, this technology stack is a key differentiator for the company and helps meet the operational requirements that ultimately drive wins. Please turn to slide 10. We couple our technology with a highly scalable, certified manufacturing footprint capable of producing over 1,000 units per month. This capacity far exceeds our current volume, supporting our long-term growth plans and giving customers confidence that we have the capacity of scaling at the pace their missions require. Let's go to slide 11. So we've talked about the fact that our technology approach aligns with customer needs and that we have the ability to ramp production. Now let's turn to our combat proven systems. We have a broad portfolio of aerial and maritime unmanned systems that have been conducting successful missions for years with over 30 unique customers, and we have deployed over 35 unique UXS platforms in the last three years. Our products have been out there, succeeding in incredibly challenging environments by providing critical mission needs to the warfighter, all powered by our CompassX autonomy platform that has delivered time and again. Please turn to slide 12. I think the benefit of this experience is best demonstrated by the work we've done to support operations in Ukraine. We successfully executed on the Phoenix Ghost program for 2022 to 2025, providing the Ukrainians capabilities that met their urgent timeline and helped them defend their country against a much larger adversary. Our success on that program led to a follow-on program that we continue to execute today, which we call the UConn Deep Strike program. Taken together, these programs account for over 9,300 systems delivered and committed through the end of 2026 to support combat operations and $1.2 billion in total contract value. They've also helped inform our customers' views on what the future of drone dominance can look like. All this has opened up a robust pipeline of over $8 billion across the full range of our UAS and maritime platforms. Please turn to slide 13. Our growth strategy is diversified and momentum is strong. We're capturing share with existing US customers, expanding our domestic base, growing internationally as allied budgets rise, moving into high value adjacencies, all while evaluating strategically aligned M&A. Let's move to slide 14. In the near term, we are focused in on four areas of critical need for our U.S. customers, which provide us line of sight on opportunities for growth and broader diversification over the midterm. These areas include both service-level requirements for launched effects, one-way attack, long-range precision strike, as well as combatant command needs, particularly in the CENTCOM AOR. These represent over $2 billion in potential follow-on and new work, and we feel well-positioned across all four of these pursuits with several initial production awards already in place. The precise timing of additional DOW bookings is always fluid, but we have active proposals and negotiations ongoing, and we anticipate a healthy backlog position exiting the year on the heels of awards across these four specific pursuits. And that's just four pursuits. We are, of course, actively working many more, both domestically and internationally, that in our view could strengthen the growth outlook even further. Please turn to slide 15. The organic growth we just discussed could be further bolstered over time by disciplined M&A. We expect to be acquisitive, and we expect to focus on ads that strengthen the core, provide opportunities to move into strategically aligned adjacent markets where we can be competitive, help us garner access to innovative technologies and key skills, or that further differentiate our solutions. Like awards on the organic side, it's tough to predict the timing of M&A, But we have several active pursuits and we'll be looking to provide updates on those, if any, at the appropriate time. Now let's move to slide 16. Okay, let's turn our attention now to 2026 and focus areas for the year. Todd's going to go through quarter one numbers in a few minutes, but I wanted to first lay out our five key priorities. To begin, and not surprisingly after all that I've discussed thus far, we are focused on accelerating growth. We are actively shaping several large programs in the pipeline. And we're continuing to invest to help us secure those wins. At this point, we anticipate a book to bill in excess of one for the full year and to enter 2027 with solid backlog coverage. We're also focused on enhancing operational performance, including driving operational efficiency and scaling production. I talked earlier about this being a key area of differentiation for us, but it's still something that you have to go do. And so we're laser focused this year on enhancing program management, integrating our business systems and implementing AI-aided execution tools to improve efficiency, supply chain management, and our industrial partner ecosystem to increase resilience. We've been successful to date in demonstrating our ability to produce at high levels, but there's always more to do. And of course, we're focused on expanding margins. We expect to achieve this by working to keep cost in check to drive OpEx leverage, maintaining discipline with our bidding activity and driving operational efficiencies through continuous improvement. Next, we're focused on improving working capital efficiency and driving higher levels of free cash flow. And finally, we're going to focus on continuing to build high performing teams and a success minded culture. We'll be looking to attract the best talent and add experienced folks to the team, create professional development opportunities, and put a comprehensive workforce management system in place. Now, before I turn the call over to Todd, I'm going to walk through the key highlights from this first quarter. Please turn to slide 17. To begin... we experienced solid revenue growth driven in large part by the UConn Deep Strike program. Bookings this quarter were in line with expectations, and we expect to see growth through the rest of the year as we hit key program awards in the months ahead. Importantly, our trailing 12-month book-to-bill was 1.16 at the end of quarter one, with several important awards during the quarter for our Atlas product in the tactical system segment and for margin accretive follow-on work in global solutions. From an investment perspective, we made progress in the development of the second version of our CompassX technology, which is designed to provide customers with even better modularity and functionality across all our platforms. Its smaller, lighter form factor is easier to produce, which should help us drive costs down and improve our competitive positioning in the market. On the operational performance side of the equation, unit volumes were up roughly 440% year over year in our tactical systems business, demonstrating the company's ability to scale production. We also continue to develop our supply chain capability with focus on enhancing material planning and sourcing. These efforts are yielding positive impact on the vendor base and material flow through the supply chain, factory, and interproducts. Importantly, on-time delivery rates improved as the quarter progressed, and we're seeing less rework on the factory floor, a clear demonstration that operational efficiency continues to move in the right direction. Our adjusted EBITDA margins improved nearly 4,200 basis points this quarter versus a year ago, driven by higher volume, improved efficiency, better product mix, and operating expense leverage. With regard to working capital and free cash flow, both improved this quarter versus a year ago, and we continue to focus on contract terms with suppliers and customers and on a disciplined capital deployment to allow us the opportunity to fund strategic growth opportunities. And finally, We continue to make investments in systems that will improve our workforce planning and in programs that will help us retain top talent. As a result, our employee net promoter scores are strong and improving, showing that AVEX employees are increasingly excited about the work at the company. And with that, let me turn it over to Todd for a discussion of our Q1 financials and our outlook for 2026. Todd, go ahead.

Thanks, Roger. I, too, would like to welcome everyone to our first earnings call as a public company. I'm excited to be here and to work with our customers, employees, suppliers, and shareholders in the years ahead. What I plan to do today is walk through the company's results for the first quarter, including segment-level details and cash flow dynamics, and then provide an update on the balance sheet, particularly considering the recent IPO. I will then end with a discussion of our outlook for 2026. Please turn to slide 18. Revenue in the first quarter was up 307% year over year to 216.7 million driven by the tactical systems business where we're executing on a large unmanned aerial system program named UConn Deep Strike that was awarded last year. Net income was 21 million in the quarter compared to a net loss of 27.3 million in Q1, 2025. The increase was driven by higher revenue, operational efficiencies and lower research and development spending. As you will note from our historical financials, both revenue and profitability improved in the second half of 2025 as programs were put on contract and production ramped up. Importantly, this trend continued into 2026 with adjusted EBITDA margins in the first quarter improving significantly year over year, driven by higher revenue, production efficiencies, and lower operating expenses as a percentage of sales. Going forward, we expect margins to be more similar to the second half of last year, in the first quarter of 2026 than what we experienced in the first half of last year. Please turn to slide 19. Our tactical system segment saw revenue growth of 548% year-over-year to 190.8 million, driven largely by the execution of the Yukon Deep Strike program. The higher revenue led to operational efficiencies and adjusted EBITDA margins of 20.2% of sales in Q1, 2026. In our view, this quarter's margins level are more reflective of the longer-term potential of tactical systems, though quarter-to-quarter fluctuations are likely to be driven by volume levels, sales mix, and timing of research and development spend. Let's turn to slide 20. Global solution segment revenue increased 9% year-over-year to $25.9 million due to higher revenue from aircraft modifications and testing products and services, which have good margins. This favorable sales mix and higher sales volume that the segment adjusted EBITDA margins to 16.2% in the quarter. We believe margin rates in global solutions going forward in 2026 will be slightly lower than Q1 2026, given the mix of programs. Please turn to slide 21. Operating activities for the three months ended March 31st, 2026 was 10.4 million. compared to net cash used in operating activities of $20.1 million for the three months ended March 31, 2025. The $9.8 million favorable change in cash flow from operations was primarily due to the $49.1 million increase in net income, net and non-cash items, offset by the $39.3 million net decrease in operating assets and liabilities during the three months ended March 31, 2026, versus the $700,000 net decrease in operating assets and liabilities during the three months ended March 31st, 2025. The $40.1 million net decrease in operating assets and liabilities during three months ended March 31st, 2026 is primarily due to the timing of our cash payments to fulfill the UConn De-Strike program versus the timing of cash receipts from the customer. Combined with an overall increase in revenue in the first quarter of 2026, versus the fourth quarter of 2025. Going forward, we plan to closely manage working capital and capital expenditures, but note that we expect to invest in inventory levels to support our customers if the need arises. Turning to the balance sheet, we ended the quarter with $257.9 million in debt and $27.4 million of cash on hand. However, these metrics have changed significantly since the IPO in April. Net proceeds from the IPO were roughly $345.9 million. Importantly, subsequent to the IPO, we also entered into new credit facilities, and as of now, have a $100 million term loan on the balance sheet and have access to two undrawn facilities, a $75 million delayed draw term loan and a $200 million revolving credit facility. We used the proceeds from the IPO and the term loan to pay down debt and add cash to the balance sheet. In our view, the collection of these transactions currently provides the company sufficient liquidity to execute on its near-term growth strategy. Now let's turn to slide 22 for discussion of the outlook for 2026. At this point, we expect total company revenues to land in the range of 600 million to 620 million, and we expect adjusted EBITDA in the range of 88 million to 94.5 million for 2026. Other noteworthy items include depreciation and amortization, which we expect to be roughly 21.3 million, and interest expense to be roughly 13.2 million in 2026. Of note, this guidance is predicated on some major assumptions that I would like to point out, including our expectation the government will remain open and that the general contracting and funding environment does not materially change. Finally, I would like to take a few minutes to discuss the expected cadence of revenue and adjusted EBITDA this year to help with your modeling. At this point, we expect first half revenue to represent 62 to 64% of the midpoint of our full year guidance for revenue and for adjusted EBITDA to represent roughly 65 to 67% of the midpoint of our fully adjusted EBITDA guidance. As discussed throughout the call, we've had a good start to the year. with strong performance in both of our reporting segments, including higher accelerated material receipts that continue into the second quarter and which drive higher revenue recognition. In the second half of the year, we will have more deliveries, but less revenue given this phenomenon. And with that, I would now like to hand this call back over to Roger for some closing remarks. Roger? Great. Thanks, Todd.

Please turn to slide 23. Before turning it over to Jason for Q&A, I want to spend a few minutes talking about how we're viewing the world on a multi-year basis. We're not going to get into practice of providing out-year guidance, but I thought a framework on how to think about our financial model would be helpful for investors. First, our goal is to grow in line or faster than the underlying markets we serve. Our strategy to do that is to stay aligned with our customers' requirements for open architectures, scale production, and proven products. And fortunately for us, market growth looks like it's going to be healthy over the longer term, driven by increased adoption of autonomous systems and in the near term by the operational tempo of our customers. Second, our focus will be on trying to expand margins year over year through scale, absorption, productivity mix, and OPEX leverage. Third, We plan to be prudent with our capital, with deployment priorities focused first on IRAD and CapEx to drive innovative new products and scalable production, followed by M&A and then debt pay down. And finally, leverage. We have very little of it now post-IPO, but we've operated at higher levels in the past, and we expect to remain flexible, including with the use of debt to fund organic and inorganic growth when we see the right opportunities. At this point, we think roughly three and a half times of leverage would be our targeted upper bound. So to wrap up, I'm really excited about what's in front of us at Avex. We believe the markets we are serving are poised for substantial growth driven by a strong customer demand for ever increasing levels of autonomy. Our technology stack is combat proven in the most challenging operational environments. And our production system is primed with capacity to scale. All this points to expected growth robust organic growth and margin expansion in the years ahead, which we anticipate will be supplemented with prudent capital deployment into M&A. And importantly, with our recent IPO proceeds, we now have improved financial flexibility to aggressively execute our growth strategy. And with that, I'm going to turn things over to Jason to conduct the Q&A session. Thanks, Roger.

Operator, at this point, I'd like to hand the call back over to you to conduct the Q&A session. Before we do, I just want to ask everybody to limit themselves to one primary question and one follow up. With that, operator, please open up the lines for the Q&A session. Thanks.

We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you're muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Noah Poppenock with Goldman Sachs. Your line is open, please go ahead.

Hey, good afternoon, good evening, everyone, and congrats on being out.

Hey, thanks, Noah. Appreciate it. Great to have you here.

So maybe instead of two questions, maybe one kind of long one. I guess, you know, I think the market sees the strength in the product and the strategy and the long-term growth in unmanned. I think the big question people have in the near to medium term is the transition from Ukraine-oriented to not Ukraine-oriented. All the numbers you gave here imply the second half of 26 revenue is a decent amount lower than the first half. We know you plan to grow next year, so that run rate of second half 26, if that continued into 2017, You know, you wouldn't grow next year. So help me understand the shaping. And I guess, you know, the backlog, the funded backlog kind of covers this year. The funded backlog is going to need new additions to it, right, in order to grow next year and complete this transition. Maybe you can give us more color on, you know, the shape and composition of the backlog as you go through the year. It kind of looks like you're saying, you know, there's a little bit of a lull sort of back half 26, first half 27 as you're ramping down deep strike and winning new business. And then the new business is kind of ramping as you go through 27. But it's just any help you can provide on triangulating all of those pieces, I think would be super helpful to the market.

Yeah, sure. So let me unpack a little bit of that, Noah. So first, we have a healthy backlog position. And at this point in the year, we have over 90% of our fiscal year 26 revenue covered in funded backlog. And at this point in the year, we're positioned to continue to build backlog for next year, a really, really healthy position. And as you point out, We continue to see strong demand for our products and technologies from a diversified customer base across several key program portfolios, namely launched effects, which we had secured bookings and orders for in the first quarter and continue to see those transitioning from pipeline into backlog as we go through the year. One-way attack, long-range pursuit and strike, and then certainly support to combatant commands across multiple AORs, including CINCOM, which will offer potential upside. As we pointed out in the prepared remarks, the trailing 12-month book-to-bill was 1.16, and we do anticipate having a book-to-bill over one for the year, which gives us a healthy funded backlog as we move into 27. As you rightly point out, the first half of 26 is, is heavily loaded as we've accelerated material into the first half of the year to support accelerated deliveries for our schedule, for our customers. You know, it's something that they've asked for. It's operationally important, and we're focused in on doing that. So the second half will be, as we pointed out, less revenue than what we're seeing in the first half, but it still gives us the opportunity to continue to build on the book of business we're seeing. And I think a couple of great examples that point to progress that we're making on this portfolio of programs. The $18.5 million of awards for one-way attack that Brian mentioned in his opening remarks is And then today, we also announced another $15.6 million for our long-range precision strike capability. So we are continuing to execute on orders. We are responding to numerous RFPs. We are in active negotiations across a number of contracts and really see strong demand and portfolio programs that will transition from our pipeline into backlog as we move through the rest of this year.

That's super helpful. Do you expect to end 2026 with a funded backlog higher than where you ended 2025, despite burning off the deep strike out of the backlog through the year?

Yeah, I think we're set up for a very healthy backlog that is supported by our scale and production capacity. I think when we think about an actual number, it's going to be heavily predicated on the timing of orders, which are hard to predict, and the delivery schedule that our customers are going to ask for. But we do feel really comfortable with not only the quantity and timing of the orders that are going to come through in the back half of the year, but also our ability to operate in a short cycle environment where we are quickly converting backlog into revenue. So I don't want to, I don't want to afford at this point an ending or starting backlog, but I think it's safe to say that we've got a lot of confidence and conviction in converting our well-qualified pipeline into the opportunities for the year and confidence in 27s rather than growth.

In any one year, what, percentage of revenue, just even if super roughly, should we expect to be that shorter term book and chip?

Yeah, I think, again, it's going to vary. I think we're seeing focus and priorities change as we enter into operational scenarios and needs. But, you know, I think, again, when we looked at 26, we came in at around 80% coverage. I think that, again, we'll roll in with a healthy amount of backlog and the ability to convert book and ship within the year, consistent with the growth that we're anticipating for fiscal year 27.

Okay. Thank you very much. I appreciate the detail. Thank you. You got it. Thank you.

Your next question comes to the line of Sheila Kayaolu with Jefferies. Your line is open. Please go ahead.

This is Kyle for Sheila. I had a little bit of a more high-level one on operational readiness maybe. You know, you call on the slide some of the commentary out of the Department of War about, you know, procuring potentially millions of drones on an annual basis, and you're on pace to maybe do, you know, 4,000 this year. in total and talked about scaling towards a thousand per month. Can you give us a little color in terms of how you bridge towards that higher production capacity from here? And when you hear those high level numbers, how do you think about winning what you would determine to be sort of your fair share and and ultimately how yourself and the supply chain are really ready to do those higher volumes?

Yeah, so high level, you know, we we firmly believe that that Autonomous and unmanned systems are going to be a part of every conflict in the future. And that's being validated in Ukraine. We're certainly seeing it be reinforced with what's happening in the Middle East. And then, you know, generally a strong need for these types of systems. We have a production system in place that's capable of delivering over a thousand systems a month. And we've continued to build the infrastructure to ensure that we can scale as our customers bring in orders and demand. So, you know, when we think about the total TAM, you know, obviously there's multiple different classes of unmanned systems, but we are seeing a strong focus from our customers on the long range precision strike capabilities and the one way attack capabilities. and a priority around supporting both current operations as well as the operational capability demonstration, evaluation events, and training. So we really see a setup where the types of products, technologies, and solutions that AVEX brings are well aligned with what the customer is budgeting for and planning as part of their force projections in the future.

I just add one thing that sometimes when you're talking about those numbers, The group one drone space, you can buy a lot of systems with $5,000 and that's obviously not where we're playing. So you got to parse out those numbers and understand what part of the market you're in. And so we're very comfortable with our projections and getting more than our fair share in the areas that we're planning.

Thanks. And if I could just follow up on the supply chain there, I think in the prepared remarks, there were some color about You know, material receipts being better than expected, some reduced rework and things like that. So can you just talk about where you would expect maybe there to be pinch points as you grow the production system and what sort of your confidence there is in the supply chain?

So let's talk about fiscal year 26 and then maybe give some color on a broader perspective. So we have the vast majority of a material supply. for the year, either in inventory or on order. So we don't see a lot of risk associated with margin compression this year due to supply chain risks. Similarly, the material receipts that we have forecasted are well within our production and delivery windows. So we'd assess the revenue risk for fiscal year 26 as low as well. So we feel really good about the supply chain position that we have currently against the revenue and deliveries that we forecasted. And certainly for new and follow-on orders, we're pricing accordingly. Now, from a broader perspective, we've really built a very resilient and robust supply chain infrastructure over multiple years as we've scaled and built systems for a broad range of customers. We have a mature and well-structured BOM with a solid supply chain ecosystem built around it. We have largely onshored our supply chain and created NDAA compliant systems. We've implemented strategic supply and pricing agreements as well as alternative sources of supply for all our critical components. And we've effectively leveraged our balance sheet to bring critical components in ahead of potential downstream supply chain risk. So we really feel good about where we are from a supply chain perspective and believe that we've done a really good job of mitigating risk, not only for fiscal year 26, but for the future. And I'd say additionally, Our modular open system architecture lets us very quickly and very affordably integrate new technologies and componentry into our system, which further mitigates the risk of supply chain constraints and obsolescence in the tech stack. Thank you. You got it. Thank you.

Your next question comes from the line of Ken Herbert with RBCCM. Your line is open. Please go ahead.

Yeah, hi, good afternoon, Roger and Todd and everybody. Congratulations again. I just want to maybe start off, you know, there's, you've called out, continued to call out some of the same programs, Launched Effects, One Way Attack, you know, Long Range Persistent Strike and others, and feel pretty good about your potential there. But when you look at the absolute amount of money, whether it's through the Defense Autonomous Worker Group or other funding vehicles, It seems like there would be an expectation that the opportunity step for you should expand, especially as you think about, obviously, where the business can be in the next three to four years. When do you expect to be able to talk about other opportunities beyond what you've outlined today? Is that something we should expect this year, just considering your confidence around bookings this year? And then as part of that, how well-defined do you think the customer is in their thinking around taking some of these high-level numbers? I know, obviously, you don't have a fiscal 27 budget, but how well-defined do you think the customer is in shaping some of these into programs that could ultimately be bid upon and won by you?

Yeah. So, on the four primary programs that offer revenue diversification as well as product diversification, I just want to point out that they're portfolio of programs. So we're going to see multiple opportunities in programs or production contracts within each one of those categories. So there are more programs as we move forward, as we develop and book those pieces of business, similar to the OWA contract we just received and the long-range precision strike. We'll be highlighting those as proof points as we go along. So, again, we really see those four areas as significant opportunity spaces, over $2 billion in opportunity value, that gives us the confidence as we roll off the backlog associated with the UCOM Deep Stripe program. So, you know, really setting us up for that revenue in the back half of $26, $27 billion. and beyond. But as you point out, you know, those are just four pieces of our portfolio. You know, we have over 30 unique customers and we typically execute over a hundred active contracts a year. A lot of them are, are smaller than these four portfolio areas. However, they are growing. I'll give a great example in our Mako. You know, we, we have, a growing and developing portfolio of capabilities in the unmanned surface vehicle market. And over the next several years, we've seen that growing and expanding. I also think that we're going to see a significant amount of international work as we develop opportunities with our partners and allies around the world. And while it's relatively small, single-digit revenue, in fiscal year 26, we do see this growth to be a significant percentage of our revenue out over the next several years. And just a couple of examples of that. We've recently won work with Finland, with Chile, and with Lithuania. So great examples of how we're developing and growing international revenue, certainly at a creative margin. As we move through the year, as we move through the execution and conversion of our pipeline into backlog, we'll be highlighting and showing off these cases as proof points around the revenue diversification and growth.

Great, thanks. And just as a follow-up, has anything changed in your view that – Ukraine revenues should go to zero in 27. Are you getting any signals that we could see that bleed into 27 or be a source of revenue in 27 as well?

Yeah, as we've highlighted, you know, we haven't factored in any follow on Ukraine work from the deep strike program into our financial growth projections for 27 and beyond. Obviously, if they come through, we're well positioned to execute on those, and it would offer upside to our existing forecasted growth rates. Great. Thank you. Yeah, you got it, Ken. Thank you.

Your next question comes to the line of Louis DePalma with William Blair. Your line is open. Please go ahead.

Thanks, Roger, Todd, and Jason. Good afternoon. And also, hi. say congrats on your IPO and the inaugural earnings call. My question is, it has been well documented that your Phoenix Ghost Disruptor was one of the leading drone aircraft systems in the Ukraine theater. Are you able to share whether your aircraft have been utilized in the Middle East theater? And related to this, the Lucas long range drone platform that replicates the shot head that has gained significant attention in the Middle East conflict. And it seems that your disruptor has significant overlap with that Lucas system. And so how does disruptor compare with Lucas and what's the general, just potential involvement in the Middle East?

Thanks. You know, on the Phoenix Ghost program, you know, we deployed numerous different systems across Group 2 and Group 3. And that portfolio of capabilities that were deployed operationally and saw combat capability really informed how we thought about developing the capabilities, the technology, and the solutions that were going to be required as missions evolved and combat evolved. The disruptor was certainly a key piece of that, but over time, we've continued to develop and evolve that platform and make it a more sophisticated, more capable, long-range precision strike system. I think where we really differentiate ourselves is the fact that our systems, to include the disruptor and the disruptor family of platforms, have the capability of operating in highly contested environments where GPS is being jammed, communications are being denied, electronic warfare is being deployed across the battlefield by a technically sophisticated adversary. And The capabilities that we've evolved through our experience in Ukraine and in close working relationship with our U.S. government partners have given us this really unique and differentiated set of capabilities that we bring to market. I'm not going to comment about whether or not our systems are operationally deployed with specific customers in various AORs, other than to say we are actively supporting the needs of our customers. with combat proven, highly flexible systems as the need arises. And, you know, when we think about our position in the market and our differentiation, I would point out a couple of things. You know, one, we are combat proven, you know, having delivered over 10,000 systems by the time we end in fiscal year 26 with the vast majority of them being put into combat. We've got scale. We've got a flexible manufacturing system that's capable of producing over 1,000 systems a month affordably and on timelines that are operationally relevant. And we've got a technology stack that is built to be modular and be open, giving our customers the ability to very quickly configure the systems to meet their specific mission needs. So those really come together to highlight how we differentiate ourselves in the market and how we differentiate our systems capabilities on the battlefield.

And Louie, this is Brian. I just add to we're here at this special op show this week and we have had a whole parade of senior military officials coming by to thank us for our recent performance and what we've been doing for the community. So we'll kind of leave it at that. But but there's a lot of folks that are very impressed with with the work that we've been doing.

Definitely, I was I was at your booth at the special op show. Um, getting with another question, um, the backlog for, um, your deep strike program, it has been winding down. You've been very clear about that. Is there some potential that a portion of the program's funding is renewed and simply redirected to. Other geographies.

Yeah, you know, our focus is really on meeting the contractual terms of the contract. And, you know, it's a very important customer for us and a very important need. So, you know, we are delivering. to that customer, to the contract, and how they deploy those systems is something that we won't comment on. But again, it's safe to say that we're very closely aligned with all of our customers. We are producing the systems that they need to support not only real-world operations, but also the events associated with technology evaluation capability effectiveness assessment and training. So You know, we're going to keep our focus in on operational delivery and making sure that we continue to evolve our technology stack.

Excellent. Thanks, everyone.

Great. Thanks, Louie.

Your next question comes from the line of Brian Jaswali with Raymond James. Your line is open. Please go ahead.

Hey, good evening, guys, and thanks for taking my questions. Great job on the first print here. The after-hours trading seems to like it quite a bit. A lot to like there. I wanted to just kind of dig into the pipeline a little bit. The $8 billion has grown substantially over the course of the last year, but really even over the last couple of months, it appears. um can you give us a sense for when you expect the majority of that work to be contracted out um and then maybe also when you look at that pipeline does that matriculate into when you talk about a book to bill greater than one 20 or 30 20 or 30 million dollar awards are there a couple of

um hundred plus million dollar awards in there when you look at the complexion of that and then how like we think the rhythm of that progresses throughout the uh calendar year here thank you yeah so uh we we have a a well-qualified uh pipeline it's as you mentioned it's over eight billion dollars it continues to to grow and expand uh and and it's really composed of uh opportunities that are either sole source follow-ons opportunities that are extensions of existing production contracts, or opportunities that we believe we've got a highly competitive capability with limited competition. So we think that our pipeline is really prepared to transition from opportunity into funding backlog. The majority of that pipeline takes us out through fiscal year 28, although from a Salesforce perspective, we have opportunities that go out through fiscal year 30. We're focused in on making sure that as we develop the products and technologies, as we shape and work with our customers to ensure that they're getting the systems and the capabilities they want. We're constantly looking at scale, we're looking at configurability, and we're looking at mission effects. The opportunities that we have in the pipeline consist of $50 million opportunities that we think will come in in incremental chunks as well as as larger opportunities that uh we think will will transition and execute over multiple years so you know there really isn't a a single contract type or single production quantity or or configuration in our pipeline it's really designed to meet the needs of our customers both operationally as as well as uh budgetarily what i will say is that we continue to see demand grow across all of our product portfolios, the group two Atlas systems for the launched effect short range and the hunter killer type collaborative autonomous operations, the group three long range precision strike and one way attack capabilities in our raker platform and our disruptor platform. And then certainly a growing position in the unmanned surface vessels with, with the Navy as well as multiple different international partners. So, You know, really, again, a high degree of conviction in our pipeline and the belief that our systems are well positioned to meet the needs of our customers on a timeline that makes sense for them.

Appreciate the detail there. Thank you very much. Maybe just one. I'd like to, you know, the 4JAC seems to be a very differentiated system. part of the business. I'd like to give you just maybe a minute or two to riff on some of the opportunities, how you're seeing that grow. Obviously, you're getting some orders, which are really encouraging, but maybe just take us into the growth of interest from your customer sets with that very unique capability.

Yeah, so the additive manufacturing capability was brought to AVAX through a strategic acquisition of the assets of RapidFlight. Not only did it bring a portfolio of additive manufactured systems, the Onyx, the Raker, the Vandal that are seeing significant adoption by our customers, but it also brought us the know-how, the design, the technology to conduct additive manufacturing. And we're actually incorporating that into our manufacturing system. to produce more efficiently, more effectively, and more quickly for our customers. We're incorporating additive manufactured parts across all of our product lines. And then the four jacks. The four jacks is a capability where we've built additive manufacturing systems and capability into a deployable container. And that gives us the ability to not only provide additive capability, the ability to produce systems and components downrange, but it also gives our customers the opportunity and capability to take that downrange and fix systems that are broken, manufacture new components to adapt and integrate new payloads and systems. So it's a great opportunity. capability and it'll allow our customers and ourselves to overcome some of the challenges associated with geographically distributed and contested logistics.

Great. Appreciate the call. Thanks. Thanks so much.

Your next question comes to the line of Ron Epstein with Bank of America. Your line is open. Please go ahead.

Hey, good afternoon. Good evening, guys. Can you speak a little bit to capital deployment in particular, what you've seen in the M&A pipeline, and if there's any areas that you're interested in, in terms of the low motors, the components, or what it could do?

Yeah, thanks, Ron. We're going to focus in on good companies that are growth-oriented and creative in nature. We're going to be very active in this front. And while we can't forecast the timing of downstream activities, we will be implementing a very disciplined and strategic approach to acquisition. And I think they really fall into three categories. We're going to look at companies that strengthen the core and bring both the platforms and capabilities that enhance our offerings. We're going to be looking at opportunities to move into closely aligned Adjacent markets where we believe the combined power of AVEX and the acquired company will allow us to accelerate growth. And we're going to be looking at acquisitions that have really innovative technology that enhance our strategic position, not only across our portfolio, but also within our CompassX ecosystem. So those are really the three areas that we're focused in on. What we won't be doing is any transformational M&A that deviates from our business model, our strategy, our approach to growth. So some of the areas that we would look at from an adjacency perspective would be expanding into the unmanned surface vessel more aggressively, potentially unmanned surface vehicles, counter UAS from the perspective of fast interceptors, something that we're strategically aligned with in our existing portfolio, or other adjacent markets that enhance our systems capabilities in an ever-growing changing dynamic battlefield. Got it, got it, got it.

And from an evaluation perspective, what are you seeing in private markets? Can you speak to that at all?

Yeah, you know, I'm not going to, you know, forecast what, you know, we would be looking at from an evaluation perspective. Really, again, we're going to be looking for good companies that are growth oriented and are creative financially to what we have now. But, you know, we've got a very healthy balance sheet and the ability to deploy both capital and stock to bring in these good companies. I would see a leveraged position with an upward balance of about three and a half times. And certainly, obviously, using our equity as capital to bring in companies that we think are very closely aligned and can help us grow. Got it, got it.

Thank you very much. Yeah, thanks, Rob. Okay, operator, I think we've got time for one more question.

Your last question comes in the line of Jan Egelbrecht with Baird. Your line is open. Please go ahead.

Good afternoon, Roger, Todd, and Jason. Congrats on a really strong sprint here at the gate. I'm on for Peter Arment today. I just, maybe a high level question. If you guys can talk about sort of group two, group three, how should we think about, you know, the typical refresh cycle just in terms of, you know, R&D was modestly down for AVEX this quarter, but the need to continue spending on R&D as a percentage of sales, what is sort of the right ballpark just in terms of, if you look at budget, it's obviously going to attract even more competition. How do you sort of stay ahead of, of, of, incumbents and just new entrants as well?

Yeah, you know, we're going to continue to focus on building the capabilities that our customers need. Fiscal year 25 and into the first part of 26 was really focused in on building the next generation of system, our Atlas class of Group 2, which we've actually gotten significant traction on with the Army's launched effects short range, as well as continuing to enhance our Compass X differentiated technology stack, enhancing our ability to do precision navigation and timing and autonomy, our collaborative approach, as well as mission effects for terminal guidance and automatic target recognition and identification. So we are going to be very focused and in lockstep with our customers ensuring that the investments that we do make are part of a well-structured product development roadmap and designed to meet the needs of our customer. And really, you know, we're building off of a long legacy of combat proven operations and a deep trusting and strong working relationship with our customers. So, you know, the percentage in our mind is less important and it's making sure that we are executing the innovation, the research and development, and the product improvement that our customers need to be successful on the battlefield. Certainly, we're going to use internal research and development dollars as well as CapEx as part of our growth strategy organically, but we also work very closely with our customers to execute contract-funded research and development as well. You know, we think that we've got a strong and good base to build from. We've got a portfolio of platforms and technology that is well positioned for the future. And, you know, we're going to focus in on, you know, innovating where it matters and it's meaningful for our customer.

Thank you. It's very helpful. I can just do a quick follow-up. If we just look at sort of 2026 guidance guidelines, you know, 2026 reconciliation funding has been sort of slow out of the gates in terms of the 150 billion flowing, but HECS did say that it's accelerating. So, um, are you guys assuming sort of anything from, from the reconciliation bill from 26, uh, in, in, in this year's guidance? Um, or after we think about that, is it more 2027, uh, impact?

We're, we're, we're seeing significant, um, interest and increase in momentum as we move through fiscal year 26. And our projections and our growth guidance is well aligned with where we believe funding is for fiscal year 26 and does not require any reconciliation funding for fiscal year 27. So again, we've got most of our revenue and funded backlog, and we're going to continue to execute on that. I won't wade into reconciliation other than to say that the demand is high from our customers and I think it's clear that Autonomous unmanned systems being a part of modern forest structure is both a bipartisan as well as a bicameral issue and well supported across both aisles. So, you know, we do see a healthy increase in funding for this type of technology as well as the industrial base as we move through 26 into 27 and beyond. And we really think that AVEX is well positioned to capitalize on that budgetary increases.

Thank you. Appreciate taking the question.

Yeah, you got it.

There are no further questions at this time. This concludes today's call. Thank you for attending and you may now disconnect.