AeroVironment Q4 2025 Earnings Call Transcript

Quartr
Provided by Quartr
June 24, 2025

Key Takeaways

  • Record Revenue: Achieved full‐year revenue of $821 million (up 14% YoY) and Q4 revenue of $275 million (up 40% YoY), driven by double‐digit organic growth and improved profitability.
  • Strong Bookings & Backlog: Secured $1.2 billion in total bookings for FY 2025 and ended the year with a funded backlog of $726 million, an 82% increase over the prior year.
  • Closed the BlueHalo acquisition, expanding AeroVironment’s portfolio into space technologies, cyber, directed energy and electronic warfare and establishing two reporting segments.
  • New Product Launches: Released the P550 Group 2 autonomous UAS, JUMP-20X VTOL UAS and Red Dragon one‐way attack drone to address priority defense needs in air, land, sea and contested environments.
  • Guided FY 2026 revenue of $1.9 billion to $2.0 billion (15% growth pro forma), adjusted EBITDA of $300 million to $320 million and non‐GAAP EPS of $2.80 to $3.00, with 29%–31% gross margins and 6%–7% R&D spend.
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Earnings Conference Call
AeroVironment Q4 2025
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Operator

Good day, and thank you for standing by. Welcome to AeroVironment's Fourth Quarter and Full Fiscal Year twenty twenty five Earnings Conference Call. After the speakers' presentation, there will be a question and answer session. 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 Paccione.

Denise Pacioni
Head of Investor Relations at AAR

Thank you, and good afternoon, ladies and gentlemen. Welcome to AeroVironment's fourth quarter and full fiscal year twenty twenty five earnings call. My name is Denise Paccione, 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.

Denise Pacioni
Head of Investor Relations at AAR

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 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, 06/24/2025. The company undertakes no obligation to update any forward looking statements, whether as a result of new information, future events or otherwise.

Denise Pacioni
Head of Investor Relations at AAR

Joining me today from AeroVironment are Chairman, President and Chief Executive Officer, Mr. Wahid Nawabi and Executive Vice President and Chief Financial Officer, Mr. Kevin McDonald. We will now begin with remarks from Wahid Nawabi. Wahid?

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Thank you, Denise. Welcome everyone to our fourth quarter and fiscal year twenty twenty five earnings conference call. I will start by summarizing our quarterly and full year performance, followed by Kevin, who will review our financial results in greater detail and provide guidance for fiscal year twenty twenty six. I will then provide a summary of our key messages. And finally, Kevin, Denise and I will take your questions.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Please be aware that our fourth quarter and fiscal year twenty twenty five financial results do not include any financial activity from Blue Halo acquisition, except for pre closing deal and integration related expenses. I'm pleased to report that once again, we have achieved another record fourth quarter and full year results, exceeding our expectations, while positioning us for even greater long term profitable growth. We had an incredible year marked by robust demand for our innovative solutions, which enabled us to achieve double digit organic revenue growth and significant increase in profitability. Our investments in all business segments helped drive demand for our products, which led to key domestic and international wins and enabled us to launch three new groundbreaking products this year, namely the P550, the Jump 20X and the Red Dragon. Now I would like to highlight our key messages for fiscal year twenty twenty five, which are included on slide number three of our earnings presentation.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

First, we achieved record fiscal year revenue of $821,000,000 which is 14% higher than the prior year period and record fourth quarter revenues of $275,000,000 which is 40% higher than prior year period. Second, in fiscal year twenty twenty five, we secured $1,200,000,000 in total bookings, underscoring the robust demand for our innovative and battle proven solutions. Third, we ended fiscal year twenty twenty five with funded backlog of $726,000,000 which is 82% higher than the prior fiscal year. Fourth, we closed our acquisition of BlueHalo, further strengthening our industry leading position as the next generation defense tech prime, with an all domain portfolio of innovative solutions across air, land, sea, space and cyber. And fifth, we are confident AV is better positioned than ever as a result of important company milestones we achieved throughout the fiscal year, and we're setting our fiscal year 'twenty six revenue guidance between $1,900,000,000 to $2,000,000,000 Let me be clear.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

In a growing and evolving market, AV's fifty plus years of proven track record of delivering next generation solutions with a proven ability to manufacture at scale remain key differentiators that sets us apart. We've been working side by side with our customers and the battlefields to help define and deliver solutions, which are shaped by real world threats they face. Over the past decade alone, we have invested nearly $2,000,000,000 in R and D to develop disruptive software defined hardware solutions. And we believe we remain extremely well positioned to meet our customers' rising demands by delivering them the best in class solutions aligned with their needs. As an example, this past fiscal year, we introduced three significant new products that are directly aligned to our customers' highest priorities.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

The first is our new Group two AI driven autonomous UAS, the P550, which leverages a modular open system approach. Second, we unveiled our JUMP-20X, which is a vertical takeoff and landing or VTOL medium uncrewed aircraft system or MUAS engineered to revolutionize shipboard UAS operations. With an advanced heavy fuel engine and fully autonomous takeoff and landing on a moving small battleship, JUM 20 X enhances operational flexibility, simplifies refueling logistics, and ensures mission adaptability across diverse maritime and expeditionary environments. And finally, we introduced our new one way attack drone solution, Red Dragon, which is a fully autonomous capable GPS denied one way attack UAS that directly ties to the needs of our U. S.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Department of Defense customers. As demand for our new and existing solutions continues to rise, we remain confident in our robust manufacturing capacity to scale at affordable cost to meet our customers' urgent needs. We are confident that we're well positioned for strong organic growth in fiscal year twenty twenty six and beyond. With that, now I would like to provide updates on each of our three business segments, starting with Loitering Munition Systems or LMS. Our LMS segment continues to drive expansive growth for the company.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

LMS revenues for the fourth quarter rose 87% to $138,000,000 and for the full fiscal year revenues of $352,000,000 were 83% higher. Fiscal year twenty five reiterated the importance and effectiveness of all our Switchblade family of solutions. This fiscal year, we secured a total of $477,000,000 in funded contract awards. We also secured the single largest award in our fifty four year history with a five year sole source Army IDIQ contract for Switchblade products and services valued at nearly 1,000,000,000 International demand for our Switchblade products also remains strong. There are now eight countries that have placed firm initial orders and an additional eight allies actively engaged in the foreign military sales process.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

With demand for Switchblades on the rise, we remain active in our manufacturing facility expansion efforts in Utah and expect to have initial production capability by the end of this fiscal year. This new production facility will enable us to support more than $1,000,000,000 in annual Switchblade revenues. Now on to our Uncrewed Systems segment or U X S. Our U X segment posted fourth quarter revenues of $113,000,000 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 $382,000,000 The Puma AE UAS, a multibillion dollar product franchise for AV, remains a profitable and sustainable growth driver for the company.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

As I mentioned earlier, we introduced our new P550 UAS this past fiscal year. Our P550 will continue to lead the entire small UAS industry with many unique features, and we're expanding our manufacturing capacity in anticipation of increased demand. As we noted last quarter, the Department of Defense announced two programs worth over $1,000,000,000 in value. We're confident our P550 solution will compete effectively and win key contracts. Our Group three meeting UAS, JMP 20 has gained significant traction, particularly in the international marketplace.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Most recently, we secured a $46,000,000 contract with the Italian Ministry of Defense. Maritime efforts on the JUMP-20X are progressing and we anticipate strong interest and demand for this in the near future. Additionally, our Unflewed Ground Vehicle or UGV business received a contract to deliver 41 UGVs to the German Federal Armed Forces with deliveries scheduled for the summer of twenty twenty five through 2027. This represents one of the largest UGV awards in our company's history. We remain confident in our UXS segment's long term outlook due to market growth, key contract wins and expanding international opportunities.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Moving now to our McCready Works segment. McCready Works continues to develop industry leading next generation solutions and is driving force behind is the driving force behind our latest one way attack drone, Red Dragon. Revenues for the fourth quarter rose 24 to $24,000,000 For the full fiscal year, revenues were $87,000,000 which was 14% higher than the prior year period. As stated earlier, Red Dragon is a fully autonomous capable, software defined uncrewed aircraft system that can operate in high threat GPS denied and communication degraded environments. This cutting edge solution includes AV's Avacore autonomous flight software suite and AV's SpotterEdge perception system, which we believe are the most advanced technologies in the battlefield today.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Red Dragon provides critical advantages to war fighters. It is designed to be mass produced affordably and can be deployed across land and sea. Redragon is now part of our Precision Strike Encounter UAS group under our Autonomous Systems segment. McCradyWorks continues to push the boundaries on leading edge technologies and we anticipate many more solutions from this group in the future. With an excellent fiscal year twenty twenty five behind us, we are now setting our sights on further growth as a combined company for fiscal year twenty twenty six and beyond.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Having successfully completed the largest acquisition in our company's history, with the addition of BlueHalo, our position as the premier defense tech leader. We're now better equipped to provide our nation and our allies around the world with new and disruptive solutions they need. Our integrated capabilities across every domain, including air, land, sea, space, and cyber, as well as our innovation engine coupled with the ability to scale, positions us to address emerging global priorities and meet rising demand. As an example, recently, the US Department of Defense reiterated the importance our solutions and capabilities play in national defense strategy, from precision fires and looting munitions, autonomous counter UAS, and to space technologies, cybersecurity solutions and advanced munitions. As we look ahead and to better align with customer missions and our financial reporting structure, starting in fiscal year twenty twenty six, we will operate under two distinct business segments.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

The first is autonomous systems, which encompasses uncrewed systems or Group one through three UAS, precision strike and one way attack systems, including Switchblade Loading Munitions and Red Dragon, defensive systems or counter UAS solutions that use both radio frequency sensors and advanced electronic warfare capabilities, ground and maritime robotic solutions and McCready Works, the company's innovation engine where autonomy, AI and advanced platform technologies converge to deliver next generation capabilities. The second segment is space, cyber and directed energy, which encompasses space technologies, directed energy solutions, cyber solutions and mission services. By adding space technologies, counter UAS, directed energy, electronic warfare and cyber solutions to our cutting edge and battle proven offerings, we have expanded our growth opportunity in a market fueled by strong tailwinds and now offer a comprehensive set of solutions across all domains, air, land, sea, space and cyber. With more than 50,000 platforms already fielded and performing in high demand environments, AV now exports systems to more than 100 allies around the world. Since the close of BlueHalo acquisition, we've been working tirelessly on integration and we're very excited to finally be one AV team.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

With that, I would like to now turn the call over to Kevin McDonald for a review of our fourth quarter and full year financials. Kevin?

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

Thank you, Wahid. Today, I will be reviewing the highlights of our fourth quarter performance during which I will occasionally refer to both our press release and earnings presentation available on our website. Just a reminder that we closed our Blue Halo acquisition on May 1, so the results for Q4 and FY twenty twenty five do not include any financial activity from Blue Halo except pre closing deal and integration expenses. We ended a record year with a record quarter in terms of revenue and adjusted EBITDA. This is the third consecutive year we've met or exceeded our initial annual revenue and adjusted EBITDA guidance.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

This has been challenging in terms of quarterly year over year comparisons, but it's gratifying to end the year with a strong fourth quarter and achieve our annual goals. I'll briefly comment on our results for the quarter and the year and spend a bit more time providing some guidance for FY 2026, since the financial landscape of the company will change significantly. As Wahid mentioned in his remarks, we ended the year with a record $275,000,000 of revenue in the fourth quarter, which represented a 40% increase over the prior year. This completed a record year at $821,000,000 in revenue, which represents 14% growth despite the challenges of reduced revenues to Ukraine. Ukraine revenues in FY 2025 end up being at 18% of total revenue for the year and 12% of revenue in the quarter.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

We expect UK revenue to be less than 5% in FY '26. However, it should be noted that we continue to receive orders for upgrades to their Puma fleet and for Switchblades. It's interesting to note that 52% of the company's revenues were from international customers, of which a little over 24% came from non Ukraine European customers. We continue to demonstrate a strong international franchise for our Puma Switchblade and JUMP 20 product lines. In fact, we received orders from eight countries for Switchblade products worth nearly a quarter billion dollars in FY 2025, and the JUMP 20 received nearly $100,000,000 of orders in the fourth quarter alone, from which over half came from international customers.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

As Wahid mentioned, LMS ended the year strong with $138,300,000 in revenue in the quarter, of which about 80% came from Switchblade 600 product. UXS had a strong quarter at $112,600,000 which represented 9% year over year growth, led by revenues from Puma products represented over 50% of the UXS revenue and a jump 20%, almost 20% of the total segment revenue. In terms of adjusted EBITDA, slides thirteen and fourteen of our earnings presentation show the reconciliation of GAAP gross margins to adjusted gross margins and net income to adjusted EBITDA. Adjusted EBITDA for Q4 was 61,600,000 up from last year's Q4 of $22,200,000 driven by higher revenue, higher gross margins and lower investments in R and D spending, partially offset by higher SG and A expenses. Full year adjusted EBITDA was $146,400,000 which is 17.8% of revenue and a 15% increase in EBITDA over FY 'twenty four.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

In terms of the fourth quarter, consolidated GAAP gross margins finished at 36%, which is lower than the fourth quarter last year, primarily due to a 4,600,000 negative impact due to a non cash accelerated intangible amortization expenses related to our UGV business. Fourth quarter adjusted gross margins were 39%, a decrease from the 40% for the same period last year due to a change in sales mix and lower service margin. Adjusted product gross margins were flat, while service gross margins were down 8%, primarily due to service mix. Full year fiscal twenty twenty five gross margins were at 41.2% versus 41.5% in fiscal twenty twenty four. While adjusted product gross margins improved year over year from 43.3% to 43.8%, the 6% decline in adjusted service gross margins resulted in the slight decline in overall adjusted gross margins.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

Moving to operating expenses. Reported GAAP SG and A for the quarter was $43,300,000 but this includes $5,600,000 for deal and integration costs, dollars 2,100,000.0 for a legal accrual and $800,000 of intangible amortization. Net of these items, SG and A for the quarter was 34,800,000 compared to $32,700,000 for the prior year in the same period, a 6% increase. For fiscal twenty twenty five, SG and A net of these same types of adjustments was $133,000,000 versus $107,300,000 in FY 'twenty four, or 16% of revenue in FY 'twenty five and fifteen percent of revenue in FY 2024. The increased SG and A is largely driven by increased global sales footprint and more importantly, bid and proposal activity.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

R and D expense for the fourth quarter was $25,000,000 or 9% of revenue compared to $35,000,000 or 18% of revenue in the prior year. The large year over year reduction in R and D was a result of the half flight testing, which occurred in Q4 of FY 'twenty four. Total R and D spend for 2025 ended at 12% of total revenue and within the 12% to 13% range of our initial guidance. Now turning to GAAP earnings. In the fourth quarter, the company generated net income of $16,700,000 versus net income of $6,000,000 recorded in the same period last year.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

The increase in net income of $10,600,000 can be attributed to a $36,300,000 increase income from ongoing and big business activities, offset by non recurring expense from an $18,400,000 goodwill impairment in the UGV business, a $5,200,000 increase in deal integration expenses and a $2,100,000 legal accrual. For the full year, the company generated net income of $43,600,000 versus net income of $59,700,000 in FY24. The decrease in net income of $16,000,000 can be attributed to additional income from normal business activities at $21,700,000 more than offset by the 18,400,000 goodwill impairment, dollars 17,200,000.0 increase in deal integration costs and a $2,100,000 legal accrual. Slide 12 shows a reconciliation of GAAP and adjusted or non GAAP diluted EPS. The company posted adjusted earnings per diluted share of $1.61 for the fourth quarter of fiscal twenty twenty five versus $0.43 diluted share for the fourth quarter of fiscal twenty twenty four.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

Moving to the balance sheet, at the close of the fourth quarter, our total cash and investments amounted to $72,500,000 in line with the same amount at the end of the third quarter of fiscal twenty twenty five. Unbilled receivables increased $60,000,000 during the fourth quarter. The increase is largely attributed to the LMS business as the volume in process switch places reached record levels. Contract definitization accepts testing schedules and new payment terms have unfavorably impacted the near term working capital. We expect favorable improvements to these working capital balances in early FY twenty twenty six.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

I should note that after the quarter ended as part of the Blue Halo transaction, at closing we paid off the acquired company's debt and transaction expenses, which totaled $925,000,000 utilizing our $700,000,000 loan facility and part of our $350,000,000 revolving credit facility. Turning now to backlog, our funded backlog at the end of the fourth quarter of fiscal twenty twenty five finished at a record 7 and $26,600,000 thanks to a record $1,200,000,000 in bookings in fiscal twenty twenty five. Finally, I'd like to discuss the reporting structure going forward and provide you our FY 2026 guidance. That's what he'd mentioned earlier, AV will now operate under two reporting segments. These descriptions as well as the pro form a FY 2025 information for each segment can be found on Slide 10 of the presentation.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

Total pro form a revenue for 2025 was approximately $1,700,000,000 for the combined businesses. Our first segment, Autonomous Systems or AXS, will be led by Trey Stephenson, who formerly led AV's Uncrewed Systems segment. The AX segment is basically the legacy AV business adding the encounter UASRF maritime robotics and electronic warfare businesses from legacy Blue Halo. The total pro form a FY twenty five revenue for AXS segment is just over $1,000,000,000 Our second segment is Space Cyber Directed Energy or SCDE, and is led by Trip Ferguson, who formerly was the Chief Operating Officer for Blue Halo. The pro form a FY twenty twenty five revenue for the SCDE segment is $646,000,000 Starting in the first quarter of fiscal twenty twenty six, our earnings results will include disaggregated revenue performance for each of the revenue categories listed on Slide 10 under the two product segments.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

Now into fiscal twenty twenty six guidance. On Page eight of the presentation, we provide fiscal twenty twenty six guidance inclusive of the recent acquisition of Blue Halo, which closed 05/01/2025. Given the shift in our financial model, we are giving more color on the guidance for the year. Fiscal year revenue is expected to between $1,900,000,000 and $2,000,000,000 adjusted EBITDA between $300,000,000 and $320,000,000 and non GAAP adjusted EPS between $2.8 and $3 The midpoint of our revenue guidance range represents nearly 15% growth over the pro form a FY 2025 results. Our visibility to the midpoint of the revenue guidance range is at 70%, which is higher at the higher end of our historical range at this point during the year.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

We expect adjusted gross margins in the range of 29% to 31%. Adjusted gross margins for the first half of the fiscal year should be in the high 20% range moving toward the low 30% as throughout the year. R and D spend is expected in the range of 6% to 7% of revenue. And BlueHalo deal integration expenses should be in the range of 40,000,000 to $45,000,000 of which approximately $20,000,000 is related to deal closing costs. The revenue for the year should break down to roughly 45 percent for the first half of the year and 55% for the second half.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

Overall adjusted EBITDA percentage of revenue for the year is approximately 16% at the midpoint of the guidance range. This should trend by quarter from 10% to 12% in Q1, trending up to the high teens in the third and fourth quarters as we start to realize synergies, a higher proportion of product sales and increased revenue levels. Slide 10 further breaks down the expected fiscal twenty twenty six revenue by business segment. Autonomous Systems fiscal year revenue is expected to be between 1,200,000,000.0 and $1,400,000,000 representing over 20% growth versus pro form a FY 2025. And Space, Cyber and Direct to Energy fiscal year twenty twenty six revenue expected to be between $700,000,000 and $900,000,000 representing double digit growth versus pro form a FY 2025.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

I'd like to close by echoing Wahid's remarks. We are very well aligned with the U. S. DoD priorities and those of its allies and are excited about our prospects. Now I'd like to turn things back to Wahid.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Thanks, Kevin. Before turning the call over for questions, I would like to reiterate the incredible positive momentum we've achieved while entering fiscal year twenty twenty six. First, we achieved record fiscal year 'twenty five revenues of $821,000,000 which is 14% higher than the prior year period, and record fourth quarter revenues of $275,000,000 which is 40% higher than the prior year period. Second, in fiscal year 'twenty five, we secured $1,200,000,000 in total bookings, underscoring the robust demand for our innovative and battle proven solutions. Third, we ended fiscal year twenty twenty five with funded backlog of $726,000,000 which is 82% higher than the prior fiscal year.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Fourth, we closed our acquisition of BlueHalo, further strengthening our industry leading position as the next gen defense tech prime, with an all domain portfolio of innovative solutions across air, land, sea, space and cyber, well aligned to our customers' highest priorities. And fifth, we are confident AV is better positioned than ever as a result of important company milestones we achieved throughout the fiscal year, and we're setting our fiscal year 'twenty six revenue guidance between $1,900,000,000 and $2,000,000,000 Our decades worth of investing in autonomous systems has paved the way for our industry, and we will continue to lead with best in class solutions that are aligned to our customers' needs. We are encouraged by the current administration's ambition for deploying defensive assets our war fighters desperately need, and we stand ready to deliver as we have always done. We're honored to support the most critical defense missions of our nation at this pivotal moment. I want to thank our employees, shareholders and customers for their continued commitment to AV and our mission.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

We would not be in the position we're at today without them. Together with Blue Halo, we're poised to seize these incredible opportunities ahead of us, and we're excited to realize the benefits from adding their capabilities across space technologies, counter UAS, directed energy, electronic warfare, and cyber solutions to AV's existing robust portfolio. And with that, Kevin, Denise, and I will now take your questions.

Operator

Thank you. Our first question comes from Louis DePalma with William Blair. You may proceed.

Louie Dipalma
Research Analyst at William Blair

Wahid, Kevin and Denise, good afternoon and congrats on closing the major acquisition.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Thank you, Louis.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

Thank you, Louis.

Louie Dipalma
Research Analyst at William Blair

For Wahid, the fourth quarter demonstrated pretty robust Switchblade growth. Can you discuss your view of the Army's announcement of their transformation initiative that came out last month and the report that the Army wants to outfit combat divisions with more than 1,000 drones. And can you discuss that in the context of how the Army has already ordered thousands of switchblades from AeroVironment and thousands of Pumas in the past. And so do you view this Army transformation initiative as incremental to what you've already provided for them? Thanks.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Thank you, Louis. Yes, first of all, we are very, very pleased with the results that we delivered on the fourth quarter, setting another record for the quarter as well as for the year. Not only in our overall business, but as you mentioned, on the Loaded Ammunition. Mean, that business is growing rapidly. And on fourth quarter, we grew over 83%, as you saw.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

And another key figure that's really important is that throughout fiscal year twenty twenty five, not only do we book a record $1,200,000,000 worth of new orders funded bookings, but the LNS business or segment alone booked close to $477,000,000 in contract awards. And it's a variety of mix of customers, some for the US Army, some part of the Replicator Initiative of the US Pentagon, international customers, about eight of them so far. And all of that means that we have tremendous momentum with our LMS business going forward. We expect that business to continue to grow. Specific to your question related to the US Army's robotics or transformation, General George has made a very clear statement, and so has the Secretary of the Army, that they would like to shift and modernize the US Army.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

And there is significant potential upside in. The key areas that they would like to modernize and transform the US Army, one of them is related to loitering munitions, drones, counter UAS and counter drones, directed energy, and RF jamming capabilities, such as our Titan solution set from Blue Halo. So if you look at the priorities of the US DOD and its US Army, AV is positioned incredibly well. Not only do we represent more than twothree or threefour of the US DOD's priorities and the Army's priorities, we also are very unique because we have the capabilities that we can deliver today. We have the production capacity to deliver to make them and produce them at scale, which we've done in the past.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

And our systems are battle tested and proven. So the short answer is yes. We expect additional incremental opportunities. Details of that is not well known yet. But I think the momentum is very much on back.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

And I think the loader ammunition business is going to continue to grow.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

That also includes counter UAS in the Army transformation, That's right.

Louie Dipalma
Research Analyst at William Blair

Great. That makes sense. And and another question. You guys discussed, the the very strong foreign military sales pipeline and how I think you are shipping the Switchblade to eight countries and you are involved in negotiations with another eight. And some investors are wondering was there a write down in the unfunded backlog and was that write down related to foreign military sales and the different policies under the new administration?

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

No, Louis. The answer is no. We did not have any write downs related to our LMS business or FMS sales on our financials this quarter at all. The LMS business is doing great. We have a lot of momentum behind it.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

We continue to work with more and more countries and allies who want to get Switchblades into their hands of their warfighters. And I believe the opportunity is just beginning, and that trend is gonna continue over several years in the future. We're positioned very, very well, but no write downs related to LMS business in the fourth quarter.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

Well, the unfunded backlog converts to funded backlog during the period.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

That's right.

Louie Dipalma
Research Analyst at William Blair

Okay. Yeah, investors were just wondering on a sequential basis, the total backlog adding funded and unfunded went down significantly and so was there any write downs terms of or was just everything just unfunded converted to funded and then there was the revenue burn associated with the backlog.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

No. I mean, like I said, it really just was a conversion of the unfunded to funded orders during the period and revenue.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

And if you know, Lou, if you recall, earlier this last fiscal year, we had nearly a $1,000,000,000 sole source IDIQ for the US Army that I mentioned in my remarks. And as the US Army places orders, farm funded orders against that, it converts from unfunded to funded backlog. And so that dynamic has been occurring for the last few years. And we explained specifically that multi year IDIQ award from the US Army for nearly a billion dollars is specifically intended to achieve that. Because they would like to make sure that we easily can put things on contract and convert them into funded backlog.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

And we're going to continue to see more orders in the future for our loading munitions in fiscal year twenty twenty six.

Louie Dipalma
Research Analyst at William Blair

Okay. Great. And one last one, if I may. Is there still a significant market opportunity for the P550? Can you just discuss the broad market opportunity for both the P550 and the Red Dragon, which I don't think have generated any revenue for you yet, but they seem to have significant potential for fiscal 'twenty six?

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Yes. So first about the P550, as I mentioned in the remarks, we introduced three groundbreaking products, two of which you just mentioned, and the third one is the JUMP-20X Group III UAS. On P550, we expect that product to do extremely well. We're positioned really well. The U.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

S. Army has announced multiple programs, at least two, one of which we're expected to be down selected and receive an order for essentially the next two quarters. And that's our LRR program of record potentially, which is worth about a billion dollars by itself. Besides that, the international demand for P550 has been tremendous so far. There's a lot of need.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

There's a lot of interest in it. And we expect to book our first initial order, most likely from international customer, this first quarter or the next quarter after that. So we expect the P550 to do very well. It is a very large market there. There's a growing demand.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

And, let me just remind everyone again that the P550 is an incredibly capable solution. It is incredibly disruptive. The economics of it, the multi payload and multi mission aspect of its features uniquely positions it to be a very competitive offering. So, we feel very good about the P550. In regards to the Red Dragon, we actually do have some revenue.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

It's part of our McQuady work so far, but in the future, it will be reflected as part of our segment one that I described under the precision munitions and fires. So we do have initial revenue, but that product is expected to do really well long term. It's just at the early stages. It is a capability that is highly differentiated. And there is a lot of interest in that capability, and not only domestically, but also internationally.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

So we feel actually really strongly, really well, as I mentioned in my remarks, in all of our three new products that we launched. We believe that in the next two to three years, these products will generate hundreds and hundreds of millions of dollars, if not billion dollar plus worth of backlog for our company to execute against going forward.

Louie Dipalma
Research Analyst at William Blair

That's excellent. Thanks, Wahid. Thanks, Kevin.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Thank you, Louis.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

Thanks, Louis.

Operator

Thank you. Our next question comes from Greg Conrad with Jefferies. You may proceed.

Greg Konrad
Greg Konrad
SVP - Equity Research at Jefferies Financial Group

Good evening.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Hi, Greg.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

Hi, Greg.

Greg Konrad
Greg Konrad
SVP - Equity Research at Jefferies Financial Group

Maybe just to start with a clarification on the revenue guidance. If I look at the bottom end of autonomous and space, it adds to the 1,900,000,000.0 But if you look at the upper end, autonomous at $1,400,000,000 space cyber at $800,000,000 it adds to 2,200,000,000.0. Is that conservative? Is there any type of intercompany elimination? Just kind of what drives that lower end lower than the

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

mean, these are obviously ranges of potential outcomes. I mean, we don't operate with large programs of record, so if things go the right way, they'll be at the higher end of the ranges. And if just in business in general, some areas go better than others and others over perform and underperform. So there's obviously opportunity to hit them both at the higher end of the range, but in terms of the total, we've taken some judgment on the totals.

Greg Konrad
Greg Konrad
SVP - Equity Research at Jefferies Financial Group

And then, you know, it's been a little bit less than two months of ownership with Blue Halo. I mean, I think the guidance excludes some of the, you know, potential expenses and amortization. Did you include anything in the way of either revenue synergies or cost synergies in terms of the '26 outlook?

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

As we put in the S-four, we had some cost synergies projected. We'll be able to achieve those, but obviously you don't get the full benefit of those until the full year. And as I said in my remarks, we'll begin to realize that throughout the year and kind of hit our original $10 plus million target for the first year. In some ways we have some revenue synergies, but it's going to take some time for those to fully play out before we can put those into our forecasts and guidance and things like that. So we're still early days here, but there's lots of opportunity, lots of excitement about the things we can do together.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

But we haven't had a chance really to start monetizing that in our forecast.

Greg Konrad
Greg Konrad
SVP - Equity Research at Jefferies Financial Group

And then maybe just last one for me, in terms of the 70% visibility coming into the year, I think you mentioned that's, you know, above where you typically guide. Can you maybe talk about the drivers of that? Does blue halo, you know, have higher visibility? Did you take a more conservative, you know, route in terms of guidance? What kind of drives that higher visibility into '26 at 70%?

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

Well, the visibility is similar between the two segments. There is when you look at the space, cyber and directed energy segment, particularly on the cyber side, they operate off of longer term contracts with task orders. So there's somewhat more visibility on those, it's not reselling every quarter for them. So they have ongoing relationships there that we forecast them in our revenue, but other than that, it's pretty much the same, they're very similar in terms of percentage of visibility.

Greg Konrad
Greg Konrad
SVP - Equity Research at Jefferies Financial Group

Thank you.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Thank you, Greg.

Operator

Thank you. Our next question comes from Peter Arment with Baird. You may proceed.

Peter Arment
Senior Research Analyst at Robert W. Baird & Co

Yes. Good afternoon, Wahid, Kevin, Denise.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

Peter.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Hi, Peter.

Peter Arment
Senior Research Analyst at Robert W. Baird & Co

Hey, guys.

Peter Arment
Senior Research Analyst at Robert W. Baird & Co

On the just kind of focusing on the guidance, guess, and individual segments. When you look at Autonomous, the year over year kind of growth ranges is quite wide from the kind of the pro form a number that you provided, the 14% on the lower end and 33% on the higher end. Wahid, is it just assumptions around what potential LMS volumes can be in Switchblade or maybe first orders for P550? What are some of the kind of key drivers that affect the lower end of the range and the higher end of the range?

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Really, Peter, it has to do primarily with the US DOD contracting and timing of these contracts and awards. That drives a lot of that range, the spread of the range. So we are ready. We have the capacity as a company. One of the key differentiators that we have is our ability to turn around and convert backlog or orders into revenue.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

That is one of our key competitive differentiators, and also have the ability to scale quickly and produce at mass and volumes. But however, what we can't really predict effectively, which is really difficult in the entire industry, is how does the US DOD funding and budgets, the congressional approvals, and all of that works out, plays out and eventually makes it into a contract to us. So those are the primary reasons for the range of outcomes and the spread of that range within essentially both segments, but more acutely into our autonomous system segment. Overall, we feel very strong because if the timing of congressional approval of the budgets and the signing of the president's budgets and the DOD converting it into contracts happens in a timely manner, we could have a significantly strong year. But it is too early to predict that.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

And we're just getting started. What we really want to work on is long term consistent double digit profitable growth, which is a great position to be for us, given the backlog and the opportunity that we've developed.

Peter Arment
Senior Research Analyst at Robert W. Baird & Co

Yeah, that's helpful color. And then just on you mentioned the budgets, just have you had a chance to evaluate kind of some of the key Blue Halo portfolio programs, how stood up under the budgets? I know the directed energy solutions and the SCAR program certainly have gotten a lot of attention recently.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Absolutely. So we've purpose built our company from the ground up to be ready for this moment, I call it. This is our moment. We have an incredible opportunity in front of us. We represent more than twothree of the Secretary of Defense's priorities.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

If you look at any documents from Congress, from the National Defense Strategy, from the administration, or from the Pentagon, you will see from almost all the services and the COCOMs, you will see that the categories that we play in and we lead, and we have the ability to deliver and scale are categories that is important to national security. And what are those? Drones, counter drones, direct energy, laser communications, space communications, electronic warfare. All of these are things that and one way attack. These are the categories that we, in many cases, invented or we're the leader in.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

And so we're positioned very, very well in those categories. And I think that we have many years of very strong potential performance and value creation opportunity here in front of us.

Peter Arment
Senior Research Analyst at Robert W. Baird & Co

Appreciate that, I'll jump back in the queue.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

You're welcome, Peter.

Operator

Thank you. Our next question comes from Ken Herbert with RBC Capital Markets. You may proceed.

Stephen Strackhouse
Stephen Strackhouse
AVP at RBC Capital Markets

Hi, Wahidhi, Kevin, and Denise. This is actually Steve Stracas on for Ken Herbert. Congrats on the closing of Blue Halo, but I was hoping you guys could dive a little further into the FY twenty six outlook. How much of the revenue is stemming from the organic legacy AVAV versus Blue Halo, if you can give some color there?

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

Well, think we tried to provide the pro formas in the guidance. So you can see on that, I think it's slide 10, we show that the pie chart with the different revenue levels for the different product groupings. Those are the pro form a FY '25 revenues for each of those groupings. So anything, all the growth that we're forecasting is off of those pro form a revenues. And so you're looking at over 20% growth to the midpoint of the autonomous systems group and over double digit for the space, cyber and directed energy group.

Stephen Strackhouse
Stephen Strackhouse
AVP at RBC Capital Markets

Okay. That's helpful. And then maybe just as a follow-up, can you maybe discuss the profitability across the two segments? You guys have previously used to give like either an adjusted operating income or gross profit across the two. Should they be about the same?

Stephen Strackhouse
Stephen Strackhouse
AVP at RBC Capital Markets

Or is there a different way to kind of think about each of them?

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

Well, I think we're not really giving guidance on the breakout of the, say, EBITDA. That will be reported on a quarterly basis for each of the segments. But I would say, as I said in my remarks, you know, that the AXS segment is very similar to the existing AV business in terms of its profitability profile. So, you know, that's one half I'm giving you.

Stephen Strackhouse
Stephen Strackhouse
AVP at RBC Capital Markets

Fair enough. And then maybe if I could just ask one more just in terms of the free cash outlook for the year. I don't think I saw this part of the guide. Should we assume that it's maybe similar to FY 2025? I can appreciate that there's a lot of moving pieces here.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

Well, we definitely have some opportunities on the working capital front as I outlined in the script, and we're very hopeful that we actually generate some cash on working capital this year. We do have a fair amount of capital expenditures expected for the year, but we're looking for a positive cash conversion this year versus last year.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

And that's all because of the fact that we're growing and we're making sure that we invest in the areas that allows us to continue to grow and capitalize on these very large opportunities in the future. We are deliberately investing. And as you could see from our track record, the areas that we invest in, whether it's R and D or capital, have actually panned out and delivered incredible good value and created value for our company. So I think we want to continue to do that because we're in a very, very good position to capitalize on these opportunities.

Stephen Strackhouse
Stephen Strackhouse
AVP at RBC Capital Markets

Sounds good. I'll hope I can achieve this, guys.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Thank you.

Operator

Thank you. Our next question comes from Andre Madrid with BTIG. You may proceed.

Andre Madrid
VP - Aerospace & Defense Analyst at BTIG

Hey, Wahid, Kevin, Denise. How are you guys? Thanks for taking my question. Hello there.

Andre Madrid
VP - Aerospace & Defense Analyst at BTIG

Know, we're seeing now it's looking like NATO might move to 5% GDP spending pledge. Given how much of a sizable portion of sales international is becoming specifically amongst NATO customers. I mean, what's your initial assessment on what the impact of this 5% pledge could be if it does get moved through?

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Andre, that's an excellent, excellent point and question. We believe that, as we mentioned in my remarks and in Kevin's remarks, we already do quite a lot of business internationally. And we continue to see more and more demand for our systems, primarily in Europe, but beyond Europe, even in Asia Pacific as well. The world, unfortunately, is not a safer place than we all wish. There's lots of challenges, there's lots of conflicts.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

The recent wars and attacks you've seen is basically put an exclamation mark on what you can do with the type of capabilities that we're the leader in. And all of that equates into a very, very large seismic shift in demand and opportunity for us internationally. It's gonna take some time. We're gonna continue to invest in being more present in Europe. As you know, we already have a subsidiary in Germany.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

We have a legal entity as well and other parts of Europe, but we want to continue to expand there to capitalize on this. The reason why we feel more even bullish on this is because we're uniquely positioned to be able to deliver. Most of these countries want to spend these dollars quickly because they lack these capabilities today in mass and volume. Our systems are battle proven and tested. They work.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

They have seen its effectiveness. And they trust our company in delivering these systems for decades. And so I think we're incredibly positioned well to be able to capitalize on this opportunity, because we can deliver at scale, and we are trusted in what our solutions do work. So I think that's going to be a trend you're going to continue to see in essentially all of our products, not just on our loitering munitions, but our non lethal drones, on our counter UAS solution set, on our direct energy solutions. Even our space communication technologies has incredible opportunities ahead of it in the space domain globally and internationally, especially with European countries.

Andre Madrid
VP - Aerospace & Defense Analyst at BTIG

Helpful. Moving, I guess, to Red Dragon, Wahid, I know we've spoken on this one, but could you maybe just break down a little bit more about what that TAM looks like? I know with Switchblade, you guys have approval to sell to 50 allied nations, but I remember our conversation, it seems like those same restrictions are not imposed on Red Dragon given the ITAR regulations at play. I mean, just provide some more detail if possible.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Sure. So as you all know, we introduced Red Dragon just a few months ago. We do believe that it's a category that we're the lead player that is growing incredibly fast. As part of these one way attack drones, an autonomous autonomy capable solutions that in a degraded GPS environment or degraded communication environment is going to be very key. We believe the market for that is well over $1,000,000,000 The data is quite difficult to get, but I can tell you that this market, the one way attack drone category should be equal, if not bigger than even the Lloyd Munitions as a whole.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

So we believe that this product is going to continue to expand. And you're correct. The foundational level of the Red Dragon solution set is a commercially developed product on our own IRAD that we do not have ITAR restrictions. Obviously, if we were to put specific payloads or communication devices in it, would become subject to that. But internationally, we can export the base unit quite easily.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

And it is designed to be modular, so where the payload and the warhead could be actually even integrated outside US with a domestic supplier internationally. And we feel very good about it. It's going to take some time, but we believe that that product is going to be a significant driver of growth for us in the long run.

Andre Madrid
VP - Aerospace & Defense Analyst at BTIG

Got it. Got it. Wahid, that's super helpful. I'll leave it there to two. Thanks so much.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Thank you, Andre.

Operator

Thank

Operator

Our next question comes from Pete Skibitski with Alembic Global. You may proceed.

Pete Skibitski
Director - Aerospace & Defense Equity Research at Alembic Global Advisors

Hey, good afternoon, guys.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

Hello.

Pete Skibitski
Director - Aerospace & Defense Equity Research at Alembic Global Advisors

I guess, just to go down the CapEx route on the 6% to 8% guidance on the cloud build out. Is that a one term or one term, one year type of a thing? Should we expect CapEx to go back to the kind of that 2% to 3% range in the future after this cloud build out?

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

That note meant to that it includes cloud capitalization, it's not all cloud build out. It's really the normal range of facilities, equipment for manufacturing, and to a certain extent, software systems and things like that. So that includes all of that. We expect it to probably trend down over time, but at the same time, we have tremendous opportunities in front of us. So I'm not going to make any predictions at this point in time.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Yeah. So Pete, just to echo what Kevin said, we have several, several very serious large growth potential opportunities in front of us. Let me just name a couple of them. The Space Communications, the Space Force is really, really behind in upgrading the entire satellite command and control and communication network that The US relies on. We have won that program of record.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

It's worth about a $1,700,000,000 program funded through the congressional budget documents. We can scale that and expedite deliveries in the fiscal year 'twenty six and beyond. That's one. Loyalty ammunition is another one. We're building another factory to increase capacity up to $1,000,000,000 in production.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Red Dragon is another category that we believe that we're going to have significant upside coming in the next few years. And then just to name a few other ones, in the directed energy space, counter UAS. We are the leading player globally, and we know that we have significant needs in our country and around the world protecting critical infrastructure, refineries, airports, nuclear power plants, or military bases, embassies, you name it. There is an enormous opportunity for us and we have the leading solution that is deployed and it's effective in the field. So these are just some examples of areas that we see tremendous upside and potential opportunity for ourselves.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

And so we have made the decision that we want to increase because we see that this will play a significant role in delivering more value to our shareholders and our company in the long run.

Pete Skibitski
Director - Aerospace & Defense Equity Research at Alembic Global Advisors

Okay. Fair enough. I appreciate it. Just one last one for me, going back to Louis' question on the backlog. So you generated $275,000,000 in revenue this quarter.

Pete Skibitski
Director - Aerospace & Defense Equity Research at Alembic Global Advisors

Total backlog declined by a little under 700,000,000 So the math just indicates there's a little over $400,000,000 that is kind of unaccounted for. It seems like it just kind of fell out of backlog. I think that's what people are trying to kind of figure out there. Any can you give us any sense of what was going on?

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

That's for you over your What's that? No, no programs are canceled. Nothing was canceled.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

So Pete, I think what you're looking I'm not sure exactly what number you're looking at, but our backlog is significantly higher at the end of this fiscal year relative to fiscal year 'twenty four, number one. A significant increase, because we booked over $1,200,000,000 throughout the year, and we recognized $821,000,000 in revenue. So that increase helped as well. The unfunded backlog, which is that IDIQ that I mentioned, has converted to funded backlog. You might be looking at the number there.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

But we will be glad to explain the details more. Our funded backlog from Q3 to Q4 slightly decreased, slightly, not much, because we also booked a lot of orders in Q4, which essentially, again, backfilled the revenue that we shipped in the quarter.

Pete Skibitski
Director - Aerospace & Defense Equity Research at Alembic Global Advisors

Yes, fair enough. We can take it offline. Thanks, guys.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Wonderful. Thank you.

Operator

Thank you. Our next question comes from Jonathan Siegman with Stifel. You may proceed.

Jonathan Siegmann
MD - Aerospace & Defense at Stifel Institutional

Hey, good evening. Thanks for taking my question.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Hi, John.

Jonathan Siegmann
MD - Aerospace & Defense at Stifel Institutional

Maybe on booking trends at BlueHalo, we haven't had an update on that since you announced the transaction now over six months ago. Maybe can you help us comment on whether things there are going better or less than what you expected?

Jonathan Siegmann
MD - Aerospace & Defense at Stifel Institutional

And then, you mentioned space cyber directed energy will lag autonomous systems sales growth. Can they keep up on bookings this year?

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Jonathan, so we actually feel pretty strong and solid about our expectations for the previous or the former BlueHalo business and their ability to book orders. We have very similar trends within the BlueHalo former businesses, traditional businesses, compared to AV. The only difference I would say is that some of their business related to the cyber and Intel are long contracts where a lot of the business is actually selling very highly differentiated engineering content to customers. The growth in that business really has to do with how we scale employees and engineers and people. So it doesn't have these significant higher growth like the rest of our products business.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

That's one unique difference. On the other hand, they also are looking at very large, large strategic wins and program and bookings that could be very large, large step function growth opportunities. So for example, in the space communication and space operations, We have a huge potential there. Laser comms is another one. Directed energy is another one.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

Electronic warfare as well as counter UAS, our Titan solution set is another one. And the trends in the market is such that these are very specific areas that The US duty needs a lot of help. And so the short answer is yes. We expect the Blue Halo business to actually grow. And there's opportunities for significant booking increases going beyond fiscal twenty twenty five there as well.

Jonathan Siegmann
MD - Aerospace & Defense at Stifel Institutional

Back to Pete's question on the CapEx. I really love the enthusiasm you had for lots of opportunities to increase and invest in these really exciting areas. Are those in the future? Or are you already accelerating CapEx plans this year? Because it does seem like your guided CapEx is higher than what you had in the S-four for the combined business.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

That is correct, Jonathan. We have already initiated some increases in CapEx in fourth quarter. Most of that is going to show up in our financials in fiscal year 'twenty six. That's why the percentages are higher in 'twenty six. And it's related to both of our businesses and lots of different products.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

As I mentioned, the areas are space communication, directed energy, counter UAS, loitering munition, a one way attack. Those are the key areas. And also unmanned systems is another area that we're investing to scale, primarily because we see opportunities coming our way. Let's keep in mind that one of the reasons why we've been able to actually capitalize on the growth and these opportunities is that our ability to be able to deliver quickly and have the production capacity. We're uniquely qualified in this area than other competitors who are either in the prototype stage or very early even trying to build a facility to make their initial lower rate initial production.

Wahid Nawabi
Wahid Nawabi
Chairman of the Board, President & CEO at AeroVironment

We're not in that category. We have battle proven systems with capacity today that needs to scale even further. So those are the areas, Jonathan, that we expect that to continue to grow. Obviously, we don't expect that to stay forever, but we're only providing you figures for the fiscal 'twenty six, and we will provide more color as we go forward and beyond fiscal 'twenty six.

Jonathan Siegmann
MD - Aerospace & Defense at Stifel Institutional

Thank you.

Kevin McDonnell
Kevin McDonnell
CFO at AeroVironment

I do have some clarification on the unfunded backlog. During the year, they moved the purchasing of the Switchblades from one purchasing group to another to PEO Soldier is where now all of the Switchblade orders are coming through. So the Ju On's contract was with the prior purchasing group, and that expired actually on the last day of the year, and they did not renew that one because now everything is going be going through the PEO Soldier Group from here on out. So there'll be likely increasing that IDIQ.

Jonathan Siegmann
MD - Aerospace & Defense at Stifel Institutional

Okay.

Operator

Thank you. I would now like to turn the call back over to Denise for any closing remarks.

Denise Pacioni
Head of Investor Relations at AAR

Thank you once again for joining today's conference call and for your interest in AeroVironment. As a reminder, an archived version of this call, SEC filings and relevant news can be found under the Investors 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.

Operator

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

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