Sep 9, 2026 earnings call — Record revenue and major counter-UAS awards
Company reported record first quarter revenue of $480 million.
Revenue $0.5B (est $0.5B) · EPS $0.59 (est $0.22) · Next-quarter revenue outlook $2.1B–$2.2B
Key quotes
"As you recall, AV was awarded a landmark contract valued at nearly $465 million for the U.S. Army's Enduring High-Energy Laser or E-HEL program in late August."
"In fact, just after the close of our first quarter, we announced a $100 million long-term investment at our Southern California facilities to build a new state-of-the-art innovation center and campus."
"We secured solid bookings of $683 million and ended the quarter with record funded backlog of $1.5 billion, up 23% from the prior quarter and higher by 37% from the same period last year."
Analyst Q&A 14
LOCUST profitability and production
Q (Edward Morgan · BTIG): Analyst asked how to think about LOCUST profitability and what recent awards mean for segment margins; then asked current production capacity and sustainable production rates.
A: Management said LOCUST margins should improve strongly in the second half as firm fixed-price contracts and higher volumes kick in, and they expect segment 2 margins to approach segment 1 over the next couple years. They are expanding production (Albuquerque) and scaling supply chain, expect growth but said long-lead items and supplier scaling take time; they view LOCUST as a future flagship franchise.
"The LOCUST product line is going -- it is expected based on the contract wins that we have and the future ones that we expect to win, to have a very strong margin profile going towards the second half of this year and beyond." — Wahid Nawabi (CEO·CHAIR)
International market for laser systems
Q (Louie Dipalma · William Blair): Analyst asked how big international sales could be versus domestic for the laser weapon system.
A: Management said recent awards include a near $0.5 billion U.S. Army contract and a direct commercial international sale, and they expect domestic and international demand to be roughly equivalent or international could be larger. They see multi-billion military demand globally and possible nondefense uses later, and are expanding capacity because they expect large growth.
"The market for these LOCUST systems domestically and internationally are going to the equivalent probably in size." — Wahid Nawabi (CEO·CHAIR)
Remaining IDIQ capacity and P550 deliveries
Q (Peter Arment · Baird): Analyst asked what remains on IDIQ vehicles supporting Switchblade production and the delivery path for the P550 aircraft and any further competitive selections.
A: Management said they have won many large contracts and that some details are with Sean; there is a nearly $1 billion Army IDIQ and an international vehicle barely used. Sean said a couple hundred million remains on the $990 million IDIQ ceiling. For P550, they are delivering now and expect to deliver most of the $117 million this fiscal year.
"We have a couple of hundred million left on the current $990 million IDIQ under the current ceiling value remaining." — Sean Woodward (CFO)
Cyber mission subsegment outlook
Q (Jonathan Siegmann · Stifel): Analyst asked about the $83 million cyber mission results, whether year-over-year growth could continue, and any headwinds or timing issues that explain why management did not raise guidance.
A: Management said cyber/mission services is a small part of growth and will not grow as fast as other businesses, though financial profile should improve; the company is focused on multiple other high-growth product lines. They noted uncertainty around timing of the FY2027 government budgets due to elections and Congress, which is a risk but not expected to affect current guidance.
"It is not the main thesis of our strategy for growth for long-term value creation either." — Wahid Nawabi (CEO·CHAIR)
Uncrewed systems growth and market structure
Q (Seth Seifman · JPMorgan): Analyst asked why uncrewed systems avoided a normal seasonal step down and whether directed energy will be many chunky orders or many smaller orders.
A: Sean said the uncrewed aircraft business grew 71% year-over-year driven by P550 awards, JUMP 20-X increase and strong commercial sales, and they expect continued growth. Wahid said directed energy is at an inflection point like loitering munitions were after Ukraine; LOCUST changes economics to very low cost per shot and could grow to be larger than loitering munitions over five years.
"The sweet spot on that is a directed energy system that has an unlimited magazine of firepower and it changes the paradigm in economics from millions of dollars per shot to literally less than $10 a shot." — Wahid Nawabi (CEO·CHAIR)
Funding timing and tariffs impact
Q (Austin Bohlig · Needham): Analyst asked how much of fiscal '26 appropriated funding is yet to be deployed and whether recent tariffs on drone components affect the business or guidance.
A: Management said they reaffirm guidance and see the main timing risk as how fast Congress approves next fiscal year budgets, but they expect budgets and are ramping production to be ready. On tariffs, they view the decision as positive because over 98% of their supply base is domestic and the small remainder is with close allies, so they do not see negative impact.
"We do not see that as a negative impact on us." — Wahid Nawabi (CEO·CHAIR)
Export approvals and LRKI production timing
Q (Peter Skibitski · Alembic Global): Analyst asked for updates on approved export countries for systems and when LRKI testing and certification will finish and production begin.
A: Management said most loitering munition orders so far are domestic, but they have approvals for about 20 allied countries and expect international awards to grow; domestic demand has dominated so far. For LRKI, they described a layered counter-UAS strategy and said they expect to deliver about 60 to 80 systems over the next 12 months or so to 18 months, then enter low-rate and later full-rate production, with full-rate a $1 billion franchise roughly 12 months away.
"We are expected to deliver about 60 to 80 systems over the next 12 months or so to 18 months." — Wahid Nawabi (CEO·CHAIR)
FAA approval and homeland defense use
Q (Trevor Walsh · Citizens): Analyst asked how long services margin drag will last and how E-HEL and FAA approvals help kick-start domestic homeland defense adoption.
A: Sean said services margin fell due to lower services volume and T&M start and will improve as volumes increase; they focus margin expansion on product commercialization. Wahid said E-HEL is the first full-rate laser program and FAA has endorsed their system as safe to operate in national airspace, which helps institutional adoption and could lead to more domestic and international wins though it's still early.
"Our system is the first system to our knowledge that has actually been endorsed by the FAA that is safe to operate in national airspace and it does not pose harm to commercial airlines and airplanes, manned airplanes." — Wahid Nawabi (CEO·CHAIR)
DHS RFP timing and Red Dragon build rate
Q (Austin Moeller · Canaccord): Analyst asked when DHS funds might enter RFPs for border use and asked about Red Dragon build-rate ramp and possibility of U.S. pulling orders forward.
A: Management said DHS and other customers are engaged but timing of awards is hard to predict; customers are writing requirements while the company expands capacity and is positioned well. On Red Dragon, they said they are ramping production and designed the product for thousands of units per year, are building units and stocking long-lead material, but cannot give sensitive program specifics yet.
"We have designed a product to get into the thousands of units a year of production." — Wahid Nawabi (CEO·CHAIR)
Revenue split and government cost transparency
Q (Cashen Keeler · BNP Paribas): Analyst asked about the implied Q2 revenue step down given a 45-55 split and about Deputy Secretary memo on cost transparency and its impact on margins.
A: Sean said they remain on the 45% first-half and 55% back-half split, with strong backlog and 86% visibility supporting higher volumes in Q3/Q4; Q1 beat but Q2 is expected to step down modestly. Wahid said they welcome government cost transparency efforts and do not see it affecting AV given their business model and domestic-focused supply chain; they view it as more targeted to larger primes.
"We don't see that to be an impact for us whatsoever" — Wahid Nawabi (CEO·CHAIR)
International demand for LOCUST
Q (Brian Dobson · Clear Street): Analyst asked about demand internationally for LOCUST and how fast international sales can scale relative to the U.S. ramp.
A: Management said they are optimistic international demand may accelerate faster than U.S. given urgent needs in regions facing drone attacks (Eastern Europe, Middle East, Asia Pacific). They noted the U.S. Army endorsement and FAA approval provide validation that should drive international adoption, but exact award timing is hard to predict while they ramp production in parallel.
"I tend to believe that the revenue may accelerate even faster internationally, given the kind of challenges that a lot of our allies have around the world with drone attacks." — Wahid Nawabi (CEO·CHAIR)
Local production and Europe JV plans
Q (Clarke Jeffries · Piper Sandler): Analyst asked what drove cash outperformance, receivables outlook, and whether the CR is in guidance; then asked about localizing production in Europe and JV plans.
A: Sean said Q1 operating cash flow was $13 million, they are investing in inventory for long-lead items, expect full-year free cash flow slightly negative driven by CapEx and that the CR is factored into guidance. Wahid said they are working with many countries, announced a Greece JV and presence in U.K., Germany, Turkey, Taiwan, and expect more localization and local content to meet customer needs and production/assembly requirements across Europe, Middle East and Asia Pacific.
"The reason for that is because the demand and the government's desire for our systems is quite strong, and it requires some level of local content and local presence, both in terms of engaging with those customers, but also in terms of actually producing subsystems or doing final assembly." — Wahid Nawabi (CEO·CHAIR)
Capacity investments unlock awards
Q (Gavin Parsons · UBS): Analyst asked if demonstrating capacity is driving bookings and whether bringing facilities online will unlock more awards; asked if anything specific in Q2 reduces EBITDA.
A: Management said it's both: past and current facility investments have already driven wins and demonstrating delivery capability builds customer trust; additional capacity for LOCUST, Red Dragon and Freedom Eagle-1 should yield more awards. Sean added Q2 sees a modest step down in EBITDA due to slightly lower sales mix and an increase in IRAD despite the revenue profile being weighted to the back half.
"Additional capacity expansions that we're making now on LOCUST, on Red Dragon, on Freedom Eagle-1, all of these are going to yield more success and awards over the next several quarters, in my opinion, because we're talking to those customers, and they're engaged with us and they want us to do that." — Wahid Nawabi (CEO·CHAIR)
Greece demand and LOCUST fit
Q (BofA): Analyst asked about demand in Greece after the joint venture and whether LOCUST fits into Greece's new missile defense deal; also asked if international buyers waited for U.S. validation.
A: Management said they are closely engaged with Greek military on loitering munitions like Switchblade and other systems; the specific multibillion missile deal does not include LOCUST today but could expand to include it and Greece is interested. They confirmed international customers often waited for U.S. Army validation and field demonstrations before awarding contracts, and that validation was a factor in the recent international win.
"In terms of their laser weapon systems and the need for that, we're already engaged with them the existing the contract you described is something a little bit specific. It does not include our LOCUST today. But it could easily expand into that and they're absolutely interested in that." — Wahid Nawabi (CEO·CHAIR)