# AeroVironment Inc: Form 10-Q for the period ended Aug 2, 2025

- Company: [AeroVironment Inc](/companies/avav.md) (CIK 1368622)
- Form: 10-Q
- Filed: 2025-09-10
- Accepted by EDGAR: Sep 9, 2025, 18:01 ET
- Period: 2025-08-02
- Accession: 0001558370-25-011973
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1368622/000155837025011973/avav-20250802x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1368622/000155837025011973/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-08-02.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-05-01 to 2025-08-02 | $454.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2025-05-01 to 2025-08-02 | $359.6m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2025-05-01 to 2025-08-02 | $95.1m | us-gaap:GrossProfit |
| Research and development | 3 months, 2025-05-01 to 2025-08-02 | $33.1m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2025-05-01 to 2025-08-02 | $131.3m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2025-05-01 to 2025-08-02 | −$69.3m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2025-05-01 to 2025-08-02 | −$15.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-05-01 to 2025-08-02 | −$67.4m | us-gaap:ProfitLoss |
| Diluted EPS | 3 months, 2025-05-01 to 2025-08-02 | −$1.44 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-05-01 to 2025-08-02 | −$1.44 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-05-01 to 2025-08-02 | 46,882,350 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-05-01 to 2025-08-02 | −$123.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-05-01 to 2025-08-02 | $22.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2025-08-02 | $685.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-08-02 | $1.64bn | us-gaap:AssetsCurrent |
| Total assets | at 2025-08-02 | $5.62bn | us-gaap:Assets |
| Current liabilities | at 2025-08-02 | $274.9m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2025-08-02 | $725.7m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2025-08-02 | $4.43bn | us-gaap:StockholdersEquityIncludingPortionAttributableToNoncontrollingInterest |

## Management's discussion and analysis

As filed, 31,363 characters.

The following is a discussion and analysis of our financial condition and the results of operations as of and for the periods presented below. The following discussion and analysis should be read in conjunction with the “Condensed Consolidated Financial Statements” and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This section and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements that involve risks and uncertainties. In some cases, forward-looking statements can be identified by words such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions. Such forward-looking statements are based on current expectations, estimates and projections about our industry, our management’s beliefs and assumptions made by our management. Forward-looking statements are not guarantees of future performance and our actual results may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended April 30, 2025, as updated by our subsequent filings under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”).

Unless required by law, we expressly disclaim any obligation to update publicly any forward-looking statements, whether as result of new information, future events or otherwise.

### Critical Accounting Estimates

The following should be read in conjunction with the critical accounting estimates presented in our Annual Report on Form 10-K for the fiscal year ended April 30, 2025.

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. When we prepare these condensed consolidated financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Some of our accounting policies require that we make subjective judgments, including estimates that involve matters that are inherently uncertain. Our most critical estimates include those related to revenue recognition, inventory reserves for excess and obsolescence, intangible assets acquired in a business combination, goodwill, and income taxes. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions.

#### Revenue Recognition

Adjustments to original estimates for a contract’s revenue, estimated costs at completion and estimated profit or loss are often required as work progresses under a contract, as experience is gained and as more information is obtained, even though the scope of work required under the contract may not change, or if contract modifications, including the finalization of undefinitized contract actions, occur. The impact of revisions in estimate of completion and variable consideration for all types of contracts are recognized on a cumulative catch-up basis in the period in which the revisions are made. Changes in variable consideration associated with the finalization of undefinitized contract actions could result in cumulative catch up adjustments to revenue that could be material. During the three months ended August 2, 2025 and July 27, 2024, changes in accounting estimates on contracts recognized using the over time method are presented below. Amounts representing contract change orders or claims are included in revenue if the order or claim meets the criteria of a contract or contract modification in accordance with ASU 2014-09, Revenue from Contracts with Customers (“ASC 606”).

For the three months ended August 2, 2025 and July 27, 2024, favorable and unfavorable cumulative catch-up adjustments included in revenue were as follows (in thousands):

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Three Months Ended August 2, 2025 ​ ​ | ​ ​ ​ | ​ ​ July 27, 2024 ​ ​ | ​ ​ |
| --- | --- | ---: | --- | ---: | --- |
| Gross favorable adjustments | ​ | $2,316 | ​ | $812 | ​ |
| Gross unfavorable adjustments | ​ | (6,459) | ​ | (285) | ​ |
| Net (unfavorable) favorable adjustments | ​ | $(4,143) | ​ | $527 | ​ |

For the three months ended August 2, 2025, favorable cumulative catch-up adjustments of $2.3 million were primarily due to cost adjustments on 13 contracts, which individually were not material. For the same period, unfavorable cumulative catch-up adjustments of $6.5 million were primarily related to higher than expected costs on 13 contracts, which individually were not material.

For the three months ended July 27, 2024, favorable cumulative catch-up adjustments of $0.8 million were primarily due to final cost adjustments on 11 contracts, which individually were not material. For the same period, unfavorable cumulative catch-up adjustments of $0.3 million were primarily related to higher than expected costs on 10 contracts, which individually were not material.

#### Goodwill

Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. We test goodwill for impairment annually during the fourth quarter of our fiscal year or when events or circumstances change in a manner that indicates goodwill might be impaired. Events or circumstances that could trigger an impairment review include, but are not limited to, a significant adverse change in legal factors or in the business or political climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant changes in the manner of our use of the acquired assets or the strategy for our overall business, significant negative industry or economic trends or significant underperformance relative to projected future results of operations.

Our evaluation of goodwill for impairment involves the comparison of the fair value of each reporting unit to its carrying value. For the impairment test, we first assess qualitative factors, macroeconomic conditions, industry and market considerations, triggering events, cost factors, and overall financial performance, to determine whether it is necessary to perform a quantitative goodwill impairment test. Alternatively, we may bypass the qualitative assessment for some or all of our reporting units and apply the quantitative impairment test. If determined to be necessary, the quantitative impairment test shall be used to identify goodwill impairment and measure the amount of a goodwill impairment loss to be recognized (if any). For the quantitative impairment test, we estimate the fair value by weighting the results from the income approach and the market approach. These valuation approaches consider a number of factors that include, but are not limited to, prospective financial information, growth rates, terminal value, discount rates, and comparable multiples from publicly traded companies in our industry and require us to make certain assumptions and estimates regarding industry economic factors and future profitability of our business.

As part of our annual goodwill impairment and identifiable asset test during the fiscal quarter ended April 30, 2025, we determined the carrying value of the Unmanned Ground Vehicles (“UGV”) reporting unit exceeded its fair value due to a decrease in forecasted results of the UGV reporting unit resulting from reduced probability and delays of obtaining certain opportunities as well as an increase in forecast expenditures to support operational decisions identified during the fiscal quarter ended April 30, 2025. These changes in estimates resulted in the recognition of a goodwill impairment charge of $18.4 million during the three months ended April 30, 2025 in the UGV reporting unit. We determined that it was more likely than not that the fair value of our other reporting units were more than their carrying values as of the annual goodwill impairment test date. As such, during the most recent annual impairment test during the fourth quarter of fiscal year 2025, the estimated fair value of all reporting units, other than UGV, substantially exceeded their carrying value. As of August 2, 2025, we have not identified any events or circumstances that could trigger an impairment review prior to the Company’s annual impairment test, including taking into account the reporting units identified from the BlueHalo acquisition on May 1, 2025.

The estimates and assumptions used to determine the fair value of our reporting units are highly subjective in nature. Actual results can be materially different from the estimates and assumptions. If actual market conditions are less favorable than those projected by the industry or by us, or if events occur or circumstances change that would reduce the estimated fair value of our indefinite-lived intangible assets below the carrying amounts, we could recognize future impairment charges, the amount of which could be material.

### Fiscal Periods

Due to our fixed year end date of April 30, our first and fourth quarters each consist of approximately 13 weeks. The second and third quarters each consist of exactly 13 weeks. Our first three quarters end on a Saturday. Our 2026 fiscal year ends on April 30, 2026 and our fiscal quarters end on August 2, 2025, November 1, 2025 and January 31, 2026, respectively.

### Results of Operations

The following tables set forth our results of operations for the periods indicated (in thousands):

### Three Months Ended August 2, 2025 Compared to Three Months Ended July 27, 2024

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Three Months Ended August 2, 2025 ​ ​ | ​ ​ ​ | ​ ​ July 27, 2024 ​ ​ | ​ ​ |
| --- | --- | ---: | --- | ---: | --- |
| Revenue | ​ | $454,676 | ​ | $189,483 | ​ |
| Cost of sales | ​ | 359,558 | ​ | 108,016 | ​ |
| Gross margin | ​ | 95,118 | ​ | 81,467 | ​ |
| Selling, general and administrative | ​ | 131,276 | ​ | 33,795 | ​ |
| Research and development | ​ | 33,114 | ​ | 24,613 | ​ |
| (Loss) income from operations | ​ | (69,272) | ​ | 23,059 | ​ |
| Other (loss) income: | ​ | ​ ​ | ​ | ​ ​ | ​ |
| Interest expense, net | ​ | (17,415) | ​ | (239) | ​ |
| Other income (expense), net | ​ | 2,361 | ​ | (234) | ​ |
| (Loss) income before income taxes | ​ | ​ (84,326) | ​ | ​ 22,586 | ​ |
| (Benefit from) provision for income taxes | ​ | ​ (15,169) | ​ | ​ 1,485 | ​ |
| Equity method investment income, net of tax | ​ | ​ 1,787 | ​ | ​ 65 | ​ |
| Net (loss) income | ​ | $(67,370) | ​ | $21,166 | ​ |

| ​ ​ ​ | ​ ​ | ​ ​ Three Months Ended August 2, 2025 AxS | ​ | ​ ​ SCDE | ​ ​ | ​ ​ Total |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Revenue | ​ | $285,324 | ​ | $169,352 | ​ | $454,676 |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Segment adjusted EBITDA | ​ | $52,760 | ​ | $3,796 | ​ | $56,556 |

| ​ ​ ​ | ​ ​ | ​ ​ Three Months Ended July 27, 2024 AxS | ​ | ​ ​ SCDE | ​ ​ | ​ ​ Total |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Revenue | ​ | $189,483 | ​ | $— | ​ | $189,483 |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Segment adjusted EBITDA | ​ | $37,178 | ​ | $— | ​ | $37,178 |

***Revenue.*** Revenue for the three months ended August 2, 2025 was $454.7 million, as compared to $189.5 million for the three months ended July 27, 2024, representing an increase of $265.2 million, or 140%. The increase in revenue was due to an increase in product revenue of $154.0 million and an increase in service revenue of $111.2 million. The increase in product revenue was primarily due to the $123.7 million of product revenue resulting from our acquisition of BlueHalo in May 2025. Legacy AV product revenue included in the AxS segment increased by $30.3 million driven by an increase in LMS products due to increased global demand for our Switchblade products associated with the current global conflicts as well as U.S. D.o.D. resupply, partially offset by a decrease in SUAS due to a decrease in international sales. The increase in service revenue was primarily due to the $111.5 million service revenue resulting from our acquisition of BlueHalo. Legacy AV service revenue, included in the AxS segment remained consistent as training and repairs service revenue decreased $2.0 million driven by the decrease in SUAS product sales, partially offset by an increase of $1.8 million in customer funded R&D and engineering services driven by an increase in contractor-owned, contractor-operated (“COCO”) demand. Proportion of service revenue to product revenue is expected to remain higher following the acquisition of BlueHalo.

***Cost of Sales.*** Cost of sales for the three months ended August 2, 2025 was $359.6 million, as compared to $108.0 million for the three months ended July 27, 2024, representing an increase of $251.6 million, or 233%. The increase in cost of sales was a result of an increase in product cost of sales of $145.2 million and an increase in service costs of sales of $106.4 million. The increase in product costs of sales was primarily due to an increase of approximately $83 million associated with the recently acquired BlueHalo product lines and an increase of approximately $29 million intangible amortization related to the BlueHalo acquisition. For legacy AV business, product cost of sales increased $33.1 million. The increase in legacy product costs of sales was primarily due to an increase of approximately $17 million due to mix shift to a higher proportion of lower margin products driven by the increase in Switchblade production and approximately $16 million due to the increase in sales volume. The increase in service cost of sales was primarily due to an increase of approximately $100 million associated with the BlueHalo acquisition and an increase of approximately $5 million intangible amortization related to the BlueHalo acquisition. Cost of sales for the three months ended August 2, 2025 included $37.4 million of intangible amortization and other related non-cash purchase accounting expenses as compared to $3.7 million for the three months ended July 27, 2024. As a percentage of revenue, cost of sales increased from 57% to 79% primarily due to increased amortization and other non-cash purchase accounting expenses and an increase in the proportion of service revenue resulting from the effect of the BlueHalo acquisition, resulting in gross margin decreasing from 43% to 21%.

***Gross Margin.*** Gross margin is equal to revenue minus cost of sales.

***Selling, General and Administrative.*** SG&A expense for the three months ended August 2, 2025 was $131.3 million, or 29% of revenue, as compared to SG&A expense of $33.8 million, or 18% of revenue, for the three months ended July 27, 2024. The increase in SG&A expense was primarily due to an increase of $41.2 million of intangible amortization expense related to the BlueHalo acquisition, an increase of $23.7 million of acquisition related expenses related to the BlueHalo acquisition and an increase of $14.7 million of employee related expenses related to the increase in headcount.

***Research and Development.*** R&D expense for the three months ended August 2, 2025 was $33.1 million, or 7% of revenue, as compared to R&D expense of $24.6 million, or 13% of revenue, for the three months ended July 27, 2024. The increase was primarily related to the BlueHalo acquisition. R&D expense is expected to continue to be 7% to 8% of revenue.

***Interest Expense, net.*** Interest expense, net for the three months ended August 2, 2025 was $17.4 million compared to interest expense, net of $0.2 million for the three months ended July 27, 2024. The increase was driven by the interest expense related to the Term Loan and Revolver Facility obtained on May 1, 2025 in conjunction with the BlueHalo acquisition and the unamortized debt issuance costs allocated to the Term Loan Facility of $6.7 million, which were expensed upon repayment of the Term Loan Facility in July using the proceeds from the Notes and common stock issuances in July 2025.

***Other Income, net.*** Other income, net, for the three months ended August 2, 2025 was $2.4 million as compared to other expense, net of $0.2 million for the three months ended July 27, 2024. The increase was driven by unrealized gains in equity security investments.

***(Benefit from) Provision for Income Taxes.*** Our effective income tax rate was 18.0% for the three months ended August 2, 2025, as compared to 6.6% for the three months ended July 27, 2024. The increase in our effective income tax rate was primarily due to an increase in federal R&D tax credits, a decrease in FDII deductions, partially offset by an increase non-deductible acquisition related expenses combined with the net loss before income taxes for the quarter. The effective income tax rate for the three months ended August 2, 2025 was primarily impacted by expected federal R&D tax credits, excess tax benefits from equity awards, and non-deductible acquisition related expenses.

***Equity Method Investment Income, net of Tax.*** Equity method investment income, net of tax for the three months ended August 2, 2025 was $1.8 as compared $0.1 million for the three months ended July 27, 2024.

### Autonomous Systems

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Three Months Ended August 2, 2025 | ​ ​ ​ | ​ ​ July 27, 2024 |
| --- | --- | ---: | --- | ---: |
| Revenue | ​ | $285,324 | ​ | $189,483 |
| ​ | ​ | ​ ​ | ​ | ​ ​ |
| Segment adjusted EBITDA | ​ | $52,760 | ​ | $37,178 |

***Revenue.*** AxS revenue for the three months ended August 2, 2025 was $285.3 million, as compared to $189.5 million for the three months ended July 27, 2024, representing an increase of $95.8 million, or 51%. The increase in revenue was due to an increase in product and service revenues of $81.2 million and $14.6 million, respectively. The increase in product revenue was primarily due to the $50.9 million of product revenue resulting from our acquisition of BlueHalo. Legacy AV product revenue included in the AxS segment increased by $30.3 million driven by an increase in LMS products due to increased global demand for our Switchblade products associated with the current global conflicts as well as U.S. D.o.D. resupply, partially offset by a decrease in SUAS due to a decrease in international sales. The increase in service revenue was primarily due to the $10.6 million of service revenue resulting from our acquisition of BlueHalo. Legacy AV service revenue, included in the AxS segment remained consistent as training and repairs service revenue decreased $2.0 million driven by the decrease in SUAS product sales, partially offset by an increase of $1.8 million in customer funded R&D and engineering services driven by an increase in COCO demand.

***AxS Segment adjusted EBITDA.*** AxS segment adjusted EBITDA for the three months August 2, 2025 was $52.8 million, as compared to $37.1 million for the three months ended July 27, 2024, representing an increase of $16.0 million, or 42%. The increase in AxS segment adjusted EBITDA was primarily due to an increase in revenue of $95.8 million. The increase in AxS segment adjusted EBITDA was partially offset by an increase in adjusted cost of sales of $68.6 million, adjusted SG&A of $5.3 million primarily due employee related costs driven by the increased headcount, and R&D of $5.2 million. The increase in adjusted cost of sales was primarily due to an increase of approximately $37 million associated with the recently acquired BlueHalo product lines, an increase of approximately $16 million due to mix shift to a higher proportion of lower margin products driven by the increase in Switchblade production and approximately $16 million due to the increase in sales volume.

### Space, Cyber and Directed Energy

| ​ ​ ​ ​ | ​ ​ ​ | ​ ​ Three Months Ended August 2, 2025 | ​ ​ ​ | ​ ​ July 27, 2024 |
| --- | --- | ---: | --- | ---: |
| Revenue | ​ | $169,352 | ​ | $— |
| ​ | ​ | ​ ​ | ​ | ​ ​ |
| Segment adjusted EBITDA | ​ | $3,796 | ​ | $— |

***Revenue.*** SCDE revenue for the three months ended August 2, 2025 was $169.4 million, as compared to $0 for the three months ended July 27, 2024. The SCDE segment consists of business units obtained in the BlueHalo acquisition on May 1, 2025, and the increase in revenue is a result of the acquisition.

***SCDE Segment adjusted EBITDA.*** SCDE segment adjusted EBITDA for the three months August 2, 2025 was $3.8 million, as compared to $0 for the three months ended July 27, 2024, representing an increase of $3.8 million, or 100%. The SCDE segment consists of business units obtained in the BlueHalo acquisition on May 1, 2025, and the increase in segment adjusted EBITDA is a result of the acquisition.

### Backlog

Consistent with ASC 606, we define funded backlog as remaining performance obligations under firm orders for which funding is currently appropriated to us under a customer contract. As of August 2, 2025, our funded backlog was approximately $1,066.4 million, as compared to $726.6 million as of April 30, 2025.

In addition to our funded backlog, we also had unfunded backlog of $3,092.1 million as of August 2, 2025. Unfunded backlog does not meet the definition of a performance obligation under ASC 606. We define unfunded backlog as the total remaining potential order amounts under cost reimbursable and FFP contracts with (i) multiple one-year options and indefinite delivery, indefinite quantity (“IDIQ”) contracts, or (ii) incremental funding. Unfunded backlog does not obligate the customer to purchase goods or services. There can be no assurance that unfunded backlog will result in any orders in any particular period, if at all.

Because of possible future changes in delivery schedules and/or cancellations of orders, backlog at any particular date is not necessarily representative of actual sales to be expected for any succeeding period, and actual sales for the year may not meet or exceed the backlog represented. Our backlog is typically subject to large variations from quarter to quarter as existing contracts expire or are renewed or new contracts are awarded. A majority of our contracts, specifically our IDIQ contracts, do not currently obligate the U.S. government to purchase any goods or services. Additionally, all U.S. government contracts included in backlog, whether or not they are funded, may be terminated at the convenience of the U.S. government.

### Liquidity and Capital Resources

On October 4, 2024, we amended the Credit Agreement to increase the Revolving Facility to $200 million, and the Term Loan Facility was repaid in full and removed from the Credit Agreement. Borrowings under the Credit Agreement may be used for working capital and other general corporate purposes, including acquisitions that meet certain parameters. In February 2025, we borrowed $15.0 million under the Revolving Facility. In May 2025, in connection with the consummation of the BlueHalo Acquisition, the Company entered into a Fourth Amendment to Credit Agreement with BofA NA, the administrative agent and the swingline lender, JPM, U.S. Bank, Citibank, BMO, Citizens and RBC. The Amended Credit Agreement provides for an aggregate $700.0 million term loan and an aggregate $350.0 million revolving credit facility. Upon effectiveness of the Amended Credit Agreement, we drew $225.0 million from the amended Revolving Facility and the full $700,000,000 of the Term Loan Facility. The proceeds from the Term Loan Facility and the Revolving Facility were used to repay certain outstanding indebtedness of BlueHalo and to pay for certain related transaction costs. In June 2025, we drew an additional $10.0 million under the Revolving Facility.

In July 2025, we issued 4,057,460 shares of common stock at a public offering price of $248.00 per share (the “Common Stock Offering”) and issued $747,500,000 aggregate principal amount of 0% convertible senior notes due 2030 (the “Notes Offering”). The aggregate net proceeds from the Common Stock Offering and the Notes Offering, after deducting underwriting discounts and debt and equity issuance costs, was approximately $1.70 billion. The Company used approximately $965.3 million of the net proceeds from the Common Stock Offering and the Notes Offering to repay indebtedness under the Term Loan Facility and outstanding borrowings under the Revolving Credit Facility, and the remainder is expected to be used for general corporate purposes, including to increase manufacturing capacity.

Our ability to borrow under the Revolving Facility is reduced by outstanding letters of credit of $11.9 million as of August 2, 2025. As of August 2, 2025, approximately $338.1 million was available under the Revolving Facility. Refer to Note 9—Debt to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details. In addition, Telerob has a line of credit of €7.0 million ($8.1 million) available for issuing letters of credit of which €2.3 million ($2.7 million) was outstanding as of August 2, 2025.

We anticipate funding our normal recurring trade payables, accrued expenses, ongoing R&D costs and obligations under the Credit Facilities through our existing working capital and funds provided by operating activities including those provided by our acquisition. The majority of our purchase obligations are pursuant to funded contractual arrangements with our customers. We believe that our existing cash, cash equivalents, cash provided by operating activities and other financing sources will be sufficient to meet our anticipated working capital, capital expenditure requirements, and future obligations related to the acquisition during the next twelve months. There can be no assurance, however, that our business will continue to generate cash flow at current levels. If we are unable to generate sufficient cash flow from operations, then we may be required to sell assets, reduce capital expenditures or draw on our Credit Facilities. We anticipate that existing sources of liquidity, Credit Facilities, and cash flows from operations will be sufficient to satisfy our cash needs for the foreseeable future.

Our primary recurring liquidity needs are for financing working capital, investing in capital expenditures, supporting product development efforts, introducing new products and enhancing existing products, marketing acceptance and adoption of our products and services, and possible acquisitions of entities or strategic assets. Our future capital requirements, to a certain extent, are also subject to general conditions in or affecting the defense industry and are subject to general economic, political, financial, competitive, legislative and regulatory factors that are beyond our control. Moreover, to the extent that existing cash, cash equivalents, cash from operations, and cash from our Credit Facilities are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing, subject to the limitations specified in the Amended Credit Facility Agreement. In addition, we may also need to seek additional equity funding or debt financing if we become a party to any agreement or letter of intent for potential investments in, or acquisitions of, businesses, services or technologies.

Our working capital requirements vary by contract type. On Cost Plus and T&M contracts, we typically bill our incurred costs and fees monthly as work progresses, and therefore working capital investment is minimal. On FFP contracts, we typically are paid as we deliver products, and working capital is needed to fund labor and expenses incurred during the lead time from contract award until contract deliveries begin. Certain contract have negotiated progress payments, which facilitates billing and collection as work is completed.

Due to the OBBBA, which allows R&D expenditures to be deducted, we expect our cash taxes paid for U.S. federal income taxes to be significantly reduced for the fiscal year ending April 30, 2026.

### Cash Flows

The following table provides our cash flow data for the three months ended August 2, 2025 and July 27, 2024 (in thousands):

*(Unaudited)*

| ​ ​ ​ ​ ​ | ​ ​ ​ ​ | ​ ​ Three Months Ended August 2, 2025 | ​ ​ | ​ ​ July 27, 2024 | ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- |
| Net cash (used in) provided by operating activities | ​ | $(123,726) | ​ | $28,351 | ​ |
| Net cash used in investing activities | ​ | $(876,648) | ​ | $(6,613) | ​ |
| Net cash provided by (used in) financing activities | ​ | $1,645,443 | ​ | $(13,954) | ​ |

***Cash (Used in) Provided by Operating Activities.*** Net cash used in operating activities for the three months ended August 2, 2025 increased by $152.1 million to ($123.7) million, as compared to net cash provided by operating activities of $28.4 million for the three months ended July 27, 2024. The increase in net cash used in operating activities was primarily due to a decrease in cash as a result of changes in operating assets and liabilities of $157.8 million, largely related to increases in accounts receivable, unbilled receivables and retentions and decreases in accounts payable due to year over year timing differences as well as increases in inventory to meet demand. The increase in cash used in operating activities was also driven by a decrease in net income of $88.5 million, partially offset by an increase in depreciation and amortization of $94.2 million, largely due to the intangibles and acquired property and equipment from the BlueHalo acquisition.

***Cash Used in Investing Activities.*** Net cash used in investing activities increased by $870.0 million to $876.6 million for the three months ended August 2, 2025, as compared to $6.6 million for the three months ended July 27, 2024. The increase in net cash used in investing activities was primarily due to the cash consideration for the acquisition of BlueHalo, net of cash acquired of $844.6 million.

***Cash Provided by (Used in) Financing Activities.*** Net cash provided by financing activities increased by $1,659.4 million to $1,645.4 million for the three months ended August 2, 2025, as compared to net cash used in financing activities of $(14.0) million for the three months ended July 27, 2024. The increase in net cash provided by financing activities was primarily due to proceeds from issuance of common shares of $968.5 million, net of underwriter costs and proceeds from the issuance of Notes of $726.9 million, net of underwriter costs. Part of the proceeds were used to repay the outstanding balances of the Term Loan Facility and Revolving Facility drawn in conjunction with the acquisition of BlueHalo.

## Market risk

As filed, 915 characters.

In the ordinary course of business, we are exposed to various market risk factors, including fluctuations in interest rates, changes in general economic conditions, domestic and foreign competition, and foreign currency exchange rates. For a discussion of market risks at April 30, 2025, refer to Item 7A in our 2025 annual report on Form 10-K. During the three months ended August 2, 2025, there were no material changes or developments that would materially alter the market risk assessment performed as of April 30, 2025, except as discussed below.

### Interest Rate Risk

In July 2025, we issued $747.5 million of Notes. The Notes have a zero percent coupon rate. We used the proceeds from the Notes Offering as well as the Common Stock Offering to repay indebtedness under our Term Loan Facility and outstanding borrowings under the Revolving Facility. The Revolving Facility has no current outstanding balance.

## Controls and procedures

As filed, 7,227 characters.

### Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of August 2, 2025, the end of the period covered by this Quarterly Report on Form 10-Q.

Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that, as of August 2, 2025, the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective and were operating at a reasonable assurance level. As part of the ongoing integration of BlueHalo, we are in

process of incorporating the disclosure controls and procedures of BlueHalo. Management’s evaluation of our disclosure

controls and procedures as of August 2, 2025 excludes an evaluation of BlueHalo’s disclosure controls and procedures

that are subsumed by its internal control over financial reporting of BlueHalo.

### Acquisition of BlueHalo

On May 1, 2025, we completed the acquisition of Blue Halo, a U.S. non-public reporting company. Prior to the acquisition, in connection with the preparation of its audited consolidated financial statements for the year ended December 31, 2024, BlueHalo identified three material weaknesses in its internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. First, BlueHalo did not design and maintain effective information technology (“IT”) general controls for information systems that are relevant to the preparation of its financial statements. Specifically, BlueHalo did not design and maintain: (i) program change management controls to ensure that program and data changes are identified, tested, authorized, and implemented appropriately; (ii) user access controls to ensure appropriate segregation of duties and to adequately restrict user and privileged access to appropriate personnel. Second, BlueHalo did not design and maintain an effective control environment commensurate with our financial reporting requirements. Specifically, it did not maintain a sufficient complement of personnel with an appropriate degree of internal controls and accounting knowledge, experience, and training commensurate with its accounting and financial reporting requirements. The limited personnel resulted in an inability to consistently establish appropriate authorities and responsibilities in pursuit of financial reporting objectives, as demonstrated by, among other things, insufficient segregation of duties in the finance and accounting functions. Third, BlueHalo did not design and maintain effective monitoring activities of the design and operation of controls on a timely basis, taking necessary corrective action to ensure that controls continue to operate effectively and are modified for changes in conditions as appropriate.

As of the date of this report, management’s remediation efforts are ongoing, and management has committed to a remediation plan to address the deficiencies and enhance the internal control environment. The remediation plan includes, but is not limited to:

- Reviewing and restricting administrator level access to financial systems, ensuring that elevated privileges are limited to authorized personnel with a documented business need;
- Implementing periodic user access reviews to confirm that access rights remain appropriate and promptly removing access for terminated or transferred employees;
- Implementing a process to utilize the ticketing system to document, approve, and track changes, configuration updates and data modifications;
- Implementing management review of audit logs of select data such as vendor master changes, user roles and rates;
- Implementing a process to utilize the Okta and Single Sign On (SSO) to centralize authentication, strengthen password and multi factor authentication controls, and improve monitoring of user activity;
- Enhancing segregation of duties review within key business cycles to ensure that no single individual has control over all aspects of a financial transaction;
- Providing targeted training to personnel on internal control requirements, documentation standards, and change management protocols;
- Evaluating employee’s skill set and actively recruiting experienced personnel with knowledge of internal control and accounting;
- Evaluating systems to integrate with our enterprise-wide monitoring tools, enabling real-time alerts for unauthorized access or unusual activity.

However, remedial controls must operate for a sufficient period of time for a definitive conclusion, through testing, that the deficiencies have been fully remediated and, as such, management can give no assurance that the measures it has undertaken have fully remediated the material weaknesses that it has identified or that additional material weaknesses will not arise in the future. Management will continue to monitor the effectiveness of these and other processes, procedures, and controls and will make any further changes that management determines to be appropriate.

### Changes in Internal Control over Financial Reporting

On May 1, 2025, we acquired BlueHalo and, as a result, we have begun integrating certain processes, systems and controls relating to BlueHalo into our existing system of disclosure controls and procedures in accordance with our integration plans. We do not believe these represent a material change. There were no changes in our internal control over financial reporting or in other factors identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during the quarter ended August 2, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act).

## Risk factors

As filed, 6,721 characters.

Except as set forth below, there have been no material changes to the risk factors disclosed under Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended April 30, 2025. Please refer to that section for disclosures regarding the risks and uncertainties related to our business.

***The indebtedness represented by our Notes could limit the cash flow available for our operations, expose us to risks that could adversely affect our business, financial condition and results of operations and impair our ability to satisfy our obligations under the Notes.***

As of August 2, 2025, we had total indebtedness of approximately $725 million consisting of aggregate principal of our Notes. We may incur additional indebtedness to meet future financing needs. We may incur additional indebtedness to meet future financing needs. The indebtedness represented by our Notes and obligations under the Indenture pursuant to which the Notes were issued could have significant negative consequences for our security holders and our business, results of operations and financial condition by, among other things:

- increasing our vulnerability to adverse economic and industry conditions;
- limiting our ability to obtain additional financing;
- requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will reduce the amount of cash available for other purposes;
- limiting our flexibility to plan for, or react to, changes in our business;
- diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the Notes; and
- placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to capital.

Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves, to pay amounts due under our indebtedness, including the Notes, and our cash needs may increase in the future. In addition, the Indenture contains, and any future indebtedness that we may incur may contain, financial and other restrictive covenants that limit our ability to operate our business, raise capital or make payments under our other indebtedness. If we fail to comply with these covenants or to make payments under our indebtedness when due, then we would be in default under that indebtedness, which could, in turn, result in that and our other indebtedness becoming immediately payable in full.

***The issuance or sale of shares of our common stock, or rights to acquire shares of our common stock, could depress the trading price of our common stock and the Notes.***

We may conduct future offerings of common stock, preferred stock or other securities that are convertible into, or exercisable or exchangeable for, our common stock to finance our operations or fund acquisitions, or for other purposes. In addition, we have shares reserved and available for issuance pursuant to our 2023 Employee Stock Purchase Plan and our 2021 Equity Incentive Plan and issued 17,425,849 shares of common stock as consideration for the BlueHalo acquisition, substantially all of which are subject to a lock-up but will be eligible for resale upon expiration of the applicable lock-up period.

The Indenture for the Notes does not restrict our ability to issue additional equity securities in the future. If we issue additional shares of our common stock or rights to acquire shares of our common stock, if any of our existing stockholders sell a substantial amount of our common stock, or if the market perceives that such issuances or sales may occur, then the trading price of our common stock and, accordingly, the Notes may significantly decline. In addition, any issuance of additional shares of common stock will dilute the ownership interests of our existing common stockholders, including Noteholders who have received shares of our common stock upon conversion of their Notes.

### The conversion of Notes could impair our financial position and liquidity.

Because we must settle at least a portion of our conversion obligation in cash, the conversion of Notes could materially and adversely affect our financial position and liquidity. Before April 15, 2030, Noteholders will have the right to convert their Notes only upon the occurrence of certain events. From and after April 15, 2030, Noteholders may convert their Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date. However, many of the conditions that permit the conversion of Notes before April 15, 2030 are beyond our control. We could be required to expend a significant amount of cash to settle conversions, which could significantly harm our financial position and liquidity.

***A decline in the U.S. and other government budgets, changes in spending or budgetary priorities, delays in contract awards or in the release of approved funds may significantly and adversely affect our future revenue.***

Because we generate a significant portion of our total sales from the U.S. government and its agencies and from foreign governments, our results of operations could be adversely affected by government spending caps, delays in the government budget process, program starts, the award of contracts or orders under existing contracts, or delays in release of funds by the federal government. Delays in the definitization of a contract could result in delayed funding, billing and payment. Our business may be adversely impacted due to shifts in the political environment and resulting changes in the government and agency leadership positions and priorities for funding. We cannot assure you that current levels of congressional funding for our products and services will continue and that our business will not decline, or that such funding will be accessible consistent with previously realized timelines due to federal budgetary review activities and potential freezes on or cancellation of various governmental programs from time to time. If annual budget appropriations or continuing resolutions are not enacted timely, we could face U.S. government shutdowns, which could adversely impact our programs and contracts with the U.S. government, our ability to receive timely payment from U.S. government entities, our ability to provide services to the U.S. government resulting in lost or delayed revenue under our services contracts (the volume of which materially increased with our BlueHalo acquisition), and our ability to timely obtain export licenses for our products and services to fulfill contracts with our international customers.

Filed Sep 10, 2025.
Source: SEC EDGAR, the filing index for accession 0001558370-25-011973. Last ingested by Listed: Nov 4, 2026, 09:12 ET. No prices; not investment advice.