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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
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(Zip Code) |
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(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
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Trading Symbol(s) |
Name of each exchange on which registered |
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The
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer ☐ |
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Non-accelerated filer ☐ |
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Smaller reporting company
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Emerging growth company
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of September 3, 2025, the number of shares outstanding of the registrant’s common stock, $0.0001 par value, was
AeroVironment, Inc.
Table of Contents
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AeroVironment, Inc.
Condensed Consolidated Balance Sheet s
(In thousands except share and per share data)
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August 2, |
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April 30, |
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2025 |
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2025 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowance for credit losses of $
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Unbilled receivables and retentions |
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Inventories, net |
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Income taxes receivable |
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Prepaid expenses and other current assets |
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Total current assets |
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Long-term investments |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Deferred income taxes |
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— |
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Intangibles, net |
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Goodwill |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Wages and related accruals |
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Customer advances |
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Current operating lease liabilities |
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Income taxes payable |
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— |
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Other current liabilities |
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Total current liabilities |
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Long-term debt |
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Non-current operating lease liabilities |
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Other non-current liabilities |
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Liability for uncertain tax positions |
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Deferred income taxes |
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— |
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Commitments and contingencies |
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Stockholders’ equity: |
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Preferred stock, $
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Authorized shares—
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Common stock, $
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Authorized shares—
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and
shares—
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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(
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(
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Retained earnings |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See accompanying notes to condensed consolidated financial statements (unaudited).
3
AeroVironment, Inc.
Condensed Consolidated Statements of Operation s (Unaudited)
(In thousands except share and per share data)
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Three Months Ended |
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August 2, |
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July 27, |
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2025 |
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2024 |
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Revenue: |
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Product sales |
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$ |
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$ |
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Contract services |
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Cost of sales: |
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Product sales |
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Contract services |
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Gross margin: |
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Product sales |
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Contract services |
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Selling, general and administrative |
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Research and development |
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(Loss) income from operations |
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(
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Other (loss) income: |
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Interest expense, net |
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(
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(
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Other income (expense), net |
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(
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(Loss) income before income taxes |
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(
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(Benefit from) provision for income taxes |
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(
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Equity method investment income, net of tax |
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Net (loss) income |
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$ |
(
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$ |
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Net (loss) income per share |
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Basic |
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$ |
(
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$ |
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Diluted |
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$ |
(
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$ |
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Weighted-average shares outstanding: |
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Basic |
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Diluted |
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See accompanying notes to condensed consolidated financial statements (unaudited).
4
AeroVironment, Inc.
Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited)
(In thousands)
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Three Months Ended |
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August 2, |
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July 27, |
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2025 |
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2024 |
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Net (loss) income |
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$ |
(
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$ |
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Other comprehensive income: |
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Change in foreign currency translation adjustments |
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Total comprehensive (loss) income |
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$ |
(
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$ |
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See accompanying notes to condensed consolidated financial statements (unaudited).
5
AeroVironment, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
For the three months ended August 2, 2025 and July 27, 2024 (Unaudited)
(In thousands except share data)
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Accumulated |
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Additional |
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Other |
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Common Stock |
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Paid-In |
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Retained |
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Comprehensive |
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Shares |
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Amount |
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Capital |
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Earnings |
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Loss |
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Total |
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|||||
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Balance at April 30, 2025 |
|
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$ |
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$ |
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$ |
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$ |
(
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$ |
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Net loss |
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— |
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— |
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— |
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(
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— |
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(
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Foreign currency translation |
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— |
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— |
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— |
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— |
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Employee stock purchase plan contributions |
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— |
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— |
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— |
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Restricted stock awards |
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— |
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— |
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— |
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— |
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— |
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Restricted stock awards forfeited |
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(
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— |
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— |
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— |
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— |
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— |
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Tax withholding payment related to net share settlement of equity awards |
|
(
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— |
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(
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— |
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— |
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(
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Issuance of common stock for business acquisition |
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— |
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— |
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Shares issued, net of issuance costs |
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— |
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— |
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— |
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Stock based compensation |
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— |
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— |
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— |
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— |
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Balance at August 2, 2025 |
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$ |
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$ |
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$ |
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$ |
(
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$ |
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Accumulated |
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Additional |
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Other |
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||
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Common Stock |
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Paid-In |
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Retained |
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Comprehensive |
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||||||
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Shares |
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Amount |
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Capital |
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Earnings |
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Loss |
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Total |
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|||||
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Balance at April 30, 2024 |
|
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$ |
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$ |
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$ |
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$ |
(
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Foreign currency translation |
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— |
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— |
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— |
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— |
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Stock options exercised |
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— |
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— |
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— |
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Restricted stock awards |
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— |
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— |
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— |
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— |
|
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— |
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Restricted stock awards forfeited |
|
(
|
|
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— |
|
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— |
|
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— |
|
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— |
|
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— |
|
|
Tax withholding payment related to net share settlement of equity awards |
|
(
|
|
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— |
|
|
(
|
|
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— |
|
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— |
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(
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Stock based compensation |
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— |
|
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— |
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|
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— |
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— |
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|
Balance at July 27, 2024 |
|
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|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
(
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$ |
|
|
6
AeroVironment, Inc.
Condensed Consolidated Statements of Cash Flow s (Unaudited)
(In thousands)
|
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Three Months Ended |
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||||
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August 2, |
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July 27, |
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||
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2025 |
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2024 |
|
||
|
Operating activities |
|
|
|
|
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Net (loss) income |
|
$ |
(
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$ |
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|
Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities: |
|
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Depreciation and amortization |
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(Gain) from equity method investments |
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(
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(
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Amortization of debt issuance costs |
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Provision for credit losses |
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(
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Reserve for inventory excess and obsolescence |
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Other non-cash expense, net |
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Non-cash lease expense |
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Loss on foreign currency transactions |
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Unrealized (gain) loss on available-for-sale equity securities, net |
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(
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Deferred income taxes |
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— |
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(
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Stock-based compensation |
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Loss on disposal of property and equipment |
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Changes in operating assets and liabilities, net of acquisitions: |
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Accounts receivable |
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(
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Unbilled receivables and retentions |
|
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(
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(
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Inventories |
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(
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|
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Income taxes receivable |
|
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(
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|
(
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Prepaid expenses and other assets |
|
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(
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(
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Accounts payable |
|
|
(
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(
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Other liabilities |
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(
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(
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Net cash (used in) provided by operating activities |
|
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(
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Investing activities |
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Acquisition of property and equipment |
|
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(
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|
(
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Contributions in equity method investments |
|
|
— |
|
|
(
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|
Acquisition of capitalized software to be sold |
|
|
(
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|
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— |
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Business acquisitions, net of cash acquired |
|
|
(
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|
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— |
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Net cash used in investing activities |
|
|
(
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(
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Financing activities |
|
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Principal payments of term loan |
|
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(
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(
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Proceeds from term loan |
|
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— |
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Principal payments of revolver |
|
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(
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— |
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Proceeds from revolver, net of creditor costs |
|
|
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|
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— |
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Proceeds from shares issued, net of underwriter costs |
|
|
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|
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— |
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|
Proceeds from convertible debt, net of underwriter costs |
|
|
|
|
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— |
|
|
Payment of debt issuance costs |
|
|
(
|
|
|
— |
|
|
Payment of equity issuance costs |
|
|
(
|
|
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— |
|
|
Tax withholding payment related to net settlement of equity awards |
|
|
(
|
|
|
(
|
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|
Employee stock purchase plan contributions |
|
|
|
|
|
— |
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Exercise of stock options |
|
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— |
|
|
|
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Other |
|
|
(
|
|
|
(
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|
Net cash provided by (used in) financing activities |
|
|
|
|
|
(
|
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|
Effects of currency translation on cash and cash equivalents |
|
|
(
|
|
|
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|
Net increase in cash and cash equivalents |
|
|
|
|
|
|
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|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
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|
Cash and cash equivalents at end of period |
|
$ |
|
|
$ |
|
|
|
Supplemental disclosures of cash flow information |
|
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|
Cash paid, net during the period for: |
|
|
|
|
|
|
|
|
Income taxes |
|
$ |
(
|
|
$ |
(
|
|
|
Interest |
|
$ |
|
|
$ |
|
|
|
Non-cash activities |
|
|
|
|
|
|
|
|
Issuance of common stock for business acquisition |
|
$ |
|
|
$ |
— |
|
|
Change in foreign currency translation adjustments |
|
$ |
|
|
$ |
|
|
|
Acquisitions of property and equipment included in accounts payable |
|
$ |
|
|
$ |
|
|
See accompanying notes to condensed consolidated financial statements (unaudited).
7
AeroVironment, Inc.
Notes to Condensed Consolidated Financia l Statements (Unaudited)
1. Organization and Significant Accounting Policies
Organization
AeroVironment, Inc. (“AeroVironment”, “AV” or “the Company”), a Delaware corporation, is a defense technology provider delivering integrated capabilities across air, land, sea, space, and cyber. AV develops and deploys autonomous systems, precision strike systems, counter-UAS technologies, space-based platforms, directed energy systems, and cyber and electronic warfare capabilities. AV operates a national manufacturing footprint to deliver proven systems and capabilities whose markets offer the potential for significant long-term growth. In addition, the Company believes that some of the innovative potential products, services and technologies in its research and development (“R&D”) pipeline will emerge as new growth platforms in the future, creating additional market opportunities.
Effective May 1, 2025, the Company reorganized its segments. In connection with the Company’s acquisition of BlueHalo Financing Topco, LLC (“BlueHalo”), the reorganization was implemented to drive additional operational improvements, foster synergies and provide leaders with greater autonomy over their product lines. The Company’s reportable segments are as follows:
Autonomous Systems (“AxS”) — The AxS segment focuses on the design, development, production, delivery, and support of intelligent, multi-domain robotic systems, including uncrewed aircraft systems (“UAS”) and ground robot systems. The segment includes the Company’s former Uncrewed Systems, Loitering Munitions Systems, and MacCready Works segments as well as Radio Frequency (“RF”) and Kinetic Counter-UAS (“C-UAS”), Electronic Warfare Systems (“EW”) and Unmanned Maritime products and services from the BlueHalo acquisition. It primarily serves organizations within or supplying the U.S. Department of Defense (“DoD”), other federal agencies, and international allied governments. This segment encompasses the Company’s core autonomous platforms, such as drones and robotic systems, tailored for mission-critical applications across air and ground domains.
Space, Cyber, and Directed Energy (“SCDE”) — The SCDE segment focuses on advanced technologies in the space domain providing space-based and ground-based platforms, cyber capabilities, and directed energy systems. This segment positions the Company in high-growth areas of next-generation defense technology, addressing emerging threats and mission requirements in space, cyber warfare, and directed energy applications (e.g., high-energy lasers). It also primarily serves organizations within or supplying the U.S. Department of Defense (“DoD”), other federal agencies, and international allied governments.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation with respect to the interim financial statements have been included. The results of operations for the three months ended August 2, 2025 are not necessarily indicative of the results for the full year ending April 30, 2026. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended April 30, 2025, included in the Company’s Annual Report on Form 10-K.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions, including estimates of anticipated contract costs and revenue utilized in the revenue recognition process, that affect the reported amounts in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
8
The Company’s unaudited condensed consolidated financial statements include the assets, liabilities and operating results of wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated.
Recent Acquisitions
On May 1, 2025, the Company closed its acquisition of BlueHalo, a Delaware limited liability company, pursuant to the Agreement and Plan of Merger, dated as of November 18, 2024 (the “Merger Agreement”) by and among AV, Archangel Merger Sub LLC, a Delaware limited liability company (“Merger Sub”), BlueHalo, and BlueHalo Holdings Parent, LLC, a Delaware limited liability company and sole member of BlueHalo (“Seller”). Refer to Note 17—Business Acquisitions for further details.
Recently Adopted Accounting Standards
The Company did not adopt any accounting standards during the three months ended August 2, 2025.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation. Specifically, the Company’s revenue disclosure of revenue by segment and the segment disclosures for prior periods have been recast to conform to the new segments and new measure of profitability.
Revenue Recognition
The Company’s revenue is generated pursuant to written contractual arrangements to design, develop, manufacture and/or modify complex products and to provide related engineering, technical and other services according to the specifications of its customers. These contracts may be firm fixed price (“FFP”), cost plus award fee, and cost plus incentive fee (collectively “Cost Plus”), or time and materials (“T&M”). The Company considers all such contracts to be within the scope of ASU 2014-09, Revenue from Contracts with Customers (“ASC 606”).
Performance Obligations
On August 2, 2025, the Company had approximately $
9
Revenue by Category
The following tables present the Company’s revenue disaggregated by segment, contract type, customer category and geographic location (in thousands):
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Three Months Ended |
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August 2, |
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July 27, |
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Revenue by segment |
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2025 |
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2024 |
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AxS |
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$ |
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$ |
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SCDE |
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— |
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Total revenue |
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$ |
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$ |
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Three Months Ended |
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August 2, |
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July 27, |
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Revenue by contract type |
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2025 |
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2024 |
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FFP |
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$ |
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$ |
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Cost Plus |
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T&M |
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Total revenue |
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$ |
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$ |
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Each of these contract types presents advantages and disadvantages. Typically, the Company assumes more risk with FFP contracts. However, these types of contracts generally offer additional profits when the Company completes the work for less than originally estimated. Cost Plus contracts generally subject the Company to lower risk. Accordingly, the associated base fees are usually lower than fees on FFP contracts. Under T&M contracts, the Company’s profit may vary if actual labor hour rates vary significantly from the negotiated rates.
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Three Months Ended |
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August 2, |
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July 27, |
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Revenue by customer category |
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2025 |
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2024 |
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U.S. government |
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$ |
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$ |
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Non-U.S. government |
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Total revenue |
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$ |
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$ |
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Three Months Ended |
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August 2, |
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July 27, |
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Revenue by geographic location |
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2025 |
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2024 |
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Domestic |
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$ |
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$ |
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International |
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Total revenue |
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$ |
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$ |
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Three Months Ended |
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August 2, |
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July 27, |
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Revenue percentage by recognition method |
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2025 |
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2024 |
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Over time |
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Point in time |
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Total revenue |
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Contract Balances
Changes in the contract asset and liability balances during the three month period ended August 2, 2025 were not materially impacted by factors other than billings, cash collections, and timing of revenue recognition. For the Company’s contracts, there are no significant gaps between the receipt of payment and the transfer of the associated goods and services to the customer for material amounts of consideration.
10
Revenue recognized for the three month period ended August 2, 2025 that was included in customer advances balances as of April 30, 2025 was $
Investments
The Company’s investments are accounted for as available-for-sale and are reported at fair value. Unrealized gains and losses for debt securities are excluded from earnings and reported as a separate component of stockholders’ equity, net of deferred income taxes for available-for-sale investments. Gains and losses realized on the disposition of investment securities are determined on the specific identification basis and credited or charged to income. Investments in equity securities and warrants are measured at fair value with net unrealized gains and losses from changes in the fair value recognized in other expense, net. Management determines the appropriate classification of securities at the time of purchase and reevaluates such designation as of each balance sheet date.
Fair Values of Financial Instruments
Fair values of cash and cash equivalents, accounts receivable, unbilled receivables and retentions, and accounts payable approximate cost due to the short period of time to maturity.
Government Contracts
Payments to the Company on government Cost Plus or T&M contracts are based on provisional, or estimated indirect rates, which are subject to an annual audit by the Defense Contract Audit Agency (“DCAA”). The cost audits result in the negotiation and determination of the final indirect cost rates that the Company may use for the period(s) audited. The final rates, if different from the provisional rates, may create an additional receivable or liability for the Company for Cost Plus and T&M contracts.
For example, during the course of its audits, the DCAA may question the Company’s incurred costs, and if the DCAA believes the Company has accounted for such costs in a manner inconsistent with the requirements under Federal Acquisition Regulations, the DCAA auditor may recommend to the Company’s administrative contracting officer to disallow such costs. Historically, the Company has not experienced material disallowed costs as a result of government audits. However, the Company can provide no assurance that the DCAA or other government audits will not result in material disallowances for incurred costs in the future. The Company’s revenue recognition policy calls for revenue recognized on all cost reimbursable government contracts to be recorded at estimated full year rates unless collectability is not reasonably assured. At August 2, 2025 and April 30, 2025, the Company had
(Loss) Earnings Per Share
Basic (loss) earnings per share is computed using the weighted-average number of common shares outstanding, excluding shares of unvested restricted stock.
The reconciliation of basic to diluted shares is as follows (in thousands except share data):
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Three Months Ended |
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August 2, 2025 |
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July 27, 2024 |
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Net (loss) income |
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$ |
(
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$ |
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Denominator for basic (loss) earnings per share: |
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Weighted average common shares |
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Dilutive effect of employee stock options, restricted stock and restricted stock units |
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— |
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Denominator for diluted (loss) earnings per share |
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11
Due to the net loss for the three months ended
August 2
, 2025,
Recently Issued Accounting Standards
In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires updates to the rate reconciliation, income taxes paid and other disclosures. The new standard is effective for fiscal years beginning after December 15, 2024 and interim periods within fiscal years beginning after December 15, 2025, with early adoption permitted. ASU 2023-09 is adopted retrospectively. The Company is evaluating the potential impact of this adoption on its consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income— Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”). ASU 2024-03 requires disclosure, in the notes to financial statements, of specified information about certain costs and expenses included in each expense caption on the face of the income statement at interim and annual reporting periods. The new standard is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, and should be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. The Company is evaluating the potential impact of this adoption on its consolidated financial statements.
2. Investments
Investments consist of the following (in thousands):
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August 2, |
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April 30, |
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2025 |
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2025 |
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Long-term investments: |
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Available-for-sale securities: |
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Equity securities and warrants |
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Total long-term available-for-sale securities investments |
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Equity method investments |
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Investments in limited partnership funds |
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Total equity method investments |
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$ |
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$ |
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12
Equity Securities
Equity securities and warrants are measured at fair value with net unrealized gains and losses from changes in the fair value recognized in other expense, net. Unrealized gain (loss) recorded (in thousands):
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Three Months Ended |
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Three Months Ended |
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August 2, 2025 |
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July 27, 2024 |
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Net gain (loss) recognized during the period on equity securities |
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$ |
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$ |
(
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Less: Net loss recognized during the period on equity securities sold during the period |
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— |
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— |
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Unrealized gain (loss) recognized during the period on equity securities still held at the reporting date |
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$ |
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$ |
(
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3. Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy contains three levels as follows:
The Company’s financial assets measured at fair value on a recurring basis at August 2 , 2025 , were as follows (in thousands):
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Fair Value Measurement Using |
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Significant |
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Quoted prices in |
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other |
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Significant |
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active markets for |
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observable |
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unobservable |
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identical assets |
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inputs |
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inputs |
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Description |
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(Level 1) |
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(Level 2) |
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(Level 3) |
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Total |
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Equity securities |
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$ |
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$ |
— |
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$ |
— |
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$ |
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Warrants |
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— |
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— |
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Total |
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$ |
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$ |
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$ |
— |
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$ |
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13
The Company had
The Company’s financial assets measured at fair value on a recurring basis at April 30, 2025, were as follows (in thousands):
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Fair Value Measurement Using |
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Significant |
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Quoted prices in |
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other |
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Significant |
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active markets for |
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observable |
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unobservable |
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identical assets |
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inputs |
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inputs |
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Description |
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(Level 1) |
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(Level 2) |
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(Level 3) |
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Total |
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Equity securities |
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$ |
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$ |
— |
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$ |
— |
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$ |
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Warrants |
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— |
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— |
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Total |
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$ |
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$ |
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$ |
— |
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$ |
|
The Company had
On September 12, 2022, the Company invested $
4. Inventories, net
Inventories consist of the following (in thousands):
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August 2, |
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April 30, |
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2025 |
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2025 |
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Raw materials |
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$ |
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$ |
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Work in process |
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Finished goods |
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Inventories, gross |
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Reserve for inventory excess and obsolescence |
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(
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(
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Inventories, net |
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$ |
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$ |
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5. Equity Method Investments
Investments in Limited Partnership Funds
In July 2019, the Company made its initial capital contribution to a limited partnership fund focusing on highly relevant technologies and start-up companies serving defense and industrial markets. Under the terms of the limited partnership agreement, the Company contributed a total of $
In March 2022, the Company entered into a limited partnership agreement with a second limited partnership fund also focusing on highly relevant technologies and start-up companies serving defense and industrial markets. Under the terms of the limited partnership agreement, the Company is committed to contributions totaling $
14
The Company accounts for investments in limited partnerships as equity method investments as the Company is deemed to have significant influence when it holds more than a minor interest. For the three months ended August 2
, 2025 and July 27, 2024
, the Company recorded its ownership percentage of the net gain of equity method investments, of $
6. Warranty Reserves
The Company accrues an estimate of its exposure to warranty claims based upon both current and historical product sales data and warranty costs incurred. The warranty reserve is included in other current liabilities on the unaudited condensed consolidated balance sheet. The related expense is included in cost of sales.
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Three Months Ended |
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August 2, |
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July 27, |
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2025 |
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2024 |
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Beginning balance |
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$ |
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$ |
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Balance acquired from acquisition |
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— |
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Warranty expense |
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(
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Warranty costs settled |
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(
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(
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Ending balance |
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$ |
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$ |
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7. Intangibles, net
The components of intangibles are as follows (in thousands):
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August 2, |
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April 30, |
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2025 |
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2025 |
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Technology |
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$ |
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$ |
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Licenses |
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Customer relationships |
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Backlog |
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In-process research and development |
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Non-compete agreements |
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Trademarks and tradenames |
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Other |
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Intangibles, gross |
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Less accumulated amortization |
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(
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(
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Intangibles, net |
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$ |
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$ |
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Technology, backlog and customer relationships intangibles were recognized in conjunction with the Company’s acquisition of Blue Halo on May 1 2025. Refer to Note 17—Business Acquisitions for further details.
The weighted average amortization period as of August 2
, 2025
and April 30, 2025 was
and
15
Estimated remaining amortization expense for the next five years is as follows (in thousands):
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Year ending |
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April 30, |
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2026 |
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$ |
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2027 |
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2028 |
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2029 |
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|
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2030 |
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$ |
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8. Goodwill
The following table presents the changes in the Company’s goodwill balance by segment (in thousands):
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AxS |
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SCDE |
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Total |
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Goodwill |
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$ |
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$ |
— |
|
$ |
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Accumulated impairment losses |
|
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(
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|
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— |
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(
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Balance at April 30, 2025 |
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|
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— |
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Additions to goodwill |
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Goodwill |
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Accumulated impairment losses |
|
|
(
|
|
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— |
|
|
(
|
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Balance at August 2, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
The AxS segment includes goodwill from the acquisitions of Pulse Aerospace, LLC (“Pulse”), Arcturus UAV, Inc. (“Arcturus”), Telerob Gesellschaft für Fernhantierungstechnik mbH (“Telerob”), Planck Aerosystems, Inc., Tomahawk Robotics, Inc. and certain BlueHalo reporting units and includes goodwill from the purchase of certain assets of Intelligent Systems Group business segment of Progeny Systems Corporation. The SCDE segment includes goodwill from certain BlueHalo reporting units.
9. Debt
On October 4, 2024, the Company entered into a Third Amendment to Credit Agreement with the existing lenders, Bank of America, N.A. (“BofA NA”), the administrative agent and the swingline lender, JPMorgan Chase Bank, N.A. (“JPM”), U.S. Bank National Association (“U.S. Bank”), and Citibank, N.A. (“Citibank”) (the “Third Amendment to Credit Agreement”).
The Third Amendment to Credit Agreement provided for an aggregate $
On May 1, 2025 (the “Closing Date”), 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 Bank N.A. (“BMO”), Citizens Banks, N.A. (“Citizens”) and Royal Bank of Canada (“RBC”) (the “Fourth Amendment to Credit Agreement” and the existing Credit Agreement as amended thereby, the “Amended Credit Agreement”). The Amended Credit Agreement now provides for an aggregate $
16
$
The Term A Loan drawn under the Term Loan Facility matures
In July 2025, the Company used the proceeds from the issuance of common stock and the Company’s
Long-term debt and the current period interest rates were as follows:
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August 2, |
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April 30, |
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2025 |
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2025 |
||
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(In thousands) |
|
(In thousands) |
||
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Revolving credit facility |
|
$ |
— |
|
$ |
|
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Convertible Notes |
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|
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— |
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Total long-term debt |
|
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Less unamortized debt issuance costs–convertible notes |
|
|
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— |
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Total long-term debt, net of unamortized debt issuance costs–convertible notes |
|
$ |
|
|
$ |
|
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Unamortized debt issuance costs–revolving credit facility |
|
$ |
|
|
$ |
|
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Current period interest rate |
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17
Future contractual long-term debt principal payments at August 2, 2025 were as follows:
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Fiscal Year |
|
(In thousands) |
|
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2026 |
|
$ |
— |
|
2027 |
|
|
— |
|
2028 |
|
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— |
|
2029 |
|
|
— |
|
2030 |
|
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— |
|
2031 |
|
|
|
|
|
|
$ |
|
10. Convertible Notes
In July 2025, the Company entered into an underwriting agreement (the “Note Underwriting Agreement”) with certain underwriters (the “Note Underwriters”) agreeing, subject to customary conditions, to issue and sell $
The Notes are the Company’s senior, unsecured obligations and are (i) equal in right of payment with the Company’s existing and future senior, unsecured indebtedness; (ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly subordinated to the Notes; (iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent of the value of the collateral securing that indebtedness, including any borrowings under the Company's revolving credit facility; and (iv) structurally subordinated to all existing and future indebtedness and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of the Company’s subsidiaries.
The Notes do not bear regular interest, and the principal amount of the Notes will not accrete. Special interest will accrue on the Notes upon the occurrence of certain events relating to the Company's failure to file certain SEC reports as provided in the Indenture. The Notes will mature on July 15, 2030, unless earlier repurchased, redeemed or converted. Before April 15, 2030, noteholders 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. The Company will have the right to elect to settle conversions either entirely in cash or in a combination of cash and shares of its common stock. Upon conversion of any Note, the consideration due upon conversion, which will be determined over an “Observation Period” (as defined in the Indenture) consisting of
The Notes will be redeemable, in whole or in part (subject to certain limitations described below), at the Company’s option at any time, and from time to time, on or after July 21, 2028 and on or before the 61st scheduled trading day immediately before the maturity date, at a cash redemption price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding, the redemption date, but only if the last reported sale price per share of the Company’s common stock exceeds
18
trading day immediately before the date the Company sends the related redemption notice; and (ii) the trading day immediately before the date the Company sends such notice. However, the Company may not redeem less than all of the outstanding Notes unless at least $
If certain events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then, subject to a limited exception for certain cash mergers as provided in the Indenture, noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any, to, but excluding, the fundamental change repurchase date. The definition in the Indenture of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.
The Notes have customary provisions relating to the occurrence of “Events of Default” (as defined in the Indenture), which include the following: (i) certain payment defaults on the Notes (which, in the case of a default in the payment of special interest on the Notes, will be subject to a
cure period); (ii) the Company’s failure to send certain notices under the Indenture within specified periods of time; (iii) the Company's failure to convert a Note in accordance with the Indenture within a specified period of time; (iv) the Company’s failure to comply with certain covenants in the Indenture relating to the Company’s ability to consolidate with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially all of the assets of the Company and its subsidiaries, taken as a whole, to another person; (v) a default by the Company in its other obligations or agreements under the Indenture or the Notes if such default is not cured or waived within
If an Event of Default involving bankruptcy, insolvency or reorganization events with respect to the Company (and not solely with respect to a significant subsidiary of the Company) occurs, then the principal amount of, and all accrued and unpaid interest, if any, on all of the Notes then outstanding will immediately become due and payable without any further action or notice by any person. If any other Event of Default occurs and is continuing, then, the Trustee, by notice to the Company, or noteholders of at least
11. Leases
The components of lease costs recorded in cost of sales and selling, general and administrative (“SG&A”) expense were as follows (in thousands):
|
|
|
Three Months Ended |
|
Three Months Ended |
||
|
|
|
August 2, |
|
July 27, |
||
|
|
|
2025 |
|
2024 |
||
|
Operating lease cost |
|
$ |
|
|
$ |
|
|
Short term lease cost |
|
|
|
|
|
|
|
Variable lease cost |
|
|
|
|
|
|
|
Sublease income |
|
|
— |
|
|
— |
|
Total lease costs, net |
|
$ |
|
|
$ |
|
19
Supplemental lease information was as follows:
|
|
|
Three Months Ended |
|
Three Months Ended |
||
|
|
|
August 2, |
|
July 27, |
||
|
|
|
2025 |
|
2024 |
||
|
|
|
(In thousands) |
|
(In thousands) |
||
|
Cash paid for amounts included in the measurement of operating lease liabilities |
|
$ |
|
|
$ |
|
|
Right-of-use assets obtained in exchange for new lease liabilities |
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Weighted average remaining lease term |
|
|
|
|
|
|
|
Weighted average discount rate |
|
|
|
|
|
|
Maturities of operating lease liabilities as of August 2, 2025 were as follows (in thousands):
|
Fiscal Year |
|
|
|
|
2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
Thereafter |
|
|
|
|
Total lease payments |
|
$ |
|
|
Less: imputed interest |
|
|
(
|
|
Total present value of operating lease liabilities |
|
$ |
|
12. Accumulated Other Comprehensive Loss and Reclassifications Adjustments
The components of accumulated other comprehensive loss and adjustments are as follows (in thousands):
|
|
|
Three Months Ended |
|
Three Months Ended |
||
|
|
|
August 2, |
|
July 27, |
||
|
|
|
2025 |
|
2024 |
||
|
Balance as of April 30, 2025 and April 30, 2024, respectively |
|
$ |
(
|
|
$ |
(
|
|
Change in foreign currency translation adjustments |
|
|
|
|
|
|
|
Balance as of August 2, 2025 and July 27, 2024, respectively |
|
$ |
(
|
|
$ |
(
|
13. Customer-Funded Research & Development
Customer-funded R&D costs are incurred pursuant to contracts (revenue arrangements) to perform R&D activities according to customer specifications. These costs are direct contract costs and are expensed to cost of sales as costs are incurred. Revenue from customer-funded R&D contracts is recognized in accordance with ASC 606 over time as costs are incurred. Revenue from customer-funded R&D was approximately $
14. Long-Term Incentive Awards
During the three months ended August 2, 2025, the Company granted awards under its 2021 Equity Incentive Plan (the “2021 Plan”) to key employees (“Fiscal 2026 LTIP”). Awards under the Fiscal 2026 LTIP consist of: (i) time-based restricted stock awards and time-based restricted stock units, which vest in equal tranches in July 2026, July 2027 and July 2028, and (ii) performance-based restricted stock units (“PRSUs”), which vest based on the Company’s achievement of revenue and non-GAAP adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”) targets for the
20
metric and maximum achievement levels for which such awards would vest at
During the three months ended July 27, 2024, the Company granted awards under its 2021 Plan to key employees (“Fiscal 2025 LTIP”). Awards under the Fiscal 2025 LTIP consist of: (i) time-based restricted stock awards and time-based restricted stock units, which vest in equal tranches in July 2025, July 2026 and July 2027, and (ii) PRSUs, which vest based on the Company’s achievement of revenue and non-GAAP adjusted EBITDA targets for the
During the three months ended July 29, 2023, the Company granted awards under the 2021 Plan to key employees (“Fiscal 2024 LTIP”). Awards under the Fiscal 2024 LTIP consist of: (i) time-based restricted stock awards and time-based restricted stock units, which vest in equal tranches in July 2024, July 2025 and July 2026, and (ii) PRSUs, which vest based on the Company’s achievement of revenue and non-GAAP adjusted EBITDA targets for the
During the three months ended July 30, 2022, the Company granted awards under the 2021 Plan to key employees (“Fiscal 2023 LTIP”). Awards under the Fiscal 2023 LTIP consist of: (i) time-based restricted stock awards and time-based restricted stock units, which vest in equal tranches in July 2023, July 2024 and July 2025, and (ii) PRSUs, which vest based on the Company’s achievement of revenue and non-GAAP adjusted EBITDA targets for the
At each reporting period, the Company reassesses the probability of achieving the performance targets for the PRSUs. The estimation of whether the performance targets will be achieved requires judgment, and, to the extent actual results or updated estimates differ from the Company’s current estimates, the cumulative effect on current and prior periods of those changes will be recorded in the period estimates are revised. No compensation cost is ultimately recognized for awards for which employees do not render the requisite service and are forfeited.
21
15. Income Taxes
For the three months ended August 2
, 2025
, the Company recorded an income tax benefit of $(
On July 4, 2025, the reconciliation bill, commonly known as the One Big Beautiful Bill Act (“OBBBA”), was enacted into law. The OBBBA, among other things, eliminates the requirement to capitalize U.S. R&D expenses, permanently extends certain provisions of the Tax Cuts & Jobs Act of 2017 and modifies certain international tax provisions, including changes to the Global Intangible Low-Taxed Income (“GILTI”) and the FDII regimes, with effective dates beginning in calendar year 2025 and extending through calendar year 2027. As the OBBBA was enacted during the Company’s fiscal quarter ended August 2, 2025, the Company reflected the impacts of the OBBBA on the condensed consolidated financial statements. The Company is in the process of evaluating the financial statement impact of these provisions to future periods. Each of these changes may result in accelerated tax deductions during the current and future tax years. Cash tax payments for the fiscal year ending April 30, 2026 are expected to be significantly reduced as a result of the accelerated tax deductions. However, the Company's total income tax expense and effective tax rate are not expected to materially change as a result of the new legislation.
16. Share Issuances
In July 2025, the Company entered into an underwriting agreement (the “Common Stock Underwriting Agreement”) with certain underwriters (the “Common Stock Underwriters”) agreeing, subject to customary conditions, to issue and sell
17. Business Acquisitions
BlueHalo Acquisition
On May 1, 2025, the Company closed its acquisition of BlueHalo LLC for merger consideration, net of cash acquired, of $
|
(in thousands) |
|
Amount |
|
Merger consideration transferred |
$ |
|
|
Settlement of BlueHalo’s transaction expenses |
|
|
|
Settlement of BlueHalo’s debt |
|
|
|
Merger consideration |
$ |
|
|
Less cash acquired |
|
(
|
|
Fair value of consideration transferred |
$ |
|
22
The fair value of the Company’s common stock issued is based on
The following table summarizes the preliminary allocation of the fair value of the merger consideration transferred to assets acquired and liabilities assumed as of the acquisition date. The allocation of the purchase price is preliminary and subject to change as the Company continues to evaluate the fair values of certain assets and liabilities acquired. Open items in the purchase price allocation include the valuation of assets acquired and liabilities assumed including, but not limited to technology, backlog and customer relationships intangibles and fair value adjustment to inventory; property, plant and equipment; leases; details surrounding tax matters; and assumptions underlying certain existing or potential reserves, such as those for inventory and legal matters (in thousands):
|
|
|
May 1, |
|
|
|
|
2025 |
|
|
Fair value of assets acquired: |
|
|
|
|
Accounts receivable, net of allowance for credit losses of $
|
|
$ |
|
|
Unbilled receivables and retentions |
|
|
|
|
Inventories, net |
|
|
|
|
Income taxes receivable |
|
|
|
|
Prepaid expenses and other current assets |
|
|
|
|
Long-term investments |
|
|
|
|
Property and equipment |
|
|
|
|
Operating lease right-of-use assets |
|
|
|
|
Intangibles |
|
|
|
|
Goodwill |
|
|
|
|
Other assets |
|
|
|
|
Total identifiable assets |
|
$ |
|
|
|
|
|
|
|
Fair value of liabilities assumed: |
|
|
|
|
Accounts payable |
|
|
|
|
Wages and related accruals |
|
|
|
|
Customer advances |
|
|
|
|
Current operating lease liabilities |
|
|
|
|
Other current liabilities |
|
|
|
|
Non-current operating lease liabilities |
|
|
|
|
Deferred income taxes |
|
|
|
|
Total liabilities assumed |
|
|
|
|
Total identifiable net assets |
|
$ |
|
Determining the fair value of the intangible assets acquired requires significant judgment, including the amount and timing of expected future cash flows, long-term growth rates and discount rates. The fair value assigned to intangible assets has been estimated based on third-party preliminary valuation studies utilizing income-based methodologies and corroborated with benchmarks of similar transactions in the industry. Use of different estimates and judgments could yield materially different results. All intangible assets acquired in the BlueHalo acquisition are subject to amortization.
The goodwill is attributable to the differences between the estimated fair value of the consideration transferred and the estimated fair value of the assets acquired, and liabilities assumed. For income tax purposes the goodwill and intangibles are not deductible for tax purposes.
23
The following table summarizes the valuation of the fair value of intangible assets acquired (in thousands):
|
|
|
Preliminary Fair Value |
Estimated Useful Life |
|
|
|
|
Years |
|
Preliminary fair value of intangible assets acquired: |
|
|
|
|
Backlog |
$ |
|
|
|
Customer relationships |
|
|
|
|
Developed technology |
|
|
|
|
Intangible assets acquired |
$ |
|
|
BlueHalo Supplemental Pro Forma Information (unaudited)
BlueHalo revenue and loss from operations for the three months ended August 2, 2025 since its acquisition on May 1, 2025 was $
|
|
|
|
Three Months Ended |
|||
|
|
|
|
August 2, |
|
|
July 27, |
|
|
|
|
2025 |
|
|
2024 |
|
Revenue |
|
$ |
|
|
$ |
|
|
Net loss attributable to AeroVironment, Inc. |
|
$ |
(
|
|
$ |
(
|
The Company recognized a nonrecurring pro forma adjustment to pro forma earnings to amortize an increase in the fair value of inventory acquired during the three months ended August 2, 2025. In addition, for the three months ended August 2, 2025, the amortization expense associated with the Company's
These pro forma amounts have been calculated by applying the Company’s accounting policies, assuming transaction costs had been incurred during the three months ended July 27, 2024, reflecting the additional amortization and depreciation that would have been charged, incremental interest expense associated with the initial financing for the acquisition under the term loan and revolver, and including the results of BlueHalo prior to acquisition.
The Company incurred approximately $
The unaudited pro forma combined financial information presented above does not give effect to the July 2025 common stock issuance and Notes issuance, as such proceeds were not used to fund the BlueHalo acquisition. As the Company’s repayment of indebtedness using the proceeds of the common stock issuance and Notes issuance was not directly attributable to the acquisition, the related reduction in interest expense is not reflected in this unaudited pro forma combined financial information.
24
18. Pension
As part of the Telerob acquisition, the Company acquired a small foreign-based defined benefit pension plan. The Rheinmetall-Zusatzversorgung service plan covers
The table below includes the projected benefit obligation and fair value of plan assets as of April 30, 2025. The net fair value of plan assets (in thousands) is recorded in other assets on the unaudited condensed consolidated balance sheet.
|
|
|
April 30, |
|
|
|
|
2025 |
|
|
|
|
(In thousands) |
|
|
|
|
$ |
(
|
|
Fair value of plan assets |
|
|
|
|
Funded status of the plan |
|
$ |
|
The projected benefit obligation includes assumptions of a discount rate of
Expected benefit payments as of April 30, 2025 (in thousands):
|
2026 |
|
$ |
|
|
2027 |
|
|
|
|
2028 |
|
|
|
|
2029 |
|
|
|
|
2030 |
|
|
|
|
2031-2035 |
|
|
|
|
Total expected benefit payments |
|
$ |
|
Net periodic benefit cost (in thousands) is recorded in interest expense, net.
|
|
|
Three Months Ended |
||||
|
|
|
August 2, |
|
July 27, |
||
|
|
|
2025 |
|
2024 |
||
|
Expected return on plan assets |
|
$ |
— |
|
$ |
— |
|
Interest cost |
|
|
|
|
|
|
|
Actuarial gain |
|
|
— |
|
|
— |
|
Net periodic benefit cost |
|
$ |
|
|
$ |
|
19. Segments
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Company’s CODM, who is the Chief Executive Officer, makes operating decisions, assesses performance and makes resource allocation decisions, including the focus of R&D and other significant expenses, leading to decisions related to resource allocations in relation to profit and loss. Accordingly, the Company identifies
25
Effective May 1, 2025, the Company reorganized its segments. In connection with the Company’s acquisition of BlueHalo, the reorganization was implemented to drive additional operational improvements, foster synergies and provide leaders with greater autonomy over their business units. The Company’s reportable segments are Autonomous Systems and Space, Cyber and Directed Energy.
The accounting policies of the segments are the same as those described in Note 1, “Organization and Significant Accounting Policies.” The operating segments sales to each other are eliminated. Effective May 1, 2025, segment adjusted EBITDA is the measure of profitability used by the CODM for purposes of making decisions about allocating resources to the segments and assessing performance. Segment adjusted EBITDA is defined as segment (loss) income from operations before depreciation and amortization, adjusted for the impact of certain other non-cash items, including amortization of implementation of cloud computing arrangements, stock-based compensation, and acquisition related expenses.
|
|
|
Three Months Ended August 2, 2025 |
|||||||
|
|
|
AxS |
|
SCDE |
|
Total |
|||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
Product sales |
|
$ |
|
|
$ |
|
|
|
|
|
Contract services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
Cost of sales less intangible amortization and other purchase accounting adjustments |
|
|
|
|
|
|
|
|
|
|
Intangible amortization included in cost of sales |
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
General and administrative less intangible amortization |
|
|
|
|
|
|
|
|
|
|
Intangible amortization included in SG&A |
|
|
|
|
|
|
|
|
|
|
Research and development |
|
|
|
|
|
|
|
|
|
|
Add: |
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
Amortization |
|
|
|
|
|
|
|
|
|
|
Acquisition-related expenses |
|
|
|
|
|
|
|
|
|
|
Amortization of cloud computing arrangement implementation |
|
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
(
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
Segment adjusted EBITDA |
|
$ |
|
|
$ |
|
|
$ |
|
26
|
|
|
Three Months Ended July 27, 2024 |
|||||||
|
|
|
AxS |
|
SCDE |
|
Total |
|||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
Product sales |
|
$ |
|
|
$ |
— |
|
|
|
|
Contract services |
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
Cost of sales less intangible amortization and other purchase accounting adjustments |
|
|
|
|
|
— |
|
|
|
|
Intangible amortization included in cost of sales |
|
|
|
|
|
— |
|
|
|
|
Sales and marketing |
|
|
|
|
|
|
|
|
|
|
General and administrative less intangible amortization |
|
|
|
|
|
— |
|
|
|
|
Intangible amortization included in SG&A |
|
|
|
|
|
— |
|
|
|
|
Research and development |
|
|
|
|
|
— |
|
|
|
|
Add: |
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
|
|
|
|
— |
|
|
|
|
Amortization |
|
|
|
|
|
— |
|
|
|
|
Acquisition-related expenses |
|
|
— |
|
|
— |
|
|
|
|
Amortization of cloud computing arrangement implementation |
|
|
|
|
|
— |
|
|
|
|
Other income (expense) |
|
|
|
|
|
— |
|
|
|
|
Stock-based compensation |
|
|
|
|
|
— |
|
|
|
|
Segment adjusted EBITDA |
|
$ |
|
|
$ |
— |
|
$ |
|
The following table (in thousands) provides a reconciliation from segment adjusted EBITDA to income before income taxes:
|
|
|
Three Months Ended |
|
Three Months Ended |
||
|
|
|
August 2, |
|
July 27, |
||
|
|
|
2025 |
|
2024 |
||
|
Segment adjusted EBITDA |
|
$ |
|
|
$ |
|
|
Depreciation and amortization |
|
|
(
|
|
|
(
|
|
Acquisition-related expenses |
|
|
(
|
|
|
— |
|
Amortization of cloud computing arrangement implementation |
|
|
(
|
|
|
(
|
|
Stock-based compensation |
|
|
(
|
|
|
(
|
|
Equity securities investments activity, net |
|
|
|
|
|
(
|
|
Interest expense |
|
|
(
|
|
|
(
|
|
(Loss) income before income taxes |
|
$ |
|
|
$ |
|
Identifiable segment assets are summarized in the table below. Corporate assets primarily consist of cash and cash equivalents, prepaid expenses and other current assets, long-term investments, property and equipment, net, operating lease right-of-use assets, deferred income taxes and other assets managed centrally on behalf of the business segments.
|
|
|
AxS |
|
SCDE |
|
Corporate |
|
Total |
||||
|
As of August 2, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
As of April 30, 2025 |
|
$ |
|
|
$ |
— |
|
$ |
|
|
$ |
|
Capital expenditures are summarized in the table below (in thousands):
|
|
|
AxS |
|
SCDE |
|
Corporate |
|
Total |
||||
|
Three Months Ended August 2, 2025 |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Three Months Ended July 27, 2024 |
|
$ |
|
|
$ |
— |
|
$ |
|
|
$ |
|
27
|
ITEM 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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”).
28
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, |
|
July 27, |
|
||
|
|
|
2025 |
|
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.
29
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, |
|
July 27, |
|
||
|
|
|
2025 |
|
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
30
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
31
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, |
|
July 27, |
||
|
|
|
2025 |
|
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, |
|
July 27, |
||
|
|
|
2025 |
|
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.
32
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
33
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):
|
|
|
Three Months Ended |
|
||||
|
|
|
August 2, |
|
July 27, |
|
||
|
|
|
2025 |
|
2024 |
|
||
|
|
|
(Unaudited) |
|
||||
|
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.
34
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.
ITEM 3. QUANTITATIVE AND QUALITATIV E DISCLOSURES ABOUT MARKET RISK
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 .
ITEM 4. CONTROLS AND PROCEDURES
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
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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).
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PART II. OTHER INFORMATIO N
ITEM 1. LEGAL PROCEEDINGS
On August 9, 2021, a former employee filed a class action complaint against AeroVironment in California Superior Court in Los Angeles, California alleging various claims pursuant to the California Labor Code related to wages, meal breaks, overtime, unreimbursed business expenses and other recordkeeping matters. The complaint seeks a jury trial and payment of various alleged unpaid wages, penalties, interest and attorneys’ fees in unspecified amounts. We filed our answer on December 16, 2021. The parties participated in a mediation session on May 8, 2025, but did not reach a resolution during the session.
On June 11, 2025, the parties reached an agreement in principle to settle all claims in the class action complaint and PAGA complaint pursuant to a mediator’s proposal made on such a date by the mediator from the May 8, 2025 class action mediation session. A court must approve the terms of the settlement before we will pay any amounts pursuant to the settlement. The parties are currently working on a written settlement agreement to present to the court for approval. The estimated settlement was accrued in our consolidated statements of income(loss) for the year ended April 30, 2025.
On March 29, 2024, a former employee filed a complaint against AeroVironment in the Ventura County Superior Court in California, alleging violations of the California Labor Code related to wages, meal breaks, overtime, unreimbursed business expenses and other recordkeeping matters and seeking penalties recoverable under California Labor Code section 2698, et. seq., Private Attorney General Act of 2004 (“PAGA”) and all other remedies available under PAGA. The complaint seeks civil penalties on behalf of the plaintiff and similarly situations persons pursuant to PAGA. We filed our answer on June 20, 2024. The parties stipulated to stay this PAGA case ahead of the mediation in the class action matter listed in the immediately preceding paragraph above.
We are subject to lawsuits, government investigations, audits and other legal proceedings from time to time in the ordinary course of our business. It is not possible to predict the outcome of any legal proceeding with any certainty. The outcome or costs we incur in connection with a legal proceeding could adversely impact our operating results and financial position.
ITEM 1A. RISK FACTORS
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. |
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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.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Trading Plan
On
Other than with respect to the McDonnell Rule 10b5-1 Trading Plan, none of our directors or officers informed us of the adoption or termination of a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408 during the three-month period ended August 2, 2025.
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ITEM 6. EXHIBITS
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Exhibit
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Description |
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3.1 |
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3.2 |
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4.1 |
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4.2 |
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10.1 |
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31.1 |
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31.2 |
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32# |
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101.INS |
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XBRL Instance Document – The instance document does not appear in the Interactive Data Files because its XBRL tags are embedded within the Inline XBRL document. |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document. |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document. |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document. |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
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104 |
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Cover Page Interactive Data File formatted as Inline XBRL and contained in Exhibit 101 |
* Filed herewith.
# The information in Exhibit 32 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act (including this report), unless the Company specifically incorporates the foregoing information into those documents by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Date: September 9, 2025 |
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AEROVIRONMENT, INC. |
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By: |
/s/ Wahid Nawabi |
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Wahid Nawabi |
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Chairman, President and Chief Executive Officer |
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(Principal Executive Officer) |
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/s/ Kevin P. McDonnell |
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Kevin P. McDonnell |
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Executive Vice President and Chief Financial Officer |
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(Principal Financial Officer) |
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/s/ Brian C. Shackley |
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Brian C. Shackley |
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Vice President and Chief Accounting Officer |
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(Principal Accounting Officer) |
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