AeroVironment Inc Q2 2026 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Greg Konrad - Jefferies LLC - Analyst : Maybe just one on programs. I think you announced that you got two more BADGER units in the quarter. Can you just remind us how you're thinking about the current scheduled SCAR and maybe how that contributes to the expected ramp for that program?

Question: Greg Konrad - Jefferies LLC - Analyst : And then maybe just one follow-up to that. I mean, I think you've talked about a couple of the headwinds that you saw in the quarter around profitability, including Oracle and the shutdown. If you kind of think about that ramp of profitability and margin, given the 70% in Q4, how are you thinking about that progression? How much is operating leverage versus maybe mix and just the biggest drivers that you see as you head into the second half?

Question: Anthony Valentini - Goldman Sachs Group Inc - Analyst : It seems pretty obvious you guys have massive growth opportunities here across the 5 to 10 different products that you guys have been highlighting, but maybe like put a finer point on it, is there a way to think through the catalyst path over the next few months as some of the reconciliation funding starts to hit backlog? Like what should people be looking for?

Question: Anthony Valentini - Goldman Sachs Group Inc - Analyst : Okay. Great. That's helpful. I appreciate all that color. One other quick one. I guess I'm just curious, like how do we square that with -- if I'm looking at the backlog in 1Q versus 2Q, it's slightly down. So can you guys help me understand like why that's the case? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 09, 2025 / 9:30PM, AVAV.OQ - Q2 2026 AeroVironment Inc Earnings Call And should we see the backlog is like significantly ramping into the back half of the year? Or is it just so unpredictable? It's more that you guys have a feel over the next 12 to 18 months versus the next 6.

Question: Anthony Valentini - Goldman Sachs Group Inc - Analyst : Okay. And Kevin, do you have a number for like what you guys expect Switchblade to be in 2026? I know you guys gave the color on what the production capacity will be out of the Utah facility in the future, but is there a way for us to think about the 2026 forecast?

Question: Louie DiPalma - William Blair Capital Partners - Analyst : Wahid, what was the tone from the Reagan Defense Forum over the weekend? And are you increasingly confident given all of the presentations of AeroVironment's positioning across your current product lines, whether it's your drones, your attack drones, the electronic warfare and space?

Question: Louie DiPalma - William Blair Capital Partners - Analyst : And on this call, you've discussed many of your product lines, such as the P550, your BADGER with the SCAR program, your JUMP 20s. I was wondering, did your long-haul laser communications program from the undisclosed customer, was that contract recently upsized from $240 million to $385 million? It shows the larger number in your slide presentation. And I was also wondering, have you started delivering terminals as part of that program?

Question: Louie DiPalma - William Blair Capital Partners - Analyst : Great. So as part of the original committed contract, does that mean that is it funded already?

Question: Trevor Walsh - Citizens JMP Securities LLC - Analyst : Great. Maybe just to touch on AV_Halo a little bit. Wahid, great to see the new products or the new, I guess, module being added on to that. Can you maybe just take a step back though, around that whole product opportunity? Just given all of the different systems from both AV as well as the other providers in the ecosystem that you're partnering and OEMing with and they're able to kind of link in. How much of that do this needs to work its way through the system in terms of getting those systems out into the field so that the customer can actually just know what's the right sort of overall software packages to go with those? I guess it's another way of asking kind of you have these wins around AV_Halo now, but is there really a kind of much wider opportunity that's kind of going to, I guess, materialize later? Again, what's the actual hardware piece a little bit more locked down, I guess? Does that make sense?

Question: Pete Skibitski - Alembic Global Advisors - Analyst : Just wondered if you could level set us. I'm still a little confused with where we're at with the Army long-range reconnaissance. I know that you guys as well as Edge both got contract in August, and then you announced another award yesterday. Are you guys sole source now on LRR with the P550? Or is there going to be kind of an ongoing competition over the next few years?

Question: Pete Skibitski - Alembic Global Advisors - Analyst : Got it. Okay. Very helpful. I appreciate that. And just on the P550 specifically, are you clear to export that internationally already? And if so, how many countries can you export it to? And how do you expect that to grow?

Question: Colin Canfield - Cantor Fitzgerald LP - Analyst : Maybe just figured it all home to cash and profitability. If we can kind of think about the building blocks of EBITDA, I think the 4Q guidance on adjusted EBITDA assumes roughly same ballpark as kind of combined whole company pro forma results as last year. So maybe just kind of walk us through how you think of the progression on SG&A and essentially kind of how we think about that EBITDA step up versus the supply chain kind of dynamics that you're focusing on? And then bridging that over, I think Street is probably close to free cash flow breakeven this year. So is it fair to assume that kind of the timing and the shift that you talk about requires investment? Or is it fair to assume that this kind of quick book and turn -- or excuse me, shipping kind of picked book and ship business can allow you to hit something like that in terms of free cash flow?

Question: Colin Canfield - Cantor Fitzgerald LP - Analyst : Got it. And just to clarify, is it fair to assume that you're free cash flow breakeven this year?

Question: Peter Arment - Robert W. Baird & Co Inc - Analyst : Wahid, could you -- maybe we'll just touch upon the cash comment that you guys just talked about it. Your precision strike kind of product revenues were up 68% for the first six months of this year, but unbilled continues to grow. And I thought we were under a new contract or payment schedule. Could you maybe give us a little more color on what's going on there? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 09, 2025 / 9:30PM, AVAV.OQ - Q2 2026 AeroVironment Inc Earnings Call

Question: Peter Arment - Robert W. Baird & Co Inc - Analyst : Okay. So just to be clear, you expect unbilled to be probably materially lower as we get through the fourth quarter, just given your comments about cash conversion on EBITDA?

Question: Clarke Jeffries - Piper Jaffray Inc - Analyst : I wanted to ask, Wahid, how do the recent changes to missile technology control and the treatment of UAS affect the current AeroVironment portfolio and maybe even how your posture might change for the future product portfolio? Did any of those changes have any direct impact on the $870 million IDIQ? It sounds like maybe there was some counter UAS focus to that contract, but curious there. And then any other key policy changes you'd flag as crucial for growing the international business?