0001104659-25-119775
SEC filingRevenue surged 151% to $472.5M, driven by BlueHalo acquisition, but gross margin contracted to 22% from 39%.
For the three months ended November 1, 2025, AeroVironment reported revenue of $472.5 million, a 151% increase from $188.5 million in the prior-year period. The surge was primarily attributable to the acquisition of BlueHalo on May 1, 2025, which contributed $134.4 million in product revenue and $110.7 million in service revenue. Legacy AV product revenue increased $39.4 million, driven by higher Loitering Munition Systems (LMS) demand for Switchblade products and medium unmanned aircraft systems, partially offset by lower small unmanned aircraft systems (SUAS) international sales.
Gross margin fell sharply from 39.1% to 22.0%, as cost of sales increased 221% to $368.4 million. The margin compression was driven by higher intangible amortization ($24.2 million vs. $3.7 million) and a mix shift toward lower-margin products, particularly Switchblade production. Operating loss was $30.2 million compared to income of $7.0 million in the prior year, impacted by increased SG&A ($98.3 million) and R&D expense ($36.0 million) from BlueHalo integration. Net loss of $17.1 million contrasts with net income of $7.5 million a year ago, reflecting the operating loss partially offset by higher interest income and other income.
The AxS segment generated $301.6 million in revenue (+60% YoY) and segment adjusted EBITDA of $51.4 million (+99%). Growth was driven by $58.8 million from BlueHalo product lines within AxS and $39.4 million from legacy LMS and MUAS. Segment adjusted EBITDA margins improved to 17.0% from 13.7%, benefiting from operating leverage. The SCDE segment, entirely from BlueHalo, reported $170.9 million in revenue but negative segment adjusted EBITDA of $(6.5) million, reflecting start-up costs and investment phase.
Management expects R&D expense to remain 7-8% of revenue. Service revenue proportion is anticipated to stay elevated following BlueHalo. Funded backlog grew to $1.09 billion from $726.6 million at year-end April 30, 2025, indicating strong future revenue visibility. The company funded the BlueHalo acquisition through debt and equity, and subsequently repaid the term loan and revolver with proceeds from a $1.70 billion equity and convertible note issuance in July 2025. No specific revenue or earnings guidance was provided for upcoming quarters.
The balance sheet was dramatically reshaped by the May 1, 2025 BlueHalo acquisition. Total assets rose to $5.64B from $1.12B, with goodwill of $2.62B and intangible assets of $972M (net) representing the bulk of the increase. Cash and cash equivalents stood at $359.4M, up from $40.9M at April 30, 2025, reflecting the July 2025 equity and convertible note issuances. Short-term investments of $229.0M (all available-for-sale securities) and long-term investments of $81.0M (including $35.7M in equity method investments) provide additional liquidity. The company held $310.0M in total marketable securities (short- and long-term).
Total debt was $747.5M in principal, consisting entirely of 0% convertible senior notes due 2030 (net of $20.7M unamortized issuance costs, carrying value $726.8M). The Term Loan Facility ($700M) and all revolver borrowings were fully repaid in July 2025 using proceeds from the common stock and convertible note offerings. The $350M revolving credit facility remains undrawn and available ($338.3M after letters of credit). Stockholders' equity surged to $4.42B from $887M, driven by $2.64B in equity consideration for BlueHalo and $967M in net proceeds from the July 2025 common stock issuance.
Remaining performance obligations (funded backlog) totaled $1.09B as of November 1, 2025, with 68% expected to be recognized in fiscal 2026 and the remainder in fiscal 2027 or later. Operating lease liabilities had a total present value of $99.1M, with future lease payments of $125.4M through fiscal 2030 and beyond. The company has committed $3.4M in additional capital contributions to a limited partnership fund over the next two fiscal years. No other material purchase commitments were disclosed in the Notes.
No share repurchase program or dividend was disclosed. Capital expenditures totaled $46.8M for the six months ended November 1, 2025 (5.0% of revenue), up from $10.4M in the prior-year period, reflecting investments in property and equipment ($33.5M) and capitalized software ($13.3M). The company issued $747.5M in 0% convertible notes due 2030 and $1.006B in common stock (net proceeds $968.5M) in July 2025, using the proceeds to fully repay the $700M Term Loan and $265M in revolver borrowings. Debt issuance costs of $6.7M were expensed upon repayment.
The company now reports two segments: Autonomous Systems (AxS) and Space, Cyber, and Directed Energy (SCDE). For the six months ended November 1, 2025, AxS generated $586.9M in revenue (63.3% of total) and segment adjusted EBITDA of $103.8M. SCDE contributed $340.3M in revenue (36.7%) but posted negative segment adjusted EBITDA of $(2.3M), reflecting integration costs and intangible amortization. Geographically, domestic revenue was $707.7M (76.3%) and international $219.4M (23.7%). By contract type, FFP contracts represented 64.8% of revenue, Cost Plus 27.0%, and T&M 8.2%.
For the six months ended November 1, 2025, AeroVironment reported a net loss of $(84.5) million, while cash used in operations was $(168.8) million, a significant deterioration from the prior-year period's net income of $28.7 million and operating cash flow of $24.7 million. The divergence is primarily due to large working capital outflows: accounts receivable increased by $51.5 million, unbilled receivables and retentions surged $124.1 million, and inventories grew $49.4 million. These swings likely reflect the ramp-up in activity following the BlueHalo acquisition.
Capital expenditures (capex) rose to $33.5 million from $10.4 million, indicating increased investment in property and equipment. Free cash flow (not explicitly stated) would be deeply negative given the operating cash outflow and elevated capex. The company did not repurchase shares or pay dividends during the period.
Investing activities consumed $1.16 billion, driven by $844.6 million in business acquisitions (BlueHalo) and $264.2 million in purchases of available-for-sale investments. Financing activities provided $1.65 billion, primarily from equity issuance ($968.5 million), convertible debt ($726.9 million), and revolver borrowings, offset by term loan and revolver repayments. The net increase in cash was $318.6 million, ending the period with $359.4 million.
Anomalies include the large non-cash issuance of common stock for the business acquisition ($2.64 billion) and the significant working capital build, which may normalize post-integration.