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Item 7. Management’s Discussion and Analysis

2026-06-29 compared with 2025-06-25 · 224 added, 283 removed, 227 unchanged (69% of the section changed)

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Refer to Part I, “Forward-Looking Statements” on page 2 and Item 1A, “Risk Factors” beginning on page 14, for a discussion of the uncertainties, risks and assumptions associated with these statements.

The disclosures and references in Item 7 of this Annual Report, including the description of our business, financial data, management’s discussion and analysis of financial condition and results of operations do not include the BlueHalo acquisition which closed on May 1, 2025, unless otherwise specifically noted.

The assets, liabilities and results of operations of BlueHalo have not been consolidated into our results as of and for the period ended April 30, 2025 or any of the historical periods presented.

We design, develop, produce, deliver and support a technologically advanced portfolio of intelligent, multi-domain robotic systems and related services for government agencies and businesses.

We supply uncrewed aircraft and ground robot systems, loitering munitions systems and related services primarily to organizations within or supplying the U.S.

DoD, other federal agencies and to international allied governments.

We derive the majority of our revenue from these business areas, and we believe that the markets for these solutions offer the potential for significant long-term growth.

In addition, we believe that some of the innovative potential products, services and technologies in our research and development pipeline will emerge as new growth platforms in the future, creating additional market opportunities.

We are a defense technology provider delivering integrated capabilities across air, land, sea, space, and cyber.

We develop and deploy autonomous systems, precision strike systems, counter-UAS technologies, space-based platforms, directed energy systems, and cyber and electronic warfare capabilities.

We operate an international manufacturing footprint, delivering proven systems and capabilities to markets that offer the potential for significant long-term growth.

In addition, we believe that some of the innovative potential products, services and technologies in our R&D pipeline will emerge as new growth platforms in the future, creating additional market opportunities.

The success of our current product and service offerings stems from our investments in R&D to invent and deliver advanced solutions, utilizing proprietary and commercially available technologies, and in acquiring leading businesses that help our customers achieve their desired outcomes.

We develop and acquire these highly innovative solutions by working closely with our key customers to solve their most important challenges related to our areas of expertise.

Our core technological capabilities, developed over more than 50 years of innovation or acquired through acquisitions, include robotics and robotics systems autonomy;

modular open systems architecture, sensor design, development, miniaturization and integration;

Our core technological capabilities, developed by more than 50 years of innovation, include robotics and robotics systems autonomy;

modular open systems architecture;

sensor design, development, miniaturization and integration;

embedded software and firmware;

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high-altitude systems design, integration and operations;

machine vision, machine learning and autonomy;

machine vision, machine learning, AI and autonomy;

land, maritime and air deployment of munitions and aircraft systems;

design and qualification for robotics in extreme terrestrial and space environments;

munitions systems warhead integration;

low SWaP (Size, Weight and Power) system design and integration;

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and integrated mission solutions for austere environments.

Our business focuses primarily on the design, development, production, marketing, support and operation of innovative UxS and LMS products that provide situational awareness, remote sensing, multi band communications, force protection and other information and mission effects to increase the safety and effectiveness of our customers’ operations.

We generate our revenue primarily from the sale, support, design and operation of our UxS, LMS and HAPS products.

Support for our SUAS, MUAS and LMS customers includes training, spare parts, product repair and product replacement.

Under ISR services contracts we deliver the information our MUAS produce to our customers, who use that information to support their missions.

We refer to these support activities, in conjunction with customer-funded R&D, as our services operation.

We derive most of our SUAS, MUAS, LMS and HAPS revenue from fixed-price and cost-plus-fee contracts with the majority from U.S.

government and allied foreign governments for SUAS, MUAS, and LMS.

The BlueHalo acquisition significantly enhanced our core technological capabilities, which now include advanced RF system design and development, software defined digital phased array antennas and radars, space qualified electronics, laser communication technologies, software defined radios, electronic warfare technology, target acquisition and tracking, directed energy-based weapons systems for counter uncrewed systems, RF-based systems for counter uncrewed, next generation counter uncrewed system missile technology, extended reality and virtual reality systems for training, modeling and simulation, hardware in the loop simulations, C2 sensing and tracking, uncrewed maritime platforms, uncrewed aerial platforms, full spectrum cyber operations, tactical mission networks, multi-int data analytics and threat intelligence, tools and analytics for GEOINT, SIGNINT, MASINT and OSINT, aerospace power and propulsion, material and processes, directed energy, photonics and electronics, biological and nanoscale technology, and health and human performance.

Our business focuses primarily on the design, development, production, marketing, support and operation of innovative autonomous systems, precision strike systems, counter-UAS technologies, space-based platforms, directed

energy systems and the provision of services for advanced cyber, intel, defense operations, solutions that deliver mission-critical expertise and prototype development.

We generate our revenue primarily from the sale, support, design and operation of our UAS, PSDS, UUV, UGV, Space and Directed Energy products.

Support for our products includes training, spare parts, product repair and product replacement.

We refer to these support activities, in conjunction with customer-funded R&D and services provided for our Cyber and Mission Solutions customers, as our services operation.

We derive most of our revenue from fixed-price and cost-plus-fee contracts with the majority from U.S.

government and allied foreign governments.

Cost of Sales

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Direct costs include labor, materials, travel, subcontracts and other costs directly related to the execution of a specific contract.

Indirect costs include overhead expenses, fringe benefits, depreciation of in-service ISR assets, amortization of acquired intangible assets and other costs that are not directly charged to a specific contract.

Indirect costs include overhead expenses, fringe benefits, depreciation of in-service ISR assets, inventory reserve for excess and obsolescence charges, amortization of acquired intangible assets and other costs that are not directly charged to a specific contract.

Gross margin is equal to revenue minus cost of sales.

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Impairment of Goodwill

As part of our annual goodwill impairment and identifiable asset test during the fiscal quarter ended April 30, 2025, we determined carrying value of the 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.

In January 2026, a stop-work order was received on an OTA for the delivery of BADGER phased array antenna systems to support Space Force’s SCAR program.

Additionally, in March 2026, the customer terminated the agreement for convenience.

We concluded that the stop-work order represented a trigger event that indicated the carrying value of the Space reporting unit exceeded its fair value.

As a result, we updated the estimates of the long-term cash flows of the Space reporting unit to reflect the reduced revenue associated with the stop-work order and termination for convenience as well as an increase in expected research and development and capital investments to achieve product commercialization, which is expected to result in expanded opportunities and improve long term product margins.

The changes in estimates resulted in the recognition of a goodwill impairment charge of approximately $241 million in the Space reporting unit.

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 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.

For the fiscal year ended April 30, 2025, we determined that it was more likely than not that the fair value of each of the other reporting units, other than UGV, was more than their carrying values as of the annual goodwill impairment test date, including the MUAS reporting unit which was no longer considered at an increased risk of failing future quantitative goodwill impairment tests due to an increase in the estimated fair value of the reporting unit from significant increases in forecasted results.

Subsequent to the performance of our annual goodwill impairment test for the fiscal year ended April 30, 2023, in May 2023, a trigger event was identified that indicated that the carrying value of the MUAS reporting unit exceeded its fair value.

Specifically, we received notification that we were not down selected for a U.S.

DoD program of record which resulted in a significant decrease in the projected future cash flows of the MUAS reporting unit.

As a result, we updated our estimates of long-term future cash flows to reflect lower revenue and EBITDA growth rate expectations used in the valuation of the MUAS reporting unit.

These changes in estimates, resulted in the recognition of a goodwill impairment charge of $156.0 million recorded during the year ended April 30, 2023.

For the fiscal year ended April 30, 2026, we determined that it was more likely than not that the fair value of each of the remaining reporting units were more than their carrying values as of the annual goodwill impairment test date.

Other (Loss) Income, net

Other (loss) income, net includes unrealized losses associated with decreases in the fair market value for equity security investments, interest income, and interest expense.

Other (loss) income, net includes unrealized gains and losses associated with changes in the fair market value for equity security investments, realized gains and losses for the disposition of available-for-sale debt securities, interest income, and interest expense.

Provision for (Benefit from) Income Taxes

Our effective tax rates for fiscal years 2026 and 2025 were lower than the U.S.

federal statutory rate of 21% primarily due to tax benefits from the Foreign Derived Intangible Income deduction (“FDII”), excess benefits from stock-based compensation, the U.S.

federal research tax credit.

federal statutory rate of 21% primarily due to tax benefits from the U.S.

federal research tax credit, excess benefits from stock-based compensation, and Foreign Derived Intangible Income deduction (“FDII”).

Equity Method Investment (Loss) Income, Net of Tax

Equity method investment (loss) income, net of tax, includes equity method income or loss related to our investment in limited partnership funds for which we have concluded we have influence for holding more than a minor interest.

Beginning October 14, 2022, equity method investment (loss) income, net of tax also includes our proportion of any gains or losses of our Turkish joint venture, Altoy Savunma Sanayi ve Havacilik Anonim Sirketi (“Altoy”), due to our share sale in which we decreased our ownership interest to 15% but concluded we retain the ability to exercise significant influence.

Net Income Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests includes the 50% interest in the income or losses of Altoy, between May 1, 2022 and October 14, 2022.

Subsequent to October 14, 2022, Altoy is no longer consolidated, and therefore, noncontrolling interest is no longer recorded.

Critical Accounting Policies and Estimates

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We believe the following critical accounting estimates affect our more significant judgments and estimates used in preparing our consolidated financial statements.

Please see Note 1 to our consolidated financial statements entitled “Organization and Significant Accounting Policies,” which is included in Part II, Item 8 “Financial Statements and

Supplementary Data” of this Annual Report.

Refer to Note 1 to our consolidated financial statements entitled “Organization and Significant Accounting Policies,” which is included in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report.

There have been no material changes made to the critical accounting estimates during the periods presented in the consolidated financial statements.

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We believe that there are two key factors which impact the reliability of management’s estimates.

The first of those key factors is that the terms of our contracts are typically less than six months.

The first of those key factors is that a significant number of our contracts are typically less than six months.

The short-term nature of such contracts reduces the risk that material changes in accounting estimates will occur on the basis of market conditions or other factors.

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Our performance obligations are satisfied over time or at a point in time.

Revenue for LMS product deliveries, customization of UGV transport vehicles and customer-funded R&D contracts is recognized over time as costs are incurred.

Contract services revenue is composed of revenue recognized on contracts for the provision of services, including repairs and maintenance, training, engineering design, development and prototyping activities, and technical support services.

Contract services revenue, including ISR services, is recognized over time as services are rendered.

We elected the right to invoice practical expedient in which if an entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date, such as flight hours for ISR services, the entity may recognize revenue in the amount to which the entity has a right to invoice.

Training services are recognized over time using an output method based on days of training completed.

Product revenue for certain Precision Strike products including LMS, Space, Directed Energy and Cyber and Mission Solution product deliveries and customization of UGV transport vehicles is recognized over time as costs are incurred.

Contract services revenue is recognized over time and composed of revenue recognized on contracts for the provision of services, including repairs and maintenance, training, engineering design, development and prototyping activities, technical support services, ISR services, and customer-funded R&D contracts.

For performance obligations satisfied over time, revenue is generally recognized using costs incurred to date relative to total estimated costs at completion to measure progress.

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Contract costs include labor, materials, subcontractors’ costs, other direct costs, and indirect costs applicable on government and commercial contracts.

We elected the right to invoice practical expedient in which if an entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date, the entity may recognize revenue in the amount to which the entity has a right to invoice.

Certain training services are recognized over time using an output method based on days of training completed.

Warranty agreements which meet the definition of a performance obligation are recognized straight line over the warranty period.

LMS product revenue is currently recognized over time as the product is considered to not have alternative use as the U.S.

government is the only current customer including FMS sales.

Once LMS products receive a DCS contract, which is expected during fiscal year 2027, the products are considered to have alternative use and revenue will be recognized at a point in time.

For performance obligations which are not satisfied over time per the aforementioned criteria above, revenue is recognized at the point in time in which each performance obligation is fully satisfied.

Our UxS product sales revenue is primarily composed of revenue recognized on contracts for the delivery of UxS systems and spare parts, respectively.

Our product sales revenue is primarily composed of revenue recognized on contracts for the delivery of UAS, UGV, UUV, IAMD, and EW systems and spare parts, respectively.

Revenue is recognized at the point in time when control transfers to the customer, which generally occurs when title and risk of loss have passed to the customer.

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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 or unpriced change orders could result in cumulative catch up adjustments to revenue that could be material.

Changes in variable consideration associated with the finalization of undefinitized contract actions or unpriced change orders could result in cumulative catch up adjustments to revenue that could be material.

During the fiscal years ended April 30, 2026, 2025 and 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 ASC 606.

Incentives or penalties and awards applicable to performance on contracts are considered in estimating revenue and profit rates, and are recorded when there is sufficient information to assess anticipated contract performance.

Incentives or penalties and awards applicable to performance on contracts are considered in

estimating revenue and profit rates, and are recorded when there is sufficient information to assess anticipated contract performance.

For the years ended April 30, 2026, 2025 and 2024, favorable and unfavorable cumulative catch-up adjustments included in revenue were as follows (in thousands):

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Net adjustments

For the year ended April 30, 2025, favorable cumulative catch up adjustments of $11.1 million were primarily due to favorable adjustments on eight contracts.

Four LMS undefinitized contract actions were definitized during the year ended April 30, 2025, which resulted in cumulative catch-up revenue adjustments that increased revenue by approximately $9.9 million.

For the year ended April 30, 2026, favorable cumulative catch up adjustments of $14.3 million were primarily due to favorable adjustments on 18 contracts, of which one contract had individually material adjustments.

A Space and Directed Energy contract had a favorable adjustment due to lower expected costs and an increase in profitability which increased revenue by approximately $6.7 million.

For the same period, unfavorable cumulative catch up adjustments of $16.9 million were primarily related to unfavorable adjustments on 25 contracts, of which one contract had individually material adjustments.

A Cyber and Mission Solutions contract had an adjustment due to revised estimates of the total expected costs to complete the contracts, which decreased revenue by approximately $(3.1) million.

For the year ended April 30, 2025, favorable cumulative catch up adjustments of $11.1 million were primarily due to favorable adjustments on eight contracts, of which four LMS undefinitized contract actions were definitized during the year ended April 30, 2025, which resulted in cumulative catch-up revenue adjustments that increased revenue by approximately $9.9 million.

The remaining adjustments individually were not material.

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The remaining adjustments individually were not material.

For the year ended April 30, 2024, favorable cumulative catch up adjustments of $7.4 million were primarily due to final cost adjustments on 17 contracts.

During the year ended April 30, 2024, we revised our estimates of the total expected costs to complete two LMS contracts.

For the year ended April 30, 2024, favorable cumulative catch up adjustments of $7.4 million were primarily due to final cost adjustments on 17 contracts, of which we revised our estimates of the total expected costs to complete two LMS contracts during the year ended April 30, 2024.

The aggregate impact of these adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was an increase to revenue of approximately $2.7 million.

For the same period, unfavorable cumulative catch up adjustments of $2.0 million were primarily related to higher than expected costs on 11 contracts, which individually were not material.

For the year ended April 30, 2023, favorable cumulative catch up adjustments of $2.9 million were primarily due to final cost adjustments on 23 contracts, which individually were not material.

For the same period, unfavorable cumulative catch up adjustments of $3.8 million were primarily related to unfavorable adjustments on 5 contracts for higher revised estimates of the total expected costs to complete the contract, including one LMS variant contract, which decreased revenue by approximately $1.9 million.

The remaining adjustments individually were not material.

Inventories Reserves for Excess and Obsolescence

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We may be required to record additional inventory write-downs if actual market conditions are less favorable than those projected by our management.

Intangible Assets – Acquired in Business Combinations

We perform valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and allocate the purchase price of each acquired business to our respective net tangible and

intangible assets.

Acquired intangible assets include:

technology, backlog, in-process research and development, customer relationships, licenses, trademarks and tradenames, and non-compete agreements.

We use valuation techniques to value these intangibles assets, with the primary technique being a discounted cash flow analysis.

A discounted cash flow analysis requires us to make various assumptions and estimates including projected revenue, gross margins, operating costs, growth rates, useful lives and discount rates.

Intangible assets are amortized over their estimated useful lives using the straight-line method which approximates the pattern in which the economic benefits of such assets are consumed.

As part of our annual goodwill impairment and identifiable asset test, performed during the quarter ended April 30, 2025, a decrease in forecasted results for 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 resulted in accelerated intangible amortization expenses of $4.3 million which were recorded during the three months ended April 30, 2025.

Due to the closure of all of our MUAS COCO sites during the three months ended April 30, 2023, we revised the estimated useful life for MUAS customer relationships which resulted in accelerated intangible amortization expenses of $34.1 million during the fiscal year ended April 30, 2023.

Additionally, in conjunction with the goodwill impairment test performed during the year ended April 30, 2023, the remaining intangibles in the MUAS reporting unit were tested for recoverability.

The asset recoverability test did not result in an impairment for the remaining intangibles in the MUAS reporting unit.

Refer to Note 6—Goodwill for further details.

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.

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.

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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 its business.

In January 2026, a stop-work order was received on an OTA for the delivery of BADGER phased array antenna systems to support Space Force’s SCAR program.

Additionally, in March 2026, the customer terminated the agreement for convenience.

We concluded that the stop-work order represented a trigger event that indicated the carrying value of the Space reporting unit exceeded its fair value.

As a result, we updated our estimates of the long-term cash flows of the Space reporting unit to reflect the reduced revenue associated with the stop-work order and termination for convenience as well as an increase in expected research and development and capital investments to achieve product commercialization, which is expected to result in expanded opportunities and improve long term product margins.

The changes in estimates resulted in the recognition of a goodwill impairment charge of approximately $241 million in the Space reporting unit.

Due to the trigger event, we also performed a recoverability test on the long-lived assets, inclusive of the intangibles, of the Space reporting unit for impairment in accordance with ASC 360.

The undiscounted cash flows exceeded the carrying value and no impairment was recorded.

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.

Specifically, we received notification that we were not down selected for a U.S.

DoD program of record which resulted in a significant decrease in the projected future cash flows of the MUAS reporting unit.

As a result, we updated our estimates of long-term future cash flows to reflect lower revenue and EBITDA growth rate expectations

used in the valuation of the MUAS reporting unit.

These changes in estimates, resulted in the recognition of a goodwill impairment charge of $156.0 million in the MUAS reporting unit recorded during the fiscal year ended April 30, 2023.

As of April 30, 2025, our MUAS reporting unit has a goodwill balance of $135.8 million.

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.

These changes in estimates resulted in the recognition of a full goodwill impairment charge of $18.4 million during the three months ended April 30, 2025 in the UGV reporting unit.

As of April 30, 2026, our Space reporting unit has a goodwill balance of approximately $291 million.

During the most recent annual impairment test during the fourth quarter of fiscal year 2026, the estimated fair value of all reporting units with goodwill from acquisitions in previous years substantially exceeded their carrying value.

The reporting units from the BlueHalo and ESAero acquisitions were recently recorded at estimated fair value during the fiscal year ended April 30, 2026 and, other than the Space unit, no triggering event for goodwill impairment was since identified.

The estimates and assumptions used to determine the fair value of our reporting units are highly subjective in nature.

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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.

Intangible Assets – Acquired in Business Combinations

Acquired intangible assets include technology, backlog, in-process research and development, customer relationships, licenses, trademarks and tradenames, and non-compete agreements.

We use valuation techniques to value these intangibles assets, with the primary technique being a discounted cash flow analysis.

A discounted cash

flow analysis requires us to make various assumptions and estimates including projected revenue, gross margins, operating costs, growth rates, useful lives and discount rates.

Intangible assets are amortized over their estimated useful lives using the straight-line method which approximates the pattern in which the economic benefits of such assets are consumed.

As part of our annual goodwill impairment and identifiable asset test, performed during the quarter ended April 30, 2025, a decrease in forecasted results for 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 was concluded to be a triggering event for impairment assessment and resulted in accelerated intangible amortization expenses of $4.3 million which were recorded during the three months ended April 30, 2025.

Due to the trigger event, the Company performed a recoverability test on the long-lived assets of the Space reporting unit, inclusive of the intangibles, for impairment in accordance with ASC 360.

The undiscounted cash flows exceeded the carrying value and no impairment was recorded for long-lived assets.

Due to the SCAR trigger event in January 2026, the Company performed a recoverability test on the long-lived assets of the Space reporting unit, inclusive of the intangibles, for impairment in accordance with ASC 360.

The undiscounted cash flows exceeded the carrying value and no impairment was recorded for long-lived assets.

Our income tax provision and related income tax assets and liabilities are based on actual and expected future income, U.S.

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Impairment of goodwill

Income (loss) from operations

(Loss) income from operations

Interest expense, net

Other income (expense), net

Income (loss) before income taxes

(Loss) income before income taxes

Provision for (benefit from) income taxes

Equity method investment income (loss), net of tax

Net income (loss)

Net income attributable to noncontrolling interest

Net income (loss) attributable to AeroVironment, Inc.

We have the following reportable segments through its fiscal year ended April 30, 2025:

Uncrewed Systems (“UxS”) segment, Loitering Munition Systems (“LMS”) segment;

and the MacCready Works (“MW”) segment.

The following table (in thousands) sets forth our revenue and segment adjusted gross margin generated by each reporting segment for the periods indicated.

Segment adjusted gross margin is defined as gross margin before intangible amortization and amortization of other purchase accounting adjustments.

Effective May 1, 2025 due to the acquisition of BlueHalo and our reorganization, reportable segments will be updated into the two reportable segments (i) Autonomous Systems and (ii) Space, Cyber and Directed Energy.

Autonomous Systems will include the historical AeroVironment businesses (UxS, LMS and MW) as well as Unmanned Maritime, Radio Frequency and Kinetic C-UAS, Electronic Warfare Systems and Autonomous R&D.

Space, Cyber and Directed Energy will include the remaining acquired BlueHalo businesses including Digital beamforming technology, Laser Communications, Space-Qualified Hardware, Phased Array Antenna Technology, Directed Energy, Cyber and Mission Systems.

We will begin to report our segments in the new structure in our Quarterly Report on Form 10-Q for the quarter ending July 26, 2025, the period in which the new organizational structure became effective.

Also effective May 1, 2025 due to the increased size and complexity of the businesses, the significant amount of debt to finance the acquisition and the related debt covenants, the Chief Operating Decision Maker’s (“CODM”) measure of profitability for the new reportable segments will be Segment Adjusted EBITDA, defined as income from operations before interest income, interest expense, income tax expense (benefit) and depreciation and amortization, adjusted for the impact of certain other non-cash items, including goodwill impairment, amortization of implementation of cloud computing arrangements, stock-based compensation, other purchase accounting adjustments and cash items including acquisition related expenses.

Net (loss) income

Effective May 1, 2025, we reorganized our segments in connection with our acquisition of BlueHalo.

The reorganization was implemented to drive additional operational improvements, foster synergies and provide leaders with greater autonomy over their business units.

Our reportable segments are AxS and SCDE.

AxS includes the historical AeroVironment businesses UxS, LMS and MW as well as IAMD, EW, UUV, and Autonomous R&D from the BlueHalo acquisition.

SCDE includes the Space, Cyber and Mission Solutions, and Directed Energy businesses from the BlueHalo acquisition.

Effective May 1, 2026 Autonomous R&D is included in the SCDE segment.

Also effective May 1, 2025, due to the increased size and complexity of the businesses, the significant amount of debt to finance the acquisition and the related debt covenants, the Chief Operating Decision Maker’s (“CODM”) measure of profitability is Segment Adjusted EBITDA, defined as segment income (loss) from operations before depreciation and amortization and adjusted for the impact of certain other non-cash items, including goodwill impairment, amortization of implementation of cloud computing arrangements, stock-based compensation, other purchase accounting adjustments, and cash items including acquisition related expenses and certain one-time non-operating expense or income such as legal expense.

The following table (in thousands) sets forth our revenue and segment adjusted EBITDA generated by each reporting segment for the periods indicated.

Prior period segment information has been revised to align with the new segment measure of profitability and the new reportable segments.

Year Ended April 30, 2026

Product sales

Contract services

Cost of sales

Intangible amortization included in cost of sales

Segment adjusted gross margin

Segment adjusted EBITDA

Year Ended April 30, 2025

Product sales

Contract services

Cost of sales

Intangible amortization included in cost of sales

Segment adjusted gross margin

Segment adjusted EBITDA

Year Ended April 30, 2024

Product sales

Contract services

Cost of sales

Intangible amortization included in cost of sales

Segment adjusted gross margin

Segment adjusted EBITDA

We recorded intangible amortization expense and other purchase accounting adjustments in the following categories on the accompanying consolidated statements of income (loss):

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Revenue for the fiscal year ended April 30, 2026 was $1,976.8 million, as compared to $820.6 million for the fiscal year ended April 30, 2025, representing an increase of $1,156.2 million, or 141%.

The increase in revenue was due to an increase in product revenue of $722.6 million, and an increase in service revenue of $433.6 million.

The increase in product revenue was primarily due to an increase of $526.0 million related to the acquisitions of BlueHalo and ESAero.

Legacy AV product revenue included in the AxS segment increased by $196.6 million driven by an increase in LMS, MacCready Works, and MUAS products due to increase in domestic and international demand, partially offset by a decrease in SUAS due to a decrease in international sales.

The increase in service revenue was primarily due to the $413.2 million service revenue resulting from our acquisition of BlueHalo.

Legacy AV service revenue, included in the AxS segment, increased by $20.4 million driven by an increase in customer funded R&D and engineering services of $22.6 million, partially offset by a decrease training and repair services primarily due to the decrease in SUAS product revenue.

The 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 fiscal year ended April 30, 2026 was $1,476.2 million, as compared to $502.0 million for the fiscal year ended April 30, 2025, representing an increase of $974.2 million, or 194%.

The increase in cost of sales was a result of an increase in product cost of sales of $554.9 million and an increase in service costs of sales of $419.3 million.

The increase in product costs of sales was primarily due to an increase of $345.0 million related to the acquisitions of BlueHalo and ESAero and an increase of $66.2 million intangible amortization related to the BlueHalo and ESAero acquisitions.

Legacy AV product cost of sales increased $143.7 million.

The increase in legacy product costs of sales was primarily due to an increase of approximately $111 million due to the increase in sales volume and approximately $34 million due to mix shift to a higher proportion of lower margin products driven by the increase in Switchblade production.

The increase in service cost of sales was primarily due to an increase of $398.8 million associated with the BlueHalo acquisition and an increase of $7.1 million intangible amortization related to the BlueHalo acquisition.

Legacy AV service cost of sales increased $13.4 million primarily due to an increase of approximately $15 million related to service volume.

Cost of sales for the fiscal year ended April 30, 2026 included $92.7 million of intangible amortization and other related non-cash purchase accounting expenses as compared to $19.4 million for the fiscal year ended April 30, 2025.

As a percentage of revenue, cost of sales increased from 61% to 75% 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 39% to 25%.

Gross Margin.

Gross margin is equal to revenue minus cost of sales.

Selling, General and Administrative.

SG&A expense for the fiscal year ended April 30, 2026 was $443.0 million, or 22% of revenue, as compared to SG&A expense of $158.8 million, or 19% of revenue, for the fiscal year

ended April 30, 2025.

The increase in SG&A expense was primarily due to an increase of $126.4 million of intangible amortization expense primarily related to the BlueHalo acquisition, an increase of approximately $48 million of employee related expenses related to the increase in headcount, and an increase of $26.4 million of acquisition related expenses related to the BlueHalo and ESAero acquisitions.

Research and Development.

R&D expense for the fiscal year ended April 30, 2026 was $127.7 million, or 6% of revenue, as compared to R&D expense of $100.7 million, or 12% of revenue, for the fiscal year ended April 30, 2025.

R&D expense increased by $27 million, or 27%, for the fiscal year ended April 30, 2026, primarily due to an increase in development activities regarding enhanced capabilities for our products, development of new product lines and to support our acquired businesses.

Impairment of Goodwill.

During the fiscal year ended April 30, 2026, a goodwill impairment charge of $240.7 million was recorded resulting from a decrease in forecasted results of the Space reporting unit due to the Space Force’s decision to cancel the contract related to the delivery of BADGER phased array antenna systems to support the SCAR program.

During the fiscal year ended April 30, 2025, a goodwill impairment charge of $18.4 million was recorded resulting from a decrease in forecasted results of the UGV reporting unit.

Interest Expense, net.

Interest expense, net for the fiscal year ended April 30, 2026 was $5.6 million, as compared to interest expense net of $2.2 million for the fiscal year ended April 30, 2025.

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 2025 using the proceeds from the convertible notes and common stock issuances in July 2025.

The increase in interest expense was partially offset by an increase in interest income due to a combination of higher cash and investment balances and lower interest bearing debt balances.

Other Income, net.

Other income, net for the fiscal year ended April 30, 2026 was $11.0 million, as compared to $1.1 million for the fiscal year ended April 30, 2025.

The increase in other income, net is primarily due to realized gains associated with the sale of equity security investments of $11.7 million.

Income Taxes.

Our effective income tax rate was 7.5% for the fiscal year ended April 30, 2026 as compared to 2.2% for the fiscal year ended April 30, 2025.

The change in our effective income tax rate was primarily attributable to the increase in net loss before income taxes, inclusive of the goodwill impairment loss which is non-deductible, combined with a decrease in FDII deductions.

The effective income tax rate for the fiscal year ended April 30, 2026, was primarily attributable to the goodwill impairment loss, which is non-deductible, partially offset by R&D tax credits.

Equity method investment income, net of tax.

Equity method investment income, net of tax for the fiscal year ended April 30, 2026 was $17.4 million, as compared to $4.8 million for the fiscal year ended April 30, 2025.

Business Segment Results of Operations

Segment adjusted EBITDA

AxS Segment Revenue.

AxS revenue for the year ended April 30, 2026 was $1,358.1 million, as compared to $820.6 million for the year ended April 30, 2025, representing an increase of $537.5 million, or 65%.

The increase in revenue was due to an increase in product and service revenues of $450.1 million and $87.4 million, respectively.

The increase in product revenue was primarily due to the $253.5 million of product revenue resulting from our acquisitions of BlueHalo and ESAero.

partially offset by a decrease in SUAS due to a decrease in international sales.

The increase in service revenue was primarily due to the $67.0 million of service revenue resulting from our acquisition of BlueHalo.

Proportion of service revenue to product revenue is expected to remain higher following the acquisition of BlueHalo.

AxS Segment Adjusted EBITDA.

AxS segment adjusted EBITDA for the year ended April 30, 2026 was $288.7 million, as compared to $146.4 million for the year ended April 30, 2025, representing an increase of $142.3 million, or 97%.

The increase in AxS segment adjusted EBITDA was primarily due to an increase in revenue of $537.5 million.

The increase in revenue was partially offset by an increase in adjusted cost of sales of $340.8 million, adjusted SG&A of $36.7 million primarily due employee related costs driven by the increased headcount, and R&D of $12.3 million.

The increase in adjusted cost of sales was primarily due to an increase of approximately $197.7 million associated with the BlueHalo and ESAero acquisitions.

Legacy AV adjusted cost of sales increased $157.8 million driven by approximately $127 million due to the increase in sales volume and approximately $30 million due to mix shift to a higher proportion of lower margin products driven by the increase in Switchblade production, partially offset by $14 million of stock-based compensation and depreciation not included in adjusted cost of sales.

Segment adjusted EBITDA

SCDE revenue for the year ended April 30, 2026 was $618.8 million, as compared to $0 for the year ended April 30, 2025.

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 year ended April 30, 2026 was $(2.6) million, as compared to $0 for the year ended April 30, 2025.

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.

Fiscal Year Ended April 30, 2025 Compared to Fiscal Year Ended April 30, 2024

Revenue for the fiscal year ended April 30, 2025 was $820.6 million, as compared to $716.7 million for the fiscal year ended April 30, 2024, representing an increase of $103.9 million, or 14%.

The increase in revenue was due to an increase in product revenue of $107.0 million, partially offset by a decrease in service revenue of $3.0 million.

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The decrease in service revenue was primarily due to a decrease of $2.8 million in other engineering services and customer-funded R&D activities primarily associated with the shift from development to production of certain LMS products.

With the acquisition of BlueHalo, we expect the proportion of service revenue to total revenue to increase in fiscal year 2026 and beyond.

Cost of Sales.

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The increase in cost of sales was a result of an increase in product cost of sales of $64.2 million and an increase in service costs of sales of $5.0 million.

The increase in product cost of sales was primarily due to approximately $62 million associated with the increase in product sales volume, $4.6 million due to the UGV accelerated intangible amortization expenses, partially offset by a decrease of approximately $3 million due to product mix shift primarily to the definitization of LMS contracts.

offset by a decrease of approximately $3 million due to product mix shift primarily to the definitization of LMS contracts.

The increase of $5.0 million in service costs of sales was primarily due to approximately $7 million increase due to mix shift associated with a higher proportion of engineering services, partially offset by approximately $2 million associated with the decreased service volume.

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As of May 1, 2025, the outstanding balance of the Credit Facilities was $955.0 million, which bears a variable interest rate.

Interest expense for fiscal year 2026 is expected to increase significantly.

Other Income (Expense), net.

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Business Segment Results of Operations

Loitering Munitions Systems

Product sales

Contract services

Cost of sales

Intangible amortization included in cost of sales

Segment adjusted gross margin

LMS revenue for the fiscal year ended April 30, 2025 was $352.0 million, as compared to $192.6 million for the fiscal year ended April 30, 2024, representing an increase of $159.4 million, or 83%.

Segment adjusted EBITDA

AxS Revenue .

AxS Revenue for the fiscal year ended April 30, 2025 was $820.6 million, as compared to $716.7 million for the fiscal year ended April 30, 2024, representing an increase of $103.9 million, or 14%.

The increase in revenue was due to an increase in product revenue of $107.0 million, partially offset by a decrease in service revenue of $3.0 million.

The increase in product revenue was primarily due to increased production of our LMS systems due to global demand for our LMS systems associated with the current global conflicts as well as U.S.

DoD resupply.

The increase in product revenue was primarily due to an increase of $164.7 million from the production of our Switchblade products, driven by increased global demand for our LMS associated with the current global conflicts as well as U.S.

resupply and an increase of $4.4 million from the delivery of MW products driven by demand for new product releases, partially offset by a decrease of $62.1 million of product deliveries of our UxS products, primarily due to a decrease in international sales to Ukraine.

Fiscal 2025 also included favorable cumulative catch-up revenue adjustments of $12.0 million due to changes in estimates associated with the definitization of certain LMS contracts.

The decrease in service revenue was primarily due to a decrease of $4.2 million in customer-funded R&D activities primarily associated with the shift from development to production of certain Switchblade products.

LMS Segment Adjusted Gross Margin.

LMS segment adjusted gross margin for the fiscal year ended April 30, 2025 was $128.6 million, as compared to $68.2 million for the fiscal year ended April 30, 2024, representing an increase of $60.4 million.

The increase in LMS segment adjusted gross margin was primarily due to an increase of $159.4 million in revenue, inclusive of the cumulative catch-up revenue adjustments of $12.0 million, partially offset by an increase of $99.0 million in cost of sales excluding amortization of intangibles, of which approximately $103 million is associated with the increased sales volume, partially offset by approximately $4 million due to shift in mix primarily related to the definitization of LMS contracts.

Uncrewed Systems

Product sales

Contract services

Cost of sales

Intangible amortization included in cost of sales

Segment adjusted gross margin

UxS revenue for the fiscal year ended April 30, 2025 was $381.8 million, as compared to $448.0 million for the fiscal year ended April 30, 2024, representing a decrease of $66.2 million, or 15%.

The decrease in revenue was due to a decrease in product revenue of $62.1 million and a decrease in service revenue of $4.1 million.

The decrease in product revenue was primarily due to a decrease of $51.0 million for product shipments of our SUAS and MUAS family of systems driven by decreased international sales, most significantly to Ukraine.

The decrease in service revenue was primarily due to a decrease of $3.3 million of customer funded R&D and engineering services primarily due to the completion of certain MUAS contracts during the fiscal year ended April 30, 2024.

UxS Segment Adjusted Gross Margin.

UxS segment adjusted gross margin for the fiscal year ended April 30, 2025 was $187.1 million, as compared to $210.5 million for the fiscal year ended April 30, 2024, representing a decrease of $23.4 million.

The decrease in UxS segment adjusted gross margin was primarily due to a decrease of $66.2 million in revenue, partially offset by a decrease of $42.8 million in cost of sales excluding intangible amortization.

The decrease of $42.8 million in costs of sales excluding intangible amortization is primarily due to a decrease of approximately $35 million associated with the decreased sales volume and shift in mix of approximately $8 million due to mix.

MacCready Works

Product sales

Contract services

Cost of sales

Intangible amortization included in cost of sales

Segment adjusted gross margin

MW revenue for the fiscal year ended April 30, 2025 was $86.9 million, as compared to $76.1 million for the fiscal year ended April 30, 2024, representing an increase of $10.8 million, or 14%.

The increase in revenue was primarily due to an increase of $6.3 million in service revenue and an increase of $4.5 million in product sales.

The increase in service revenue is primarily due to an increase in engineering services and customer-funded R&D in part due to HAPS return to flight services.

The increase in product sales is primarily due to the shift from development to early-stage production of certain new products.

MW Segment Adjusted Gross Margin.

MW segment adjusted gross margin for the fiscal year ended April 30, 2025 was $22.4 million, as compared to MW segment adjusted gross margin of $18.7 million for the fiscal year ended April 30, 2024, representing an increase of $3.7 million.

The increase in MW segment adjusted gross margin was primarily due to an increase of $10.8 million in revenue, partially offset by an increase of $7.1 million in cost of sales excluding amortization of intangibles of which approximately $8 million is associated with the increased sales volume.

Fiscal Year Ended April 30, 2024 Compared to Fiscal Year Ended April 30, 2023

Revenue for the fiscal year ended April 30, 2024 was $716.7 million, as compared to $540.5 million for the fiscal year ended April 30, 2023, representing an increase of $176.2 million, or 33%.

The increase in revenue was due to an increase in product revenue of $232.7 million, partially offset by a decrease in service revenue of $56.5 million.

The increase in product revenue was primarily due to an increase of $147.1 million of product deliveries of our UxS products, including $10.6 million associated with the recent Tomahawk acquisition, and an increase of $84.2 million from the production of our Switchblade products.

These increases were primarily driven by increased global demand for our uncrewed systems and loitering munitions systems associated with the current global conflicts as well as U.S.

DoD resupply.

The decrease in service revenue was primarily due to a decrease of $49.7 million due to the closure of all COCO site locations during fiscal year 2023 and a decrease of $11.1 million in other engineering services and

customer-funded R&D activities primarily associated with the shift from development to production of certain LMS products, partially offset by $5.3 million associated with the recent Tomahawk acquisition.

Cost of Sales.

Cost of sales for the fiscal year ended April 30, 2024 was $432.8 million, as compared to $367.0 million for the fiscal year ended April 30, 2023, representing an increase of $65.8 million, or 18%.

The increase in cost of sales was a result of an increase in product cost of sales of $136.8 million, partially offset by a decrease in service costs of sales of $71.0 million.

The increase of $136.8 million in product cost of sales was primarily due to approximately $126 million associated with the increase in product sales volume, an increase in inventory reserve charges of $5.8 million primarily related to the introduction of our next generation products and an increase of $4.1 million in intangible amortization expense primarily resulting from the Tomahawk acquisition.

The decrease of $71.0 million in service costs of sales was primarily due to approximately $47 million associated with the decreased service volume, of which $44.4 million is due to the closure of all COCO site locations in the prior year, mix shift of approximately $20 million due to the continuation of services with higher margins than the ceased COCO services, and a decrease of $4.6 million in intangible amortization expense due to intangible assets being fully amortized.

Cost of sales for the fiscal year ended April 30, 2024 included $13.5 million of intangible amortization and other related non-cash purchase accounting expenses as compared to $14.0 million for the fiscal year ended April 30, 2023.

As a percentage of revenue, cost of sales decreased from 68% to 60%, primarily due to an increase in the proportion of product revenue to total revenue and the prior year COCO accelerated depreciation and amortization expenses resulting in an increase in gross margin from 32% to 40%.

Gross Margin.

Gross margin is equal to revenue minus cost of sales.

Selling, General and Administrative.

SG&A expense for the fiscal year ended April 30, 2024 was $114.4 million, or 16% of revenue, as compared to SG&A expense of $131.9 million, or 24% of revenue, for the fiscal year ended April 30, 2023.

The decrease in SG&A expense was primarily due to a decrease of $44.6 million in intangible amortization and other non-cash purchase accounting expenses.

The decrease in intangible amortization expense was primarily driven by a decrease in COCO customer relationship amortization of $46.5 million due to the accelerated amortization of COCO customer relationships recorded during the three months ended April 30, 2023, partially offset by an increase of $1.7 million resulting from the Tomahawk acquisition.

The decrease in SG&A expense was partially offset by an increase in employee related expenses of $15.7 million driven by an increase in average headcount and expansion of our global business development team, an increase in sales and marketing expense of $6.4 million primarily due to an increase in bid and proposal efforts and an increase in depreciation expense of $1.4 million driven by increased capital requirements to support our growth.

Research and Development.

R&D expense for the fiscal year ended April 30, 2024 was $97.7 million, or 14% of revenue, as compared to R&D expense of $64.3 million, or 12% of revenue, for the fiscal year ended April 30, 2023.

R&D expense increased by $33.4 million, or 52%, for the fiscal year ended April 30, 2024, primarily due to an increase in development activities regarding enhanced capabilities for our products, development of new product lines and to support our acquired businesses.

Impairment of Goodwill.

During the fiscal year ended April 30, 2023, we recorded a goodwill impairment charge of $156.0 million in the MUAS reporting unit due to a trigger event identified once we received notification that we were not down selected for a U.S.

DoD program of record which resulted in a significant decrease in the projected future cash flows of the MUAS reporting unit.

Interest Expense, net.

Interest expense, net for the fiscal year ended April 30, 2024 was $4.2 million, as compared to interest expense net of $9.4 million for the fiscal year ended April 30, 2023.

The decrease in interest expense, net was primarily due to an increase of $2.7 million in interest income due to an increase in the average interest rate earned on our cash balances and a decrease in interest expense of $2.5 million due to lower average outstanding balances on our debt facility, partially offset by higher interest rates applicable to our debt facility.

Other Expense, net.

Other expense, net for the fiscal year ended April 30, 2024 was $4.4 million, as compared to other expense, net of $0.3 million for the fiscal year ended April 30, 2023.

The increase in other expense, net is

primarily due to unrealized losses associated with decreases in fair market value for equity security investments of $3.9 million.

Income Taxes.

Our effective income tax rate was 3.0% for the fiscal year ended April 30, 2024, as compared to 7.8% for the fiscal year ended April 30, 2023.

The decrease in our effective tax rate was primarily due to the prior year’s loss before income taxes, an increase in the foreign-derived intangible income deduction and an increase in R&D tax credits, partially offset by the prior year non-deductible goodwill impairment expense.

Equity method investment loss, net of tax.

Equity method investment loss, net of tax for the fiscal year ended April 30, 2024 was $1.7 million, as compared to $2.5 million for the fiscal year ended April 30, 2023.

Business Segment Results of Operations

Loitering Munitions Systems

Product sales

Contract services

Cost of sales

Intangible amortization included in cost of sales

Segment adjusted gross margin

LMS revenue for the fiscal year ended April 30, 2024 was $192.6 million, as compared to $120.6 million for the fiscal year ended April 30, 2023, representing an increase of $72.0 million, or 60%.

The increase in revenue was due to an increase in product revenue of $84.2 million, partially offset by a decrease in service revenue of $12.2 million.

The increase in product revenue was primarily due to increased production of our LMS systems due to global demand for our LMS systems associated with the current global conflicts as well as U.S.

DoD resupply.

The decrease in service revenue was primarily due to a decrease of $11.9 million in customer-funded R&D activities primarily associated with the shift from development to production of certain Switchblade products.

LMS Segment Adjusted Gross Margin.

LMS segment adjusted gross margin for the fiscal year ended April 30, 2024 was $68.2 million, as compared to $42.7 million for the fiscal year ended April 30, 2023, representing an increase of $25.5 million.

The increase in LMS segment adjusted gross margin was primarily due to an increase of $72.0 million in revenue;

partially offset by an increase of $46.5 million in cost of sales excluding amortization of intangibles, of which approximately $46 million is associated with the increased sales volume.

Uncrewed Systems

Product sales

Contract services

Cost of sales

Intangible amortization included in cost of sales

Segment adjusted gross margin

UxS revenue for the fiscal year ended April 30, 2024 was $448.0 million, as compared to $343.9 million for the fiscal year ended April 30, 2023, representing an increase of $104.1 million, or 30%.

The increase in revenue was due to an increase in product revenue of $147.1 million, partially offset by a decrease in service revenue of $43.0 million.

The increase in product revenue was primarily due to $136.1 million from increased product shipments of our SUAS and MUAS family of systems driven by increased global demand for our uncrewed systems associated with the current global conflicts as well as U.S.

DoD resupply and $10.6 million associated with the recent Tomahawk acquisition.

The decrease in service revenue was primarily due to decreases of $49.7 million from the closure of all COCO site locations during fiscal year 2023, partially offset by an increase of $5.3 million associated with the recent Tomahawk acquisition.

UxS Segment Adjusted Gross Margin.

UxS segment adjusted gross margin for the fiscal year ended April 30, 2024 was $210.5 million, as compared to $124.7 million for the fiscal year ended April 30, 2023, representing an increase of $85.8 million.

The increase in UxS segment adjusted margin was primarily due to an increase of $104.1 million in revenue, partially offset by an increase of $18.3 million in cost of sales excluding intangible amortization.

The increase of $18.3 million in costs of sales excluding intangible amortization is primarily due to an increase of approximately $65 million associated with the increased sales volume and $6.0 million from an increase in inventory reserve charges primarily related to the introduction of our next generation products, partially offset by shift in mix of approximately $53 million due to a higher proportion of international products sales and lower levels of COCO service revenue.

MacCready Works

Product sales

Contract services

Cost of sales

Intangible amortization included in cost of sales

Segment adjusted gross margin

MW revenue for the fiscal year ended April 30, 2024 was $76.1 million, as compared to $76.0 million for the fiscal year ended April 30, 2023, representing an increase of $0.1 million.

The increase in revenue was primarily due to an increase of $1.5 million in product sales, partially offset by a decrease of $1.4 million in service revenue.

The increase in product sales is primarily due to the shift from development to early-stage production of certain products.

The decrease in service revenue is primarily due to a decrease in engineering services and customer-funded R&D due to delays in anticipated contract awards associated with the government budget authorization process.

MW Segment Adjusted Gross Margin.

MW segment adjusted gross margin for the fiscal year ended April 30, 2024 was $18.7 million, as compared to MW segment adjusted gross margin of $20.1 million for the fiscal year ended April 30, 2023, representing a decrease of $1.4 million.

The decrease in MW segment adjusted gross margin was primarily due to an increase of $1.5 million in cost of sales excluding amortization of intangibles driven by increased sales mix of approximately $1 million due to the shift from development to early-stage production of certain products.

AxS Segment Adjusted EBITDA.

AxS segment adjusted EBITDA for the year ended April 30, 2025 was $146.4 million, as compared to $127.8 million for the year ended April 30, 2024, representing an increase of $18.6 million, or 15%.

The increase in AxS segment adjusted EBITDA was primarily due to an increase in revenue of $103.9 million.

The increase in revenue was partially offset by an increase in adjusted cost of sales of $60.1 million, adjusted SG&A of $25.5 million primarily due employee related costs driven by the increased headcount, and R&D of $3.0 million.

The increase in adjusted cost of sales was primarily due to an increase of approximately $58 million due to the increase in sales volume and approximately $2 million due to mix shift to a higher proportion of lower margin products driven by the increase in Switchblade production.

SCDE was formed as a segment May 1, 2025 with no results prior to this date.

Liquidity and Capital Resources

On February 19, 2021 in connection with the consummation of the Arcturus acquisition, we entered into a credit agreement, subsequently amended February 4, 2022, June 6, 2023, October 4, 2024 and May 1, 2025, (as amended, the “Credit Agreement”).

The October 4, 2024 amendment increased the Revolving Credit Facility to $200 million, and a previously provided Term Loan Facility was fully repaid in full and removed from the Credit Agreement.

Our ability to borrow under the Revolving Credit Facility includes a sublimit for the issuance of standby and commercial letters of credit, of which there were outstanding letters of credit of $39.4 million as of April 30, 2025.

As of April 30,

2025, approximately $160.6 million was available under the Revolving Facility.

Borrowings under the Revolving Facility may be used for working capital, acquisition costs and other general corporate purposes.

Refer to Note 11—Debt to our financial statements for further details.

In addition, Telerob has a line of credit of €7.0 million (approximately $8.0 million) available for issuing letters of credit of which €2.3 million (approximately $2.6 million) was outstanding as of April 30, 2025.

On May 1, 2025 in connection with the closing of the BlueHalo acquisition, we amended the Credit Agreement to provide for a new $700 million term A loan (the “Term A Loan,” and with the Revolving Credit Facility, the “Credit Facilities”), the proceeds of which were used on the Closing Date to repay certain outstanding indebtedness of BlueHalo and to pay for certain related transaction costs.

The Term A Loan matures two years after the closing date of the BlueHalo acquisition and amortizes at a rate of 5.00% per annum, with the remaining outstanding principal amount due and payable on the maturity date.

The applicable margin on the Term A Loan is based upon our Consolidated Leverage Ratio (as defined in the Credit Agreement) and whether we elect as its benchmark rate (i) SOFR (in which case, the applicable margin ranges from 1.50 - 2.50% per annum depending on our Consolidated Leverage Ratio) plus a credit spread adjustment of 0.10% or (ii) Base Rate (in which case, the applicable margin ranges from 0.50 - 1.50% per annum depending on our Consolidated Leverage Ratio).

Upon the occurrence of an event of default, an additional 2.00% per annum default interest rate may apply.

Mandatory prepayments of the Term A Loan are required in connection with (i) the disposition of certain assets to the extent not reinvested and (ii) the incurrence of non-permitted debt.

The May 1, 2025 amendment also, among other things, (a) increased the revolving commitment amount to an aggregate principal amount of $350 million, (b) increased certain negative covenant baskets, thresholds and de minimis amounts, (c) amended the definition of “Consolidated EBITDA” to include additional add-backs thereto and (d) added materiality qualifiers to certain covenants and events of default.

On May 1, 2025, we borrowed approximately $225 million under the amended Revolving Credit Facility to repay certain outstanding indebtedness of BlueHalo and to pay for certain related transaction costs.

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 acquisitions of Arcturus, ISG, Telerob, Planck, Tomahawk and BlueHalo.

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 $700.0 million 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.

The $700.0 million term loan has been repaid in full and closed;

although new term loans can be renegotiated and issued under the Credit Facility.

Our ability to borrow under the Revolving Facility is reduced by outstanding letters of credit of $13.2 million as of April 30, 2026.

As of April 30, 2026, approximately $336.8 million was available under the Revolving Facility.

Refer to Note 10—Debt to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Annual Report on Form 10-K for further details.

In addition, Telerob has a line of credit of €9.0 million ($10.5 million) available for borrowing or issuing letters of credit of which €2.2 million ($2.6 million) was outstanding as of April 30, 2026.

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, future obligations related to the acquisitions and obligations under the Credit Facilities during the next twelve months.

There can be no assurance, however, that our business will continue to generate cash flow at current levels.

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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 liquidity needs are for financing working capital, investing in capital expenditures, supporting product development efforts, support our credit facility, introducing new products and enhancing existing products, marketing acceptance and adoption of our products and services.

The Company is party to a receivables purchase agreement with Citibank, N.A., with an aggregate capacity of $100 million.

As of April 30, 2026, no receivables have been sold, proceeds collected, or purchase discount fees incurred.

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 our Credit 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.

Any financing or refinancing with new debt could be at higher interest rates and may require us to comply with more onerous covenants than the Credit Facilities, which could further restrict our business operations.

Any financing or refinancing through our sale of equity or equity-linked securities would result in further dilution to our stockholders or may provide for rights, preferences or privileges senior to those of holders of our common stock.

Our working capital requirements vary by contract type.

On cost-plus-fee programs, we typically bill our incurred costs and fees monthly as work progresses, and therefore working capital investment is minimal.

On fixed-price

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.

We have made certain investment commitments outside of the ordinary course of business, including capital contribution commitments to certain limited partnership funds.

Under the terms of the most recent limited partnership agreement, we have committed to make capital contributions to such fund totaling $20.0 million, inclusive of the expected reinvestment of distributions from our existing investments in an affiliated fund, at April 30, 2025, $5.5 million of our commitment remains to be funded.

Due to the new internal revenue service tax capitalization rules, Section 174, which requires R&D expenditures to be capitalized and amortized over a 5-year period for tax return purposes, we experienced an increase in cash paid for U.S.

federal income taxes during the fiscal year ended April 30, 2025 and expect higher levels of cash taxes in in future fiscal years relative to historical periods.

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 contracts have negotiated progress payments, which facilitates billing and collection as work is completed.

Due to the July 2025 reconciliation bill, commonly known as the One Big Beautiful Bill Act (“OBBA”), which allows R&D expenditures to be deducted, our cash taxes paid for U.S.

federal income taxes are significantly reduced for the fiscal year ending April 30, 2026.

In May 2026, we notified the lessor of our intent to exercise the purchase option in the 100 Quality Circle, Huntsville, Alabama lease agreement and plan to purchase the building for $16.3 million.

The following table provides our cash flow data from continuing operations for the periods ended:

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Net cash used in investing activities

Net cash (used in) provided by financing activities

Net cash provided by (used in) financing activities

Cash (Used in) Provided by Operating Activities.

Net cash used in operating activities for the fiscal year ended April 30, 2026 increased by $77.1 million to $78.4 million, as compared to net used in operating activities of $1.3 million for the fiscal year ended April 30, 2025.

This decrease in net cash provided by operating activities was primarily due to a decrease in changes in operating assets and liabilities of $236.6 million, largely resulting from increases in inventories due to increased demand and accounts receivable and unbilled receivables and retentions due to year over year timing differences, and a decrease in net income of $308.7 million.

The decrease in cash provided by operating activities was partially offset by an increase in non-cash expenses of $468.3 million, primarily due to an increase in depreciation and amortization and goodwill impairment charges.

Net cash used in operating activities for the fiscal year ended April 30, 2025 increased by $16.6 million to $1.3 million, as compared to net cash provided by operating activities of $15.3 million for the fiscal year ended April 30, 2024.

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The decrease in cash provided by operating activities was partially offset by an increase in non-cash expenses of $10.9 million, primarily due to a goodwill impairment of $18.4 million in the fiscal year ended April 30, 2025, an increase in stock-based compensation and depreciation and amortization, partially offset by a decrease in stock inventory reserve charges.

Net cash provided by operating activities for the fiscal year ended April 30, 2024 increased by $3.9 million to $15.3 million, as compared to $11.4 million for the fiscal year ended April 30, 2023.

This increase in net cash provided by operating activities was primarily due an increase in net income of $235.8 million, partially offset by a decrease in non-cash expenses of $209.3 million, primarily due to a goodwill impairment of $156.0 million in the fiscal year ended April 30, 2023 and a decrease in depreciation and amortization, largely due to $34.1 million of accelerated MUAS intangible amortization expenses in the prior year end, partially offset by an increase in stock-based compensation and an in increase in inventory reserve charges primarily related to the introduction of our next generation products and an increase in the cash used as a result of changes in operating assets and liabilities largely resulting from increases in unbilled receivables and retentions and prepaid expenses and other assets, partially offset by decreases in accounts receivables and inventory due to year over year timing differences.

Cash Used in Investing Activities.

Net cash used in investing activities increased by $1,204.2 million to $1,232.7 million for the fiscal year ended April 30, 2026, compared to $28.5 million for the fiscal year ended April 30, 2025.

The increase in net cash used in investing activities was primarily due to business acquisitions, net of cash acquired of $871.5 million related to the BlueHalo and ESAero acquisitions in the fiscal year ended April 30, 2026 and net purchase investments of $283.4 million.

During the fiscal years ended April 30, 2026 and 2025, we used cash to purchase property and equipment totaling $62.5 million and $22.8 million, respectively.

Net cash used in investing activities decreased by $23.2 million to $28.5 million for the fiscal year ended April 30, 2025, compared to $51.7 million for the fiscal year ended April 30, 2024.

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During the fiscal years ended April 30, 2025 and 2024, we used cash to purchase property and equipment totaling $22.8 million and $23.0 million, respectively.

Net cash used in investing activities increased by $44.7 million to $51.7 million for the fiscal year ended April 30, 2024, compared to $7.0 million for the fiscal year ended April 30, 2023.

The increase in net cash used in investing activities was primarily due to a decrease in net redemptions of available-for-sale investments of $24.7 million, an increase in business acquisitions, net of cash acquired of $19.1 million, and an increase in the acquisition of property and equipment of $8.1 million, partially offset by a decrease in equity security investments of $5.1 million.

During the fiscal years ended April 30, 2024 and 2023, we used cash to purchase property and equipment totaling $23.0 million and $14.9 million, respectively.

Cash (Used in) Provided by Financing Activities.

Cash Provided by (Used in) Financing Activities.

Net cash provided by financing activities increased by $1,650.0 million to $1,647.2 million for the fiscal year ended April 30, 2026, compared to net cash used in financing activities of $2.9 million for the fiscal year ended April 30, 2025.

The increase in net cash used in financing activities was primarily due to proceeds from shares issued, net of issuance costs of $968.5 million proceeds and proceeds from the convertible notes of $726.9 million, partially offset by net principal payments of the credit facility of $39.9 million.

Net cash used in financing activities decreased by $20.0 million to $2.9 million for the fiscal year ended April 30, 2025, compared to net cash provided by financing activities of $22.9 million for the fiscal year ended April 30, 2024.

The decrease in net cash used in financing activities was primarily due to a decrease in the principal payments on the credit facility of $69.0 million and an increase in proceeds from the credit facility of $40.0 million, partially offset by a decrease in the proceeds from shares issued, net of issuance costs of $88.4 million in the fiscal year ended April 30, 2024.

Net cash used in financing activities increased by $73.7 million to $22.9 million for the fiscal year ended April 30, 2024, compared to net cash provided by financing activities of $50.8 million for the fiscal year ended April 30, 2023.

The increase in net cash used in financing activities was primarily due to an increase in the principal payments on the debt facility of $52.0 million and a decrease in the proceeds from shares issued, net of issuance costs of $16.2 million in the fiscal year ended April 30, 2023, a decrease in the exercise of stock options of $2.3 million and increase in the payment of contingent consideration of $2.1 million.

a decrease in the proceeds from shares issued, net of issuance costs of $88.4 million in the fiscal year ended April 30, 2024.

Contractual Obligations

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(2) Not included in the table above is additional capital contributions of $0.9 million committed under the terms of a limited partnership agreement.

Additionally, subsequent to the reporting period in May 2026, the Company entered into a new limited partnership and committed to contributions totaling $20.0 million over an expected five year period.

Recently Adopted Accounting Standards

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”).

ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses reported to the CODM.

ASU 2023-07 also requires all segment profit or loss and assets disclosures to be provided on an annual and interim basis.

Effective April 30, 2025, we adopted ASU 2023-07.

ASU 2023-07 was adopted retrospectively and did not have a material impact on our consolidated financial statements.

New Accounting Standards

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

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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.

We are evaluating the potential impact of this adoption on its consolidated financial statements.

Effective April 30, 2026, we adopted the ASU 2023-09 retrospectively.

The Company’s adoption of ASU 2023-07 did not have a material impact on the Company’s consolidated financial statements.

New Accounting Standards

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income— Expense Disaggregation Disclosures (Subtopic 220-40):

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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.

We are evaluating the potential impact of this adoption on our consolidated financial statements.

The new standard is effective for fiscal years beginning after December 15, 2026, 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.

We do not expect this guidance to have a material impact on our financial position or results of operations;

however, it will result in additional disclosures in the notes to our consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”), which better aligns the accounting guidance to how software is developed by eliminating project stages from capitalization criteria.

The new standard is effective for annual reporting periods beginning after December 15, 2027 and interim periods within those annual reporting periods.

The standard allows for prospective, modified, or retrospective transition.

Early adoption is permitted.

We are currently evaluating the impact of adopting this new pronouncement.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (“ASU 2025-11”), which is intended to improve the navigability of required interim disclosures and clarify when that guidance is applicable, and also to provide additional guidance on what disclosures should be provided in interim reporting periods.

The new standard is effective for annual reporting periods beginning after December 15, 2027 and interim periods within those annual reporting periods.

The standard allows for prospective or retrospective transition.

Early adoption is permitted.

We do not expect this guidance to have a material impact on our financial position or results of operations.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis