What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-09-10 compared with 2026-03-11 · 92 added, 216 removed, 116 unchanged (73% of the section changed)

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

During the three and nine months ended January 31, 2026 and January 25, 2025, changes in accounting estimates on contracts recognized using the over time method are presented below.

During the three months ended August 1, 2026 and August 2, 2025, changes in accounting estimates on contracts recognized using the over time method are presented below.

Amounts representing contract change orders or claims are included in revenue if the order or claim meets the criteria of a contract or contract modification in accordance with ASU 2014-09, Revenue from Contracts with Customers (“ASC 606”).

For the three months ended January 31, 2026 and January 25, 2025, favorable and unfavorable cumulative catch-up adjustments included in revenue were as follows (in thousands):

For the three months ended August 1, 2026 and August 2, 2025, favorable and unfavorable cumulative catch-up adjustments included in revenue were as follows (in thousands):

Three Months Ended

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Net (unfavorable) favorable adjustments

For the three months ended January 31, 2026, favorable cumulative catch-up adjustments of $12.5 million were primarily due to cost adjustments on 30 contracts.

During the three months ended January 31, 2026, we revised our estimates of the total expected costs to complete an LMS contract and a Small UAS (“SUAS”) contract.

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 $3.2 million.

For the same period, unfavorable cumulative catch-up adjustments of $8.0 million were primarily related to higher than expected costs on 24 contracts, which individually were not material.

For the three months ended January 25, 2025, favorable cumulative catch-up adjustments of $10.3 million were primarily due to cost adjustments on three contracts.

During the three months ended January 25, 2025, the Company revised its estimates of the total expected costs to complete three LMS contracts.

For the three months ended August 1, 2026, favorable cumulative catch-up adjustments of $8.2 million were primarily due to cost adjustments on 7 contracts.

During the three months ended August 1, 2026, we revised our estimates of the total expected costs to complete a Space and Directed Energy contract.

For the same period, unfavorable cumulative catch-up adjustments of $(11.5) million were primarily related to higher than expected costs on 34 contracts, which individually were not material.

For the nine months ended January 31, 2026 and January 25, 2025, favorable and unfavorable cumulative catch-up adjustments included in revenue were as follows (in thousands):

Nine Months Ended

Gross favorable adjustments

Gross unfavorable adjustments

Net favorable (unfavorable) adjustments

For the nine months ended January 31, 2026, favorable cumulative catch-up adjustments of $3.3 million were primarily due to cost adjustments on 13 contracts, which individually were not material.

For the same period, unfavorable cumulative catch-up adjustments of $12.8 million were primarily related to higher than expected costs on 31 contracts.

During the nine months ended January 31, 2026, we revised our estimates of the total expected costs to complete an LMS contract.

The impact of these adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was a decrease to revenue of approximately $1.9 million.

The remaining adjustments individually were not material.

For the nine months ended January 25, 2025, favorable cumulative catch-up adjustments of $11.6 million were primarily due to cost adjustments on four contracts.

During the nine months ended January 25, 2025, we definitized certain LMS undefinitized contract actions.

The aggregate impact of these cumulative catch-up revenue adjustments for the contract definitization was an increase to revenue of approximately $9.9 million.

The remaining adjustments individually were not material.

For the three months ended August 2 , 2025 , favorable cumulative catch-up adjustments of $2.3 million were primarily due to cost adjustments on 13 contracts, which individually were not material.

For the same period, unfavorable cumulative catch-up adjustments of $6.5 million were primarily related to higher than expected costs on 13 contracts, which individually were not material.

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The changes in estimates resulted in the recognition of a goodwill impairment charge of approximately $240 million in the Space reporting unit.

As of January 31, 2026, we have not identified any events or circumstances, other than those identified for the Space reporting unit, that could trigger an impairment review prior to the our annual impairment test during the fourth quarter of fiscal year 2026, including taking into account the reporting units identified from the BlueHalo acquisition on May 1, 2025.

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.

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 during the fiscal year ended April 30, 2026.

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

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 Uncrewed Ground Vehicles (“UGV”) reporting unit exceeded its fair value due to a decrease in forecasted results of the UGV reporting unit resulting from reduced probability and delays of obtaining certain opportunities as well as an increase in forecast expenditures to support operational decisions identified during the fiscal quarter ended April 30, 2025.

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

We determined that it

was more likely than not that the fair values of our other reporting units were more than their carrying values as of the annual goodwill impairment test date.

As such, during the most recent annual impairment test during the fourth quarter of fiscal year 2025, the estimated fair value of all reporting units, other than UGV, substantially exceeded their carrying value.

As of August 1, 2026, we have not identified any events or circumstances since the prior year’s annual impairment test that could trigger an impairment review.

The Space reporting unit, included in the SCDE reportable segment, is considered to have an increased risk of failing future quantitative goodwill impairment tests as an impairment was recorded during the quarter ended January 31, 2026.

The Company’s annual impairment test for the fiscal year ending April 30, 2027 will be performed during the fourth quarter of fiscal year 2027.

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

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Our first three quarters end on a Saturday.

Our 2026 fiscal year ends on April 30, 2026 and our fiscal quarters end on August 2, 2025, November 1, 2025 and January 31, 2026, respectively.

Our 2027 fiscal year ends on April 30, 2027 and our fiscal quarters end on August 1, 2026, October 31, 2026 and January 30, 2027, respectively.

Results of Operations

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

Three Months Ended January 31, 2026 Compared to Three Months Ended January 25, 2025

Three Months Ended August 1, 2026 Compared to Three Months Ended August 2, 2025

Three Months Ended

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Research and development

Impairment of goodwill

Loss from operations

4 unchanged sentences

Benefit from income taxes

Equity method investment loss, net of tax

Three Months Ended January 31, 2026

Equity method investment income, net of tax

Three Months Ended August 1, 2026

Segment adjusted EBITDA

Three Months Ended January 25, 2025

Three Months Ended August 2, 2025

Segment adjusted EBITDA

Revenue for the three months ended January 31, 2026 was $408.0 million, as compared to $167.6 million for the three months ended January 25, 2025, representing an increase of $240.4 million, or 143%.

Revenue for the three months ended August 1, 2026 was $480.5 million, as compared to $454.7 million for the three months ended August 2, 2025, representing an increase of $25.8 million, or 6%.

The increase in revenue was due to an increase in product revenue of $15.5 million and an increase in service revenue of $10.3 million.

The increase in product revenue was primarily due to the $85.1 million of product revenue resulting from our acquisition of BlueHalo in May 2025.

Legacy AV product revenue included in the AxS segment increased by $53.0 million driven by an increase in LMS, MacCready Works, SUAS, medium uncrewed aircraft systems (“MUAS”) and uncrewed ground vehicles (“UGV”) products due to increase in domestic and international demand.

The increase in service revenue was primarily due to the $91.4 million service revenue resulting from our acquisition of BlueHalo.

Legacy AV service revenue increased by $10.9 million driven by customer funded R&D and engineering services increase of $10.2 million driven by an increase in SUAS customer funded R&D awards.

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

The increase in product revenue was driven by an increase in UAS products of $39.1 million due to an increase in the global demand for UAS products, partially offset by a decrease in Space and Directed Energy product sales of $18.1 million primarily related to the termination of the SCAR program in the prior year and a decrease in Precision Strike and Defense Systems (“PSDS”) of $6.8 million.

The decrease in PSDS was driven by decrease of $56.9 million of Switchblade product revenue due to order delays, partially offset by revenue from the ESAero acquisition of $41.8 million and increased demand for defense systems of $18.5 million.

The increase in service revenue was primarily driven by increases in AxS service customer funded R&D services of $34.1 million, partially offset by decreases to Cyber and Mission Solutions (“CMS”) service revenue of $18.3 million driven by reduced scope on certain contracts.

Cost of Sales.

Cost of sales for the three months ended January 31, 2026 was $309.3 million, as compared to $104.4 million for the three months ended January 25, 2025, representing an increase of $204.9 million, or 196%.

The increase in cost of sales was a result of an increase in product cost of sales of $119.0 million and an increase in service costs of sales of $85.9 million.

The increase in product costs of sales was primarily due to an increase of approximately $63.1 million associated with the recently acquired BlueHalo product lines and an increase of approximately $9.4 million in intangible amortization primarily related to the BlueHalo acquisition.

For legacy AV business, product cost of sales increased $46.5 million.

The increase in legacy product costs of sales was primarily due to an increase of approximately $30 million due to the increase in sales volume and approximately $17 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 approximately $87.2 million associated with the BlueHalo acquisition, partially offset by a decrease in legacy AV service cost of sales of $1.9 million primarily due to a mix shift of approximately $11 million due to a higher proportion of higher margin services driven by an increase in customer funded R&D, partially offset by an increase of approximately $9 million due to the increase in service revenue.

Cost of sales for the three months ended January 31, 2026 included $12.7 million of intangible amortization and other related non-cash purchase accounting expenses as compared to $3.7 million for the three months ended January 25, 2025.

As a percentage of revenue, cost of sales increased from 62% to 76% 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 38% to 24%.

Cost of sales for the three months ended August 1, 2026 was $355.9 million, as compared to $359.6 million for the three months ended August 2, 2025, representing a decrease of $3.7 million, or 1%.

The decrease in cost of sales was a result of a decrease in product cost of sales of $17.1 million, partially offset by an increase in service cost of sales of $13.4 million.

The decrease in product cost of sales was primarily due to a shift in mix of product sales of approximately $28 million, partially offset by approximately $11 million due to the increase in product revenue.

The increase in service costs of sales was primarily due to an increase of approximately $9 million due to the increase in sales volume and approximately $4 million due to shift in mix of services provided.

Cost of sales for the three months ended

August 1, 2026 included $18.6 million of intangible amortization and other related non-cash purchase accounting expenses as compared to $37.4 million for the three months ended August 2, 2025.

As a percentage of revenue, cost of sales decreased from 79% to 74% primarily due to decreased amortization and other non-cash purchase accounting expenses, resulting in gross margin increasing from 21% to 26%.

Gross Margin.

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Selling, General and Administrative .

SG&A expense for the three months ended January 31, 2026 was $99.4 million, or 24% of revenue, as compared to SG&A expense of $43.8 million, or 26% of revenue, for the three months ended January 25, 2025.

The increase in SG&A expense was primarily due to an increase of $30.1 million of intangible amortization expense related to the BlueHalo acquisition and an increase of approximately $7 million of employee related expenses related to the increase in headcount.

SG&A expense for the three months ended August 1, 2026 was $111.5 million, or 23% of revenue, as compared to SG&A expense of $131.3 million, or 29% of revenue, for the three months ended August 2, 2025.

The decrease in SG&A expense was primarily due to a decrease of $17.4 million of intangible amortization expense and a decrease of $22.5 million in acquisition related expenses resulting from the prior year acquisition of BlueHalo, partially offset by an increase of approximately $9 million of employee related expenses related to increases in headcount and an increase of $4.4 million of bad debt expense.

Research and Development.

R&D expense for the three months ended January 31, 2026 was $27.1 million, or 7% of revenue, as compared to R&D expense of $22.5 million, or 13% of revenue, for the three months ended January 25, 2025.

The increase was primarily related to the BlueHalo acquisition.

R&D expense is expected to continue to be 7% to 8% of revenue.

Impairment of Goodwill .

Impairment of goodwill for the three months ended January 31, 2026 was $151.3 million.

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

The Company 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 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 $151 million in the Space reporting unit.

R&D expense for the three months ended August 1, 2026 was $24.0 million, or 5% of revenue, as compared to R&D expense of $33.1 million, or 7% of revenue, for the three months ended August 2, 2025.

The decrease was primarily related to timing of planned expenditures.

R&D expense is expected to continue to be 7% to 9% of revenue for fiscal year ended April 30, 2027.

Interest Income (Expense), net.

Interest income, net for the three months ended January 31, 2026 was $3.7 million compared to interest expense, net of $0.2 million for the three months ended January 25, 2025 due to a combination of higher cash and investment balances and lower interest bearing debt balances.

Interest income, net for the three months ended August 1, 2026 was $4.1 million compared to interest expense, net of $17.4 million for the three months ended August 2, 2025.

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

The decrease in interest expense related to the Fourth Amendment Term Loan Facility and Revolver Facility obtained on May 1, 2025 in conjunction with the BlueHalo acquisition and the unamortized debt issuance costs allocated to the Fourth Amendment Term Loan Facility of $6.7 million, which were expensed upon repayment of the Fourth Amendment Term Loan Facility in July using the proceeds from the Notes and common stock issuances in July 2025.

Other (Expense) Income, net.

Other expense, net, for the three months ended January 31, 2026 was $0.4 million as compared to other income, net of $1.0 million for the three months ended January 25, 2025.

The increase in other expense, net was driven by unrealized losses in equity security investments.

Other expense, net, for the three months ended August 1, 2026 was $0.6 million as compared to other income, net of $2.4 million for the three months ended August 2, 2025.

The decrease in other income, net was driven by unrealized gains in equity security investments for the three months ended August 2, 2025.

The equity security investments were subsequently sold during the fiscal year ended April 30, 2026.

Benefit from Income Taxes.

Our effective income tax rate was (11.1)% for the three months ended January 31, 2026, as compared to (25.6)% for the three months ended January 25, 2025.

The change in our effective income tax rate was primarily attributable to FDII, federal R&D credits and non-deductible goodwill impairment loss for the quarter.

The effective income tax rate for the three months ended January 31, 2026, was primarily attributable to non-deductible goodwill impairment loss

Equity Method Investment Loss, net of Tax.

Equity method investment loss, net of tax for the three months ended January 31, 2026 was $0.3 million as compared $0 for the three months ended January 25, 2025.

Our effective income tax rate was 5.4% for the three months ended August 1, 2026, as compared to 18.0% for the three months ended August 2, 2025.

The change in our effective income tax rate was primarily attributable to a reduction in loss before income taxes and an increase in Section 162(m) limitation on executive compensation, partially offset by an increase in federal R&D credits.

The effective income tax rate for the three months ended August 1, 2026, was primarily attributable to the current quarter loss before income taxes relative to the projected full year income before income taxes, state valuation allowances, Section 162(m) limitation on executive compensation, partially offset by federal R&D credits.

Equity Method Investment Income, net of Tax.

Equity method investment income, net of tax for the three months ended August 1, 2026 was $1.9 million as compared $1.8 million for the three months ended August 2, 2025.

Autonomous Systems

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Segment adjusted EBITDA

Revenue for the three months ended January 31, 2026 was $278.7 million, as compared to $167.6 million for the three months ended January 25, 2025, representing an increase of $111.1 million, or 66%.

The increase in revenue was due to an increase in product revenue of $83.0 million and an increase in service revenue of $28.1 million.

The increase in product revenue was primarily due to the $30.0 million of product revenue resulting from our acquisition of BlueHalo in May 2025.

Legacy AV product revenue included in the AxS segment increased by $53.0 million driven by an increase in LMS, MacCready Works, SUAS, MUAS and UGV products due to increase in domestic and international demand.

The increase in service revenue was primarily due to the $17.2 million service revenue resulting from our acquisition of BlueHalo.

Legacy AV service revenue increased by $11.0 million driven by customer funded R&D and engineering services increase of $10.2 million driven by an increase in SUAS customer funded R&D awards.

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

AxS revenue for the three months ended August 1, 2026 was $346.0 million, compared to $285.3 million for the three months ended August 2, 2025, representing an increase of $60.7 million, or 21%.

The increase in revenue

was due to an increase in product revenue of $33.2 million and an increase in service revenue of $27.5 million.

The increase in service revenue was primarily driven by increases in AxS customer funded R&D services of $34.1 million.

AxS Segment Adjusted EBITDA.

AxS segment adjusted EBITDA for the three months January 31, 2026 was $46.2 million, as compared to $21.8 million for the three months ended January 25, 2025, representing an increase of $24.4 million, or 112%.

The increase in AxS segment adjusted EBITDA was primarily due to an increase in revenue of $111.1 million.

The increase in revenue was partially offset by an increase in adjusted cost of sales of $79.8 million, adjusted SG&A of $6.2 million and R&D of $1.6 million.

The increase in adjusted cost of sales was primarily due to an increase of approximately $37 million associated with the recently acquired BlueHalo product lines, an increase of approximately $38 million due to the increase in sales volume and approximately $7 million due to mix shift to a higher proportion of lower margin products driven by the increase in Switchblade production.

AxS segment adjusted EBITDA for the three months August 1, 2026 was $62.3 million, as compared to $52.8 million for the three months ended August 2, 2025, representing an increase of $9.5 million, or 18%.

The increase in AxS segment adjusted EBITDA was primarily due to an increase in revenue of $60.7 million and a decrease in R&D of $7.6 million, partially offset by an increase in cost of sales of $25.2 million and a decrease in adjusted EBITDA add backs of $34.6 million for depreciation, amortization, cloud computing related amortization, stock-based compensation, and acquisition related expenses.

The increase in cost of sales was primarily due to an increase of approximately $37 million due to the increase in sales volume, approximately $1 million due to mix shift to a higher proportion of services, partially offset by a decrease of approximately $13 million in intangible amortization expense.

Space, Cyber and Directed Energy

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Segment adjusted EBITDA

SCDE revenue for the three months ended January 31, 2026 was $129.3 million, as compared to $0 for the three months ended January 25, 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 three months January 31, 2026 was $(1.7) million, as compared to $0 for the three months ended January 25, 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.

Nine Months Ended January 31, 2026 Compared to nine Months Ended January 25, 2025

Nine Months Ended

Cost of sales

Selling, general and administrative

Research and development

Impairment of goodwill

(Loss) income from operations

Interest expense, net

Other income, net

(Loss) income before income taxes

(Benefit from) provision for income taxes

Equity method investment income, net of tax

Net (loss) income

Nine Months Ended January 31, 2026

Segment adjusted EBITDA

Nine Months Ended January 25, 2025

Segment adjusted EBITDA

Revenue for the nine months ended January 31, 2026 was $1,335.2 million, as compared to $545.6 million for the nine months ended January 25, 2025, representing an increase of $789.6 million, or 145%.

The increase in revenue was due to an increase in product revenue of $465.9 million and an increase in service revenue of $323.7 million.

The increase in product revenue was primarily due to the $343.3 million of product revenue resulting from our acquisition of BlueHalo in May 2025.

Legacy AV product revenue included in the AxS segment increased by $122.6 million driven by an increase in LMS, MUAS, MacCready Works, and UGV 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 $313.6 million service revenue resulting from our acquisition of BlueHalo.

Legacy AV service revenue, included in the AxS segment, increased by $10.1 million driven by an increase in customer funded R&D and engineering services of $11.7 million.

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 nine months ended January 31, 2026 was $1,037.2 million, as compared to $327.3 million for the nine months ended January 25, 2025, representing an increase of $709.9 million, or 217%.

The increase in cost of sales was a result of an increase in product cost of sales of $418.5 million and an increase in service costs of sales of $291.4 million.

The increase in product costs of sales was primarily due to an increase of approximately $242.1 million associated with the recently acquired BlueHalo product lines and an increase of $60.7 million intangible amortization related to the BlueHalo acquisition.

For legacy AV business, product cost of sales increased $115.7 million.

The increase in legacy product costs of sales was primarily due to an increase of approximately $67 million due to the increase in sales volume and approximately $52 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 $290.1 million associated with the BlueHalo acquisition and an increase of $5.3 million intangible amortization related to the BlueHalo acquisition, partially offset by a decrease in legacy AV service cost of sales of $4.0 million primarily due to a mix shift of approximately $11 million due to a higher proportion of higher margin services driven by customer funded R&D, partially offset by an increase of approximately $7 million due to an increase in service volume.

Cost of sales for the nine months ended January 31, 2026 included $74.3 million of intangible amortization and other related non-cash purchase accounting expenses as compared to $11.1 million for the nine months ended January 25, 2025.

As a percentage of revenue, cost of sales increased from 60% to 78% 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 40% to 22%.

Gross Margin.

Gross margin is equal to revenue minus cost of sales.

Selling, General and Administrative .

SG&A expense for the nine months ended January 31, 2026 was $329.0 million, or 25% of revenue, as compared to SG&A expense of $115.5 million, or 21% of revenue, for the nine months ended January 25, 2025.

The increase in SG&A expense was primarily due to an increase of $94.2 million of intangible amortization expense primarily related to the BlueHalo acquisition, an increase of approximately $34 million of employee related expenses related to the increase in headcount, and an increase of $32.5 million of acquisition related expenses related to the BlueHalo acquisition.

Research and Development.

R&D expense for the nine months ended January 31, 2026 was $96.2 million, or 7% of revenue, as compared to R&D expense of $75.8 million, or 14% of revenue, for the nine months ended January 25, 2025.

The increase was primarily related to the BlueHalo acquisition.

R&D expense is expected to continue to be 7% to 8% of revenue.

Impairment of Goodwill .

Impairment of goodwill for the nine months ended January 31, 2026 was $151.3 million.

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

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

The changes in estimates resulted in the recognition of a goodwill impairment charge of approximately $151 million in the Space reporting unit.

Interest Expense, net.

Interest expense, net for the nine months ended January 31, 2026 was $9.1 million compared to $1.2 million for the nine months ended January 25, 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 Notes and common stock issuances in July 2025.

Other Income, net.

Other income, net, for the nine months ended January 31, 2026 was $6.9 million compared to other income, net of $0.8 million for the nine months ended January 25, 2025.

The increase was primarily due to unrealized gains associated with the fair market value of our equity security investments.

(Benefit from) Provision for Income Taxes.

Our effective income tax rate was (13.2)% for the nine months ended January 31, 2026, as compared to 2.5% for the nine months ended January 25, 2025.

The change in our effective income tax rate was primarily attributable to FDII, federal R&D credits and non-deductible goodwill impairment loss.

The effective income tax rate for the nine months ended January 31, 2026, was primarily attributable to non-deductible goodwill impairment loss.

Equity Method Investment Income, net of Tax.

Equity method investment income, net of tax for the nine months ended January 31, 2026 was $2.7 million as compared $1.1 million for the nine months ended January 25, 2025.

Autonomous Systems

Nine Months Ended

Segment adjusted EBITDA

AxS revenue for the nine months ended January 31, 2026 was $865.6 million, as compared to $545.6 million for the nine months ended January 25, 2025, representing an increase of $320.0 million, or 59%.

The increase in revenue was due to an increase in product and service revenues of $262.5 million and $57.5 million, respectively.

The increase in product revenue was primarily due to the $139.8 million of product revenue resulting from our acquisition of BlueHalo.

The increase in service revenue was primarily due to the $47.4 million of service revenue resulting from our acquisition of BlueHalo.

Legacy AV service revenue, included in the AxS segment, increased by $10.1 million driven by an increase in customer funded R&D and engineering services of $11.7 million.

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 nine months January 31, 2026 was $150.0 million, as compared to $84.8 million for the nine months ended January 25, 2025, representing an increase of $65.2 million, or 77%.

The increase in AxS segment adjusted EBITDA was primarily due to an increase in revenue of $320.0 million.

The increase in revenue was partially offset by an increase in adjusted cost of sales of $223.1 million, adjusted SG&A of $20.2 million primarily due employee related costs driven by the increased headcount, and R&D of $10.2 million.

The increase in adjusted cost of sales was primarily due to an increase of approximately $117.9 million associated with the recently acquired BlueHalo product lines, an increase of approximately $77 million due to the increase in sales volume and approximately $38 million due to mix shift to a higher proportion of lower margin products driven by the increase in Switchblade production.

Space, Cyber and Directed Energy

Nine Months Ended

Segment adjusted EBITDA

SCDE revenue for the nine months ended January 31, 2026 was $469.6 million, as compared to $0 for the nine months ended January 25, 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 Revenue.

SCDE Revenue for the three months ended August 1, 2026 was $134.5 million, as compared to $169.4 million for the three months ended August 2, 2025, representing a decrease of $34.9 million, or 21%.

The decrease in revenue was due to a decrease in product revenue of $17.6 million and a decrease in service revenue of $17.3 million.

The decrease in product revenue was driven by a decrease in Space and Directed Energy product sales of $18.1 million primarily due to the termination of the SCAR program in the prior year.

The decrease in service revenue was driven by a decrease to CMS service revenue of $18.3 million driven by reduced scope on certain contracts.

SCDE Segment Adjusted EBITDA.

SCDE segment adjusted EBITDA for the nine months January 31, 2026 was $(4.0) million, as compared to $0 for the nine months ended January 25,2025.

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.

SCDE segment adjusted EBITDA for the three months August 1, 2026 was $(8.9) million, as compared to $3.8 million for the three months ended August 2, 2025, representing a decrease of $12.7 million, or 334%.

The decrease in SCDE segment adjusted EBITDA was primarily due to a decrease in revenue of $34.9 million and a decrease in adjusted EBITDA add backs of $26.6 million for depreciation, amortization, cloud computing related amortization, stock-based compensation, and acquisition related expenses, partially offset by a decrease in cost of sales of $28.7 million, a decrease in SG&A of $19.0 million and a decrease in R&D of $1.6 million.

The decrease in cost of sales was primarily due to a decrease of approximately $30 million due to the decrease in sales volume and approximately $5 million decrease in intangible amortization expense, partially offset by approximately $7 million due to mix shift to a higher proportion of lower margin services.

Consistent with ASC 606, we define funded backlog as remaining performance obligations under firm orders for which funding is currently appropriated to us under a customer contract.

As of January 31, 2026, our funded backlog was approximately $1,120.7 million, as compared to $726.6 million as of April 30, 2025.

In addition to our funded backlog, we also had unfunded backlog of $2,968.8 million as of January 31, 2026.

As of August 1, 2026, our funded backlog was approximately $1,457.8 million, as compared to $1,183.0 million as of April 30, 2026.

In addition to our funded backlog, we also had unfunded backlog of $1,366.5 million as of August 1, 2026.

Unfunded backlog does not meet the definition of a performance obligation under ASC 606.

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There can be no assurance that unfunded backlog will result in any orders in any particular period, or at all.

Unfunded backlog includes a $1,493.2 million of unexercised options related to the SCAR program which are no longer expected to be awarded.

Because of possible future changes in delivery schedules and/or cancellations of orders, backlog at any particular date is not necessarily representative of actual sales to be expected for any succeeding period, and actual sales for the year may not meet or exceed the backlog represented.

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Liquidity and Capital Resources

On October 4, 2024, we amended the Credit Agreement to increase the Revolving Facility to $200 million, and the Term Loan Facility was repaid in full and removed from the Credit Agreement.

Borrowings under the Amended Credit Agreement may be used for working capital and other general corporate purposes, including acquisitions that meet certain parameters.

In February 2025, we borrowed $15.0 million under the Revolving Facility.

In May 2025, in connection with the consummation of the BlueHalo Acquisition, the Company entered into a Fourth Amendment to Credit Agreement with BofA NA, the administrative agent and the swingline lender, JPM, U.S.

Bank, Citibank, BMO, Citizens and RBC.

In May 2025, in connection with the consummation of the BlueHalo acquisition, the Company entered into the Fourth Amendment to Credit Agreement with BofA NA, the administrative agent and the swingline lender, JPM, U.S.

Bank, and Citibank.

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.

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 Fourth Amendment Term Loan Facility.

The proceeds from the Fourth Amendment 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”).

In July 2025, we issued 4,057,460 shares of common stock at a public offering price of $248.00 per share and issued $747,500,000 aggregate principal amount of 0% convertible senior notes due 2030.

The aggregate net proceeds from the Common Stock Offering and the Notes Offering, after deducting underwriting discounts and debt and equity issuance costs, was approximately $1.70 billion.

The Company used approximately $965.3 million of the net proceeds from the Common Stock Offering and the Notes Offering to repay indebtedness under the Term Loan Facility and outstanding borrowings under the Revolving Credit Facility, and the remainder is expected to be used for general corporate purposes, including to increase manufacturing capacity.

Our ability to borrow under the Revolving Facility is reduced by outstanding letters of credit of $11.0 million as of January 31, 2026.

As of January 31, 2026, approximately $339.0 million was available under the Revolving Facility.

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 Fourth Amendment Term Loan Facility and outstanding borrowings under the Revolving Facility.

The remainder can and has been used for general corporate purposes, including to increase manufacturing capacity.

Our ability to borrow under the Revolving Facility is reduced by outstanding letters of credit of $13.0 million as of August 1, 2026.

As of August 1, 2026, approximately $337.0 million was available under the Revolving Facility.

Refer to Note 9—Debt to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for further details.

In addition, Telerob has a line of credit of €7.0 million ($8.2 million) available for issuing letters of credit of which €2.2 million ($2.6 million) was outstanding as of January 31, 2026.

We anticipate funding our normal recurring trade payables, accrued expenses, ongoing R&D costs and obligations under the Credit Facilities through our existing working capital and funds provided by operating activities including those

provided by our acquisition.

In addition, Telerob has a line of credit of €9.0 million ($10.5 million) available for issuing letters of credit of which €2.2 million ($2.6 million) was outstanding as of August 1, 2026.

The majority of our purchase obligations are pursuant to funded contractual arrangements with our customers.

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

As of January 31, 2026, no receivables have been sold, proceeds collected, or purchase discount fees incurred.

As of August 1, 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.

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Moreover, to the extent that existing cash, cash equivalents, cash from operations, and cash from our Credit Facilities are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing, subject to the limitations specified in the Amended Credit 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.

In addition, we may also

need to seek additional equity funding or debt financing if we become a party to any agreement or letter of intent for potential investments in, or acquisitions of, businesses, services or technologies.

Our working capital requirements vary by contract type.

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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, which allows R&D expenditures to be deducted, we expect our cash taxes paid for U.S.

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

The following table provides our cash flow data for the nine months ended January 31, 2026 and January 25, 2025 (in thousands):

Nine Months Ended

Net cash used in operating activities

In August 2026, we closed on our purchase of a new campus facility in Southern California for $29.3 million.

The following table provides our cash flow data for the three months ended August 1, 2026 and January 25, 2025 (in thousands):

Three Months Ended

Net cash provided by (used in) operating activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

Cash Used in Operating Activities.

Net cash used in operating activities for the nine months ended January 31, 2026 increased by $172.9 million to $(173.9) million, as compared to $(1.1) million for the nine months ended January 25, 2025 .

The increase in net cash used in operating activities was primarily due to a decrease in cash as a result of changes in operating assets and liabilities of $260.3 million, largely related to increases in unbilled receivables and retentions due to year over year timing differences as well as increases in inventory to meet demand.

The increase in cash used in operating activities was also driven by a decrease in net income of $268.0 million, partially offset by an increase in depreciation and amortization of $175.8 million, largely due to the intangibles and acquired property and equipment from the BlueHalo acquisition, and goodwill impairment of the Space reporting unit of $151.3 million.

Net cash (used in) provided by financing activities

Cash Provided by (Used in) Operating Activities.

Net cash provided by operating activities for the three months ended August 1, 2026 increased by $137.2 million to $13.5 million, as compared to $(123.7) million for the three months ended August 2, 2025 .

The increase in net cash used in operating activities was primarily due to an increase in cash as a result of changes in operating assets and liabilities of $112.7 million, largely related to decreases in accounts receivable and increases in accounts payable, partially offset by increases in unbilled receivables and retentions due to year over year timing differences.

The increase in cash provided by operating activities was also driven by a decrease in net loss of $62.3 million, partially offset by a decrease in depreciation and amortization of $34.2 million.

Cash Used in Investing Activities.

Net cash used in investing activities increased by $1,208.3 million to $(1,224.9) million for the nine months ended January 31, 2026, as compared to $16.6 million for the nine months ended January 25, 2025 .

The increase in net cash used in investing activities was primarily due to the cash consideration for the acquisition of BlueHalo, net of cash acquired of $844.6 million and the net purchase of available-for-sale securities of $313.7 million.

Cash Provided by (Used in) Financing Activities.

Net cash provided by financing activities increased by $1,655.6 million to $1,647.2 million for the nine months ended January 25, 2025, as compared to net cash used in financing activities of $8.4 million for the nine months ended January 25, 2025.

The increase in net cash provided by financing activities was primarily due to proceeds from issuance of common shares of $968.5 million, net of underwriter costs and proceeds from the issuance of Notes of $726.9 million, net of underwriter costs.

Part of the proceeds were used to repay the outstanding balances of the Term Loan Facility and Revolving Facility drawn in conjunction with the acquisition of BlueHalo.

Recent Developments

Since the acquisition of BlueHalo, we have been working to integrate the computer systems of Legacy BlueHalo and Legacy AV, and we expect to have an integrated system that complies with the Department of Defense’s CMMC cybersecurity requirements by summer 2026.

During the course of this integration effort, we became aware of potential issues concerning Legacy AV’s compliance with certain cybersecurity requirements.

Accordingly, in February 2026, we initiated an internal investigation, led by external counsel, regarding Legacy AV’s compliance with cybersecurity requirements in certain Department of Defense contracts and subcontracts, to include an evaluation of the accuracy of Legacy AV’s cybersecurity information in the Supplier Performance Risk System (SPRS).

We are committed to complying with all applicable cybersecurity requirements, and depending on the outcome of the evaluation, we will update SPRS as needed.

Our investigation is ongoing, and we cannot predict whether it will lead to any adverse impact, nor can we predict the timing, outcome, or nature of any possible impact.

It is possible that, for a period of time, Legacy AV’s ability to receive certain new Department of Defense contracts, subcontracts, or follow-on work could be affected.

Additionally, the U.S.

Government or other customers could terminate Legacy AV’s existing contracts, cease doing business with Legacy AV, or impose additional requirements.

We also could be subject to significant penalties, damages, criminal fines, and suspension or debarment from U.S.

Government contracting.

Any of these potential consequences could materially and adversely affect our business, prospects, financial condition, and results of operations.

Net cash used in investing activities decreased by $768.4 million to $(108.2) million for the three months ended August 1, 2026, as compared to $(876.6) million for the three months ended August 2, 2025 .

The decrease in net cash used in investing activities was primarily due to the cash consideration for the acquisition of BlueHalo, net of cash acquired of $844.6 million in the prior year, partially offset by the net purchase of available-for-sale securities of $58.8 million.

Cash (Used in) Provided by Financing Activities.

Net cash used in financing activities decreased by $1,649.5 million to $(4.1) million for the three months ended August 1, 2026, as compared to net cash provided by financing activities of $1,645.4 million for the three months ended August 2, 2025.

The decrease in net cash provided by financing activities was primarily due to proceeds from issuance of common shares of $968.5 million, net of underwriter costs and proceeds from the issuance of Notes of $726.9 million, net of underwriter costs in the prior year.

Part of the proceeds were used to repay the outstanding balances of the Fourth Amendment Term Loan Facility and Revolving Facility drawn in conjunction with the acquisition of BlueHalo.

QUANTITATIVE AND QUALITATIV E DISCLOSURES ABOUT MARKET RISK

In the ordinary course of business, we are exposed to various market risk factors, including fluctuations in interest rates, changes in general economic conditions, domestic and foreign competition, and foreign currency exchange rates.

For a discussion of market risks at April 30, 2025, refer to Item 7A in our 2025 annual report on Form 10-K.

During the nine months ended January 26, 2026, there were no material changes or developments that would materially alter the market risk assessment performed as of April 30, 2025, except as discussed below.

For a discussion of market risks as of April 30, 2026, refer to Item 7A in our 2026 annual report on Form 10-K.

During the three months ended August 1, 2026, there were no material changes or developments that would materially alter the market risk assessment performed as of April 30, 2026, except as discussed below.

Interest Rate Risk

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The Notes have a zero percent coupon rate.

We used the proceeds from the Notes Offering as well as the Common Stock Offering to repay indebtedness under our Term Loan Facility and outstanding borrowings under the Revolving Facility.

We used the proceeds from the Notes Offering as well as the Common Stock Offering to repay indebtedness under our Fourth Amendment Term Loan Facility and outstanding borrowings under the Revolving Facility.

The Revolving Facility has no current outstanding balance .

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-Q

Item 2. Management’s Discussion and Analysis