What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-03-05 compared with 2024-12-05 · 170 added, 165 removed, 235 unchanged (59% of the section changed)

21 unchanged sentences

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

Contract services revenue, which historically included ISR services, is recognized over time as services are rendered.

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.

1 unchanged sentence

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.

Incurred costs represent work performed, which correspond with, and thereby best depict, transfer of control to the customer.

Contract costs include

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

Incurred costs represent work performed, which correspond with, and

thereby best depict, transfer of control to the customer.

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

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.

5 unchanged sentences

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 six months ended October 26, 2024 and October 28, 2023, changes in accounting estimates on contracts recognized using the over time method are presented below.

During the three and nine months ended January 25, 2025 and January 27, 2024, changes in accounting estimates on contracts recognized using the over time method are presented below.

Amounts representing contract change orders or claims are included in revenue if the order or claim meets the criteria of a contract or contract modification in accordance with 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.

For the three months ended October 26, 2024 and October 28, 2023, favorable and unfavorable cumulative catch-up adjustments included in revenue were as follows (in thousands):

For the three months ended January 25, 2025 and January 27, 2024, favorable and unfavorable cumulative catch-up adjustments included in revenue were as follows (in thousands):

Three Months Ended

2 unchanged sentences

Net favorable adjustments

For the three months ended October 26, 2024, favorable cumulative catch-up adjustments of $8.9 million were primarily due to final cost adjustments on five contracts.

During the three months ended October 26, 2024, 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 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.

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 $9.6 million.

For the same period, unfavorable cumulative catch-up adjustments of $1.2 million were primarily related to higher than expected costs on 23 contracts, which individually were not material.

For the three months ended October 28, 2023, favorable cumulative catch-up adjustments of $4.1 million were primarily due to final cost adjustments on seven contracts.

During the three months ended October 28, 2023, we revised our estimates of the total expected costs to complete an LMS variant contract.

For the three months ended January 27, 2024, favorable cumulative catch-up adjustments of $4.5 million were primarily due to cost adjustments on three contracts.

During the three months ended January 27, 2024, we revised our estimates of the total expected costs to complete an LMS contract.

For the same period, unfavorable cumulative catch-up adjustments of $1.3 million were primarily related to higher than expected costs on seven contracts, which individually were not material.

For the six months ended October 26, 2024 and October 28, 2023, favorable and unfavorable cumulative catch-up adjustments included in revenue were as follows (in thousands):

Six Months Ended

For the same period, unfavorable cumulative catch-up adjustments of $0.1 million were primarily related to higher than expected costs on three contracts, which individually were not material.

For the nine months ended January 25, 2025 and January 27, 2024, favorable and unfavorable cumulative catch-up adjustments included in revenue were as follows (in thousands):

Nine Months Ended

Gross favorable adjustments

1 unchanged sentence

Net favorable (unfavorable) adjustments

For the six months ended October 26, 2024, favorable cumulative catch-up adjustments of $10.3 million were primarily due to final cost adjustments on four contracts.

During the six months ended October 26, 2024, we definitized certain LMS undefinitized contract actions.

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.

1 unchanged sentence

For the same period, unfavorable cumulative catch-up adjustments of $2.1 million were primarily related to higher than expected costs on 30 contracts, which individually were not material.

For the six months ended October 28, 2023, favorable cumulative catch-up adjustments of $5.6 million were primarily due to final cost adjustments on 10 contracts.

During the six months ended October 28, 2023, we revised our estimates of the total expected costs to complete an LMS variant contract.

For the nine months ended January 27, 2024, favorable cumulative catch-up adjustments of $6.5 million were primarily due to cost adjustments on 17 contracts.

During the nine months ended January 27, 2024, we revised our estimates of the total expected costs to complete an LMS contract.

For the same period, unfavorable cumulative catch-up adjustments of $2.0 million were primarily related to higher than expected costs on 10 contracts, which individually were not material.

For the same period, unfavorable cumulative catch-up adjustments of $1.5 million were primarily related to higher than expected costs on eight contracts, which individually were not material.

Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets.

12 unchanged sentences

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

As of October 26, 2024, our MUAS reporting unit had a goodwill balance of $135.8 million.

As of January 25, 2025 , our MUAS reporting unit had a goodwill balance of $135.8 million.

The estimated fair value of the MUAS reporting unit does not substantially exceed its carrying value due to the impairment recorded during the fourth quarter ended April 30, 2023.

7 unchanged sentences

Accordingly, the MUAS reporting unit is considered at an increased risk of failing future quantitative goodwill impairment tests.

The intangibles included in the MUAS reporting unit of $11.8 million as of October 26, 2024 will also be evaluated for potential impairment during the fourth quarter impairment test.

The intangibles included in the MUAS reporting unit of $10.9 million as of January 25, 2025 will also be evaluated for potential impairment during the fourth quarter impairment test.

During the most recent annual impairment test during the fourth quarter of fiscal year 2024, the estimated fair value of all reporting units, other than MUAS, substantially exceeded their carrying value.

As of October 26, 2024, we have not identified any events or circumstances that could trigger an impairment review prior to the Company’s annual impairment test.

As of January 25, 2025 , we have not identified any events or circumstances that could trigger an impairment review prior to the Company’s annual impairment test.

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

8 unchanged sentences

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

Three Months Ended October 26, 2024 Compared to Three Months Ended October 28, 2023

Three Months Ended January 25, 2025 Compared to Three Months Ended January 27, 2024

Three Months Ended

2 unchanged sentences

Research and development

Income from operations

(Loss) income from operations

Other income:

Interest expense, net

Other income (expense), net

Income before income taxes

Other income, net

(Loss) income before income taxes

(Benefit from) provision for income taxes

Equity method investment income (loss), net of tax

Net (loss) income

We have identified three reportable segments, Uncrewed Systems (“UxS”), Loitering Munitions Systems (“LMS”) and MacCready Works (“MW”).

6 unchanged sentences

All corporate and headquarter expenses are allocated to the reportable segments.

Three Months Ended October 26, 2024

Three Months Ended January 25, 2025

Product sales

1 unchanged sentence

Segment adjusted gross margin

Three Months Ended October 28, 2023

Three Months Ended January 27, 2024

Product sales

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Cost of sales:

2 unchanged sentences

Selling, general and administrative

Revenue for the three months ended October 26, 2024 was $188.5 million, as compared to $180.8 million for the three months ended October 28, 2023, representing an increase of $7.6 million, or 4%.

The increase in revenue was due to an increase in product revenue of $5.4 million and an increase in service revenue of $2.2 million.

The increase in product revenue was primarily due to an increase of $47.9 million from the production of our Switchblade products primarily driven by increased global demand for our Switchblade products associated with the current global conflicts as well as U.S.

resupply and a cumulative catch-up revenue adjustment for the definitization of LMS contracts of $9.9 million.

The increase was partially offset by a decrease in product deliveries of our UxS products of $41.8 million primarily due to a decrease in international sales.

The increase in service revenue was primarily due to an increase of $5.1 million in customer funded R&D and engineering services driven by an increase in HAPS return to flight services, partially offset by a decrease of $2.9 million of training and repairs service revenue driven by the decrease in UxS product sales.

Revenue for the three months ended January 25, 2025 was $167.6 million, as compared to $186.6 million for the three months ended January 27, 2024, representing a decrease of $18.9 million, or 10%.

The decrease in revenue was due to a decrease in product revenue of $16.2 million and a decrease in service revenue of $2.8 million.

The decrease in product revenue was primarily due to a decrease in product deliveries of our UxS products of $46.7 million primarily due to a decrease in international sales to Ukraine.

The decrease was partially offset by an increase of $28.9 million from the production of our Switchblade products primarily driven by increased global demand for our Switchblade products associated with the current global conflicts as well as U.S.

resupply and an increase in product deliveries of our MW products of $1.7 million due to the shift from development to early production of certain new products.

The decrease in service revenue was due to a decrease of $1.6 million of training and repairs service revenue driven by the decrease in UxS product sales and a decrease of $1.2 million in customer funded R&D and engineering services driven by a decrease in development programs in part due to delays in the establishment of the government fiscal year 2024 budget.

The January 2025 Southern California high winds, fires and resulting blackouts and shutdowns negatively impacted revenue for the three months ended January 25, 2025.

The increase in the LMS product revenues as compared to the prior year period is expected to continue for the remainder of the fiscal year ending April 30, 2025.

Cost of Sales.

Cost of sales for the three months ended October 26, 2024 was $114.8 million, as compared to $105.5 million for the three months ended October 28, 2023, representing an increase of $9.3 million, or 9%.

The increase in cost of sales was a result of an increase in product cost of sales of $8.0 million and service costs of sales of $1.3 million.

The increase in product costs of sales was primarily due to an increase of approximately $5 million associated with the increase in product revenue and approximately $3 million due to a 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 $1 million associated with the increase in service revenue.

Cost of sales for the three months ended October 26, 2024 included $3.7 million of intangible amortization and other related non-cash purchase accounting expenses as compared to $3.2 million for the three months ended October 28, 2023.

As a percentage of revenue, cost of sales increased from 58% to 61% primarily due to an increase in the proportion of LMS product revenue, partially offset by the cumulative catch up adjustment for the definitization of LMS contracts, resulting in gross margin decreasing from 42% to 39%.

Cost of sales for the three months ended January 25, 2025 was $104.4 million, as compared to $119.3 million for the three months ended January 27, 2024, representing a decrease of $14.9 million, or 12%.

The decrease in cost of sales was a result of a decrease in product cost of sales of $18.5 million, partially offset by an increase in service costs of sales of $3.6 million.

The decrease in product costs of sales was primarily due to a decrease of approximately $10 million associated with the decrease in product revenue and approximately $8 million due to mix shift related primarily to the definitization of LMS contracts.

The increase in service cost of sales was primarily due to an increase of approximately $5 million associated with a higher proportion of fixed asset allocated costs, partially offset by a decrease of approximately $2 million associated with the decrease in service revenue.

Cost of sales for the three months ended January 25, 2025 included $3.7 million of intangible amortization and other related non-cash purchase accounting expenses as compared to $4.0 million for the three months ended January 27, 2024.

As a percentage of revenue, cost of sales decreased from 64% to 62% primarily due to the definitization of LMS contracts, resulting in gross margin increasing from 36% to 38%.

Gross Margin.

1 unchanged sentence

Selling, General and Administrative .

SG&A expense for the three months ended October 26, 2024 was $37.9 million, or 20% of revenue, as compared to SG&A expense of $28.1 million, or 16% of revenue, for the three months ended October 28, 2023.

The increase in SG&A expense was primarily due to an increase of $4.3 million in employee related expenses primarily driven by an increase in average headcount to support our growth and expansion of our global business development team, an increase of $3.0 million of sales and marketing expense primarily driven by an increase in bid and proposal efforts, and an increase of $2.5 million in acquisition related expenses.

SG&A expense for the three months ended January 25, 2025 was $43.8 million, or 26% of revenue, as compared to SG&A expense of $27.8 million, or 15% of revenue, for the three months ended January 27, 2024.

The increase in SG&A expense was primarily due to an increase of $10.1 million in acquisition related expenses related to the BlueHalo merger and an increase of $2.5 million of sales and marketing expense primarily driven by an increase in bid and proposal efforts.

Sales and marketing expense includes commissions on certain direct commercial sales to international customers, and an increase in revenue results in an increase in commission expense.

Research and Development.

R&D expense for the three months ended October 26, 2024 was $28.7 million, or 15% of revenue, as compared to R&D expense of $22.0 million, or 12% of revenue, for the three months ended October 28, 2023.

The increase was primarily due to an increase in development activities regarding enhanced capabilities for our products, development of new product lines and support for our acquired businesses.

R&D expense for the three months ended January 25, 2025 was $22.5 million, or 13% of revenue, as compared to R&D expense of $25.1 million, or 13% of revenue, for the three months ended January 27, 2024.

The decrease was primarily due to an acceleration of R&D activity in the second quarter of fiscal year 2025.

Interest Expense, net.

Interest expense, net for the three months ended October 26, 2024 was $0.7 million compared to interest expense, net of $2.0 million for the three months ended October 28, 2023.

The decrease in interest expense, net was primarily due to lower average outstanding balances on our debt facility.

Interest expense, net for the three months ended January 25, 2025 was $0.2 million compared to interest expense, net of $0.1 million for the three months ended January 27, 2024.

Other Income, net.

Other income, net, for the three months ended October 26, 2024 was $16 thousand compared to other expense, net of $(2.9) million for the three months ended October 28, 2023.

The decrease was primarily due to lower net unrealized losses associated with the fair market value of our equity security investments.

Benefit from Income Taxes.

Our effective income tax rate was (3.5)% for the three months ended October 26, 2024, as compared to 5.6% for the three months ended October 28, 2023.

The decrease in our effective income tax rate was primarily due to an increase in FDII deductions and excess tax benefits from equity awards.

The effective income tax rate for the three months ended October 26, 2024 was primarily impacted by expected federal R&D tax credits and FDII deductions and excess tax benefits from equity awards.

Equity Method Investment Income (Loss), net of Tax.

Equity method investment income, net of tax for the three months ended October 26, 2024 was $1.0 million as compared to equity method investment loss, net of tax of $(1.4) million for the three months ended October 28, 2023.

Uncrewed Systems

Three Months Ended

Product sales

Contract services

Segment adjusted gross margin

UxS revenue for the three months ended October 26, 2024 was $85.4 million, as compared to $132.8 million for the three months ended October 28, 2023, representing a decrease of $47.4 million, or 36%.

The decrease in revenue was due to a decrease in product revenue of $41.8 million and an increase in service revenue of $5.5 million.

The decrease in product revenue was primarily due to $40.4 million from decreased product shipments of our SUAS family of systems and UGV product systems driven by to a decrease in international sales due to lower sales to Ukraine.

The decrease in service revenue was primarily due to a decrease of $3.1 million of training and repairs service revenue driven by the decreased product sales and a decrease of $2.5 million of customer-funded R&D and engineering services.

UxS Segment adjusted gross margin.

UxS segment adjusted gross margin for the three months October 26, 2024 was $41.4 million, as compared to $65.6 million for the three months ended October 28, 2023, representing a decrease of $24.2 million, or 37%.

The decrease in UxS segment adjusted gross margin was primarily due to a decrease in revenue of $47.4 million, partially offset by a decrease of $23.1 million in adjusted cost of sales.

The decrease in adjusted cost of sales was primarily due to a decrease in sales volume of approximately $23 million.

Adjusted cost of sales is defined as cost of sales before intangible amortization expense including amortization of purchase accounting adjustments.

Other income, net, for the three months ended January 25, 2025 was $1.0 million as compared to other expense, net of $1.0 million for the three months ended January 27, 2024.

(Benefit from) Provision for Income Taxes.

Our effective income tax rate was 25.6% for the three months ended January 25, 2025 , as compared to 8.3% for the three months ended January 27, 2024.

The increase in our effective income tax rate was primarily due to an increase in FDII deductions and excess tax benefits from equity awards.

The effective income tax rate for the three months ended January 25, 2025 was primarily impacted by expected federal R&D tax credits and FDII deductions and excess tax benefits from equity awards.

Equity Method Investment Loss, net of Tax.

Equity method investment loss, net of tax for the three months ended January 25, 2025 was $0 as compared to equity method investment loss, net of tax of $0.1 million for the three months ended January 27, 2024.

Loitering Munitions Systems

3 unchanged sentences

Segment adjusted gross margin

LMS revenue for the three months ended October 26, 2024 was $77.7 million, as compared to $30.2 million for the three months ended October 28, 2023, representing an increase of $47.5 million, or 157%.

LMS revenue for the three months ended January 25, 2025 was $83.9 million, as compared to $57.7 million for the three months ended January 27, 2024, representing an increase of $26.2 million, or 45%.

The increase in revenue was due to an increase in product revenue of $28.9 million, partially offset by a decrease in service revenue of $2.6 million.

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

resupply and a cumulative catch-up revenue adjustment for the definitization of LMS contracts of $9.9 million.

The decrease in service revenue was primarily due to decreases 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 three months October 26, 2024 was $30.2 million, as compared to $9.3 million for the three months ended October 28, 2023, representing an increase of $20.8 million, or 223%.

The increase in LMS segment adjusted gross margin was primarily due to an increase in revenue of $47.5 million, inclusive of the cumulative catch-up revenue adjustment of $9.9 million, partially offset by an increase in adjusted cost of sales of $26.7 million.

The increase in adjusted cost of sales was primarily due to an increase in sales volume of approximately $26 million.

LMS segment adjusted gross margin for the three months January 25, 2025 was $33.0 million, as compared to $18.0 million for the three months ended January 27, 2024, representing an increase of $15.0 million, or 83%.

The increase in LMS segment adjusted gross margin was primarily due to an increase in revenue of $26.2 million, partially offset by an increase in adjusted cost of sales of $11.2 million.

The increase in adjusted cost of sales was primarily due to an increase in sales volume of approximately $18 million, partially offset by a mix shift of approximately $7 million to related primarily to the definitization of LMS contracts.

LMS is operating under multiple unpriced change orders, or UCO's, for which we recognize revenue based upon estimates of the final price negotiations.

In the period these contracts are definitized a cumulative catch-up revenue adjustment will be recorded.

For the full fiscal year, we anticipate LMS adjusted gross margin as a percentage of revenues to trend toward the prior year levels.

In the period these contracts are definitized a cumulative catch-up revenue adjustment may be recorded.

Uncrewed Systems

Three Months Ended

Product sales

Contract services

Segment adjusted gross margin

UxS revenue for the three months ended January 25, 2025 was $63.8 million, as compared to $113.3 million for the three months ended January 27, 2024, representing a decrease of $49.5 million, or 44%.

The decrease in revenue was due to a decrease in product revenue of $46.7 million and a decrease in service revenue of $2.9 million.

The decrease in product revenue was primarily due to $46.7 million of decreased international sales of our UxS family of systems, most significantly sales to Ukraine.

The decrease in service revenue was primarily due to a decrease of $1.9 million of customer-funded R&D and engineering services.

UxS Segment adjusted gross margin.

UxS segment adjusted gross margin for the three months January 25, 2025 was $29.4 million, as compared to $50.1 million for the three months ended January 27, 2024, representing a decrease of $20.7 million, or 41%.

The decrease in UxS segment adjusted gross margin was primarily due to a decrease in revenue of $49.5 million, partially offset by a decrease of $28.8 million in adjusted cost of sales.

The decrease in adjusted cost of sales was primarily due to a decrease in sales volume of approximately $29 million.

Adjusted cost of sales is defined as cost of sales before intangible amortization expense including amortization of purchase accounting adjustments.

MacCready Works

3 unchanged sentences

Segment adjusted gross margin

MW revenue for the three months ended October 26, 2024 was $25.3 million, as compared to $17.8 million for the three months ended October 28, 2023, representing an increase of $7.5 million, or 42%.

The increase in revenue was due to an increase in service revenue of $8.2 million, partially offset by a decrease in product revenue of $0.7 million.

MW revenue for the three months ended January 25, 2025 was $19.9 million, as compared to $15.6 million for the three months ended January 27, 2024, representing an increase of $4.3 million, or 28%.

The increase in revenue was due to an increase in service revenue of $2.7 million and an increase in product revenue of $1.6 million.

The increase in service revenue was primarily due to an increase of $2.7 million in customer funded R&D and engineering services efforts primarily due to HAPS return to flight services.

The increase in product revenue was primarily driven by the shift from development to production of certain new product lines.

MW Segment adjusted gross margin.

MW segment adjusted gross margin for the three months October 26, 2024 was $5.8 million, as compared to $3.6 million for the three months ended October 28, 2023, representing an increase of $2.2 million or 62%.

MW segment adjusted gross margin for the three months January 25, 2025 was $4.5 million, as compared to $3.3 million for the three months ended January 27, 2024, representing an increase of $1.2 million or 36%.

The increase in MW adjusted gross margin was primarily due to an increase in revenue of $4.3 million, partially offset by an increase in adjusted cost of sales of $3.1 million.

The increase in adjusted cost of sales was primarily due to an increase in sales volume of approximately $3 million.

Six Months Ended October 26, 2024 Compared to Six Months Ended October 28, 2023

The following tables (in thousands) sets forth our revenue, gross margin and adjusted operating income (loss) from operations generated by each reporting segment for the periods indicated.

Adjusted operating income is defined as operating income before intangible amortization, amortization of purchase accounting adjustments, and acquisition related expenses.

Nine Months Ended January 25, 2025 Compared to Nine Months Ended January 27, 2024

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

Adjusted margin is defined as gross margin before intangible amortization, amortization of purchase accounting adjustments.

All corporate and headquarter expenses are allocated to the reportable segments.

Six Months Ended

Nine Months Ended

Cost of sales

3 unchanged sentences

Interest expense, net

Other expense, net

Other income (expense), net

Income before income taxes

1 unchanged sentence

Equity method investment income (loss), net of tax

Six Months Ended October 26, 2024

Nine Months Ended January 25, 2025

Product sales

1 unchanged sentence

Segment adjusted gross margin

Six Months Ended October 28, 2023

Nine Months Ended January 27, 2024

Product sales

1 unchanged sentence

Segment adjusted gross margin

Revenue for the six months ended October 26, 2024 was $377.9 million, as compared to $333.2 million for the six months ended October 28, 2023, representing an increase of $44.8 million, or 13%.

Revenue for the nine months ended January 25, 2025 was $545.6 million, as compared to $519.7 million for the nine months ended January 27,2024 , representing an increase of $25.8 million, or 5%.

The increase in revenue was due to an increase in product revenue of $29.3 million, partially offset by a decrease in service revenue of $3.5 million.

1 unchanged sentence

resupply and a cumulative catch-up revenue adjustment for the definitization of LMS contracts of $9.9 million.

The increase was partially offset by a decrease of $24.3 million of product deliveries of our UxS and MW products, primarily due to a decrease in international sales.

The decrease in service revenue was primarily due to a decrease of $0.7 million in customer funded R&D and engineering services due to a decrease in development programs in part due to delays in the establishment of the government fiscal year 2024 budget.

The increase was partially offset by a decrease of $69.4 million of product deliveries of our UxS products, primarily due to a decrease in international sales to Ukraine.

The decrease in service revenue was primarily due to a decrease of $1.9 million in customer funded R&D and engineering services due to a decrease in development programs in part due to delays in the establishment of the government fiscal year 2024 budget and a decrease of $1.6 million in training and repair services primarily due to the decrease in UxS product revenue.

The January 2025 Southern California high winds, fires and resulting blackouts and shutdowns negatively impacted revenue for the three months ended January

The increase in the LMS product revenues as compared to the prior year period is expected to continue for the remainder of the fiscal year ending April 30, 2025.

Cost of Sales.

Cost of sales for the six months ended October 26, 2024 was $222.8 million, as compared to $192.2 million for the six months ended October 28, 2023, representing an increase of $30.7 million, or 16%.

Cost of sales for the nine months ended January 25, 2025 was $327.3 million, as compared to $311.4 million for the nine months ended January 27, 2024 , representing an increase of $15.9 million, or 5%.

The increase in cost of sales was a result of an increase in product cost of sales of $13.4 million, partially offset by a decrease in service costs of sales of $2.4 million.

The increase in product costs of sales was primarily due to an increase of approximately $24 million associated with the increase in product revenue and approximately $8 million due to a mix shift to a higher proportion of lower margin products driven by the increase in Switchblade production.

The decrease in service cost of sales was primarily due to a decrease of approximately $1 million associated with the decrease in service revenue.

Cost of sales for the six months ended October 26, 2024 included $7.4 million of intangible amortization and other related non-cash purchase accounting expenses as compared to $5.6 million for the six months ended October 28, 2023.

As a percentage of revenue, cost of sales increased from 58% to 59%, primarily due to an increase in the proportion of LMS product revenue, partially offset by the cumulative catch up adjustment for the definitization of LMS contracts, resulting in gross margin of decreasing from 42% to 41%.

The increase in product costs of sales was primarily due to an increase of approximately $16 million associated with the increase in product revenue, partially offset by approximately $3 million due to a mix shift related primarily to the definitization of LMS contracts.

The increase in service cost of sales was primarily due to an increase in mix shift of approximately $5 million due to a higher proportion of fixed asset allocated costs, partially offset by a decrease of approximately $3 million associated with the decrease in service revenue.

Cost of sales for the nine months ended January 25, 2025 included $11.1 million of intangible amortization and other related non-cash purchase accounting expenses as compared to $9.6 million for the nine months ended January 27, 2024 .

As a percentage of revenue, cost of sales remained consistent at 60% resulting in gross margin remaining consistent at 40%.

Gross Margin.

1 unchanged sentence

Selling, General and Administrative .

SG&A expense for the six months ended October 26, 2024 was $71.7 million, or 19% of revenue, as compared to SG&A expense of $52.0 million, or 16% of revenue, for the six months ended October 28, 2023.

The increase in SG&A expense was primarily due to an increase of $8.8 million of sales and marketing expense primarily driven by an increase in bid and proposal efforts, an increase of $8.3 million in employee related expenses primarily driven by an increase in average headcount to support our growth and expansion of our global business development team, and an increase of $1.8 million in acquisition related expenses.

SG&A expense for the nine months ended January 25, 2025 was $115.5 million, or 21% of revenue, as compared to SG&A expense of $79.8 million, or 15% of revenue, for the nine months ended January 27, 2024 .

The increase in SG&A expense was primarily due to an increase of $12.0 million in acquisition related expenses, $11.3 million of sales and marketing expense primarily driven by an increase in bid and proposal efforts and an increase of $9.0 million in employee related expenses primarily driven by an increase in average headcount to support our growth and expansion of our global business development team.

Sales and marketing expense includes commissions on certain direct commercial sales to international customers, and an increase in revenue results in an increase in commission expense.

Research and Development.

R&D expense for the six months ended October 26, 2024 was $53.3 million, or 14% of revenue, as compared to R&D expense of $37.5 million, or 11% of revenue, for the six months ended October 28, 2023.

R&D expense for the nine months ended January 25, 2025 was $75.8 million, or 14% of revenue, as compared to R&D expense of $62.6 million, or 12% of revenue, for the nine months ended January 27,2024 .

The increase was primarily due to an increase in development activities regarding enhanced capabilities for our products, development of new product lines and support for our acquired businesses.

Interest Expense, net.

Interest expense, net for the six months ended October 26, 2024 was $0.9 million compared to $4.0 million for the six months ended October 28, 2023.

Interest expense, net for the nine months ended January 25, 2025 was $1.2 million compared to $4.1 million for the nine months ended January 27,2024 .

The decrease in interest expense, net was primarily due to lower average outstanding balances on our debt facility.

Other Expense, net.

Other expense, net, for the six months ended October 26, 2024 was $0.2 million compared to $4.0 million for the six months ended October 28, 2023.

The decrease was primarily due to lower net unrealized losses associated with the fair market value of our equity security investments.

Other Income, net.

Other income, net, for the nine months ended January 25, 2025 was $0.8 million compared to other loss, net of $(3.0) million for the nine months ended January 27, 2024 .

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

Provision for Income Taxes.

Our effective income tax rate was 4.4% for the six months ended October 26, 2024, as compared to 5.6% for the six months ended October 28, 2023.

The decrease in our effective income tax rate was primarily due to an increase in FDII deductions and excess tax benefits from the vesting of equity awards, partially offset by an increase in excess tax benefits from equity awards.

The effective income tax rate for the six months ended October 26, 2024 was primarily impacted by expected federal R&D tax credits and FDII deductions and excess tax benefits from equity awards.

Our effective income tax rate was 2.5% for the nine months ended January 25, 2025 , as compared to 6.3% for the nine months ended January 27, 2024 .

The decrease in our effective income tax rate was primarily due to an increase in FDII deductions and excess tax benefits from the vesting of equity awards.

The effective income tax rate for the nine months ended January 25, 2025 was primarily impacted by expected federal R&D tax credits and FDII deductions and excess tax benefits from equity awards.

Equity Method Investment Income (Loss), net of Tax.

Equity method investment income, net of tax for the six months ended October 26, 2024 was $1.1 million as compared to equity method investment loss, net of tax of $(1.4) million for the six months ended October 28, 2023.

Uncrewed Systems

Six Months Ended

Product sales

Contract services

Segment adjusted gross margin

UxS revenue for the six months ended October 26, 2024 was $205.4 million, as compared to $231.0 million for the six months ended October 28, 2023, representing a decrease of $25.6 million, or 11%.

The decrease in revenue was due to a decrease in product revenue of $22.7 million and a decrease in service revenue of $2.9 million.

The decrease in product revenue was primarily due to $21.9 million of decreased product shipments of our SUAS family of systems driven by to a decrease in international sales.

The decrease in service revenue was primarily due to a decrease of $2.9 million of customer funded R&D and engineering services primarily due to the completion of certain MUAS contracts during the six months ended October 28, 2023.

UxS Segment adjusted gross margin.

UxS segment adjusted gross margin for the six months October 26, 2024 was $108.6 million, as compared to $116.0 million for the six months ended October 28, 2023, representing a decrease of $7.4 million, or 6%.

The decrease in UxS segment adjusted gross margin was primarily due to a decrease in revenue of $25.6 million, partially offset by a decrease of $18.1 million in adjusted cost of sales.

The decrease in adjusted cost of sales was due to a decrease in sales volume of approximately $12 million, partially offset by a mix shift of approximately $6 million primarily due to a lower proportion of international products sales.

Adjusted cost of sales is defined as cost of sales before intangible amortization expense including amortization of purchase accounting adjustments.

Equity method investment income, net of tax for the nine months ended January 25, 2025 was $1.1 million as compared to equity method investment loss, net of tax of $(1.5) million for the nine months ended January 27,2024 .

Loitering Munitions Systems

Six Months Ended

Nine Months Ended

Product sales

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Segment adjusted gross margin

LMS revenue for the six months ended October 26, 2024 was $129.7 million, as compared to $61.2 million for the six months ended October 28, 2023, representing an increase of $68.5 million, or 112%.

LMS revenue for the nine months ended January 25, 2025 was $213.6 million, as compared to $118.8 million for the nine months ended January 25, 2025 , representing an increase of $94.8 million, or 80%.

The increase in revenue was due to an increase in product revenue of $98.7 million, partially offset by a decrease in service revenue of $3.9 million.

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LMS Segment adjusted gross margin.

LMS segment adjusted gross margin for the six months October 26, 2024 was $43.4 million, as compared to $21.7 million for the six months ended October 28, 2023, representing an increase of $21.8 million, or 100%.

The increase in LMS segment adjusted gross margin was primarily due to an increase in revenue of $68.5 million, inclusive of the cumulative catch-up revenue adjustment of $9.9 million, partially offset by an increase

in adjusted cost of sales of $46.8 million.

The increase in adjusted cost of sales was primarily due to an increase in sales volume of approximately $38 million and mix shift of approximately $9 million primarily due to an increase in the proportion of LMS product revenue.

LMS is operating under multiple unpriced change orders, or UCO's, which we recognize revenue based upon estimates of the final price negotiations.

In the period these contracts are definitized a cumulative catch-up revenue adjustment will be recorded.

For the full fiscal year, we anticipate LMS adjusted gross margin as a percentage of revenues to trend toward the prior year levels.

LMS segment adjusted gross margin for the nine months January 25, 2025 was $76.4 million, as compared to $39.6 million for the nine months ended January 27, 2024 , representing an increase of $36.8 million, or 93%.

The increase in LMS segment adjusted gross margin was primarily due to an increase in revenue of $94.8 million, inclusive of the cumulative catch-up revenue adjustment of $9.9 million, partially offset by an increase in adjusted cost of sales of $58.0 million.

The increase in adjusted cost of sales was primarily due to an increase in sales volume of approximately $62 million, partially offset by mix shift of approximately $4 million related primarily to the definitization of LMS contracts.

LMS is operating under multiple unpriced change orders, or UCO's, for which we recognize revenue based upon estimates of the final price negotiations.

In the period these contracts are definitized a cumulative catch-up revenue adjustment may be recorded.

Uncrewed Systems

Nine Months Ended

Product sales

Contract services

Segment adjusted gross margin

UxS revenue for the nine months ended January 25, 2025 was $269.1 million, as compared to $344.3 million for the nine months ended January 27, 2024 , representing a decrease of $75.2 million, or 22%.

The decrease in revenue was due to a decrease in product revenue of $69.4 million and a decrease in service revenue of $5.7 million.

The decrease in product revenue was primarily due to $69.4 million of decreased international sales of our SUAS family of systems, significantly sales to Ukraine.

The decrease in service revenue was primarily due to a decrease of $4.8 million of customer funded R&D and engineering services primarily due to the completion of certain MUAS contracts during the nine months ended January 27, 2024 .

UxS Segment adjusted gross margin.

UxS segment adjusted gross margin for the nine months January 25, 2025 was $138.0 million, as compared to $166.1 million for the nine months ended January 27, 2024 , representing a decrease of

$28.1 million, or 17%.

The decrease in UxS segment adjusted gross margin was primarily due to a decrease in revenue of $75.2 million, partially offset by a decrease of $47.1 million in adjusted cost of sales.

The decrease in adjusted cost of sales was due to a decrease in sales volume of approximately $40 million and by a mix shift of approximately $7 million primarily due to primarily due to a higher proportion of international products sales.

Adjusted cost of sales is defined as cost of sales before intangible amortization expense including amortization of purchase accounting adjustments.

MacCready Works

Six Months Ended

Nine Months Ended

Product sales

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Segment adjusted gross margin

MW revenue for the six months ended October 26, 2024 was $42.9 million, as compared to $41.0 million for the six months ended October 28, 2023, representing an increase of $1.8 million, or 4%.

The increase in revenue was due to an increase in service revenue of $3.4 million, partially offset by a decrease in product revenue of $1.6 million.

MW revenue for the nine months ended January 25, 2025 was $62.8 million, as compared to $56.6 million for the nine months ended January 27, 2024 , representing an increase of $6.2 million, or 11%.

The increase in revenue was primarily due to an increase in service revenue of $6.1 million.

The increase in service revenue was primarily due to an increase of $6.1 million in customer funded R&D efforts and engineering services in part due to HAPS return to flight services.

The decrease in product revenue was primarily due to timing of contracts.

MW Segment adjusted gross margin.

MW segment adjusted gross margin for the six months October 26, 2024 was $10.5 million, as compared to $8.9 million for the six months ended October 28, 2023, representing an increase of $1.6 million, or 18%.

MW segment adjusted gross margin for the nine months January 25, 2025 was $15.0 million, as compared to $12.2 million for the nine months ended January 27, 2024 , representing an increase of $2.8 million, or 23%.

The increase in MW adjusted gross margin was primarily due to an increase in revenue of $6.2 million, partially offset by an increase in adjusted cost of sales of $3.4 million, primarily due to an increase in sales volume.

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 October 26, 2024, our funded backlog was approximately $467.1 million, as compared to $400.2 million as of April 30, 2024.

In addition to our funded backlog, we also had unfunded backlog of $1,829.1 million as of October 26, 2024.

As of January 25, 2025 , our funded backlog was approximately $763.5 million, as compared to $400.2 million as of April 30, 2024.

The Department of the Army issued a stop-work order on certain existing U.S.

government contracts, previously awarded to us for foreign military sales funded by the U.S.

government via foreign military financing.

As of January 25, 2025, funded backlog included approximately $13 million impacted by the stop-work order.

In addition to our funded backlog, we also had unfunded backlog of $1,429.9 million as of January 25, 2025 .

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

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Management believes that unfunded backlog does not provide a reliable measure of future estimated revenue under our contracts.

A protest has been filed with the U.S.

Government Accountability Office (“GAO”) challenging the U.S Department of the Army’s decision on August 27, 2024 to award an indefinite delivery, indefinite quantity contract with a ceiling value of $990.0 million on a sole source basis to AeroVironment, Inc.

(the “Company”) related to the Company’s Switchblade systems, of which $860.0 million is included in unfunded backlog.

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 September 8, 2022, we filed an S-3 shelf registration statement to offer and sell shares of our common stock, including a prospectus supplement in relation to an Open Market Sale Agreement SM , also dated September 8, 2022, with Jefferies LLC relating to the proposed offer and sale of shares of our common stock having an aggregate offering price of up to $200.0 million from time to time through Jefferies LLC as our sales agent.

During the three and six months ended October 28, 2023, we sold 807,370 shares for total gross proceeds of $91.3 million, total proceeds received of $88.6 million, net of commission expense and $88.4 million net of equity issuance costs.

As of October 28, 2023, we completed the Open Market Sale Agreement SM and sold 1,917,100 of our shares for total gross proceeds of $200.0 million and $194.0 million proceeds received, net of commission expense and $193.1 million net of equity issuance costs.

On September 8, 2022, we filed an S-3 shelf registration statement to offer and sell shares of our common stock and other securities, including a prospectus supplement in relation to an Open Market Sale Agreement SM , also dated September 8, 2022, with Jefferies LLC relating to the proposed offer and sale of shares of our common stock having an aggregate offering price of up to $200.0 million from time to time through Jefferies LLC as our sales agent.

During the six months ended October 28, 2023, we completed the Open Market Sale Agreement SM .

During the six months ended October 28, 2023, we sold 807,370 shares for total gross proceeds of $91.3 million, total proceeds received of $88.6 million, net of commission expense and $88.4 million net of equity issuance costs.

As of October 28, 2023, we sold 1,917,100 of our shares for total gross proceeds of $200.0 million and $194.0 million proceeds received, net of commission expense and $193.1 million net of equity issuance costs.

On February 19, 2021, in connection with the consummation of the Arcturus Acquisition, we entered into the Credit Agreement for (i) the Revolving Facility, and (ii) the Term Loan Facility, and together with the Revolving Credit Facility, the “Credit Facilities.” The Term Loan Facility required payment of 5% of the outstanding obligations in each of the first four loan years, consisting of three quarterly payments of 1.25% each, with the remaining outstanding principal amount of the Term Loan Facility due and payable on the final maturity date.

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

Our ability to borrow under the Revolving Facility is reduced by outstanding letters of credit of $9.8 million as of October 26, 2024.

As of October 26, 2024, approximately $175.2 million was available under the Revolving Facility.

Our ability to borrow under the Revolving Facility is reduced by outstanding letters of credit of $9.5 million as of January 25, 2025.

As of January 25, 2025, approximately $165.5 million was available under the Revolving Facility.

On February 26, 2025, we borrowed an additional $15.0 million under the Revolving Facility.

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

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 ($7.6 million) available for issuing letters of credit of which €0.3 million ($0.3 million) was outstanding as of October 26, 2024.

In addition, Telerob has a line of credit of €7.0 million ($7.3 million) available for issuing letters of credit of which €0.4 million ($0.4 million) was outstanding as of January 25, 2025 .

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

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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, introducing new products and enhancing existing products, marketing acceptance and adoption of our products and services, and possible acquisition of entities or strategic assets.

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 acquisition of entities or strategic assets, including expenses related to the BlueHalo transaction.

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 Agreement 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 Facility agreement.

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 Facility agreement.

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

In connection with the BlueHalo acquisition, we entered into the Debt Commitment Letter with BofA and JPM on November 18, 2024 to provide a new term loan, the Acquisition Financing Facility, .

The initial principal amount of the

Acquisition Financing Facility will be $700,000,000, and the Acquisition Financing Facility will have a maturity date of two years from effective date of the Credit Agreement Amendment.

In connection with the BlueHalo acquisition, we entered into the Debt Commitment Letter with BofA and JPM on November 18, 2024 to amend the Amended Credit Facility, and amended and restated on December 30, 2024 to include U.S.

Bank, Citibank, BMO Bank, Citizens and RBC, to provide a new term loan facility, referred to as the Acquisition

Financing Facility.

The initial principal amount of the Acquisition Financing Facility will be $700,000,000, and the Acquisition Financing Facility will have a maturity date of two years from the effective date of the amendment to the Amended Credit Facility.

The proceeds of the Acquisition Financing Facility will be used to refinance a portion of BlueHalo’s debt and pay fees, costs and expenses incurred in connection with the Transactions.

The debt will be serviced from the combined cash flows of the Company and BlueHalo.

We expect the debt will be serviced from the combined cash flows of the Company and BlueHalo.

Our ability to restructure or refinance this additional indebtedness (or otherwise refinance the indebtedness of BlueHalo) will depend on numerous factors, including the condition of the capital markets and our results of operations and financial condition.

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

Any 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.

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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.

During the fiscal year ended April 30, 2022, we made certain commitments outside of the ordinary course of business, including capital contribution commitments to a second limited partnership fund.

Under the terms of a new 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 limited partnership fund, of which $10.0 million was remaining at October 26, 2024.

During the fiscal year ended April 30, 2022, we made certain commitments outside of the ordinary course of business, including capital contribution commitments to a second limited partnership fund (refer to Note 5—Equity Method Investments to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q).

The contributions are anticipated to be paid over the next three fiscal years.

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federal income taxes to continue during the fiscal year ending April 30, 2025 and future fiscal years.

The following table provides our cash flow data for the six months ended October 26, 2024 and October 28, 2023 (in thousands):

Six Months Ended

Net cash provided by (used in) operating activities

The following table provides our cash flow data for the nine months ended January 25, 2025 and January 27, 2024 (in thousands):

Nine Months Ended

Net cash (used in) provided by operating activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

Cash Provided by (Used in) Operating Activities.

Net cash provided by operating activities for the six months ended October 26, 2024 increased by $50.3 million to $24.7 million, as compared to net cash used in operating activities of $(25.6) million for the six months ended October 28, 2023.

The increase in net cash provided by operating activities was primarily due to an increase in cash as a result of changes in operating assets and liabilities of $65.7 million, largely related to inventories and unbilled receivables and retentions, partially offset by accounts receivable and other liabilities, due to year over year timing differences as well as an increase in non-cash expenses of $4.4 million primarily due to a decrease in reserve for inventory excess and obsolescence, partially offset by an increase in depreciation and amortization.

Net cash used in financing activities

Cash (Used in) Provided by Operating Activities.

Net cash used in operating activities for the nine months ended January 25, 2025 increased by $28.0 million to $(1.1) million, as compared to net cash provided by operating activities of $27.0 million for the nine months ended January 27, 2024 .

The decrease in net cash provided by operating activities was primarily due to a decrease in net income of $26.7 million and a decrease in non-cash expenses of $7.2 million primarily due to a decrease in reserve for inventory excess and obsolescence, partially offset by an increase in depreciation and amortization, partially offset by an increase in cash as a result of changes in operating assets and liabilities of $5.9 million, largely related to inventories and unbilled receivables and retentions, partially offset by accounts receivable, due to year over year timing differences.

Cash Used in Investing Activities.

Net cash used in investing activities decreased by $26.0 million to $(11.6) million for the six months ended October 26, 2024, as compared to $(37.6) million for the six months ended October 28, 2023.

The decrease in net cash used in investing activities was primarily due to a decrease in business acquisitions due to Tomahawk acquisition during the six months ended October 26, 2024.

Net cash used in investing activities decreased by $24.8 million to $16.6 million for the nine months ended January 25, 2025 , as compared to $41.4 million for the nine months ended January 27, 2024 .

decrease in net cash used in investing activities was primarily due to a decrease in business acquisitions due to Tomahawk acquisition during the nine months ended January 27, 2024.

Cash Used in Financing Activities.

Net cash used in financing activities increased by $49.0 million to $(17.5) million for the six months ended October 26, 2024, as compared to net cash provided by financing activities of $31.5 million for the six months ended October 28, 2023.

The increase in net cash used in financing activities was primarily due to a decrease in proceeds from shares issued of $88.4 million, partially offset by net principal payments of the credit facilities of $42 million.

Net cash used in financing activities decreased by $2.2 million to $8.4 million for the nine months ended January 25, 2025 , as compared to net cash used in financing activities of $10.6 million for the nine months ended January 27, 2024.

The decrease in net cash used in financing activities was primarily due to a decrease in net principal payments of the credit facilities of $92 million, partially offset by a decrease in proceeds from shares issued of $88.4 million.

New Accounting Standards

Please refer to Note 1—Organization and Significant Accounting Policies to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for the conclusion that we did not adopt any accounting standards during the six months ended October 26, 2024.

QUANTITATIVE AND QUALITATIV E DISCLOSURES ABOUT MARKET RISK

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What changed 10-Q

Item 2. Management’s Discussion and Analysis