AEVEX Corp. Q2 FY2026 earnings call

Strategic Acquisition of Black Sea Technologies

• AVEX entered a definitive agreement to acquire Black Sea Technologies, a leading developer of battle-proven unmanned surface and subsea vessels for the U.S. Navy, SOCOM, and intelligence community, for total consideration of up to $650 million: $250 million cash at closing, $350 million in AVEX common stock, and a $50 million performance-contingent earn-out through 2027.
• The acquisition is expected to close in September 2026, will be accretive to near-term EPS (excluding non-cash purchase accounting amortization), and Black Sea is expected to generate ~$150 million in 2026 revenue with an adjusted EBITDA margin in line with AVEX. Black Sea will operate as a standalone third business unit led by its existing CEO post-close.
• The combination creates one of the largest pure-play multi-domain (air, surface, subsea) autonomous unmanned systems providers in the U.S., with complementary non-overlapping capabilities: AVEX leads in Group 2/3 unmanned aerial systems, while Black Sea leads in maritime autonomous systems. The acquisition unlocks new access to the Navy UAS market for AVEX and expands addressable maritime markets.
• Black Sea has over 350 delivered USVs, more than 25,000 operational hours (including 500 hours in active combat operations), $110 million in funded backlog, over $250 million in unfunded backlog, existing scalable production capacity of 40 small USVs per month across 5 U.S. facilities, and 275 cleared, mission-aligned employees, matching AVEX's hybrid produce-and-operate business model.

Q2 2026 Core Operational and Financial Highlights

• AVEX delivered 100% year-over-year total revenue growth to $201.8 million, with 114% year-over-year unit volume growth, a trailing 12-month book-to-bill of 1.08, and turned to a net income of $6.7 million from a $11.8 million net loss in Q2 2025.
• Total opportunity pipeline grew from $8.1 billion at end-2025 to ~$10.5 billion as of Q2 2026, with proposal activity on track to increase ~30% year-over-year in 2026, driven by clearer government budget priorities, product development, and expanded production capacity.
• The company made two key senior hires: a new Chief Growth Officer from Northrop Grumman and a new VP of Government Affairs with 20+ years of Capitol Hill and defense industry experience to support expansion.
• Market dynamics: Geopolitical tensions are driving higher global defense spending and increased demand for autonomous systems, with the FY27 U.S. budget projecting significantly higher autonomous system spending. However, award cycles have elongated in some cases due to the Middle East conflict, acquisition process changes, and operational reprioritization.

1. Tactical Systems Segment: Q2 2026 revenue was $174.2 million, representing 142% year-over-year growth, driven by execution of the UCOM Deep Strike program. This segment contributed 86.3% of total Q2 2026 revenue. Segment-adjusted EBITDA margin came in at 17% of sales, with operational efficiencies from higher volume driving margin improvement. Quarterly fluctuations are expected based on volume, sales mix, and R&D timing. 2. Global Solutions Segment: Q2 2026 revenue was $27.6 million, a 5% year-over-year decrease, resulting from a one-time aircraft sale in Q2 2025 that did not repeat in the current quarter. This segment contributed 13.7% of total Q2 2026 revenue. Favorable sales mix drove a 700 basis point expansion of segment-adjusted EBITDA margin to 14.2% for the quarter.

• AVEX upwardly revised its full year 2026 guidance to a total revenue range of $700 million to $720 million, up from prior guidance, and adjusted EBITDA of $105 million to $111.5 million, representing an implied margin of ~15% consistent with first half 2026 performance. The 2026 outlook does not include the Black Sea acquisition, which will be added to guidance after close.
• Approximately 95% of the midpoint of the 2026 revenue outlook is already covered by funded backlog, with the remaining 5% expected from incremental funding on existing long-standing Global Solutions contracts.
• Full year 2026 book-to-bill is expected to be near 1.0, with an inflection in funded backlog growth expected in the second half of 2026 heading into 2027.
• Management expects Black Sea's 2027 growth to be at least in line with its addressable maritime unmanned systems markets, with specific guidance to be provided after transaction close.
• A continuing resolution to start FY27 is expected, but management does not anticipate it will have a material impact on 2026 financial results.

• Forward-looking statements, including those related to the Black Sea acquisition, growth projections, and 2026 performance, are subject to risks and uncertainties that could cause actual results to differ materially from expectations, with additional risks detailed in AVEX's SEC filings.
• Elongated award cycles in some programs create uncertainty around near-term booking timing, driven by operational reprioritization and changes to acquisition processes following the Middle East conflict.
• Transaction close is subject to HSR waiting period expiration and customary closing conditions, which may delay or prevent completion of the Black Sea acquisition.
• Transition away from the large UCOM Deep Strike program in the second half of 2026 carries execution risk as the company shifts to new smaller-cycle programs.

Q: Peter Arman (Baird) asks for an update on the UCOM Deep Strike program, specifically how much revenue has been recognized to date, how much is expected in the second half of 2026, and how much will carry into 2027. / A: Management confirms UCOM Deep Strike is the major driver of 2026 revenue, with the vast majority of deliveries and revenue recognition planned to be completed in FY26. Most material for the program is already in-house or on order, with no expected delivery challenges this fiscal year. While exact percentages are not disclosed, revenue contribution from the program will decline sequentially in Q3 after higher contributions in Q1 and Q2, with only a small amount of revenue remaining to be recognized in 2027 as the company transitions to other new programs.

Q: Brian Jesuale (Raymond James) asks for color on product-specific demand within the expanded $10.5 billion opportunity pipeline and when this pipeline will convert to backlog. / A: Management notes the strongest demand is for Group 3 long-range precision strike and one-way attack systems (the Disruptor and Raker product lines), driven by operational lessons from Ukraine and Middle East operations. Pipeline growth comes from three sources: product innovation and expansion, clearer visibility into U.S. government future demand priorities, and increased production capacity from prior capital investments, positioning AVEX well to convert pipeline to backlog through the end of the year and beyond.

Q: Adam Samuelson (Jefferies, for Sheila Kayaolu) asks for clarity on backlog coverage for 2026, how much current backlog is earmarked for 2027, and what book-to-bill is assumed for the second half of 2026. / A: Over 95% of the midpoint of 2026 guidance is already covered by funded backlog, with the remainder from incremental funding on existing contracts. Full year 2026 book-to-bill is expected to be near 1.0 following the guidance raise, which will drive an inflection in funded backlog growth for 2027 in the second half of the year. Management notes customers are shifting to shorter-cycle production contracts to rapidly field systems, which aligns well with AVEX's existing ability to deliver at scale on quick timelines.

Q: Louis De Palma (William Blair) asks if AVEX's mass manufacturing expertise and existing customer relationships can accelerate Black Sea's historical 15% annual growth post-acquisition. / A: Management confirms both companies already have scalable production capacity in place: Black Sea can currently produce 40 small USVs per month with significant headroom in its existing facilities, and AVEX recently added 83,000 square feet of additional production capacity. The combination of AVEX's CompassX modular autonomy stack, cross-selling opportunities into the Navy UAS market, and shared focus on multi-domain operations creates significant upside to accelerate Black Sea's historical growth trajectory.