AEVEX Corp. Q3 FY2026 earnings call

Strategic Positioning and Market Demand:

• AVEX is executing from a position of strength with strong year-over-year growth and a profitable base.
• The defense market is shifting toward autonomous systems that can be fielded quickly and produced at scale, with bipartisan support for recapitalizing armed services.
• Demand remains strong for launched effects, long-range precision strike, one-way attack, and multi-mission maritime vessels.

Operational Execution and Integration:

• Completed the acquisition of Black Sea Technologies in September, establishing Maritime Systems as the third reportable segment.
• Integration milestones have been met across five priorities: customer continuity, technology integration, manufacturing operations, growth access, and people/culture.
• No disruption to customers; operational efficiencies are improving in business management, hardware/software development, and supply chain.
• CompassX ecosystem is being extended across platforms to enable multi-domain collaborative operations.

Financial Discipline and Margins:

• Guiding toward low-to-mid 20% margins over time through bid integrity, operational discipline, and cost control.
• Deployed cash and debt to acquire Black Sea while generating strong free cash flow ($34.6 million YTD).
• Working capital managed closely, with investments in inventory and capacity to support demand.

Growth Trajectory:

• Core business bookings nearly quadrupled from Q1 to Q3 ($65.8 million to $250.2 million).
• Book-to-bill ratio stood at 1.56 for core business and 1.3 company-wide.
• Pipeline expanded significantly to approximately $16.6 billion, driven by cross-selling and new customer access.

Airborne Systems: Revenue was $147.8 million, up year-over-year, driven primarily by UAS products and support services, including the Yukon Deep Strike program which contributed $52.5 million. Global Solutions: Revenue was $27.5 million, a decrease year-over-year, primarily due to lower aircraft modification and testing product revenue. Maritime Systems (formerly Black Sea Technologies): Contributed $14.4 million in revenue for the quarter, including $13 million from the acquired Black Sea business. This segment is now reported as AVEX's third operating segment.

• Raised full-year 2026 revenue guidance to $820 million - $840 million (previously $700 million - $720 million).
• Raised full-year 2026 adjusted EBITDA guidance to $128 million - $132 million (previously $105 million - $111.5 million).
• Approximately 96% of the midpoint revenue outlook is supported by current funded backlog.
• Not providing formal 2027 guidance, but expressing confidence in continued growth based on broad demand, maritime addition, and expanding pipeline.

• Budgetary processes, acquisition reform, and operational reprioritization may affect the timing of orders, even when mission need is clear.
• Potential impact of government continuing resolutions on order timing, though no significant revenue/margin risk expected for FY26.
• Supply chain challenges remain in specific areas such as cameras, radios, engines, alternators, and power management units, though mitigated by alternative onshore sources.
• Political dynamics on Capitol Hill could impact specific funding lines or reconciliation packages previously anticipated for autonomous warfare groups.

Q: Analyst asked about the timing of revenue conversion for the new ~$400M IDIQ contract and its margin profile relative to the broader business. / A: Management stated that while the award came slightly later than expected, they remain confident in securing orders later this year, setting up strong visibility for FY27 revenue. Margin-wise, the contract is expected to align with core airborne systems margins, contributing to an overall target of low-to-mid 20s over time.

Q: Analyst inquired how much of the raised FY26 guidance midpoint ($120M increase) was attributable to the Black Sea roll-in versus organic AVEX growth. / A: Management clarified that the increase was roughly 50-50 split. Half of the raise was derivative of existing AVEX performance, and the other half represented the roll-in of Black Sea (Maritime Systems) revenue, indicating healthy dynamics moving forward.

Q: Analyst questioned the impact of political shifts and potential loss of specific reconciliation funding on the business, and asked about supply chain stress from hyperscaler demand. / A: Management noted that core business is supported by base budget increments rather than reconciliation funds, and sees persistent demand for autonomous systems. Regarding supply chains, they see little risk for FY26 due to in-house materials, but have proactively secured onshore alternative sources for critical components like engines and radios to mitigate risks for FY27.

Q: Analyst asked for clarification on the composition of the $16.6B pipeline, specifically whether it includes funded/unfunded mixes and what drives the upside outside of maritime. / A: Management explained that the pipeline expansion was driven by both the $4.9B added from Maritime Systems and a $1.2B organic expansion in Airborne and Global Solutions. The pipeline comprises well-qualified opportunities across funded and unfunded programs, reflecting strong demand for precision strike and contested logistics.