Jonathan Siegmann

Jonathan Siegmann asked about the status of PMA parts for military aircraft, noting it's been characterized as a medium-term opportunity despite executive orders and directives, and inquired about the differences and complexities in qualifying PMA parts for military versus commercial aircraft.

Answer

Eric Mendelson stated that progress has been made on PMA parts for military aircraft, emphasizing the opportunity for the U.S. military to leverage FAA-approved parts for commercial derivative aircraft. He noted that while the administration is focused on execution, it takes time for government processes, but remains bullish on the opportunity.

Jonathan Siegmann asked about the progress and potential acceleration of the opportunity for PMA parts in the military sector, given executive orders and directives from the Secretary of the Army. He also inquired about the differences in qualifying PMA parts for military versus commercial aircraft.

Answer

Eric Mendelson explained that the U.S. military operates many commercial derivative aircraft, for which FAA-approved parts and repairs exist, presenting a clear opportunity. He noted that while the administration is focused on execution, the process can take time. He expressed bullishness on the opportunity as the government executes, declining specific details for competitive reasons.

Jonathan Siegmann with Stifel inquired about the potential for additional frictions in Q3 bookings, given the historical weakness of the January quarter and the recent government shutdown, and whether AeroVironment anticipates challenges in catching up with pent-up demand and funded orders.

Answer

Chairman, President, and CEO Wahid Nawabi acknowledged the timing risk for task orders due to the ongoing budget situation post-shutdown. He expressed confidence in achieving the full-year guidance, noting that the company performed well in Q1 and Q2 despite the shutdown and is prepared with capacity and team to meet aggressive goals for the second half, anticipating significant task orders.

Jonathan Siegmann asked for clarification on AeroVironment's funded backlog, noting that the combined total seemed lower than expected based on prior BlueHalo disclosures, and questioned if accounting changes affected the figures.

Answer

Wahid Nawabi, Chairman, President, and CEO, clarified that the SCDE division (BlueHalo) had just over $300 million in funded backlog at the beginning of the period, not $600 million, and that it increased during the quarter. He explained that significant unfunded contracts are awaiting the release of authorized congressional funding, expecting substantial funded orders in Q2 and Q3. Kevin McDonnell, Executive VP and CFO, added that Q2 contract signings could approach $2 billion.

Jonathan Siegmann questioned the reported funded backlog, noting that the combined figure seemed lower than expected when adding BlueHalo's previously disclosed $600 million to AeroVironment's prior backlog. He asked if accounting changes or any backlog dropping out occurred during the merger.

Answer

Executive VP and CFO Kevin McDonnell clarified that the SCDE division (formerly BlueHalo) had just over $300 million in funded backlog at the beginning of the period, which increased during the quarter. Chairman, President, and CEO Wahid Nawabi added that significant unfunded contracts are in place, with expectations for substantial funded orders in Q2 and Q3 as authorized funding is released.

Jonathan Siegmann asked for clarification on the funded backlog, noting that the current $1.1 billion seemed lower than expected when combining AeroVironment's previous backlog with BlueHalo's reported $600 million. He questioned if accounting changes or other factors led to a reduction.

Answer

Chairman, President, and CEO Wahid Nawabi clarified that the $600 million figure for BlueHalo's funded backlog was not accurate, stating that the SCDE division had just over $300 million at the beginning of the period. He explained that significant unfunded contracts are in place, awaiting the release of authorized funding from Congress and the President, which is expected to convert into substantial funded orders in Q2 and Q3. Executive Vice President and CFO Kevin McDonnell added that contract signings in Q2, including the recently announced laser contract, could exceed $1 billion, potentially approaching $2 billion.

Jonathan Siegmann of Stifel asked about booking trends at BlueHalo since the acquisition announcement and whether its new segment could keep pace with the Autonomous Systems segment on bookings. He also asked if the higher CapEx plans were a recent acceleration.

Answer

CEO Wahid Nawabi expressed strong confidence in BlueHalo's booking ability, highlighting large strategic opportunities in space and directed energy. He confirmed that the increased CapEx plans have already been initiated to scale capacity for high-growth areas across the combined company. Following the question, CFO Kevin McDonnell clarified that the expiration of the JUONS contract vehicle, as Switchblade purchasing moved to PEO Soldier, was the reason for the large drop in unfunded backlog.

Jonathan Siegmann asked about SAIC's strategy to align with the Department of War's announced reforms and how the company plans to pivot its business. He also questioned the timing of the decision to change the company's direction given the dynamic environment.

Answer

Interim CEO Jim Reagan stated SAIC is ready to help implement the Department of War's changes, welcoming greater speed in procurement through vehicles like OTAs and accepting 80-90% adherence to requirements. He emphasized SAIC's readiness for increased AI content, citing the SilverEdge acquisition as proof. The decision to change direction now is driven by a focus on execution, listening to customers, and accelerating growth, with innovation spend being more closely mapped to pipeline opportunities.

Jonathan Siegmann from Stifel asked for details on the financial implications of Kopin's European announcements, specifically regarding disaggregated revenues, the new equity/minority interest line, and the anticipated pace of improvement and capacity development in Europe.

Answer

CEO Michael Murray stated that Kopin currently has zero defense revenue in Europe but has secured an $8 million development agreement with Theon for a color micro-LED for European, Southeast Asian, and NATO markets. He anticipates rapid expansion in 2026, projecting single high millions in revenue from R&D and production, escalating to tens of millions in 2027 and 2028, with potential orders from Europe as early as Q4 this year.

Jonathan Siegmann asked about the expected pace of improvement and capacity in Europe, and how investors should anticipate disaggregated European revenues and the impact on the minority interest line.

Answer

CEO Michael Murray stated Kopin currently has zero defense revenue in Europe but has an $8 million development agreement with Theon for color micro-LEDs for Europe, Southeast Asia, and NATO. He expects rapid expansion in 2026, with high single-digit millions in revenue from R&D and production, growing to tens of millions in 2027-2028, and anticipates initial orders from Europe potentially in Q4 of this year.

Jonathan Siegmann asked for comments on the XQ-58 flying with AI by the Air Force and an update on opportunities with the Air Force. He also sought a contrast between Kratos' open mission system architecture and the AI approaches of new entrants, given Kratos' partnerships across continents.

Answer

Eric DeMarco, Kratos' President and CEO, confirmed that Valkyrie has been flying routinely with the United States Air Force, including F-22s, F-35s, F-15s, and F-16s, deploying weapons and utilizing multiple AI/augmented autonomy packages. He highlighted Kratos' Athena jet drones successfully flying in swarms with leading VC-backed AI software. Mr. DeMarco expressed confidence in Kratos' long-standing experience with augmented autonomy, stating that the company is not concerned about new entrants and expects to secure jet aircraft contracts in several countries.

Jonathan Siegmann asked about the XQ-58 Valkyrie flying with AI for the Air Force, updates on Air Force opportunities, and how Kratos's open mission system architecture contrasts with new entrants' AI pitches.

Answer

Eric DeMarco, President and CEO of Kratos, confirmed Valkyrie flights with the U.S. Air Force (F-22s, F-35s, F-15s, F-16s) since 2019, highlighting their low cost and deployment with various AI/augmented autonomy packages. He emphasized Athena's successful swarm flights with a VC-backed AI company's software, reinforcing Kratos's extensive experience with flying AI-enabled jet drone aircraft and expressing confidence in their proven technology and affordability.

Jonathan Siegmann of Stifel asked for confirmation on the relevance of recent legislative funding, the connection between the Prometheus JV and Israeli defense needs, and the potential to accelerate Prometheus's capacity.

Answer

CEO Eric DeMarco confirmed the direct relevance of funding for low-cost cruise missiles and solid rocket motors, linking it to Kratos's engine business. He affirmed the Prometheus JV is directly relevant to Israel's needs, with demand for tens of thousands of motors. While acceleration is limited, he highlighted a significant opportunity to expand the JV into a merchant supplier for other primes.

Jonathan Siegmann asked for an early outlook on the medical exam business within the health segment for next year, including any environmental factors that might influence its performance.

Answer

CEO Tom Bell confirmed strong trends driven by the administration's focus on reducing the backlog of age claims. He noted the introduction of a fourth provider in some regions but expressed confidence in Leidos' ability to maintain its position through innovation, technology, and strong customer satisfaction. He expects to sustain current performance levels and expand into other managed health services, with the team already preparing for the 2026 recompete.

Jonathan Siegmann asked for an early preview of how Leidos expects its medical exam business within the health segment to perform next year, including any positive or negative impacts from the current environment.

Answer

CFO Chris Cage stated that demand signals remain elevated due to the administration's focus on reducing the backlog of age claims. He acknowledged the introduction of a fourth provider but emphasized Leidos' strategy of staying ahead through innovation, technology, and customer satisfaction. He expects to sustain current performance levels and expand into other managed health services areas, with the team already preparing for the recompete at the end of 2026.

Jonathan Siegmann from Stifel asked about the opportunities for organic investment, particularly in the maritime space, given the strong demand signals from recent government funding initiatives.

Answer

CEO Thomas Bell confirmed excitement for organic investment opportunities aligned with the 'One Big Beautiful Bill,' including FAA modernization and border security. For maritime, he clarified that Leidos will leverage its autonomous vessel expertise by partnering with existing shipyards rather than entering the shipbuilding business itself. CFO Chris Cage noted that investments are being made in a capital-light manner, such as upgrading the Huntsville campus to increase product throughput.

Jonathan Siegmann commented on CACI's impressive Q1 margins, particularly with incremental sales being technology-driven, implying a high incremental margin. He asked for insights into the mix or any one-time benefits. He also inquired if the government's shift to more agile and commercial buying methods is driven by more customers adopting these approaches or existing customers increasing purchases.

Answer

CFO Jeff MacLauchlan confirmed strong technology margins, noting the segment's diverse components, some with higher margins. He stated that Q1 performance de-risks the historical first-half/second-half margin step-up, making it less pronounced this year. Mengucci added that the shift in government buying is a mix of both, with a significant increase in OTAs and CACI's deliberate positioning to support both commercial and traditional FAR/CAS environments, offering agile development and continuous software upgrades.

Jonathan Siegmann followed up on the government's evolving buying practices, asking if the impact is more about customers embracing progressive ways to buy software and agile solutions, or if it's the same customers buying more.

Answer

CFO Jeff MacLauchlan and President and CEO John Mengucci explained it's a combination of both, with a significant increase in the use of OTAs by both existing and new customers. Mengucci emphasized CACI's deliberate positioning to support both commercial and traditional FAR/CAS environments, enabling them to meet the government's demand for agility and commercial-like purchasing of software-defined technology, moving away from long development contracts.

Jonathan Siegmann of Stifel inquired about the tangible impact and timing of the DoD's software acquisition directive and the Army's system consolidation initiative, asking if benefits could be seen this year and if similar consolidation is expected in other military branches.

Answer

President and CEO John Mengucci expressed strong support for the government's focus on software, stating it is central to CACI's growth model in both enterprise and mission systems. He emphasized that CACI's approach is to develop software to support the mission, positioning the company well for consolidation efforts that seek efficiency and speed. He believes these trends will drive more software solutions across government.

Jonathan Siegmann inquired about the strong global demand signals for unmanned systems, particularly the customer aspiration for lower costs. He asked about the attractiveness of supplying components and drones at much lower prices but substantially higher volumes, and potential capital investment opportunities in this area.

Answer

Executive Chairman Robert Mehrabian stated that while lower costs are a long-term consideration, customers currently prioritize accuracy and effectiveness. He highlighted Teledyne's cost-competitive drones, such as the lightweight Rogue One quadcopter and nano drones, which offer high capability. He emphasized that the Ukraine experience shows no single solution, and while cost is important, accuracy and weight are equally critical.

Jonathan Siegmann of Stifel inquired about the global demand for unmanned systems, the potential for supplying components at lower costs for higher volumes, and opportunities for increased capital investment in this area, given customer aspirations for more affordable capabilities.

Answer

Executive Chairman Robert Mehrabian emphasized that while cost is a factor, customers currently prioritize accuracy and capability, noting Teledyne's drones (Rogue 1, nano drones) are cost-competitive due to their lightweight and effectiveness. He highlighted that the Ukraine experience suggests accuracy and weight are as crucial as cost, and there's no single low-cost solution.

Jonathan Siegmann asked about Teledyne's product relevance to the 'Golden Dome' defense initiative and the potential size of the opportunity. He also questioned if the increased share buyback authorization indicates a slowing M&A pipeline or a view that the stock is undervalued.

Answer

CEO George Bobb and Executive Chairman Robert Mehrabian confirmed Teledyne is well-positioned for 'Golden Dome' due to its strength in space-based imaging and electronic subsystems. Regarding the buyback, Mehrabian explained it provides optionality, as M&A pricing is currently 'insane.' The company will be selective with acquisitions and may repurchase stock if it offers better value, supported by a low 1.6x debt-to-EBITDA ratio.

Jonathan Siegmann inquired about Teledyne's potential role in the 'Golden Dome' defense initiative and asked if the increased share buyback authorization indicates a slowing M&A pipeline or a view that the stock is undervalued.

Answer

President & CEO George Bobb and Executive Chairman Robert Mehrabian stated that Teledyne is well-positioned for 'Golden Dome' due to its extensive portfolio of space-based imaging and electronic subsystems. Regarding capital allocation, Mehrabian explained the buyback provides optionality, as M&A valuations are currently 'insane.' They will remain on the sidelines for large deals until pricing moderates, viewing their own stock as a potential better value.

Jonathan Siegmann asked about Teledyne's role and potential opportunity in the 'Golden Dome' defense initiative. He also questioned if the increased share buyback authorization indicates a slowing M&A pipeline or a view that the stock is undervalued.

Answer

CEO George Bobb and Executive Chairman Robert Mehrabian stated Teledyne is well-positioned for Golden Dome due to its strength in space-based imaging and electronics. On capital allocation, Mehrabian explained the buyback offers optionality, as M&A pricing is currently 'insane.' The company will remain disciplined and may repurchase shares if they offer the best value.

Jonathan Siegmann of Stifel Institutional inquired about the drivers of the sequential margin improvement and asked for confirmation on the recent strengthening in the freight end market.

Answer

CEO & President Igal Zamir attributed the consistent margin improvement to long-term strategic initiatives focused on operational efficiency, automation, workforce productivity, and disciplined cost management, rather than any one-off benefits. He confirmed that the freight end market, which had previously shown concern over tariffs, is now strengthening, leading to increased MRO intake from cargo carriers.

Jonathan Siegmann of Stifel sought to reconcile the seemingly contradictory trends of a sequentially lower backlog in Federal Solutions with the company's high growth expectations for the second half.

Answer

CFO Matt Ophelis confirmed that looking at metrics like Remaining Performance Obligations (RPO) and funded backlog provides the correct view of the business's strength over the next 12-18 months, which underpins their confidence in the growth ramp. CEO Cary Smith reinforced this by noting that funded backlog is up 14% year-over-year, indicating strong near-term visibility.

Jonathan Siegmann of Stifel asked for Booz Allen's perspective on recent directives to change software acquisition and streamline the FAR. He also inquired about what aspects of this new procurement environment the company finds most exciting for its long-term prospects.

Answer

CEO Horacio Rozanski responded enthusiastically, stating that a rewrite of the FAR is overdue and would allow the entire industry to operate more efficiently. He highlighted that executive orders accelerating the use of technology, especially AI, are fundamental for national competitiveness and create significant opportunities for Booz Allen. Rozanski concluded that the push to deploy technology faster while removing barriers is what excites the company most and offers the most medium-term upside.