Louie DiPalma

Louie DePalma inquired about Sterling's expansion into Texas, specifically if they have won jobs on the east side and other markets, clarifying the 'attacking from the east and west' strategy. He also asked if 2026 geographic expansion is primarily focused on Texas or if other data center/mission-critical geographies are targeted. Finally, Mr. DePalma questioned if profitability in new markets would be lower than core E-Infrastructure mission-critical business.

Answer

CEO Joseph Cutillo clarified that 'attacking from the east' refers to the Dallas/Houston corridor via their Plateau business, and 'attacking from the west' uses Rocky Mountain resources for West Texas, where they are actively winning jobs, with plans for strategic acquisitions. For 2026, he confirmed the lion's share of data center growth will be in Texas and the Southeast, with early activity in the Northeast and future expansion into the Pacific Northwest (for 2027 projects) and potentially Ohio/Indiana. Mr. Cutillo stated that margins in new markets would be similar if equipment suites are moved, and while acquisitions might start with lower margins, they improve with Sterling's processes. Multi-phase projects also see margin improvement over time.

Louie Dipalma from William Blair inquired about the impact of increased data center hyperscaler CapEx on Sterling's core markets and whether the data center book-to-burn ratio remained above one. He also asked about the strategy and timeline for geographic expansion into Texas and the Northwest.

Answer

CEO & Director Joseph Cutillo confirmed Sterling is extremely well-positioned for the data center capital boom and is actively expanding into new geographies like Texas, with plans for the Northwest in 2026-2027. He noted that data centers now constitute 62% of the E-Infrastructure backlog. Mr. Cutillo stated that expansion will be a mix of organic growth and acquisitions, and he would be disappointed if Sterling didn't secure wins in Texas by the end of 2025.

Louie DiPalma asked about the origin of the OEM licensing fuel pump deal and the APU distribution agreement, specifically whether they were competitive situations or arose from existing partnerships. He also questioned if M&A is necessary for margin expansion or if there's a long runway for organic margin expansion, and if the OEM licensing fuel pump deal would typically be higher margin, similar to the Honeywell deal.

Answer

President and CEO John Cuomo stated that both agreements resulted from focused relationship building, with one being more competitive and the other a partnership. CFO Adam Cohn confirmed that M&A is not necessary for margin expansion, citing historical organic margin improvement, insourcing repairs, operating leverage, and optimization efforts as drivers. He also confirmed that OEM licensing opportunities typically yield higher margins than the consolidated margin, similar to the Honeywell program.

Louie DiPalma asked about the origin of the OEM licensing fuel pump deal and the APU distribution agreement, specifically whether they were competitive situations or arose from existing partnerships. He also questioned if VSE could expand EBITDA margins organically without M&A, and if the OEM licensing fuel pump deal would be higher margin, similar to the Honeywell deal.

Answer

CEO John Cuomo stated that both agreements resulted from building relationships with OEM partners, with one being a competitive process and the other a partnership. CFO Adam Cohn confirmed that M&A is not necessary for margin expansion, citing historical organic improvement from insourcing repairs, operating leverage, and supply chain optimization. He also confirmed that OEM licensing deals, like the fuel pump agreement, typically yield higher margins, similar to the Honeywell program.

Louie DiPalma of William Blair & Company, L.L.C. asked about the origin of the Eaton Hydraulics MRO agreement, the progress of the Honeywell Fuel Control integration, and VSE's expected future M&A cadence and deal size.

Answer

CEO John Cuomo explained the Eaton deal originated from VSE's OEM-centric strategy of solving aftermarket problems for partners and that he sees it as a starting point for a broader relationship. Regarding Honeywell, he stated the goal is to become the manufacturer of record well before year-end. On future M&A, Cuomo emphasized a disciplined approach, stating VSE would not consider new deals until 2026 and that the pipeline includes a mix of small, medium, and transformational opportunities, making the timing unpredictable.

Louie DiPalma asked about the potential for trapped corporate costs following the Fleet segment divestiture and the resulting pro forma margin. He also inquired about the expected margin uplift in 2026 from the Honeywell integration and whether Boeing's Aviall business is a potential acquisition target for VSE.

Answer

CFO Adam Cohn stated that some trapped corporate costs are expected, likely at the higher end of the previously guided $3-$4 million range, and that pro forma margins should improve by over 100 basis points post-divestiture. President and CEO John Cuomo clarified that the Honeywell margin uplift will be largely realized in 2025, not 2026. Regarding M&A, Cuomo said he does not see Aviall coming to market and that VSE is comfortable with its current pipeline, though it is now positioned to consider larger assets.

Louie DiPalma sought clarification on whether nearly all of Iridium's 9 MHz spectrum could theoretically be used for NTN Direct.

Answer

CEO Matt Desch confirmed that, theoretically, from a long-term perspective, nearly all 9 MHz could be used for NTN Direct. He added that the evolution of services like original broadband connections to Starlink and other terminals is freeing up spectrum, making the remaining spectrum more flexible.

Louie DiPalma asked about the next milestone for the new PNT chip. He also inquired about the maximum amount of Iridium's 9 MHz spectrum that could be used for NTN Direct, considering existing network usage. Additionally, he questioned if safety services like GMDSS and aviation communications could shift to NTN Direct or if they would need to remain on the existing network, and sought clarification on whether nearly all 9 MHz could theoretically be used for NTN Direct.

Answer

CEO Matt Desch stated that prototypes for the new PNT chip are available, with commercial availability expected in June/July, and the key milestones will be partners announcing product implementations. He explained that NTN Direct is a narrowband service (100-200 kHz) that can be efficiently positioned within the network, capable of supporting millions of customers with minimal spectrum. He noted that shifting safety services to NTN Direct is not practical due to lengthy regulatory approval processes (e.g., 10 years for GMDSS) and lack of inherent advantages. Theoretically, nearly all 9 MHz could be used for NTN Direct in the long term, especially as spectrum-intensive broadband services evolve.

Louie DiPalma from William Blair asked if IoT subscribers would turn positive later in 2025 after a partner's plan changes are annualized, whether the associated contract would remain fixed-price, if the main CapEx for NTN Direct would be completed in 2025, and about the health of the original Iridium NEXT satellites.

Answer

CEO Matt Desch expects the IoT subscriber trend to normalize in 2026 after the one-year transition period for the partner's plan change. He confirmed discussions are ongoing for a new 'win-win' contract structure. He also stated that the 'big lump' of NTN Direct CapEx will be largely completed this year. Finally, he confirmed all 80 satellites are healthy, no spares have been used, and the network is performing well beyond original expectations, suggesting the useful life could be extended again in the future.

Louie DiPalma asked if the better-than-expected broadband results reinforce the view of a return to growth in 2025. He also inquired about the level of business development activity for Satelles since the acquisition, especially given recent geopolitical conflicts and GPS spoofing.

Answer

CEO Matt Desch stated that the broadband performance was in line with internal expectations and reinforces Iridium's strong position as a companion service, though it is not considered a primary growth driver. He confirmed that business development activity for Satelles has grown 'dramatically' since the acquisition, driven by global demand to counter GPS jamming, which has led to an expansion of the sales footprint and team.

Louie DiPalma asked about the drivers behind the Silvus guidance raise, specifically if it was primarily due to non-Ukraine deployments like the Taiwan loitering missiles order and other contracts. He also inquired about an uptick in demand for video systems from hospitals, schools, and public venues in response to recent high-profile incidents and the need for increased camera density.

Answer

Executive Vice President and COO Jack Molloy confirmed the Silvus guidance raise is a mix of international and unmanned systems, noting strong relationships with customers like Anduril, where two-thirds of their products incorporate Silvus radios. Executive Vice President and CFO Jason Winkler, Chairman and CEO Greg Brown, and Executive Vice President and CTO Mahesh Saptharishi stated that video demand is driven by AI-driven analytics and increased camera density, with camera deployments up slightly in 2025 and a better 2026 expected. They highlighted the growth of their cloud Alta platform and hybrid solutions, along with generative AI capabilities supporting safety and compliance use cases beyond traditional security.

Louie DiPalma of William Blair & Company asked if the Silvis acquisition provides a competitive advantage for Motorola's drone-as-a-first-responder offering or if the technology is primarily targeted at battlefield applications. He also requested more details on the integration of LEO satellite connectivity into the network.

Answer

EVP & CTO Mahesh Saptharishi explained that near-term use of Silvis for drones in North American public safety is limited by spectrum availability, but its spectrum monitoring capability is valuable for drone detection now. EVP & COO Jack Molloy noted a significant opportunity at the borders. Regarding LEO, Mahesh Saptharishi clarified that support will be integrated via base stations to provide redundancy, with discussions underway with LEO providers.

Louie DiPalma asked about the technology behind the superior audio quality in Motorola's microphones, the specific AI provider for AI Assist, and how the BRINC partnership for drones expands their market opportunity.

Answer

EVP and CTO Mahesh Saptharishi attributed the audio quality to decades of microphone design expertise coupled with advanced AI for noise cancellation. He revealed they use Anthropic's Claude model for AI Assist due to its safety features. Chairman and CEO Gregory Brown praised the BRINC partnership for its US-made products and expanded capabilities, which Saptharishi noted aligns with a sharp increase in FAA waivers for 'drone as a first responder' programs.

Louie Dipalma asked for an assessment of the current U.S. state and local government spending environment compared to prior years. He also inquired about Motorola's plans to introduce more advanced AI applications to its LMR radios at the edge.

Answer

EVP & COO John Molloy characterized the state and local funding environment as 'great' and as strong as it was two years ago, citing the prioritization of public safety and healthy local tax revenues. EVP & CTO Mahesh Saptharishi detailed that while applying AI to mission-critical use cases is complex, the company already has significant edge AI in its video cameras and plans to enhance its 'Vicki' radio assistant with generative AI, leveraging the devices' superior audio quality.

Louie DiPalma asked about the addressable market for Parsons' DroneArmor system in both the U.S. and internationally, given the increased focus on air defense. He also inquired about the demand for mega projects in the Middle East, particularly Saudi Arabia, and the potential for Parsons to export its intellectual property, like DroneArmor and iNET, to the region for upcoming global events.

Answer

Carey Smith, Chair, President, and CEO, highlighted DroneArmor's Technology Readiness Level 9 and its broad market opportunities with the Department of State, Homeland Security, and FAA. Smith noted Saudi Arabia's shift towards fiscal discipline, prioritizing projects for the 2030 World Expo and 2034 FIFA World Cup, and confirmed Parsons' strong position on giga projects in the Middle East. He also stated that iNET is already deployed for traffic management in Riyadh, with potential for other IP offerings pending ITAR and technical assistance agreement processes.

Louie DiPalma asked about Parsons' DroneArmor system, its addressable market in the U.S. and internationally, and the demand for mega projects in the Middle East, including potential shifts from transportation to data centers. He also questioned the company's ability to export its intellectual property and technology solutions, like DroneArmor and iNET, to the Middle East.

Answer

Carey Smith, Chair, President, and CEO, highlighted DroneArmor's Technology Readiness Level 9, modular open system architecture, and AI/ML capabilities, identifying opportunities with the Department of Homeland Security, FAA, and Department of State. Regarding the Middle East, Smith noted Saudi Arabia's fiscal discipline, prioritizing projects for upcoming global events (2030 World Expo, 2034 FIFA World Cup) and scaling back speculative real estate. He confirmed Parsons' #1 program manager position in Saudi Arabia, UAE, and Qatar, with expansion into defense, border security, and tourism. Smith stated that the iNET solution is exportable and used in Riyadh, while federal offerings like electronic security and biometrics could be provided with appropriate ITAR/TAA clearances.

Louie DiPalma of William Blair asked about the revenue trajectory of large U.S. infrastructure projects, the wind-down of the confidential contract, and details of the new satellite communications partnership with Globalstar.

Answer

CEO Cary Smith explained that infrastructure revenue profiles vary by project role, being front-loaded for design work and steady for program management. She noted the confidential contract wind-down would be immaterial. Regarding the Globalstar partnership, Ms. Smith described it as an innovative solution combining Parsons' technology with Globalstar's LEO constellation to provide assured PNT in contested environments, with successful deployments already active.

Louie DiPalma from William Blair asked for details on a confidential contract's revenue recognition, Parsons' potential role in a U.S. missile defense system analogous to Israel's Iron Dome, and the potential impact of federal funding shifts on its U.S. infrastructure projects.

Answer

CEO Carey Smith and CFO Matt Ofilos clarified the confidential contract's $242 million is initial funding and considered solid, with potential for upside if a related program restarts. Carey Smith detailed Parsons' extensive missile defense, cyber, and systems integration experience, positioning them well for a layered defense initiative. She also noted that their infrastructure funding is from state, local, and IIJA sources, and that any reallocation of federal funds towards 'hard infrastructure' would be a positive.

Louie DiPalma asked about the discrepancy between recent 20%+ organic growth and the long-term mid-single-digit guidance. He also inquired if digital twin software is being used on recent large IIJA contracts and how the risk profile of these new contracts differs from legacy ones that incurred write-downs.

Answer

CEO Carey Smith explained the guidance reflects realism, accounting for typical program run-offs and recompete risks, like a key confidential contract. She confirmed digital twin capabilities are used across both segments, particularly with the Missile Defense Agency and on airport projects. Smith emphasized that new IIJA contracts are for lead design work, which is Parsons' core strength, and do not carry the same construction-related risks as the legacy programs from the 2010-2015 era that caused write-downs.

Louie DiPalma asked about Gilat's M&A targets following its private placement, whether Stellar Blu achieved its second milestone of $120 million in new backlog by December 2025, Stellar Blu's 2025 revenue and 2026 growth projections, and progress with Airbus for Sidewinder LineFit inclusion.

Answer

CEO Adi Sfadia stated that Gilat's M&A focus is primarily on defense, seeking companies with $50M+ or $100M+ revenues that are accretive and not turnarounds, while also exploring adjacent markets and opportunistic minority investments. Mr. Sfadia confirmed Stellar Blu did not fully achieve the $120 million airline milestone, with a large order slipping to 2026 for 2027 revenues, but emphasized mitigated risks due to strong antenna acceptance. He reported Stellar Blu's 2025 revenues were about $127 million, with expectations for double-digit unit delivery growth in 2026. Mr. Sfadia also confirmed an agreement with SES to bring Sidewinder for LineFit with Airbus, though it's not yet part of the official Airbus HBC+ plan.

Louie DiPalma of William Blair asked for an update on Gilat's progress with Airbus regarding the inclusion of the Sidewinder ESA terminal into its LineFit program.

Answer

CEO Adi Sfadia confirmed an agreement with SES to enable Sidewinder LineFit with Airbus, allowing SES to install the terminal within Airbus premises, though it's not yet part of the official Airbus HBCplus plan.

Louie Dipalma of William Blair asked about the primary contributors to the improved guidance, the current backlog for Stellar Blue's Sidewinder terminals, the status of the acquisition-related milestone payments, and the company's perspective on the OneWeb Gen 2/Iris Squared programs and the recent Intelsat-SES merger.

Answer

CEO Adi Sfadia attributed the raised guidance to improved visibility in both the core business and Stellar Blue, with some new awards contributing revenue into 2026. He detailed the three Stellar Blue earn-out milestones, stating the first was missed, the second has a 'very good chance' of being met, and the third is too early to call. Sfadia highlighted Iris Squared as a top priority and noted that business with the newly merged Intelsat/SES continues with strong momentum.

Louie Dipalma inquired about the remaining milestones for the Boeing line-fit certification and the expected revenue linearity for the Peru segment in upcoming quarters.

Answer

CEO Adi Sfadia explained that the Boeing line-fit program is in the certification process, with qualification expected in the next 2-3 quarters. Regarding Peru, he noted that while the annual revenue run rate is expected to be $45-$50 million, Q1 was low due to project renewal delays, which are anticipated to resolve in Q2 or Q3, with a significant hardware delivery also expected in Q3.

Louie DiPalma asked about the status of discussions and contract timeline for the IRIS2 constellation, trends and pipeline in the defense vertical, the revenue outlook for the Peru segment beyond 2025, and an update on Stellar Blu's contingent payments.

Answer

CEO Adi Sfadia described IRIS2 discussions as being in early stages, with RFPs expected around mid-2025. He detailed a strong defense pipeline driven by the DataPath acquisition and synergies with the U.S. DoD. CFO Gil Benyamini stated that Peru is expected to grow long-term despite a potential dip in 2025 from contract renewal delays. Regarding Stellar Blu's earn-out payments, Sfadia noted it is too early to determine, with the first milestone evaluation occurring mid-year.

Michael Louie DiPalma asked about Gilat's potential role as a supplier for Europe's Iris² constellation, the competitive environment, and any potential implications for the OneWeb Gen 2 procurement process.

Answer

CEO Adi Sfadia stated that Gilat is well-positioned for the Iris² project through its EU subsidiaries and has already responded to RFIs, viewing ST Engineering iDirect as a potential competitor. He clarified that Gilat considers Iris² and OneWeb Gen 2 as two separate opportunities, as Iris² is focused on defense applications while OneWeb is commercial, though synergies could present greater potential.

Louie DiPalma asked about potential synergies between the heavy maintenance business, particularly after the HAECO Americas deal, and AAR's other segments like component repair and Trax. He also questioned if the landmark Trax win with Delta Air Lines has stimulated the pipeline for other airlines.

Answer

CEO John Holmes confirmed significant synergies, noting that heavy maintenance drives volume to component shops through aircraft possession and long-term customer commitments. He added that Trax primarily synergizes with parts supply and component repair, while the AeroStrat acquisition directly supports heavy maintenance planning. Holmes affirmed that the Delta Air Lines win has absolutely stimulated the Trax pipeline, opening doors and with Delta serving as a valuable reference during its ongoing 3-year implementation.

Louie DiPalma (William Blair & Company, L.L.C.) asked about the synergies between AAR's heavy maintenance business and its component repair and Trax software segments. He also inquired if the landmark Trax win with Delta Air Lines has stimulated the sales pipeline for other airlines.

Answer

Chairman, President, and CEO John Holmes confirmed synergies, explaining that heavy maintenance drives volume to component shops and that Trax has synergies with parts supply and component repair. He affirmed that the Delta Air Lines win has 'absolutely' opened doors for Trax, highlighting Delta's influence and willingness to serve as a reference.

Louie Dipalma of William Blair inquired about the long-term revenue potential for the Trax software solution, costs for the new supplier marketplace, the recent growth of the acquired Triumph business, and the demand outlook for the new Oklahoma City and Miami hangars.

Answer

CEO John Holmes stated the goal is to double Trax's revenue again from its current ~$50 million run rate, driven by new wins like Delta and upgrading existing customers. CFO Sean Gillen confirmed costs for the supplier portal are being incurred this fiscal year. Gillen also noted the Triumph business is now part of organic growth, contributing to the 8% growth in Repair & Engineering. Holmes confirmed the new hangar capacity is already sold and will be filled immediately upon opening.

Louie Dipalma from William Blair asked about the long-term revenue potential for the Trax software business, any significant costs associated with its new supplier marketplace, the recent growth rate of the acquired Triumph business, and the demand outlook for the new Oklahoma City and Miami MRO hangars.

Answer

CEO John Holmes stated that after doubling Trax revenue to ~$50 million since its acquisition, the goal is to double it again through new wins like Delta and by upgrading existing customers. CFO Sean Gillen confirmed there are costs associated with the supplier portal rollout in the current fiscal year. Gillen also noted the Triumph business is now part of organic results and contributed to the segment's 8% growth. Holmes confirmed that the new hangar capacity is already sold out ahead of its opening in calendar 2026.

Louie DiPalma inquired about the potential margin accretion from the Landing Gear business divestiture and whether recent Trax software wins would contribute to future margin expansion.

Answer

CFO Sean Gillen clarified that while the Landing Gear divestiture will be accretive to margins, the impact will be modest as the business was only slightly profitable. CEO John Holmes confirmed that the Trax business is AAR's highest-margin segment, and recent wins with Cathay Pacific and Singapore Airlines, along with a strong pipeline, will drive overall margin expansion as it scales.

Louie Dipalma of William Blair asked if the USM business has hit an inflection point, the timeline for new distribution agreements to scale, and the company's long-term view on net leverage and M&A appetite amid rising interest rates.

Answer

Executive John Holmes stated it was early but that signs were encouraging for USM, with both USM and distribution performing well simultaneously. He projected the Chromalloy deal would contribute immediately, while the Whippany agreement would ramp over multiple quarters into FY26. Executive Sean Gillen reiterated the focus on deleveraging to a 2x net leverage target within two years post-acquisition, while maintaining a long-term appetite for M&A in the aftermarket.

Louie DiPalma with William Blair asked about the sentiment from the Reagan Defense Forum regarding AeroVironment's market positioning and inquired whether the long-haul laser communications contract had been upsized from $240 million to $385 million, also asking about the funding status and delivery of terminals for that program.

Answer

Chairman, President, and CEO Wahid Nawabi stated that AeroVironment is seen as a role model company at the Reagan Defense Forum, setting the pace for agile, self-funded development and rapid scaling in critical capability gaps. He confirmed the long-haul laser communications contract has options up to $385 million, with $240 million originally committed, but the vast majority is not yet funded due to government shutdown and budget delays. He noted that deliveries are just beginning. Executive Vice President and CFO Kevin McDonnell clarified that the $381 million includes options.

Louie DiPalma asked about the AV Halo Unified software platform's integration with third-party hardware and its potential as an open platform for third-party software developers, similar to Palantir's Maven Smart system.

Answer

Wahid Nawabi, Chairman, President, and CEO, confirmed that AV Halo integrates the best of AeroVironment and BlueHalo software, enables interoperability with third-party hardware, and supports third-party software development via an open platform/API. He emphasized AV Halo's development from battlefield expertise, focusing on command and control (C2) interoperability at the edge, and significant ongoing investment in software innovation.

Louie DiPalma inquired about the AV_Halo unified software platform's integration capabilities with third-party hardware providers and its potential to be an open platform for third-party software developers, drawing parallels to Palantir's Maven Smart system.

Answer

Chairman, President, and CEO Wahid Nawabi confirmed that AV_Halo is designed to integrate with third-party devices and platforms, and it supports third-party software development via an open API. He emphasized AeroVironment's unique advantage in developing C2 interoperability at the battlefield edge, backed by significant investment in its software engineering department.

Louie DiPalma asked about the AV Halo Unified software platform, specifically how it integrates with third-party hardware providers and if there's potential for it to be an open platform for third-party software developers to build applications.

Answer

Chairman, President, and CEO Wahid Nawabi confirmed that AV Halo already enables integration and interoperability with third-party devices and hardware systems. He also stated that it is designed to be an open platform, allowing third-party companies to develop software as an API, with existing solutions already incorporating third-party apps. Mr. Nawabi highlighted that AV Halo was built from the ground up with expertise from the battlefield edge, providing a unique competitive advantage in command and control interoperability at lower levels.

Louie Dipalma of William Blair asked about the impact of the U.S. Army's transformation initiative on drone demand, the foreign military sales pipeline for Switchblade, the sequential change in total backlog, and the market opportunity for the new P550 and Red Dragon products.

Answer

CEO Wahid Nawabi confirmed the Army's initiative represents a significant incremental opportunity for AeroVironment's core products. He stated there were no write-downs in the backlog and that the change was due to the conversion of unfunded to funded orders. Later in the call, CFO Kevin McDonnell clarified that a large unfunded IDIQ contract expired as purchasing authority shifted to a new group (PEO Soldier), which will use a new vehicle. Nawabi expressed high confidence in the P550 and Red Dragon, expecting them to become major revenue drivers with strong international interest.

Louie DiPalma sought confirmation on whether BlueHalo is also projected to generate nearly $1 billion in FY26 revenue, similar to AVAV's standalone outlook. He also asked about the status of a second JUMP 20 order mentioned last quarter and for clarification on the nature of the Army's stop-work order.

Answer

Wahid Nawabi, Chairman, President and CEO, directed the question on BlueHalo's forecast to the S-4 filing, expressing bullishness on the combined entity. He confirmed one of two large JUMP 20 orders has closed (Denmark, $181M) and the second is expected in Q4 or early Q1 FY26. He clarified the stop-work order is for U.S. government-funded FMS contracts, which the DoD is re-evaluating. CFO Kevin McDonnell added that combined guidance will be issued post-close.

Louie DiPalma asked about progress on integrating Switchblade into the Kinesis software ecosystem, the potential for Kinesis to serve as a common operating system for BlueHalo products, and the impact of the Ukraine conflict on the Loitering Munitions segment.

Answer

Wahid Nawabi, Chairman, President, and CEO, stated that integrating Switchblade with the Kinesis ecosystem is a planned initiative, but its priority is driven by customer requirements, which currently focus on immediate delivery with existing controllers. He confirmed the long-term strategic goal is a common operating picture across all company platforms, including future BlueHalo assets post-acquisition. Regarding Ukraine, Nawabi emphasized that global demand for both UAS and loitering munitions is highly diversified and robust, driven by a fundamental shift in global defense strategy that extends well beyond any single conflict.

Louie DiPalma from William Blair sought clarification on which programs fall under the new $990 million Switchblade IDIQ, its relation to LMAMS, LASSO, and Replicator, and asked if the new contract includes improved margins from better pricing terms.

Answer

CEO Wahid Nawabi explained that the new IDIQ, under the U.S. Army's 'Lethal Unmanned Systems' (LUS) terminology, is the successor to the previous LMAMS contracts. He clarified it can fulfill needs for the Army, Ukraine aid packages, and Replicator initiatives for the Army. CFO Kevin McDonnell and CEO Wahid Nawabi clarified that while they expect overall LMS segment profitability to improve with volume, the key contractual improvement is more favorable progress payment terms, which will improve working capital and cash flow.

Louie DiPalma from William Blair asked if 25 satellites in orbit is a sufficient estimate to support beta trials in North America in 2026. He also inquired if the $1 billion in contracted revenue commitments applied only to the three definitive commercial agreements and asked about the average duration of these commitments, specifically if they were similar to STC's 10-year deal. Lastly, he asked about the progress of technology for recombining AT&T and Verizon spectrum and combining mobile satellite spectrum.

Answer

Scott Wisniewski, President and Chief Strategy Officer, and Andy Johnson, CFO and Chief Legal Officer, confirmed that 25 satellites is a fair proxy for North America beta trials. Scott Wisniewski clarified that the $1 billion in commitments is primarily from definitive agreements but includes other binding agreements, with durations varying (e.g., 5, 6, 10 years). Abel Avellan, Chairman and CEO, stated that the spectrum recombination technology is working very well, enabling nationwide service by combining AT&T, Verizon, and AST SpaceMobile's own spectrum.

Louie DiPalma asked if 25 satellites in orbit is a sufficient estimate to support beta trials in North America in 2026, sought clarification on the $1 billion in contracted revenue commitments (number of definitive agreements, average duration), and inquired about the performance of satellite processing technology in combining disparate spectrum holdings.

Answer

Scott Wisniewski, President and Chief Strategy Officer, confirmed that 25 satellites is a fair proxy for North America beta trials. He clarified that the $1 billion in commitments primarily stems from definitive agreements but also includes other binding agreements, with durations varying from five to ten years. Abel Avellan, Chairman and CEO, stated that the technology for combining AT&T, Verizon, and mobile satellite spectrum for nationwide service is working very well and will be ready for intermittent service early next year.

Louie DiPalma inquired about the M&A pipeline, asking if it's becoming more challenging for Karman Space & Defense to find accretive deals given its high EBITDA relative to the industry. He also asked about the potential impact of major changes to the Artemis program and Karman's current assumptions for it.

Answer

CEO Tony Koblinski affirmed that finding accretive deals is not harder, citing a well-established M&A process for off-radar opportunities and consistent valuations. He noted Karman is ahead of its advertised pace with three deals in 12 months and expects more. For Artemis, he mentioned removing Space Launch System forecasts but confirmed receiving orders for Orion capsule and Lunar Lander (CLIPS), anticipating solid demand amidst an impressive launch cadence.

Louie DiPalma inquired about the health of Karman Space & Defense's M&A pipeline, specifically if it's becoming more challenging to find accretive deals given the company's high EBITDA. He also asked about the potential impact of major changes to the Artemis program and the company's assumptions regarding it.

Answer

CEO Tony Koblinski affirmed that the M&A pipeline remains healthy, noting they are ahead of their advertised pace for acquisitions and are not observing significant differences in valuations for their target deals. Regarding Artemis, he mentioned that Space Launch System forecasts have been removed, but they see solid demand from Orion and other related programs, highlighting the impressive and steady launch cadence across various space providers.

Louie DiPalma questioned whether the strong backlog would allow for increased pricing power and continued margin expansion. He also asked for color on how the recent MTI and ISP acquisitions are contributing to business segments and expanding prime contractor partnerships.

Answer

CEO Tony Koblinski stated that while he expects modest margin expansion from operational efficiencies, the company would not use its strong backlog for aggressive price increases, emphasizing its partnership approach with customers. He detailed that the MTI and ISP acquisitions are immediately accretive, bringing new capabilities, classified programs, and new customer relationships that are already enabling cross-selling opportunities.

Louie DiPalma questioned whether Carmen expects to maintain its pricing power and continue margin expansion given its strong backlog. He also asked for color on how the recent MTI and ISP acquisitions are contributing to business segments and expanding partnerships with prime contractors.

Answer

CEO Tony Koblinski explained that the company works collaboratively with customers and does not expect the strong backlog to directly translate to higher pricing, though he anticipates modest margin expansion from operational efficiencies. He detailed that the MTI and ISP acquisitions have added new capabilities, customers, and are already being integrated to cross-sell across the business.

Louie DiPalma inquired about the impact of the government shutdown and the rationale behind the guidance reduction, specifically asking if the funding environment for the defense and intelligence business is improving and what assumptions are baked into the negative 21% civil guidance regarding further cuts or stabilization.

Answer

Horacio Rozanski (Chairman, CEO and President) highlighted the extreme bifurcation, noting the civil business faces the most challenging market in a generation with procurement delays, while national security is stronger despite friction and slower ramp-ups. Matt Calderone (EVP and CFO) clarified that the civil guidance assumes no further cuts beyond those discussed in Q1, but anticipates a competitive procurement environment with pricing pressure. Kristine Anderson (EVP and COO) confirmed the civil business has stabilized since earlier reductions, but the overall environment remains slow, with growth expected in the medium term.

Louie Dipalma of William Blair inquired about Booz Allen's strong 1.4x book-to-bill ratio, recent high-tech contract wins similar to those of new defense tech firms, and whether the procurement environment has improved. He also asked about the level of interest from Silicon Valley tech partners and the implications of shifting to fixed-price, outcome-based contracts.

Answer

CEO Horacio Rozanski confirmed the business has stabilized, highlighting that Booz Allen's ability to make technology work in extreme mission conditions is a key differentiator. He noted the procurement environment has improved but is still operating below historical speeds. Rozanski also emphasized strong partnerships with tech companies, who see Booz Allen as a premier partner for mission integration. CFO Matt Calderone added that fixed-price contracts are a potential 'win-win' for both the company and its customers.

Louie DiPalma of William Blair asked about the future of major AI-related programs like Advana and Thunderdome and whether optimism for the AI business has changed amid government scrutiny.

Answer

Horacio Rozanski, Chairman, CEO and President, expressed strong optimism, stating AI is a core strength and the focus has shifted from 'if' to 'how quickly' AI is adopted. He confirmed they are bullish on key programs like Advana and Thunderdome, where their value is in integrating commercial tech with their own proprietary solutions. Matthew Calderone, EVP and CFO, added they are actively working to convert these large programs to outcome-based contracts.

Louie DiPalma from William Blair asked if the prior 5-8% long-term revenue guidance is still a reasonable benchmark, how the current environment compares to the 2011 sequestration, and if unpriced options in the backlog are at risk.

Answer

CEO Horacio Rozanski differentiated the current situation from sequestration, describing it as a shorter adjustment period focused on reinvesting efficiencies into technology, not across-the-board cuts. CFO Matt Calderone added that the contracting environment is now focused on outcomes and innovation, the opposite of the low-price focus during sequestration. He also noted the company's versatility allows them to redeploy talent to new priorities quickly.

Louie DiPalma of William Blair asked about the strength of the demand environment in light of potential headwinds from the Advana recompete and a VA contract loss, and questioned how technology scope expansions like AI and cyber are impacting contract values.

Answer

CEO Horacio Rozanski stated the company is not defined by any single contract, highlighting the ability to redeploy talent and the Defense business's strong momentum, evidenced by the $2.6B SSMARTT win. CFO Matt Calderone noted the portfolio's resilience. Rozanski confirmed that technology convergence is a key growth driver, leading to scope expansion as AI and cyber are integrated into existing mission contracts.

Louie DiPalma inquired about the progress of the Navy Spectral program.

Answer

President and CEO John Mengucci reported that the Navy Spectral program is progressing very well. He mentioned close coordination with the Navy to integrate Azure deliveries with Spectral. The next phase, Milestone C, is expected in January-February, with deliveries anticipated to begin in calendar year 2026.

Louie DiPalma asked about CACI's positioning for the U.S. Army's modular mission payload plan for small drones, specifically with Spectral SIF and Kickflip, and how this differs from the Army's current use of Spectral SIF on Puma or C-100 drones. He also inquired about the progress of the Navy Spectral program.

Answer

CEO John Mengucci explained that a significant portion of CACI's EW portfolio consists of modular mission payloads, which involve applying common software capabilities to various form factors for detecting wireless, land-based, or missile signals. CACI delivers these to counter-UAS vendors and drone builders (e.g., Puma, C-100) directly or through OEMs, anticipating continued growth in this market. Mengucci reported that the Navy Spectral program is progressing well, with Azure deliveries timed to support Spectral, and milestone C expected in January-February, leading to deliveries in calendar year 2026.

Louie DiPalma of William Blair & Company, L.L.C. asked about the Army's plan for a mounted variant of the TLS Manpack, questioning if it's part of the current contract, if another contract upsizing is likely, and the scope of its applicability.

Answer

President and CEO John Mengucci clarified that the mounted variant is not part of the current $500 million TLS Manpack program and would represent new work for CACI. He explained that the software-defined nature of the technology makes it easily adaptable for mounted platforms, like tanks and other vehicles, and noted that other services are also interested in this capability, suggesting future opportunities.

Louie DiPalma of William Blair & Company asked if CACI is pursuing domestic Counter-UAS opportunities and about the potential to adapt the Spectral system for other Navy and DoD platforms.

Answer

CEO John Mengucci confirmed CACI views domestic Counter-UAS as a viable and critical growth market, where it is already a leading provider. Regarding Spectral, he described it as a '5- to 10-year franchise win,' explaining its modular, open-architecture design makes it highly suitable for other platforms, and that discussions for broader use are already underway.

Louie DiPalma asked if zero-margin materials revenue impacted gross margins and questioned CACI's counter-UAS strategy, asking if the company needed a more end-to-end kinetic solution. He also followed up on the counter-UAS pipeline.

Answer

CFO Jeffrey MacLauchlan clarified that materials revenue was not a material factor in margins, which were driven by a favorable business mix. CEO John Mengucci defended their RF-focused counter-UAS strategy as the most reliable method, highlighting their extensive experience, confirmed kills, and cost-effectiveness. He confirmed a strong pipeline exists, boosted by the Azure Summit acquisition, with new awards expected soon.

Louie DiPalma from William Blair & Company asked for more elaboration on the expected resurgence of growth in 2026, seeking details on the key long-term drivers.

Answer

CEO Thomas Hogan detailed several growth drivers for 2026, including the continued rapid adoption of Guardian, converting the remaining 50% of the customer base to the Insights platform, and a strong rebound in the U.S. Federal business, which will be aided by the pending FedRAMP ATO. He also highlighted significant growth potential from the Keryllium acquisition and new strategic initiatives.

Louie Dipalma asked about the main alternatives to Cellebrite's Guardian solution and whether penetrating that market is low-hanging fruit. He also inquired about the revenue percentage from the U.S. federal vertical and whether disruption would primarily affect new bookings over existing recurring revenue.

Answer

Chief Products and Technology Officer Ronnen Armon and Interim CEO Thomas Hogan positioned Guardian as a unique, purpose-built digital investigation platform, not just a storage solution, emphasizing its integrated capabilities and rigorous chain of custody. CFO Dana Gerner confirmed that the U.S. federal business is about 20% of revenue and almost entirely subscription-based. She clarified that any current disruption is causing a slight lag in new business timing, not impacting the stable renewal base.

Louie Dipalma from William Blair asked about Curtiss-Wright's role in the Army's next-gen command and control program and the demand for its edge computing products, and sought confirmation of the over $1 billion AP1000 reactor opportunity in North America.

Answer

President, CEO & Chair Lynn Bamford confirmed involvement in next-gen command and control and broad penetration across new defense programs like Golden Dome and XM30. She also affirmed the $1 billion+ figure for the North American AP1000 opportunity as a reference point, while noting they are cautiously working to be Westinghouse's partner on the program.

Louie DiPalma inquired about the progress of the company's content partnerships for Small Modular Reactors (SMRs).

Answer

CEO Lynn Bamford confirmed that SMR partnerships are progressing well, highlighting ramping development revenues with partners like TerraPower and X-energy. She also noted that the Ultra Energy acquisition has been critical in extending the partnership with Rolls-Royce. The company anticipates moving to prototyping within the next 12 to 24 months.

Louie Dipalma sought confirmation on the significant cost reductions expected in 2026 from synergies and the completion of major product development programs. He also asked for a high-level performance comparison of Gogo's Galileo (HDX/FDX) solution versus Starlink and an update on the timing for 5G flight tests.

Answer

CFO Zachary Cotner confirmed that the vast majority of the approximate $65 million in 2025 strategic spending and synergy-related costs are expected to be removed in 2026. CEO Christopher Moore addressed the performance question by emphasizing that Galileo provides a consistent, reliable, aviation-grade service with global support, which is what customers value over raw speed tests. He reiterated that the 5G rollout is on track for Q4, with flight testing commencing in September, as the necessary chip is now in hand.

Louie DiPalma inquired about the amount of 2025 one-time program costs that will be eliminated in 2026 and asked for details on the real-world performance of the new Galileo HDX product.

Answer

CFO Zachary Cotner estimated that $60 million to $70 million in costs related to strategic programs and synergies should be removed in 2026. CEO Christopher Moore reported that initial HDX customers are experiencing 'flawless' service, supporting activities like Teams meetings and streaming. He stated the product is performing within its spec of up to 60 Mbps and emphasized its consistent performance globally, which is a key differentiator over raw peak speed.

Louie DiPalma of William Blair inquired about the new revenue-sharing economic model with satellite operators and its effect on margins. He also asked if Satcom Direct is expected to maintain positive net additions for its JX product in 2025 given competitive traction from Starlink.

Answer

CEO Chris Moore explained that Gogo has shifted to revenue-sharing models with operators, which provides greater pricing flexibility. He and CFO Zach Cotner anticipate modest positive net additions for the JX product, citing its stickiness as a line-fit option on aircraft like Gulfstream and the high cost of switching. Executive Chairman Oakleigh Thorne added that high-end customers will continue to demand multi-orbit solutions for redundancy and global coverage, supporting demand for GEO services.

Louie DiPalma of William Blair asked about the strength of the photo enforcement pipeline, the RFP process, and the conversion of bookings to revenue. He also questioned if investors could assume a general 5% alpha outperformance for Commercial Services revenue growth above underlying travel volumes, and whether other secular trends remain healthy.

Answer

CEO David Roberts confirmed the photo enforcement pipeline is very strong, citing the $60 million in trailing-twelve-month ARR bookings as an indication of strong conversion to revenue. CFO Craig Conti addressed the commercial growth question, stating that while the 5% alpha over travel volume holds for the current year, it may vary in the future. He confirmed that the underlying secular tailwinds, such as the shift to cashless tolling, remain unmistakably positive despite some fits and starts.

Louie DiPalma of William Blair asked about the long-term potential for partnerships with autonomous vehicle fleet operators, sought clarity on how to interpret the camera backlog and potential churn, and questioned how recession risk might influence the company's long-term leverage targets.

Answer

CEO David Roberts stated that while autonomous vehicle technology is advancing, Verra Mobility's current partnership focus is on embedding its technology directly with car manufacturers. CFO Craig Conti explained that the $52 million in trailing 12-month ARR bookings will convert to revenue over 12-18 months and that churn is very low with a 97-98% renewal rate. He also affirmed that the 3x net leverage target remains appropriate but would be re-evaluated if the macroeconomic environment changes significantly.

Louie DiPalma asked if the speed camera pipeline remains as strong as it was two years ago, about 2025 booking expectations, technology investments in cameras, and the customer penetration of all-inclusive pricing for rental car tolling.

Answer

CFO Craig Conti gave an 'emphatic yes' that the pipeline is as strong as ever, supported by a $185 million addressable market. CEO David Roberts mentioned a dedicated engineering group focuses on camera technology. Regarding pricing, he explained all-inclusive adoption is location-specific, and Craig Conti added it is currently used by two rental car customers and performing well.

On behalf of Louie DiPalma, an associate asked about the award timing for other California pilot cities, business development activity in Florida, and for more details on the $8 million ARR contract with Hayden AI.

Answer

Executive David Roberts stated that other California cities may use San Francisco's RFP as a template, potentially accelerating their timelines. He described Florida as competitive but a market where Verra Mobility is well-positioned. He explained the Hayden AI partnership involves Verra providing back-end processing for Hayden's mobile bus lane enforcement camera technology.

Louie DiPalma asked for a comparison of Viasat's Trellisware with Silvis Technologies, its growth prospects in new platforms like drones, and the drivers behind the upgrade cycle for its next-generation encryption products, particularly in relation to AI platforms like Palantir.

Answer

CEO & Chairman Mark Dankberg explained that Trellisware's proprietary waveform differentiates it from WiFi-based peers and its growth is driven by government standard adoption. He confirmed its potential for aerial platforms and highlighted a major encryption upgrade cycle fueled by quantum-computing resistance and demand from secure data centers using AI and data fusion, which benefits from the growth of platforms connecting sensors to shooters.

Louie DiPalma of William Blair asked if $1 billion is a good CapEx benchmark for fiscal 2027, what provides confidence in the maritime business inflection, and whether Viasat expects to participate in the Golden Dome program.

Answer

Chief Financial Officer Garrett Chase did not provide fiscal 2027 guidance but noted fiscal 2025 CapEx was around $1 billion. Chairman and CEO Mark Dankberg expressed confidence in the maritime turnaround due to a strong and growing backlog for the new NexusWave service, which is capitalizing on higher revenue per ship from increased crew usage. He also confirmed Viasat is well-positioned to play a role in the Golden Dome program across various technology areas like cybersecurity and sensor fusion.

Louie DiPalma asked a series of questions regarding the MACH-TB 2.0 program status, an update on a previously protested classified contract, and the domestic viability of the Enduring Shield IFPC system for initiatives like IRON DOME.

Answer

CEO Thomas Bell confirmed Leidos is a subcontractor on MACH-TB 2.0 but retains prime work on 1.0. He stated the protested contract has not yet been adjudicated and is not in backlog. He affirmed that the Enduring Shield system is viable for domestic deployment and is a key part of their IRON DOME value proposition.

Louie DiPalma asked if the PACT Act-driven disability exam volumes seen in Q2 and Q3 represented a peak or if they should be expected to trend higher.

Answer

CFO Chris Cage stated that he does not expect Q4 volumes to show an uptick over the "spectacular performance" of Q2 and Q3. However, he clarified that the underlying demand signal is strong enough to sustain that level of performance going forward, as the backlog of pending claims remains substantially elevated. He expects volumes to stay in the current zone for the next several quarters.

Inquired about the potential impact of the new presidential administration, the timeline and follow-on potential for the "State X" (Florida) deployment, the existence of approved product lists (APLs) in other key states, and the sufficiency of the cost savings to reach cash flow positivity.

Answer

Executives view the new administration as a net positive, citing a focus on infrastructure and AI. They confirmed "State X" is Florida and that the opportunity is immense with follow-on orders expected. They explained that while other states have APLs, Rekor has strategies to navigate them, and the trend towards data-as-a-service models makes them less of a barrier. They affirmed that the cost savings provide enough liquidity to reach their 2025 cash flow goals.

Louie DiPalma of William Blair asked for details on the financial impact of the EPASS contract ending, the outlook for the GFIM production contract, the potential size of the AIMS contract, the new diluted share count, further SG&A optimization, and the impact of generative AI on the business pipeline.

Answer

CFO Julie Peffer noted the EPASS contract ramp-down is occurring in phases but did not quantify the impact. CEO Mandy Long expressed confidence in securing the GFIM production contract due to their sole-prime status on the extension and expects the AIMS contract value to grow significantly. Peffer provided the updated diluted share count figures. Regarding expenses, Long and Peffer confirmed they are in a balanced position after significant cost reductions but will continue to seek efficiencies. Finally, Long described generative AI as a key tool and highlighted a growing trend of partnerships with hardware platform companies.

Louie DiPalma of William Blair asked for quantification of the EPASS subcontract's impact, the outlook for the production GFIM contract, the potential contract value of AIMMS, the new diluted share count, potential for more SG&A cuts, and how generative AI is impacting the pipeline.

Answer

CFO Julie Peffer explained the EPASS contract is ramping down in two phases, contributing to revenue lumpiness, but did not provide a specific financial impact. CEO Mandy Long expressed confidence in their position for the GFIM production award and suggested the AIMMS contract could see a similar significant increase in value as it moves to production. Peffer provided the new diluted share count (155.45M ending). Regarding SG&A, both executives indicated that while major cuts are done, they remain focused on efficiency. Long also framed generative AI as a key tool in their problem-solving approach, highlighting opportunities for more hardware-software partnerships like the one with L3Harris.