Victor Santiago

Victor Santiago asked about the public safety and commercial opportunities for Silvus, inquiring whether these markets would be incremental to the total addressable market (TAM) originally envisioned during the acquisition.

Answer

Chairman and CEO Greg Brown clarified that Silvus's primary focus remains defense and borders, with some limited state and local police use cases requiring special spectrum authorization. He emphasized significant growth opportunities within the U.S. Department of Defense (DOD) and internationally, particularly within NATO and unmanned systems, noting that law enforcement opportunities would be incremental to the current focus.

Victor Santiago asked about the public safety and commercial opportunities for Silvus, inquiring if these markets would be incremental to the original Total Addressable Market (TAM) envisioned during the acquisition.

Answer

Executive Vice President and COO Jack Molloy stated that Silvus's primary focus remains defense, borders, and unmanned systems. While there are some public safety opportunities (e.g., Las Vegas PD), these would be incremental to the TAM but require spectrum. He emphasized significant growth potential within DOD business in the U.S., international expansion (NATO, Australia), and platform modernization for various drone technologies.

Victor Santiago, on behalf of Matt Sheerin, asked if the strong Q3 revenue was due to order pull-ins or the ramp-up of new programs, and whether the sequential gross margin growth seen in Q3 could be expected to continue into Q4.

Answer

CEO Michael Murray clarified that the Q3 revenue beat was driven by a combination of a favorable product mix and strong production execution. He noted that under ASC 606 revenue recognition, a smooth supply chain allowed the company to advance production. Murray confirmed that the plan is for gross margins to continue their sequential growth into the fourth quarter.

Victor Santiago from Stifel, on behalf of Matthew Sheerin, asked for clarification on the expected impact of the Bailiwick acquisition on future operating expenses. He also questioned the gross margin outlook, suggesting a potential sequential decline due to an anticipated increase in product sales.

Answer

CEO Mark Marron confirmed that operating expenses would increase in Q3 due to a full quarter of Bailiwick's headcount and related acquisition costs. He also agreed that it was fair to assume gross margins would be tighter in the second half compared to the record 410 basis point expansion in Q2, as both product and services sales are expected to increase.