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AeroVironment Inc (AVAV)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 revenue was $167.6M, down 10% year over year, with GAAP gross margin at 38% and non-GAAP EPS at $0.30; GAAP diluted EPS was $(0.06) as SG&A rose on BlueHalo deal costs and storms disrupted operations .
  • Record funded backlog reached $763.5M; LMS delivered record revenue ($83.9M, +46% YoY) on large Switchblade awards, while UxS fell 44% amid the Ukraine pivot and operational disruptions .
  • Guidance was lowered: FY25 revenue $780–$795M, adjusted EBITDA $135–$142M, non-GAAP EPS $2.92–$3.13; management still expects a record Q4 and accelerating growth in FY26; BlueHalo closing targeted for Q2 CY2025 .
  • Near-term catalysts: record Switchblade delivery orders ($288M and $55M), new JUMP 20 Denmark program ($181M ceiling), and a new Utah facility to more than double Switchblade capacity and bolster resiliency .

What Went Well and What Went Wrong

What Went Well

  • LMS momentum and record orders: “The LMS team secured more than $350 million in Switchblade contracts, including a single $288 million award… the single largest award in AV's 50-year history” .
  • Capacity and resiliency investments: “New Utah manufacturing facility… will more than double our Switchblade capacity and provide resiliency against regional weather events” .
  • Strategic wins and pipeline: Sole-source $181M JUMP 20 program with Denmark; management expects another major JUMP 20 award in coming months .

What Went Wrong

  • Operational disruptions: “Unprecedented high winds and fires in Los Angeles… forced shutdowns and power outages… disrupted manufacturing and logistics,” constraining Q3 performance and full-year expectations .
  • Stop-work orders: ~$13M of FMS orders received stop-work just before Q3 results; majority expected to ship in Q4, requiring guidance reduction .
  • Margin/expense pressure: Adjusted EBITDA fell to $21.8M (vs $28.8M LY); SG&A up with ~$10M acquisition-related expenses tied to BlueHalo; adjusted service margin dropped to 20% .

Financial Results

Quarterly comparison vs prior periods

MetricQ1 FY2025Q2 FY2025Q3 FY2025
Revenue ($USD Millions)$189.5 $188.5 $167.6
GAAP Diluted EPS ($)$0.75 $0.27 $(0.06)
Non-GAAP Diluted EPS ($)$0.89 $0.47 $0.30
GAAP Gross Margin (%)43% 39% 38%
Adjusted EBITDA ($USD Millions)$37.2 $25.9 $21.8

Year-over-year (Q3 FY2025 vs Q3 FY2024)

MetricQ3 FY2024Q3 FY2025YoY Change
Revenue ($USD Millions)$186.6 $167.6 -10%
GAAP Diluted EPS ($)$0.50 $(0.06) -$0.56
Non-GAAP Diluted EPS ($)$0.63 $0.30 -52%
GAAP Gross Margin ($USD Millions)$67.3 $63.2 -6%
GAAP Gross Margin (%)36% 38% +200 bps
Adjusted EBITDA ($USD Millions)$28.8 $21.8 -24%

Segment breakdown (Q3 FY2025 vs Q3 FY2024)

SegmentQ3 FY2024 Revenue ($USD Millions)Q3 FY2025 Revenue ($USD Millions)YoY Change
UnCrewed Systems (UxS)$113.3 $63.8 -44%
Loitering Munitions Systems (LMS)$57.7 $83.9 +46%
MacCready Works (MW)$15.6 $19.9 +28%

KPIs

KPIQ1 FY2025Q2 FY2025Q3 FY2025
Funded Backlog ($USD Millions)$372.9 $467.1 $763.5
Unfunded Backlog ($USD Millions)N/A$1,829.1 $1,429.9
Unbilled Receivables ($USD Millions)$219.8 $204.2 $229.7
Adjusted Product GM (%)48.0% 44.2% 43.9%
Adjusted Service GM (%)28.6% 28.4% 19.9%
R&D Expense as % of Revenue~13% 15% 13%
SG&A (ex intangibles & deal) as % of RevenueN/A18% 20%

Guidance Changes

MetricPeriodPrevious Guidance (as of Q2)Current Guidance (as of Q3)Change
Revenue ($USD Millions)FY2025$790–$820 $780–$795 Lowered
Adjusted EBITDA ($USD Millions)FY2025$143–$153 $135–$142 Lowered
Non-GAAP EPS (diluted, $)FY2025$3.18–$3.49 $2.92–$3.13 Lowered
Adjusted Gross Margin (%)FY202538–40 (2H); 40–41 FY 40–41 FY Maintained FY; 2H refined
R&D Expense (% of Revenue)FY202512–13% 12–13% Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q1)Current Period (Q3)Trend
AI/autonomy and softwareEmphasis on Kinesis integration roadmap and AVACORE; P550 positioned for LRR; HAPS SAR payload tests “Generational shift” to distributed autonomous AI-enabled solutions; AVACORE and SPOTR-Edge expanding across portfolio Strengthening
Supply chain/operationsProgress payments to improve cash and unbilled; strong production ramp for LMS Wildfires/winds caused shutdowns, outages; plan to recover and add resiliency with distributed manufacturing Near-term headwind
Tariffs/macro/regulatoryReaffirmed guidance with CR risk and admin change Stop-work on ~$13M FMS; mention of tariffs and paused Ukraine aid impacting visibility; guidance cut Deteriorated
Product performance (LMS)IDIQ awards ($990M ceiling) and $55M task order; Switchblade as global standard $288M delivery order; LMS exit Q4 at ~$500M annualized run-rate Accelerating
Regional/internationalPipeline: Lithuania/Romania/Sweden orders; Taiwan/Greece intent Six firm orders, ~20 active engagements; Denmark $181M JUMP 20 program Broadening
R&D executionQ2 peak spend on P550, JUMP 20-X, controller integration; target 12–13% of revenue R&D down sequentially; continued Switchblade variant investment; maintain 12–13% of revenue Normalizing
M&A/BlueHaloAnnounced acquisition; combined ~$1.7B pro forma revenue; closing 1H CY2025 HSR and S-4 cleared; shareholder vote Apr 1; expect close Q2 CY2025; deal expenses ~$10M in Q3 Advancing

Management Commentary

  • “We won large contract awards tied to key long-term strategic programs… growing our backlog to a record $764 million… despite high winds and fires… we are lowering our guidance but remain on track for record fourth quarter revenue and accelerating growth in fiscal year 2026” — Wahid Nawabi, CEO .
  • “LMS… secured more than $350 million in Switchblade contracts… a single $288 million award… new Utah facility… set to double production throughput… support over $1 billion in annual LMS revenue by the end of fiscal year 2027” — Wahid Nawabi .
  • “Adjusted EBITDA for Q3 was $21.8 million… we incurred approximately $10 million of acquisition-related expenses in Q3… we expect adjusted EBITDA for Q4 to be significantly higher than any of the first three quarters” — Kevin McDonnell, CFO .

Q&A Highlights

  • FY26 bridge and Q4 exit: Management expects Q4 revenue ~$240–$250M and is “nearly” at a ~$1B organic revenue pipeline for FY26; LMS ~$500M run-rate exiting Q4 .
  • BlueHalo growth vectors: Counter-UAS (incl. directed energy), space communications (>$1B program), cyber/intelligence; combined portfolio to be interoperable with AV systems .
  • FMS stop-work context: ~$13M across multiple countries; timing uncertain; removed from Q4 outlook; underlying need for capabilities remains .
  • UxS demand outlook: Transition off Ukraine; P550 and JUMP 20 positioned for U.S. Army programs (LRR ~$1B) and international wins; expect UxS growth into FY26 .
  • Wildfire impact: Extended utility shutdowns affected sites, employees, local suppliers during late Q3; management focused on resiliency and recovery .

Estimates Context

  • Wall Street consensus (S&P Global) for Q3 FY2025 EPS, revenue, and EBITDA was unavailable due to data-access limits at time of analysis; as a result, we cannot quantify beats/misses vs consensus for this quarter. Values retrieved from S&P Global were unavailable due to request limits.*

  • Implication: With guidance lowered and operational headwinds disclosed (storms, FMS stop-work), sell-side estimates for FY25 likely need to drift down within the revised ranges, while Q4 remains a focal point for the “record quarter” assertion .

Key Takeaways for Investors

  • LMS is the growth engine: Record Switchblade orders ($288M DO; $55M prior) and capacity expansion (Utah facility) underpin a ~$500M annualized LMS run-rate exiting Q4; management targets >$1B LMS revenue capacity by FY2027 .
  • Near-term execution risk but resilient setup: Q3 disruptions (wildfires) plus ~$13M FMS stop-work forced a guidance cut; record backlog ($763.5M funded) and strong pipeline offset some uncertainty .
  • Sequential inflection expected in Q4: Management reiterated Q4 adjusted EBITDA “significantly higher” than first three quarters, with record Q4 revenue anticipated; monitor conversion from backlog and unbilled receivables .
  • UxS pivot progressing: Ukraine revenue mix declining as intended; new JUMP 20 program wins (Denmark $181M) and P550 positioning for LRR/adjacent programs support medium-term growth .
  • Margin dynamics: Adjusted product margins robust (43.9%), but adjusted service margins compressed (19.9%); mix toward LMS drives product margin strength while field service costs pressure service margins .
  • Balance sheet/working capital: Unbilled receivables elevated ($229.7M) amid LMS progress billing transition; management expects significant reduction in Q4 as payments ramp .
  • M&A catalyst: BlueHalo closing targeted for Q2 CY2025; expect combined capabilities across counter-UAS, space comms, cyber to broaden TAM and accelerate growth into FY26 .

Additional Supporting Detail

  • Q3 composition: UxS $63.8M (-44% YoY), LMS $83.9M (+46%), MW $19.9M (+28%); GAAP gross margin $63.2M (38% of revenue); adjusted EBITDA $21.8M; non-GAAP EPS $0.30 .
  • FY25 guidance: Revenue $780–$795M, adjusted EBITDA $135–$142M, non-GAAP EPS $2.92–$3.13; adjusted GM 40–41%; R&D 12–13% of revenue .
  • Prior quarter context: Q2 revenue $188.5M, GAAP EPS $0.27, non-GAAP EPS $0.47, adjusted EBITDA $25.9M; funded backlog $467.1M; reaffirmed guidance then .
  • Q1 context: Revenue $189.5M, GAAP EPS $0.75, non-GAAP EPS $0.89, adjusted EBITDA $37.2M; funded backlog $372.9M; guidance initially $790–$820M .

All numbers and statements above are cited from company filings, press releases, and the Q3 FY2025 earnings call as indicated.