AeroVironment (AVAV) Q1 2027 earnings call transcript

I would not like to hand it over to our first speaker. I will now turn the call over to management for aeroVironment Inc earnings conference call. We have a discussion about risks and uncertainties that could cause actual results to differ materially from our expectations. Further information on these risks and uncertainties is contained in the company's 10-K and other filings with the FTC, in particular in the risk factors and forward-looking statement portions of such filings. Copies are available from the FTC or on the AeroVironment website, www. avinc. com, or from our investor relations team. This afternoon, we also filed a slide presentation with our earnings release and posted the presentation to the investor section of our website under events and presentations.

The content of this conference call contains time-sensitive information that is accurate only as of today, September 9, 2026. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. Joining me today from AV are Chairman, President, and Chief Executive Officer, Mr. Wahid Nawabi, and Executive Vice President and Chief Financial Officer, Mr. Sean Woodworth. We will now begin with remarks from Wahid Nawabi. Wahid?

Thank you, Denise. Welcome, everyone, to our first quarter fiscal year 2027 earnings conference call. I will begin today's call by summarizing our quarterly performance, followed by Sean, who will review our financial results in greater detail. After this, Sean, Denise, and I will take your questions. I'm pleased to report excellent first quarter results across several key financial performance metrics that meet or exceed our expectations. AV reported first quarter revenues of $480 million, with record-setting funded backlog of $1.5 billion, as well as adjusted EBITDAO of nearly $46 million and bookings of $683 million.

These results reflect our focus on capturing key growth opportunities and our ability to execute with excellence. Building on our success from fiscal year 2026, we believe our first quarter results have positioned us well to deliver an even greater and stronger fiscal year 2027.

Before discussing the details of our strong results, let me first highlight some key achievements from the first quarter. First, we won several key contracts on franchise programs during the quarter that contributed to $683 million in bookings. These wins add to a strong bookings pipeline for both this fiscal year and beyond.

Second, our funded backlog grew to a record $1.5 billion, which is 37% higher than the same period last year. Third, we achieved record-per-square revenue of $480 million. And fourth, we continue to advance our manufacturing capacity expansion plans across several of our platforms and products to support our strong growth over the next several years. With a strong quarter behind us and positive momentum carrying us into the second quarter, we are reaffirming our fiscal year 2027 revenue guidance of between $2.125 billion and $2.225 billion.

And adjusted EBITDA guidance for fiscal year 2027 of between $305 million and $325 million. Both of our business segments are progressing well toward their fiscal year 2027 growth goals, supported by key domestic and international program wins and increased backlog and revenue contributions. During the first quarter, our autonomous system segment contributed $346 million, or 72% of the total company revenue, while our space, cyber, and directed energy segment contributed $134.5 million in revenue, or 28% of the total company revenue, consistent with our plans for the quarter. Both segments contributed to the 25% increase in funded backlog from the prior quarter due to very strong order flow and several source-source wins.

Our total funded backlog now stands at $1.5 billion. Strong contract wins across multiple programs in both segments, particularly in counter UAS, positions us for a record fiscal year 2027 and supports our progress towards long-term growth goals.

I would like to now walk you through some significant achievements since our last earnings call in each of our four main product areas, which are multi-mission ISR, precision strike, I-Town or UAS, and Space and Advanced Technologies. Starting first with our multi-mission ISR product area. As we mentioned on our last call, AB's P550 was selected for the U. S. Army's Long Range Reconnaissance Program at the beginning of the first quarter, with an award of $117 million. Successful integration into the U. S. Army's Next Generation Command and Control System, or MGC-2, and strong performance during recent field tests positioned the P-550 as another key franchise program expected to drive future growth.

We anticipate the LRR program to be a $1 billion program over the next few years. Also during the quarter, AV was awarded a $30 million contract to deliver PUMA AE and PUMA LE systems for Germany's LARUS Airborne Reconnaissance Program.

This award represents one of the most significant European PUMA procurements to date. In addition to these wins from our small UAS product line, our Jump 20 and Jump 20X continue to make headways in AB's Group 3 or medium UAS offering. For example, our Jump 20 recently received an MQ31A military designation from the Italian Ministry of Defense, formally recognizing AB's Jump 20 as an official military capability. This is a critical next step in the procurement process, enabling the Italian Army to accept deliveries of Jump 20 and recognizing it as an element of its formal military inventory.

With this recent announcement, Jump 20 and Jump 20X have now won several international progues of the record just over the last 12 months alone.

Turning now to precision strike. We continue to see progress and momentum across several of our platforms within Precision Strike.

Our comprehensive family of one-way attack, loitering munitions, and launch defects products has the ability to meet our customers' immediate needs while remaining adaptable to future requirements.

Our recent Switchway 400 award under the U. S. Army's Low Altitude Stocking and Strike Ordinance, or LASSO, program AeroVironment Inc earnings conference call is an example of AB's ability to quickly adapt our proven capabilities to meet new customer program requirements.

Leveraging capabilities from both the Switchblade 300 and 600, AB's Switchblade 400 is now a key solution set within the U. S. Army's LASSO program. Also during the quarter, AB received a $51 million U. S. Army contract for Switchblade 600s in support of a lethal unmanned systems IDIQ.

Taking together these two awards, position AB as a long-term partner to the U. S. Army. With 20-plus brigade combat teams and 180-plus soldiers trained, these awards also reflect the U. S. Army's confidence in our solutions and our ability to deliver mission-critical capabilities at speed.

Looking ahead, we are also seeing strong demand signals for our one-way attack solution, Red Dragon, and increased international demand in loitering munitions. Turning now to our Counter-UAS portfolio. We're extremely excited about the progress we've made this past quarter with our multi-layered Counter-UAS defensive systems. Both Titan and Locust systems received several awards this past quarter, which are strategic to the long-term growth of these franchise products. Just recently we announced two significant wins for our market-leading counter-UAS-directed energy platform called Locust.

As you recall, AV was awarded a landmark contract valued at nearly $465 million for the U. S. Army's Enduring High Energy Laser, or e-health, program in late August. This award represents the first ever production contract for direct energy systems in the U. S. military history.

This is a defining moment not only for our company, but also for our customers, our country, and the advancements of laser weapons technology as a critical tool in modern warfare. Following this announcement, we also announced our first international order for our LOCUS directed energy counter UAS laser weapon system as a direct commercial sale. This order underscores the growing global demand for scaled high energy laser weapon systems. As global threats continue to evolve, and as asymmetric economics persist on the modern battlefield, directed energy has emerged as an increasingly important, cost-effective solution for countering high-volume, low-cost drone attacks. On under $10 per shot, LOCUS redefines the cost balance between offensive and defensive systems and provides the warfighter with an essentially unlimited magazine.

We see these landmark awards as demonstrating the growing demand for LOCUS both in the United States and internationally in positions AB as a leader for the rapidly expanding directed energy market. Building our momentum from these awards, we anticipate a growing pipeline of opportunities for our Locust laser weapon systems, both domestically and abroad, and look forward to sharing additional award progress with you in the coming quarters. In addition to these historic achievements with Direct Energy counter UAS, we also announced earlier in the quarter a major contract win for our RF Detect and Defeat platform called Titan.

Our Titan MS was awarded a sole source $500 million IDIQ in support of Joint Interagency Task Force 401 domestic shield program. Which included an initial $80 million contract in support of the United States Golden Dome Initiative.

Our Titan series of RF jammers continue to be a market-leading solution in the world and a strong growth driver for the company. And we anticipate the use cases for its capabilities to continue to expand beyond traditional military applications. In addition to these two counter UAS program wins, we also announced the expansion of our Huntsville, Alabama facility in anticipation of additional demand for our Freedom Eagle I, or FE1, kinetic intercept solution. Since winning the U. S. Army's Long Range Kinetic Intercept, or LRKI, program last year, our customer requested an accelerated production schedule, and we received additional congressional funding to support this acceleration of production and delivery of products on this program. Our investments in capacity expansion will allow us to rapidly scale FE1 manufacturing in order to meet the U. S. Army's urgent operational needs.

This program is critical in filling critical operational requirements needed by our customers to combat low-cost drone threats. Now let's look at the progress we made in our Space and Advanced Technologies Group. AV recently won a $43 million contract to integrate Panther phased array antenna on SkyRange platforms for hypersonic telemetry. This contract will enhance the nation's weapons testing capabilities and will help enable more frequent testing cycles and faster weapons development timelines, especially related to hypersonic weapons. These combined achievements across all four of our product categories during the first quarter demonstrate the breadth and capabilities of our products and solutions across the defense sector.

With several of our products at an inflection point for multi-year sustained growth, we are focused on enhancing operational readiness. As we communicated at our investor day this past July, leading the sector in innovation has been and will continue to be a key priority for AB. The progress we made this past quarter demonstrates how that commitment is translating into meaningful customer wins and key franchise program awards across our diversified portfolio. As we build on this momentum, we're sharply focused on executing with excellence, increasing capacity, scaling production, and delivering high-quality battle-proven solutions to our customers. The investments we are making in fiscal year 2027 are designed to support future growth by positioning us to capture additional awards, expanding capacity across key sites, scaling manufacturing with speed and efficiency, and enhancing the resiliency of our supply chain.

We are nearly a third of the way into this fiscal year, and we're making significant progress toward achieving these goals. In fact, just after the close of our first quarter, we announced a $100 million long-term investment out of our Southern California facilities to build a new State of the Art Innovation Center and campus.

This new facility will consolidate operations and provide additional production capacity. In addition to this investment, we're also progressing on our Salt Lake City facility where we plan to increase loading munitions manufacturing capability. This facility is expected to provide AV with the ability to meet increased demand across our switchblade product lines well into the future, while also providing additional manufacturing capacity to support other products across our portfolio. This new state-of-the-art campus is on track for a spring of 2027 opening. Earlier in the quarter, we also announced expansion efforts for our Albuquerque, New Mexico facility, where production is starting for our newly awarded locust contracts along with additional future global demand. This facility is planned to be one of the world's largest and highest volume full-rate manufacturing space for laser weapon systems used for defense applications.

And as we mentioned earlier, we're also building our Huntsville, Alabama location for our kinetic intercept counter UAS solution, Freedom Eagle One. These internally funded capacity expansion projects are specifically designed to keep pace with rising demand in both the near and long term.

We expect that continued investment in our leading platforms will yield meaningful returns and drive long term value creation. Before turning the call over to Sean, let me summarize with the following comments. This past quarter was a great start to our fiscal year 2027.

We delivered record first quarter revenues and funded backlog, won several landmark awards on franchise programs domestically and internationally, and expanded production capacity across multiple U. S. facilities. Demand across our portfolio remains robust, and we're focused on executing with discipline as we invest in our business, scaling manufacturing, and stricken our supply chain to deliver for our customers at the speed their missions require.

With that, I would like to now turn the call over to Sean Woodward for a review of our first quarter fiscal year 2027 financials. Sean?

Thank you, Wahid. I will now walk you through our first quarter performance and fiscal year 27 outlook, referring frequently to our press release and earnings presentation available on our website. I am pleased to report a very strong start to fiscal 2027, with first quarter results meeting or exceeding several of our key financial targets. We exceeded our financial targets for the first quarter on revenue, adjusted EBITDA, and non-GAAP EPS, while also achieving positive operating cash flow. We secured solid bookings of $683 million and ended the quarter with record funded backlog of $1.5 billion, up 23% from the prior quarter and higher by 37% from the same period last year.

Relatively consistent unfunded backlog at $1.4 billion brought total funded and unfunded backlog at the end of the first quarter to approximately $2.8 billion. At the same time, we made significant progress on our capacity expansion initiatives that we expect will allow the company to quickly scale to meet expected increased global demand.

During the quarter, we announced several key capacity expansion efforts directly tied to growth on key franchise programs. First, we purchased and are looking to expand our existing facility in Huntsville, Alabama, to support near-term growth needed for our counter-UAS kinetic intercept solution for Nomingo I. In addition, we recently announced a $100 million investment at our Southern California campus where we plan to improve execution on engineering design and development alongside our production operations across multiple platforms.

This investment will consolidate multiple existing lease facilities resulting in expected lower annual operating expenses. We are continuing to make progress on building up production in Albuquerque, New Mexico for our rapidly growing Locus Counter-UAI solutions. Besides these three capacity expansion investments, we are getting significantly closer to opening our new state-of-the-art manufacturing facility in Salt Lake City, Utah. This 120,000 square foot facility will allow for rapid scaling of our loading and munition products and provide additional space for other products that are facing increased demand.

As discussed in detail at our July Investor Day, these investments directly support the strong demand we're seeing across our product portfolio. We look forward to sharing further progress on these facility expansions in the coming quarters. Charting now in first quarter results We secured bookings totaling million in new authorized contract value Our book ratio for quarter one was 1 times reflecting strong demand from large program awards Our trailing 12 bookings exceeded billion representing a book ratio of 1 times Total funded and unfunded backlog at the end of the first quarter was just over billion Slide 6 of the earnings presentation shows the first quarter revenue by operating group for each of our two segments compared to first quarter fiscal year 26 revenue.

The Autonomous Systems, or AXS, segment recognized $346 million in revenue in the quarter, which represented a 21% increase over first quarter fiscal year 26 revenue. The Precision Strike and Defensive Systems operating group generated $197 million in revenue in the first quarter. Which represented an 8% increase over first quarter fiscal year 26 revenues, driven by our loading munitions family, along with our one-way attack systems and counter UAS RF Titan products.

The uncrewed aircraft systems operating group generated $120 million in revenue in the first quarter, higher by 71% from the same period last year. Led by strong domestic and international sales in P550, Jump 20X, and Puma.

The space, cyber, and directed energy segment generated $134 million in the quarter one revenue, down 21% year-over-year, and in line with our expectations, reflecting the first quarter revenue loss from the SCAR contract termination, which occurred in March of this calendar year, and other discontinued government programs. Within the segment, the space and directed energy operating group sales declined 28% year-over-year due to discontinued SCAR programs. For reference, SCAR-related revenue was $32 million during first quarter of 26.

The cyber and mission solutions revenue declined 16% year-over-year, primarily due to discontinued government programs. Moving on to gross margins. Slide 12 shows the adjusted product and service gross margin reconciliations to GAAP gross margin. First quarter overall adjusted gross margins of 30% or higher than first quarter 26 results of 29%. Quarter one adjusted product gross margin was solid at 40% compared to 36% for first quarter 26. Quarter one adjusted service gross margin was 8%, which was lower than the 13% for first quarter fiscal year 26. The reason for the decline in quarter one service margin was related to our cyber mission solutions business. Specifically, we experienced approximately $5 million in revenue impact from discontinued programs, Combined with other program losses and award delays, which made it more challenging to absorb fixed costs.

Moving on to operating expenses. Adjusted SG&A, which excludes intangible amortization and deal and integration costs, was $85 million compared to $65 million in the prior year. The increase was in line with our expectations, driven largely by key investments in infrastructure, along with expanded business development resources to assist in capturing growing global demand. Additionally, we incurred increased legal expenses and an unexpected non-recurring bad debt reserve of $4.2 million in the quarter.

As a percentage of revenue, adjusted SG&A in the quarter was 18%, compared to 14% in quarter one of fiscal 26.

Full year fiscal 27, adjusted SG&A is projected to be between 14% and 16% of revenue. Quarter 1 R&D expense was $24 million, or 5% of revenue, compared to $33 million, or 7%, during the same quarter in the prior year.

Full year fiscal 27 R&D is projected to be between 7% and 9% of revenue, in line with prior guidance.

In terms of adjusted EBITDA, slide 13 of our earnings presentation shows the reconciliation of GAAP net income to adjusted EBITDA. Quarter one adjusted EBITDA reached $53 million, or 11% of revenue. ASS segment adjusted EBITDA was $62 million for the first quarter of fiscal year 27, with an 18% adjusted EBITDA margin, reflecting strong revenue and gross margin contributions. This was partially offset by SEDE segment adjusted EBITDA, which was negative $9 million, which was expected, following lower year-over-year revenue and resulting under-absorption of fixed costs in both the space and direct energy and cyber and mission solutions businesses.

Now turning to non-GAAP earnings per share. Slide 11 shows the reconciliation of GAAP and adjusted or non-GAAP diluted EPS. Our adjusted EPS reached $0.59 in Q1, up from $0.32 in the prior year quarter, or an 84% year-over-year increase.

Moving to the balance sheet. At the close of the first quarter, our total cash and investments amounted to $675 million, a $38 million decrease from the prior quarter. A. V. total debt composed solely of zero coupon convertible notes was $747.5 million and a net leverage ratio of 1.6 times adjusted EBITDA.

The company generated $13 million of positive operating cash flow in the first quarter despite making strategic working capital investments, primarily from higher unbilled receivables and inventory. The increase in inventory is intentional, supported by record-funded backlogs, and to ensure key critical components with long leave times are secure.

As expected, free cash flow is negative, $36 million in quarter one, reflecting higher capital investments to support the expansion of our production facilities. We are still targeting fiscal year 27 to be negative from a free cash flow perspective, driven by the increased capital expenditures.

Now turning to backlog. Funded backlog totaled $1.5 billion at quarter end, which is 37% higher than the first quarter of FY26. Funded backlog composition by segment is $1.1 billion, or 75%, attributable to the AXS segment and $358 million, or 25%, to the SCDE segment. Unfunded backlog at the end of the first quarter was $1.4 billion, with $1.2 billion, or 89%, attributable to the SCDE segment and $157 million, or 11%, to the AXS segment.

It's important to note that our unfunded backlog figures exclude ceiling values from sole-source IDIQ contracts. The remaining balance on the $990 million U. S. Army Switchplay contract, the remaining balance on the $874 million UAS and Counter-US FMS contract, and the remaining balance on the $500 million JIA 401 Counter-US RF contract, among others, represent significant additional contract capacity beyond our reported unfunded backlog figures.

Turning now to Fiscal Year 27 guidance. On slide 7 of the earnings presentation, you will see we are reiterating our fiscal year 2027 guidance. Based on our strong Q1 performance, record-funded backlog positions, and capacity investments underway, we remain confident in our full-year outlook. As Waheed mentioned in his remarks, we continue to expect fiscal year 2027 revenue to be between $2.125 billion and $2.225 billion, representing 10% growth at the midpoint over fiscal year 2026 results. We continue to expect adjusted EBITDA to be between $305 million and $325 million, and non-GAAP adjusted EPS between $3.02 and $3.34. Near-term non-GAAP adjusted EPS remains relatively flat year-over-year due to higher anticipated depreciation and cloud amortization expenses from the significant capital deployed in fiscal year 26 and expected in fiscal year 27.

A few details on the revenue cadence, adjusted EBITDA profile, and non-Gas EPS distribution. We continue to expect revenue to be stronger in the second half of fiscal year 27. We're planning on an approximate 45-55 revenue split between the first half and second half.

Following this revenue cadence, we expect adjusted EBITDA to be roughly one-third in the first half and two-thirds in the second half of the year. This is similar to the fiscal year 26 results from a distribution perspective and reflects improved sales mix and higher sales volume in the back half of the year.

Non-GAAP EPS is anticipated to be roughly 30-70 split between the first half and second half. This reflects the adjusted EBITDA profile and the impacts from depreciation expense and stock-based compensation timing. We continue to expect to invest between 7% and 9% of revenue in R&D and 12% to 14% of revenue in CAPEX, primarily focused on production capacity expansion across all our product lines, supported by our total backlog.

Adjusted SGD expenses are projected at 14% to 16% of revenue. In closing, we are very encouraged by our first quarter performance and the strong foundation it provides for fiscal 2027.

We delivered results above several of our key financial targets, generated solid bookings, and continued to make disciplined investments in the production capacity and innovation needed to support growing demand across our portfolio. With total backlog of approximately $2.8 billion and revenue visibility to the midpoint of our full-year guidance at 86%, we believe the business is well-positioned for the balance of the year.

Importantly, our recent Counter-UANS awards, including Titan and Locust, are already incorporated into our fiscal 2027 outlook. As we continue to scale the business, we remain focused on execution, capacity expansion, and long-term value creation in markets where we see sustained demand and favorable multi-year growth scale wins.

Now, I'd like to turn things back to Ahid.

Thanks, Sean. As Sean stated earlier, we are reaffirming our fiscal year 2027 guidance. While we remain optimistic and encouraged by the urgency placed for our solutions and the Department of War budget, there remains some uncertainty around the timing of final budget approval by U. S. Congress. Our view is unchanged from last quarter, and we do not expect this to be a significant risk to our outlook at this time. But it is something we will continue to monitor closely.

In closing, we're very pleased with the progress we made during this past quarter. We won several significant awards which increase our revenue visibility for fiscal year 2027 and provide a strong foundation for growth in the future. We remain focused on execution as we work to meet the growing demand in our markets. With strong momentum across our portfolio and significant opportunities ahead, we believe the long-term potential for growth and value creation at AV has never been better and stronger. I would like to thank our employees, shareholders, and customers for their continued commitment to AV and our mission.

And with that, Sean, Denise, and I will now take your questions. Thank you.

So, Ned, great question. As you know, we're at an inflection point in the segment two profitability profile and products that are being commercialized. The Locust product line is going, it is expected, based on the contract wins that we have and the future ones that we expect to win, to have a very strong margin profile going towards the second half of this year and beyond. That's why, as you heard from Sean in the comments on our guidance, that the profitability is stronger and more lopsided towards the second half of the year. It's because a lot of the Locust and a few other products in that segment is going to have higher volumes as firm fixed price contracts take over and the margin profile improves significantly.

We expect the locust product line and the segment two margin profile to eventually get to the same level as the segment one over the next couple of years. So it is an inception year. We're growing very fast in that market. We're working on markets and solution sets that is going to set us up for multi-billion dollar opportunities over the next several years. And as we said at the beginning of the year, as our plan was, to continue to transition those into more mature production, high volume, direct commercial sales, firm fixed-prite contracts, all of which is going to improve the margins.

Well, so Andre, we are winning, as you see, some landmark contracts. The entire laser weapon systems, the directed energy laser weapon system market, is essentially starting to begin to evolve now. The adoption rate in the knee on this curve is very steep. However, the supply chain and the suppliers that provide subsystems for this is quite young, and we're scaling them and improving them as we go. So that's why we made a significant investment in our Albuquerque, New Mexico facility to expand production. We are confident that we're going to meet the rising demands. It will not surprise me in about a year or so that this is a significant franchise for the company, well over a half a billion dollar plus a year franchise.

That has been part of our strategy when we acquired Blue Halo. We are making solid progress, and we're making solid progress also in terms of increasing production capacity. However, having said all that, it takes some time. There's lots and lots of long lead items we have to do with to get those in-house and scale those suppliers, or we bring it on more suppliers. It's a fairly large system, but we are sitting in a very regular position. I mean, I expect this product line to be a franchise, you know, flagship franchise for the company, you know, essentially competing with anything else that we do in the business in terms of revenue, profit profile, and scale.

You're welcome, Andre.

Thank you, Louie.

Thank you, Louie. I was wondering, you recently announced an international direct commercial sale shortly after the e-hell contract. And in terms of the total addressable market, how do you view the size of potential international sales relative to domestic sales? I know following the Ukraine war, you've been able to sell many Switchblade 300s and 600s to allies, and you have a long history of selling the Raven and Puma to allies. But how do you view the international market for the laser weapon system? Thanks.

Thank you, Luis. Yes, we're very pleased with these recent awards. As you said, not only do we win this marquee franchise contract and program with U. S. Army for half a billion dollars nearly, we also won and we announced a direct commercial sale for the first laser weapon system that we're aware of, to an international ally. We expect this to be the beginning of a lot more awards, Louis, number one. And number two, the market for these locus systems, domestically and internationally, are going to be equivalent probably in size. You saw domestically, we've already won a half a billion dollar contract, and we're engaged with several additional customers. And I think it's the beginning of this inflection point of adoption for the U. S. military.

But beyond that, I see equivalent, if not more, demand for these systems internationally. There are lots of places in the world, including the Middle East, Asia Pacific, and Eastern Europe that could benefit from our systems because the solutions that exist today cannot economically be sustainable and sustain a long-term conflict where thousands, if not tens of thousands, I know thousands of these group 1, 2, 3 drones are coming, and we're shooting million-dollar missiles at them.

LOCUS solves that problem both in terms of economics and depth of magazine. It's very, very unique in that perspective. So I tend to believe that there's a multibillion-dollar market just for military applications. If you fast forward this strategy two to three years later, I could also see non-defense applications for critical infrastructure sites that could become available and suitable for adoption of our laser weapon systems. And AV is unique because we're one of the very few companies in the world that have gotten to a full rate production of systems that are deployed now in the battlefields today. And that is a very unique position, and that's why we're expanding capacity, because we think over the next several years, this could be a massive growth driver and value creation opportunity for the company.

Welcome, Louis.

And could you give us an update there? Thanks. Sure. So as you know, our win rate and our progress in the last several quarters has been phenomenal. You know, I can't think of another time in the last 16 plus years I've been with the company that we've had such tremendous track record of winning large strategic contracts. We've won. We had a lot of great years, but these are very unique years, and I think this is going to continue. In terms of what's remaining, there's lots of different contracts. Sean has the details on that. In general, there's several contracts that we have. There is a nearly a billion dollar U. S. Army IDIQ sole source that we want, which is coming towards a full-up value.

And then we have an international one that's actually barely scratched the surface in terms of how much of that we've used. And then we also are working on additional contracts with other customers.

Sean? Yeah, Peter, we have a couple hundred million left on the current $990 million IDIQ under the current ceiling value remaining.

And then just as a quick follow-on, just congrats on the P-550 award. What's the next, I guess, what's the path for those 82 aircraft, you know, when you'll be delivering those, and is there another, you know, competitive downslide we should be thinking about? Sure. So as you know, the LRR promo record that the U. S. Army has is expected to be about a billion-dollar value long-term over the next several years.

We are getting the lion's share of the awards. I believe it's between us and one of the competitors, where we know that for a fact, based on the U. S. Army's announcement. We're essentially getting with over 80% of the dollars of those awards so far, maybe close to 90% of the awards. We're actively delivering those systems as we speak, and we expect to deliver the vast majority of that contract this fiscal year. Almost all of that $117 million this year, this fiscal year. That's why we've been wrapping up production. That's why we've been making systems. And by the way, the most important factor for me besides us delivering is that the success of the product in the field, the satisfaction of the warfighter when they get our systems in their hand versus our competition is incredibly high.

Incredibly high. What does that mean? It means when the customer and the warfighter uses our product in the battlefield and our systems work and deliver as promised and if not even more and our competitors don the future acquisitions will be affected by that It natural It very common for that to happen And so we expect the US Army to continue to award more contracts as we go forward because they just starting the fulfillment of that program which is close to a billion dollars over the next several years And I think we in a very good position and I very thankful and appreciative of what our team has done worked so hard to get us to the stage Appreciate it.

Thank you, Peter.

John, so look, we're fortunate because we have a very diversified portfolio of products, solutions, businesses, and groups of business units as well.

The cybersecurity and mission service is a fairly small part of our growth this year. We don't expect that to be at the same pace of growth as the rest of the businesses. We're making significant improvements there. This year is not the main thesis of our strategy for growth and long-term value creation either. And so we've got plenty of growth, as you saw for this quarter, on many, many other fronts. Seven or eight different product lines, platforms that are at inflection points to grow very, very handsomely, not only this year, but the years to come. But overall, we do expect the financial profile of that business to improve. The growth on that business has never been expected to be as high as the rest of our businesses.

But it's just a portfolio approach to our business, a diversified portfolio, and we're making progress. We're pleased with the results so far. We're going to continue to actually work on it. You should see more improvements financially in that business, but it's not going to have the kind of growth as the rest of the business because we were expecting that from the beginning of this business. It's just not the same kind of a market, and the profile of that business is very different. However, for the year, we remain very focused on growing the entire business. As we said, as Sean said on the guidance, you know, 10% to the midpoint of our guidance range, a year over organic growth.

We're looking fairly good and we're positioned extremely well and we came off the first quarter extremely strong.

So, John, that's a great question. We've asked ourselves that question several times, right? We believe that we've got a lot of growth coming our way. There's one thing that's really uncertain about the market today, which is the timing of the fiscal year, government fiscal year 2027 budgets. We have an election year, but a lot of elections and uncertainty within Congress. That by itself represents a significant potential risk. We don't believe that's going to affect our current guidance, and it's only our first quarter. You know, we just came out of the gate on our first quarter. We're positioned extremely well. And as things progress over the next quarter or so, we'll keep you updated. The long story for AeroVironment and the growth potential is fantastic.

I can genuinely tell you that for the years that I've been here, the rate of wins that we're having and strategic progress we're making in several strategic areas of our platforms and franchises is positioning us for lots and lots of fantastic growth and value creation optimism beyond fiscal 27. That's where we're focused on, long-term value shareholder value creation, and I think we're on the right track in that step of the business.

You're welcome, John.

Sorry, good evening. Just wanted to ask, in the uncrewed systems business, we saw some strong results and pretty much no change relative to the fourth quarter, I will now turn the call over to the Q1 level.

Hey, Seth. Yeah, so the uncrewed aircraft systems business performed exceptionally well in the first quarter. 71% year-over-year increase, expected to continue with a significant growth this fiscal year, included in our guidance. And the strong awards that we got on P550, the increasing in the Jump 20X, and the strong Puma sales that we're seeing both domestically and internationally all led to that sustained growth, and we expect to continue to see growth in this business throughout the next few quarters.

I'm glad you brought that up. This is Waheed. What I would tell you is that I'll go back in history, right? Four or five years ago, when the Ukraine conflict started, it was an inflection point in our loyering munition and one-way attack drone market as a whole. The entire market was tiny, very small. And what we saw in the Ukraine conflict, the use and the efficacy of drones, in one way attack drones especially, made a phenomenal impact, and war fighting basically changed forever as a result of it. I think what a similar inflection point on directed energy and counter UAS. All the weapon systems and defeat mechanisms that the U. S. has, and all of our allies have, basically every military in the world, to address high-volume attacks by one-way attack drones is economically not sustainable.

You know, we cannot continue to shoot down a $100,000, $150,000 shot head drone with a $1,000,000 to $10,000,000 missile. It's just not sustainable against countries like China and Russia in the long run. The sweet spot on that is a direct energy system that has an unlimited magazine of firepower, And it changes the paradigm in economics from millions of dollars per shot to literally less than $10 a shot. That's what our local system offers today.

That's why we won the first program record for pro-production in the U. S. military's history. I can see in the next five years that that business could be bigger than our loading munition business. You know, that business has grown to over half a billion dollars already over the last four or five years. And I think the market for laser weapon systems and direct energy is at least as big, if not bigger, globally. And we're just at the beginning of that adoption, just at the beginning.

And it's going to take some time because the U. S. military has been working on this and all of our competitors for literally three to four decades. And we're the first company, to our knowledge, that has really cracked the code and is delivering systems at scale that is actually effective in conflicts today. In the Middle East, in Ukraine, and other parts of the world, including the southern border.

And so I consider this to be an infection point. And over the next several quarters of the year, this business could grow dramatically for AV. And the market is very large, long term.

Welcome, Sam.

Yes, Sam. So, look, we have a great start on this fiscal year. We reaffirmed the guidance because at the visibility levels that Sean articulated, which is historically very high, we should be able to achieve the outcomes that we have in front of us. That's why we reaffirmed our guidance for this fiscal year. The biggest, what I call, question mark is how fast can Congress approve the next fiscal year's budget? It's really not that relevant whether it's $1.3 billion or $1.5 trillion, I'm sorry, or $1.8 trillion, whatever the number ends up being. As long as the budget gets approved, and most likely it will be not less than the government fiscal year, I think it will be fine for A. B. because the category that we play in is significant dollars.

Now, the timing of that is a little bit of risk. We don't consider that to be a risk for our current guidance. But if that were to go longer, then obviously the risk for value increases, and we're going to keep you updated. And so that's number one. Number two, the reason why we're wrapping up production and several of our products and several of our sites is because we're getting ready for a potential scenario where the government is going to get the money, and whoever can deliver at scale reliably and effectively most likely going to benefit. We have benefited from that in the past, and we're positioning ourselves for that this year as well. And so that's the reason why we're aggressively and judiciously investing in areas that we believe will have solid returns for our company, not only this fiscal year, for years to come.

And a quick follow-up, just on the recent announcements around tariffs and drone components, just curious on what the impact could be to your guys' business. So, yes, the tariffs, of course, was a welcomed decision by our government in the Pentagon as well as the president. We do not see that as a negative impact on us. If anything, we consider that to be a positive. Why? The reason why is because over 98% of our supply chain and supply base is all domestic. We do not rely on exports from foreign countries, especially countries like China, for any of our systems. Any of our systems. Okay, number one. The other 2% or so of our supply base are the closest allies to the United States.

Canada, Germany, Israel, et cetera, et cetera. So we're in a very good position because we've been working on this problem ahead of the decisions years in advance. As part of the AV DNA, when we develop capabilities and we secure a supply chain, that we secure those with multiple sources and as much as possible domestically. That's a competitive advantage for AV in my view. And so we don't expect that to be a negative impact, and it could be a positive impact because we can deliver cost effectively, where the competitors have to actually adjust to that in a while.

Thank you, Sam.

Thank you, dude. Yeah, Waheed, I was wondering if you could update us. Something we haven't heard in a while is just you used to update us on the number of countries you've been approved to export systems to. Maybe, you know, switch play, but new programs like Mayhem 10, Red Dragon, maybe P550. I don't know if you had those at hand, but I was just wondering what we're up to in terms of the approved country list on some of those programs.

Yeah. So, Pete, a vast majority of our loading munition and precision strike systems have been domestic demand in orders that we've gotten, As Sean mentioned, on the $990 million plus U. S. Army contract for oil and ammunition, vast, vast majority of that is domestic consumption. Some of it U. S. has taken to give to some of our allies, but majority of it is U. S. , right?

A lot of the growth in demand for Switchblade in the second half of this year and also beyond this fiscal year, most likely going to come from countries outside U. S. who we've been working with to get them to procure these systems and award us contracts. We have announced a few of those, but there's a list of close to 20 different countries, allies, that we've been approved for both FMS and DCS sales.

The list is pretty large, and you will see awards to come in as we progress throughout this year and next year that is going to continue to grow the international adoption of switchblade and motor ammunition and the other platforms that we have in the precision strike over the next several quarters and years. So I think you're definitely on to something that business is going to continue to grow. The domestic demand has really been the dominant factor in growth so far, and it's going to shift a little bit more towards international demand. And it's still going to be a significant contributor to growth for ABE overall for this year and next year.

Just last one for me. You talked about the Army LRKI, maybe wanting to accelerate that. What do you think you'll kind of finish, you know, the test and certification phase and then enter production on that program? So great question, Pete, because, you know, our strategy for counter-UAS is not a one-pronged strategy. It's a layered defense approach. A layered defense system means that first we use the world's best jammers, our Titan series, which is one of our fastest-growing product lines and franchises, to be able to defeat drones that use RF communication. When that doesn't work, then you apply our laser weapon systems called LOCUS.

And if that doesn't work, then you go to their last resort, which is you use a kinetic missile or weapon to shoot down any drone that's from group one to three.

Today's arsenal of U. S. weapon systems and missiles does not have an economically viable solution to attack to address this problem. That is precisely the reason why this is a strategic priority for the U. S. Army. U. S. Army wants us to go faster because they recognize that if they continue to shoot million-dollar missiles at $100,000 to $150,000 shot heads, it's not going to be economically sustainable. So Congress actually provided us with additional funding to accelerate. We are aggressively attacking that. That's part of the investments we're making in our Hansel facility. We have the support of Congress. We have the support of the U. S. Army, and we have the support of the Pentagon to accelerate that.

We have won that, and it's our chance to actually build another franchise product line for ABE. This year and next year, we're going to be in the rapid testing and certification of this missile. It's literally a brand-new missile for the U. S. military. And we are expected to deliver about 60 to 80 systems over the next 12 months or so to 18 months. And then once that is completed, then we're going to get into initial low-rate production and full-rate production. The full-rate production of that missile is going to be a billion-dollar franchise longer. And that's probably about 12 months away from now, given what it takes to get to that level over the next 12 to 18 months.

You're welcome, Pete.

Sean, maybe I'll start with you. I understand or I appreciate the color around the gross margin on the services business. Is that really just going to be a function, or I guess how long is that going to stick with us in terms of that being a bit of a drag, I'm going to turn it over to the AeroVironment Inc earnings conference call. I'm going to turn it over to management for a while. I'm going to turn it over to management for a while. Great question. Yeah, so the services margins, we did see a downtick in quarter one compared to last year, mainly driven by the volume and the reduction in the overall business volume of our services revenue.

The SCAR contract being camped and some of that revenue not being able to absorb the fixed costs, we saw the reduction in the gross margins. As the volume increases through some of the key awards that we're expecting to be delivering on and the overall services revenues increase, we expect the margins to improve slightly. Certainly, services margins isn't really where we're focused on growing overall margins. Really, the transition to products and commercialization of our products is really where the expansion of our overall EBITDA is going to come from. But near term, the volume will be the major driver to improve the margins on the services side.

Well, Waheed, the Locus e-health announcement included some commentary around some of the FAA approvals and such for using of directed energy domestically. Our understanding of e-health was that it was going to be a little bit more field-centric, you know, deployed on vehicles, kind of more overseas, austere environments, et cetera. Can you just maybe give us a little bit of perspective of how that deal can actually help to kickstart efforts here for more homeland defense when, again, I'm presuming that those X3s are going to be more, again, forward deployed and just kind of give us maybe a little bit more sense of how one opportunity kind of leads to the next. Thanks. Sure, Trevor. So great question again.

The EEL program is the first ever program to our knowledge, where the U. S. military has awarded a contractor a full rate, you know, high volume production of a laser weapon systems to be institutionalized within the force structure. The initial deployment of this is going to be on critical sites that the US Army has. But we believe that this is the beginning of an inflection point. We're actively working with the US Air Force, US Navy, US Marine Corps, and US SOCOM, and also a lot of other international customs.

In the first time in the history of the United States military, we witnessed in the last several months the Secretary of the War, However, Mr. Hexet, the Secretary of the Army, the Secretary of the Navy, who have now become believers in using our LOCA systems in the field, shooting down drones, shooting down drones in a realistic, real-life test environment.

This is an inflection point in this business and in this category. The US has been chasing this for three plus decades. And we're the first company that actually basically made the I believe button for them to push the I believe button. And so I think it's the instruction point. Yes, initially the program was structured to put on vehicles, moving targets. Immediately after the event that happened in the southern border, the FAA said we got to test these things to make sure it's safe to operate these and the national airspace domestically, you know, Continental United States. And our system is the first system to our knowledge that has actually been endorsed by the FAA that is safe to operate in national airspace, and it does not pose harm to commercial airlines and airplanes, manned airplanes.

And so we're very pleased with that because the government and the agencies that are involved in this are moving very, very fast. But it's still the beginning. It's still the beginning. We expect additional wins, hopefully, over the next several quarters. And we'll keep you updated. We're not in a question for you.

Thanks both.

That DHS opportunity and problem is a significant one, but it's not the only one. We're engaged with several, several customers. As I said, the I believe button has been pushed now in several fronts on direct energy laser weapon systems, And especially the sweet spot that we're in, which is between, you know, 15 to 30 kilowatt system, is the sweet spot of the market. Lots and lots of applications. The statistics that you actually shared about 300 cartel throws being shot, we're very proud of. Our systems are working and operating effectively in the southern border and other areas of the country. And, you know, I think it's an instruction point. When exactly those dollars are going to show up and the awards will happen, it's really tough to determine the timing of that precisely.

We're working with them actively. You know, the customers are trying to move fast, but they are literally writing requirements, holding competitions as we're building an expanding capacity. And it's a multifaceted challenge and initiative, but I think we're positioned very well and we'll keep you updated as we go forward. There are several, several customers they're working with beyond just U. S. Army and DHS that should resolve to some additional wins over the next several quarters for AB.

So I can only comment to this briefly and at a high level, Austin. You're absolutely right. We have a winning solution that is very unique in its capability and its efficacy, especially given the kind of conflicts that are going on and threats that are globally. We have lots of engagements and demand for that. We're ramping up production. We have designed a product to get into the thousands of units a year production. We're ramping that up actively today. I'm not able to comment specifically on where we are because of the sensitivity of that mission and customers.

What I can tell you that we're making great progress, and we should have updates for you in the near future. You're absolutely right. That capability is a necessity, not a nice-to-have. It's a must-have in the type of conflicts we see in the world, and we're engaged with those customers. They're trying to move quite aggressively, but it still takes time, and it's just a matter of just hopefully some timing that we're going to make progress. We're now waiting for the customer contracts and progress there. We're in parallel, actively based on very strong signals for our customers and engagements with them. We're wrapping up production. We're building units, and we're ready to scale this. We're actually scaling it right now as we speak.

This is the reason why we're investing in new facilities, buying long-lead material, building units in stock, because we know that the demand is coming. We know our customers need it. It's just a matter of how fast they can get into the contract.

Thank you, Austin.

Yeah, Cash, great question. You know, we're still holding to our 45-55 split. We got a fantastic backlog. We see the back half of the year really being an increase in the overall volumes for our revenue. We did really good in Q1. We're able to deliver above our expectations. But the first half of the year, we're still tracking to the 45% and 55% in the back half of the year.

Well supported by our visibility at 86%, and overall increased volumes in Q3 and Q4.

And then, you know, a couple of weeks ago, there was a memo from the Deputy Secretary of War regarding greater cost transparency and basically setting margins across the industrial base. So I guess how can we think about that and what impact it might have on your ability to maintain your kind of margin edge over, say, like legacy defense businesses and hopefully expand margins over time towards your 23rd targets?

So, Cashin, we are absolutely supportive of the government's effort in this area. You know, as well as we do, that UAV's business model and strategy is incredibly unique and enticing and compelling. Again, that particular directive is obviously directed to the entire market and all the suppliers, but we see it more directed to the much larger primes where the department has significant serious challenges on visibility to their supply chain, their cost models, their cost structures, their rate structures, et cetera, et cetera. We don't see that to be an impact for us whatsoever. We welcome it. It's still very premature. It's an audacious task that the government is going to be taking on. Not easy to actually implement such an effort.

I really, really support them on that in front. We welcome it. We do not see that as a problem. We welcome it. We're ready. We're working with them. You know, we spend a lot of our money on R&D, IRED, internal R&D, to develop our products as commercial products. This is the AV business model that we've been working and executing successfully for multiple decades, ever since we've been public. It's almost 20 years now that we've been doing this. And so it's nothing new to us. We welcome it. I don't see it as an issue. And it's more targeted towards much larger primes where this problem is much more acute and a lot more dollars that are, you know, sloshed around on lots of munitions and space programs and other things.

Thank you, Cashin.

You gave some very exciting commentary about perhaps that product being adopted across military branches and a variety of venues. You also signed an international contract. Can you speak a little bit to the demand there, and perhaps how quickly you see international sales scaling in comparison with what seems to be a pretty steep ramp in the United States? So, Brian, I'm very optimistic about the international demand for our local systems.

I tend to believe that the revenue may accelerate even faster internationally, given the kind of challenges that a lot of our allies have around the world with drone attacks. Look at what's happening in Eastern Europe. Look what's happening in Ukraine. Look what's happening around the Black Sea, Persian Gulf, Epic Fury, Middle East, Asia Pacific. Prime, prime, prime urgent needs for these countries to protect themselves.

And they just don't have the magazine depth to be able to withstand the type of attacks they're getting from some of our adversaries, such as Iran and others, and you're in Russia. So I think this was part of our strategy from the beginning because we know the sweet spot for counter UAS is directed energy laser weapon systems.

And we've got the world's best solution. It's performing. It's working. And we're scaling it. And exactly when those awards are going to come in, I think it's very difficult to predict that. But we do have several engagements, and I think those are going to continue to come in, and we'll keep you updated. The key was to get the inflection point, the U. S. Army to endorse it, select us, officially say that we're going to deploy this, FAA to approve it and support it and endorse it, and then now everyone else is going to follow.

Not only domestically, but also internationally. It's playing according to our strategy just perfectly, nearly perfectly. And while that's happening in the market, we're in parallel ramping up production, building systems as fast as we can. And that's at stage time.

Thank you, Brian.

Yeah, Clark, great question on the cash. We had a positive operating cash flow in the first quarter, $13 million, very favorable on that. We're really working to manage the cash as effectively as we can while also strategically investing in inventory to get ahead of some of these long lead items and get that in stock to support rapid delivery of our products.

We're anticipating managing the cash from a free cash flow perspective for the full year being slightly negative, driven mainly from the CapEx. We're going to have a lot of cash flow that's going to be able to do with the cash flow that's negative. We don't anticipate that carrying into next year. We expect to see our capital levels return to more normalized levels, as this is an inflection point on our production capacity expansion in fiscal year 27.

Regarding your second question on the CR, so that is factored into our guidance. We stated that in the last call. Things have progressed pretty much exactly as we expected. A short-term CR followed by an approved defense budget. That's what we're expecting to happen in the December timeframe. Our guidance currently reflects that.

You're welcome, Clark. So we're engaged with several countries. You know, we've announced Greece joint venture. We've announced our presence in UK. We already have presence in Germany. We have a joint venture, a small one in Turkey. We also have efforts that we announced in terms of teaming agreements and announcements in Taiwan. You're going to continue to see more and more of these over the next several quarters and years to come, both in Europe as well as in Asia Pacific and also in Middle East. Those are the three focus areas. All of Europe, Eastern and Western, plus Middle East, plus Asia Pacific. And then those countries are very specific. The reason for that is because the demand and the government's desire for our systems is quite strong, and it requires some level of local content and local presence, both in terms of engaging with those customers, but also in terms of actually producing subsystems or doing final assembly.

So the Greek militaries made public statements that they're going to be procuring a lot of loyering munitions, and specifically switchblade is one of those particular items. And it's in their, you know, government's budget process. It's gone through their parliament, and I've met with their top leaders, and it's actually progressing quite well. And so that's just not the only one, though. We have similar engagements in other parts of Europe and Asia Pacific and in the Middle East. And I think you're going to continue to see us progress there as part of our international expansion and growth, and you're going to see more such announcements that happen over the next several quarters and years to come.

You're welcome, Clark.

Good evening, Gavin. Well, you've talked about needing to demonstrate capacity to unlock awards. I mean, is that what we're starting to see in these bookings, or do you think bringing Salt Lake and Albuquerque, et cetera, online will unlock more?

It's a combination of both. Yes, the current investments that we're making in our facilities, and we've made over the last several quarters and even last year, has already yielded very strong growth, right? When Ukraine more started, we aggressively expanded the production of our Swiss Lake facilities. We aggressively increased the production of our Puma systems for Ukraine. And then at the same time, when additional demand was needed for, we built a solid city facility. So we've gotten awards for that. When we developed the P-550, we expanded facilities for P-550. U. S. Army gave us an award now. And so tight in the same thing, we've increased the capacity for counter UAS systems. There is a direct correlation and link between us investing and showing our customers that we can deliver and producing and delivering on time and reliable product to the customer and getting a lion's share of their business.

Many people can claim that they have it or they can do it, but unless they demonstrate, it's not the same thing. And what sets us apart is that we continue to deliver, execute, and demonstrate to our customers that we are a safe bet. And so I think that's been working for us. Additional capacity expansions that we're making now on Locust, on Red Dragon, on Free and Eagle One, all of these are going to yield more success and awards over the next several quarters, in my opinion, because we're talking to those customers, and they're engaged with us, and they want us to do that. And so it solves the government's problem because they don't have budgets that are long-term, and when they get the money, they want to give it to people that can just deliver right away or quickly and reliably.

And that's A. B. We're one of the top companies who can do that actually successfully, and we've demonstrated it.

And then just back to 2Q kind of guide, I appreciate it's early in the year, and there's still a lot of budget unknowns, But is there anything specific in 2Q that steps down EBITDA even while revenue increases?

Yeah, so Q2, the way we've laid this out with our revenue profile at the 45-55, the back half of the year being a more favorable volume and improved sales mix, that's what's driving the EBITDA in the second half of the year. First half of the year, we've delivered really strong in Q1, and in Q2, we see a little bit of a step down. Even though the volume is up higher, the overall sales mix is slightly below, and then our increased IRA to be expected to take up in Q2.

You're welcome, Gavin.

And I guess just a quick follow-up. So, was the recent international contract kind of a similar dynamic where the customer was waiting to see validation from the U. S. Army? The answer is yes, Andrew. Validations from two fronts. The U. S. Army, of course, because U. S. military and approvals and program record selection is the golden standard of our allies in general. You have seen that in our 20-plus year track record. When we win program records with the U. S. Army for Puma, for Raven, for Switchblade, for Titan, whatever product we win programs with the U. S. military, it almost always translates into adoption internationally with not one ally but several of them. So that was one.

The second key criteria was also for them to come to the United States, go to the field, test, and push the I believe button by shooting down drones themselves in the field. They did that. We demonstrated it. Our system worked while the competitive systems are not working, and therefore they gave us the award. And we expect that to continue with additional customers. That has always been our strategy to just basically demonstrate and deliver. And if we do that, obviously adoption will occur. And that's consistent with our strategy with Locus as well.

You're welcome, Andrew. Thank you.

I would now like to turn it back over to Denise for any closing remarks. Thank you once again for joining today's conference call and for your interest in AV. As a reminder, an archived version of this call, SEC Filings and Relevant News, can be found under the Investor section of our website. We hope you enjoy the rest of your evening, and we look forward to speaking with you again following next quarter's results.