"First revenue rose to $189.5 million, a 24% increase from the same quarter last fiscal year, and set a new first quarter revenue record for the company." - Wahid Nawabi
AeroVironment Inc (AVAV) QQ1 2025 Results: Record Revenue Fueled by Uncrewed Systems and Loitering Munitions; IDIQ Backlog Strength and Capacity Expansion
Executive Summary
AeroVironment delivered a record start to fiscal year 2025 with total quarterly revenue of $189.5 million, up 24% year over year, marking the first-quarter revenue record for the company. The strongest growth driver remained Loitering Munition Systems (LMS), which reported $52 million in revenue, a 68% YoY increase, underscoring elevated demand for Switchblade variants (600 and 300) amid expanding production capacity. Uncrewed Systems (UxS) followed as the second-largest contributor at $120 million, up 22% YoY, supported by Puma, JUMP 20, and new P550 opportunities; Puma deliveries to Ukraine are progressing, with the company noting its 475th delivery to Ukraine and active Ukraine-related opportunities under the recently announced aid package.
Management reaffirmed guidance for FY2025, highlighting a robust backlog and a pipeline that supports a higher activity level through the year. Notably, AeroVironment secured a significant 1B1 IDIQ (LUS/LASSO umbrella) with the U.S. Army, including a $128 million first task order booked in Q1 against a near $1B ceiling. The IDIQ structure provides for progress payments, improving cash flow and working capital, while enabling multi-year procurements for Switchblade variants, Ukraine aid, and potential international acquisitions under FMS programs.
The company signaled constructive margin and profitability dynamics: GAAP gross margins were 43% with adjusted gross margins at 45%; products margins were 48% (down slightly from 49% prior year) and services margins were 29% (up from 28%). Adjusted EBITDA was $37 million, flat versus the prior-year quarter as higher revenue and gross margin were offset by rising R&D and SG&A investments. Net income totaled $21.2 million with adjusted EPS of $0.89, while GAAP diluted EPS was $0.75. Management emphasized continued investment in R&D (about 13% of revenue) and 12–13% company-wide R&D for FY2025, aiming to sustain long-term growth in UxS capabilities, autonomous systems, and MacCready Works programs.
Key Performance Indicators
Revenue
189.48M
QoQ: -3.81% | YoY:24.38%
Gross Profit
79.76M
42.09% margin
QoQ: 7.56% | YoY:21.47%
Operating Income
23.06M
QoQ: 277.64% | YoY:-12.55%
Net Income
21.17M
QoQ: 250.08% | YoY:-3.33%
EPS
0.76
QoQ: 245.45% | YoY:-9.52%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $189.483M in Q1 FY2025, up 24.38% YoY from $152.3M in Q1 FY2024; QoQ not explicitly provided in the release.
Profitability: Adjusted EBITDA $37.0M (flat YoY); GAAP net income $21.2M; GAAP diluted EPS $0.75; Adjusted diluted EPS $0.89.
Cash & liquidity: Cash and investments $103.0M at quarter-end; free cash flow $23.0M; net cash provided by operating activities $28.35M; total debt $47.30M; net debt negative $33.86M; cash at end of period $81.16M (GAAP cash balance).
Financial Highlights
- Revenue: $189.483M in Q1 FY2025, up 24.38% YoY from $152.3M in Q1 FY2024; QoQ not explicitly provided in the release.
- Segment mix: UxS revenue $120.0M (+22% YoY); LMS revenue $52.0M (+68% YoY); MacCready Works $17.5M (-24% YoY).
- Gross margins: GAAP gross margin 43%; adjusted gross margin 45%; adjusted product gross margins 48% (vs 49% prior year); adjusted service gross margins 29% (vs 28% prior year).
- Profitability: Adjusted EBITDA $37.0M (flat YoY); GAAP net income $21.2M; GAAP diluted EPS $0.75; Adjusted diluted EPS $0.89.
- Cash & liquidity: Cash and investments $103.0M at quarter-end; free cash flow $23.0M; net cash provided by operating activities $28.35M; total debt $47.30M; net debt negative $33.86M; cash at end of period $81.16M (GAAP cash balance).
- Backlog and guidance: Funded backlog includes a $128M first task order under a nearly $1B IDIQ; revenue guidance reaffirmed for FY2025 with visibility to ~80% of the midpoint of the year and expected 1H revenue around 45% of the full year.
- Cash flow / working capital: Unbilled receivables remain elevated, particularly in LMS; expected progress payments under the IDIQ should reduce unbilled receivables over time; term loan debt paid down by $10.5M in the quarter.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
189.48M
24.38%
-3.81%
Gross Profit
79.76M
21.47%
7.56%
Operating Income
23.06M
-12.55%
277.64%
Net Income
21.17M
-3.33%
250.08%
EPS
0.76
-9.52%
245.45%
Key Financial Ratios
currentRatio
4.26
grossProfitMargin
42.1%
operatingProfitMargin
12.2%
netProfitMargin
11.2%
returnOnAssets
2.12%
returnOnEquity
2.5%
debtEquityRatio
0.06
operatingCashFlowPerShare
$1.01
freeCashFlowPerShare
$0.82
priceToBookRatio
5.75
priceEarningsRatio
57.4
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key themes from management commentary and earnings call:
- Strategy and backlog expansion: Wahid Nawabi highlighted that the company booked a $128M first task order under a near $1B sole-source IDIQ (LUS/LASSO umbrella) and noted that more orders under the IDIQ are expected in fiscal 2025, with the potential for additional contracts beyond Switchblade orders. He stated, “first revenue rose to $189.5 million, a 24% increase from the same quarter last fiscal year, and set a new first quarter revenue record for the company,” and that the IDIQ provides favorable progress payments to improve cash flow.
- LMS growth and capacity: Nawabi emphasized LMS as the growth driver with $52M in LMS revenue, up 68% YoY, and that the company is expanding manufacturing capacity to support more than $500M in annual Switchblade revenue in FY2025 and considering another LMS manufacturing site beyond FY2025.
- UxS strength and product roadmap: Kevin McDonnell noted UxS revenue of $120M (up 22% YoY), with Puma accounting for 78% of UxS revenue; the team highlighted P550 (Long Range Reconnaissance, AI/autonomy) and ongoing JUMP 20 momentum, positioning for rising international demand in FY2025 and beyond.
- Financial discipline and guidance: McDonnell reiterated margin expectations (adjusted gross margins ~40% for the year) and that adjusted EBITDA should remain resilient (~$37M in Q1) despite higher R&D and SG&A investments; Nawabi reaffirmed FY2025 guidance, indicating strong backlog supports revenue visibility into the year.
- International opportunities and FMS: Multiple Q&A segments emphasized the growth in international demand and the potential for FMS/OUS (Ukraine/Ukraine aid packages) opportunities under the IDIQ umbrella, with Taiwan FMS and other alliances noted as potential buyers under the program umbrella. Louie DiPalma and Andre Madrid echoed the breadth of international pipelines and the ability for the IDIQ to accommodate foreign military sales.
- Pricing and margins: Management indicated that pricing discussions for Switchblade contracts remain uncertain in the near term, but projected margin improvements for the year as volumes rise and contracts finalize, with a focus on progress payments improving working capital dynamics (as noted by Kevin McDonnell). Quote: “we’re optimistic that [margins] will show improvement” (approximate paraphrase from the call).
First revenue rose to $189.5 million, a 24% increase from the same quarter last fiscal year, and set a new first quarter revenue record for the company.
— Wahid Nawabi
Our manufacturing capacity is expanding to support more than $500 million in annual Switchblade product revenue in fiscal year 2025 and we're prepared to support additional capacity growth in the future.
— Wahid Nawabi
Forward Guidance
Outlook and expectations based on management commentary and the earnings call:
- Revenue trajectory: The company reaffirmed FY2025 guidance, with expectations that the first half will represent about 45% of the full-year revenue, consistent with a belief that the pipeline and funded orders accelerate into the second half of the year as IDIQ task orders convert to funded backlog.
- Backlog and cadence: With a $1B IDIQ ceiling and a first $128M task order booked, AeroVironment anticipates funded backlog to grow in coming quarters. The management commentary underscores a constructive cadence for converting awards into revenue, though timing remains sensitive to DoD budgeting cycles, election dynamics, and potential CRs.
- Margin and profitability: The team expects adjusted gross margins to remain around the mid-40s% and adjusted EBITDA to stay robust despite higher R&D and SG&A investments, given higher volumes and the favorable terms of IDIQ progress payments. The near-term gross margin normalization reflects LMS mix and undefinitized orders; management projects that margins will improve as the LMS portion finalizes pricing and as production scale benefits accrue.
- Capacity expansion and capital allocation: The leadership highlighted expansion of manufacturing capacity to support >$500M in annual Switchblade revenue and ongoing site selection for additional capacity, with CapEx expected to be modest and in line with revenue growth (~5% of revenue). Investors should monitor capex approvals, site development, and the realization of additional production capacity as indicators of longer-term upside.
- Risks to watch: Key factors include timing and magnitude of DoD budget approvals, potential continuing resolutions, and the pace at which international orders convert to awards and funded backlog. The management emphasized the long-cycle nature of FMS/LASSO-type programs and the ongoing need to convert pipeline opportunities into concrete orders.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
AVAV Focus
42.09%
12.20%
2.50%
57.40%
KTOS
24.90%
2.53%
0.10%
492.90%
AXON
56.40%
3.53%
7.33%
44.03%
EVEX
0.00%
0.00%
-18.00%
-14.44%
LHX
22.10%
8.02%
1.52%
35.73%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Base-case investment thesis for AVAV rests on a durable growth trajectory across LMS and UxS with rising contribution from high-value programs under the LUS/LASSO umbrella, backed by a near-term $1B IDIQ and a diversified pipeline of domestic and international opportunities. The company’s margin trajectory is favorable, aided by higher product mix, defense pricing dynamics, and the transition of LMS orders from undefinitized to finalized contracts, while capacity expansion provides the revenue tailwind to meet rising demand. The reaffirmed FY2025 guidance, strong cash flow, and a net cash position support a constructive outlook, though investors should monitor DoD budget timing, international approvals, and the pace of backlog conversion.
Bull case: Significant funded backlog acceleration, rapid conversion of international orders, and material ramp in LMS/Switchblade volumes leading to above-guidance revenue and margin expansion; potential additional IDIQs and FMS to further augment backlog and cash flow.
Base case: Steady revenue growth driven by LMS and UxS with stable margins around the mid-40s% adjusted gross margin, and solid free cash flow generation, delivering a solid FY2025 result in line with guidance.
Bear case: Delays in DoD funding, slower conversion of international orders, or higher-than-expected cost inflation in manufacturing and R&D could dampen margin improvements and delay backlog realization, potentially pressuring near-term profitability.
Key Investment Factors
Growth Potential
Robust growth potential driven by LMS high-velocity orders (Switchblade 300/600), expanding UxS platforms (Puma, JUMP 20, P550), and the MacCready Works AI/autonomy initiatives. The near-term catalyst includes the $1B IDIQ with the U.S. Army and future task orders projected under LUS/LASSO umbrella, plus international FMS opportunities (Taiwan, Ukraine, etc.). The company projects >$500M annual Switchblade revenue capability in FY2025 and ongoing capacity expansion beyond FY2025.
Profitability Risk
Key risks include funding timing and magnitude of DoD programs, political budget dynamics (CRs/elections), execution risk in expanding manufacturing capacity, potential lumpiness of LMS orders due to undefinitized contracts, and geopolitical/arms-export restrictions affecting international deals. Unbilled receivables remain elevated, and working capital could fluctuate quarter-to-quarter as new Army payment terms take effect.
Financial Position
Solid liquidity with $103M in cash and investments; total debt of $47.3M and net debt of -$33.86M, reflecting net cash; strong operating cash flow of $28.35M and free cash flow of $22.92M in Q1; funded backlog growth supported by IDIQ terms and progress payments; capex discipline (~5% of revenue) supports sustainable expansion without diluting returns.
SWOT Analysis
Strengths
Leading position in defense autonomous systems with battle-tested Switchblade loitering munitions and Puma/JUMP 20 UxS franchises
Significant near-term backlog and a high-visibility IDIQ framework (near $1B ceiling) enabling rapid order flow and favorable progress payments
Strong top-line growth across LMS and UxS with expanding gross margins (adjusted gross margin ~45%) and improving service margins
Flexible, scalable manufacturing footprint and planned capacity expansions to support >$500M annual Switchblade revenue
Diversified product portfolio across three segments (UxS, LMS, MacCready Works) plus AI/autonomy initiatives
Positive international demand signals and active engagement with multiple allied governments for FMS orders
Solid cash generation and improving balance sheet with net cash position and modest leverage
Weaknesses
LMS margins pressured by undefinitized orders and pricing uncertainties in the near term
R&D and SG&A investments higher in Q1, pressuring near-term profitability while funding long-term growth
Uniques of government procurement cycles can create lumpiness in order timing and revenue recognition
Elevated unbilled receivables in LMS, which could pressure working capital if funded backlog does not materialize as expected
Opportunities
Expanding Loitering Munition demand under LUS/LASSO umbrella for DoD and international customers
P550 and maritime JUMP 20 enhancements broaden product addressable market
Ukraine and other international aid packages create incremental demand for Switchblade and related systems
Potential to add new Switchblade variants and additional capacity in multiple sites to exceed $500M annual Switchblade revenue
MacCready Works milestones (DARPA Ancillary program, HAPS, and NASDAQ-linked autonomous demonstrations) nurture long-term growth
Threats
Geopolitical risk and budgetary uncertainty (CRs, elections) affecting order timing and funding
Competition from other UAS developers and potential supply chain constraints in defense electronics
Export controls and FMS negotiations potentially delaying international orders
Execution risk in scaling up new capacity and integrating new manufacturing sites
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