AeroVironment opened fiscal 2026 with a record first quarter, its first period to include the BlueHalo acquisition that closed May 1, 2025. Revenue reached $454.7 million, up 140% as reported (about 18% on a comparable per-quarter basis), with adjusted EBITDA of $56.6 million (12.4% of revenue) and adjusted EPS of $0.32. Bookings were nearly $400 million, funded backlog grew to $1.1 billion and unfunded backlog to $3.1 billion, and management maintained full-year revenue guidance of $1.9-$2.0 billion with 82% visibility to the midpoint. The quarter also carried heavy purchase-accounting costs from BlueHalo, producing a GAAP net loss of $67.4 million and compressing GAAP gross margin to 21% from 43%.
Thank you, and good afternoon, ladies and gentlemen. Welcome to AeroVironment's First Quarter Fiscal Year 2026 Earnings Call. My name is Denise Pacioni, Director of Investor Relations for AeroVironment. Before we begin, please note that certain information presented on this call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve many 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 SEC, in particular in the Risk Factors and forward-looking statement portions of such filings. Copies are available from the SEC, 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 9th, 2025. The company undertakes no obligation to update any forward-looking statements, whether it is a result of new information, future events, or otherwise. Joining me today from AeroVironment are Chairman, President, and Chief Executive Officer, Mr. Wahid Nawabi, and Executive Vice President and Chief Financial Officer, Mr. Kevin McDonnell. We will now begin with remarks from Wahid Nawabi. Wahid.
Thank you, Denise. Welcome everyone to our first quarter fiscal year 2026 earnings conference call. I'll start by summarizing our quarterly performance, followed by Kevin, who will review our financial results in greater detail, and then discuss guidance for fiscal year 2026. After this, Kevin, Denise, and I will take your questions. I'm pleased to report a very strong start to our fiscal year with excellent first quarter financial results, setting new records for the company. We are better positioned than ever to drive industry-leading organic revenue growth and profitability. Our acquisition of BlueHalo has created significant new growth opportunities in critical areas that are aligned with our customers' highest priorities, and our integration efforts are progressing ahead of plan. Our first quarter results benefited from programs tied to this acquisition, and we look forward to building on that momentum in the coming quarters.
Now, let me summarize the key messages for the first quarter of fiscal year 2026, which are included on slide number three of our earnings presentation. As a reminder, this is the first quarter where our results are inclusive of our recent BlueHalo acquisition. First, we achieved another record first quarter with revenue of nearly $455 million. Second, bookings for the first quarter reached nearly $400 million, and our funded backlog grew to $1.1 billion. Unfunded backlog is now at $3.1 billion. Third, we introduced several innovative solutions in counter-UAS, space communications, and direct energy, among other areas that are directly aligned to our customers' urgent priorities and represent multi-billion dollar market opportunities over the next several years. Fourth, we're maintaining our fiscal year 2026 guidance with revenue between $1.9 billion and $2 billion.
Overall, AV is uniquely positioned as a leading defense tech prime with our innovative product offerings, along with the experience and capacity necessary to scale manufacturing on an expedited timeline. This is what is required for the urgent national security priorities of our nation and our allies around the globe. We have worked very hard throughout the past few years to position AV for such a historic set of opportunities. Since our last earnings call, we announced several key program wins and milestone achievements. For example, yesterday we announced a nearly $240 million award for our long-haul space laser communications terminals that will be delivered over the next three and a half years, with options for additional systems.
To put this in perspective, we expect that laser communication is going to be one of the most important aspects of warfare in the space domain and represents a multi-billion dollar opportunity for AV. AV is clearly leading the industry in this critical area and technology. Our technology allows the secure transfer of high-bandwidth data in the most challenging space environments at the fastest rates and across much longer distances than any other current capability on the market. This is a strategic and critical milestone for our customers, and we're now excited to move it from development into full-range production. With our decades of proven track record, AV is well positioned to efficiently scale our laser communications manufacturing to capture growing demand in this multi-billion dollar new market.
In addition, AV was also recently awarded a $95 million contract to further the development and scale manufacturing of our Freedom Eagle One, or FE-1, for the long-range kinetic interceptor program for the U.S. Army. This missile is designed to deliver extended range, higher altitude, and all-weather performance against a broad set of emerging threats. AV's FE-1 missile addresses a much broader set of requirements at much more affordable price points than anything available on the market today. Our nation needs capabilities such as FE-1 to affordably defend our nation against such emerging threats. This award enables AV to enter and disrupt a multi-billion dollar missile defense market. The U.S. Army considers our innovative FE-1 solution the leading capability in this critical area. We're looking forward to sharing future progress with you on FE-1 and our next-generation counter-UAS missile efforts in the coming quarters.
Another key achievement in the first quarter was the recent delivery of two of our counter-UAS infantry squad vehicle-mounted LOCUST laser weapon systems under the U.S. Army's Multipurpose High Energy Laser Program, or AMP-HEL. We're set to deliver two additional Joint Light Tactical Vehicles, or JLTVs, mounted LOCUST laser weapon systems next month for the second increment of the AMP-HEL program. These deliveries mark a major milestone in the U.S. Army's objective of operationalizing directed energy capabilities to defend against the emerging proliferation of drone warfare. Our LOCUST laser weapon system's use of directed energy is a critical emerging technology that is key to defending against Group 1 through 4 drones, and in the future will enable defense against hypersonic missiles, cruise missiles, and other projectiles at much lower and affordable costs.
We also see this emerging market exceeding several billion dollars in the coming years, and AV is ahead of most, if not all, industry players to scale and capture a significant portion of this very large opportunity. Finally, we delivered multiple P550 Group 2 UAS systems, along with training to the U.S. Army for the Long- Range Reconnaissance, or LRR, program of record. Persistent, low-cost, reliable ISR at the edge of the battlefield represents a shift in defense strategy around the globe, and we believe our P550's performance specifications meet the U.S. Army's program requirements better than any other competitor solution on the market. This program of record represents approximately $1 billion in value over the next five years, and AV is very well prepared to execute and deliver on it. The successful adoption of our P550 with the U.S.
Army's LRR program should also lead to more international adoption of this capability by our allies in the coming years. We've experienced such a trend with our other global franchises, such as the Raven, Puma, and Switchblade. We look forward to continued progress with this significant program of record. In addition to these significant program wins and milestone achievements, last week, we unveiled AV_Halo, a software platform and ecosystem that is hardware agnostic and unifies our suite of mission-ready software tools and offerings. AV_Halo clearly demonstrates the depth and breadth of our AI-powered software ecosystem for our end markets. At launch, the software modules include our multi-domain command and control, intelligence analysis, synthetic training, and autonomous targeting.
AV_Halo blends the best of both legacy AV and BlueHalo software solutions and offers our customers a comprehensive mission-ready suite of AI-powered software tools that empowers warfighters to dominate the mission across air, land, sea, space, and cyber domains. We're excited to share more details over the coming months about how AV_Halo software enhances the speed, autonomy, modularity, and interoperability of our offerings to address growing market needs. As the industry continues to grow and demand for customer-driven solutions increases, we are focused on leveraging our strategic partnerships to unlock new opportunities for AV, both domestically and abroad. Since our last earnings call, we have announced several key partnerships that will advance our long-term growth objectives and broaden our exposure in new areas. First, we announced a strategic partnership with Sierra Nevada Corporation for limited area defense architecture under the Golden Dome for America initiative.
This partnership focuses on integrating and aligning existing open architecture solutions using passive and active sensing, radio frequency, directed energy, kinetic energy, electronic warfare, and cyber solutions, and addresses the complete kill chain to neutralize Group 1 through 4 unmanned aerial systems, advanced cruise missiles, and other next-generation aerial threats. With our broad suite of technological solutions, AV is uniquely positioned to help protect our nation by implementing a cost-effective solution for sovereign missile defense. Second, we signed a memorandum of understanding in Denmark for expanding airport utilization for medium UAS training, demonstrations, and customer integration activities in the region. Finally, we announced an expanded partnership with the Dutch Ministry of Defense to modernize and expand their Puma fleet, highlighting the rising demand for adaptable, mission-ready uncrewed systems across NATO.
In summary, we're currently pursuing more than 20 different programs of record, which exceed $20 billion in potential value over the next five years. Included in these programs are OPF light and medium, one-way attack, LASSO, LRR, laser communications, NGCM, HMIF, and additional options with our SCAR space program, among several others. As we pursue these significant opportunities and programs ahead, we're also focused on managing the business efficiently during this period of high growth and capacity expansion. This past quarter, we successfully raised more than $1.5 billion through equity and convertible debt. Funds were used to pay down debt from the acquisition of BlueHalo, and the balance will be used to help support the company's growth, including necessary production capacity expansion. As we've discussed over the past year, our current facilities are capable of scaling manufacturing to meet rising demand through at least fiscal year 2027.
We're making progress on a new state-of-the-art manufacturing facility in Salt Lake City, Utah, which will allow us to considerably increase our manufacturing capacity for demand beyond fiscal year 2027. As part of our distributed approach to manufacturing for resiliency and risk diversification, we now have manufacturing sites operating across 12 different states. Now, I would like to provide brief updates on our two business segments. Our first segment, autonomous systems, achieved revenues for the first quarter of $285 million. This segment continues to remain a strong growth driver for the company as demand continues to increase for our family of UAS solutions such as Puma , P550 , and JUMP 20.
Thank you, Wahid. Today, I will be reviewing the highlights of our first quarter performance, for which I will occasionally refer to both our press release and earnings presentation available on our website. Just a reminder that we closed our BlueHalo acquisition on May 1st, so the results for Q1 and projected FY 2026 will include the financial activity from BlueHalo. I'll briefly comment on the results for the quarter and then turn to guidance for the remainder of FY 2026. In summary, we are very pleased with the results of the new AV on all metrics, delivering solid top line and EBITDA growth. As Wahid mentioned, our equity and debt raise in July positioned us well for growth, with over $700 million of cash and investments on the balance sheet.
As Wahid also mentioned in his remarks, we started the year with $454.7 million of revenue in the first quarter, which represents a 140% increase over the prior year as reported, or an 18% increase on a per quarter revenue basis. Since the acquisition of BlueHalo, our regional revenue index has shifted towards the increase in domestic revenue. For Q1, 78% of our revenue came from domestic customers and 22% from international customers. In the first quarter, Ukraine represented 8% of revenue. The rest of Europe represented another 6% of revenue. We expect Ukraine revenue to remain between the 5% and 8% of total revenue in FY 2026. When compared to per quarter revenue for the first quarter of FY 2025, several of our products realized tremendous growth. Switchblade 600 had over 200% revenue growth. JUMP 20 had over 6x revenue growth.
Our LOCUST directed energy counter-UAS business also had 5x per quarter revenue growth. Titan revenues nearly doubled, a reflection of the strength of our counter-UAS RF business, and finally, BADGER, the advanced RF satellite ground station, grew nearly 40%. Notably, we received an award for $70 million for an additional BADGER unit in the quarter, and this is part of a larger order we expect to receive in Q2. As mentioned on prior earnings calls, AV is now operating under two reported segments: Autonomous Systems, or AxS, and Space, Cyber, and Directed Energy, or SCDE. AxS ended the quarter strong with $285 million of revenue, which represented a 22% increase over FY 2025 per quarter revenues. Of the total in the quarter, about 35% came from Switchblade 600 product, 15% came from Puma product, 9% from Switchblade 300, 7% from counter-UAS RF, and 6% from JUMP 20.
SCDE ended the quarter with $169 million in revenue, which represented a 12% increase over prior quarter FY 2025. Of the total for the quarter, approximately 19% came from BADGER's satellite ground station, 12% from LOCUST directed energy counter-UAS systems, and 12% from our advanced R&D businesses, which focuses on research, development, testing, and evaluating emerging technologies to ensure their effective transition to the warfighter. In terms of adjusted EBITDA, slides 10 - 11 on our earnings presentation show the reconciliation of GAAP gross margins to adjusted gross margins and net income to adjusted EBITDA. Adjusted EBITDA in Q1 was $56.6 million, up from last year's Q1 of $37.2 million, as reported, primarily due to the incremental BlueHalo result. EBITDA as a percentage of revenue ended at 12.4% of revenue, which was in line with our expectations. We continue to forecast full-year adjusted EBITDA at 16% of revenue.
Moving to gross margins, in the first quarter, consolidated GAAP gross margins finished at 21% versus 43% in the prior year. The decrease in GAAP gross margins can be attributed to the higher service mix of 31% of revenues versus 16% in the prior year, plus an increase of intangible amortization, other non-cash accounting expenses of $33.7 million over FY 2025. First quarter adjusted gross margins were 29% versus 45% in the first quarter of FY 2025. As noted, the business landscape of the combined new company has changed significantly with a higher service mix and several products in early stages of maturation. We believe adjusted gross margins to continue to improve throughout the year, ending up in the mid-30s by Q4, with an average for the year in the low 30s.
Moving on to operating expenses, reported GAAP SG&A for the quarter was $131.3 million versus $33.8 million in the prior year. Net of intangible amortization, deal, and integration costs, adjusted SG&A was $65.2 million versus $32.7 million in the prior year. The increase is largely a result of the combination with BlueHalo. As a percentage of revenue, adjusted SG&A in the quarter was 14.3% of revenue versus 17.3% in FY 2025. Again, these SG&A levels represent a shift in the business model, and we expect to end the year in the 11% - 13% range as we begin to realize synergies and achieve higher revenue levels. Our new expense for the first quarter was $33.1 million, or 7.3% of revenue, compared to $24.6 million, or 13% of revenue in the prior year.
Again, this is a shift in the business model, and we expect R&D as a percentage of revenue to end the year at between 6% - 7% revenue range. Now turning to GAAP earnings, in the first quarter, the company generated a net loss of $67.4 million versus net income of $21.2 million reported in the same period last year. The decrease in net income of $88.5 million can be attributed to increased intangible amortization, other non-cash purchase accounting expenses of $74.9 million for the BlueHalo acquisition, plus another $23.7 million of deal and integration costs. In addition, interest and other income expenses increased $14.6 million year- over- year. This was offset by an additional $6.3 million of income from operating activities and a decrease in taxes of $16.7 million. Slide 12 shows the reconciliation of GAAP and adjusted and non-GAAP with EPS.
The company posted adjusted earnings per diluted share of $0.32 for the first quarter of fiscal 2026 versus $0.89 per diluted share for the first quarter of fiscal 2025. Moving to the balance sheet, at the close of the first quarter, our total cash and investments amounted to $722 million. As most of you know, we completed a $1.7 billion financing during the first quarter, of which approximately $950 million was used to pay down the debt from the BlueHalo acquisition. We now have a completely new balance sheet as a result of the BlueHalo transaction. Consequently, many of our balances are not comparable to prior periods. For instance, our overtime revenue recognition has increased from 41% to 75% of revenue year- over- year, driving up unbilled receivables. With that said, unbilled receivables continue at a higher level than we are targeting.
They have been negatively affected by the alignment of the contracting officers for our Switchblade product. This transition has been completed, and we expect unbilled to be down significantly in the next quarter. Turning to backlog, our funded backlog at the end of the first quarter of fiscal 2026 finished at $1.1 billion. Unfunded backlog grew to $3.1 billion at the end of Q1. I should note that we included in our visibility from expected revenue for long-term contracts, which we expect to perform during the fiscal year, but which have not been funded as of this date. Given this, the visibility to the midpoint of our revenue guidance range is 82%. We expect our unfunded backlog to continue to grow significantly during the second quarter due to the recently announced contracts and new contracts in the pipeline. Finally, I would like to provide you with our updated FY 2026 guidance.
On page six of the presentation, we provide fiscal 2026 guidance. Fiscal year revenue is still expected to be between $1.9 billion and $2 billion. Adjusted EBITDA remains between $300 million and $320 million, but non-GAAP adjusted EPS is now projected to be between $3.60 and $3.70 due to the refinancing of our debt. The midpoint of our revenue guidance range represents nearly 15% growth over the prior FY 2025. As mentioned previously, our visibility to the midpoint of the revenue guidance range is at 82%, which is higher than at the higher end of the historical range at this point during the year. I'd like to close by echoing Wahid's remarks. We are very well aligned with the U.S. DoW priorities and those of the allies, and I'm excited about our prospects. Now I'd like to turn things back to Wahid.
Thanks, Kevin. Before it's time to call over for questions, I'd like to reiterate all the positive momentum we have entering our second quarter of fiscal year 2026. First, we achieved another record first quarter with revenues of nearly $455 million. Second, bookings for the first quarter reached nearly $400 million and our funded backlog grew to $1.1 billion. Unfunded backlog is now at $3.1 billion. Third, we introduced several innovative solutions in counter-UAS, space communications, and directed energy, among other areas that are directly aligned to our customers' urgent priorities and represent multi-billion dollar market opportunities over the next several years. Fourth, we're maintaining our fiscal year 2026 guidance with revenue between $1.9 billion and $2 billion. Our strong first quarter results underscore the confidence we have in the future of AV and our ability to reshape the future of defense.
Our integrated capabilities across every domain of modern warfare, combined with our enhanced innovation and ability to scale, strengthen our ability to address emerging global priorities. We stand ready and committed to deliver just as we've always done. With strong support on both sides of the aisle in Congress, the current administration, and our customers, we're confident that AV will not be negatively affected should Congress fail to pass a budget resulting in a continuing resolution. The support for our solutions and the urgency behind the need for our products gives us confidence that we will remain a high priority in either scenario. Additionally, we have significant momentum internationally with our allies, where our ability to deliver battle-proven solutions quickly at scale is certainly a competitive advantage. I want to thank our employees, shareholders, and customers for their continued commitment to AV and our mission.
We're honored to support the most critical defense missions at this pivotal moment, and we're ready to seize the tremendous opportunities ahead. With that, Kevin, Denise, and I will now take your questions.