Good morning. My name is Greg Konrad, and I am with SVP of Aerospace and Defense Equity Research at Jefferies. Welcome to our annual Jefferies Industrial Conference in New York City. Very excited to have Wahid Nawabi, President and CEO of AeroVironment, with us today, along with Kevin McDonnell, Senior Vice President and CFO. They reported last night, so we're gonna start there. Maybe just, you know, for investors who haven't looked at the print yet, you—what should people take away with what the numbers you put out last night? Well, we were busy with the earnings call and the callbacks. Overall, I mean, we had a great quarter. Record first quarter in terms of revenues, grew the business 24%. Very robust growth in our loitering munition Switchblade family of products, grew almost 68%. We're on this inflection point that we've started a couple of years ago, and we're continuing to grow, and it's gonna be a great year. So we're on track with our another growth year, another record year, and overall, both on top and bottom line, we're doing really well. And then, of course, we had one more announcement about the $128 million t ask order that was added to the billion-dollar IDIQ. I mean, and kind of with that, how do you think about the balance of growth, given the recent backlog expansion, including the award that's not in there yet? You're expecting low double-digit revenue growth this year. You know, how do you think about the main drivers given the start in Q1? Yeah, so most of it has to do with the timing of this year's what I call a transition year for the U.S. government. We have an election that's hopefully gonna be over by January or so, and hopefully we have a likelihood, all the experts indicate that there's a strong likelihood for a CR, continuing resolution, for the DoD budget. And so those are the two main factors in terms of the timing of the additional contracts. We have significantly more contracts in the works that we expect to book between now and the end of the fiscal year. But what's really gonna matter is how fast can the DoD move in terms of putting those opportunities that we're working with them into an actual contract to us. Our backlog is very strong. Our visibility number that we provide every quarter is at 80%, and that's roughly about $500 million worth of backlog, with when you include the $128 million that we just received a week ago or so. Overall, I think we're gonna have a great year, but the timing of those contracts will determine how much more we could do if we were to do more in this fiscal year. Obviously, our goal is not to just manage for this year. Our goal is to generate really, really strong growth and value for the shareholders over the long term, and we've done that really, really well over the last decade. And then maybe just getting a little bit more granular on that point, I mean, a lot of us follow the process of the fiscal year 2025 budget. I mean, that's probably well past January. What are the largest swing factors, you know, while we watch that move through the House, Senate, and probably stall from there, but, you know, what program should we most be watching? Well, generally, most of our revenue and growth is gonna come from our two main segments. We have three segments. The loitering munition is by far the largest growth factor for us, the Switchblade family, and then, of course, our unmanned systems or uncrewed systems segment is the second. There are several I mentioned, not in this call, but the call before, about over $300 million worth of opportunities that we're working on for Switchblade alone. If you look at some of the public announcements and awards that we've been given by the U.S. DoD, there's several very large ones. We essentially just booked the first large, what I call IDIQ, that allows for those other contracts to just come under this umbrella contract. And so Replicator, we were nominated for that, and awarded, and we haven't. That's not reflected in our backlog, majority of it. There is also additional aid to Ukraine for Switchblade, as well as our small UAS, the Pumas. Those are not reflected in our backlog. There is opportunities internationally that we're working on several countries, both for small UAS as well as our loitering munition. Many of those are not in our backlog. And then, of course, besides that, we have a whole bunch of what I call cats and dogs, opportunities that we're engaged in and chasing, and we expect those to convert to backlog and bookings, but just the timing is really based on the U.S. DoD's contracting speed. And then, I mean, and I'm sure this is a question you get all the time, but, you know, what's changed post-Ukraine? And when we think about supplementals, which I think you've talked about double digit number of s ystems in Ukraine, you know, where are we in terms of that, you know, restocking and supplying Ukraine? So fundamentally, the U.S. DoD's stockpile or inventory of both of our loitering munition and small UAS is incredibly, incredibly low, almost dire low, in my view. So we know that because we are talking to our customers all the time. So fundamentally, we haven't even begun to backfill the depletion of the U.S. DoD stockpiles for small UAS and loitering munition at all. They were low to begin with before the conflict, and then as the conflict started, almost everything went to Ukraine, and then U.S. DoD's appetite is a lot bigger. If you ask me what's the biggest change since the start of the Ukraine conflict is. I fundamentally believe, and we always believed this before the Ukraine conflict, that there's going to be a shift, a fundamental shift in military operations and strategy, which is the future wars, no matter where it is and who the adversary is, it's going to include a much, much higher level of robotic systems, call it uncrewed systems, such as drones, both non-lethal and lethal drones. And we're the category leader in both of those. We invented, essentially, those categories for the defense market, and we have a huge install base, large customer base. That shift alone is going to is already starting an enormous amount of what I call demand across all services, all customers, all geographies. And so we will most likely see over the next few years, half a dozen to dozen billion-dollar-plus program records, all geared towards our capabilities, and some of them has just been announced recently. The $128 million contract that we received, which I mentioned yesterday, is specific to the U.S. Army. It's the first time U.S. Army's buying Switchblade for themselves. Over the last decade and a half, they haven't done that. They've always bought it for other services. And so that's the initial phase of this program called LASSO, which is considered to be a very large loitering munition capability for the U.S. Army alone. U.S. Marine Corps has a similar program called OPF that we also have been awarded. And so these are just the initial steps where almost every military, every service around the world, our allies primarily, are gonna acquire and equip their force structure with more unmanned systems on the edge, distributed, as well as loitering munitions. That's fundamentally the biggest change. I mean, you somewhat answered it, but just wanna drill into one point that a question I get all the time is, for AeroVironment, what happens, assuming that Ukraine eventually is resolved? Yeah. How do you think about that transition away from what you're doing for the country today? Sure. So we would love for Ukraine to resolve because it's good for humanity, it's good for Ukraine and for Russia to get out, and that's hopefully that eventually gonna happen. And it's most likely that, well, not most likely, it's certain that it's gonna happen eventually, right? So what would happen after that? There is a significant amount of additional demand drivers for our business. In fact, in our investors event, we showed a chart that outlines the various different, what I call layers of the cake, that helps our business. So let's just go for specifically more detail. If Ukraine were to stop tomorrow or today, right, Ukraine is not going to be left with not more small unmanned systems and loitering munitions. They wanna have a much bigger stockpile of than because they're gonna be concerned about the future, right? All the neighbors around that region is gonna do the same. Everybody that's a U.S. ally in Asia- Pacific is trying to do the same. U.S. military has exhausted their inventory, and not only are they gonna replenish it, but most likely they're gonna replenish it by a much, much higher factor of the, of numbers, and that's what most of these programs are all for. In addition, almost every other platform that's in the ground, air, or maritime is going to be more and more equipped with more types of Switchblade. You see some programs that are already out there. We have a partnership with, as you know, General Dynamics Land Systems for the Optionally Manned Fighting Vehicle, the next generation Stryker vehicle. These are all future capabilities on newer platforms. U.S. Army has a program, an initiative called Launched Effects. They would like to put things such as Switchblade and various helicopters, airplanes, and other assets in their inventory. So every one of these essentially is massive, massive opportunity for us. And so if you just add those up alone, that's an incredible amount of growth over the next 5+ years. And you mentioned neighbors of Ukraine. I mean, where are you in that process of being able to sell to a broader international, and any way to kind of size that pipeline? Yep. So, it is unprecedented to our knowledge that U.S. DoD and State Department actually gave us carte blanche approval to go and engage and provide, and approved us to be able to sell Switchblade 300 and 600 variants to up to 50 different allies. You know, we already have contracts and sales of our small UAS to 55 countries. That took over, well over a decade to build. And now you could argue that our small UAS franchise is 50-50 domestic versus international. I believe the same is doable and a much faster sort of a pace in our loitering ammunition. So out of those 50 different countries, at least 20 of them already raised their hand that they wanna-- they're talking to us in terms of engaging a certain level of our acquisition process. There is a dozen real serious engagements, some of whom have already actually publicly announced that they're getting Switchblade. The latest one is, of course, Taiwan. U.S. DoD approved that, and they said they're gonna receive Switchblade. Lithuania is a country that mentioned, you know, and Lithuania actually even mentioned the specific or the some range of dollars. And, countries such as, Australia just recently announced that they're gonna be getting Switchblade. France has publicly announced. Some of them have not publicly announced, and I can't disclose the details of those, but at least a half a dozen of those are into the pipeline moving towards a real contract. Now, that process is not easy, and the U.S. DoD is overwhelmed, and so is the State Department, with exports in general since the Ukraine conflict. We're trying our best, and so is our customer, and so is the U.S. government, to try to expedite these things as fast as possible. That's why we've continued to increase capacity in terms of supply and production, and we're ahead of our actual demand in general. We have always stayed that way, and it's a very key differentiator for our business. The list is pretty long, and the potential is very large over the next several years. ...And then, I mean, the market seems to freak out every time there's anything competitively that's done in this category outside of AeroVironment. I mean, how do you think about the advantage? How do you think about that market playing out? Because obviously, there's gonna be more than just Switchblade. Yeah. You know, I've been with AV for fourteen years. There's not been a single year that people have not asked and wondered: "Oh, my God, how could you guys compete with the big guys in a market that is your platform player, and this is a market that you're doing really well, and there's no way you can maintain this?" We've proved it, you know, sort of, and delivered over the last decade and a half, very, very successfully. And there's lots of reasons why. But you're right. Now, because the market is growing so fast, and it's getting so much bigger, there's a lot more competition that's coming in, and we've had competition for a long time. I think competition is very good. I welcome that in general, even though it doesn't feel good sometimes. Welcome it because it keeps us competitive. It keeps us to continue to innovate and deliver the best solution for our customers. Our win rate is incredibly high, and our track record of being able to actually deliver on those competitions and then win ultimately is very, very high, too. You could see example after example, both domestically, internationally, where we've gone against head-to-head against very great top competitors, and eventually we've prevailed. So we really focus on our own abilities, our execution, and we welcome it. Honestly, there's no issue with that for us. In general, though, because the market is growing so much, there's a lot of interest in getting into this space, and that's causing a lot of what I call hype. Then, I mean, kind of closing that loop, I think you reiterated the $500 million of capacity coming online, I think $1 billion in fiscal year 2027. You've talked about this being a $5 billion market. I mean, how do you think about share as you do bring on capacity? Yeah, so I mean, our share is continues to stay very high in the areas that we're focused in. I do believe that the market is even growing beyond that. You know, the figures that you just mentioned, I believe, is very much conservative in terms of the size of the market and the growth that we see. And I think it's gonna continue to be competitive like it's always been. I mean, there's not a single opportunity that we've gone in the last decade and a half that I've been here that has not been very competitive. But that's the business we're in, and we love it. There's not an issue. We love to compete, as I said. And we always look at, you know, the competitive landscape relative to every single one of our products and category that we play in, and we really like our cards, our chances, and it's really good. So I think you're gonna continue to see that. There's no one that I can think of that even comes close to the breadth and depth of our solution set. You know, I've always believed in this, and we continue to believe in this as an organization and team, which is a distributed portfolio of intelligent, multi-domain robotic systems in the air, ground, surface water, and subsurface water. These systems connected with very high level of integration, so it puts very little cognitive load on the operator, and they can actually share and team and work together as a cohesive set of robotic systems coupled with AI and autonomy, which is very, very key, and we're leading in that category is a very, very compelling sort of competitive advantage. And I think we're unmatched in that category in this industry. I'm gonna skip forward and then come back. I mean, you mentioned some of the systems, but I mean, how do you think about the benefit of the family of systems? How does it change the sales process and anything around, you know, customers where you think they've taken more than one system? I mean, how does that kind of- Yeah. So it is fundamentally also an opportunity for growth for us. Most of our customers that use our small UAS, including Ukraine, they use them as what I call a hunter-killer solution. You know, as you know, Puma, we've delivered over close to four hundred and seventy-five of them actually, we shipped the four hundred and seventy-fifth unit to Ukraine last month. That is their, essentially their air force, and that fundamental paradigm is incredible because it probably cost them less than one F-16. No offense to an F-16, but they, they've used Pumas all across Ukraine's, you know, conflict zones and day in and day out, twenty-four seven. It is the UAS that they rely on for intelligence, surveillance, and reconnaissance. In most cases, the Pumas are actually finding targets and helping almost every single all artillery that the U.S. has given to Ukraine, besides our own Switchblades. So not only is it teaming with Switchblade and loitering munitions and other drones that they have, domestic drones as well, but it also is actually helping the sweetening the targets for things such as even HIMARS and other artillery that Ukraine is using on the battlefield on a daily basis. So that fundamental shift in military operation is actually something that is just beginning. Almost every one of our customers is looking at acquiring more than one of our products as part of their portfolio. We have a fairly large P-550 opportunity there because they love the way our systems work, how easy it is for the operator, how easy it is to train them, how easy it is to actually integrate them. A great example of that is the Tomahawk Robotics integration with our systems. We now have the ability to actually have one controller on the ground, with one operator, manage and operate several devices, call it, or assets in the air and on the ground, including non-AV devices, with the Kinesis ground control station. That's fundamentally a huge, huge value proposition, and we're very unique in that category. And I don't think investors maybe always appreciate the positioning of Puma. I mean, you, you've made a lot of good advances on that program, adding stuff like autonomy and vertical takeoff. How do you think about the upgrade opportunity versus the installed base, and how does that shift over time, given some of those block upgrades? Yeah, so, like I said, that's why I'm so excited about the opportunities for growth. We're still what I call on a first-generation small UAS deployments across the world and in U.S. DoD over the last decade and a half or two. The P-550 we just announced about three months ago, and I talked about it on the call yesterday. That is what I refer to as the next-generation small UAS ISR asset, and it's a multi-mission UAV because it has the ability to you can change the payload on that literally within a minute on the ground. You can take it from an ISR payload to even a lethal payload, and various different kind of payloads you can put. So overall, I think that is another, what I call layer of growth and opportunity for us over the next probably ten years. There are lots and lots of our customers who would love to stay with our systems as long as we continue to provide upgrades and enhancements and improvements. And if you look at the Puma today, the Puma AE is almost 80% a brand-new Puma system than what we shipped five years ago. Many of its internal modules have been already upgraded and enhanced. And the latest enhancement is the Autonomy Retrofit Kit. If you have a Puma, and you buy this little box, and you plug it right to the side of the Puma, Puma now can operate in completely jammed, untethered, GPS-denied environment. It's actually very key to Ukraine. They need systems that can actually operate in a heavily jammed and contested environments, and that's what Puma does every day. And we've shown it. In fact, we did it on Investor Day, so our system is in essentially doing that, so all of our systems across our portfolio, in the long run, is going to benefit from those enhancements and capability. And I think, you know, we've probably talked more about capacity on the Switchblade side and at your Analyst Day, on the uncrewed system side, you talked about $1+ billion of capacity in 2025, up from $500 million. I mean, where are you seeing most of that capacity go, and how should we think about that in terms of the growth on the uncrewed side? So when we develop products and we establish manufacturing, which we do all of our own manufacturing, essentially, all in U.S., so that's really critical, with the exception of just our ground robots, which is made in Europe, in Germany. We actually intentionally design our factories in such a way that they're flexible, both in terms of capacity and the mix of products that we can manufacture and produce in every line. So that's inherent and fundamental to the design of our manufacturing, capability and capacity growth. We've always stayed ahead of the demand curve, both on our small UAS, medium UAS, as well as our loitering munition. So as I mentioned on the call yesterday, and you repeated it, we're gonna be at about $500 million worth of production capacity this fiscal year. And we are already looking at another physical site outside of California that we would like to expand even further beyond fiscal 2025. Or you know this is something that we work very closely with our customers. If these contracts come in faster and sooner and if we need additional capacity we have the ability to flex and convert different lines into Switchblade production or from Switchblade to Puma production or P-550 production very easily without a lot of requirement for capital. It's not a very capital-intensive business because the way we design our products and how it's made and produced and assembled together and tested. So we have very and in fact that's another competitive advantage today. We're the only one that I know of that can actually produce these things in the thousands of units today, the loitering munitions, and deliver them at the U.S. DoD's level of rigor, reliability, and quality, and safety. And so that fundamentally by itself is a huge, huge competitive differentiator for us. And so we continue. The first Replicator contract that we received, we've already delivered a small portion of it that they needed it right away, and there's more to come on that in Replicator. Same thing with other programs that we have won and we are engaged with. Ukraine, incredibly satisfied with the speed by which we actually turn around and deliver capabilities to them or products to them. Overall, I would say we're slightly ahead of the demand curve in terms of our capacity, and we're gonna continue to grow that as our business grows. We see this business growing significantly over the next few years, quite aggressive. And then, I mean, you've talked a lot about AI and communications. You mentioned Tomahawk a little bit. At the Analyst Day, you touched on those. How do you think about monetization? Is that a separate or is that sold with, you know, the actual vehicle? How do you think about those really being monetized? Yeah, so there's a lot of hype in the market with a lot of privately funded companies that they're gonna be a software company, et cetera, et cetera. You know, we're very focused on what is the best way to satisfy our customers' needs. Today, I would say that the approach of the U.S. DoD's taken, I call it, software enhanced and software differentiators built into our hardware system solution that we sell as a package, so when you buy a Switchblade, there's an enormous amount of software enhancements that is in it, such as the ability to visually track a target and finish the mission at the end game all automatically and without a human intervention, et cetera, et cetera. These are all software capabilities or autonomy capabilities. We don't sell that separately as a license, but the value of that is in embedded into the solution that we deliver to the customer. And so, as we all know, U.S. DoD still struggles with buying software separately, and you hear that repeatedly from everybody. But, you know, we said, if you can't change something, and it's not easy to change, then you gotta adapt to it. And the way to adapt to it is to basically enable our systems to be highly differentiated with software and the values built into the system price, and that's how we do that very, very effectively. We've done it for years. The RF radios for the communication of all of our Pumas and Ravens and Switchblades is designed by us. It's called the Digital Data Link. That is an AeroVironment patented, developed waveform that the U.S. DoD has adopted. We're the standard, essentially, for that, and we can sell that separately, but usually, we sell it as a system solution to the customer. So the value of that is embedded into the system price of the system. And so, I'm sorry, Tomahawk and Kinesis operating system is most likely gonna carry a similar pattern with our systems. One thing we also provide Kinesis and Tomahawk Robotics capability with any of our competitors or non-competitor, other robotic systems, whether it's a ground vehicle, UGV, UAV, et cetera. And most of those, we either sell it to the customer directly, or the, the provider of that system buys it from us and couples it and sells it as a system to the, to the end customer, and I think it's gonna continue. I mean, you have healthy margins today, but you've also laid out a long-term target of 22%-24%. You know, we've talked about software, mix, capacity. Can you maybe talk about the path to get there, what the biggest drivers are, and, you know? what the biggest incremental pieces are? So, yeah, so right now, we're still very focused on growth because there's so much more growth to come our way, and we have a very strong, what I call, belief, that we are entitled to a lot of that 'cause we created it, and we've developed it over time. So we're really focused on that as the first factor. Yeah, although our business is very profitable, I think there's opportunity for us to do, to actually have more margin expansion in, in several ways. One is the volume itself is gonna grow. Two is the terms of these programs and contracts that are coming in is gonna help us, and also the ability to sell a system solution. With program of records, we will get more visibility from the customer, so we can actually plan the demand much better in terms of long-term contracts with suppliers and getting better cost positions on those, too. Those are some of the few very key ingredients for us to be able to actually expand the margin and improve our profitability, as well as our margins over the next several years. You get a little bit more leverage on your R&D investment as you get some of these larger programs. And then, maybe final question, I mean, how does that equate to free cash flow? I mean, there's a lot of moving pieces today around inventory and, you know, ensuring supply chain growth, but how do you think about, you know, free cash flow? And then the second part of that, you know, where that free cash is deployed, whether it's organic or inorganic. We had a very good first quarter in terms of free cash flow, over $23 million in the quarter. The last couple of years have been high growth years. We had a 20% growth two years ago and a 30% growth last year, so that's put a lot of investment in working capital during that time. We've talked publicly about the fact the way our Loitering Munitions business has been structured or those contributions structured, it's a very negative cash flow business for us right now. With the recent IDIQ, the terms of payment were changed to progress payments, so as those orders start to come in, our unbilled receivables, which is about $200 million on our balance sheet, should start to come down and help the free cash flow, particularly in the short run. We see a lot of positive this year in terms of free cash flow. As Wahid said, it's not a capital-intensive business. You know, usually, our capital expenditures are about low single digits of our revenue. We don't foresee any, even with a second factory, a significant capital expenditure. We continue to see the free cash flow to increase year over year here in the near term. It's been a rough couple of years that way, just 'cause of the growth more than anything, and the growth in the loitering munitions business, which had a very negative cash flow scenario. Thank you. We'll leave it at that. Okay. Thank you. Well, that was a- Easy one. End with a financial guy. I don't know. That's great!