Morning, everyone. My name is Adam Samuelson, a Senior Vice President on the Aerospace and Defense Equity Research team here at Jefferies. Welcome everyone to our annual Jefferies Industrials Conference here in New York. Today, we're lucky enough to have Roger Wells, the CEO of AEVEX, joining us. Just quick bio, Roger served as CEO of AEVEX since October 2025. Previously the President from April of 2025. Before joining AEVEX, he was COO and Executive Vice President and President of Mercury Systems from 2021 through 2025. Previously in his career, he's also served in senior leadership roles at FLIR, ICx, and Northrop Grumman. Roger, thank you so much for joining us. I think we're just going to jump right into Q&A, but Roger, is there anything quickly you wanted to say on the forward-looking statements or compliance comments?
Yeah, no. Excited to jump in and tell the AEVEX story. I would just refer everybody to the forward-looking disclosure statements we have posted on our website, as we will be talking about forward-looking statements as part of this presentation. But excited to be here. Thanks, Adam.
Great. Well, thank you. So, maybe just to begin, AEVEX went public this year. For investors newer to the story, just provide just a quick overview and primer of AEVEX, how the company's evolved from ISR and mission services into a scaled unmanned systems provider, and where you sit today in the broader and rapidly evolving defense technology landscape.
Yeah, absolutely. So, from a historical perspective, AEVEX has been in business for almost two decades. We've been deeply embedded with our customers. When we started, our business model was very simple. We wanted to support our customers, and we wanted to support their mission. We were embedded, we were deployed, and we were working with them hand-in-hand to deploy and operate unmanned systems, do intelligence surveillance, reconnaissance analysis, mission support, and flight operations. But we knew we could do more. So we started investing in building capacity and developing a portfolio of unmanned systems, specifically unmanned airborne systems, that were informed by the operations that we were working with our customers. We built that into a broad and diverse portfolio of unmanned aircraft.
Everything from small Group 1 quadcopters that were designed for special missions, all the way up to larger Group 4 or 5 long-endurance ISR aircraft. But where we have the specific strength of portfolio is in the Group 2 and Group 3 kinetic strike capabilities. Unmanned aircraft that are designed for long-range precision strike, one-way attack, launched effects, and loitering munitions. And we've been delivering these for several years across multiple different mission areas. Not least of which is the operational support that we've been providing to Ukraine since 2022. A great portfolio. But we continue to grow. We continue to expand the portfolio and very excited to say yesterday we closed the acquisition of BlackSea Technologies, which is really allowing us to create one of the largest pure-play, multi-domain autonomous unmanned systems companies in the country.
With a robust, deployed, and battle-proven set of capabilities across air, maritime surface, and maritime undersea platforms and technologies, including a developing set of capabilities for contested logistics support vessels, which we believe is a significant growth vector for the future. All of these systems are backed by a deep and differentiated technology stack that we call CompassX, that gives our systems the opportunity and the capabilities to operate successfully in a contested environment where GPS is denied or spoofed, communications are jammed, electronic warfare is being deployed by technically sophisticated adversaries. To sum up where we sit in the market, we are a multi-domain autonomous unmanned systems company with battle-proven systems deployed.
We have the scale in place today to deliver on timelines that are operationally relevant, and we've got a differentiated technology stack that allows our systems to not only operate in that contested environment, but to do so in a multi-domain, multi-system, collaborative environment, leveraging autonomy to a large extent. Feel like we're well positioned in one of the fastest-growing segments of the defense tech market.
Absolutely. There's a lot there to unpack. Maybe we'll gradually hone in at what's going on in the current environment and then go into the portfolio. You described in the past the current environment as a potential unmanned system super cycle. It's got Ukraine, the Middle East, some of the budget priorities from the administration, broader demand from allies, especially in Europe. Just what gives you the confidence this actually becomes a multi-year procurement cycle and it's not just a conflict-driven surge for your type of equipment?
The activities and operations we've seen in Ukraine and more recently, in the Middle East, validate the fact that unmanned systems, especially those that are autonomous multi-domain, are going to be a part of every major military operation in the future. They are going to be embedded in the force structures and the technology that the U.S. military, as well as our global allies and partners deploy. We're seeing this structural transition happen very quickly. Our customers are rushing to get unmanned systems into the fleet, learn how to use them, and learn how to incorporate them into the system, the tactics, training, and activities that they have. While the current operations have certainly created a tailwind, that's just a piece of the growth vector, right?
We see significant procurement as, again, they work to get these into the system quickly to build depth of magazine and stocks, to put into place operational evaluation and technology evaluation, and to get training done. They've got to get the reps and sets in. We see multiple different growth vectors for autonomous and unmanned systems supporting readiness as well as deterrence. We're seeing this certainly in the U.S., but we're seeing this across the globe in allies. We really do believe that demand continues to grow and accelerate. Budgetary priorities continue to be aligned with this particular market segment, and this will be a major part of how wars are fought in the future.
I want to maybe unpack that both in terms of the order intake that you're receiving today, and then think about the revenue, how that then helps bridge revenue into 2027. Maybe to start for this year, you've said book-to-bill, for this term for 2026, would be near one. Even after you raised your revenue guidance by nearly $100 million on the last quarter. Based on the order activity in the first half, that would seem to imply a very significant acceleration in order intake in the second half versus the first. Can you just help us think about what is giving you that line of sight? Whether that's specific customer in the Department of War or internationally, programs, the product family, the budget line items.
I think one of the things investors frequently struggle with is there's less clear programs of record oftentimes, and for some of the unmanned systems. Just help us think about the order and your visibility on orders through the rest of the year to achieve that kind of book-to-bill number.
Yeah. As I said, we are continuing to see strong demand and an acceleration of production orders coming through the system. I think where we are seeing is a structural transition from the traditional programs of record, right? Those long-term programs where they go through the defense acquisition cycle, and they EMD to LRIP to full rate production. The pace of technology and the dynamic nature of the battlefield is causing that structure to be obsolete. So we are seeing a transition to shorter cycle production type contracts as they work to get unmanned and autonomous systems into inventory quickly and deployed effectively. As it relates to specific book-to-bill and our growth prospects, we have obviously been instrumentally involved in Ukraine for quite some time.
We will have deployed over 9,000 systems by the time we get through fiscal year 2026, having generated over $1.2 billion of revenue and really a meaningful and instrumental participation in what is probably the largest modern drone warfare program. It has given us the ability to improve our battlefield technology, to build scale, and to really build a modular architecture. All of those learnings, all of those capabilities, are now transitioning, in ways often faster than we thought, an acceleration better than what we thought at the beginning of the year to U.S. programs and U.S. production orders. Just to give you a little bit of perspective, in the first half, we booked about $175 million of revenue publicly disclosed since the close of quarter two.
Orders.
Orders, orders. Yeah. We have booked over $150 million. So we are seeing that acceleration of orders coming in. They are production oriented, they are short cycle, and that is a perfect position for AEVEX, right? We built a mature system. We have a resilient and robust supply chain and supply infrastructure. We have got the capitalized facilities that can produce at scale quickly, and so we are well positioned in this market to really meet the demands of our customers, accelerate production, and continue to grow in line or better than the market that we serve.
Got it. That is helpful. Maybe kind of rolling that forward and maybe we will put BlackSea aside for a second because it closed yesterday.
Yeah.
People will help. We can have a separate discussion of that in a moment. As we think about 2027, UCOM Deep Strike is going to be winding down. That should be over half of the company's revenue this year. If you take that out of your guidance for 2026, that's $325 million or so is our kind of guesstimate of what the legacy business would be doing, or the remainder of the business. As we think about how do we think about the growth of that remainder of the business, and total company being able to grow.
Yeah.
With the absence of UCOM in 2027, kind of talking programs you have visibility to or think you have visibility to, kind of repeat book and ship business, the new ramps across launch effect, one way attack, long range persistent strike. I think investors are helpful understanding that bridge as we think about where did the company go after that UCOM Deep Strike contract is over.
That transition is well underway. We had forecasted, and built into our financial models, the UCOM Deep Strike program rolling off through fiscal year 2026 as we deliver on our commitments. That is not to say that more work cannot come in in support of Ukraine. We just have not built it into our financial models because we have such confidence and are seeing revenue and orders from U.S. programs and procurements coming through at a pace faster than what we had anticipated in the opening part of the year, which is one of the driving factors that led us to raise twice through two consecutive earnings calls. We are seeing the transition happen faster than we expected. The systems that our customers are buying are aligned and well-positioned for the capabilities that we bring to them. Long-range precision strike, one-way attack, launched effects, and loitering munitions.
We really are well positioned to meet the demands and the mission needs of the U.S. customers today. All of the services, the intelligence community, OGA, as well as the special operations community. That is domestically. We are seeing the same needs and the same demands internationally. From a numbers perspective, to give you a little bit of context, we have over 95% of our fiscal year 2026 revenue in funded backlog. The remaining 5% is coming through funding increments on longstanding contracts and proposals. We have a strong conviction and line of sight to the fiscal year 2026 revenue and margin. That also creates an environment where as we move through the back half of 2026 and into 2027, we are capitalizing on the acceleration of short cycle production work.
It sets up the dynamic for an inflection point as we start to build backlog for 2027 and create the environment for continued growth 2027 and beyond. Strong pipeline continues to grow. Opened the year at 8.1. Right now, we are sitting about 10.5 billion qualified opportunities that we are well positioned to execute on. We are in active negotiations around a fair number of them. That, again, sets up the dynamic for a backlog inflection point, continued growth and expansion in a short cycle environment, which we are particularly well adapted to deliver on, and certainly growth into fiscal year 2027.
Okay. That is very helpful. Maybe that is a good pivot, then, to BlackSea. A major acquisition announced with earnings closed yesterday. What made this the right asset for the company to make a big splash, pun intended, in the M&A market, and to move from an air dominant portfolio to have multi-domain autonomy across air surface and subsea systems?
Yep. First let me start by saying how excited we are about the acquisition. As you point out, we closed yesterday. I was at the Baltimore facility doing an employee all-hands, and the sentiment and excitement is palpable. We're really excited about the portfolio that we're building. As I mentioned in the first question, we see this as an acquisition that sets AEVEX up to be the largest pure play multi-domain company in the U.S. We really saw this as an important part of our growth strategy. It's exactly the type of acquisition that we highlighted, one which allowed us to strategically move into adjacent markets to open up cross-customer selling as we look to expand our unmanned air systems and platforms into the U.S. Navy and take the unmanned maritime systems and expand them out to longstanding AEVEX customers.
It also gives us the opportunity to build on the differentiated technology stack that we've developed, CompassX, advanced assured precision navigation and timing, autonomy, collaboration, and mission execution tools. Not only do we believe that there's going to be increased spending at each one of the domains, air, surface, subsurface, but we think there's going to be much more emphasis being placed on collaborative multi-domain operations. Operations where unmanned aircraft, unmanned surface vessels, unmanned undersea vessels are working in collaboration to perform complex missions on a contested environment. We see being able to build out the infrastructure, to apply our technology, to leverage the capabilities that BlackSea to really be a first mover in this multi-domain collaborative operations, which we believe is going to be an increasing part of operations. We've seen it in Ukraine. We're seeing it in the Middle East.
We certainly believe that it's going to be a big part of operations when you think about the Pacific. A great move for us, and one that is very much aligned with our strategic growth perspectives and plans.
Got it. As you think about that, you talked about this year about $150 million or so revenues for BlackSea, EBITDA margins roughly in line with where AEVEX sits today. How do you think about the growth of the business, and what are the largest opportunities to accelerate that growth now that you've closed, while also keeping the core of what is a healthy business intact?
Yeah. We're going to continue to build out capabilities across all of our portfolio areas, certainly in the unmanned from an AEVEX perspective. But the unmanned systems portfolio continuing to move and missionize GARC and its immediate follow on the LYNX. Comet and Chaser is the next generation small unmanned surface vessels that are gaining adoption and use today. We're going to continue to develop and promote our underwater systems, and as I mentioned earlier, continuing to grow the capabilities that we're bringing to market in the contested logistics support vessels. Critically important for operations in the Pacific. So continuing to develop and build out their portfolio, letting them continue to do the great work and leverage the large installed base that they have currently today in the fleet and being proven out by operations in the Middle East.
We're going to generate value and drive growth by applying our technology stack, CompassX, to the portfolio to allow additional missionization and additional capabilities beyond what they're currently doing now, again, largely in the multi-domain collaborative space, but also expanding the ability to work collaboratively with different types of unmanned systems. Then scale, right? Our customers are buying systems that are battlefield proven, which both AEVEX and BlackSea Technologies has. They need companies that can produce at scale, and they need companies that have the modular architectures that allow them to continue to enhance and missionize based upon a dynamic battlefield. So leveraging their scale, building upon their scale, integrating it into the AEVEX system. We believe that there's significant long-term shareholder value and growth that's going to be achieved by the combination of these two wonderful companies.
How much overlap is there today in terms of the customer set? They're primarily serving the Navy. I imagine SOCOM is probably the area where there's the most commonality in terms of the customer set, but does it unlock opportunities with the Marines for the legacy AEVEX business? Or how do we think about where some of that cross-selling might open up?
Both companies have deep and longstanding relationships, and are selling systems across all of the services. AEVEX not only has unmanned airborne systems, but we also have small unmanned surface vessels that we're deploying, the Mako and the Mako Lite. BlackSea has deep and entrenched relationships with the Navy, with special operations, with the intelligence community. So we really see this as an opportunity to leverage the existing relationships we have, build on them, create cross-selling opportunities, while at the same time creating the opportunity to really go after multi-domain collaborative operations in a way that is not being used in wide-scale operations today. I think the other really, really important piece of this is the similarity in business model. Not only do the two companies produce platforms, we also have a robust service infrastructure that we call Global Solutions in AEVEX, and they're the maritime operations group.
These are teams of specialized people that are embedded, working day to day with our customers for deployed. That really not only creates a force multiplier for our customers, right? They get the experience and the operational capability that a Global Services team provides. But we move beyond just providing a product and walking away. We are there to help operate, support, sustain, work hand-in-hand with our customers. That really creates an enduring relationship and a very virtuous cycle where we are continuing to build relationships, but we are also gaining insights that inform our strategic investment plans and our product development roadmap. Having that entrenched, embedded, deployed capability and relationship allows us to create much more effective systems and put our capital to better use in a way that is designed for growth.
Okay. Maybe shifting gears a little bit. As you think about the production footprint of the company, you are consolidating, expanding your capacity in Tampa. You talked about more than doubling the production capacity of the company over the course of the next year. How would you describe the challenges around that? What are the supply chain bottlenecks that you are seeing, and how should investors measure the progress of that capacity investment?
Yeah. The decision to continue to expand, capitalize, and build out scale was driven 100% by demand. Right? We are seeing acceleration and increasing demand. The strength and conviction that we have in our pipelines led us to the need to expand our production capacity to be able to deliver at scale on quick timelines with quantities that were aligned with our customers' needs. We went out and secured an additional 83,000 sq ft in Tampa, adding on to our existing 100,000 sq ft, which will allow us to more than double our production capacity in the next year. We are already spooling that up and starting to build systems out of that facility now. So continuing to build the scale that our customer is asking us for.
We see building out the defense industrial base, the scale, the supply chain as a strategic and national imperative, and we are deploying our capital to do that. When I think about the metrics and what it means to be a success, I think it comes down to the delivery of results, and let me give a couple of key metrics. We have been going through this operational efficiency program, building up scale, leveraging operational capacity, and we grew revenues almost 100% year-over-year. We expanded our margins by over 1,000 basis points, and our operational throughput increased over 114%. So we are seeing the benefit of the actions.
We're seeing the financial benefit to the expansion and the deployment of capital that we've put in place, not only to develop innovative new products and technologies that are aligned with our customer, but also to expand and enhance capacity and the ability to deliver in this short cycle environment where our customers need battle-proven systems now.
Got it. To that point on the margin front, in the second quarter, EBITDA margins were about 14%, tactical systems margins were 17%. How do we think about the margin profile moving forward, especially as you have this large single contract with UCOM Deep Strike that starts to roll off and be not a significant contributor into 2027? What are the key puts and takes to moving that margin profile up towards the 20% + range?
We still see continued opportunity and very specific in terms of increasing and expanding margin. As I said, we are well underway into expanding our margins through operational efficiency activities now. When I think about the areas of margin accretion, it comes down to a couple of key points. One, we're going to be transitioning out lower gross margin work in our current funded backlog and replacing it with higher margin work in our pipeline. You mentioned the UCOM Deep Strike program. A significant component of that was pass-through, and so that's a lower margin program. We're going to be rolling that off through the fiscal year 2026, and it's being replaced by programs and production orders that come at higher margin because it's all AEVEX content and leverages AEVEX technology. So it's the transition between lower margin pipeline or lower margin backlog and higher margin pipeline.
Two, really driving operational efficiency activities across our manufacturing environment. Focusing in on things like scrap and rework and purchase price variance, putting into place the contractual mechanisms to limit additional downstream risk and liabilities to our cost of goods sold. We're going to continue to gain efficiencies on operating leverage. As we continue to scale, we'll be dispersing a fixed cost over a larger base, and we're going to focus very heavily on discretionary cost control. Some within AEVEX has called it a ruthless approach to managing OpEx, but it's a key part of making sure that we're maintaining and growing our margins. So all of those are activities that we believe are going to continue to enhance our margins and drive to something that looks like in excess of 20.
I think the one other point that it's important to point out is today, we have roughly a single-digit percentage of our revenue tied to international. That's growing. We've had success expanding our international footprint with recent wins in areas like Chile, Lithuania, Finland, to name a couple. But those orders and those revenues comes with higher margin. So, as we work the international-domestic mix, we believe that'll be accretive to margin. So we feel good about our plans. We've demonstrated the ability to expand our margins, and we think we're going to be able to continue to do that over the near term.
Got it. I want to be just cognizant if there's any questions from the audience, so we do have a mic that we can pass around. I'm happy to got one over here.
Just a question.
We have to wait for the mic for just the webcast, if you don't mind.
Thank you. Just a question. Is there a specific capability or performance advantage that AEVEX has over competitors, and is it range, time on target, accuracy, that sort of thing? I ask that question in the context of a new acquisition environment through OTAs or shorter cycles, as you mentioned earlier. Is there a particular competitive advantage you have that's going to keep the customer coming back?
I think it's a collection of competitive advantages. The activities that we've participated in has given us unique insight into a dynamic and changing battlefield. We've incorporated those learnings into a differentiated technology stack that's designed to be open and modular so we can react very quickly to the changes that we see and put operationally relevant, capable systems in the field quickly and affordably. Our systems typically have been designed for the missions that we fly, long-range precision strike. Think ranges over 500 km, in excess of 200 km, carrying operationally relevant payloads. So, the design philosophy, the differentiated technology stack that's both open and modular, and scale, right? The ability to produce. I think all of those creates a unique, differentiated, and competitive environment for AEVEX, and BlackSea has a lot of those same competitive advantages.
One of the things that made the acquisition so attractive to us, right? They've got battle-proven systems they can produce at scale. They've got an architecture that allows them to be modular, flexible, preventing vendor lock-in, creating both operational benefit as well as economic benefit when you think about the employment of their system. There's not just one thing that I think gives us competitive. I think it's a dynamic, all of which are backed by a healthy financial infrastructure, good cash collection, a balance sheet that allows us to borrow capital to get ahead of downstream risks and just a world-class team.
Question up here in the front.
A quick question. In reference to your expansion into Tampa and Florida being the boating capital of the world and all that maritime industry there, do you see a greater opportunity for the on-water and underwater unmanned vessels? Say, in what range would that be? We're looking in 30-70 ft. What is your perspective on that opportunity for growth?
Yeah. One of the great things about BlackSea Technologies and the historical AEVEX is we have capacity and well-capitalized infrastructure in multiple different locations, right? BlackSea is operating in a 47,000 ft deep water port in Baltimore. I was just down there yesterday. So they've got plenty of capacity in their plant as well as water access to do it. We have something similar in Tampa, right? So we really see the ability to cross-leverage these to capitalize on the capacity we have while making sure that we're keeping the capital outlay in check, right? As far as the portfolio and how we see a product development roadmap, we're a very customer-centric, mission-focused organization. We take our cues from the customer, and we leverage the experience that we've gained being deployed downrange with them to inform that, right? We're going to continue to develop our portfolio of unmanned aircraft.
We're going to continue to develop the portfolio of unmanned surface vessels and adding mission capabilities. But right now, our focus is in on the small and medium USVs. UUVs is a unique technology area that BlackSea brings to AEVEX, and we're going to continue to develop and mature that within the context of multi-domain collaborative operations. And then certainly the contested logistics is a unique piece of the portfolio and brings a lot of value. The SPDS, the Seabed Petroleum Distribution System, a $250 million contract, high demand, and something that we believe is going to be critical to operations in the Pacific. So, a unique platform, a great set of technology, and a team that I think is really well-positioned to meet the needs of our customers in the future.
It's exciting.
It's very exciting. I have a hard time not tamping down on the enthusiasm about the BlackSea acquisition. Great team, wonderful culture, really built from the same DNA, and this combined organization is just one that cares about our customer. We're deeply entrenched, embedded, and focused in on building the systems and capabilities that are going to allow them to be successful.
Well, great. We're getting close to the end of our time, so maybe I'll just ask one final wrap-up question. AEVEX, it's transitioned from a recent IPO. You've had significant Ukraine-driven growth that's now shifting to a multi-domain autonomy platform. What do you think investors still underappreciate most about the story in terms of the durability, the scale, the earnings power of the company, and what do you think the company looks like in three to five years?
Yeah, I think investors largely understand the story. But I'll point out a couple of things. AEVEX with BlackSea, we're in the fight today. We're producing battlefield-proven capabilities and technologies at scale on timelines that make sense for our customers. We've got a robust and differentiated technology stack that is designed for missions of the future and enable not only autonomy but also collaborative operations across multiple domains. Well-capitalized infrastructure, great team, and we're a company that's been in business, again, for almost two decades. We have the relationships, we have the enduring contracts, and the position that give us unique insight into where the market is going, where the technology needs to go in order to support our customers, and what they need to be successful, not only today, but more importantly in the future. I think that's the growth story that I like to tell around AEVEX.
Well, great. Maybe that's a great place to stop. Roger, thank you so much for taking the time today, and thank you all for joining.
Great.
Thank you.
Adam, thank you very much. I appreciate it.
Yeah, thank you.
Thank you, everybody.