AeroVironment, Inc. (AVAV) Earnings Call Transcript & Summary

Good morning, everybody. Thanks to all of you for being here. My name is Wahid Nawabi, as Jonah mentioned. I'm going to try to keep this short. I want to thank all of you for taking the time to be here, #1. And your time is very precious. And so the question really is what do we want to get out of today. The first half of the day that you guys are investing in somebody flying across the country, what do we want to get out of it? In my view, there's basically 2 to 3 key messages we want to get across. All of you know AV already, a good amount. And actually, this is a really good chance for all of you to also meet our leadership team. We've kind of changed quite a bit over the last 3 to 5 years. And you'll get to see our general managers who are running our businesses. You'll get to meet our Head of Government Relations. Some of the folks that are behind the founding members of what I call computer vision in the defense industry, [ Dr. Faltermayer ]. And that's one category, so the team. Second one is to give you a little more insight into our strategy, where are we going? And the third thing is really about the capabilities. I think you hear things about our capabilities on earnings calls or trade shows, we probably -- you haven't got a chance to really in-depth see the breadth and depth of our technology and the capabilities that are relevant not for today but also for the long-term. And all those 3 objectives are for the ultimate outcome, which is we invented the space that we're playing in 15, 20 years ago, and we are the leader, and we intend -- and this market is growing really fast, rapidly in the next 5 years, 5 to 10 years, and we intend to keep our leadership position. There's lots and lots of competitors, but we intend to keep it. And so far, our track record is as such, and we want to show you that there is no one else that's well qualified as AeroVironment get that done. And so really, those are the 4 things. The last one is the main objective. But in order to do that, we'd like to show you why and how we're going to achieve that. So I've got only 3 or 4 slides, and I'm going to walk through this real quickly. One slide on who we are. You all know us pretty well, and I've joined the company about 14 years ago, and we've really grown significantly over the last -- this is the seventh consecutive year we just announced our earnings, as you know, of top line growth. Most of those years have been double digit, if not all, have been double digit. Stock has done really well, but I think still it's a value stock. I believe that when I became the CEO and people laughed at me at that time, and I love it because it's our job to demonstrate and prove and deliver on that. And so far, knock on wood, here or there, we've done so. About $700 million this past year, 50,000 plus of our robots are deployed. That is really a massive, massive achievement if you ask me. Not a single company that I know of, other than DJI can claim those kinds of numbers, especially in the military space, to my knowledge, there isn't any and even close. 55 allied countries that we ship our products to, and the list continues to grow. And I still believe that we have probably penetrated half of that opportunity size in the international markets. Most of that growth internationally has been with a small UAS, but we've got enormous equal amount of growth coming from our loading munitions and new platforms that we're going to show you some today as well. And we're organized in 3 segments. You know that already, and that's about it for this slide. Okay. This slide is all about sharing with you what's happening to the market, what are the fundamental demand drivers. There is one fundamental shift that I've been waiting for my entire career at AV, and that's happening actually now. And it really took a turn in the last 2.5 years since Ukraine war and maybe a little bit before that, then Azerbaijan and Armenia. If you recall, I used to talk about that before Ukraine even. I have fundamentally believe there is a shift in the military strategies of not only the United States, but all of our allies and all of our adversaries as well. The wars of the future and the conflicts of the future is going to include a significantly more number of robotic systems, primarily small distributed robotic systems, mostly air domain and not just air but also surface to water and underwater as part of the force structure. There is not a single military leader that you can go talk to in any country around the world or United States that will not admit to the fact that they have learned something massively new in their history in their career that they've been in military, which is small unmanned systems. Distributed, connected, working as a team and contest it and jammed environment without GPS and with some level of autonomy and there's different degrees of autonomy is going to do an enormous amount of pain caused a lot of pain for the adversary. And that's exactly what we've been actually driving for the last 2-plus decades as a company. That has been our mission. We have believed in it, and we continue to believe in that in the long run, okay? And -- so that's the fundamental shift, #1, #2, the world is not a safer place than it was a year ago or 2 years ago, 3 years ago. We've got conflicts and threats brewing in almost every corner of the continents, from Eastern Europe to Central Asia to Far East to Southeast Asia, you name it, even in the southern hemisphere of the Americas. There are issues that we're dealing with. And so I don't see militaries sitting back and saying, you know what, it's time to take it easy. It's not the case. We all know that. So the demand for security and for capability is there. Most of the militaries, including the United States and our allies are amping up investments. They are really doubling down and if there's one area that they all feel they are underinvested is in our category because they never thought about it in such a huge way. I mean, think of it. Today, we're providing stuff to Ukraine that our own military doesn't really have as a program of record. And this has been stated in congressional hearings, it's been stated at the leadership of Pentagon and is stated by the different services within every branch of the military. We have to do a lot more. And there's no other way in my view, to be able to combat and face our adversaries, primarily in the Pacific without this sort of capabilities. That is inexpensive, far more less expensive -- far less expensive than much more expensive other larger assets. And it's also more resilient. The resiliency makes a huge, huge difference that you can't just take one item and then reduce 10% of somebody's capability in a theater. That's a huge problem in military. And so lastly, AV is incredibly well positioned because we're the only pure-play company that's public that is focused on this and actually has made it our mission to deliver the most integrated, widest and deepest portfolio of solutions to our customers' problems. And that is going to continue. You're going to see some new capabilities today but we're just getting started. There's a lot more to come. The reason why we're investing in R&D is because we see an enormous amount of potential in the next 5-plus years. That's really that's a fundamental belief that we have as an organization. Okay. Let's talk a little bit about the TAM. I know that TAM for a lot of folks makes a lot of -- and it's important. If I were to put this chart up, 10 years ago, 7 years ago, 5 years ago, it was much smaller. Today, we're playing at about a $12 billion plus TAM, Total Addressable Market. We don't serve all of that market, but we serve a decent chunk of that market. And the last one, the MacCready Works is actually intentionally sort of faded out because it could be bigger than any of the other categories. Things such as HAPS and some other capabilities that Jeff is going to talk about are contested logistics capabilities with the SOAR platform, et cetera, is really disruptive and the dollars are way, way, way bigger, way bigger than any of the other markets for us. And we don't really talk a lot about that because it's not today, it's in the next few years, but they have enormous opportunities. And we are really disrupting those markets with incredibly innovative clever solutions that you'll see some examples of it today. So, a, the market has changed, the TAMs are larger and we're positioned really well. And this chart essentially says that. Okay. So what are the key growth drivers? If you want to buy a stock, you're going to say, what is it going to make this company more successful? And what are the demand drivers that are going to drive it in the next 1 to 2 years, the 3 years maybe or so. I would say, #1, the conflict areas, Ukraine in the Pacific, Central -- the Central Command in the Middle East. We still have conflicts, there's a lot going on in all those regions still today. And guess what, one of the top, top needs in those markets is the stuff that we provide. And you -- that's why you see a drawdown authorizations by the President after another -- one of another that has our solutions included in them because the customers want more of them. I would call that the first layer of the cake. We're trying to build layers of cake, so we can have a diversity of opportunities and revenue streams in the long run and continue our growth. The second one is while these conflicts are happening because the U.S. DoD never really had program of records for these capabilities, there are several, not just one, several billion dollar plus program of records, some of them more than a couple of billion dollars that we're basically positioned in the catbird seat. We were the one who shaped the requirements because of our systems and solutions performance, and we're leading the first or second tranche of those acquisitions today. And so the job for us is to make sure that we capitalize on the rest of those program of records and win them in the long run. And we have a tremendous opportunity in position, but we got to continue that. And those are going to go on for 10-plus years. And as we get those, those are going to give us long-term tails of acquisition, sustainment and revenue. Then it's the existing inventories of our own customers today that don't have the program of records and probably won't have some program of records for the short-term, midterm, 2 to 3 years from now. And then beyond that is all of the international sales. We are doing really well on our small UAS category, but even that has tremendous potential for growth. Many of those countries are really going to do exactly what the U.S. DoD is doing probably times 2 or 3, because our systems are much more less expensive for them to acquire, easier for them to be able to get them due to export issues. And third, it's a lot more relevant to their problems. If you are some of the Asian countries or European countries, smaller ones, you're not worried a lot about China or United States or Russia, you worry about your neighbors into what your closer regions of your national security and also domestically, and we provide the best solutions for that. And it's a very cost-effective solution for them. And then -- the next 2 are integration of our solutions with other platforms. This is just at its infancy right now. We're just doing some demonstrations and all the other program offices such as the next-generation Stryker and Abrams tank and the Humvee's and JLTVs, helicopters, airplanes, unmanned larger aircraft, all looking to integrate these capabilities into those platforms. And that's actually coming down the pipeline as we grow. And then lastly, organic and inorganically, we have new categories that you're going to see some examples of today, not a lot. I got to keep something for the future. And those are going to increase our TAM significantly more, significantly more, and we've got these small bets that we're co-funding with our customers that could really transform those markets and disrupt them with our solutions. So fundamentally, these are the top 6 ways we're going to continue to grow, and we're going to continue to deliver value to our shareholders. So the recipe is pretty simple. We've got the technology that no one else has in terms of the markets that we play in. And the second one is probably the least -- the most understated, if the U.S. DoD set today, and you hear this from almost every military leader and congressional leader that's in this space that says, if we were to ramp up, how fast can you get to thousands of systems, if not tens of thousands and even hundreds of thousands of systems. Well, look, there is no debate. We have done that in our history, more than once. Three times at least so far in our history, we've done it in the last 15 years. The coin conflict in Iraq and Afghanistan, we were called on. We were making a single number of Ravens and pointers a day, a week. We went to hundreds a week, hundreds, okay, in a matter of months. Literally 2 to 3 months. And we have people on our staff that will tell you that. Scott actually sitting in the back there. He was part of that -- those teams. We've done it during several Switchblade 300, same story and then Ukraine started. We have always been able to address demand very, very well as a company. And so we have a history of knowing how to take these capabilities and deliver them to our customers at scale, but that's not the only thing. It has to be also underlined with quality and military-grade reliability. Battle-tested systems. It's -- as most of you know, making the prototype is 10% of the effort, 90% of the effort is actually getting it to a producible product that can win program of records withstand the military rigor and actually work in the theater. And you will hear story after story if you talk to our customers, including Ukraine, how satisfied and how thrilled they are with our systems and why they want more of them. And so that's really the capacity problem. There's no one out there that can actually produce loading munitions by the thousands today. We're doing it. We are doing it today in our factories, and we welcome all of you to come and visit us. And then lastly, we have the experience. We're not just pounding our chest because we were doing it for the first time. This is not our first rodeo. We've done this many times in our past. We know what we're doing, and we're very close with our customers. So the combination of those 3 differentiators and unique qualifications with our innovation engine, this is fast cycle of developing things. You'll see a solution here is called the P550, we went from concept, customer requirements, set with a customer, U.S. Army and says, what are your needs to the time we actually flew the airplane about 9 months, 9 months. okay? Now we submitted our proposal to the LR program this past week. And the decision is going to be made sometime in the next month or 2, hopefully, 3, 4, something like that. So that is in our DNA. We don't take 5 years, 10 years to develop these things. We know how to do this very quickly, and we've done it over and over again. And so that's really our recipe. And we want to keep this engine running. So we keep building more and more distance between us and our competitors. That really has been fundamentally part of our recipe and we're going to continue that. That's all I got. So I'm going to hand it over to the rest of our team, who's going to tell you a lot more about the other 2 or 3 pieces of this objective that we talk about today. Thank you.

So it's now my pleasure to introduce Church Hutton, who leads our government relations team in DC. As Wahid mentioned, there's a lot of things we need to do to succeed and one of them is being intimate with our customers and stakeholders in Washington. Church has a phenomenal background and I look forward to what he's going to present here shortly, but in terms of a brief introduction, he joined the company with a wealth of industry and government experience, he's held similar government relations leadership positions at Mercury Systems in Sierra Nevada Corporation. He also served in the Army as an officer and held several senior staff positions on Capitol Hill and in the offices of Senators Joe Mansion and John McCain. Church, come on up.

Everybody hear me okay? I was also a sergeant, Jonah. Church Hutton. I discovered AeroVironment about a decade ago, maybe when some of you all did. When a Colonel representing SOCOM came into the Senate Appropriations Committee and briefed us on what was then an earlier variant of Switchblade 300 and I felt a little bit of love. I joined last year because we are so well positioned with our capabilities relative to not just the department's pacing threat in the Indo-Pacific but with capabilities that are applicable to every combatant command in every war-fighting scenario, and we deliver, and I'm thrilled to be here. We have grown significantly in our DC presence in the last 6 months. When I got here, there was a team of 3, 2 years prior to that, I have been a team of one, we're now 6 and I had a question this morning about hiring and about the challenges of hiring. We've got well-funded and competitors. We've got primes who are competing for talent with AV, and I have had no trouble whatsoever. We have a mission-focused culture and people are excited to come work for us. We have a phenomenal capability growing in Washington and providing value back into the business. So I want to talk briefly about both the geostrategic environment in which we're operating and of course, the budget environment and then transition to the rest of the team who are going to talk in-depth about those capabilities. I won't belabor it too much. Everybody understands what the department's pacing threat is and how important distributed autonomous lethality and mass are going to be in helping the department address its primary challenge. We are beautifully positioned as a company to deliver those capabilities. We see the Department of Defense modernizing as quickly as it can to attempt to bring in new capabilities, the very same capability space that we offer to provide deterrence through mass. However, after a couple of years of significant budget growth, we are now looking at flat budgets and in real terms, declining budgets across DoD, right, in terms of top line, and that may persist. However, within those budgets, we're seeing incredible growth in the small unmanned space -- some of the examples down here that my colleagues will talk about, the Army's LASSO program, long-range reconnaissance, medium-range, company UAS, all in the Army, organic precision fires light in the Marine Corps, potentially medium in the future. Of course, to replicate our effort and all of that entails and then continued for military sales and other SOCOM capabilities and classified capabilities. So there really is -- it is an order of magnitude increase in the size of our market space within the overall flat DoD budget. So how are we positioned in Washington to address that? We've got some key differentiators. Number one, we are leading in production now. We have capacity. We are delivering and for a set of customers who are demanding things in the immediate term, we're able to provide that. Number two, we're testing the next generation of capabilities now. Some of those are classified, but everything that is being delivered now will shortly be improved upon as we move forward. That is well known to our customers and stakeholders. They are actively participating in that. And finally, in Jeff's MacCready Works team, we have a group of high-end engineers who are providing the enabling capabilities for this entire space, which they'll talk about it at some length in terms of computer vision and autonomy. And being able to be the provider to multiple customers and give us that insight into what are the big problems the departments attempting to solve the services are attempting to solve is a fantastic advantage for us. We know our heritage. We are increasingly well positioned in Washington with access to the White House to the Pentagon, to think tanks and associations all over Congress. We have a team now that is very nearly at full strength and why -- how do we have that access because we are delivering on programs because we are inventing the next set of capabilities and because we're principally solving problems of the department. So a very brief introduction. Happy to talk to you all afterwards. Jonah...

Thank you, Church. We're now going to have a fireside chat. It's my pleasure to introduce Brett Hush and Trace Stevenson, if you guys could come up to the stage. Talking about our experience in the field. Trace and Brett are the respective leaders of our uncrewed systems and loitering munitions segment. By way of introductions, Brett, AKA, the father of loitering munitions has been with the company since 2010. During that time, he's led the build-out of the loitering munitions business from concept to the business that you now see today with a Switchblade 300 and 600 and more to come. Before joining AeroVironment, he had an extensive career in the defense space and worked at a number of large companies, which you'll recognize such as Teledyne, Lockheed Martin and BAE Systems. Trace, sitting there beside Brett, has been with AV since 2004, where he's had a number of leadership roles within the company before [indiscernible] now leading the uncrewed systems segment, including the small UAS business, our international business, and oversaw acquisitions and integrations among other things. As you may recall from our last Investor Day, these 2 have a bit of a competition to see who can grow the largest segment within the company. Trace got out to an early lead, but Brett is coming up quick. And it's now my pleasure to hand it over to you guys, we'll do a video first, and then I'll hand it over to you guys. [Presentation]

All right. Trace, would you like to get us started with talking about how our products or why our products were selected to go to Ukraine to begin with.

Yes. Thanks, Jonah and welcome, everybody. A pleasure to be here. It's really an honor to be speaking to you today. It's an honor to be in this position. I truly believe that what we do makes a difference in the world every single day by delivering these capabilities to the frontline and really protecting our militaries and our allies around the world. So it's really an honor for me to be here and a pleasure to talk about the great things that we're doing out in the world. On the onset of Ukraine, I think a lot of you remember a couple of years ago, some of you may have been in Petaluma, where I talked about really the new capabilities at the time that we were bringing forward for our small UAS systems at the time, VTOL, GPS denied. We were just in the middle of developing our Puma visual navigation system, which enables it to fly without GPS, new payloads, so there were lots of things that we were working on at the time that we were going to bring to market to really create to make these systems that we are currently delivering and building more capable than they had in the past and really be prepared for the next fight. And coincidentally, we were very lucky that we were investing heavily in those things as Wahid mentioned, we continue to invest heavily and really try to stay ahead of the competition, but most importantly, stay ahead of the adversary so that our systems bring the best capability to the war fighter when they need it. And so basically, we were well positioned when Ukraine happened. We had envisioned a peer versus peer or near peer fight and really brought these capabilities together and we're able to deliver them to Ukraine rapidly. From the first contract that we received for Pumas for Ukraine, we delivered within 26 days. So that was a proud moment to really get our systems into the fight within a month of the war -- the Russians invading. And so as the leader in the market space, and as having done this for 20 years, we've been delivering small UAS to our military and other allies for 20-plus years. Now we were well positioned for the U.S. military and Ukraine to say, we want their systems, we know they work and they know that they'll work against the adversary. I feel sorry for our competition right now. No, actually, I don't. But we are operating on the frontline every day and getting real-time feedback from our customers on what they would like to see in the product going forward to continue to keep its edge against the adversary as the adversary continues to evolve. We've got an amazing engineering team that's working around the clock, and we continue to introduce new capabilities to the Ukrainians and our other customers very rapidly. And you can see the first drone war is being fought right now, right? This has been a total pivot, as Wahid mentioned, and being the leader in the space has really just excelled our growth and positioned us for future growth going forward. And we're really excited to support Ukraine and providing them the best-in-class systems that we've been providing in the U.S. military to date.

Thank you, Trace. And by the way, congratulations. That was a phenomenal fourth quarter and last year performance by you and you team.

I appreciate it. Brett is chomping at my heels just like the competition is, but I'm still trying to keep that lead as the largest segment. But Obviously, there's lots of huge excitement about Switchblade and he is coming quickly behind. So...

Sure, yes. Thank you. So when how we got to this point with Ukraine is Switchblade products have been fielded with U.S. military and allies going back to our first field ins and combat engagements in 2011. We learned a lot over those years in the counterinsurgency fights that we were supporting U.S. military and allies for. So then when the opportunity to support the U.S. government and Ukraine through presidential drawdowns and additional orders came, we were ready, we were prepared. We had certain capabilities. We had faced the Russian jammers in other theaters. So we had developed special techniques to be successful in a very harsh RF environment. So we had a lot of great successes Switchblade became a household name, believe it or not in Ukraine. You go talk to people and people knew of Switchblade because of the effect it was having right off the bat, starting after the war in February 2022. But we haven't stopped there. I think part of our DNA, our culture is a hunger that I think both our teams have to get as quick, relevant information from the war fighters of what's going on, what's working and every time something is not working as well as you want it to or the adversary has innovated in a way to counter our solution. We hunger for that information as quickly as possible and then bring it back to, I think, what we have the best engineering team in the world in the uncrewed and loitering munitions space and some of these innovations. And so we're very quick in being able to iterate that and then get that deployed back into the theater and then see the results. Some of the things that we have learned is the Russians have taken RF jam in either on the navigation solutions that come from the satellites or from the comms links to another level. And they're continuing to innovate at a fast pace as well. So unless we're get in that real-time information and feeding it back to our engineers who we think are better than their engineers. We won't be able to be successful long-term. A couple of other things that we've learned is Switchblades were designed, again, primarily for the counterinsurgency, kind of a single high-value target operated by special users. When Ukraine defense forces started using Switchblade, they were using them in very different ways. All of a sudden, they're going against a peer or near peer of the United States and NATO allies. And they were using them in what's called combined arms operations. So instead of just Switchblade by itself, taking out a particular target, they're using Switchblade as part of the overall force structure to change the maneuver that they're trying to do through a certain area or the maneuver of their enemy to stop them at that place. What you'll see in one of these pictures, and I think it's just right behind me, it's kind of hard to see what that is. But that is a Russian high-end electronic warfare and surface-to-air missile system to -- and they have very few of these assets in total. You probably heard of S300s, SA300, S400s. This is a [ tour ]. And Switchblade 600 have been taken those out on a regular basis. Switchblade, I won't say the exact price of it, but it's fairly comparable to like a Javelin missile in the unit cost. We'll take out a $25 million asset and so that's quite a leverage that Ukraine forces have of the cost, the expense and what it takes to operate a Switchblade 600 versus what the asset you can take out. But it's even more important than the dollar difference between the cost of the missile and the cost of that integrated air defense system. It's that the Russians have very few of them. They're in the hundreds in total quantities. And while they can pull out of storage, T50, T60 were tanks from decades back of the Soviet Union that can't pull these out of storage. They're the highest-end technology that they have filled with microprocessors, RF devices and so on. And so Switchblade 600 is making an incredible impact in the battle. And that's why you've seen in the news now the fourth request from the U.S. government and the U.S. AI packages for it. The other thing that we've learned and we're innovating on is Switchblade 300 went in, in the very early days and was very successful and now we have a new generation of Switchblade 300, our small man packable fits in a backpack loitering munitions is we've now tripled the range instead of 10 kilometers, it will go 30 kilometers. And instead of just a frag warhead, which was primarily anti personnel, we now have an explosively formed penetrator basically something that take out Armor. It will take out 90% of all the Armor maybe with the exception of a main battle tank like a T-90 that the Russians have at 30 kilometers and an individual soldier can be carrying 3 of them in the backpack, game changing. This is really game changing. So we're continuing to innovate. I like to tease, Trace, that I steal from his group all the time. If we didn't have originally the small UAS business, we wouldn't have loitering munitions. We share technology back and forth, whether it's radios, cameras, light structures, motors, battery technology. So we get a lot of synergy from each other on these products, and we're continuing to innovate. What he learns on the battlefield with Puma, what I learned on the battlefield with Switchblades, we share that information because a lot of the counters that we have to deal are the same for our systems.

It's really need also to see our products working together in Ukraine as well, right? The Puma going out, finding targets, identifying targets and then Switchblades taking out those targets. So we collaborate in the workplace, but we also collaborate on the battlefield as well.

Fantastic. And that's -- I just want to go back to a point you were making, Brett, around the success our products are having. How has that success reshaped the landscape for our opportunity set.

Do you want me to start off for -- I've been doing this for 14 years, right, starting with Switchblade. And for a very long time, we were advocating that, hey, this capability, this merger of missile and a small UAS has a capability on the battlefield that's far beyond just what's being used by special forces and our allies in the Middle East and some other regions. And so we're in a lot of believers. And now what we've seen over the last probably 3 years or so is all of a sudden, U.S. Army, U.S. Marine Corps have hit the, I believe, button on it. And they're developing long-term programs of record to establish Switchblades into their force structure. So there's been a lot of learning, not just by us, U.S. military forces, the leadership, and it shaped where they're putting their money. So programs like replicator, which we'll talk a little bit more about -- came about from this learning on the battlefield. Trace?

Yes. I mean we've seen it on the uncrewed systems side as well as, Wahid, mentioned, this is tremendous growth right now, right? The way that wars are being fought has changed. We all see it on the news every day. And as Brett mentioned, the U.S. Department of Defense has said, "Hey, we got to catch up your and put in place long-term program of records" where we can get the products that we know are making a difference and winning the fight today. And again, we see huge growth internationally as well. Everybody is watching what's happening in Ukraine. Everybody wants to see what works. Because having a show in force, having their own indigenous drones that most likely will not survive in this fight today does not provide them any security that they need in this threat environment long-term. So they're watching Ukraine, they're watching what works. I'm proud that our systems are working tremendously in Ukraine today, and that we are well positioned to capture programs of record, both within the U.S., Long Range Reconnaissance. You saw P550 that product over there built round up, focused on that program of record. And as I mentioned, taking all the technologies that we've been working on within MacCready Works and across the company and incorporating them in a brand-new platform -- next-generation platform, the focus on that one program of record and then obviously, international adoption beyond that. We're also focused on the Army Medium Range Reconnaissance program of record a little bit further out. But they are doing what we call a directed requirement tranches where they will buy small amounts of systems to inform their requirements for that long-term program of record that's probably on G FY '28 timeframe. And then, of course, on our medium UAS, Group III space, lots of opportunities, both domestically with the Navy ex-UAS program and then internationally as well. And it's just -- it's a really exciting time to see the defense militaries around the world recognize what's going on and put long-term programs in place that I believe AeroVironment is better positioned than anybody to go and capture.

Great. I couldn't agree more. And it's interesting when Trace and I talk about our businesses, there's so much similarity with how the world is changing in their view of uncrewed systems as well as loitering munitions going forward. I spent almost 4 decades, 30 -- I think this is my 39th year in the defense industry. Jonah mentioned earlier, some of the other companies that I worked for. And throughout that career, I've got a lot of military service in my family, my father, brother, son-in-law, many others. And through my career, I was focused, I think as many in the U.S. industrial complex to say, we got to have the most exquisite technology. It's got to be the best capability, and we will protect freedom, we will win wars based on having the best technology to take out certain targets. One of the military leaders that I work closely with I had a conversation with recently and said to me that there's a change in that whole mindset in -- certainly within the U.S. military. That it's now not just about a small number of exquisite weapons. It's now -- quantity has its own quality is what he said to me -- and he kind of like what the heck. That sounds kind of like an odd phrase, right? What does that mean? Quantity has its own quality. And that is in this fight today, whether it's deterrent China or helping Ukraine defeat Russia, quantity matters. So you have to have this exquisite capability, but it's irrelevant on the battlefield if it cannot be procured, delivered trained, employed in mass quantity. And so that's very exciting for us. That's what we're focused on. So this is a list, you'll see a number of programs that are on here. Replicator obviously got a lot of press recently, the Army state and they're going to procure about 1,000, Switchblade 600s for this first tranche of replicator. Army has a program of record called LASSO, that they're putting it in place and they've been buying our system so far, leading up to that. And the Marine Corps has certainly pressed the, I believe, button in loitering munitions as they've gone to a lighter, faster force eliminating their tanks and their heavy motors and introducing loitering munitions into their force structure. So we are -- some people say that luck is when opportunity meets preparation, we are definitely prepared and continue to focus on what's the mission, what do we have to do to continue to lead in the space. Now some more competitors are winning, some of them are coming out there. I look at that as it's a big pie. It's growing. We're not going to win 100%. I'd like to win 100% -- but we're not going to win 100%. It's a clear validation that the investment strategy that we made a number of years ago and continue to make is paying off. This market is clearly demonstrated to be growing, big and we can win in it, continue to win.

Well, Brett, along those same lines, you mentioned that we're now shipping high volumes. Wahid talked about, it's not just hundreds or thousands, it's tens of thousands, potentially hundreds of thousands. Can you guys talk about the expansion you've been making and the preparations you've been making to deliver at these volumes, assuming to win some of these programs.

Great. I mean, again, we've we saw this conflict start. We were prepared. We've been delivering a high rate production in our uncrewed systems for years. So -- but because of the conflict and what we saw with the changing market, we have ramped up considerably in the uncrewed space. We shipped thousands of airplanes last year. You saw our results yesterday. It was a great year on the uncrewed systems side as we continue to ship uncrewed systems to our allies across the world and the U.S. department events and, at the same time, ramped up production and anticipate this increasing market. So last year, we had the capability of being able to deliver approximately $500 million of revenue converted to uncrewed systems. And this year, based on our ramp up, we are set to be able to deliver over $1 billion of uncrewed systems. If the customers were to ask us to deliver in those type of quantities. And again, we'll be prepared to double that again if we see the need to.

Yes. Very good. Again, here's an example where uncrewed systems has been leading in this area of high-volume production and loitering munitions is following suit the same way. Wahid mentioned one of my -- kind of one of my favorite quotes from Elon Musk from Tesla, which is prototypes are easy. If you look around in our space, oh my god, there's so much flattery of Switchblade, you'll see so many different variants that look like a Switchblade, but does that lead to a compelling business success for those other companies. In most cases, no. Building the prototype is 10% of the effort, building the factory, the supply chain, the reliability, the consistency is a main focus for us because we know it's not really relevant unless we can build it at scale and with the quality that our customers demand. So you saw the results last year, we grew pretty substantially in loitering munitions, up to just under $200 million in revenue, added capacity. When you look at these numbers that are on here, this is really meant to say it's not a forward-looking, here's our revenue for next year. It's -- here's the capacity that were developed and so it will be in place. A lot of that has been AeroVironment leaning forward with our supply base leaning forward with the hiring and setting up parallel lines. And this is all on still just single shift. We still have the ability to surge greater for both our businesses going to multiple shifts. But for this year, capacity wise, and we didn't help from the U.S. government, too, because they recognize how important this is, which is kind of a first for our company as they're helping us financially. They're helping us with prioritization of supply -- suppliers. This year, we'll have a capacity and we get the orders in a certain time up to $500 million of delivery. We will be building thousands of Switchblade 300s and thousands of Switchblade 600s this fiscal year. So pretty remarkable. And we look at that as just the start. The demand is accelerating for these programs. All this is happening under essentially for loitering munitions under some urgent needs, not even with long established program of records, which are in the pipeline right now and will start over the next couple of years. So from a capacity standpoint, we're going to add another factory which will then take us from the $500 million potential production capability up to $1 billion by 2027. And we'll have it in place a little bit sooner than that.

That's great guys. Any final remarks?

No. Again, thank you, everyone, for coming. And it's been a pleasure, and we look forward to having discussions with you throughout the day.

Yes. Thank you very much, and it's great to see some familiar faces.

All right. So we were just talking about how we're getting real-time feedback from the field and leveraging that to make improvements in our products. I'd now like to introduce Jeff Rodrian, who heads our third, but by no means our least important segment, MacCready Works. It's our center of excellence for autonomy and machine learning and also our home for incubating new technologies and new product lines. Prior to his role leading MacCready Works, Jeff led the development of multiple platforms for AeroVironment, including small UAS all the way up to large hybrid UAS for both the commercial and defense markets. Also before joining AV in 2010, he held several leadership positions at start-up companies focused on the uncrewed systems market. Jeff will cover how some of our -- we're thinking even further into the future about where our adversaries might be and what technologies we need to be developing today in order to counter those and keep our customers ahead in the battle space. With that, Jeff, I'd like to welcome you to the stage.

Thank you, Jonah. Thanks, everyone, for your time. So as Jonah mentioned, I have the pleasure of leading the MacCready Works segment, which is where we're really focused on creating disruptive innovations. And that's where technology meets market opportunities and that power is significant growth for our company. And Wahid's at a great stage for the market shifts that we're seeing today with autonomous systems and just to frame simply the technology shift that's been happening, and we all see this every day. The Puma behind you, the Puma 550 that you see over there today with some of the capabilities that the teams are adding has more computing capabilities than a high-end gaming computer 5 years ago, right? And so our team at MacCready Works of majority of software engineers, along with some phenomenal, very creative aerospace engineers are taking advantage of those 2 items coming together to create new and exciting disruptive innovations for environment. Today's talk, I'm going to focus mostly on what we're doing in the software-defined arena, so autonomy, ML, how we bring that together, how we think about the 4 main pillars of challenges that UAS will focus on and have to face in the future. So we'll talk about those 4 main pillars. And then we gave the challenge to the software teams several weeks ago to be able to bring this all to you to show you this live to show how when we put that much computing capacity on small UAVs can change how these systems get used. So we're going to do a live demonstration with 2 Puma's and 1 VAPOR operating across the country, connected to me here. And so it's very cool to see the team take on this challenge. I asked the team several weeks ago, I said what's the biggest risk of doing this? they said, it's you. So hopefully, I can navigate all this successfully, but I'm sure it's going to be exciting for you all to see how these things come together. And as Brett and Trace mentioned, the 3 of us operate very closely together, collaborate on how we take what's coming out of MacCready Works and the software-defined area and get it on to new systems like P550, along with pushing it on to our legacy systems. And while all of this is going on in MacCready Works were developing HAPS, their scale model you see over here. We have about a half a dozen other new kind of platform level system concepts in development with various customers that we can share in the coming year with you. As they mature and we're very excited for those that really exploit the confluence of market changes and technology changes in the world of AI. So with that, first, let's set the stage with what are the 4 main pillars that we see going forward that UAS systems are going to have to face. Brett and Trace talked about this and what's happening in Ukraine today. But when we fast forward and think about even greater peer kind of conflicts, this is going to become an overwhelmingly larger challenge. So the first one, data links are going to be compromised, right? So take away our cell phones, take aware, internet connectivity, things have to behave very differently. What we see in Ukraine today is intermittent availability of communication and in the future, this is going to become even less and less reliable as a capability as a way to use autonomous systems. The foundational elements in Puma and Switchblade have enabled us to be successful and will continue to allow us to be successful, but we have to always be anticipating the next 3 to 5 years where this is going to be heading. So I'll share a little bit what we're doing there to overcome these challenges. Next, GPS is going to become unreliable or almost at the point of unavailable. So you take away GPS, we now need to figure out other means of navigation. The Puma VNS system is a start, and our group is continuing to evolve and take that capability to the next level through software-defined capabilities. The third pillar is Air Defense System. So about 20 years ago, Afghanistan, Iraq was other areas we were operating in, we can pretty much operate however we want it. We could fly reefers, we can fly Pumas. We can fly Switchblades and virtually be untouched. As you saw when the Ukraine conflicts started unfolding the TB2 Bayraktar, very heavily focused in the news, a very successful platform at this point, not existent, right? The airspace has collapsed. Those systems get eliminated the second they're put in the air. We're moving towards smaller, more distributed capabilities to overcome air defense systems. What that means is we need to enable swarms of systems like Puma, Switchblade, P550 and future systems to operate where there's tens, hundreds of systems with 1 operator planning and executing those missions. So we'll talk about what we're doing to overcome Defense Systems. And then lastly, the rapidly evolving battlefield, products that went down range at the beginning of the Ukraine conflict. We had to quickly evolve things on the data links, behaviors of the aircraft in a matter of months to keep them relevant. And this is going to just accelerate unfortunately, great power conflicts during World War 2 throughout the entire conflict, radar and other new technologies, they were becoming more and more susceptible to being degraded more quickly, requiring faster evolution. And when we see autonomous systems being heavily software-defined, that means we can evolve at the speed of software. And we need to anticipate that in our future products, and I'll share with you what we're doing in MacCready Works to help enable that for the future. So one of the first items for Data Link. We talked about the great computing power that we can put on Puma. So if I can take that much computing power and that much intelligence and push it onto a Puma, push it on to P550, I now remove my reliance on data links. And so you saw several months ago, we made the press release on ARK, our Autonomy Retrofit Kit available on the entire Puma family. It can be expanded to other UAS's. It's basically our computing capability and our software capabilities put together to enable Pumas and other UAVs to use the perception engine on SPOTR Edge, which Tim will talk about later, to drive decisions on board the Puma, removing its reliance on data links. To the extent that what we'll see today in this demonstration, I'll be commanding and interacting with Pumas in California and getting just simple information back to myself, I don't need to be reliant on the data link or high-quality connections. So very excited about this capability and where it's going to take us in the future. To deal with the GPS being unreliable, we need to move away from this means for navigation, right? So the VNS, visual navigation system that's on Puma, there's a display in the back with us on it today is something that AeroVironment anticipated 5 years ago and started investing in developing this capability as a collaboration with MacCready Works and sUAS, to mature the technology, show the realm of possible. And we're very excited that, that's now a product that's going to be going down range and being used. Continuing to build on that, not remaining static is critically important to us. We've taken this technique, which uses some very fascinating image processing techniques. We've abstracted it in a way to being a pure software-defined capability and that we can push across all of our products. So that's a very exciting capability that's going to continue to evolve and create new use cases for our products when we're not reliant on GPS to go after those higher-end assets like Brett had mentioned earlier today. To deal with Air Defense Systems, there's many areas we can focus on, but the primary area that we're concentrated on in MacCready Works is back to what Brett mentioned, this lower cost, quantity is quality concept. And we need to be able to deploy that efficiently. So we saw several months ago, the unfortunate attack by Iran on Israel, they sent 300 very low-cost systems towards Israel. Luckily, we were able to defeat that capability. But if you read about it, it's probably a 7:1 cost that was imposed by the Iranians on the friendly forces to defeat those 300 missiles, right? And so we want to be able to impose that in greater types of economic disparity on our adversaries by using swarms of low-cost attributable systems like Switchblade and Avacore, our software framework that's running on the ARK system is a key enabler for this where we will drive based on the perception engine behaviors that are made to onboard the aircraft. That's what you see on the image here is our decision tree. These are relatively simple concepts in theory, but implementing it becomes very complicated to drive our perception engine where we now are using onboard decision-making to prioritize targets, identify friend or foe based on the foundational elements of SPOTR-Edge. So this is a very exciting capability in the Avacore framework that is available through the ARK capability. And then bringing that all together to enable us to evolve quickly and to get a little bit deeper into what Avacore is. It's a very new concept at AeroVironment. It parallels Kinesis on the ground side of it. Avacore is this vision, and it's a software framework that is in place today where we are basically developing autonomy, SPOTR-Edge computer vision, all wrapped together in a very robust operating system, if you will, that enables our suite of products across AeroVironment to build the yellow interface layer and you build that interface layer once to connect to your platform, and now as our blue circle of mission autonomy evolves over the coming years, that autonomy becomes available across the suite of AeroVironment family of systems. So that means that today, we'll see a vapor in a Puma talking to Shane. He can deploy that exact same capability. And if I was operating and commanding these type of assets and it was flying in a JUMP 20, it would really look no different to me. The exact same autonomous mission behavior modes become immediately available in the JUMP 20. And we see that being very powerful in the future to enable all of our systems to evolve their capabilities on the battlefield at the speed of software. So that brings this all together, and it's a very exciting new future for us. So just to show you an example of how software can evolve capabilities, this is a business I help stand up several years ago, it's the Quantix. Tim and his team took this capability, they looked at how to evolve it and make it more military applicable. And they, through software, created the swarming capability for Quantix not touching any elements of the hardware, right? And so this gets back to the ability to redefine new capabilities through software and autonomous systems, which AeroVironment's at the lead position to do. And it's all fueled by the learnings we're getting continuously in theaters across the world of how our systems are being used today. So to put it all into action, we're going to jump over and do a demonstration. So what we have today is we're sitting here, we have a Vapor team using a helicopter like you see here on my left in Kansas. And so they're flying, they're going to be doing what we call [ Century mission ]. So they're basically just watching an area for targets, and we'll jump over and we'll connect to them. They're connected to the Internet via cellular. And then in Simi Valley, California, we have 2 Pumas with the ARK payload and Avacore running, and they're going to be doing several different missions, and we'll walk through that as we jump into this scenario. And they're connected via StarLink to the Internet to us here. So should we be pretty fascinating. Fingers crossed, right, Kevin? So I think we need to switch to the ATAK. So fortunately, I can see the Pumas that are flying here wonderfully. So that's great. So in front of me, I have a Samsung Android tablet. It's running what's called ATAK. It's an interface, developed by the U.S. military for command and control of UAVs. It parallels into and flows into the road map for Tomahawk Robotics Kinesis. And it's basically able in pinch and zoom, we have a map display of several Pumas flying in California? And if I zoom out, go to Kansas. Now it's all up. Great. So you can see Washington, D.C., that's us, over to New York. We've got Kansas and we've got the 2 Pumas here. This is live. It's not recorded. So let's go zoom-in on Kansas... And I have here vibrating if you hear that, that's basically every time it's detecting a new image via SPOTR-Edge, it's alerting the user. And so you don't have to have someone continuously watching the display. So tap on the video feeds. There are 2 Pumas up right now, doesn't look like the Vapor is flying. I think there was maybe some weather issues. So let's go back to California. So this is a flight test range, just outside our offices in Simi Valley, California. The blue chevrons are the Pumas flying. This is live. The Orange Redish diamonds are targets that they're detecting. And then we've set the Green is what we call it geofences basically, we're constraining where the Pumas can operate. And then the Red is an area where we defined previously as an area of interest that we want to search for our target. All right, now I'm defining search or region of interest. So Polygon is going to be the airfield, the multivehicle mission. And there's several options people can change altitudes or different areas there. We're going to have those all set to the default. So there, we have the video feed from that Puma tracking a pickup truck driving down the air field that we just searched and found. So this is fully autonomous. We have, for the FA regulations, we have operators sitting back just drinking coffee watching the Pumas fly, but basically pickup trucks driving through that desert area. And we can see if this around here. SPOTR-Edge is running, picking up that pickup truck. Avacore is then making the decision on board the Puma to autonomously track and follow that pickup truck.

And we have GPS or...

In this scenario, we have GPS, but with the VNS system, we do not need GPS. It would be doing this autonomously.

And you are only looking inside the box?

We're only looking inside of that box, yes, correct and now since we told it to search that pickup truck, it will then follow it outside that box and continue to follow it wherever it may go. So as it starts to give a flavor of how you start building these missions and how it can become very useful, where now I have 2 Pumas. In the future, you could imagine 6 Switchblades and I'm searching an area for a target. And when it finds a target, operate a little more savvy than me, we just simply click on it and say, Engage Target, and we start really reducing the load on operators, increasing mission effectively, all through these software-defined capabilities. Now we switched over to the other Puma. You can see this is in the infrared spectrum. And so it's also doing a search of the area. So again, they're flying California connected via StarLink to the Internet and then were connected via WiFi back into a common server that enables this type of distributed operations. And so bringing this all together with the GPS-Denied capabilities, enables single operators to command large swarms of UAVs with very low operator burden and really drive a new entire use case for our products and it keeps us at the forefront of disrupting defense technology. And so if someone were to get out of that car, let's say it stops, we have preprogrammed it to stay following the car and not track the people. But we could easily change that. We could redefine the mission and say my mission is actually to find where the people from the car go. And now when the truck stops and people get out, the UAV will follow those people, all without autonomous, all without any Data Link or any operator in the loop. And you can see here I am up here talking to you, these are performing the missions, very low operator cognitive load. I had about 30 minutes of training on this before I got up here. So a very exciting capability that's on the forefront, and will keep us leading defense tech for the foreseeable future and well beyond. Other question, then we have a Q&A session, but since I have this up, does anyone want to see anything else right now on it. And there you just saw we drilled past some other vehicles. And again, because we gave this vehicle the priority, it did not jump and track those other vehicles. Great. Well, thank you all. I think we have up next, Jonah, do you want to -- if we're both on time for the break. All right.

Thank you, Jeff. Thanks.

We can leave this up if you want to come to look at it. Brad will probably know how to use this better than me.

Yes. So we have another example of AeroVironment delivering ahead of schedule. We're a little early for the break. So I have 9:47, let's plan to get back in the seats about 10:00 and will get restarted. For those on the webcast, we'll just pause right here. We'll leave it running, and we'll be back at 10. Thank you. [Break]

All right. Thank you, everybody. Welcome back. We'll have plenty of time for Q&A at the end of our prepared remarks. And also, you'll get a chance to continue discussions with the team after we finish today's event. It is now my pleasure to get started again. As you can see, we're right on track with the agenda. Up next is Brad Truesdell, who leads our small UAS business. He recently joined AeroVironment through the acquisition of Tomahawk Robotics last year, where he was the co-founder and CEO; Brad has over 25 years of military and defense industry experience where he has held numerous strategic roles in executive leadership. Before founding Tomahawk, Brad served or Brad worked at Harris Corporation and proudly served as a naval special warfare officer. It is now my pleasure to introduce Brad where he's going to take you through how common control capabilities are enabling the future of autonomous AI-powered uncrude solutions. Brad?

Good morning. My name is Brad Truesdell. As Jonah said, I'm the Vice President of sUAS, which is P550, Vapor products that you see over there. I'm very excited to be here in general. And I would say that also from an investor perspective, the acquisition of Tomahawk Robotics, it's been great for me personally. It's been great for our team. And I'm really excited about how we're bringing those technologies together to the betterment of AeroVironment and frankly, our customer base and getting after a really challenging problem of common control. All right. So first off, what is Tomahawk Robotics, what's the technology and all that. I'll spend a few minutes on this, talking through the technology, how it's differentiated, how it's driving enhanced competitive position, growing the top line for AeroVironment. Then I'll talk about some specific customer examples of that. Then lastly, I'll talk about how we're saving money for our environment as well through the use of these technologies. So first off, you'll see -- and over there, we have a model depicting the technologies that I'm talking through right now. The primary technology here is a software suite called Kinesis. And the simplest way to think of this, and this is -- my engineers will give me a little bit of a hard time about saying it this way, but think of it as windows for robots. So you have a common user experience regardless of the underlying hardware. So when I say that, think of fixed-wing aircraft like the Puma, think of rolling-wing aircraft, like you might see from a company like Teal Drones, unmanned surface vessels, EOD robots, manipulation systems, tractor wheeled robots. So it's the same software that can control all those different platforms, okay? That is a profound technical achievement in itself, and it reduces cost training, and it builds, frankly, greater efficacy and safety of use of these systems because of greater familiarity. So I'll talk more about what's the condition of the marketplace otherwise as I move forward. A couple of other things here that I'll bring up. Jeff and Tim will talk in a bit about some of the things that AeroVironment is doing from an AI perspective. We provide the software and hardware infrastructure to deploy many of these AI algorithms at the edge, and we've been doing this for years, under contract with whether it's the U.S. Army through PEO Soldier or through the U.S. Marine Corps, the U.K. Ministry Defense, deploying AI algorithms at the edge to do video analytics against multiple video streams at once, right? So that is a significant -- again, a differentiated capability for the marketplace. Then the last thing here, when we talk about the network, Jeff talked about this with regards to the challenging network environment of places like Ukraine and what we expect in future conflicts in general. One of the beauties of the Kinesis system and what we brought forward with Tomahawk Robotics is to talk across all these different robotic networks. So there's capacity for things like failover, real-time network shaping things like that, that allow robots to collaborate with each other and to share information with maneuver [indiscernible] platoon, squad, warfighters on the ground. So a very differentiated capability in that regard. All right. So I'll come back to the problem we're fixing here with the Tomahawk robotics and the Kinesis ecosystem. And this is just an example of the army, okay? So the reason why my co-founder and I started the company was we saw this problem of one-to-one control of disparate robotic system. So literally, the state of the world was all these different robotic systems, as an example of this in the army here, have different hardware and software to control them, different training, different logistics, increased cost across them. And they didn't work together. They did not natively speak amongst each other, share information amongst each other or work with existing tactical network systems like ATAK, et cetera, that were available that Squads or platoons used. So really, again, what Tomahawk Robotics allows people to do is either one-on-one control of these in parallel through the same system, one-to-many control, I can use disparate systems in combination to do more complex tasks or many-to-many control, meaning multiple people can share, view, control, robotic systems of various types across this. And what's interesting, again, from your perspective, is this is just the Army, the Marine Corps, the Navy, the U.K. Ministry of Defense, every single allied military that we deal with has this problem. They want to use unmanned systems at greater scale, and they have a mix of unmanned systems. So again, we get after that problem by offering our technologies. All right. So talking a little bit about, again, what Kinesis is and the problem it solves. I use some analogies about windows for robots, a common software set or suite. On the right side here, you'll see the types of robots that we interact with today. So from over a dozen different manufacturers, and some of these are the largest manufacturers of robotic systems in the world, certainly, AeroVironment chief amongst those, but you have folks like GDLS, Lockheed Martin, L3Harris, Teal, Skydio, the list goes on and on. And what's interesting about the marketplace and why the need for our technology existed in the first place is when you talk rotary-wing platforms like what you might have from Teal or Skydio, they use a protocol called MAVlink. And with that is a fancy word for messaging format for moving data to a robot. Some of the larger fixed-wing platforms use something called [indiscernible] another messaging format. And then some of the ground robots use RAS- G IOP or ROS app. And this is -- fundamentally, this is like having an Italian speaker, a French speaker and a German speaker all in the same squad. None of this stuff worked together, okay? So what we're able to do is through these technologies, the software and what you'll see here the [ Kx10 ], which is over on the model there, we're able to speak all those languages simultaneously at the same time, communicate so all these different disparate robotic systems can work together. And again, this is -- none of this is aspirational. We've delivered thousands of these systems to multiple users, allies across the world in NATO and obviously here in the U.S. Now back to this, and I'll talk a little bit more about the product family. This edge processor, and we've got various form factors of our hardware to allow us to deploy software. But on the left side of the chart here, you'll see the various AI algorithms, again, that we're deploying on our edge processor to run against the multiple and various video streams created by these different robots. And again, we've been doing this for years under contract for folks like the U.S. Army, working with AI providers in addition to AeroVironment, folks like Minor Corporation, Booz Allen Hamilton, to name just a couple of those -- all right. Again, I talked about our family of products. And what you'll see here is hardware so you can scale up or scale down predicated upon mission need. You'll see different display sizes here on my left. You'll see the KxM I talked about, one example of our edge processor. And then on the right, you'll see something called the RAID System. So this is a great example of the U.S. Marine Corps identifying the value of this, and they've been a great customer for ourselves for years and wanting a more tightly packaged integrated solution. And that's a nice opportunity. I'll talk about a little bit further as far as growing the top line for AeroVironment. All right. So talk about the technology, some of the products here. So what's this enabled? You've heard Brett talk about some of the more sophisticated operating challenges in places like Ukraine. You've heard Trace talk about that with regards to [ UxS ] or Jeff. And what this is, again, is a foundational technology that allows maneuver units to interact with robotic systems to execute much more sophisticated operations than they did in the past, right? So I can combine ISR and strike in the case of Puma and Switchblade or I can combine ISR and EOD in those 2 examples there. So those are the kind of things that we're getting after today. And again, this has been -- these kind of missions are being executed by U.K. Ministry of Defense, Marine Corps, Army, et cetera. So very proud about the market traction we've generated over the years. All right. Here are examples of the customer base we have, and I've certainly alluded to it. I think what's interesting is not only the -- whether it's the Marine Corps, the Navy or whatnot. But there's this whole -- and obviously, the list is much longer than this of OEMs that we've been working with, right? So the idea of providing best-in-class ground control solutions, meaning that when a robot buyer or builder says, "do I want to build this technology myself or do I want to use what Tomahawk has, right? And what AeroVironment has?" They come to us, right? And you'll see folks that we run into from a competitive basis all the time using our technologies. We've got Shield on the list. We have Anderol where there's competitive overlap. L3Harris, the list goes on. I mentioned Lockheed before. Bell has used our technologies. Last year alone, there was over 100 purchase orders from different OEMs. So you see what we're doing is we're planning seeds with each of these OEMs. Some of them won't scale up, but some of them will, right? So it's a nice opportunity for us to grab a share of the market and, frankly, monetize parts of the market that we would not otherwise monetize, right? So maybe on the smaller drone side where it's not as lucrative or other parts of the market again where we're not operating. All right. Now talking about some of the -- getting to more specifics about driving top line or increasing our competitive position. So Brett made mention of a program called LASSO, so that is a combination of loitering munitions and it's primarily loitering munitions, ISR platforms, but also the GCS. So that is a program being managed and run by PEO Soldier. PEO Soldier is a company that's obviously worked with AeroVironment for many years, but also Tomahawk and they specifically requested common control between those elements that I just talked about. So the benefit there of increasing our competitive position and increasing our share of wallet in that, for instance, right? So again, significant benefit to the company as a result. Two other examples. And while he talked about these programs earlier, both MRR and LRR where that's medium-range reconnaissance for the Army and long-range reconnaissance for the Army, they specifically had requirements in there for ATAK interoperability. Again, a technology that we bring to the table right out of the box, again, to allow those kind of data exchanges to take place. I mentioned RAID a few minutes ago. This is a large program where the Marine Corps intends to deploy that system with every marine infantry squad and enablers. So a significant market opportunity for us to again grow additive top line to the business. And there are some other examples across here. [indiscernible] is a program we're executing right now for the Navy where they want some of these improved networking and communication capabilities where they're augmenting. And actually, that was the largest program from PMS 408 last year, which is the Navy EOD command. I may mention of the international -- or pardon me, the U.K. Ministry defense on a couple of times. We are a major sub for a program called HMT, Human Machine Teaming, where they're using the same technologies. We're delivering to the Navy, the Wing corp, the Army, et cetera, to get after common control for the British military, so a great opportunity for us. Those are some examples. Certainly, there are more. But as you can see, again, driving additional competitive differentiation and be top line for the company as well. All right. The demonstration, we will -- I will move over to that after we break here, and I'll run through the equipment that's over there. So I'll move forward. And really, here is where I'll conclude. The benefit I talked about of increased competitive differentiation, improved top line, but also comes with cost savings. So we, as AeroVironment, we're optimizing ground control stations for individual robotic platforms in the past. Now we have a common ground control station across UXS and LMS and you're starting to see the benefits of that today through the combination of use of those platforms together. But number two, that enhances our ability to rationalize our supply chain, have a single software baseline for these technologies, which reduces a lot of costs from a labor perspective, reduces time to market for new capabilities as well. So a lot of benefits there that accrue to the company as well through these technologies from a cost savings perspective. All right. And that is it for me. I appreciate the opportunity to be here, and thank you, Jonah.

We're going to bring the management for...

We'll have Brad do the demo for those of you who are interested. Now keeping with the theme of software-enabling autonomy in the future of our systems, I want to have Shane and Tim come up here to have a fireside chat. Shane Hastings is the Head of our Medium UAS business with the JUMP20, and Dr. Tim Faltemier is the Head of our Learning and Active Perception or LEAP business, which is within the MacCready Works segment. By way of introductions, Tim realized long ago that AI would play a key role in defense and has spent his entire 15-plus year career developing innovative defense technologies in the areas of computer vision, image and video analytics and perception. During this time, he has become one of the nation's leading experts in the defense application of this technology. Most notably, he led the development of the Surveillance, Persistent Observation and Target Recognition or SPOTR technology that you've already heard about today. Shane has more than 20 years of experience in defense and commercial markets. Shane has held key leadership roles within our small UAS and tactical UAS businesses before taking on the medium UAS business. And before joining AeroVironment in 2015, he was the Head of Engineering at [ Institute for the ] ScanEagle program. Starting with Tim, would you like to give us a quick overview of your role and what you work on within the company? And what are your key priorities right now?

Sure. Thank you, Jonah. Thank you, everyone. As mentioned, I've been kind of blessed to come to AeroVironment and work on a lot of really interesting cool problems. My background is in PhD in computer vision and how do we really take perception and change the thoughts of how you take these aircraft that we're building here and enabling them to go massively multiple. How do we start flying thousands or tens of thousands of them and use the perception capabilities as if you had someone on board that's able to make those decisions. And so all of the research that my group does and the development of production of that is how do we make that a reality. And that's what we'll talk about here today.

Shane?

Yes. Good afternoon, good morning. My responsibility is really is the profit and loss leader for the MUAS division and AeroVironment. So that really includes the JUMP 20 Group 3 platform and the T20 Group 3 platform. The difference between the two is the vertical takeoff kit that we use on our JUMP 20.The Group 3 platforms are generally 15- to 24-hour persistent endurance. And we are constantly looking at new concept of operations and how to deploy a Group 3 platform, and that's part of my key responsibilities as the overall P&L leader of the MUAS business.

And Shane, building off your last thoughts. Can you talk us through the JUMP 20 and what differentiates that platform today, especially when it comes to the field experience we've been getting?

Yes. Very good. So I think the key differentiator, the JUMP 20 is actually a battle-proven platform. It's gone over 300,000 operational flight hours and generally under our commercial owned, commercial operated service-based contract or even government owned, government operated. What I found very interesting about the JUMP 20 given my background with other businesses and actually developing Group 2 platforms and Group 3 platforms is the JUMP 20 is legitimately a truck. And when I say it's a truck, I think of an F150, where you can put different sort of payloads into your truck, fly it operationally and actually become a multi-mission platform. Multimission is more than just ISR, intelligence surveillance reconnaissance. We can put different payloads in there and become more than just a one-trick pony. With that, we've been able to fly over 60 different payloads on the JUMP 20, and I truly believe that with its payload carrying capability and a small logistic footprint, that is a key differentiator amongst the other assets that we're seeing in the Group 3 battle space right now.

And Tim, what about your access to the JUMP 20 platform for testing the technologies you're developing has given AeroVironment an advantage?

Great question. So as Shane mentioned, one of the things that we need as part of our machine learning and computer vision work is experience in the real world. We need to understand how these systems work and what's going to happen. And one of the differentiators is that by taking one of Shane's platforms and running on it, we can start working on tomorrow's con ops today. One of the things that we'll be talking about a little bit today is our new platform called Wildcat. They mentioned it as an offshoot of the DARPA ANCILLARY program. And one of the things that we needed to be able to do is start working years ahead of the actual platform being finished, where we could start working on the con ops, start working on the different kinds of technology that we'll be releasing to it. And so we're using JUMP 20 as that surrogate platform to be running all of the crazy things we're doing from ship ID to automatic landing and others that we'll talk about in a few minutes. And using that platform so that when that new platform comes around, we are ready to have the software build ready to go and developed and deployed. And I think Tim brings up an excellent point, and this is what's really got me excited about partnering with Tim and getting that technology on JUMP 20. If you're at all familiar with how a Group 3, I just mentioned the Endurance persistence of 14 to 24 hours, having a soldier sit at a screen and looking at full motion video for 24 hours is really just a nonvalue-add. And I think it probably increases the probability of missing something because you're staring at mind numbing video. And so being able to introduce software technologies and hardware technologies that reduce the cognitive load on the soldier and/or the user is a strong value proposition in my mind. And I'm excited that JUMP 20 provides that avenue to put this technology on there. And I think you start unlocking different possibilities. No longer is it a one-to-one relationship where you're staring at 14 hours of video. Now you're introducing software that does the hard work and it engages the battlefield when that needs to be engaged, the soldier, the Commander. And I think that when you start looking at that, you start looking at one-to-many solutions. Brad talked about having disparate vehicles, cross domain vehicles, I think JUMP 20 fits in that ecosystem. And so I think having this partnership of taking Jump 20, taking with the LEAP SPOTR-Edge and other software under that platform really starts to get tomorrow's Con Ops today. And as Tim mentioned, as we start looking at the future programs, ANCILLARY is one of them, we can actually start stretching the legs on those concepts long before that program really transitions into a full program of record. And I think that's what's exciting about JUMP 20 being able to do that. And to kind of pile on to Shane's thoughts. One of the first opportunities that we're looking to do that is imagining how maritime ISR should work. So if you think of in an ocean big sense, Ocean is a big place. And if you're trying to cover that with normal terrestrial imagers, the one plane to a very large space is very challenging. Imagine if you had a 400-kilometer playbox where you're trying to tell the commander at every point in time how many actual ships are out there, whether or not they're running any kind of AIS or any kind of radio frequency type of operations. What we're talking about here is changing the dynamic of having one plane go off and leave and try to cover 400 square kilometers, where you're effectively mowing very small slots in the grass to having 10 to 20 of them covering all simultaneously. And so Jeff did a fantastic introduction with the Puma work. And that was showing the power of just 2 Pumas in 1 section. If you start taking the power in the lift and the duration of Group 3 UAS, you can have persistent coverage without the use of satellites at a fraction of the cost of satellites in a completely autonomous fashion. They autonomously take off, they autonomously search and every time something sees it because it's processing on board, it's able to make a decision on, is that a high priority? Should I follow it? Or should I let it go and add it to my list. All of this is the next generation of ISR let alone to how it can relate to the work that Brett and others are doing with strike and targeting.

Absolutely. And I think it's real time. So we're talking about low earth orbit satellites doing a pass every 8, 12, 24 hours, having the capability of actually running multiple vehicles to get that swath of square miles is extremely valuable. And I think as we start looking at where conflicts could be going and you're looking at the [indiscernible] of distance and looking at a lot of blue water, as you go to Asia Pacific, you're going to need something like that. One platform for one vessel is just not going to be good enough. And so getting this technology on JUMP 20 and looking at that maritime mission is paramount in my mind as the business owner for MUAS because I believe that's where it's going to go in the very near future. And I think with the lessons that we're learning through our other businesses from Ukraine, that's only strengthening and make our systems and positioning it better for the next fight.

So transitioning to the future, [ Shane ], what does this mean for the future of MUAS to be able to have the capability that Tim and his team is developing and future platforms like the wildcat?

It's a good question, Jonah. I think that we have the beauty of doing a lot of those things now. And I mentioned that we've got technologies across AV's diverse portfolio. You've heard a lot of different things today. And we're able to bring that into our JUMP 20 platform and really start fleshing out what the concept of operations are going to be, what the procedures are going to be. So you have to realize that we're trying to extract the human from the loop. We're trying to put them on the loop. And that's going to redefine how systems are going to be deployed in the future. And we don't want an operator staring at a screen, but we want an operator engage when the operator needs to be engaged. And I think that with what we have now and the JUMP 20 and the T-20, we can start putting in play and going to market with the solution long before these future programs become a program of record. And I think that gives in my view, AeroVironment, a strong position of credibility that we can actually do this. So we're not doing it by PowerPoint. We're actually doing it. We can fly it, we can integrate it, and we can do it today, and I really start believing, and Wahid mentioned we're shaping requirements for future program of record. Why can't we do that now on this next Group [ 3 ] program of record? So we talk about ancillary. They're doing transformative innovation to think about the DARPA hard problems. And I think that's great. We'll take that, and you have to figure out how to go to market with it. And I think with us in MUAS, that's what we do. We go to market. We take that new technology and we put it in there. We talk about the quality of it. We talk about building the programs of record, you have to have foundational excellence to actually launch that to market so that when it gets out to the end user, it works each time and every time. That's everything in the hardware and the software.

Fantastic.

To kind of piggyback on that, one of my jobs, which you never really understood when you're kind of accepting the job of what my job would be, is education. So most of the time, I'm talking to government customers who started out with a set of requirements and saying, based on my experience in the previous conflict, this is what I think the requirements for this new platform or new capability should be. And most of what I end up doing is helping them understand that they're shooting way too low. Here is actually what's possible today. Here's what our group is doing in collaboration with [indiscernible] Research and DARPA and others. If you start thinking about how it really could work, then you're writing the requirements that will eventually be there versus letting them kind of organically happen from requirements writers. And so the real way that happens is exactly, as Shane said, let's go out and fly it. Let's put 20 of these things out in CENTCOM, and see what actually happens and show the effect of this completely different modality that no one's ever really been able to do.

That's great guys. Any final remarks?

No, I think -- as you said, yes, I think that I'm really passionate about this space. I'm really passionate about the products that I manage. I've got a solid team, and partnering with really all of the different divisions within AV for me is exciting. I've worked on platforms in the past that you kind of pigeon hold into only being one thing. And with what we have in the MUAS business, and then having the ability to tap into other technologies, it's just -- I just get passionate about it and excited by it. And I think we really start tapping into the art of the possible. One of the things that you may see it on YouTube or why not, we've got demonstrations of having Switchblades integrated on a JUMP 20. So now you start thinking system and system solutions and using the LEAP software to do more than just track, and now it's starting to do targeting. We can do all sorts of stuff. And so really excited about where this is going. I can't wait to get this out there. And yes, thank you.

And I guess for mine, one of the biggest thoughts that we have going forward is the currency of data. So at a very fundamental level, what drives a lot of my research and development is the access to data that we and AeroVironment have that almost no one else does. As Wahid started out, we have more deployed UAS systems than anyone else that's out there. And what that allows us to do is collect data that no one else has, get that data annotated and start to build out libraries and con ops missions that are really just next level and building that into the core framework of all of our products. So that was the first thing that I really took on when I came to AV is, hey, we have all these platforms. Let's build infrastructure to start gathering that data to start using that data in ways that no one else has access to. And that allows us to make a differentiating kind of solution that is going to be that next generation capability.

Fantastic. Thank you, guys. We appreciate it. And finally, it is my pleasure to introduce our closure, Kevin McDonnell, our CFO. Many of you have had a chance to meet Kevin over the past few years. But for those who haven't, Kevin has more than 35 years of financial leadership experience at companies such as Jams and Digital Insight, where he helped them grow significantly, and especially at Teradata Corporation, where he had a number of senior financial roles and grew revenue more than 100 fold. No pressure. It's my pleasure now to introduce Kevin. Come on up.

Everybody. Thank you, Jonah. Thank you, everybody else. Great presentations by my colleagues, and take you a few things here. I'm going to start with this chart. I've been showing this investor presentation pretty much all of this year. And it kind of talks to kind of the phases of growth and what is driving the growth of AV. And the first section there, the first, the 1- to 2-year section. We're in that right now. And we're -- the key point is we're about to cross that line that says in the 3- to 5-year period. It really isn't 3 to 5 year out. We're really at that point where we're about to cross that line to a world where we're in multiple programs of record in a replacement cycle for the group 1, 2 and 3 UAVs. So you're going to see an acceleration of growth through that phase. And then as we move through that, we have, as you saw from Jeff and what we do in the [indiscernible] works and other areas of the company, there's a whole another set of products that should follow that to fill gaps necessary for the U.S. military and our allies. And as you know, a lot of the things mentioned here might be U.S. programs, but you can kind of multiply that when you look at the global picture. We talked a little bit about the programs of record on the horizon. We talked a lot about the LMS programs. The medium UAS side is not a -- there is one large U.S. Army program, but there's also Navy programs in the U.S. And most importantly, there's an upgrade cycle happening throughout the world. I think there's a number of opportunities for us in foreign countries where we're already operating. They already know who AeroVironment is, where we can compete for their equivalent programs of record. And the same thing is happening on small UAS in the U.S. and globally. So there's a lot of action happening in this marketplace. I mean, think about the technology has changed quite a bit. The needs of the Warfighter have changed over the last 5 or 10 years. And now those militaries around the world are adopting those new technologies that are necessary in a peer-to-peer conflict and things like that. So you're going to see a lot of change. We talked yesterday on the earnings call about our guidance for next year. We came in at about a 12% revenue growth on average, $790 million to $820 million. Our EBITDA at $143 million to $153 million. What's implied in these numbers is continued investment in R&D. We're talking -- we've normally talked about 10 to 12. Next year, we're talking about 12% to 13%, a little bit higher than average. I think when you think about, we say, the leading defense tech company, what is a defense tech company? It's really a company who's investing in the military market to deliver products around the globe. And usually, that will mean higher growth and higher earnings or EBITDA percentages over time than the traditional defense company. And so here is that. So this just shows our historical performance. We've been able to grow 15% every year, keep that R&D investment in the low teens, EBITDA in the high teens. We're showing some improvement there in the EBITDA percentage this year even with an increasing R&D percentage. The gross is 10 to 15, and we really want to be at the 15. But as you -- as we talked about yesterday on the call, there's a number of awards. So the hard part is getting the customers say, yes. The next hard part is getting them to get the contract, particularly with the U.S. DoD. And so we're in that phase. And really, the high and the low are dependent upon how quickly that happens. If that happens faster than we anticipate, then we'll be at the high end of the range. If it's a little slower, we'll probably be at the lower end of the range. But longer term, we really think this is a 15% plus organic revenue growth business and we can be well above 20% with some strategic acquisitions like we've done in the last few years. We want to continue to do those and continue to drive the top line growth. Again, R&D investment is high right now as we get some -- as we move into that next phase or that we cross that line into the larger programs, there'll be much more leverage on our R&D investment today. Right now, we're in a very much a fast turn business, where it's IDIQs and things like that and responding to those needs. We're not on a lot of programs of record. Moving into the program of record phase will allow us to get some more leverage on the R&D and start to drive that down over time, not lower dollars but lower percentage. And then that should allow us to achieve in the next 3 to 5 years, a 20% plus EBITDA number. And then longer term, this should be a 22% to 24% EBITDA business. Again, that's kind of, I think, what the mark of a defense tech business is, is those higher EBITDA percentages over time. You're going to get the higher gross margins, which are going to drive the higher EBITDA percentages. So our strategy is pretty much unchanged. I mean for a long time, and Wahid says this all the time, just a portfolio of distributed intelligent multi-domain robotic systems softwares and components for the defense and public safety industry. That's been -- since I've come to the company, what our future state and goal has been. We're going to add to that some additional capabilities through acquisitions, through an acquisition strategy looking at that market, not moving too far afield from where we're at, but a lot of the areas we're in are high growth with other companies that are developing interesting technologies that we can bolt-on to our current platform and build what we call our goal now is a multibillion-dollar defense tech business. And I think that's very much in reach here in the next 3 to 5 years is to get to that multibillion-dollar defense tech business. So Wahid talked a little bit about our TAM, kind of estimating that at $12 billion. We have different levels of kind of penetration into these different markets. But as those have followed us for several years now, we started out 4 years ago, mostly as a small UAS business. That was really the market we're going after. Through acquisitions, along the way, investments in R&D, we've been able to expand those capabilities and expand that TAM into what is a $12 billion market, a little bit driven by the low ammunitions market exploding over the last couple of years. But as we look forward, there's a whole playing field of things that fit nicely into that -- to our footprint and our capabilities today. This shows you multiple areas that we can invest in or buy or acquire companies in, but they're not outside our lane. I can make a case that everything on this page we're really already doing in some form or another. We have either organic initiatives moving forward that may produce products or we have -- and there's inorganic opportunities, but they leverage our capabilities. I mean, really, at the end of the day, when you look at all of this, the secret sauce of the things that Tim and Shane talked about, that machine vision, that autonomy. These are all capabilities that kind of across all of these segments of the market, and we can leverage that and build that multibillion-dollar defense tech platform. So this is Wahid's chart, but I add it on a little box. We have -- as you can see today, we have a strong technology engine, innovation engine, 50 years of doing this stuff. And technology and innovation is in our DNA. There's no challenge too high when a customer comes to us and says, here's what I'm trying to do. Even as Tim said, it's not -- their challenge might be high enough. We're telling them go higher because there are capabilities to do these things. We have the capacity. We've been doing this a long time. We're fortunate to have built out our factories on the Switchblade product line, on the small UAS product line and the medium UAS product line, so we have the capacity for growth and the manufacturing capability to go along with the demand. We have the experience, as I think Brett or somebody was saying earlier, it's that ability to innovate while -- with the war fighter as things are going on. I mean, Ukraine has been a great example of our ability to work with the environment, get the feedback, come back, have our engineers innovate a new solution for the warfighter. That's what's going to be needed as warfare goes forward in many of these different theaters. And then I'm going to add to that as a growth platform, it's ready to -- for inorganic capabilities also. Like I said, not moving far afield from where we've been on our current capabilities, but moving further into what is really possible for us in those markets. And that's it. So now have a long way to -- I'm not the closer, Wahid's the closer with the Q&A capabilities. So we know that we need to bring chairs up or we...

Yes, we can have Trace, Brett, Shane, Wahid here.

You're doing great or time.

Yes. All right. Let's jump right into it. If you don't mind introducing yourself.

Sure. Yes. Peter Arment from Baird. I guess maybe to Brett, on thinking about the Switchblade 600 and some of the technologies like that -- they talked about with ARC and VNS and some of those things that are really, I think, at the forefront, and maybe you want to comment as well is just that given the environment that you're seeing in Ukraine, the jamming, all the different technologies, when the Switchblade 600 will be in a position to kind of -- you're already doing things to get around some jamming but in a more critical manner. When will that happen? And how do you just see that impacting the Switchblade 600?

Yes. That's a good question. Can you hear me okay?

Wahid's talking, I think, is going to come on. Great. There you go.

Yes. So great question. And you clearly articulated, there's things that we're doing right now to be able to get around the jamming environment. What we have not incorporated is some of the latest technology that Jeff's MacCready Works group has done. And some of that has already been fielded on Puma's over in traces on crude systems. Bidding it into the very constrained swap of the Switchblade 300 and 600 is a little bit more challenging, and it's taken us some time. We're in the middle of that development. We have a SOCOM customer sponsor for ingredient Jeff's spotter edge, automatic target recognition software into Switchblade 600. So that's coming. And we're also working on a solution for alternate NAV when the GPS signals are jammed as well. So our strategic intent is we're working together as partners on this. It's just taken a little bit longer to get that into a production configuration for Switchblade 600. Time in wise, we'll be flying later this calendar year. We'll be flying those technologies in Switchblade 600. And then depending on what customer interests are, let's say, before the end of our fiscal year, we should have orders that include those capabilities.

Ken Herbert with RBC. As you look at the -- your capacity additions to support the young crude and LMS segments, how fungible are those? Can you go back and forth, like is all the incremental capacity you're putting in for Switchblade, could you use it for the uncrude product line if, obviously, you have any gaps there? And then how do we think about sort of the CapEx framework over the next 3 to 4 years to support that capacity and where you think the revenues could ultimately get through get to?

Okay. I'll take maybe the first part then Trace, if there's anything you want to add. So our primary production facilities are in Southern California, close proximity between the small UAS and the larger munitions. So we do share resources as capacity kind of goes up and down. And we -- and so our teams are working close together. While we are in separate P&Ls, we still have a mechanism for sharing those resources, and we get a lot of synergy because when you look at building a Switchblade 300 to 600 versus a Puma or Raven, a lot of the techniques, capabilities procedures are similar. We're integrating small, lightweight composite structures with battery packs, avionics, cameras, radios, all their common things. So we do get benefit out of that so far. The second question, I think, is probably maybe more on the CapEx for...

Yes. So generally speaking, in terms of the -- so just to add to Brett's point on the first one, not only the similarities and the techniques. We used to make Switchblade years ago before we had a dedicated factory at the same factory. In fact, the same operators were making the Switchblade as they were making the Pumas and Ravens. So if we have to flex capacity in one facility versus the other, it's a very doable easy task for us because we've done it before. We've done it before multiple times. In fact, we've even taken people and taken them back in forth [indiscernible] facilities as well because it's not that far away from each other. In terms of the CapEx, as we bring on a new factory, which is our plan beyond this fiscal year, we have to make some investment this year, it's within our current CapEx expenditures of between 3% to 5%. Our facility investments, unlike many other manufacturing facilities, is not very high CapEx or expenditure heavy investments. We just need the building and the automation in building the test fixtures and that is actually quite inexpensive rather than being very expensive robots and all that. So within 3% to 5% of our spend, we would be able to manage that as we grow into new facilities over the next. If we have to build bigger facilities for some larger structures that Jeff has -- to Jeff's business has some much larger airframes that are much bigger than the ones that we're doing here, such as HAPS, right, the sun glider or that platform or other ones that he's working on. Those could require more, but that would be incremental and will be way more than our top line growth as well. So that will be much, much bigger dollars.

When do you expect to be able to announce where the next Switchblade location production facility will be? And when do you expect that to be starting to actually produce product?

Should I start?

Yes.

No, I'm sorry. We're not allowed to actually say the location, but I think that we'll probably make an announcement within our fiscal year.

Within this fiscal year, we'll do that. And there's a lot of other factors that goes into it. It's the supply base, the ability to be able to integrate the warhead with the airframe, it's really important. And also for the customer to be able to do, as you know, all Switchblades we deliver gets a lot of acceptance test, which means customer comes, there's a pilot Switchblades, lots of Switchblades, and they randomly pick 5, and 4 out of 5 has to work. And historically, we've never had to fire #5 because we want to save the customer money. That process is going to have to be done in a field where they actually live fire test is being done. And these are government sites. And so that is critical for us to be able to actually deliver systems and for the government to accept them quickly as well besides the integration.

Yes. Thank you, Wahid. I'd add that I've selected the location, we will go through the proper internal approvals, including with the Board, and then move out with that and then disclose it before the end of the fiscal year. I'd also -- I have offered, I really admire the operations group under uncrewed system have offered that we would take that over for our capacity expansion. But Trace says he needs it for his business.

There's lots of questions back there.

This is Louie DiPalma in the front row. I think, Kevin, on one of the slides, you talked about how for the total addressable market opportunity that the international market for Switchblades presents what you said, a multiplier in terms of the domestic market. And last night, you discussed the order and the approval with Lithuania and in the news, there's been the order with Taiwan. And I think previously, you've had Switchblade orders with France and the U.K. and Ukraine. Can you talk about more the international pipeline and the approval process? And I think, Wahid, on past calls, you said that there's been over 20 countries that have requested the Switchblade. And so in terms of that long term guidance for 10% to 15%, what is assumed in terms of like more countries approving it and actually delivering the Switchblade to those other countries?

You like me to take that?

So if you don't mind, I'll address that.

Let's -- Switchblade guy is going to answer it.

Yes. So it's been a long haul. I have to tell you, honestly, very restrictive U.S. government export policy, only approved the Five Eyes in the beginning, U.K., Canada, Australia, New Zealand, and we sold to a number of those and then expand a little bit new. And you've nailed it, you had exactly which ones have been publicly announced. And then there are some others that are not publicly announced that we're under contract for, and those will probably become released at some point. But we've seen with the Ukraine war, the phase of the war, a big shift. And the number that I would say right now based on U.S. government policy would be we could get into the 40 to 50 different countries that we'd be able to export Switchblade 300 and 600 to. Similar -- there might be just a few of them held back, but very similar to what our small UAS business under uncrewed systems is. This year, from an order standpoint, envisioning that forecasting that will probably be somewhere close to 50-50 on our orders for domestic versus international. So it's going really fast. You can imagine the countries in Europe, Eastern Europe are concerned about Russia and what Russia's intentions would be as well as in the into [indiscernible]. And so we're getting a lot of movement and U.S. government policy is supportive, slow but supportive.

And I want to add, if I were to just add, most of these countries are buying their initial buys, which means that similar to the U.S. customers, they buy the initial systems and then they kind of sort of finalize the con ops and training procedures and uses, which then could lead to more. And besides even not leading to more, because it's a onetime use product, there's always going to be need for training. As you know, for the last decade, we've been delivering thousands, and a lot of them is also for just to keep new soldier trained on the capability.

Yes. And we believe the publicly announced decision of U.S. government to sell 720 Switchblade 300 to Taiwan. Well, that's a fairly decent piece of business. We believe that's just the start even just with that one customer. We're pretty bullish about what international will be.

Great. And also a follow-up related to the commentary last night in terms of the $300 million, I would say, awards for Switchblades that aren't yet in backlog. And in terms of the timing in that, I think you said you expect those orders to be finalized over the next 9 to 12 months. How does that relate to the government fiscal year ending in September and how the budget was passed, I think, around March 15. And I think there was funding for [indiscernible] and there was $500 million in funding for Replicator. Do you need those contracts finalized in terms of some type of a budget flush by the end of September? Or if it's not finalized at the end of September, can that money from the 2024 budget like carryover into 2025 in terms of long-term contract? And how does that work?

Yes. Great question. So the timing -- government FY '24 funds, what was referred to as the $300 million that's been publicly identified yet not contracted with us yet, is multiyear money. So it could go past September and still be awarded. I think the bulk of that, if not all of that number, will probably be awarded before the end of September, but it could go past.

I think you have had...

Yes, we're good now? All right.

You guys take turn.

Andre Madrid from BTIG. I don't mean to take away from Switchblade and the [ UXS ] business, but I noticed that the TAM on UGV grew. We didn't really talk about it much today. Yes, what are you thinking about? What's the status update on what's going on there and where it's going?

Sure. You want to take it or won't take it? So let me just add some and if I missed anything, you can add as well. The UGV market, as you know, we got into that business at a time when the -- most of the U.S. program records and initial large program records was already decided and procured. So the U.S. has gone through what I call a sort of trough for the last 3 years or so. And the next 3 to 5 years, it's actually going to be growing, number one. Number two, we also have R&D investments. So that's one. Two, we've been growing that business internationally, very successfully. They also have close to 40 plus or 50 countries, if I'm not mistaken, in terms of countries of the export to from the [ Telerob ] product line. So our international customer base for our UGVs has actually grown. And we have a great reputation with that product in terms of its technology. It's the cutting edge out there. The third piece is also that -- we are investing in a couple of new ground robots and capabilities that actually expands the TAM. There are certain categories that we were not playing before, which we intend to compete in, given sometimes later this year or next year. And so those 3 alone is what allowed the TAM to grow. And the fourth item is actually the U.S. DoD. The U.S. market also has new programs on the horizon beyond 2 years, and that's actually another part of the growth of the market.

Just a follow on. You've heard a lot today about interoperability, robotic systems working together. One of the thesis behind the strategy for the acquisition of Telerob really was forward thinking, and the vision that ground robots will be working with [indiscernible] aircraft and USBs and all these systems collaborating together to perform missions that aren't being performed today. So we are continuing to invest in that strategy. With Puma's working with UGVs, Puma is going out and finding IEDs or mines or those type of things, and then setting out the UGV to destroy it or take care of it. So again, those systems collaborating, working together, talking together through common control and interoperability, performing autonomous missions, as you've heard about today, has been really our strategy for some period of time, and we are on the road to implementing that with the UXS and the UGVs.

If I can squeeze in one more follow-up?

Sure.

So also on that -- I guess, on that path, where we talking about just other platforms that didn't get much coverage today, just looking at paper. I know that on that interoperability point, I think when we were last in Petaluma, you guys talked about there being some level of that on that on the 55. So what are we seeing there? What's the kind of customer need? How do you guys feel like you're fitting in? Just another status update.

Sure. Yes. I mean we continue to make traction with the Vapor 55, the new version, the Vapor 55 MX we released this last fiscal year, which really was taking the product that we acquired through that acquisition of Pulse Aerospace and investing in it to really make it more reliable, more rugged and really be able to address the customer needs of a reliable rugged platform that works in the field. We sold Vapor 55 MX to over 10 customers last year, which I think was a significant increase. And so we continue to see -- we're starting to see that adoption. And then again, bringing on Tomahawk and spot or edge into the Vapor to really give it the capability to perform autonomous type missions. It carries a lot of payload. And so it has a lot of capability that the fixed-wing assets don't have and again, stand behind that acquisition and the strategy there, and I feel confident about the adoption that we're starting to see.

Yes. And another thing that's happening in the space is because of the use of these quadcopters or multi rotors in Ukraine, FPVs, it has started this thought process of having platforms that are quadrotors or so. But helicopters of this nature has actually an advantage from a physics perspective, for its pound per pound or apple-to-apple, it could carry a lot more payload. And so the ability to carry 2 Switchblades on this or have the ability now that they have a modular rail system where you can snap on a variety of different payloads. If you saw one of the videos, it had a directed munition that we launched off of it. That is starting to open up new missions that a bunch of our customers are actually experimenting with right now. And the purchases they've made is to sort of lead to the next step, which could be larger acquisitions over the next year to 2 years of the Vapor platform. So as part of the family systems, it's very critical. We knew that from a long time ago that it will become part of the strategy of the portfolio because the customer is going to have some missions that this is the best solution for, and we're going to continue to do the platform. Yes, whoever's got the mic, maybe next, sorry. Right there is...

Greg right here.

Great. Okay. Good. Greg, go ahead.

Greg Konrad from Jefferies. Can you maybe just talk about how you build to that 10% to 15% growth rate? I think, Kevin, you said multibillion-dollar defense technology company. If we take the $1 billion of LMS capacity in '27, everything arrives at maybe a higher number. And then as a follow-up, what is that 20% number? Is that just including M&A relative to the base?

[indiscernible] so it's kind of like a minimum. We hope, obviously, to grow faster than that. Sorry. that's going to turn out... That work?

Yes.

So these intended to be kind of minimums. So it's trying to say we're going to grow at least 20%. That may include some inorganic growth along the way, very much how we've done over the last few years. And organic growth, we think, at least could be the 15% range. But obviously, depending upon the timing of things, really, this business is so much about how things play out and the timing of things, you can obviously see much higher growth. We grew 20% in FY '23, [ 30% ] in FY '24. You're definitely going to see points of inflection where you get to the higher numbers. We're just saying kind of looking out 3 to 5 years, that's kind of a minimum we can see in terms of growth.

And it's -- it could be a lot of times there's -- as you saw from some of the programs that we have, if the timing of those programs work out the way that the customers are intending to say it today, it could be sooner, all organic. If we -- some of them slip, it could be a little later. And so timing get exactly at what exact time frame it's going to happen, your guess is just as good as anyone, including our customers, actually. Because it's really tough to predict exactly when those things are going to happen. The key is over the next 3-plus years, we should be able to achieve that type of CAGR overall, very easily in my view. And it could be a combination of a lot of organic, also some inorganic as well.

And then maybe just a quick follow-up, a lot of impressive stuff going on with Tomahawk. It seems like you've made runway since you acquired that. What is the path to monetization? And when we think about the TAM, is that implied in that? Or is that in that battlefield part? How do you think about really monetizing that technology?

Yes. So there's fundamentally 2 ways that we could monetize. Number one, as Brett mentioned, Brett mentioned -- Brett and Brad, sorry, is that it helps our solution set become more relevant to the customer. So we built a competitive differentiator that all of our stuff is integrated. And if you buy a Puma or you buy a Jump 20 or you buy a Switchblade or you buy something else from us, they're all going to work together and we've got it already designed from the ground up. That's the -- one of the primary reasons why we did it. The second reason equally is important, by the way, you saw on Brad's slide, there's a whole bunch of other robotic manufacturers and providers. small and large. And there's a bunch more that's going to come out probably in the next 2 to 3 years that we're working on. USVs, UUVs, you name it, it's going to come out. And most of them are going to rely on some sort of a controlling device. And we're completely agnostic. We are completely open. We've never changed that strategy from the beginning, and it was not our intent to change it anyway, that we're open to any other platform, including competitors, that if the customer chooses a different UAV or USV or lower [indiscernible], we always think they are the best, and we will work hard to earn that, but we will be open to that. And then that's why we have customers that are technically in some areas, competitive overlap with our products. Long term or I call it most of like an Android and Apple ecosystem combination. Internally, it's the Apple ecosystem. We build the systems upfront to be more optimized as a system solution so they work together from the ground up. But if the customer decides that another widget is better, then we can plug that in, and we can work with that as well as an Android open model as well. That's the fundamental strategy. Anything that I missed? Yes. Okay.

[ Byron Cohen, Capital Alpha Partners ]. I just want to take a little bit on the changes that you guys are seeing. You mentioned your customers hitting the I believe button. But if you look at the Army budget justification books, we only have $120 million, I think, this year for FY '25 for LAS. When do you really start -- you see the big institutional buy-ins, the real buys at scale? Do they play with these for a year or 2? They develop con ops, and that's when you really start to see the take off? Are they waiting to see more from Ukraine? What's kind of the knee in the curve for you?

Start that. Everybody hear me, okay?

Yes.

Okay. Thank you for the question. So right now, the U.S. Army has made a decision that they're going to move forward with the [indiscernible] program of record. So what you see in the budget documents is just the bridge funded to buy, as you described very accurately, a number of systems to get Army units trained, develop the TTPs, the con ops, rules of engagement, release authorities. There's a lot they have to work out. So starting in government FY '26, we should be seeing bigger and bigger buys as they start to fill out the 4 structure with lower ammunitions.

Second question...

I'm sorry, just the Army. Marine Corps has a similar strategy and SOCOM is a little bit actually ahead of that. We've been providing that to them as well.

Yes. So a very good point is while we're very proud to be selected by U.S. Marine Corps Organic Precision Fires Light, which was the Switchblade 300 variant. They're also work in a medium, which would be a Switchblade 600 variant. But the initial awards are very small, so they do essentially the same thing I just described that the U.S. Army is doing. They're going to take them through testing, evaluation, and then they turn on the full rate production in a couple of years. So that's where really the knee in the curve beyond all these urgent needs and priming the pump with U.S. services is it really takes off.

Okay. Second related question is counter-UAS. You basically talked about reconnaissance, comms, relays, strike. Is there a counter UAS strategy and here a kind like what Raytheon is doing with Coyote?

So counter UAS is an area that we have had contract -- DoD contracts with and demonstrated capabilities used in variance of a Switchblade 300 as an interceptor. We are continuing to work at a lower level, some of those opportunities. We do see that as still a need in the industry that while some of our competitors have been successful in counter UAS, it's not filling the gaps that are needed out there, okay, because of the proliferation of threat, UAS and threat [indiscernible]. So that is an area we're looking at very closely. It's not built into any of our financials today, but we're taking a serious look at it.

And we have some active projects that are sensitive that we can't talk about. Knowing so much we know about drones in general and the systems that we have that's deployed, gives us a unique qualification with the customer base. And in some of those cases, like you mentioned, the Coyote, what's really going to be important in counter UAS, if I add to Brett's point, is cost per kill. You just can't get into these businesses and expect this to be really long term, profitable or viable when the cost per kill is a disadvantage for us as a war fighter entity. So you got to make it cost advantageous for yourself, so the cost per kill could be a lot lower. And that problem is still not totally solved yet. And there are projects that we've got that hopefully will get us there and -- but it's still work in progress.

And my last question, how do you guys think about Ukraine, not just as a market, but as a potential source to co-develop product. They're going to have an awful lot of experience. They've got their own organic industry that's developing. Is there a strategy that you think to work more closely with them in the future?

Very much so. Great question. A, B, we are actively working on that today. We have a internal effort within Brett's team and within Jeff's team and even actually within Trace's team that are actively working with partners in the country. We're working with various entities. We are also working with the U.S. site to make sure that whoever we select to partner with and the partnerships are in a variety of different forms, including codevelopment, including local production, including sharing technology to the extent that the U.S. DoD will allow us then we feel safe about, to not only serve Ukraine, but way beyond Ukraine. We think that beyond this conflict, hopefully, one day, it's going to be resolved, none of us know exactly when and doesn't look like any time soon, that Ukraine companies that are doing this stuff now will become a major player in the global market. And they really respect our brand and our work already because we've been working with them, and they love to partner with us. We got to do our homework to pick the right ones. And that's actually actively being worked today. And we also -- we're very close with the Ukrainian military today in terms of both the U.S. side as well as the Ukrainian side on those learnings. So we're privy to a lot of that learning as well on the front lines. We've got people actively engaged in that on a daily basis. Yes. He's been waiting for a while.

Pete Skibitski, Alembic Global. I was wondering if you could talk about your strengthening balance sheet in the midterm, your capacity for M&A is going to be pretty substantial and growing, that brings opportunity that brings risk as well, right? Not all the platform type deals that you've done in the past, I wouldn't necessarily consider them home runs per se. Some of the platforms, it almost seems like MacCready could have developed internally for less money than what you paid. So on a more critical note, how do you guys think about make buy decisions for platforms? How are you thinking about homerun-type of deals in the future and how do we avoid less accretive deals going forward because it's -- you're going to have a lot of firepower for sure.

Yes. So it's a great question, Pete, and it's a question that we discuss and debate not only internally as a management team, leadership team, but also at the Board level on a very regular basis. Every quarter, if not even more frequently, we do that. There's no doubt in my mind and most of our minds that developing some of these capabilities organically, we know how to do, most, not all, but most. And we probably will do a better job than anything else because we've done that multiple times over and over again. And in fact, every platform that we've done as an acquisition -- going in, we knew that we had to improve on it. And that's part of the strategy that we've been in, and you see the Vapor and Jump 20 and et cetera. The key question becomes do we have enough time? And how much resources do we have to focus on what? Our #1 priority still is organic because we believe we have tremendous amount of organic opportunities and potential for growth. As we grow organically, we definitely see that inorganic opportunities will pop up because as our portfolio grows, our market grows, there's new things that are going to come up. So it's really a matter of can we get there faster better and cheaper with an inorganic option or not. And you could argue that certain categories would qualify quite well for that. You can argue that, for example, another domain like USVs and UUVs would be a really naturally good candidate for that. Counter-UAS could be on a candidate, both could be hybrid, organic and inorganic. So we're going to be -- we know that we have the ability because of the strength of our currency and our balance sheet that we can do it. But we really are prioritizing organic first because there's lots of it there. And if we can execute those and we can achieve those, we're going to supplement and complement that, as Kevin described in the slide, additionally. There's no guarantee on inorganic because we're going to make decisions every single time based on the rationale for that particular case. But I think the probability is going to increase as time goes by. And our ability to do it is actually getting better, not worse, as a company. So anything else you want to add?

No.

Yes. Let me add one more comments to that. You added a really good point about we have the ability to invest organically on this. So I just want to mention as much as we love all of our investors, we do, they are long termers and they've been with us for a long time. They also look at every quarter. So as you saw, we just published our guidance for this year, and we have [ 2 ] 12% to 13% R&D spend and maybe there was an expectation that should be lower. So they do act on that based on short-term metrics rather than long-term metrics. It is a really tough challenge for a company like us because the opportunities are really there. And I truly believe that we're on an inflection point that is going to lead to a lot more growth in the future. So that's really the key.

So Peter Arment with Baird again. So Wahid, you mentioned last night on the call that eventually you're going to see kind of a blanket agreement for purchasing of Switchblades, and it sounds like what Brett described that there's sort of like this natural cadence of where you're getting the training up, the teams up and all these, whether it's U.S. Army or the Marines. So what is the kind of the milestones investors should be looking for before we start to see that when we know the blanket agreement is probably coming? What do we need to think about? Because it seems like that's not only going to be important for just the volumes, but also what you've talked about as the cash flow aspect of progress payments.

Sure. So we're technically working right now, 2 parallel paths of acquisition and contracting. One is every single one of the opportunities that Brett mentioned for him as well as actually even for Trace, we are working on individual contracts, individual customers, individual opportunities to be able to get those converted into contracts and orders. And we've been doing that for the last many years, as you know. And about 2-plus years ago, we -- I don't know, 4 years ago, we had this IDIQ contract that the Army actually kept extending at ceiling, multiple times. $248 million was the initial for Switchblade and then they increased the ceiling a couple of times during the Ukraine. They would like to have a much larger one. In parallel to those individual activities, we've got this multiyear contract, which I mentioned on the earnings call, that we've been working with for many months. And so while this larger umbrella contract, IDIQ sole-source is in progress, we may see some orders individually before that. And our wish would be ideal, which [indiscernible] our customers wish to get the umbrella contract in place fast. Now fast is a relative term, number one. Number two, there is also some legitimate arguments for taking your time. Number one, we want to make sure that this contract is far based contracting rules and regulations because you do not want a competitor later to come in, in protest. Army doesn't want that. We don't want that. Nobody wants it except our competitors. And so that process takes time. And there's been some criticism of this publicly within congressional leadership and the different committees about the contractor process. So that is really the key. And number two is the terms and conditions of that contract that we're trying to address, which is quite -- we want it to be much more favorable than it is today because we believe right now, it's not as favorable it should be. Right now, we're ordering parts in advance of a contract. We're building product. We get a contract, then we recognize revenue because it's over time. What we can't invoice until we actually ship into customer access to the product after the lot acceptance test. We want to change that to be a better capital structure. And so we have a desire to make sure that that's addressed in this contract and our customer is interested in addressing that as well. But we're going to have to negotiate that, and we're negotiating it actively right now. And so that's the other aspect. And the last aspect is also the economic model in general for the contract in terms of pricing and all that because there's going to be a large umbrella contract for multiple years, and we want to make sure that the price is reflective of the value that we're delivering and the cost that we're going to be incurring over multiple years in several contracts. So those are the 2 avenues. I wish I could give you a better milestone. We know that our customer, this is the best thing I can tell you. Our customer, the U.S. Army is incredibly motivated at the highest levels of the acquisition. We've met with them directly, more than once, that they would like to get this done fast. There's a sense of urgency within the use of U.S. Army and Pentagon to get these contracts in place. But they do have hurdles and procedures and processes that you got to go through. And it does -- and it's a matter -- believe it or not, the time that it's taken for them to do this with us, they will tell you, every one of the contracting experts within the U.S. military will tell you, it's as fast as they've ever seen it. They've told that to me in my own directly to myself and to him, well, -- there's been other contracts that have been smaller, but the size of this and the magnitude and the importance of this, it's incredibly fast relative to how the U.S. military buys things. Yes.

Other questions? Okay.

Okay. Well, I just want to thank all of you for coming today and investing your morning, and we're finishing ahead of schedule. Really appreciate it. I hope we answered your -- the key objectives that I had and I answer -- we answered some of your questions. We wanted you to meet the team. So we have a very proven leadership team and the expertise and the capabilities, number two. And the markets are there and the growth is going to be really sustainable over the long term. And now we're going to break for lunch, I believe, and Jonah is going to tell us more about that. Okay. Thank you again.

All right. Thank you, Wahid, and I'll echo his sentiment. We really appreciate your time, your questions and your continued interest in the company. We will be publishing a video recording to our website, along with the presentation slides that were filed this morning, so you can take a look at this in the future. For those of you on the webcast, we will be closing the webcast shortly. For those of you here in person, we will be serving lunch. Feel free to take a look at our demos, grab some food and mingle with our team. And with that, thank you all very much. Have a good rest of your day.