Strong quarter, FY27 guidance reiterated; Buy

AVAV reported F1Q27 results ahead of consensus on revenue, EBITDA, margin, and EPS. Funded backlog was up 37% yoy and up 23% sequentially, driven by orders in AxS. The company maintained FY2027 revenue and EBITDA guidance, citing a conservative posture. AVAV has exposure to faster growing portions of the defense budget, which we believe will drive better than industry average organic revenue growth, with margin expansion, over the medium-term. We are Buy rated on the stock. F1Q27 revenue of $480.5mn was 6.3% above FactSet consensus. Adjusted EBITDA of $53.4mn was 36.6% above consensus, on a 11.1% EBITDA margin. Autonomous services adjusted EBITDA margin was 18% and Space, Cyber, and Directed Energy was (6.6)%. Total company reported book to bill was 1.4X in the quarter. Funded backlog was up 23% sequentially and 37% yoy at $1.5bn. Free cash flow was $(30.5)mn, up from $(146.5)mn a year ago. The company maintained its FY27 EPS guidance of $3.02-$3.34, revenue guidance of $2.125-2.225bn