AVAV

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How AVAV rewrote its risk factors

10-K ITEM 1A · FY2025 → FY2026

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Propertie s. As of April 30, 2026, our facilities are primarily leased.
Our corporate headquarters are located in Arlington, Virginia where we currently occupy approximately 7,400 square feet under an amended lease agreement expiring in August 2030.
We also lease (i) a total of approximately 280,000 square feet of space in Simi Valley, California, which leases expire between 2027 and 2030, (ii) a total of approximately 200,000 square feet of space in Albuquerque, New Mexico, which leases expire between 2028 and 2034, (iii) a total of approximately 150,000 square feet of space in Huntsville, Alabama, which leases expire between 2026 and 2029, and (iv) approximately 150,000 square feet of space in Moorpark, California, for which the lease expires in 2030.
These locations are used for administration and to design, engineer, test and manufacture, and (v) other facilities in California, Maryland, Florida, Virginia, Pennsylvania, Kansas, Colorado, Minnesota, Oklahoma, Texas and Ohio.
We have international locations in Hampton Bishop, United Kingdom, used for business development and program management support, and Stuttgart, Germany, which facilities are used for administration, research and development, logistics, testing and manufacturing of UGV products. As of April 30, 2026, our business segments of AxS and SCDE had significant operations at the following locations listed alphabetically: ● AxS: Centreville, VA; Huntsville, AL; Lawrence, KS; Leesburg, VA; Moorpark, CA; Petaluma, CA; ; Pottstown, PA; San Luis Obispo, CA; Simi Valley, CA; Sunrise, FL; Stuttgart, Germany. ● SCDE: Albuquerque, NM; Annapolis Junction, MD; Dayton, OH; Herndon, VA; Huntsville, AL; Germantown, MD. ● Corporate: Arlington, VA; Herndon, VA and Simi Valley, CA. Item 3.
Legal Proceeding s. On May 26, 2026, a securities class action complaint was filed in the U.S.
District Court for the Eastern District of Virginia by Eric Norrell naming AeroVironment; Wahid Nawabi, our President and CEO; Kevin McDonnell, our former Executive Vice President and Chief Financial Officer; and Mary Clum, President of our Space, Cyber & Directed Energy segment, as defendants.
AeroVironment, Inc., No. 1:26-cv-01429 (E.D.
The complaint asserts violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder, claiming that the defendants made false and materially misleading statements regarding our work for the U.S.
Space Force’s Satellite Communication Augmentation Resource (“SCAR”) program.
The plaintiff seeks to represent a proposed class of all persons who purchased or otherwise acquired our common stock during the period June 25, 2025 through March 10, 2026.
The complaint seeks a jury trial and unspecified compensatory damages, interest, and attorneys’ fees and other costs. On August 9, 2021, a former employee filed a class action complaint against AeroVironment in California Superior Court in Los Angeles, California alleging various claims pursuant to the California Labor Code related to wages, meal breaks, overtime, unreimbursed business expenses and other recordkeeping matters.
The estimated settlement was accrued in our consolidated statements of income(loss) for the year ended April 30, 2025.
We are currently working with the plaintiff to seek preliminary approval of the settlement. We are subject to lawsuits, government investigations, audits and other legal proceedings from time to time in the ordinary course of our business.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Common Stock On June 24, 2026, the closing sales price of our common stock as reported on the NASDAQ Global Select Market, where it trades under the symbol AVAV, was $142.18 per share.
As of June 24, 2026, there were 435 holders of record of our common stock. Dividends To date we have retained all earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future.
The terms of our Credit Agreement restrict our ability to pay dividends. Stock Price Performance Graph The following graph shows a comparison of cumulative returns on our common stock, based on the market price of the common stock, with the cumulative total returns of companies in the Russell 2000 Index and the SPADE Defense Index. The following table shows the value of $100 invested on April 30, 2021 in AeroVironment, Inc., the Russell 2000 Index and the SPADE Defense Index. Performance Graph Table ($) April 30, April 30 April 30, April 30, April 30 April 30, 2021 2022 2023 2024 2025 2026 AeroVironment, Inc.
Refer to Part I, “Forward-Looking Statements” on page 2 and Item 1A, “Risk Factors” beginning on page 14, for a discussion of the uncertainties, risks and assumptions associated with these statements. Overview We are a defense technology provider delivering integrated capabilities across air, land, sea, space, and cyber.
We develop and deploy autonomous systems, precision strike systems, counter-UAS technologies, space-based platforms, directed energy systems, and cyber and electronic warfare capabilities.
We operate an international manufacturing footprint, delivering proven systems and capabilities to markets that offer the potential for significant long-term growth.
In addition, we believe that some of the innovative potential products, services and technologies in our R&D pipeline will emerge as new growth platforms in the future, creating additional market opportunities. The success of our current product and service offerings stems from our investments in R&D to invent and deliver advanced solutions, utilizing proprietary and commercially available technologies, and in acquiring leading businesses that help our customers achieve their desired outcomes.
Our core technological capabilities, developed by more than 50 years of innovation, include robotics and robotics systems autonomy; modular open systems architecture; sensor design, development, miniaturization and integration; embedded software and firmware; miniature, low power, secure wireless digital communications and networks; lightweight aerostructures; high-altitude systems design, integration and operations; machine vision, machine learning, AI and autonomy; land, maritime and air deployment of munitions and aircraft systems; design and qualification for robotics in extreme terrestrial and space environments; low SWaP (Size, Weight and Power) system design and integration; collaborative multi-robotic crewed and uncrewed mission operation; power electronics and electric propulsion systems; efficient electric power conversion, storage systems and high density energy packaging; controls and systems integration; vertical takeoff and landing for fixed wing and hybrid aircraft and rotocraft systems; image stabilization and target tracking; advanced flight control systems; fluid dynamics; human-machine interface development; modular dismounted, networked multi-domain robotic control interfaces and analytic processing architecture; and integrated mission solutions for austere environments. The BlueHalo acquisition significantly enhanced our core technological capabilities, which now include advanced RF system design and development, software defined digital phased array antennas and radars, space qualified electronics, laser communication technologies, software defined radios, electronic warfare technology, target acquisition and tracking, directed energy-based weapons systems for counter uncrewed systems, RF-based systems for counter uncrewed, next generation counter uncrewed system missile technology, extended reality and virtual reality systems for training, modeling and simulation, hardware in the loop simulations, C2 sensing and tracking, uncrewed maritime platforms, uncrewed aerial platforms, full spectrum cyber operations, tactical mission networks, multi-int data analytics and threat intelligence, tools and analytics for GEOINT, SIGNINT, MASINT and OSINT, aerospace power and propulsion, material and processes, directed energy, photonics and electronics, biological and nanoscale technology, and health and human performance. Our business focuses primarily on the design, development, production, marketing, support and operation of innovative autonomous systems, precision strike systems, counter-UAS technologies, space-based platforms, directed energy systems and the provision of services for advanced cyber, intel, defense operations, solutions that deliver mission-critical expertise and prototype development. Revenue We generate our revenue primarily from the sale, support, design and operation of our UAS, PSDS, UUV, UGV, Space and Directed Energy products.
Support for our products includes training, spare parts, product repair and product replacement.
We refer to these support activities, in conjunction with customer-funded R&D and services provided for our Cyber and Mission Solutions customers, as our services operation.
We derive most of our revenue from fixed-price and cost-plus-fee contracts with the majority from U.S. government and allied foreign governments. Cost of Sales Cost of sales consists of direct costs and allocated indirect costs.
Indirect costs include overhead expenses, fringe benefits, depreciation of in-service ISR assets, inventory reserve for excess and obsolescence charges, amortization of acquired intangible assets and other costs that are not directly charged to a specific contract. Gross Margin Gross margin is equal to revenue minus cost of sales.
Our R&D activities focus specifically on creating capabilities that support our existing product portfolio as well as new solutions. Impairment of Goodwill In January 2026, a stop-work order was received on an OTA for the delivery of BADGER phased array antenna systems to support Space Force’s SCAR program.
Additionally, in March 2026, the customer terminated the agreement for convenience.
We concluded that the stop-work order represented a trigger event that indicated the carrying value of the Space reporting unit exceeded its fair value.
As a result, we updated the estimates of the long-term cash flows of the Space reporting unit to reflect the reduced revenue associated with the stop-work order and termination for convenience as well as an increase in expected research and development and capital investments to achieve product commercialization, which is expected to result in expanded opportunities and improve long term product margins.
The changes in estimates resulted in the recognition of a goodwill impairment charge of approximately $241 million in the Space reporting unit.
As part of our annual goodwill impairment and identifiable asset test during the fiscal quarter ended April 30, 2025, we determined the carrying value of the UGV reporting unit exceeded its fair value due to a decrease in forecasted results of the UGV reporting unit resulting from reduced probability and delays of obtaining certain opportunities as well as an increase in forecast expenditures to support operational decisions identified during the fiscal quarter ended April 30, 2025.
These changes in estimates resulted in the recognition of a goodwill impairment charge of $18.4 million during the three months ended April 30, 2025 in the UGV reporting unit. For the fiscal year ended April 30, 2026, we determined that it was more likely than not that the fair value of each of the remaining reporting units were more than their carrying values as of the annual goodwill impairment test date. Other (Loss) Income, net Other (loss) income, net includes unrealized gains and losses associated with changes in the fair market value for equity security investments, realized gains and losses for the disposition of available-for-sale debt securities, interest income, and interest expense. Provision for (Benefit from) Income Taxes Our effective tax rates for fiscal years 2026 and 2025 were lower than the U.S. federal statutory rate of 21% primarily due to tax benefits from the U.S. federal research tax credit, excess benefits from stock-based compensation, and Foreign Derived Intangible Income deduction (“FDII”). Equity Method Investment (Loss) Income, Net of Tax Equity method investment (loss) income, net of tax, includes equity method income or loss related to our investment in limited partnership funds for which we have concluded we have influence for holding more than a minor interest. Critical Accounting Policies and Estimates This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
Refer to Note 1 to our consolidated financial statements entitled “Organization and Significant Accounting Policies,” which is included in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report.
The first of those key factors is that a significant number of our contracts are typically less than six months.
Product revenue for certain Precision Strike products including LMS, Space, Directed Energy and Cyber and Mission Solution product deliveries and customization of UGV transport vehicles is recognized over time as costs are incurred.
Contract services revenue is recognized over time and composed of revenue recognized on contracts for the provision of services, including repairs and maintenance, training, engineering design, development and prototyping activities, technical support services, ISR services, and customer-funded R&D contracts.
We elected the right to invoice practical expedient in which if an entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date, the entity may recognize revenue in the amount to which the entity has a right to invoice.
Certain training services are recognized over time using an output method based on days of training completed.
Warranty agreements which meet the definition of a performance obligation are recognized straight line over the warranty period.

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Gone since FY2025

Propertie s. As of April 30, 2025, our facilities are primarily leased.
Our corporate headquarters are located in Arlington, Virginia where we currently occupy approximately 7,400 square feet under an amended lease agreement expiring in June 2030.
Under leases in effect prior to the closing of the BlueHalo acquisition, we also lease (i) a total of approximately 280,000 square feet of space in Simi Valley, California, which leases expire between 2027 and 2030, (ii) approximately 150,000 square feet of space in Moorpark, California, which lease expires in 2027, used for administration and to design, engineer, test and manufacture UAS, and (iii) other facilities in California, Alabama, Kansas, Massachusetts, Florida, Pennsylvania, Minnesota, and Virginia.
We have international locations in Hampton Bishop, United Kingdom, used for business development and program management support, and Stuttgart, Germany, which facilities are used for administration, research and development, logistics, testing and manufacturing of UGV products. As of April 30, 2025, our business segments as in effect during the year ended on such date (Uncrewed Systems, or “UxS;” Loitering Munitions Systems, or “LMS;” and MacCready Works, or “MW”) had significant operations at the following locations: ● UxS, LMS, and MW: Simi Valley, CA; Moorpark, CA; Huntsville, AL; Lawrence, KS; Wilmington, MA; Centreville, VA; and Minneapolis, MN. ● UxS: Petaluma, CA; Rohnert Park, CA; San Diego, CA; Melbourne, FL; Hampton Bishop, United Kingdom; Stuttgart, Germany and Erie, PA. ● Corporate: Arlington, VA, Moorpark, CA and Simi Valley, CA. Additionally in May 2025, we acquired BlueHalo, which has operations in Florida, Pennsylvania, New Mexico, California, Maryland, Virginia, Alabama, and Ohio. Item 3.
Legal Proceeding s. On August 9, 2021, a former employee filed a class action complaint against AeroVironment in California Superior Court in Los Angeles, California alleging various claims pursuant to the California Labor Code related to wages, meal breaks, overtime, unreimbursed business expenses and other recordkeeping matters.
The estimated settlement was accrued in our consolidated statements of income(loss) for the year ended April 30, 2025. We are subject to lawsuits, government investigations, audits and other legal proceedings from time to time in the ordinary course of our business.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Common Stock On June 18, 2025, the closing sales price of our common stock as reported on the NASDAQ Global Select Market, where it trades under the symbol AVAV, was $190.04 per share.
As of June 19, 2025, there were 419 holders of record of our common stock. Dividends To date we have retained all earnings for use in the operation and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future.
The terms of our Credit Agreement restrict our ability to pay dividends. Stock Price Performance Graph The following graph shows a comparison of cumulative returns on our common stock, based on the market price of the common stock, with the cumulative total returns of companies in the Russell 2000 Index and the SPADE Defense Index. The following table shows the value of $100 invested on April 30, 2020 in AeroVironment, Inc., the Russell 2000 Index and the SPADE Defense Index. Performance Graph Table ($) April 30, April 30 April 30, April 30, April 30 April 30, 2020 2021 2022 2023 2024 2025 AeroVironment, Inc.
Refer to Part I, “Forward-Looking Statements” on page 2 and Item 1A, “Risk Factors” beginning on page 14, for a discussion of the uncertainties, risks and assumptions associated with these statements.
The disclosures and references in Item 7 of this Annual Report, including the description of our business, financial data, management’s discussion and analysis of financial condition and results of operations do not include the BlueHalo acquisition which closed on May 1, 2025, unless otherwise specifically noted.
The assets, liabilities and results of operations of BlueHalo have not been consolidated into our results as of and for the period ended April 30, 2025 or any of the historical periods presented. Overview We design, develop, produce, deliver and support a technologically advanced portfolio of intelligent, multi-domain robotic systems and related services for government agencies and businesses.
We supply uncrewed aircraft and ground robot systems, loitering munitions systems and related services primarily to organizations within or supplying the U.S.
DoD, other federal agencies and to international allied governments.
We derive the majority of our revenue from these business areas, and we believe that the markets for these solutions offer the potential for significant long-term growth.
In addition, we believe that some of the innovative potential products, services and technologies in our research and development pipeline will emerge as new growth platforms in the future, creating additional market opportunities. The success of our current product and service offerings stems from our investments in R&D to invent and deliver advanced solutions, utilizing proprietary and commercially available technologies, and in acquiring leading businesses that help our customers achieve their desired outcomes.
Our core technological capabilities, developed over more than 50 years of innovation or acquired through acquisitions, include robotics and robotics systems autonomy; modular open systems architecture, sensor design, development, miniaturization and integration; embedded software and firmware; miniature, low power, secure wireless digital communications and networks; lightweight aerostructures; high-altitude systems design, integration and operations; machine vision, machine learning and autonomy; land, maritime and air deployment of munitions and aircraft systems; design and qualification for robotics in extreme terrestrial and space environments; munitions systems warhead integration; low SWaP (Size, Weight and Power) system design and integration; collaborative multi-robotic crewed and uncrewed mission operation; power electronics and electric propulsion systems; efficient electric power conversion, storage systems and high density energy packaging; controls and systems integration; vertical takeoff and landing for fixed wing and hybrid aircraft and rotocraft systems; image stabilization and target tracking; advanced flight control systems; fluid dynamics; human-machine interface development; modular dismounted, networked multi-domain robotic control interfaces and analytic processing architecture; and integrated mission solutions for austere environments. Our business focuses primarily on the design, development, production, marketing, support and operation of innovative UxS and LMS products that provide situational awareness, remote sensing, multi band communications, force protection and other information and mission effects to increase the safety and effectiveness of our customers’ operations. Revenue We generate our revenue primarily from the sale, support, design and operation of our UxS, LMS and HAPS products.
Support for our SUAS, MUAS and LMS customers includes training, spare parts, product repair and product replacement.
Under ISR services contracts we deliver the information our MUAS produce to our customers, who use that information to support their missions.
We refer to these support activities, in conjunction with customer-funded R&D, as our services operation.
We derive most of our SUAS, MUAS, LMS and HAPS revenue from fixed-price and cost-plus-fee contracts with the majority from U.S. government and allied foreign governments for SUAS, MUAS, and LMS. Cost of Sales Cost of sales consists of direct costs and allocated indirect costs.
Indirect costs include overhead expenses, fringe benefits, depreciation of in-service ISR assets, amortization of acquired intangible assets and other costs that are not directly charged to a specific contract. Gross Margin Gross margin is equal to revenue minus cost of sales.
Our R&D activities focus specifically on creating capabilities that support our existing product portfolio as well as new solutions. Impairment of Goodwill As part of our annual goodwill impairment and identifiable asset test during the fiscal quarter ended April 30, 2025, we determined carrying value of the UGV reporting unit exceeded its fair value due to a decrease in forecasted results of the UGV reporting unit resulting from reduced probability and delays of obtaining certain opportunities as well as an increase in forecast expenditures to support operational decisions identified during the fiscal quarter ended April 30, 2025.
These changes in estimates resulted in the recognition of a goodwill impairment charge of $18.4 million during the three months ended April 30, 2025 in the UGV reporting unit. For the fiscal year ended April 30, 2025, we determined that it was more likely than not that the fair value of each of the other reporting units, other than UGV, was more than their carrying values as of the annual goodwill impairment test date, including the MUAS reporting unit which was no longer considered at an increased risk of failing future quantitative goodwill impairment tests due to an increase in the estimated fair value of the reporting unit from significant increases in forecasted results. Subsequent to the performance of our annual goodwill impairment test for the fiscal year ended April 30, 2023, in May 2023, a trigger event was identified that indicated that the carrying value of the MUAS reporting unit exceeded its fair value.
Specifically, we received notification that we were not down selected for a U.S.
DoD program of record which resulted in a significant decrease in the projected future cash flows of the MUAS reporting unit.
As a result, we updated our estimates of long-term future cash flows to reflect lower revenue and EBITDA growth rate expectations used in the valuation of the MUAS reporting unit.
These changes in estimates, resulted in the recognition of a goodwill impairment charge of $156.0 million recorded during the year ended April 30, 2023. Other (Loss) Income, net Other (loss) income, net includes unrealized losses associated with decreases in the fair market value for equity security investments, interest income, and interest expense. Provision for (Benefit from) Income Taxes Our effective tax rates for fiscal years 2025 and 2024 were lower than the U.S. federal statutory rate of 21% primarily due to tax benefits from the Foreign Derived Intangible Income deduction (“FDII”), excess benefits from stock-based compensation, the U.S. federal research tax credit. Equity Method Investment (Loss) Income, Net of Tax Equity method investment (loss) income, net of tax, includes equity method income or loss related to our investment in limited partnership funds for which we have concluded we have influence for holding more than a minor interest.
Beginning October 14, 2022, equity method investment (loss) income, net of tax also includes our proportion of any gains or losses of our Turkish joint venture, Altoy Savunma Sanayi ve Havacilik Anonim Sirketi (“Altoy”), due to our share sale in which we decreased our ownership interest to 15% but concluded we retain the ability to exercise significant influence. Net Income Attributable to Noncontrolling Interests Net income attributable to noncontrolling interests includes the 50% interest in the income or losses of Altoy, between May 1, 2022 and October 14, 2022.
Subsequent to October 14, 2022, Altoy is no longer consolidated, and therefore, noncontrolling interest is no longer recorded. Critical Accounting Policies and Estimates This Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.
Please see Note 1 to our consolidated financial statements entitled “Organization and Significant Accounting Policies,” which is included in Part II, Item 8 “Financial Statements and Supplementary Data” of this Annual Report.
The first of those key factors is that the terms of our contracts are typically less than six months.
Revenue for LMS product deliveries, customization of UGV transport vehicles and customer-funded R&D contracts is recognized over time as costs are incurred.
Contract services revenue is composed of revenue recognized on contracts for the provision of services, including repairs and maintenance, training, engineering design, development and prototyping activities and technical support services.
Contract services revenue, including ISR services, is recognized over time as services are rendered.
We elected the right to invoice practical expedient in which if an entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date, such as flight hours for ISR services, the entity may recognize revenue in the amount to which the entity has a right to invoice.
Training services are recognized over time using an output method based on days of training completed.
Our UxS product sales revenue is primarily composed of revenue recognized on contracts for the delivery of UxS systems and spare parts, respectively.
During the fiscal years ended April 30, 2025, 2024 and 2023, changes in accounting estimates on contracts recognized using the over time method are presented below.
Incentives or penalties and awards applicable to performance on contracts are considered in estimating revenue and profit rates, and are recorded when there is sufficient information to assess anticipated contract performance. For the years ended April 30, 2025, 2024 and 2023, favorable and unfavorable cumulative catch-up adjustments included in revenue were as follows (in thousands): Year Ended April 30, 2025 2024 2023 Gross favorable adjustments $ 11,106 $ 7,359 $ 2,893 Gross unfavorable adjustments (5,104) (1,951) (3,771) Net adjustments $ 6,002 $ 5,408 $ (878) For the year ended April 30, 2025, favorable cumulative catch up adjustments of $11.1 million were primarily due to favorable adjustments on eight contracts.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2025 ↗, FY2026 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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