AEVEX Corp. 2026 Q2 Earnings Call

Please go ahead. Thank you for joining AEVEX's second quarter 2026 earnings conference call.

I'm Jason Gursky, Vice President of Investor Relations. Joining me on the call today are Brian Raduenz, Executive Chairman, Roger Wells, Chief Executive Officer, and Todd Booth, Chief Financial Officer. Before we begin, please note that on this call, certain information presented contains forward-looking statements, including those related to the proposed acquisition of BlackSea Technologies, multi-domain strategy and technology integration, our 2026 outlook, backlog from the M&A strategy, and capital allocation priorities. Our forward-looking statements are based on current expectations, forecasts, and assumptions, and may involve risks and uncertainties that could cause actual results to differ materially. Additional information concerning these risks are described in AEVEX's reports filed with the SEC. I'd also like to note that we will discuss a number of non-GAAP financial measures on this call.

Our earnings press release and presentation, which were also published earlier today and can be found on the investor relations section of our company's website, contain a reconciliation of any non-GAAP financial measures to the most directly comparable GAAP measure. The content of this conference call relates to information that is accurate only as of today, August 12, 2026. Except to the extent required by law, the company undertakes no obligation to make any revision to any forward-looking statements contained in our remarks today or to update them to reflect the events or circumstances occurring after the date of this conference call. I would like to now turn the call over to Brian for some opening remarks.

Brian, go ahead. Thanks, Jason.

Good afternoon, everyone. AEVEX delivered another very strong quarter, our second consecutive beat and raise, driven by sustained demand and strong execution across the business. We're scaling production, expanding mission and customer reach, and strengthening our position as one of the most impactful providers of autonomous capability in the market today. Our momentum is being recognized. AEVEX was recently identified by the Department of War as one of a select few defense technology primes, accelerating the development and production of systems for real-world missions. Roger was invited to brief the secretary and his staff at the Pentagon, outlining how we will continue to make an impact for the war fighter. It's a powerful validation of the role AEVEX is playing as the department moves decisively toward autonomous, affordable, multi-domain solutions, which is exactly what we built this company to provide.

Against that backdrop, today we're announcing another meaningful step forward, the proposed acquisition of BlackSea Technologies. For those not familiar with BlackSea, they're a leading developer of autonomous and unmanned surface and subsea vessels for the U.S. Navy, SOCOM, and various other customers. Their USV platforms are among the most widely produced and most operationally deployed systems in the Navy's inventory. Just as AEVEX has established leadership in Group 2 and Group 3 unmanned aerial systems, BlackSea has likewise established leadership in unmanned surface and subsea capability, delivering fielded systems at scale with real operational history. By bringing these two organizations together, we will unite two battle-tested air, surface, and subsea portfolios in the market at exactly the moment the department is accelerating procurement of unmanned systems. Both companies are delivering in theater. Both are producing at volume with additional capacity beyond today's deliveries.

Together, we expect to expand our ability to support customers across domains, including meaningful new access to maritime pathways where AEVEX has not previously participated. This acquisition is another major proof point of the strategy we've laid out, building one of the nation's most impactful providers of autonomous and unmanned systems capability. It reinforces our momentum, it strengthens our trajectory, and it advances the larger vision of what we set out to build, a company with the scale, relevance, and operational credibility to lead in this new era of defense. We could not be more excited about what this combined team can do together, and we can't wait to get started. With that, I'll hand it over to Roger to walk through the strategic rationale and transaction details, as well as a review of our very strong second quarter.

Thanks, Brian, and good afternoon, everyone. As Brian mentioned, today marks two important milestones for AEVEX. We've entered into a definitive agreement to acquire BlackSea Technologies, and we announced our second quarter results, hosting robust growth and strong operational performance across the business, leading us to raise our outlook for the year based on continuing strong demand signals and significant deployment of our mission-critical systems in theater. What Todd and I plan to do today is walk through the strategic rationale for the acquisition and to provide more details on both the transaction and the company. We will then quickly review our second quarter results and open the line to your questions. Our remarks today will be a bit longer than normal, given the importance of both events. Let's go to slide 4 in the presentation deck. The transaction story is straightforward and clear.

By bringing these two leading companies together, we believe we will create one of the largest and most comprehensive multi-domain unmanned systems providers in the market. We expect this merger to deliver significant production capacity, access to new markets, and the ability to credibly deliver a broader portfolio of multi-domain unmanned capabilities, all underpinned by AEVEX's core autonomy stack, CompassX. In addition, both AEVEX and BlackSea employs a hybrid business model that can both produce and operate assets for our customers. This provides predictable long-term revenue and valuable operational insights to feed back into platform development. Very few companies can credibly claim a multi-domain unmanned portfolio of this scope, and even fewer can claim one that's actually in the fight. Finally, we expect to retain strong financial flexibility post-transaction, which will allow us to continue to invest in innovation, production capacity, and future M&A.

The bottom line is this, with the acquisition of BlackSea, we believe we will create one of the most capable, pure-play, multi-domain autonomous systems providers in the U.S., delivering effects to the battlefield across air, surface, and sub-sea domains at a time when the Department of War is leaning into unmanned systems spending. This transaction aligns perfectly with our strategic direction and our mission-focused culture and also represents the kind of opportunity we signaled we'd pursue. With that as a strategic framework, let me turn it over to Todd to walk through the transaction itself.

Thanks, Roger, and good afternoon, everyone. Please turn to slide five. Let me walk you through the key economic terms. AEVEX intends to acquire BlackSea Technologies for a total consideration of up to $650 million, structured in three components. First, approximately $250 million in cash at closing. Second, roughly $350 million in AEVEX common stock at agreed price of $27.50 per share, which amounts to approximately 12.7 million shares issued to the sellers. Lastly, the transaction also includes a $50 million earn-out that is contingent on the achievement of certain performance targets by BlackSea through fiscal year 2027. We designed the earn-out to align incentives so that the incremental $50 million becomes payable only if BlackSea's financial performance creates long-term shareholder value.

We expect the transaction to be accretive to earnings per share in the near term before giving effect to non-cash purchase accounting amortization. BlackSea is expected to generate approximately $150 million in revenue in fiscal year 2026, with adjusted EBITDA margin roughly in line with AEVEX. While we are not providing formal guidance for BlackSea for fiscal year 2027 today, we expect this growth to be at least in line with its addressable markets. I think it's worthwhile noting that BlackSea's leadership and shareholders were particularly excited about the opportunity to be a part of AEVEX and share our go-forward vision. As such, the equity consideration was very important to them, and we feel the purchase price was quite favorable given those dynamics. A few other items worth noting.

We expect the transaction to close in September 2026, subject to the expiration of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 waiting period and satisfaction of our customary closing conditions. BlackSea will operate as a third business unit within AEVEX, which we believe will preserve the mission focus and customer relationships that make the business valuable. I'd like to note that Bob Pugkney, BlackSea's CEO, is expected to stay on to lead the business at AEVEX. Roger, back to you. Thanks, Todd.