AADX

Baron Capital, an investment management company, released its Q2 2026 investor letter for the “Baron Small Cap Fund.” Baron Small Cap Fund gained 12.57% (Institutional Shares) in the second quarter, trailing the Russell 2000 Growth Index’s 25.71% return. A copy of the letter can be downloaded here. U.S. equities rebounded sharply after March’s selloff related to the U.S.-Iran conflict, with AI infrastructure, semiconductors, and other technology stocks driving much of the market’s gains. Small caps also outperformed large caps, although performance remained concentrated in high-Beta and Momentum stocks, areas where the Fund has historically had less exposure. The Fund benefited from several AI-related and industrial holdings, but software and services stocks remained pressured by concerns that AI could disrupt their businesses. Looking ahead, management believes broader market participation, attractive small-cap valuations, improving industrial growth, and stronger earnings could support future returns despite continued uncertainty around oil prices, inflation, and interest rates. In addition, please check the Fund’s top five holdings to know its best picks in 2026. In its second-quarter 2026 investor letter, Baron Small Cap Fund highlighted Applied Aerospace & Defense, Inc. (NYSE:AADX). Applied Aerospace & Defense, Inc. (NYSE:AADX) designs, engineers, and manufactures integrated aerospace and defense subsystems for space and defense applications. On August 18, 2026, Applied Aerospace & Defense, Inc. (NYSE:AADX) closed at $17.79 per share. The one-month return of Applied Aerospace & Defense, Inc. (NYSE:AADX) was 2.89%. Applied Aerospace & Defense, Inc. (NYSE:AADX) has a market capitalization of $3.07 billion. Baron Small Cap Fund stated the following regarding Applied Aerospace & Defense, Inc. (NYSE:AADX) in its Q2 2026 investor letter: Applied Aerospace & Defense, Inc. (NYSE:AADX) is not on our list of the 40 Most Popular Stocks Among Hedge Funds. While we acknowledge the potential of Applied Aerospace & Defense, Inc. (NYSE:AADX) as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. In another article, we covered Applied Aerospace & Defense, Inc. (NYSE:AADX) and shared the list of stocks Jim Cramer discussed. In addition, please check out our hedge fund investor letters Q2 2026 page for more investor letters from hedge funds and other leading investors. READ NEXT: 33 Stocks That Should Double in 3 Years and 15 Stocks That Will Make You Rich in 10 Years. Disclosure: None. This article is originally published at Insider Monkey.

Image source: The Motley Fool. Wednesday, Aug. 12, 2026 at 8:30 a.m. ET Chief Executive Officer - James Ferguson President and Chief Strategy Officer - Christopher Rogers Chief Financial Officer - Jeffrey McRae Operator: Greetings. Welcome to the Applied Aerospace & Defense Second Quarter 2026 earnings. [Operator Instructions]. Please note, this conference is being recorded. I will now turn the conference over to Tom Cook, Managing Director of ICR. Thank you, Tom. You may begin. Tom Cook: Thank you, operator, and good morning, everyone. Welcome to Applied Aerospace & Defense's Second Quarter 2026 Earnings Conference Call. With me on the call today are Trip Ferguson, Chief Executive Officer; Chris Rogers, President and Chief Strategy Officer; and Jeff McRae, Chief Financial Officer. Before we begin, I'd like to remind everyone that our remarks may include forward-looking statements about our expectations, plans, outlook and future performance, which we make pursuant to the safe harbor provisions of federal securities laws. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed today. Please refer to the forward-looking statements disclosure in our earnings presentation and our filings with the Securities and Exchange Commission. We will also discuss certain financial measures that are not presented in accordance with GAAP. Our earnings presentation includes additional information about these non-GAAP measures, including definitions and reconciliations to the most directly comparable GAAP measures as applicable. The earnings presentation is available on the Investor Relations section of our website. With that, I'd like to turn the call over to Trip Ferguson. Trip? James Ferguson: Thank you, Tom, and welcome to everyone joining us for our first earnings call as a public company. Before we review our results as a company, I'd like to recognize and thank all of our team members from across our organization at Applied. Applied's success is built on the skill and dedication of our people, and I'm proud of the work they deliver day in and day out. The second quarter saw Applied successfully complete our initial public offering and enter our next season as a public company with real momentum. The IPO meaningfully strengthened our balance sheet and enhanced our financial flexibility. It gave us new resources to invest in our people, our capabilities and our operations as we scale to support a broad and expanding range of our customers' most critical programs. Importantly, it also reduced our pro forma net leverage to 2.7x. In the quarter, we generated record revenue of $167.3 million, up 47.4% year-over-year. On a pro forma basis, giving effect to CBI in both periods, revenue grew 21.3%. We delivered record adjusted EBITDA of $36.4 million, up 38.4%. And importantly, our contract backlog also grew to a record of over $1.1 billion, providing us with a high level of forward visibility. I'd like to begin this call by spending a few minutes on who we are, where we're focused and why customers choose us. Chris will cover our end markets and our outlook for growth, and Jeff will cover financials. I'll then come back with our priorities for the second half of the year before we take your questions. Applied Aerospace & Defense is a premier provider of advanced design, engineering and vertically integrated manufacturing solutions for leading and next-generation space and defense technology companies. We build complex mission-critical hardware for extreme operating environments across 3 core end markets: Space and Launch Systems, Defense Aviation and Airborne Systems, and C5ISR and Precision Strike Systems. In the second quarter, those markets were roughly 23%, 47% and 30% of revenue. I'll note that it's not just the diversity of our business across end markets that differentiates us. It's also the high number of programs we support across the entire space and defense ecosystem. Applied sits at the intersection of 2 powerful long-term and uncorrelated demand drivers. The first is an unprecedented growth outlook for the commercial space economy. The second is a dynamic global threat environment that demands highly capable advanced manufacturing capacity and major new investments in defense technology. Across both, the ability to manufacture highly engineered systems at the speed, quality and scale our customers require has never been more important. Applied is purpose-built for this mission, and we're confident our strategy provides an opportunity for asymmetric upside. What differentiates us today is the combination of 2 things: First, platform's unique and highly integrated capabilities. And second, our operating philosophy. Let's start with our capabilities. We focus on building highly-engineered systems that integrate advanced and high-performance materials to operate in extreme environments. We believe that this integrated capability set is rare, and it's built on 3 foundational pillars: deep engineering talent with more than 220 engineers and well more than 400 technical subject matter experts, real material science know-how and depth across advanced resins and RF transparent materials, all forms of metals and space-grade polymers, and proprietary process IP that has been built up over decades. Today, we believe roughly 88% of our revenue is tied to products produced using our IP-enabled processes. What all this delivers for our customers is faster development, higher quality, lower cost and proven performance that typically endures for the full life of a program. Now let me touch on our operating philosophy because it's just as important. First, we're prime agnostic. We serve nearly all the leaders and innovators in defense and space, and we don't compete with our customers by design. Second, we're a full life cycle partner, trusted by the proven market leaders and by the bold new innovators, and we believe there are very few companies that can genuinely serve both. Third, we have relentlessly innovative engineering culture. Our people solve problems for our customers. That's how we build proprietary know-how into our processes and how we qualify into positions where, in many cases, we're the only supplier that has completed the requirement qualifications. Finally, we are built to scale with the agility and the capacity to ramp alongside our customers from early development straight through to full-rate production. Here's why all this matters now. The U.S. space and defense industrial base needs exactly this capability set, and it needs it today. We believe that primes and new entrants alike are looking for partners with deeply integrated capabilities who can carry a hard problem from prototype to full production, and there aren't many companies capable of that kind of partnership. That's the single best explanation for the demand we're seeing at Applied. Behind all of this sits our real physical capacity. We draw on more than 120 years of advanced manufacturing heritage, and we operate 11 purpose-built U.S.-based facilities across 6 states with more than 1.5 million square feet of production capacity. We estimate roughly 40% of that capacity is available today, measured across floor space, equipment capacity and workforce flexibility. Some of this we invested in strategically and proactively ahead of programs that we won but haven't yet begun to ramp. In today's market, this is proving to be a real advantage, and our entire Applied team is incredibly excited about what lies ahead. Before I turn it over to Chris, I'll note that earlier this week, we announced Chris as President and Chief Strategy Officer, giving him broader strategic and operational oversight across our enterprise alongside the growth functions he already leads. With that, let me turn it over to Chris. Christopher Rogers: Thanks, Trip. Let me start with backlog because it's the clearest evidence of where we're headed. We grew contract backlog to a record of over $1.1 billion, up from $871 million at year-end. Backlog is one key element from which we derive forward visibility, and that's why we can talk about the second half of this year and what lies beyond with confidence. One observation I'd share from the first half is how many programs in our pipeline now drawn multiple applied capabilities at once. As one example, we brought together complementary capabilities from across the platform to further vertically integrate our solid rocket motor case manufacturing. That's increasing speed and strengthening our ability to ramp production against the demand signal that we're seeing for a capability that supports multiple high-priority defense programs. In another case, a large defense prime came to us looking for integrated production capability on key subsystems for a strategic precision strike program. We organized the full breadth of our capabilities against that opportunity in a way that's very unique to Applied. This is all about complementary and differentiated capabilities that when integrated, translate into speed, responsiveness and cost-competitive solutions. It's the platform working exactly the way we built it to deliver. The customer comes to us for capability and finds 3, and we win work we simply couldn't have won as separate businesses. Now turning to our markets. In space, momentum is continuing across our commercial launch and satellite programs, and we're deepening relationships with the leading innovators in the sector. Rising launch cadence and the continued build-out of proliferated constellations point in the same direction, and our capabilities for uncompromising performance in the harsh environments of launch and space sit right in the middle of it. In defense aviation, we're ramping on next-generation programs, including our work supporting multiple collaborative combat aircraft platforms and the MV-75. These are the programs that will define the market over the coming decade, and we're positioned on them early at the point when content decisions get made. Alongside that, our aftermarket positions continue to be a powerful advantage for our platform. Replacing, overhauling and repairing flight critical and life-limited parts on large installed fleets directly supports defense aviation fleet mission readiness and gives us high recurring demand that doesn't depend on new production rates. Demand remains high, and we're expecting solid aftermarket performance in the back half of 2026. Precision Strike is where you can really see the platform coming together. We have strong momentum in solid rocket motor cases, drawing on integrated capabilities from across Applied and serving customers we weren't working with a year ago. We've made the capacity investments these ramps require, and we're integrating our capabilities more tightly to drive speed and performance. The pipeline in this market is very dynamic and active. On new business more broadly, we're seeing momentum on 2 fronts at once, deeper content with the large defense primes we've served for decades and genuinely exciting first-time opportunities with high potential new customers. Both of these matter. The first will always be our highest certainty growth, and there remains vast white space. And the second is one of many ways that we will compound growth. A quick word on M&A. CBI is delivering the synergies we underwrote and our M&A pipeline remains exciting and very active. We know where we want to invest internally and which capabilities we'd rather bring in from the outside. That clarity is what keeps us disciplined. Let me leave you with this. What stands out most is the sheer scale of the integrated opportunity that sits in front of us. Applied today is a coordinated platform, and that is what lets us pursue tremendous white space in a coordinated way, drive productivity improvements and approach M&A thoughtfully. That combination is what we mean when we talk about Applied having asymmetric upside. It has really shown up in our pipeline, and I'm more optimistic about the scale of opportunity set in front of us today than I was just a few months ago. We're carrying real momentum into the second half, and there is a tremendous amount of energy and productive activity taking place all across Applied. With that, I'll turn it over to Jeff to walk you through our financials. Jeffrey McRae: Great. Thanks, Chris, and good morning. I am very pleased with our second quarter as our results reflect strong execution and position us well to deliver on our full-year expectations. Before we get into the details, one note on the basis of the numbers. Everything I discuss today related to financial results as well as our guidance reflects GAAP as reported on a non-pro forma basis. Our acquisition of CBI is only reflected for the period from its March 2 closing date forward. Where I do reference pro forma figures, I'll say so. So let's get into the results for the second quarter. Revenue for the quarter was $167.3 million, reflecting 47.4% growth year-over-year. The strong revenue performance was the result of growth across all 3 of our end markets. On a pro forma basis, including revenue realized by CBI for the same period last year, second quarter revenue grew by 21.3%. We also exceeded our internal revenue plan for the quarter due to some timing dynamics. We saw strong execution on several programs, which resulted in the incremental pull forward of revenue and contracted backlog that we had anticipated converting to revenue in the second half of 2026. This phasing does not alter our outlook for the full year. Now a few highlights on revenue by end market. Space and Launch Systems revenue was $38.8 million, up 58.5% on high volumes of content supporting priority launch vehicle and satellite production programs. Specifically, we continue to see strong demand on content enabling SpaceX's Falcon 9 program as well as ramping demand on Blue Origin's New Glenn program. Defense Aviation & Airborne Systems revenue was $78.9 million, up 4.8% with certain next-generation development programs beginning to move into production, specifically our support of Anduril on their CCA Fury program and Bell on the MV-75 program. This alongside sustained aftermarket demand across a large installed base of aircraft. C5ISR & Precision Strike Systems revenue was $49.6 million, up $13.7 million from the year prior. This market benefited from significant contributions from CBI and was supported by strong demand signals across integrated air and missile defense systems and Precision Strike programs. From a margin perspective, we saw a heavier weighting of revenue from several early-stage next-generation programs that are now ramping up, and we see those programs accelerating from here. As such, we typically see some compression as we work through product development and initial learning curves with our engineering and production teams. Importantly, this is a typical short curve for us and most programs will reach our target margin profile within the first several units. So, as we ascend the learning curves and volumes ramp, efficiencies improve, and we will see margins improve as we progress through the year and into 2027. Consolidated gross margin for the quarter was 22.2%. This did reflect the impact of share-based compensation resulting from the accelerated vesting of equity units at the IPO, which impacted margins by approximately 6%. Adjusting for this, gross margins were in line with the same period a year ago as increased volume and improved throughput offset the lower initial margins on our development programs. Net loss for the quarter was $154 million, including aggregate share-based compensation expense of $110 million from accelerated vesting of equity units, higher levels of interest expense for the period prior to our IPO, increased intangible asset amortization when compared with the prior year quarter and other costs related to our IPO. Excluding these impacts and their corresponding income tax effects, we would have generated net income in the quarter. Adjusted EBITDA for the quarter came in at $36.4 million, representing solid year-over-year growth. Adjusted EBITDA margin, which is a non-GAAP measure, was 21.8% for the quarter compared to 23.2% in the prior year period, which reflects the investment we've made in our business to expand operational support capabilities as well as investments to support operating in a public company environment. On cash flow, for the first 6 months of the year, net cash used in operating activities was $82.1 million. Three things drove this use of cash, the first 2 of which were nonrecurring, elevated IPO and acquisition-related costs, cash interest on a portion of our debt repaid with the proceeds from our IPO, which we carried for most of the period and a working capital build of roughly $36 million in contract assets and inventory to support second half deliveries and a growing contract backlog. We expect much of that working capital to be converted back to cash as second half deliveries occur, and we project generating positive free cash flow in the second half of the year. On capital expenditures, we spent roughly $21 million in the first half of the year and expect full-year spending on capital of roughly $50 million, weighted toward the qualified capacity and efficiency investments that support the production ramps Trip referenced earlier. Turning to our balance sheet. Our June offering of approximately 34.2 million primary shares at $20 per share generated $635.7 million of net proceeds, and we used $626.2 million to repay term loan principal, our drawn revolver balance and accrued interest. Total debt as of June 30 was $405.8 million, down from $643.4 million at year-end. Net debt was $387.7 million with a cash balance of $18.1 million as of the quarter end. We had our full $125 million available under our revolver. Net leverage based on pro forma trailing 12-month earnings was roughly 2.7x. Now to our outlook. For the full year 2026, we expect total revenue between $670 million and $690 million and non-GAAP adjusted EBITDA between $150 million and $155 million. It is important to note that we have strong backlog coverage supporting our outlook for the second half of the year and well into 2027 and beyond. We expect that revenue will build through the balance of 2026 with the fourth quarter being our most significant quarter. From a supply chain perspective, we are seeing the same environment many of our peers and customers are, and we are actively working to mitigate some supply chain congestion. We see path to resolution, but we'll continue to monitor closely. On the materials side, we are making a number of forward investments to support growth initiatives and are seeing some raw material inflation as oil prices remain high and impact other inputs. To date, this has primarily been confined to aluminum and has thus far been relatively immaterial. Two last items for modeling. We expect our full year 2026 effective tax rate to be approximately 7%, which reflects certain items recognized this year rather than our long-term tax rate that we would expect, and we had 172.4 million shares outstanding at June 30 against a weighted average of 148.2 million for the quarter. Our expectations for the full year are essentially unchanged. Relentless execution, proactively managing our supply chains and working up the learning curve on new programs that are in ramp mode, all bode well for 2027 and beyond. And with that, let me turn it back to Trip. James Ferguson: Thanks, Jeff. Before we open the call for questions, I'd like to lay out our priorities for the second half of the year. There are 3. First, drive operational excellence and building Applied right. That means operational excellence at the enterprise level and within every site, playing offense within our supply chain, pulling all the right levers to drive efficiencies and exceptional performance and accelerating the development programs that are ramping today into the growth programs of tomorrow. Building Applied right also means bringing our enterprise together the right way and making sure we have the right leaders and talent base for opportunity set ahead of us. That is what I mean when I say we are building Applied to endure. Second, coordinating and thoughtfully triaging a dynamic new business pipeline. As Chris said earlier, we have exceptional momentum with the large primes we serve for decades and real opportunity with high potential customers we're working with for the first time. That pipeline is dynamic enough that choosing well matters as much as winning, and we're particularly excited about what lies ahead here. And third, executing on our high-growth and next-generation program ramps while continuing to invest ahead of demand and capacity and capabilities. Getting high potential programs advancing towards full-rate production on schedule and at the right cost is one of the most important things we'll be doing this year. So, with that, let me close where I started. Applied was purpose-built for this moment. We have differentiated capabilities and operating philosophy that our customers value, long-tenured relationships with excellent customers, diversified and embedded positions across enduring programs of record and next-generation growth programs and the qualified capacity to serve them all. Our job for the balance of this year is execution. And I'll tell you that I'm even more optimistic about what is in front of this company today than I was a quarter ago. Before we open up to questions, I'd like to once again personally thank our team members whose work produced this quarter, customers for their trust, our service members for their commitment to our nation and our shareholders for their confidence. With that, operator, we're ready to take questions. Operator: [Operator Instructions] Our first question is from Sheila Kahyaoglu with Jefferies. Sheila Kahyaoglu: Trip, Jeff and Chris, congratulations on the IPO and a big milestone. I wanted to ask 2 questions, if possible, please. The first one on backlog. It grew to over $1.1 billion, significantly ahead of your IPO levels. Can you maybe discuss the backlog conversion as we think about it over the next 12 to 24 months and how we think about it across space, defense, aviation and precision strike? Jeffrey McRae: Yes. Sure, Sheila. Generally, as we look at backlog, we generally view it as a 12- to 18-month forward view on the business. As we think of conversion of it for 2026, we effectively have the balance of the year sitting in firm backlog, and it's all about the execution. As we look forward into '27, roughly about half of that backlog should convert to revenue in 2027. The balance of 2027 will be filled out by existing long-term agreements where additional orders drop in backlog over time. And then it starts positioning us as we start thinking into 2028. So very confident. We love the firm backlog of this business. It gives us great visibility as we view the forward view of the business. It really is strong across all 3 end markets. We do not provide specific values across the 3 end markets, but I would say we're in great shape 2026, 2027 as we think backlog conversion across all 3 end markets. Sheila Kahyaoglu: And maybe as a follow-up, just to support that growth, can you discuss some of the working capital investments you're making just to support the business going forward? Jeffrey McRae: Yes. I mean, we're obviously making sure that we are prepared for the growth in the business, both from a working capital, but also from a capital facility and equipment standpoint. As we've talked in the past, we have forward invest in the business to support demand signals that we have there. We continue to do that through 2026. As we mentioned, we have roughly $50 million of capital going into the business. That is combined then with working capital growth really that is supporting that ramp in revenue through the second half of the year. James Ferguson: Sheila, I would also add, we're incredibly excited about 2027 and beyond. We are seeing the same demand signals that many of the primes and our customers are seeing. And so we're preparing for success. Operator: Our next question is from Ken Herbert with RBC Capital Markets. Kenneth Herbert: Congratulations again on the successful IPO. Maybe just to start, either Trip or Jeff, I guess. As we look at the 2026 guide, it implies a bit of a sequential step-up in the EBITDA margins in the second half. Maybe, Jeff, can you just walk through some of the sort of onetime or transitory headwinds to margins you saw here in the first half and how you think about the step-up? And I guess underneath that is some implied assumptions maybe on some of the costs coming down on some of the newer programs that are ramping. Jeffrey McRae: Yes. I would say that the most significant driver is that point there, Ken. As we look at the first half of the year, we did see some compression on margins related to start-up new development programs. As those programs start to mature through the second half of the year, we will see margin expansion there. If I look at first half of the year, roughly 20% of the revenue related to those start-up programs. And as we think about it, we tend to get through a handful of initial production units before we start seeing normalized margins. So working up the learning curve, getting through the engineering. So that is what really kind of drives the second half of the year. There are some mix dynamics as well, as we always have, that's helping us in the second half of the year as we see that growth in revenue. Kenneth Herbert: And maybe as a follow-up, trip, one of your first points, as you called out second half priorities was the operational excellence piece. Can you just level set us on where you see integration across the Applied portfolio? And what would be some of the next major steps as you think about operational excellence? Or I guess, with that backdrop, integration of the various businesses and where you are on that journey? James Ferguson: Yes, for sure. We are ahead of schedule, bottom line up front. We have great alignment of all of our senior leaders. We have seen both people, process and system come together extremely well. One of the things that's a really bright spot is we have seen synergies across sites driving revenue on opportunities supporting our customers. So an example with an emerging innovator who has a Go Fast program, we've been able to leverage our capabilities in a new thoughtful way that's helping accelerate that program. And so just the key takeaway is we feel really comfortable with where we stand today, and we believe we'll really benefit through the second half of the year, but most importantly, going into '27 and it will really help us grow the business in all the right ways. Operator: Our next question is from Peter Arment with Baird. Peter Arment: I'll echo everyone else's sentiments. Congrats on the quarter and the IPO. Trip, maybe you could talk a little bit about space and launch. You guys have exposure to New Glenn, and there's been obviously an anomaly there. Just wondering how you think about the business for the second half and going forward? James Ferguson: Thank you for the question. I feel really optimistic about the space economy in general. What I would say, all indicators and direction from Blue Origin have been to continue moving at pace. We have not slowed down. So that reflects also their public statements. And I would say we also see a lot of good tailwinds across I would say, other emerging areas within space. And one area that we've seen growth is really in our proprietary tank business as well. So all in all, I would say, very exciting, very positive, and we're preparing to really ramp throughout '27. Peter Arment: Got it. I appreciate that. And then just as a follow-up, if you could -- a lot of the framework agreements are starting to get firmed up or at least some of them are. Could you talk a little bit about your exposure there and when you expect to start seeing things flow to Applied? James Ferguson: Yes. I'm going to pass it over to Chris and let him. He's been working that directly. Christopher Rogers: Sure. To start off with, we've got deep content already across a range of the programs that you're seeing in the headlines. So a big part of our forward ramp is tied to those programs. We are also working on a range of opportunities we're pretty excited about. At the time we were last speaking, I know we did touch on sole-source revenue, single-source revenue being kind of in the 86% range. Our expectation is that will go down in part because a lot of the opportunities we're seeing to dual source are ones that are very attractive. They offer us an opportunity to showcase a lot of what we do best in terms of kind of moving fast and being cost effective. So a lot there and probably some more things that you'll see from us in the near term. Operator: Our next question is from Kristine Liwag with Morgan Stanley. Kristine Liwag: I wanted to follow up on the working capital question that was asked earlier. So when we think about the timing of the cadence, should we think about 1H as being a negative use of cash on working capital and second H is positive? Is that the normal run rate for the business? Or are there any onetime items, excluding the IPO stuff that make this pattern like this year? Jeffrey McRae: Thanks for the question, Kristine. Yes, I think you have it pretty much in line. We will see the conversion to cash of the growth in working capital we saw in the first half of the year, which really is supporting the revenue generation that we see in Q3 with growth then in Q4. I would generally see a pretty linear growth with working capital as we move forward into 2027 and continue to see growth in the business where you'll see some step up. You'll see ups and downs by quarters depending on kind of total revenue volume. Kristine Liwag: Okay. Great. So just to confirm, we shouldn't think of this as a pattern where going forward, 1H is the usage of cash, 2H is a generation on an annual basis. This is just the pattern for this year? Jeffrey McRae: Yes, that's correct. And we'll lay out 2027 in the future for you and give you a little bit more clarity there. Kristine Liwag: Great. Super helpful. And if I could follow up on Starship, perhaps the Starship -- SpaceX Starship continues to hit some of its launch milestones. I was wondering, can you provide any color on the progress of potentially being a supplier to Starship? How far along are those conversations? And if that were to proceed, when should we expect potential timing? Christopher Rogers: Sure. It's a couple of things to touch on there. So SpaceX is a very important customer for us. We view ourselves as that. It's a SpaceX relationship. So while we have meaningful Falcon 9 content, relationship is with SpaceX. So we're working a range of things related to Starship today. We're also seeing Falcon 9 orders continue to come in. I think our expectation there is that, that will run through 2030, which is consistent, I think, with what SpaceX is sharing. I think we're also expecting that for a range of applications, we've got capability that's likely relevant to kind of future state of Starship. When you think about some of what we're doing on composites, while the overwhelming design of Starship ties into metal, there's things as it relates to payloads and others that we think are going to be really relevant. A number of those are working already. We also think that as it relates to kind of SpaceX, there's probably upside, although we've kind of conservatively modeled to be in line with SpaceX's expectations. There's probably a good chance that Falcon 9 actually runs longer. So that's how we're approaching it today and feel very bullish about opportunity set Starship and our work on it. Operator: Our next question is from Myles Walton with Wolfe Research. Emilee Deutchman: This is actually Emilee on for Myles. Congrats on the IPO. Just a quick question on the budget landscape. The Senate and the House, both voting for CRs to go through at least early to mid-December. How are you guys thinking about that in terms of impact to your guide? Are there any specific programs that are on your radar that could be impacted by any funding constraints? Or are you all pretty much agnostic to the CR? Christopher Rogers: Yes. We are monitoring it closely like many of our customers and other folks that we're working with within the ecosystem. I think one of the benefits of our platform is we are very diversified. Much of our work is on long life enduring programs of record. And so if you think about the potential to enter into a continuing resolution environment, we are in many ways, insulated from that in the near term, particularly as Jeff touched on, a lot of our definition of backlog ties into things that are funded kind of purchase order in hand. We are monitoring as you think about some of the things that will be impacted in terms of some of these ramps on next-gen programs that probably ties more into kind of outlook for '27. So that's something we're going to be tied in there in terms of just potential implications probably beyond this year. Emilee Deutchman: Got it. And then one follow-up. In Defense Aviation with the MV-75 being a key growth driver, are you all seeing any impact from the funding gap that Textron is at least attempting to cover? James Ferguson: To date, we have not. We have been directed to continue moving forward. It is a monitoring watch item for our team, but we view any near-term kind of headwinds that could come as just near term. We believe that program has very strong, strong backing, and we're very excited about it in 2027, '28 and beyond. Operator: Our next question is from Jonathan Siegmann with Stifel. Jonathan Siegmann: On these new multiyear munition deals, they're new for the industry. Can you talk about what it means as a supplier? And specifically, is there any trade-off going on with pricing and margins for this longer-term visibility on these programs? Christopher Rogers: Sure. We are actively working a number of multiyear agreements. Part of where we've been very forward, I think, has been forward investing in terms of some of the capacity. From a pricing standpoint, I mean, our endpoint is to deliver value. And so much of that ties to kind of the speed at which we can deliver. And what we're seeing there are things that are really good fits for our platform. And so if you look at kind of what we can deliver relative to kind of the customer set, it's pricing that works, pricing that's fair, pricing delivers a high level of value, and I think exactly kind of the type of capabilities that kind of the nation needs. So these are all fairly real time in terms of what we're working, but we're pretty bullish in terms of kind of what that means for both the mission, getting a lot of this kit kind of into the hands of our customers and ultimately out to the war fighters. James Ferguson: And John, I would add, one of the great things about good visibility, volume, it really allows you to provide efficiency in your manufacturing operations. And so that's one thing that we are very focused on as we think about how we support mission and customer in the areas you asked about. Jonathan Siegmann: And then you've highlighted consistently some great exposures to some of the name brand programs that we're all familiar with. But when we think about the push for lower cost affordable mass, can you just talk about how your capabilities might fit with some of those lower cost programs and whether that's a fit for your capabilities? Christopher Rogers: That's an area we're actively working with a range of customers who I would consider kind of nontraditional new entrants. Our capability set is incredibly relevant to them. Why? Because we can be super responsive from some of the early-stage prototype working to also ability to ramp. And so while we've not publicly disclosed some of the work that we're doing, many of those are folks that are nontraditionals that are aiming to deliver that type of very kind of cost-effective, higher volume type of capability. So it will be more of kind of the future state of our business for sure. James Ferguson: The Applied playbook drives us to have discipline and focus. We are working to partner with the teams and new emerging innovators that we believe will have long-term success, not everything that looks flashy. We're just being very disciplined as we look forward. Operator: We have reached the end of the question-and-answer session. I would like to turn the floor back over to Trip Ferguson for closing comments. James Ferguson: Thank you, operator. Thank you all for joining us. We look forward to updating you in November. And once again, thank you to the team in Applied for all of your hard work and effort and focus on mission. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation. 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This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Applied Aerospace & Defense (AADX) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

HUNTSVILLE, Ala., August 12, 2026--(BUSINESS WIRE)--Applied Aerospace & Defense (NYSE: AADX) ("Applied" or "the Company"), a premier provider of advanced design, engineering, and vertically integrated manufacturing solutions for leading and next-generation space and defense technology companies, today reported its financial results for the second quarter ended June 30, 2026. Second Quarter 2026 & Recent Highlights: Generated record revenue of $167.3 million, up 47.4% year over year Incurred a net loss of $154.0 million primarily due to share-based compensation and transaction expenses related to the Company’s June 2026 initial public offering ("IPO") Delivered record Adjusted EBITDA of $36.4 million, up 38.5% year over year Grew contract backlog to over $1.1 billion providing solid multi-year revenue visibility Successfully completed a $683.0 million IPO, raising approximately $635.6 million of net primary proceeds (after underwriting discounts, commissions, and offering expenses) via the sale of approximately 34.2 million primary shares of common stock at $20.00 per share "The second quarter saw Applied successfully complete our initial public offering and begin our next chapter as a public company," said Trip Ferguson, Chief Executive Officer of Applied. "The IPO meaningfully strengthened our balance sheet and enhanced our financial flexibility, reducing pro forma net leverage to 2.7x, and provided new resources to invest in our people, our capabilities and our operations as we scale the business to support a broad and expanding range of our customers’ most critical programs." "Applied is positioned at the intersection of two powerful, long term, and uncorrelated demand drivers: an unprecedented growth outlook for the commercial space economy and a dynamic global threat environment that necessitates highly capable advanced manufacturing capacity and major new investments in defense technology," Ferguson explained. "Across both end markets, the ability to manufacture highly engineered systems at the speed, quality, and scale required by our customers has never been more important. Applied was purpose-built for this mission. Our differentiated capabilities, long-tenured customer relationships and embedded positions across a diverse array of large and enduring programs of record and next-generation growth programs make us a trusted partner to the leading defense primes and bold new innovators in commercial space and defense technology." Ferguson continued, "Our second quarter performance reflects the strength of that position, with significant revenue growth across each of our three core markets. Demand for space and launch systems remains high, demand for precision strike systems continues to build rapidly, we are ramping several important next-generation programs, and aftermarket demand remains strong as we enable mission readiness for our customers’ defense aviation fleets. Together with over $1.1 billion in backlog, this provides us with strong multi-year revenue visibility. We are also making progress integrating our recent acquisitions and adding qualified capacity in the areas where our customers need it most. Looking ahead, we remain focused on operational excellence, disciplined investment, and expanding our content on enduring and next-generation programs to drive profitable growth and create long-term value for our customers and shareholders." Second Quarter 2026 Financial Results Consolidated revenue was $167.3 million, up 47.4% compared to the prior year period of $113.5 million. Revenue growth in the second quarter of 2026 was driven by strength across all the Company’s key end markets, reflecting continued demand for our highly engineered systems and contributions from recent acquisitions. Excluding the impact of acquisitions completed in 2026, revenue increased $22.5 million or 19.8%. The following table presents the Company’s revenue disaggregated by end market for the three and six months ended June 30, 2026 and 2025: Revenue growth in Space and Launch Systems of $14.3 million was primarily attributable to increased volumes on launch vehicle and satellite production programs amid higher launch cadence and proliferated constellations. Revenue growth in Defense Aviation and Airborne Systems of $3.6 million was primarily attributable to sustained aftermarket demand across a large installed base of aircraft, as well as continued new production activity. Demand is supported by increases in global defense budgets across a broad range of fixed-wing and rotorcraft platforms, including increasing funding for next-generation fixed-wing, vertical lift, and autonomous airborne systems. Revenue growth in C5ISR and Precision Strike Systems of $35.9 million was primarily attributable to higher revenue across a range of integrated air and missile defense systems and radar programs. Near term demand is expected to remain supported by missile and munition rearmament, layered missile defense priorities, and continued national defense and budget investments in next-generation precision strike systems. Contract Backlog As of June 30, 2026, the Company had contract backlog of $1.13 billion. Contract backlog represents the total value of existing contracts, less amounts previously invoiced, as of the backlog date. Full Year 2026 OutlookFor the full year 2026, the Company expects total revenue of between $670 million and $690 million, and non-GAAP Adjusted EBITDA of between $150 million and $155 million. Non-GAAP Adjusted EBITDA is provided in the full year 2026 Outlook on a forward-looking basis. The Company does not provide a reconciliation of such forward-looking measures to the most directly comparable financial measures calculated and presented in accordance with GAAP because such reconciliation cannot be prepared without unreasonable effort given the difficulty of projecting event driven transactional and other non-core operating items in any future period. The magnitude of these items, however, may be significant. Conference Call and WebcastApplied will host a conference call today at 8:30 a.m. Eastern Time to discuss the Company's financial results. The live webcast of the conference call and accompanying presentation materials can be accessed through Applied’s website at https://investors.applied-ad.com/. For those unable to access the webcast, the conference call can be accessed by dialing (877) 407-0789 (domestic) or +1 (201) 689-8562 (international) and requesting the Applied Second Quarter 2026 Earnings Conference Call. An audio replay of the conference call can be accessed by dialing (844) 512-2921 (domestic) or +1 (412) 317-6671 (international) and providing the passcode 13761567. About Applied Aerospace & DefenseApplied Aerospace & Defense, Inc. is a premier provider of advanced design, engineering, and vertically integrated manufacturing solutions for leading and next-generation space and defense technology companies. Applied builds complex, mission-critical hardware for extreme operating environments across three core markets: Space & Launch Systems, Defense Aviation & Airborne Systems, and C5ISR & Precision Strike Systems. With over 120 years of advanced manufacturing heritage, Applied employs a nationwide infrastructure of 11 purpose-built facilities across six states and more than 1.5 million square feet of production capacity, supported by IP-enabled process expertise for the full lifecycle management of rapid prototyping, large-scale production, and aftermarket sustainment of enduring platforms. Applied Aerospace & Defense is a publicly traded company on the New York Stock Exchange (NYSE) under the ticker symbol "AADX." To learn more visit www.applied-ad.com. Forward-Looking StatementsThis press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements, including statements about our future results of operations, financial condition, business strategy, prospects, and plans and objectives. Forward-looking statements may be identified by words such as "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "target," "will" or "would," the negative of these words, or similar terms or expressions, although not all forward-looking statements contain these identifying words. Forward-looking statements are based on our current expectations and projections about future events and trends we believe could affect our business, financial condition, results of operations, and prospects. These statements involve risks, uncertainties, and other factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements. Such risks, uncertainties and other factors include, without limitation: changes in economic, capital market, and political conditions in the U.S. and globally; changes in U.S. or foreign government defense spending, policies, and priorities; significant declines in business with key customers, or the cancellation, reduction, or deferral of customer orders; our performance on our contracts and programs, including our ability to control costs; the rapid pace of technological change, and the potential for reduced demand for our capabilities and products if we fail to keep up; our ability to establish and maintain important relationships with government agencies and prime contractors; requests or expectations from government customers that we make investments in our business that may not directly benefit stockholders; our acquisition strategy, including our ability to complete acquisitions on satisfactory terms and successfully integrate acquired businesses; our ability to attract, train, and retain experienced senior management and qualified engineering, operational, and other personnel, and the impact of work stoppages or other labor disruptions; shortages, delays, or increased costs associated with critical components, raw materials, and services from suppliers and subcontractors; disruptions affecting our manufacturing facilities and operations; our ability to renew facility leases on favorable terms, and the potential business impact associated with relocating operations, including risk to our information technology systems and security; technology failures, cybersecurity incidents, and unauthorized access to our information systems or sensitive proprietary information; settlements, penalties, remediation, and attorney’s fees if we fail to comply with the numerous legal and regulatory requirements to which we are subject; fines and compliance- and remediation-related costs associated with environmental, health and safety laws, regulations, and permitting requirements; pending, threatened, and future legal and regulatory proceedings, audits, investigations, and other contingencies; changes in trade policies, the implementation of sanctions, imposition of tariffs and counter-tariffs, and other trade measures and restrictions; our ability to protect and enforce our intellectual property rights and defend against infringement claims; our indebtedness, restrictive covenants under our credit facilities, and the effect of debt service obligations on our operational and financial flexibility; and other risks and uncertainties described in our filings with the Securities and Exchange Commission. You should not rely on forward-looking statements as predictions of future events. The forward-looking statements in this press release relate only to events as of the date on which the statements are made. Except as required by law, we undertake no obligation to update or revise any forward-looking statements to reflect events, circumstances, or new information after the date of this press release. We may not achieve the plans, intentions, or expectations in our forward-looking statements, and you should not place undue reliance on them. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments. Non-GAAP Financial Measures We present in this press release certain financial information based on our Adjusted EBITDA and Adjusted EBITDA Margin. The non-GAAP financial measures are supplemental measures of our performance that we believe help investors understand our financial condition and operating results and assess our future prospects. We believe that presenting these non-GAAP financial measures, in addition to the corresponding GAAP financial measures, are important supplemental measures that exclude non-cash or other items that may not be indicative of or are unrelated to our core operating results and the overall health of our company. We believe that providing this information assists our investors in understanding our operating performance and the methodology used by management to evaluate and measure such performance. When read in conjunction with our GAAP results, these non-GAAP financial measures provide a baseline for analyzing trends in our underlying businesses and can be used by management as one basis for financial, operational and planning decisions. Finally, these measures are often used by analysts and other interested parties to evaluate companies in our industry. We define Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization, as adjusted to eliminate certain non-cash charges and other items not reflective of ongoing operations, which include: acquisition-related expenses, integration expenses and restructuring costs, share-based compensation expense and other costs. We define Adjusted EBITDA Margin as Adjusted EBITDA expressed as a percentage of revenue. Although we use Adjusted EBITDA and Adjusted EBITDA Margin and for the purposes described above, these non-GAAP financial measures have inherent limitations and should neither be considered in isolation nor as substitutes for analyzing our financial results as reported under GAAP. For example: Adjusted EBITDA and Adjusted EBITDA Margin do not reflect significant interest expense or the related cash requirements to service our debt; These measures exclude depreciation and amortization, which are non-cash charges, but do not account for the future cash needs to replace depreciated or amortized assets; These measures exclude substantial amortization expense associated with our intangible assets, limiting the measures’ usefulness; These measures do not include our provision for income taxes which generally represents taxes paid in the period or that are payable in the future, which are necessary aspects of our operations; These measures exclude share-based compensation expense, which is an important component of employee compensation; and These measures exclude costs related to the IPO and certain acquisition-related and post-merger integration and restructuring costs, which are necessary elements of certain acquisitions. Because of these limitations, Adjusted EBITDA and Adjusted EBITDA Margin should not be considered as measures of cash available for investment in our business. Management addresses these limitations by evaluating these metrics alongside other GAAP measures, such as revenue, to assess our operating performance. These metrics are non-GAAP financial measures, are not defined by GAAP and should not be considered alternatives to net loss or cash flows from operations as determined under GAAP. Moreover, our methods of calculating Adjusted EBITDA and Adjusted EBITDA Margin may differ from those used by other companies with similarly titled measures and therefore may not be directly comparable. Adjusted EBITDAThe following table sets forth the reconciliation of net loss to Adjusted EBITDA and presentation of net loss margin and Adjusted EBITDA margin for the three and six months ended June 30, 2026 and 2025: View source version on businesswire.com: https://www.businesswire.com/news/home/20260811723545/en/ Contacts David Myers, SVP Marketing & [email protected] Investor Contact:[email protected]

Interested in Applied Aerospace & Defense, Inc.? Here are five stocks we like better. Record second-quarter results: Revenue rose 47.4% year over year to $167.3 million, while adjusted EBITDA increased 38.4% to $36.4 million. Contract backlog exceeded $1.1 billion, and the IPO reduced pro forma net leverage to approximately 2.7 times. Demand remains broad-based: Growth was led by Space and Launch Systems, up 58.5%, while C5ISR and Precision Strike benefited from the CVI acquisition and demand for air-defense and precision-strike programs. Defense Aviation also advanced as development programs moved toward production. 2026 outlook reaffirmed: Management maintained its revenue forecast of $670 million to $690 million and adjusted EBITDA guidance of $150 million to $155 million. The company expects working capital to convert to cash in the second half, positive free cash flow, and continued investment in capacity and program ramps. Applied Aerospace & Defense (NYSE:AADX) reported record second-quarter revenue and adjusted EBITDA in its first earnings call as a public company, while highlighting a growing contract backlog, capacity investments and continued demand across space and defense programs. Revenue for the second quarter of 2026 rose 47.4% year over year to $167.3 million. On a pro forma basis that includes CVI in both comparison periods, revenue increased 21.3%, Chief Financial Officer Jeff McRae said. Adjusted EBITDA rose 38.4% to a record $36.4 million, while contract backlog reached more than $1.1 billion, up from $871 million at year-end. → SoundHound AI Sends a Loud Signal After Its Q2 Earnings Beat Chief Executive Officer Trip Ferguson said the company’s June initial public offering strengthened its balance sheet and increased its flexibility to invest in operations, personnel and capabilities. The offering reduced pro forma net leverage to approximately 2.7 times. Applied Aerospace & Defense supplies advanced design, engineering and vertically integrated manufacturing solutions for space and defense customers. Its second-quarter revenue mix was approximately 23% Space and Launch Systems, 47% Defense Aviation & Airborne Systems, and 30% C5ISR & Precision Strike Systems. Space and Launch Systems: Revenue totaled $38.8 million, up 58.5% from the prior-year quarter. McRae cited strong demand for content supporting SpaceX’s Falcon 9 program and rising demand tied to Blue Origin’s New Glenn program. Defense Aviation & Airborne Systems: Revenue was $78.9 million, up 4.8%. The segment benefited from next-generation development programs moving toward production, including work supporting Anduril’s CCA Fury program and Bell’s V-280 Valor program, as well as sustained aftermarket demand. C5ISR & Precision Strike Systems: Revenue was $49.6 million, increasing $13.7 million from a year earlier. The business benefited from contributions from the CVI acquisition and demand for integrated air and missile defense and precision-strike programs. → AST SpaceMobile Earnings Just Reminded Investors How Risky Space Can Be Ferguson said the company operates 11 U.S.-based facilities across six states, totaling more than 1.5 million square feet of production capacity. Management estimates that roughly 40% of capacity remains available, measured across floor space, equipment and workforce flexibility. The company has made some capacity investments in advance of expected program ramps. President and Chief Strategy Officer Chris Rogers said the company is seeing an increasing number of opportunities that use multiple Applied capabilities. He cited additional vertical integration in solid rocket motor case manufacturing and a precision-strike subsystem opportunity with a large defense brand as examples of the platform approach. → First Solar’s Profit Engine Faces a New Policy Test in Washington McRae said the company generally views backlog as providing a 12- to 18-month view of its business. The remaining 2026 outlook is effectively covered by firm backlog, he said, while approximately half of the current backlog is expected to convert to revenue in 2027. The rest of 2027 is expected to be supplemented by orders under existing long-term agreements. The company reiterated its full-year 2026 forecast for revenue of $670 million to $690 million and adjusted EBITDA of $150 million to $155 million. Management expects revenue to build through the remainder of the year, with the fourth quarter representing the most significant quarter. Second-quarter revenue exceeded the company’s internal plan because of execution on several programs that pulled forward revenue and contracted backlog conversion originally anticipated for the second half. McRae said the timing benefit did not change the full-year outlook. Management said it is monitoring supply-chain congestion and is working to mitigate potential constraints. The company also cited raw-material inflation, primarily in aluminum, though McRae described its impact to date as relatively immaterial. Consolidated gross margin was 22.2% during the quarter. That figure included approximately 6 percentage points of impact from share-based compensation associated with accelerated equity-unit vesting at the IPO. Excluding that impact, gross margin was in line with the prior-year period, according to McRae. Adjusted EBITDA margin was 21.8%, compared with 23.2% a year earlier. McRae attributed the change to investments in operational support and public-company capabilities, as well as lower initial margins on early-stage programs beginning production ramps. Management expects margins to improve as those programs advance through engineering and production learning curves. The company reported a net loss of $154 million, including $110 million of share-based compensation expense from accelerated vesting of equity units. McRae also cited interest expense before the IPO, higher intangible-asset amortization and IPO-related costs. Excluding those items and related tax effects, he said the company would have generated net income in the quarter. For the first half, net cash used in operating activities was $82.1 million. Drivers included IPO and acquisition costs, cash interest on debt repaid with IPO proceeds, and a roughly $36 million working-capital build in contract assets and inventory. Management expects much of that working capital to convert to cash as second-half deliveries occur and projects positive free cash flow in the second half. The company spent about $21 million on capital expenditures in the first half and expects approximately $50 million for the full year, focused on qualified capacity and efficiency investments. Following the IPO, total debt fell to $405.8 million as of June 30 from $643.4 million at year-end. Net debt was $387.7 million, with $18.1 million in cash and the full $125 million revolver available. Ferguson said Applied’s priorities for the second half are improving operational performance across its sites and supply chain, selectively pursuing a dynamic new-business pipeline, and executing on high-growth and next-generation program ramps. Management said it remains optimistic about demand in commercial space, defense aviation and precision strike. Rogers added that the company is working on opportunities with traditional defense primes as well as newer, nontraditional customers seeking cost-effective and higher-volume capabilities. On potential federal budget uncertainty, Rogers said the company’s diversified positions on long-life programs of record and its funded backlog provide near-term insulation, though management is monitoring potential effects on next-generation program ramps and the 2027 outlook. Applied Aerospace and Defense Inc specializes in providing advanced design, engineering and vertically integrated manufacturing solutions for next-generation space and defense technology companies. Its core service offerings include design and analysis, fabrication and assembly and inspection, qualification and testing. Applied Aerospace and Defense Inc is based in HUNTSVILLE, United States. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "Applied Aerospace & Defense Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for August 2026.