AADX earnings analysis
What we found in AADX's 10-Q: the parts that mattered, the offsets in the same document, and what the company said about what comes next.
Our reading of the filing · Free to read, no account needed
Applied Aerospace & Defense delivered strong top-line momentum, with second-quarter revenue up 47.4% year over year to $167.318 million and backlog reaching $1.13 billion. However, gross margin contracted to 22.2%, the company posted a $96.232 million operating loss and a $153.971 million net loss, and first-half operating cash flow was negative $82.091 million. IPO proceeds substantially reduced debt to $405.796 million, but elevated share-based compensation, acquisition-related costs, working-capital investment, and interest expense keep the overall result mixed.
The parts that mattered.
Pulled out of the filing itself, with the figures the company reported.
- Revenue grew 47.4% year over year
- Second-quarter revenue increased 47.4% year over year to $167.318 million from $113.499 million. Six-month revenue rose 34.4% to $301.669 million from $224.523 million.
- C5ISR drove segment growth
- C5ISR and Precision Strike Systems revenue surged 261.6% to $49.587 million from $13.714 million, driven by integrated air and missile defense and radar programs.
- Backlog reached $1.13 billion
- Backlog increased $258.7 million to $1.13 billion at June 30, 2026, from $0.87 billion at December 31, 2025; CBI contributed approximately $178.5 million of incremental backlog.
- IPO proceeds reduced debt
- The company received approximately $635.6 million of net IPO proceeds and used approximately $626.2 million to repay borrowings, including $565.0 million of term-loan principal and $56.1 million on the revolver.
- Leverage improved materially
- Total debt declined to $405.796 million at June 30, 2026, from $643.443 million at December 31, 2025, while total debt-to-capitalization improved to 0.33 from 0.80.
- Capex targets production expansion
- Management expects fiscal 2026 capital expenditures of approximately $50.0 million, focused on manufacturing efficiency, capacity expansion, and ramping customer demand.
And the other side of it.
The offsets in the same document — the things a summary that only listed the good news would have left out.
- Gross-margin compression
- Second-quarter gross margin fell to 22.2% from 28.2% a year earlier, while six-month gross margin declined to 23.5% from 28.0%. Management attributed pressure to product mix shifting toward ramping programs with lower initial margins.
- IPO charges drove operating loss
- Second-quarter operating loss was $96.232 million, or 57.5% of revenue, versus operating income of $13.910 million, or 12.3%, in the prior-year quarter. SG&A increased 965.0% to $123.315 million, primarily from $99.3 million of incremental IPO-related share-based compensation.
- Operating cash burn increased
- Net cash used in operating activities was $82.091 million in the first six months, versus $16.666 million used in the prior-year period. Contract assets and inventory increased cash usage by approximately $36.4 million as the company invested for ramping demand.
- Debt-related costs remain elevated
- Interest expense rose 55.0% year over year to $26.249 million in the second quarter, including $6.7 million of deferred debt discount and issuance-cost write-offs upon debt repayment.
- No formal risk-factor updates
- The filing states there were no material changes to the risk factors disclosed in the Prospectus. Nevertheless, the quarter included a $153.971 million net loss and $31.490 million of income tax expense despite a $122.481 million pretax loss.
- Liquidity depends on operating cash flow
- The company had $18.108 million of cash at June 30, 2026, against $405.796 million of total debt. Revolver availability was $125.0 million, but no availability remained under the delayed-draw term-loan commitment.
What they reported.
What the company itself reported, taken out of the document.
- Gross margin
- 22.2%
- Operating margin
- -57.5%
- Segment
- Space and Launch Systems: $38.802 million, up 58.5% year over year from $24.476 million.
- Segment
- Defense Aviation and Airborne Systems: $78.929 million, up 4.8% year over year from $75.309 million.
- Segment
- C5ISR and Precision Strike Systems: $49.587 million, up 261.6% year over year from $13.714 million.
What they said about what is next.
The 10-Q provides FY2026 outlook of revenue of $670.0 million-$690.0 million and Adjusted EBITDA of $150.0 million-$155.0 million, but does not identify a prior outlook for comparison. Management expects fiscal 2026 capital expenditures to be approximately $50.0 million and believes operating cash flow plus available borrowings will fund requirements for at least the next 12 months.
The filing reads about the same as the one before it.
This is our reading of a public filing, not the filing. Read the original on SEC.gov · Educational only. Nothing here is investment advice.
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