Astera Labs (ALAB) Q2 2025 Earnings Call August 05, 2025 04:30 PM ET Speaker0Good afternoon. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the Astera Labs Second Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After management remarks, there will be a question and answer session.Thank you. I will now turn the call over to Leslie Green, Investor Relations for Astera Labs. Leslie, you ma ...

Financial Data and Key Metrics Changes - Revenues for Q1 2025 were $302.6 million, exceeding the estimated range of $285 million to $295 million, with notable organic revenue growth across all business lines [22][23] - Adjusted EBITDA for Q1 2025 was $26.7 million, above the estimated range of $20 million to $24 million, reflecting a favorable mix of higher-margin revenues [22][23] - Cash flow used in operations for Q1 2025 was $29.2 million, primarily due to working capital requirements related to revenue growth [23][24] Business Line Data and Key Metrics Changes - Unmanned Systems organic revenue growth was 6.2% for Q1 2025, while KGS organic revenue growth was 7.8%, excluding the impact of recent acquisitions [22][23] - Microwave products, T5ISR, and defense rocket support businesses saw organic revenue growth rates ranging from 13% to over 18% [22] Market Data and Key Metrics Changes - Approximately 68% of revenues in Q1 2025 were generated from contracts with the US federal government, including the Department of Defense [25] - Revenues from commercial customers accounted for 12%, while foreign customers contributed 20% [25] Company Strategy and Development Direction - The company is focused on expanding its hypersonic franchise, which is expected to be a key growth driver for the foreseeable future [10][88] - Investments are being made in manufacturing and production facilities to meet existing and anticipated customer orders, particularly in microwave products and hypersonic businesses [23][27] - The company is pursuing large multi-hundred million dollar single award opportunities, particularly in the drone area and integrated air and missile defense [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed increased confidence in 2025 and 2026 financial forecasts due to clearer defense funding and priorities, including a potential $1 trillion national security budget for 2026 [7][8] - The company anticipates continued organic revenue growth of approximately 10% in 2025 and 13% to 15% in 2026 [7] - Management highlighted the importance of existing products and systems in government procurement decisions, suggesting a shift away from funding new programs [9] Other Important Information - The company is experiencing a record opportunity pipeline of approximately $12.6 billion, indicating a strong demand for its products and services [9] - The Israeli-based microwave electronics business is expected to grow significantly following a facility move, which is planned to minimize disruption [19][26] Q&A Session Summary Question: How does Kratos fit into the Golden Dome program? - Management indicated that Kratos is involved in ground command and control, telemetry tracking, and control, with a focus on space domain awareness [33][34] Question: When will test flights with the new landing gear for Valkyrie commence? - Management confirmed that the landing gear capable Valkyrie is tracking to fly soon this year, but specific details could not be disclosed for security reasons [36][37] Question: What missile programs will support turbojet engine production? - Management mentioned several missile programs, including JDAM and classified projects, that would utilize their engines [42] Question: How will the production of Valkyries impact financials once contracts are awarded? - Revenue will be recorded at the time of contract award, with completed units transferring to inventory [44] Question: What is the profit contribution expectation from unmanned systems this year? - Management expects unmanned systems to continue being profitable this year, despite challenges from fixed-price contracts [51] Question: What competitive threats exist in the tactical drone market? - Management stated that there are no competitive threats keeping them up at night, emphasizing their leading position in the market [68] Question: What areas would be targeted for potential M&A? - Management indicated that microwave electronics and turbomachinery would be top targets for tuck-in acquisitions [76][78]