AeroVironment, Inc. Announces Second Quarter Results and Resets

AeroVironment, Inc. Announces Second Quarter Results and Resets Guidance for Fiscal 2022

Investors with Internet access may listen to the live audio webcast via the Investor Relations page of the AeroVironment, Inc. website, http://investor.avinc.com. Please allow 15 minutes prior to the call to download and install any necessary audio software.

A supplementary investor presentation for the second quarter fiscal 2022 can be accessed at https://investor.avinc.com/events-and-presentations.

Audio Replay

An audio replay of the event will be archived on the Investor Relations section of the Company's website at http://investor.avinc.com.

ABOUT AEROVIRONMENT, INC.

AeroVironment (NASDAQ: AVAV) provides technology solutions at the intersection of robotics, sensors, software analytics and connectivity that deliver more actionable intelligence so you can Proceed with Certainty. Headquartered in Virginia, AeroVironment is a global leader in intelligent, multi-domain robotic systems, and serves defense, government and commercial customers. For more information, visit www.avinc.com.

FORWARD-LOOKING STATEMENTS

This press release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words such as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,” “plan,” or words or phrases with similar meaning. Forward-looking statements are based on current expectations, forecasts and assumptions that involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of our control, that may cause our business, strategy or actual results to differ materially from the forward-looking statements.

Factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to, the impact of our recent acquisitions of Arcturus UAV, Telerob and ISG and our ability to successfully integrate them into our operations; the risk that disruptions will occur from the transactions that will harm our business; any disruptions or threatened disruptions to our relationships with our distributors, suppliers, customers and employees, including shortages in components for our products; the ability to timely and sufficiently integrate international operations into our ongoing business and compliance programs; reliance on sales to the U.S. government and related to our development of HAPS UAS; availability of U.S. government funding for defense procurement and R&D programs; changes in the timing and/or amount of government spending; our ability to perform under existing contracts and obtain new contracts; risks related to our international business, including compliance with export control laws; potential need for changes in our long-term strategy in response to future developments; the extensive regulatory requirements governing our contracts with the U.S. government and international customers; the consequences to our financial position, business and reputation that could result from failing to comply with such regulatory requirements; unexpected technical and marketing difficulties inherent in major research and product development efforts; the impact of potential security and cyber threats; changes in the supply and/or demand and/or prices for our products and services; the activities of competitors and increased competition; failure of the markets in which we operate to grow; uncertainty in the customer adoption rate of commercial use unmanned aircraft systems; failure to remain a market innovator, to create new market opportunities or to expand into new markets; changes in significant operating expenses, including components and raw materials; failure to develop new products or integrate new technology into current products; risk of litigation, including but not limited to pending litigation arising from the sale of our EES business; product liability, infringement and other claims; changes in the regulatory environment; the impact of the outbreak related to the strain of coronavirus known as COVID-19 on our business; our ability to comply with the covenants in our loan documents; our ability to attract and retain skilled employees; and general economic and business conditions in the United States and elsewhere in the world. For a further list and description of such risks and uncertainties, see the reports we file with the Securities and Exchange Commission. We do not intend, and undertake no obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise.

NON-GAAP MEASURES

In addition to the financial measures prepared in accordance with generally accepted accounting principles (GAAP), this earnings release also contains non-GAAP financial measures. See in the financial tables below the calculation of these measures, the reasons why we believe these measures provide useful information to investors, and a reconciliation of these measures to the most directly comparable GAAP measures.

– Financial Tables Follow –

AeroVironment, Inc.
Consolidated Statements of Operations (Unaudited)
(In thousands except share and per share data)

	Three Months Ended						Six Months Ended
	October 30,			October 31,			October 30,			October 31,
	2021			2020			2021			2020
Revenue:
Product sales	$	70,998		$	65,528		$	124,114		$	123,885
Contract services		51,010			27,137			98,903			56,230
		122,008			92,665			223,017			180,115
Cost of sales:
Product sales		38,937			34,209			71,527			66,293
Contract services		40,616			17,605			80,312			37,560
		79,553			51,814			151,839			103,853
Gross margin:
Product sales		32,061			31,319			52,587			57,592
Contract services		10,394			9,532			18,591			18,670
		42,455			40,851			71,178			76,262
Selling, general and administrative		24,819			14,977			51,947			26,988
Research and development		14,297			11,976			28,005			23,079
Income (loss) from operations		3,339			13,898			(8,774	)		26,195
Other (loss) income:
Interest (expense) income, net		(1,379	)		115			(2,654	)		323
Other (expense) income, net		(10,048	)		72			(10,394	)		105
(Loss) income before income taxes		(8,088	)		14,085			(21,822	)		26,623
(Benefit from) provision for income taxes		(9,511	)		2,491			(10,468	)		3,698
Equity method investment income (loss), net of tax		1,133			(9,522	)		(8	)		(10,810	)
Net income (loss)		2,556			2,072			(11,362	)		12,115
Net (income) loss attributable to noncontrolling interest		(31	)		22			(94	)		59
Net income (loss) attributable to AeroVironment, Inc.	$	2,525		$	2,094		$	(11,456	)	$	12,174
Net income (loss) per share attributable to AeroVironment, Inc.
Basic	$	0.10		$	0.09		$	(0.47	)	$	0.51
Diluted	$	0.10		$	0.09		$	(0.47	)	$	0.50
Weighted-average shares outstanding:
Basic		24,641,614			23,936,950			24,630,838			23,914,737
Diluted		24,885,870			24,196,912			24,630,838			24,190,316

AeroVironment, Inc.
Consolidated Balance Sheets
(In thousands except share data)


	October 30,			April 30,
	2021			2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	104,770		$	148,741
Short-term investments		6,311			31,971
Accounts receivable, net of allowance for doubtful accounts of $566 at October 30, 2021 and $595 at April 30, 2021		26,552			62,647
Unbilled receivables and retentions		119,031			71,632
Inventories		81,944			71,646
Income taxes receivable		11,708			—
Prepaid expenses and other current assets		13,761			15,001
Total current assets		364,077			401,638
Long-term investments		11,271			12,156
Property and equipment, net		68,217			58,896
Operating lease right-of-use assets		26,058			22,902
Deferred income taxes		2,900			2,061
Intangibles, net		110,620			106,268
Goodwill		335,888			314,205
Other assets		6,276			10,440
Total assets	$	925,307		$	928,566
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	21,443		$	24,841
Wages and related accruals		21,697			28,068
Customer advances		10,322			7,183
Current portion of long-term debt		10,000			10,000
Current operating lease liabilities		6,440			6,154
Income taxes payable		214			861
Other current liabilities		31,313			19,078
Total current liabilities		101,429			96,185
Long-term debt, net of current portion		182,769			187,512
Non-current operating lease liabilities		21,665			19,103
Other non-current liabilities		10,302			10,141
Liability for uncertain tax positions		3,518			3,518
Deferred income taxes		5,390			—
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value:
Authorized shares—10,000,000; none issued or outstanding at October 30, 2021 and April 30, 2021		—			—
Common stock, $0.0001 par value:
Authorized shares—100,000,000
Issued and outstanding shares—24,805,829 shares at October 30, 2021 and 24,777,295 shares at April 30, 2021		2			2
Additional paid-in capital		261,612			260,327
Accumulated other comprehensive (loss) income		(1,677	)		343
Retained earnings		339,965			351,421
Total AeroVironment, Inc. stockholders’ equity		599,902			612,093
Noncontrolling interest		332			14
Total equity		600,234			612,107
Total liabilities and stockholders’ equity	$	925,307		$	928,566

AeroVironment, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)

	Six Months Ended
	October 30,			October 31,
	2021			2020
Operating activities
Net (loss) income	$	(11,362	)	$	12,115
Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities:
Depreciation and amortization		30,019			5,693
(Income) losses from equity method investments, net		(520	)		10,810
Amortization of debt issuance costs		258			—
Realized gain from sale of available-for-sale investments		—			(11	)
Provision for doubtful accounts		(35	)		(156	)
Other non-cash expense (income)		157			(473	)
Non-cash lease expense		3,358			2,393
Loss on foreign currency transactions		30			2
Deferred income taxes		(840	)		(621	)
Stock-based compensation		2,342			3,509
Loss on disposal of property and equipment		3,036			2
Amortization of debt securities		113			(12	)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		37,134			43,115
Unbilled receivables and retentions		(46,619	)		5,264
Inventories		(10,075	)		(6,244	)
Income taxes receivable		(10,667	)		—
Prepaid expenses and other assets		272			(1,029	)
Accounts payable		(3,587	)		(5,028	)
Other liabilities		3,642			(10,736	)
Net cash (used in) provided by operating activities		(3,344	)		58,593
Investing activities
Acquisition of property and equipment		(13,147	)		(6,052	)
Equity method investments		(6,245	)		(1,173	)
Business acquisitions, net of cash acquired		(46,150	)		—
Redemptions of available-for-sale investments		30,531			92,226
Purchases of available-for-sale investments		—			(116,945	)
Other		224			—
Net cash used in investing activities		(34,787	)		(31,944	)
Financing activities
Principal payment of loan		(5,000	)		—
Holdback and retention payments for business acquisition		(5,991	)		—
Tax withholding payment related to net settlement of equity awards		(1,176	)		(1,778	)
Exercise of stock options		119			86
Other		(16	)		—
Net cash used in financing activities		(12,064	)		(1,692	)
Effects of currency translation on cash and cash equivalents		(275	)		—
Net (decrease) increase in cash, cash equivalents, and restricted cash		(50,470	)		24,957
Cash, cash equivalents and restricted cash at beginning of period		157,063			255,142
Cash, cash equivalents and restricted cash at end of period	$	106,593		$	280,099
Supplemental disclosures of cash flow information
Cash paid, net during the period for:
Income taxes	$	1,923		$	2,364
Interest	$	2,283		$	—
Non-cash activities
Unrealized loss on available-for-sale investments, net of deferred tax benefit of $0 and $1 for the six months ended October 30, 2021 and October 31, 2020, respectively	$	3		$	61
Change in foreign currency translation adjustments	$	(2,017	)	$	75
Issuances of inventory to property and equipment, ISR in-service assets	$	12,472		$	—
Acquisitions of property and equipment included in accounts payable	$	415		$	818

AeroVironment, Inc.
Reportable Segment Results (Unaudited)
(In thousands)

	Three Months Ended October 30, 2021
	Small UAS		TMS		MUAS			All other			Total
Revenue	$	54,714	$	18,418	$	26,525		$	22,351		$	122,008
Gross margin		27,754		6,222		2,223			6,256			42,455

Income (loss) from operations		13,377		47		(7,000	)		(3,085	)		3,339
Acquisition-related expenses		297		163		108			280			848
Amortization of acquired intangible assets and other purchase accounting adjustments		707		-		6,358			3,257			10,322
Adjusted income (loss) from operations	$	14,381	$	210	$	(534	)	$	452		$	14,509

	Three Months Ended October 31, 2020
	Small UAS		TMS			MUAS		All other			Total
Revenue	$	58,265	$	18,961		$	-	$	15,439		$	92,665
Gross margin		29,695		5,943			-		5,213			40,851

Income (loss) from operations		15,386		(995	)		-		(493	)		13,898
Acquisition-related expenses		171		94			58		91			414
Amortization of acquired intangible assets and other purchase accounting adjustments		715		-			-		-			715
Adjusted income (loss) from operations	$	16,272	$	(901	)	$	58	$	(402	)	$	15,027

	Six Months Ended October 30, 2021
	Small UAS		TMS			MUAS			All other			Total
Revenue	$	94,638	$	37,594		$	48,904		$	41,881		$	223,017
Gross margin		44,674		12,211			5,404			8,889			71,178

Income (loss) from operations		15,335		(416	)		(13,381	)		(10,312	)		(8,774	)
Acquisition-related expenses		721		414			1,492			1,475			4,102
Amortization of acquired intangible assets and other purchase accounting adjustments		1,414		-			11,549			6,483			19,446
Adjusted income (loss) from operations	$	17,470	$	(2	)	$	(340	)	$	(2,354	)	$	14,774

	Six Months Ended October 31, 2020
	Small UAS		TMS			MUAS		All other		Total
Revenue	$	114,467	$	28,495		$	-	$	37,153	$	180,115
Gross margin		57,178		7,863			-		11,221		76,262

Income (loss) from operations		30,583		(5,140	)		-		752		26,195
Acquisition-related expenses		171		94			58		91		414
Amortization of acquired intangible assets and other purchase accounting adjustments		1,376		-			-		-		1,376
Adjusted income (loss) from operations	$	32,130	$	(5,046	)	$	58	$	843	$	27,985

AeroVironment, Inc.
Reconciliation of non-GAAP Earnings per Diluted Share (Unaudited)

	Three Months		Three Months		Six Months			Six Months
	Ended		Ended		Ended			Ended
	October 30, 2021		October 31, 2020		October 30, 2021			October 31, 2020

Earnings (loss) per diluted share	$	0.10	$	0.09	$	(0.47	)	$	0.50
Acquisition-related expenses		0.03		0.02		0.15			0.02
Amortization of acquired intangible assets and other purchase accounting adjustments		0.33		0.02		0.62			0.04
HAPSMobile Inc. JV impairment of investment in Loon LLC		—		0.35		—			0.35
Legal accrual related to our former EES business		0.32		—		0.32			—
Earnings per diluted share as adjusted (Non-GAAP)	$	0.78		0.48	$	0.62		$	0.91

Reconciliation of Forecast Earnings per Diluted Share (Unaudited)

	Fiscal year ending
	April 30, 2022
Forecast loss per diluted share	$	(0.47) - (0.33)
Acquisition-related expenses		0.16
Amortization of acquired intangible assets and other purchase accounting adjustments		1.22
Legal accrual related to our former EES business		0.32
Forecast earnings per diluted share as adjusted (Non-GAAP)	$	1.23 - 1.37

Reconciliation of Fiscal Year 2021 Actual and 2022 Forecast Non-GAAP adjusted EBITDA (Unaudited)

	Fiscal year ending		Fiscal year ending
(in millions)	April 30, 2022		April 30, 2021
Net (loss) income	$	(12) - (8)	$	23
Interest expense, net		5		1
Benefit from income taxes		(12) - (9)		1
Depreciation and amortization		65		19
EBITDA (Non-GAAP)		46 - 53		44
HAPSMobile Inc. JV impairment of investment in Loon LLC		—		10
Equity method investment gain		(2)		—
Legal accrual related to our former EES business		10		9
Acquisition-related expenses		5 - 4		9
Adjusted EBITDA (Non-GAAP)	$	59 - 65	$	72

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