AeroVironment Announces Fiscal 2023 Second Quarter Results

A supplementary investor presentation for the second quarter fiscal year 2023 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, including but not limited to 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 or the risk of unauthorized access to our, our customers’ and/or our suppliers’ information and systems; changes in the supply and/or demand and/or prices for our products and services; increased competition; 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; unexpected changes in significant operating expenses, including components and raw materials; failure to develop new products or integrate new technology into current products; unfavorable results in legal proceedings; our ability to respond and adapt to unexpected legal, regulatory and government budgetary changes, including those resulting from the ongoing COVID-19 pandemic, such as supply chain disruptions, vaccine mandates, the threat of future variants and potential governmentally-mandated shutdowns, quarantine policies, travel restrictions and social distancing, curtailment of trade, diversion of government resources to non-defense priorities, and other business restrictions affecting our ability to manufacture and sell our products and provide our services; our ability to comply with the covenants in our loan documents; our ability to attract and retain skilled employees; the impact of inflation; and general economic and business conditions in the United States and elsewhere in the world; and the failure to establish and maintain effective internal control over financial reporting. 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.

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


	Three Months Ended						Six Months Ended
	October 29,			October 30,			October 29,			October 30,
	2022			2021			2022			2021
	(Unaudited)						(Unaudited)
Revenue:
Product sales	$	62,343		$	70,998		$	120,317		$	124,114
Contract services		49,241			51,010			99,783			98,903
		111,584			122,008			220,100			223,017
Cost of sales:
Product sales		39,445			38,937			72,344			71,527
Contract services		46,249			40,616			88,152			80,312
		85,694			79,553			160,496			151,839
Gross margin:
Product sales		22,898			32,061			47,973			52,587
Contract services		2,992			10,394			11,631			18,591
		25,890			42,455			59,604			71,178
Selling, general and administrative		23,613			24,819			45,556			51,947
Research and development		16,591			14,297			31,636			28,005
(Loss) income from operations		(14,314	)		3,339			(17,588	)		(8,774	)
Other (loss) income:
Interest expense, net		(2,309	)		(1,379	)		(3,912	)		(2,654	)
Other income (expense), net		810			(10,048	)		404			(10,394	)
Loss before income taxes		(15,813	)		(8,088	)		(21,096	)		(21,822	)
Benefit from income taxes		(10,457	)		(9,511	)		(7,851	)		(10,468	)
Equity method investment (loss) income, net of tax		(1,273	)		1,133			(1,773	)		(8	)
Net (loss) income		(6,629	)		2,556			(15,018	)		(11,362	)
Net income attributable to noncontrolling interest		(39	)		(31	)		(45	)		(94	)
Net (loss) income attributable to AeroVironment, Inc.	$	(6,668	)	$	2,525		$	(15,063	)	$	(11,456	)
Net (loss) income per share attributable to AeroVironment, Inc.
Basic	$	(0.27	)	$	0.10		$	(0.61	)	$	(0.47	)
Diluted	$	(0.27	)	$	0.10		$	(0.61	)	$	(0.47	)
Weighted-average shares outstanding:
Basic		24,900,873			24,641,614			24,852,219			24,630,838
Diluted		24,900,873			24,885,870			24,852,219			24,630,838

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


	October 29,			April 30,
	2022			2022
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	101,417		$	77,231
Short-term investments		—			24,716
Accounts receivable, net of allowance for doubtful accounts of $74 at October 29, 2022 and $592 at April 30, 2022		31,664			60,170
Unbilled receivables and retentions		92,457			104,194
Inventories, net		109,810			90,629
Income taxes receivable		8,940			442
Prepaid expenses and other current assets		13,244			11,527
Total current assets		357,532			368,909
Long-term investments		22,462			15,433
Property and equipment, net		52,415			62,296
Operating lease right-of-use assets		25,580			26,769
Deferred income taxes		8,098			7,290
Intangibles, net		88,660			97,224
Goodwill		334,963			334,347
Other assets		1,972			1,932
Total assets	$	891,682		$	914,200
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	26,317		$	19,244
Wages and related accruals		25,049			25,398
Customer advances		7,074			8,968
Current portion of long-term debt		10,000			10,000
Current operating lease liabilities		7,564			6,819
Income taxes payable		26			759
Other current liabilities		27,824			30,203
Total current liabilities		103,854			101,391
Long-term debt, net of current portion		155,622			177,840
Non-current operating lease liabilities		20,043			21,915
Other non-current liabilities		748			768
Liability for uncertain tax positions		1,450			1,450
Deferred income taxes		2,482			2,626
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value:
Authorized shares—10,000,000; none issued or outstanding at October 29, 2022 and April 30, 2022		—			—
Common stock, $0.0001 par value:
Authorized shares—100,000,000
Issued and outstanding shares—25,157,618 shares at October 29, 2022 and 24,951,287 shares at April 30, 2022		4			2
Additional paid-in capital		283,789			267,248
Accumulated other comprehensive loss		(8,480	)		(6,514	)
Retained earnings		332,170			347,233
Total AeroVironment, Inc. stockholders’ equity		607,483			607,969
Noncontrolling interest		—			241
Total equity		607,483			608,210
Total liabilities and stockholders’ equity	$	891,682		$	914,200

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


	Six Months Ended
	October 29,			October 30,
	2022			2021
Operating activities
Net loss	$	(15,018	)	$	(11,362	)
Adjustments to reconcile net loss from operations to cash provided by (used in) operating activities:
Depreciation and amortization		32,275			30,019
Loss (income) from equity method investments		1,773			(520	)
Loss on deconsolidation of previously controlled subsidiary		189			—
Amortization of debt issuance costs		422			258
Provision for doubtful accounts		19			(35	)
Other non-cash expense, net		565			157
Non-cash lease expense		3,775			3,358
(Gain) loss on foreign currency transactions		(59	)		30
Unrealized gain on available-for-sale equity securities, net		(928	)		—
Deferred income taxes		(808	)		(840	)
Stock-based compensation		4,402			2,342
Loss on disposal of property and equipment		825			3,036
Amortization of debt securities		125			113
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		28,012			37,134
Unbilled receivables and retentions		11,696			(46,619	)
Inventories		(23,836	)		(10,075	)
Income taxes receivable		(8,539	)		(10,667	)
Prepaid expenses and other assets		(1,117	)		272
Accounts payable		6,823			(3,587	)
Other liabilities		(8,664	)		3,642
Net cash provided by (used in) operating activities		31,932			(3,344	)
Investing activities
Acquisition of property and equipment		(7,587	)		(13,147	)
Equity method investments		(2,774	)		(6,245	)
Equity security investments		(5,100	)		—
Business acquisitions, net of cash acquired		(5,105	)		(46,150	)
Proceeds from deconsolidation of previously controlled subsidiary, net of cash deconsolidated		(635	)		—
Redemptions of available-for-sale investments		25,945			30,531
Purchases of available-for-sale investments		(1,326	)		—
Other		—			224
Net cash provided by (used in) investing activities		3,418			(34,787	)
Financing activities
Principal payments of term loan		(22,500	)		(5,000	)
Holdback and retention payments for business acquisition		—			(5,991	)
Proceeds from shares issued, net of issuance costs		11,778			—
Tax withholding payment related to net settlement of equity awards		(853	)		(1,176	)
Exercise of stock options		682			119
Other		(14	)		(16	)
Net cash used in financing activities		(10,907	)		(12,064	)
Effects of currency translation on cash and cash equivalents		(257	)		(275	)
Net increase (decrease) in cash, cash equivalents, and restricted cash		24,186			(50,470	)
Cash, cash equivalents and restricted cash at beginning of period		77,231			157,063
Cash, cash equivalents and restricted cash at end of period	$	101,417		$	106,593
Supplemental disclosures of cash flow information
Cash paid, net during the period for:
Income taxes	$	718		$	1,923
Interest	$	3,398		$	2,283
Non-cash activities
Unrealized (gain) loss on available-for-sale investments, net of deferred tax expense of $0 for the six months ended October 29, 2022 and October 30, 2021, respectively	$	(26	)	$	3
Change in foreign currency translation adjustments	$	(1,992	)	$	(2,017	)
Issuances of inventory to property and equipment, ISR in-service assets	$	4,085		$	12,472
Acquisitions of property and equipment included in accounts payable	$	810		$	415

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


	Three Months Ended October 29, 2022
	Small UAS			TMS		MUAS			HAPS		All other			Total
Revenue	$	26,681		$	31,101	$	27,281		$	9,066	$	17,455		$	111,584
Gross margin		12,319			12,636		(6,884	)		3,001		4,818			25,890

Income (loss) from operations		(2,079	)		2,004		(15,242	)		1,564		(561	)		(14,314	)
Acquisition-related expenses		-			-		119			-		450			569
Amortization of acquired intangible assets and other purchase accounting adjustments		669			-		5,897			-		1,276			7,842
Adjusted income (loss) from operations	$	(1,410	)	$	2,004	$	(9,226	)	$	1,564	$	1,165		$	(5,903	)


	Three Months Ended October 30, 2021
	Small UAS		TMS		MUAS			HAPS		All other			Total
Revenue	$	54,714	$	18,418	$	26,525		$	10,342	$	12,009		$	122,008
Gross margin		27,754		6,222		2,223			3,944		2,312			42,455

Income (loss) from operations		13,377		47		(7,000	)		2,073		(5,158	)		3,339
Acquisition-related expenses		297		163		108			58		222			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	)	$	2,131	$	(1,679	)	$	14,509

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


	Three Months Ended			Three Months Ended		Six Months Ended			Six Months Ended
	October 29, 2022			October 30, 2021		October 29, 2022			October 30, 2021

(Loss) earnings per diluted share	$	(0.27	)	$	0.10	$	(0.61	)	$	(0.47	)
Acquisition-related expenses		0.02			0.03		0.03			0.15
Amortization of acquired intangible assets and other purchase accounting adjustments		0.25			0.33		0.47			0.62
Legal accrual related to our former EES business		—			0.32		—			0.32
Earnings (loss) per diluted share as adjusted (Non-GAAP)	$	—		$	0.78	$	(0.11	)	$	0.62

Reconciliation of non-GAAP adjusted EBITDA (Unaudited)

	Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
(in millions)	October 29, 2022			October 30, 2021			October 29, 2022			October 30, 2021
Net (loss) income	$	(7	)	$	3		$	(15	)	$	(11	)
Interest expense, net		2			1			4			3
Benefit from income taxes		(10	)		(10	)		(8	)		(10	)
Depreciation and amortization		19			17			32			30
EBITDA (Non-GAAP)		4			11			13			12
Amortization of purchase accounting adjustment included in loss on disposal of property and equipment		—			1			—			1
Stock-based compensation		2			—			4			2
Equity method and equity securities investments activity, net		—			(1	)		2			—
Acquisition-related expenses		1			1			1			4
Legal accrual related to our former EES business		—			10			—			10
Adjusted EBITDA (Non-GAAP)	$	7		$	22		$	20		$	29

Reconciliation of Forecast Earnings per Diluted Share (Unaudited)

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