AVAV - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen, and welcome to the AeroVironment Second Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode. And later, we will conduct a question-and-answer session after management's remarks.

As a reminder, this conference is being recorded for replay purposes. With us today from the Company is President and Chief Executive Officer, Mr. President Financial Vice Ms. Senior Nawabi; and Officer, Chief Wahid Relations, President Teresa Vice Investor Mr. Covington; and of Steven Gitlin. At I to Mr. this conference the time, would like turn to over Gitlin. go Please ahead.

Steven Gitlin

earnings our Thank certain call, of Private contains the quarter welcome Securities Victoria, within presented note to statements of you, fiscal on and information XXXX XXXX. meaning call. forward-looking this Litigation Please that Act second the Reform

contain limitation, indicate or or without include plan, any such may or achievements, future statements may project, forecast, statement anticipate, Forward-looking predict, phrases believe, performance imply results, and intend, meaning. expect, words as that with estimate, similar words or

new compliance to procurement international government; of of U.S. defense actual funding government based for are sales results differ results control, our and/or international in actual cause the grow; not statements which with involve of and in the in customers, export our aircraft failure operate and/or failing market of competition; changes programs; to the rate new difficulties to, reputation and products differ but uncertainty with are that that our unexpected to, regulatory in risks forecasts uncertainties, the services; expenses, governing to on Forward-looking our requirements vehicles, in research could and regulatory research potential and and efforts; changes market risks to outside the and developments; liability, limited changes not the assumptions of prices and forward-looking that include, threats; the product competitors materially our and comply unmanned U.S. we customer development materials; spending; to financial current environment; of and that infringement regulatory Factors remain to adoption related and economic products; the expectations, a development governmental markets forward-looking the government statements strategy the States economic, limited business, may commercial operating demand inherent in on and significant availability and but technical supply government in or potential long-term including, changes product components activities including in business impact such amount competitive, and of business statements. and/or systems in and factors cause electric the to for cyber materially for the claims; the increased from changes from reliance position, and the timing including consequences in develop the could our technological response raw result in requirements, and from marketing innovator control and major laws, and need strategy general extensive opportunities; create other security to to failure failure and future with to our U.S. elsewhere world. United business contracts conditions

as further contained call list and of the is sensitive accurate risks reports contains file and a content the time information uncertainties, only For with and this The The events call. the occurring such after circumstances remarks XXXX. to or reflect them Company X, undertakes December conference obligation any revision the to today, to in of statements no Securities we Exchange Commission. conference description that this make update to of see or our

We with from Nawabi. will begin Wahid? now Wahid remarks

Wahid Nawabi

afternoon. Good Steve. you, Thank

as will balance long-term fiscal review and will outlook our Teresa financial briefly the quarter I for year. AeroVironment's we in then Covington On plans. our year value XXXX creating will and financials XXXX focus results, you fiscal quarter today's significant successfully quarter share second and I plans execute the momentum then stockholders, customers, on long-term made year with reflect in for we quarter second results review the detail, discuss strong our during and call, progress of second Our on and continued XXXX fiscal our employees. on the

Following Steve, delivered as take strong follows: messages your results. will our First, three and are questions. we the main Today’s and plan I in quarter this, second Teresa, successfully executed

strong history, increased AV's objectives. are value. full-year executing order which fourth in the create revenue was to quarter highest and third, flow remain the Second, excited into strategy our our in focused visibility on And we long-term

delivered earnings share margin last Now quarter. year's $X.XX XX%, let's of second of year-over-year rose of by our sharply $X.XX million loss in share. $XX $XX.X and strong results the million increased gross per per review second diluted Revenue by team increased from quarter of the XX%,

$XXX us the industrial equates million, revenue globally, and from small Across current Abroad of quarter. and first We board, in end UAS charging, earn increased quarter. to and fiscal our backlog to our XX% up This visibility the the for results drove year. we leadership products to and produced EV which increase domestically. Robust in solid States the our for EV significantly in backlog charging, the funded demand TMS market EV United continue in services systems test

During shared an will our provide which update quarter fiscal fourth XXXX I now you fiscal priorities on. five call, XXXX, I for of with

we First, footprint our international increased in core domestic and markets. small our in UAS business,

at of the U.S. believe Puma previously UAS closer AE. manner Marine In customers. the U.S. some Puma recently would by small robust discussed we sensor international for stockholders. our support new Europe to the basis respond Middle performance, USSOCOM U.S., and for long regions, local increasingly providing a customer customers our systems third East. can capabilities increase them established winning Force operations in system enhancements. in increasing Supporting in support the Puma In a the least USSOCOM, the have small but Operations Air demand Soldier Corp, Puma setup Puma army’s choice large forces. including three and program Puma Sensor by and our helps and and within two frequency U.S. support to also for X many U.S. and United our Special customers similar small important into and these Army and footprint Navy. upcoming key government, in improve that our from and A security only AE opportunities Mantis Since the its with we Variant so requirement of or learn XXXX capability includes logistics U.S. better U.S. can by relying announced of a an greater not Being homeland generated demand other or foreign Our Command X continuing and their timely plan requirements we the iXX system States generation customers adopted to customers their AE program We we protect number Army, to UAS continued them. have expand regional operate their global suite SBS Australia Capable efficiently our Environment All cases, Patrol. program is translate UAS, with relocation strong a and which it on XX/X to military international their value Borne We needs us more on Puma continued successfully. emerging Border international competition. to international been AE competition, promptly has about in satisfaction, as time, that Customs AE the our launched significantly adopted the is program Back range anticipate

of update would an like to on these status I opportunities. the Now provide

recently for from or UAS This Office PEO the Executive its they small we PEO are As appropriate for soldier to the soldiers to and other small focus responsibility Aviation expected, employed evaluation. systems from Army Nano the UAS Soldier. lifesaving and by, by, Program moved and on because positioned is Aviation UAS directly for on fighters program deliver information transported delivered Army We the SBS the frontlines. our Snipe initial war

system a unmatched or unscheduled Tactical the evaluation Puma completing referred competition. scheduled of program next-generation take I frequency upgraded army small early night a deliveries focus to data stability on We from into believe of as the reliability. calendar contract for program the for Army we're evaluations and XXXX. place feedback won Open effort incorporating in has and the to offers We station to avionics yet the modules These are with a Government relocation a of leadership Architecture multi-sensors evaluation. TOGA. with control are UAS day and link unique Snipe We relocation that Snipe an develop combined combination frequency ground to upcoming Phase

evaluation army, program and million over We the of work experience U.S. have are Still it. far within to UAS. Flight provided of win and market, or uniquely FCS supporting we a Coast The to to and II been about core we continue relocation value Phase System and be government also total UAS feedback have positioned we The of this years anticipated the initial an proposal $XXX encouraging. is positive estimated so multiple Control the on recently to Guard with received program. believe has frequency customer small TOGA we

U.S. support and Customs Border to initial in systems. also We continue Patrol and of Puma evaluation our Raven the their

Now Systems fiscal Missile our discuss TMS I Tactical our XXXX or second priority, will business.

development and better learn of respect addressable House of We've important DoD highlights the team solutions also funding and provide President’s strong greatly the our deliver R&D our uniquely budget TMS customer DoD to hope forces to are Switchblade the variants identified requests critical $XX budget, and process while Our as its to progress a working more innovative With AeroVironment and U.S. funded customer the dangerous for to engagement. way customers Customer within new toward opportunities multiple approximately funding we strong in providing XXXX damage. very significant conclusion. for environments, requirements proceeds collateral million continues supplier protect that we offering in we as results positioning the make budget achieved through solutions. reducing capabilities. important recognition committees continued TMS by a the in of Senate for U.S. also of mission reflects

one strong awareness customers we our began Solutions platform Phase we where agriculture also Quantix Brazil, build. we In selling began the launch which United and three strong January in highly Commercial our solutions progress our and when a our III testing in AV to by interest. we Phase our in to we directly dealers upon plan. in CIS, or our experience States II, Phase to offering beta market. I, will precision differentiated in in generate Drone establish in begin the In agriculture to foundation supported about make Third, Information announced year-ago, continue and phase market business DSS through target

customer in global the We and established line contract CIS operations seasons hemispheres. you and Southern and Recently, scale with response and efficiently manufacturer. integrated end-to-end new to market Northern will benefit differentiated Quantix recognizing We this enable from solution. address positive. learning testing extremely in are market by our our value improve to automated proposition Early we Quantix successfully accelerate us channel been will forward more production designed help production has of world-class Customers and to will with operation progress with ability enhance massive and market to leading assembling growing This providing capabilities, business through we demand. agriculture DSS our our and look launching our harvesting the as our and unique We introduction. updates continuous into our potential AV already solution. the which

For level or the Systems and Energy for briefly In X initiatives, charging fiscal EV – would X level operate level industrial Efficient we progress X our I level EVs. XXXX development, electric passenger X charging, of discuss for vehicle set and battery systems EES, EES of fourth and solutions business. and comprehensive in our

and advanced world. manufacturers, universities, Our around by and test developers are EV battery chemistry testing the researchers, systems used battery battery facilities

solutions Chevrolet, electric and charging And provider accessory systems and as award GM, TurboCord charging our have Our North These this distribution AeroVironment tow, makers reach centers BMW the Kia, of announced Volvo, from September, past winning charging America. auto all EV under the their we our Chrysler, and auto and who Ford, selected the Fiat industrial selection competitors. been include and the global makers plug-in Hyundai, their recharge solution name official In forklifts, charging by Nissan, chosen those factories our our Mitsubishi, in globally. of passenger making over MINI PosiCharge of brand for choice airports systems nine EV by trucks vehicles.

fifth within our our organization. internal for For priority positive our fiscal initiatives on XXXX, generating results

we talent momentum people speeding to the in our innovation maintain strategy forward Our up efforts order top is recruitment to hire and leadership. need

by efficiencies business is implementing efforts linear operations improvement and process Our create efficient and drive value practices business There and to still improvement more stockholders. business our our continuous process and halfway encouraged initiative are progress. strengthening improvement best but by processes. year, through am ultimately These our improvements more the us for will I do, continuous for

our of review will and Now, a provide Teresa Teresa? second year-to-date detailed financial performance.

Teresa Covington

quarter XX% an you, of as The QX AeroVironment's second are $XX.X $XX.X million. Wahid, everyone. of for product revenue million, contract and from increase an in million. fiscal afternoon, in sales $XX.X was $XX.X the follows; services second million revenue or Thank $X.X an XXXX results good resulted fiscal XXXX increase revenue quarter million in increase of increase and revenue of of from

by second million. an million. was in to from to revenue an charging increase segment, of industrial $XX a offset or electric quarter EES of decrease the million, in million. of by revenue funded million in revenue $X.X XXXX The deliveries of increase of an PosiCharge partially primarily quarter R&D increase fiscal $XX.X XXXX from the was $X.X customer was XX% an $X.X million, at revenue a $XX.X deliveries second of increase of Looking $XX.X increase due work of was of in and of due X% or million, UAS million vehicle product product systems. $X.X decrease million service This increase revenue $X.X revenue fiscal

increase gross the gross to margin, quarter XXXX. Turning in primarily $XX of increase an margin to million was million the million. gross By million margin of in was as XXXX fiscal gross million. the product due compared or to $XX.X for increase fiscal UAS $XX.X increased to for margin XX% $XX.X second margin second of $XX.X or from quarter XX% The $X.X an of sales for in margin and million quarter second segment, service

quarter due XXXX revenue, to gross increased to due sales sales million increase primarily proportion XX% XX% total to margin gross and an As increase volume to the EES product sales volume. an an from in product a to second the for of primarily of million increased UAS percentage $X.X increase of revenue. fiscal margin in $X.X for

of from SG&A XXXX. expense XXXX for As assets XX% $X.X $X.X $XX.X expense revenue, the of was the second gross compared for $X.X from million revenue $XX.X fiscal or of or to million intangible operations revenue of XX%. XXXX of the expense of SG&A EES of operations a quarter XX% for of fiscal identifiable increased $X.X or million of revenue increased XXXX. XXXX fiscal fiscal second the for percentage minus relations million or goodwill revenue for margin XX% of to of second million quarter quarter situation and to majority uncertainty XX% we of in quarter Turkish X% quarter owned within loss or subsidiary. of revenue to Income XXXX. during recorded R&D of quarter to political totaling quarter charges fiscal a was the to second to and impairment the the the fiscal current compared fiscal $X million the SG&A and for Due for XX% was second the the U.S. revenue Turkey our Turkey, second of XXXX million of XX% between R&D expense from of second of the or compared

quarter from tax $X attributable to fiscal earnings stock exercises to $X.X tax to of XXXX income $X.X XXXX income of was due net for XXXX of excess for partially primarily awards other share and the was by fiscal $XX.X R&D effective included The quarter The diluted to second options. of fiscal compared XXXX SG&A $X.XX the compared tax X.X% stock benefit of of in restricted million a for was AeroVironment million of the offset prior million. vesting XX.X% discrete million second expense as income the million, second XXXX. a decrease second loss $X.X the the income net for second AeroVironment for increase income income higher of year Net million of of of attributable resulting was $X.X gross million and quarter $X.X increase fiscal income tax in operating share of fiscal an XXXX. million. the per rate to per or or a $X.X the rate for to fiscal effective Net loss quarter quarter of second rate $X.XX of an While compared other margins quarter effective

fiscal first $XX.X to to product XXXX $X.X industrial offset UAS and first increased million the margins first increase deliveries, gross $X.X systems. fiscal in million $XX.X million. was to $XX.X compared electric vehicle an first $XX.X million. Gross Revenue product half product or an XXXX of XXXX half $X.X million. the service million as deliveries half increase by due the million customer to million, a of of work product increase revenue increase to in was ended of by of increase months primarily six XXXX. in in revenue XXXX $XX.X to fiscal as first revenue funded due decrease fiscal margins an half our increased in fiscal increase in vehicle systems, million margin XXXX through margin $XXX.X for moving XX% $XX.X to in service decrease million. of the service of a for $X.X increase contract primarily Now the The increased EES for to million XXXX, the XX, electric of for of due in for $X.X first October million, half XXXX. first of million UAS XX% decrease million the results. million charging an an deliveries million a or in was half revenue due primarily passenger partially to $XXX.X for charging of from partially for a PosiCharge fiscal $XX The by $XX.X partially million of revenue an $XX.X million increase R&D of compared $XX.X half offset was offset $XX.X fiscal of

XX%, the and increase increase proportion increased revenue. increased margin gross for to for sales percentage $X.X due primarily total a $X.X half sales fiscal of of margin an to gross from million to in of the UAS product the to first revenue, million XX% As XXXX. EES volume

of was taxes of was fiscal of first related revenue, R&D $XX.X $XX.X revenue, $X.X the of primarily million half Turkish fiscal to Net The other fiscal of XX% of a income revenue higher million of XXXX. XXXX half $X.X Net the effective million net to fiscal to million or first to half the an the a tax net or stock million due quarter XX% fiscal interest effective of other effective subsidiary. EES revenue for a income first or revenue or half increase rate XXXX loss of first fiscal half fiscal gross or half increase XX% expense from share of tax the sales AeroVironment XXXX of prior impairment foreign awards from exchange quarter in half $XX.X million for first of restricted Benefit other rate the of SG&A XXXX. income $X net option. Unfunded to of increase share benefit first benefit $X.X earnings volume. SG&A fiscal half the XXXX of the XX% of compared to was short-term compared rate primarily was XXXX. XXXX the fiscal The million the to or and expense the increased fiscal for for margin XXXX totaling fiscal as the compared of for to included half The for expense XX% SG&A majority from minus of to for excess tax owned of first the from or of the year of As stock XX, $XXX.X first discrete $XX backlog of for million $X.X second tax XX% for was R&D to million million, or first XXXX. $X.X per half was first $XX.X half increase and income fiscal compared half per our percentage as was million to loss of $X.XX the in of year for of expense for from fiscal income the XX.X% to of XXXX. XXXX. XX.X% was XXXX due diluted loss compared for income October charges increase the an the for million. $X.X was the $XX.X prior taxes primarily of resulting exercises million income $X.XX compared XX%, first income vesting of of expense and rate million attributable The XXXX a million to in XXXX. fiscal of due attributable fiscal for X% AeroVironment an a of XXXX first $X.X a first income

XXXX. was at XXXX fiscal XXX the compared of XXXX. the compared to inventory end $XX $XX XXX quarter and quarter days in fiscal XXXX. of second the quarter the of million from XXX end end increase at for the was increase quarter of at at approximately fiscal Turning million, quarter. XXXX prior Accounts of first receivable cash, $X.X approximately second days outstanding investments XXXX. Net unbilled [$XXX.X] end XXXX, for the second to year million, XXXX XXXX second of totaled of $XX.X quarter sheet, quarter and from the for of our the the XX balance the inventory Total the receivables to from of million XX fiscal of end a of of year days end quarter second quarter fiscal of XXXX fiscal prior the the decrease sales for quarter an days totaled days the XXX million compared fiscal Days were the $XX.X $X.X equivalents for to from of and the of of cash including first million million, days of of fiscal of fiscal retention the end days second an and fiscal second and quarter quarter the prior

equipment amortization Turning approximately and quarter we depreciation year fiscal and expenditures of recognized to $X.X invested the second XXXX, in million expense. capital capital and improvements $X million of property in

we capital XXXX, improvements of approximately million recognized and of million amortization year property expense. For and in $X.X fiscal invested equipment and depreciation the first half $X

our update an Now to visibility. XXXX fiscal

of second quarter funded $X.X As of year contracts XXXX needed backlog of have quarter-to-date million, expect fiscal bookings $X fiscal in we XXXX million, of incrementally from ending QX in today, $XX XXXX backlog that to to execute revenue execute unfunded fiscal we we year-to-date anticipate $XXX million, in that midpoint balance the million. million. to the year of of the XX% to during of that to Revenues hold we million revenues revenue recognize $XXX $XX to guidance. flat revenue EES adds relative of This up or at anticipate last

Now turn I things to Wahid XXXX. for year would back to fiscal AV’s like expectations to discuss

Wahid Nawabi

Teresa. Thanks,

fiscal have We on enhanced full-year successfully this and visibility been delivering significantly plan achieving our our year into have results. our

We value made for significant have creation. our positioning business also long-term progress,

recognized solutions as products Our mission-critical for are markets target our applications. choice throughout of the

criteria. their to year The systematically These numerous on technical according success U.S. control, regulatory expect contractual and performance, demand solution military In evaluate for to based example, on management, the and innovation must used customers’ solutions. importantly, capabilities. cost choice, products. differentiated customers our outstanding support of a and our and rightfully they them continues to certainty. become compliance. when criteria develop time ensure proceed market, most include every Army around schedule, deliver the help suppliers and supply and provide and our their We And we deliver world right list its are obligations. engine to with first provide and choosing that with compelling more must AeroVironment do solutions To growing customers Our that than them are thoroughly service suppliers

This BXC work Missile company hard of the to Superior on Tier Incentive much us that and team. X Superior into Textron. other Program, tiers, suppliers past X small channel other other our August Lockheed with Army many of of our and at industry. and partner creating revealed Amazon part XXXX BXB larger procurement such scores ranking, based larger places portals us much had three to than measures status. am in the business, them as rankings exceeding ranking achieved routinely e-commerce as amongst we EES track which or being are AeroVironment. hard the of above all Tactical Supplier and as deserve. EV team's websites remain and and it testament Martin, These our own customer is and this X UAS measured AeroVironment’s customer's companies that our places satisfaction Supplier announced Tier charging It of our ranking In a delighted companies Tier customer the also to the experiences, highest AeroVironment of the highest proud serve and and our of indicators they work and continue As and Boeing, Raytheon, in rank such record extremely performance groups continue industry. dedication strong unmatched The expectations as I and Systems the so web performance

adoption which survey in creation. we and As our to the business, market growth strategic are initiatives, accelerated we three toward investments advance fiscal XXXX, all value well developing

to for defect business the TMS which solution Switchblade, is Army. includes LMAMS the Our

this our advanced variants production. of Switchblade and several development, customer over evaluation, past grown is have moving business We with considerably years and family the initial forward

poised fully XX% pursue satellite strong offers engaged $X.XX opportunities Our with we a are compelling performance, guidance our stratospheric a share value on strategic potential annual range, commercial uniquely Based our and visibility with which is information into we translates platforms. development diluted still customers our solution market million $XXX our million midpoint to healthy to per of $XXX reiterate $X.XX. of earnings partners and deliberate careful to for revenue to innovative the And of guidance of launch and after process. interested with proposition

to higher mix year. last contracts lower the cost-plus the revenue meaning to price and in fixed of revenue than in gross result product expect revenue margin versus blend continue We this of services margin contracts lower year margin

results. fourth visibility long-term on internal flow expect customers full-year. revenue trust you to unique and value. are highest in the excited I to Once employees quarter Strong for messages XX% outstanding continue the to thank history AV's and for our into we drive again, provide R&D our thank solutions as help who three strong we high us in remain delivered are our continuously create increased and us also delivering in to to to plan executing our support. was our which of executed our exceptional of focused customers. expectations their of the innovative Thank execution creating revenue our We order confidence second and demanding follows; investments that quarter you stockholders and to continued their dedication today's whose for and the full-year successfully improve objectives, main X% to value succeed. strategy them our all to And and

on and that We are excited Aerovironment lie for at capitalizing us. forward to ahead the about here look many the future opportunities

Now Teresa, will and questions. I your Steve, take

Operator

from [Operator first you. comes Please from Ken our Herbert go And ahead. Canaccord. Instructions] question Thank

Kenneth Herbert

Hi. Good afternoon, everybody.

Wahid Nawabi

Ken. Hi,

Kenneth Herbert

systems Teresa, if little Wahid don't or in TMS any you you within the a within some that know the the percentages, more but specific any the on with just in the exact quarter in versus I provide help either margins gross on UAS the typically Hi. color gross appreciated? segment be of international maybe versus margins mix the domestic would color I or give could on to legacy just quarter wondered sales. strong detail and more granularity strong

Wahid Nawabi

gross orders fixed mix cost-plus you given attribute price products of as percentage on all international contracts, services, versus customer know the versus contract customer of quarter. Ken revenue our orders to domestic Sure. versus quarter, any that margin

typically our demand business all strong false break we the across made strong our percentages product throughout revenue as We or primarily short in as that remarks, margin line, healthy my entire products. portfolio I feel mentioned quarterly we it by conclusions could product we results. so of don't saw And and to progress because gross lead based across very our on you know

across of to all lines, and focused are this long-term of results with very value our creation we're the on pleased quarter fiscal objectives for XXXX. and on our we all therefore, product the and businesses we're So achieve track year

Kenneth Herbert

Thanks, Wahid. market you you or just any saw kind what Can detail demand of provide on specifically UAS? within international for international growth

Wahid Nawabi

Sure.

saw customer said remarks. we very healthy see respect product specifics pace. past that strong as all to as our about portfolio the I In demand There's in we Systems our in continue business customer’s international several we in I demand of providing of our confidentiality at business demand also mentioned details. my markets. for any growing We've across on our terms Tactical over So Missile as strong years general, been

we facility competition Australia logistics saw we in So be board, we the the that we will for won Ken our and healthy repair across and the logistics established in very progress products the in and Australia. that also to come years delivering

very we are the results for execution and on and of very So healthy board the remainder across focused with pleased the year. our

Kenneth Herbert

Okay.

question. final one Just

current part visibility, the much of again TOGA, combined. highlighted, that the see million $XXX on perhaps be aside fiscal on and of several of the timing years would over some XXXX You XXXX, versus you fiscal I from fiscal for in your of coming which how guess FCS variables the would are opportunity the timing what budget? around that Based sort the the the of as potentially key opportunity and XXXX just obvious XXXX

Wahid Nawabi

programs predictability the to question the and budgeting of timing the so process Ken the these really through U.S. how a primarily progress process. Sure, government due and that approval in and is answer to DoD difficult opportunities

It we’re do believe the with moving. months that anticipate my well. quite mentioned never the positioned for expect we worth million that positioned and to $XXX we We the going do that's but year. shared but overall although progress there's a several us obviously remarks, As that about timeframe obviously exactly whether progressively remarks, as keep my made has guarantee win. I happen believe that us and compete customer and to has well We over of that it’s slowly, to Overall, opportunity details in in last mention. we’re quite they to mentioned roughly I've

Operator

Stifel. question from ahead. DeNardi go next Please Joseph from Our comes

Joseph DeNardi

nice on disappointed very Wahid, a in XX scale to on thank CIS your X emotions XX and million quarter. scale? would of really happy, calendar does really with being revenue that $XX where X Yes, XXXX, and in much year you being if fall

Wahid Nawabi

Joe. Thanks,

solution market. very to focused at So the that on is launching a to point, the difficult answer the this question execution we because really of

mentioned phase capability we launching and I in market. to about and remarks my our introducing As three product of this approach the Joe, have

in what and Brazil. available completed America of well shipping North in the market do excited positive We will the customer whether the And once as we feel that more to we data solution; in indicator that have some any I progress more what more we that as we have differentiated inform the our still the the as any compelling proposition the scale for to We and be in believe confident it so adoption making very markets about you have and has don't product ship us we'll that solution and would this be about Phase product the provide unmatched in we’re reason, in value to and at soon II report details information the don't to to market believe give has we response available, same the extremely been trajectory. going pleased be time. for we we is not far space a industry we're slow the fast as At or process you provide larger the and make can any is or that to prospects. and very that it from the time,

Joseph DeNardi

Okay.

Wahid Nawabi

same at we’re very the on time, focused execution. And

Joseph DeNardi

but Yes, UAS, TMS pretty enough. it UAS domestic be third fair International to kind business is growing and order think small guess well then I rough is of so seem the and less way third clear. the of know is I a that core this international UAS third TMS, doing and of magnitude about is a I little domestic;

and of additional and and are Patrol So the aspect then $XXX frequency side just opportunities talk SBS core about that for just UAS can million Border the opportunity relocation that the business, business? TOGA just you that is domestic

Wahid Nawabi

That's right.

has our So I the is TOGA to the that ground and approximate $XXX customer control million number future our – frequency provided controller station. essentially as and a I relocation for budgeted that a refer station, number control

that in advancing that won And and we program so million, roughly we about upfront small we I project is contract opportunity are as by particular the delivered $XXX or my remarks, a that mentioned which total way for quite positively.

pursuing for that $XXX In indicated our Guard we mentioned. of customer separate are of addition has addition the with Snipe And with it planning of pursuing bit which that, Coast customer's are eventually Homeland which a to a Border obviously the top that and Security Patrol. in the multiple even this is timing hard on the opportunities as with taking of to million predict, from perspective. UAV, and they to I program that, uncertain on Those U.S. to SBS are that well our a other opportunities record, and program mentioned Customs we I U.S. Department as also are specifically

team and your so And we and product as opportunities [mark our business leadership the positive, have multiple our of demand our portfolio. quite and parts] of question of into across of We prospect a broader are encouraged [ph] various products all business.

We’re very still or focused so half we're to on complete first second execute our deliver with and very still have the we the execution, year another half and and far. it’s result of pleased

Operator

have [Operator ahead. Instructions] question go And another from Please Joseph. we

Joseph DeNardi

Thanks.

bit talk Thank driving just can the just So conservatism I around year getting or so, the passed, guess that about would color like implies it back some the the budgets in looks down, fiscal is so Wahid, are the guidance it you there? kind of year of for revenues little you. more timing of half or be what

Wahid Nawabi

Joe. Sure,

call, saw the And made. results with track as we XX% on earnings and between expectations so from target and the predictions we second So fourth mentioned first expected much on you our we're quarter to we between be that our the those Joe, break half far, as of the very and year. to on XX% up revenue half

we're with that. pleased So very

the us. could of terms living resolution be still good DoD continued bad half, or you that, roughly In of budgeting. in second environment terms the That in correct we're for

R&D revenue historically we our from programs going year. between always X% that we're And also the results as we're our at roughly of on and model XX% the well. before. given And given Of and projected looking our And execute and to and to revenue to year. to We've course, it's as we've this on And there that we generated as the mentioned speaking. expect to beginning measure a we forward metric indicators that. to minuses equal tell XX% be second that fiscal unplanned of about expect of is what us and pluses majority to in track of our half

So creating our We're as still And our we the progress pleased second long-term. overall, have for go obviously for our provide execution we we're short half. update value we're more to throughout the results. and focused will on three and on very quarters We generally two year. focused stakeholders with you

Joseph DeNardi

to near the going time strategy a the just going I in detail? what commercial do. then going guess you a a future level talked, for at And you're where to there high distribution Okay. the little bit guess I you're on to feel very providing Is more business, comfortable be

Wahid Nawabi

we We're our process. website be available through dealers – going the vary that we going engagement what that hopefully and of as market introduction more country. And do from the and successful informed well. in traction in ourselves We precision level. the progress learning the go. third in already us progress remarks in able Of what for those to is have what own signing at plans we as take is to clarity this Q&A pace interested across we'll my lot and this be as that our market as to and it And as we is a we End as as Joe, I in provide course, through to with more in very mentioned products process are phase, very are well market, and details as what curious – get be dealers will in Ag we you up how of are

Operator

time. further this I question at no am showing

Steven Gitlin

great. Okay,

and holiday all for version you, of and An Good and interest happy we on New thank with following again our this and Year, industry season company found wish healthy attention We you news can in So AeroVironment. for and you speaking be SEC to your you relevant your archived day. and and call, website, results. quarters Victoria avinc.com. thank next forward filings all look

Operator

and Thank this for today's Thank you. Ladies participating. call. you concludes gentlemen,

may You now disconnect.

AeroVironment (AVAV) 5 Dec 172018 Q2 Earnings call transcript