AVAV - Earnings call transcript Q3 2018

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Operator

Good day, ladies and gentlemen, and welcome to the AeroVironment, Inc.

Third Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode.

We will conduct a question-and-answer session after management’s remarks.

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

Steven Gitlin

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

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

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

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

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

Wahid Nawabi

Good afternoon. Steve. you, Thank

of On and on XXXX financial will our quarter our the advance keep achieve and our results quarter our long-term stockholders, the results, year Covington briefly fiscal financials review today’s creating detail, third goals us discuss I then made customers objectives XXXX the to we employees. on for fiscal during of share third then third track year. in AeroVironment’s I the call, will will with value for you the and Teresa significant balance quarter plans. solid progress our quarter Our year review outlook

your into visibility with main and three third next-generation will significant communication third, our Corporation to in have our strong our backlog flow Teresa, Steve quarter; I our year revenue $XX increased this, its executed objectives; take and in full our of messages second, EPS questions. AV, HAPSMobile we and supported business. first, are launched Following formation continued plan by the broadband Today’s the we contract the order JV as successfully and quarter SoftBank global follows: million

the current our services for detail backlog shortly. will earnings year, for share significantly that and and our our to or year, per increasing deferred $X.X loss XX% means quarter This includes the per the States Cuts third of last grew million $XX.X demand results. out per less funded and quarter our asset Now our estimated $XXX.X that loss to Act share produced XXXX. $X.XX of than expense and last per last Revenue higher from Healthy was Jobs quarter would $X.XX our year’s third fiscal share. United of $X.XX results than been third team remeasuring for share quarter. let’s team $X.XX significantly share due drove Teresa as an nine months. the half delivered of Tax $X.XX of the not third to over in It per per is one-time of one-time tax year-to-date per effect. across share XX% increased solid Federal and year’s solid products first earnings review million globe year-over-year adverse in if revenue million, by Across the by visibility loss for important is the of revenue our Fiscal liabilities $X.XX have point share loss and this business, diluted

where highlights core UAS Now business, market from with share. maintain important quarter. In you increasing of our for tracking demand the some several UAS our I’ll we We within see DoD share signs the small U.S. we’re small opportunities. leading

by with and fighter moving to deployed two or the program one goal can drone of First, a the is be Sensor war ahead or quickly Soldier awareness selecting small within provide very Borne Army a carried situational kilometers. SBS that

anticipated evaluation. a more The life date the total over X,XXX As delivered systems this the we previously, than systems of customer with later award we program. Snipe stated objective acquisition of year for is have calendar XX

referred the As competitors UAS of very The stand solutions. competition of in for program. FCS for equipped the in the always, will and Puma confident Relocation. new as proposal ready against This is to tough to our with was our value program formally this but request and currently called Army systems FCS We capable Frequency modifications. also respond frequency the is to Nano Raven evaluating and be we’re category, the process a in strength U.S.

demand recently small to our small of UAS Additionally, responded and Homeland to this remains the RFI look we Department also UAS from opportunity. strong. of an International Security pursuing capabilities family for for forward

During This the with UAS. third AE contract Middle million we $XX.X iXX for quarter, the systems suite. small customer largest issued secured for sensor Super a our international contract Eastern ever award Puma Gimbal

in previewed to last to establishing we effectively we in call, more continued are services demand, our respond order in-country international earnings operations. support As logistic

is Western first fiscal for running The the in first in Europe. is up Australia and planned XXXX quarter of the and second

on our and us deliver the international our customers continuously, support XX/X. capabilities logistics customers more to operate value. to responsive we’ve UAS closer services said of our ability be Positioning certainty previously, As gives relying more with them solutions our proceed our some to help small international

systems to the customers’ provider In also intimate us. non-native Tactical global more Our and even forces Switchblade our to with as the produce with help variants. of be address the to to of new as continue strong we our competition. AeroVironment advance our significant Switchblade solution native deliver overseas we market development even Systems our small UAS business, relationships protect Missile operations our desire and across Family build continues and viewed best-in-class Systems

As for evaluation and again part process, continued and selected facto we LMAMS their solution of the the again we requirement. U.S. procurement provider competed as de were Army’s

contract in to and to the a working continues means Raven Switchblade solution B the from Army Systems we for need orders of statement. LMAMS in of Aircraft in year Puma at potential as to XXX Soldier part or next We’re the be fiscal RP demand currently Army additional This for million million in systems is million tranche for Air that this AE deliveries. via systems seen is contract lead with Once February for Borne and XXXX years. reflects will value budget requests the year Force and The XXXX year operational finalized, the will I of contract valued acquisition urgent more U.S. intend The scope. and also to government requests the that it $XX Switchblade quantity joint The This on our years. Portable more summarize. U.S. we systems Rucksack request healthy $XX.X system DoD, current in Sensor that Raven $XX.X than government demand the requesting for for Unmanned the fiscal program. XXXX now provide largest released the Army government procurement million its fiscal Army $XX.X UAS UAS President’s for small finalize solutions a negotiations larger request procurement. demand and are This totals have information the the long-standing

for initial Army’s request systems. more Short-Range funding four budget acquisition the formally an largest objective Army’s $XXX procurement procurement for totals following seen. by fiscal visibility UAS far Switchblade The plus request the with The the or Micro more proposed government totaling have SRR than army than funding that known proposes as $XXX Beyond more services. request associated Short-Range Switchblade into XXXX, X,XXX plans and providing million, equipment systems for line Reconnaissance for includes year government of X,XXX next-generation UAS ever procurement procurement. fiscal the budget than an over SRR, years year for additional small we the This item also XXXX represents million rounds,

Solutions initiative, DSS protection now drones unique Quantix further capabilities to our damage growing our a CIS through More dealers network it via and directly agriculture selling force and validates avoidance. Commercial website, subscriptions and collateral AV Switchblade’s or and of changing www.avdroneanalytics.com. and Information game Shifting importantly, we’re

in Belt. two the launch, focused Central Valley the California’s specific Corn and for regions are on We States our United geographic Midwest

for with Quantix focused the AV drone milestones development, year is boarding education component this subscription our We is a Inc. commercial our HAPSMobile, HAPS. about on the sales excited portfolio named usage factories new intended fully channel offer on our growing customer CIS dealer company to of global process Our the altitude, drone, venture joint High-Altitude price continuous is long-term. Corporation solar the well business we above in differentiated uniquely that integrated and with a to our and over on satisfaction. positioned within analytics generation of one-year joint we’re for we many of is we strategic a Still feedback launch dealer compelling. Pseudo-Satellite and phase demonstrate SoftBank our and market its channel level. very business is of initiatives, solution, we launch, stratospheric indicates price end-user believe this the growth data By $XX,XXX. value XX,XXX are product or feet more Because solution DSS initial suggested emerging critical believe Initial sensor focused growth The operation The business. at retail strategy. proposition high a sea achieving maintaining communication broadband next than mean venture

SoftBank partnered whose We’re this same strategic business. with share Corporation fortunate global the for vision to leaders have

have the Our we also leader as agreement of based supply globally pursue with to $XX Japan. JV’s planned doubt, globally. the demonstration decades and to HAPSMobile the the outside terms AeroVironment AeroVironment in of AeroVironment AeroVironment the initial funds The opportunities rights achievements. the to HAPSMobile aircraft for develop, JV. demonstrated and opportunities increase million Without contract commercial exclusive AeroVironment’s option work our rights of HAPSMobile to on joint program is to at capitalization produce $XXX non-commercial million. venture owns a HAPS much pioneer and as grants X% JV, retains XX% valued of JV ownership

XXXXs with at NASA which record agencies feet Our XXXX, flight wingspan the XX,XXX the still Helio today. achieved as such stands more a XXX-foot the in our Solar and government highest altitude work in flight in level U.S. that in the than culminated HAPS, XXXXs of world’s

to broadcast, television in which unit build Smithsonian connectivity solution XG high-definition mobile provide now terrestrial large One Things We case communications next-generation the IoT from our and Pathfinder out or and the HAPS resides businesses Internet also demonstrated for be leapfrog, costly significantly consumers use HAPS, the broadband Plus Space demand of HAPS small and price A connectivity of that than potential globe. unit is The solar telephony Internet our is XG successfully adoption. speeding system to the Museum. around of will Air infrastructure and the UAS. very with higher

this on initiative information as growth provide will competitive We more constraints permit.

active portfolio, thesis. For to this long-term adds a our within optionality growth significant consider initiative partner investment now, funded our which

Now customers. on industry the Workplace, the leader the we for Global way third In Charging and EV to our Utility EV and and pave is markets. innovative Built this product the our single app certifications agency our a Bluetooth quarter, which continues first as version using has is OEM Next-Generation EES and charging TurboDX solutions. and a Solution network optionally branded Chinese TurboCore to architecture, testing on in our integration. with up business, smartphone platform charging European launched scalable Wi-Fi U.S, for Commercial, with residential TurboDX

to enclosure Europe a we derivative also commenced China. in a product, domestically, OEM packaged series for and of addition shipping customer custom-designed this of In product this manufacturing for global

equipment commercial workplace sustained next-generation and charging remains developing packs. automotive Demand We in interest larger, will units EV to for are seeing test our shipping systems, global support network our primarily OEMs voltage domestic solid for soon installations we higher ground applications. for and begin battery partners

progress we're business, As positions and objectives. goals you can business see, long-term us growth making that our our current progress strategy and our supports throughout significant for year

Now, quarter year-to-date third and of Teresa a detailed Teresa? review performance. provide Covington will financial

Teresa Covington

$XX.X third good million Wahid, afternoon, for $XX.X XX% Revenue everyone. as million. $XX.X fiscal partially was are the AeroVironment's service XXXX of sales from quarter of an you, revenue fiscal million. in by of increase follows. offset third results decrease of an resulted XXXX $XX.X or of in revenue revenue increase quarter product in increase The Thank QX from million, $X.X and million,

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

margin margins third was By partially or the decrease compared to increase increased $XX.X service margin. million XX% The $X.X for offset gross the Gross primarily million margin or margins million, fiscal of UAS from sales a $XX.X $XX.X gross third fiscal Turning to quarter of $XX.X in quarter of XXXX. for million. XXXX quarter gross XXXX. for third quarter an product as was the $X million fiscal segment, third to XX% due in increase million the for of margin by to of in

$X.X adjustments primarily program unfavorable due unfavorable cost and margin As quarter favorable a a service the to EES to the percentage primarily in for to XXXX, of XX%, product on lower service margin fourth anticipate increased $X.X gross UAS revenue, higher decreased third gross of XX% to for mix. due due million margin mix. million from quarter. to UAS a We fiscal margins sales

of a increased margin from to XX%. revenue, As gross EES percentage XX% for

$XX.X quarter million Looking expense compared or of rest or SG&A was the of the the XXXX R&D the XXXX. a revenue was quarter $X.X the to X% or quarter expense decrease at third million million, gross and decrease third of operations of increase revenue fiscal quarter of R&D XXXX. of million $X.X in expense minus offset of in the expense statement. $X.X prior quarter XXXX million income income of for other compared minus for of XX% fiscal of quarter an $XX.X of the SG&A fiscal fiscal was million loss of The for of XX% other third $X for to for compared third primarily million income revenue of million an the operations the the Net the loss XXXX. of was R&D tax $X.X SG&A The as rate quarter fiscal X.X% of minus fiscal for or third income of by for to was was of operations XXXX to revenue the third from revenue expense revenue net to of of The year of compared compared million. unchanged fiscal effective or tax XXX.X% income from margins third XXX.X% to or quarter from $X.X $X.X in quarter fiscal effective XXXX. loss of partially for a due of million. XX% of $X.X third fiscal of rate for higher XXXX third XXXX, XX%

method on loss XXXX the joint quarter or $X.XX an the of estimated $X.X the of to third investment The assets related of was XXXX, Tax impact quarter Act net XXXX, equity net of expense of compared $X,XXX and the by million included loss million a of HAPSMobile tax deferred venture for third of equity fiscal which quarter the $X.XX third rate reserve of and to third equity the third activity, discrete of million XXXX. AeroVironment quarter to net Cut a loss The fiscal fiscal of XXXX. attributable attributed loss quarter $X.X per share fiscal $X.X the of per share compared XXXX to loss net of or loss or AeroVironment million fiscal was tax for The of or per $X.X tax a for to $X.XX vesting for method and million from $X.X of remeasuring excess $XX% effective liabilities. $X.X our tax share Jobs one-time The tax million the awards. investment increase offset the tax for was partially included benefit position uncertain reversal of activity,

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

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

revenue in for of $XX.X for increased $X of from tax quarters rate for increase the deferred a Jobs compared Act for R&D expense and prior related $X.X October three SG&A or first the quarters million liabilities. first interest the fiscal year of income effective primarily quarters an fiscal the to XXXX. XXXX quarters was impact first fiscal The XX% XXXX. XX.X% tax million SG&A million net to in fiscal for products. and of loss expense in quarters months of the or first and net revenue increase the in the Net was foreign benefit compared was of during million was of our fiscal the to a first tax primarily sustaining XX.X% first remeasuring The subsidiary related was which XXXX. three three effective to income other fiscal to fiscal or of XX% R&D to XXXX. existing quarters The compared XXXX. gross revenue to XXXX XX% rates increased short-term XXXX revenue support income The Tax rate million. income rate and taxes expense was quarters included one-time charges ended XXXX, of of $X.X a million $XX.X income three for expense XX% SG&A the for Turkish for was of estimated million XX, our XXXX due XXXX. of margin expense of effective fiscal exchange compared XXXX majority-owned to of primarily the of first As $XX.X the our first for higher sales totaling an XX%, other other of due volume engineering the million fiscal $X.X in compared first year to as The expense fiscal the three $X.X of $XX Cut the for activities assets fiscal prior to tax to three EES XXXX income XX% income year-to-date of due percentage included $X.X decrease provision taxes quarters million for million the for three quarters three three of or of of three of of impairment revenue, the

tax vesting the return reversal to year in the higher unfavorable partially the the impact tax fiscal position and uncertain by provision The adjustments. change effective quarter be has law from tax from equity XXXX We rate third favorable the expect of of benefit XXXX an to offset XXXX. full than excess discrete awards, been tax

years tax for fiscal method full net higher activity, to we a lower For the compared loss tax in $X.X investment of pretax to effective loss, Equity XXXX, income, three $X.X AeroVironment investment anticipate the with XXXX. XX%. quarters share net rate million income first to quarters for first of year was share range of for the fiscal activity, a XX% $XX of method of earnings Net attributable AeroVironment equity of million future million fiscal or of or for net fiscal three fiscal attributable was the XXXX. first three loss diluted quarters of loss $X.X per $X.XX of XXXX to million per compared a to for quarters $X.XX the first three tax

Our XX, fiscal funded a of of and January fiscal a XXXX. the million X% from quarter or million was XXXX, backlog of million, as $X.X XXXX, the decrease of second from quarter $XXX.X or decrease third X% of $X.X

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

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

to our visibility. update an Now XXXX fiscal

$XXX to execute ending fiscal of million. we fiscal anticipate expect million; XXXX no execute we in third As have XXXX contracts revenue flat that in in XXX% to today, fiscal million; QX $X that year This quarter-to-date that adds XXXX guidance. of or quarter of year-to-date revenues million; of we at revenues to needed $XX and from of bookings $XX revenue unfunded backlog $XXX to to funded incrementally the million relative EES up last of midpoint backlog hold

Now to back year I'd fiscal like remainder to to turn Wahid the expectations discuss for of XXXX. AV's things

Wahid Nawabi

you, Thank Teresa.

plans on we stated are earlier, XXXX. track fiscal I As our with for

and Our persistence and differentiated translating CIS strong and solutions HAPS DoD with from commercial strategic made for and strategy are customers, into demand markets. higher international our our and progress uniquely we've

to are I mentioned contract As always, there approvals the timing government risk relating contracts, related particularly earlier. to for exports LMAMS and

we to revenue $X.XX reiterate to million guidance of $XXX million our visibility, diluted earnings in per in $X.XX our with $XXX and XXX% annual However, share.

fiscal to also of investments revenue and research expect We of development year. XX% X% this continue to

objectives; The deliver total, In healthy achieve backlog flow of nearly to generated order in fiscal the today, backlog year we messages thanks the into UAS Corporation next-generation their JV the first, million $XXX our on plan by your with U.S. value and third significant work strong remain in transformational our promise delivering XXXX. now innovations Steve in supports for Teresa, our for Switchblade help to for stockholders. have I continued HAPSMobile in with potential million contract for year certainty. revenue year schedules visibility visibility second, order meet delivering confident formation main employees and our strong and strong our small creating the and AeroVironment, our continued Defense our them into and of global the are procurement SoftBank proceed our continued successfully We will we ability third, launched questions. manufacture To customers significant reiterate requests hard and guidance. increased our all communication to broadband take funded supported fiscal fiscal quarter and business. our and and serving for quarter; its our We XXXX. Thank we've committed our and this customers' to flow you EPS with executed delivery provide fourth of $XX to Department full support, beyond and your quarter government to

Operator

you. Thank

DeNardi. question-and-answer now have ahead. we [Operator will Instructions] go session. the Please From Joseph Stifel We begin

Joseph DeNardi

Yes. your uncertainty of public and it’s very least a you’ve going predict more Wahid, revenues capabilities. just now five But years, time kind of aside four of I adoption just and three higher AV around think been of can’t some look opportunities of timing of given revenues about always be or since step given could out Thanks front you? on where there’s the maybe talked why the to they of has shouldn’t maybe how multiple back magnitude where if and are hard in much. timing or you at put and

Wahid Nawabi

there. So, hi Joe,

for value foremost, strategy strategic as good can the seven initiatives been do the within primarily that to and and long-term And company. I growth First in two years commitment demands our I for over value business in that history recent to – stockholder and I’ve creation. what points. here recall our results the direct very than with does my we’ve position years almost referred outcome strategic and and that’s you of got better this creation our look our the I and here and and execution agree with

we small domestic our customers, we every we satisfied from look very very if share, there. our signals strong UAS at strong have demand business you where So see enjoy market of business, aspect

strong grown The commercial we’ve of early in business signals is business, information our business. Systems business and on launch a opportunity. with very course, and joint Missile and it we just business our essentially that market also see business. sets launches growth Tactical stratospheric our long-term that significantly of communication solar venture, we potential And large solutions Our significant launched that HAPS our very global broadband

EV as We’re the EV very market, that’s obviously, very and the on solutions, business tied execution focused and to for long-term a opportunity on EV there but represents our signs on And quite the business, charging large stakeholders. well. very of three look adoption positive directly that excited and it

strategy you business satisfied we this with guidance general, the We��re doing far agree why our execution more that, nutshell, this of our in a our So with is for year. that’s year, not in quite and very so for confirmed I well. could

what of get with our size strategic it’s short the in what revenue time be to predict that business. hard we’re on in update the about customers as guidance, confirming could markets, and in see in to to And we our our our with we on proceed relating it the confident what will Based Now forecast, long-term able the for would in working the our we our that you that, opportunities, be, like. pipeline, as and to we frame forward. a in engagements feel our of look

Joseph DeNardi

of question. up all little then kind goes from Army in I to If And million from look million $XX $XXX a million right. it dollars, then in bit the in back more $X in maybe tactical LMAMS to Okay, FYXXXX. FYXXXX just at procurement and FYXXXX

million. I was You think, said about business last a $XX Tactical Missiles fiscal as whole, the year,

you then XXXX? we dip of half what maybe the help given Switchblade and Can LMAMS or just think that in from I LMAMS. the revenue funding FYXXXX expect rebound in should me understand was

Wahid Nawabi

Great Very Joe. good question, observations.

I so So our the because if speak, an go if it, back business to I what the to to you strategically – the able illusion, basis us dice statement, long-term call – I give on a data could focused get. very short-term is optical slice and on being call again, the earlier would

we’ve very our business for if last projections historical several business, handsomely and So the the grown years. track Systems very, you at look record Missile revenue that Tactical over

you I terms In Program in of a requirement this Record the potential with the with as LMAMS demand Army stated Switchblade, for called is program, of have we Record there a not and business, Program currently alluded of do know, which a the to.

dollars not And in through Joint Urgent Contingency and consumption of Operations Overseas fulfilling so terms demand consumption Needs and to primarily are Statements really happens Operational that our customer that programmatic. in

even which our we’re solution, Family slightly a and yearly the shows just for compelling are of perspective, supports proposition at unusual curve. in data, solution we strategy look successful slight the adoption you or differentiated established at prospects basis this and and the fluctuations way And so it beginning creation But very, the and the if variants, of from development our multiple expanding execution that I general, on not and way. quarterly have value our their it’s to Systems because value it or very call long-term of see of other to a what

of see run, in over that Family Switchblade little we the profiles long procurement take you the the the for of a types the So feel terms about Systems. cycles. In timing different very short-term, our prospects and on strong bit based of these events of Systems could Tactical Missile of always place business

Operator

from go ahead. Peter Baird, Thank we have you. Arment. And Please

Peter Arment

could Good thanks. afternoon, Yes, Steve. of if timing Wahid, Teresa, I question. just a to kind Wahid, follow-on

process the an were Switchblade. contract Thanks. looks there for of that expectation like? with Is You the finalizing mentioned timeline another you what of Army in

Wahid Nawabi

– predict, are timing most the if primarily external one said the items of many as involved all in is I of always before, the times because factors the things Well, that always, difficult to these process. of procurement

we’re a do government. opportunity the So an with U.S. we that negotiating and have contract

government and you it to budgeting to last As a to related activities quite DoD those sort ride contract. shutdown the be made predict rollercoaster U.S. government definitize difficult we know, process months. events, more all the And and of in be that and the budgeting exactly been able able has process will when few the with

of as and for contract capacity see deliver from definitize terms demand, As you soon ready the and production opportunity we we to plans inventory. as in our production prepared on execute stand – our customer. expected We that develop and that have with

it’s any it However, or and that day be accurately. exactly time and difficult very of month, to the timing could

Peter Arment

on just announcement, one And congrats on any helpful. – that? I you Puma the squeeze just That’s you if on timeline in expect more the more, could give could but Okay. deliveries with Thanks. contract color us occur the to the

Wahid Nawabi

No problem, Peter.

a from Eastern achievement for It’s again, largest AeroVironment. the $XX.X is ever for for international small this a Middle obviously, country. contract million historic, UAS So

we’re of objective strategic a, customers, well another long-term our deepening as It supports those number one. very with this contract, our relationship with this of So, as is pleased example base that. growing our and customer international

that but, We capacity of we terms levels and in production our types specifically as also of for we’ve have as I said of not is that inventory built I opportunities. – the general, opportunities, in these said, earlier, types just one increased this these have

So we quickly, we intend this and execute very contract on stand to ready to deliver.

the As we to you update more updates, within have we next come. quarters will

Operator

we From have Please ahead. go Ken Canaccord Genuity, Herbert.

Ken Herbert

Hi, good afternoon.

Wahid Nawabi

Ken. Hi,

Ken Herbert

just I wanted Wahid, clarify. just to

that midpoint in got So quarter of XXX% out full backlog revenues you and had with the the numbers range. the through, this guidance like that of third coming effectively that so you’ve either the the of far – went you’ve quarter you it or Teresa, you to sounds year the gets booked

So April now anything to and of between correctly? Am and booked upside be midpoint. that that understanding I shipped is would end the the

Wahid Nawabi

a look in and our timing that and opportunities So, Ken, able and and revenue. orders we go through hurdles of ship that’s at to the have be to very order point. forecast good the basically We various recognize product to

$XXX we So confirmed of EPS Obviously, previous of opportunities those and our $XXX our reiterated more, upside to and our forecast million and and risks and those reasons always probably many million guidance. to $X.XX for $X.XX. there’s we all downside – and – guidance and to

licenses, strongly – achieve about an we going paperwork our complete, are to definitization and as our fourth through and you our the contracting progress business the export example, guidance. we feel provide we’re a capability, various we And at to quarter. where confident update the and point and execution nature Given feel and we of not we have change for that to

Ken Herbert

that’s the typically very you very a ask fair. pieces. is – note. year maybe quarter a look the moving at question guess because can – there’s strong lot obviously I appreciate ended is, I Okay, another to of on the if way a of fourth historically, sort

If at at you’ve year? been typically fourth could you still pattern I’m about about last sort of you to of applies is, with that years, think a business what the maybe here quarter booked two-thirds I of and few the fourth we the guess much for in talk I to might quarter? historical as and it shipped bookings shipments what’s just come, that this quarter you the how seen getting look mean,

Wahid Nawabi

Yes.

better is you, we orders the would more – slightly I she though, thing. that full a of visibility points to tell year in are said, guidance, the are fourth for because fiscal in details, book add this our position quarter is throughout What the a the there. obviously, before, additional to and I our year, as outlined our Teresa can we than midpoint of in So this for year, as ability

that the high call the obviously their expectations. the And customers’ timing contractual do, months But logistics our most demands requirements as and to over contracts. the and this a the However, as everything and and forward. shrinks next time for whatever are needs is months, priority to criteria the decreases or else X.X these followed window really important X of we probability I goes risks take lot by demands transacting – that what related of

a now. demand into that by million do strong year also request, And literally, worth has XXXX. amount potential request government visibility. my we XXXX therefore, that’s saw plans submitted, President’s public fiscal what the So I budget of it’s federal you the our and beyond been $XXX remarks, have budget in of outlined And already demand products for

believe, I things, positive XXXX fiscal and those for So beyond. it’s very

strongly as Teresa? far Anything the and XXXX execute to year short, ability is fiscal is guidance. concerned, As like deliver this reconfirmed and add, on to our about you’d feel window and we our

Teresa Covington

things in execute. walk-down Yes. Ken, one we of a did that the I quarter-to-date to my we have is talked number about that bookings that of visibility high expect

we million far thus that, in the in have quarter. So $XX

a later. very little in year, was the fourth came And strong. bit quarter, last those that in So

XX.X%, year, last visibility than we last this we’re so so And bit time year. higher at little a was at our were

Operator

Piper Jaffray, Troy go we From have Jensen. Please ahead.

Troy Jensen

international that, of pipeline it sounds then you for it contract, to this give my It Hey, just there duration like when deals? the here. Maybe $XX of the size thanks that million like for in couple starts it. about addition a the sounds on on question. Wahid in pipeline? and can But details talk Are other of other taking opportunities can’t – you us

Wahid Nawabi

Troy. Hi, Sure.

I our Security. and as for both U.S. small the the Force mentioned the across the remarks, said multiple demand domestic So in well my board, different domestic the products I’ve is customers Air UAS strong of and as earlier Army, as U.S. Homeland healthy Department customers. from

strong years. beginning customer on this very UAS our the well, and strategy for assessment delivered of very in my business, last and demand that our been have since over we has small several have broad This part also grown of the objective and strategic We internationally.

globally, different one such details more time, opportunities to example is this the reasons. number of I’m go multiple a any so for we At specifics And in able have which opportunity. into of given not

of world. the XX number base also multiple update those international services customer each you depth And as our with relationships in not customers, or and government’s with progress. now larger Systems the but has DoD U.S business, branches for over of intend need of of of world contracts, breadth sales support make departments. the only our with logistics this Family us the grown – the part of support regions over And the or country – all success grow to the we countries we for we we in customers that our as However, of long-term to strategy believe

feel So business. we our long-term in this for general, in prospect growth strong about very

Troy Jensen

right, perfect. one I Teresa here. have for maybe follow-up All

of then if you to million, at an of just If know business in thoughts there acceleration the look current profitable? to EES? rate run $XX And $XX business, demand is so, it is EES I’d for be curious any million this if

Teresa Covington

level. Troy. numbers. Yes, EES report the how From side we gross down business, those report we margin the of It’s to

So to level. operating we don’t talk profit about the down

Operator

Hamilton, we Brian go ahead. Drexel Please From have Ruttenbur.

Brian Ruttenbur

Yes.

us of to? On more many or sold mentioned questions. you talked little Can specifics? And about, those how sold of of you year. a you’ve your bit Just actually a that drone quick pricing per commercial couple you subscription tell that $XX,XXX have your

Wahid Nawabi

know. This Wahid. Brian. launched I’ll as that We is question. Hi, just this you Sure. take business,

with tablet it it’s made system, It’s Quantix very business price – that drone potential the two and market. $XX,XXX, the large and a pieces. business, packaging of that. mentioned, you forefront long-term adoption get I which with ensuring that very stages at the of with the goes full of this We’re the that curve that of developing that is up in in The terms along in we’re along comes building the and that opportunity early that

the informed a In is platform, addition software System to subscription and tablet the DSS AV AV drone collect uses the which also get platform. user that, software for you That Support then the one-year to Decision then the the so then decisions. the into intelligence cloud they then advanced data, and process for analytics, actionable our on can data more get we AV make it can and load they DSS and they

So engagement the and intentionally buy they that our because price can packaged customer from that want not that learned solution we’ve this they launched, operate. only also we have we use a bundled and but simple, hassle-free

so And is that price $XX,XXX. at

very success. you that, a understand early to the is to systems addition and piece customer proposition of and strategic getting these significant get value our We in the Now how the use asked about the of to education believe question and long-term status the that our progress.

this channel so, dealer our and intelligence. end value actionable sure focused therefore, product or we’re being on that and customer And the onboarding quarter sees outcome the making really end

essentially will this accelerate and then market. so And growth that and usage in adoption actually

we quarters, next more So updates. we’re the In you as throughout progress focused process, with we’ll where made the that’s really provide on.

Brian Ruttenbur

margins? Okay. of they or Can as then above average tell just you the – you a And are can number have, the you margins ballpark-ish? dealers follow-up, that us you below expect,

Wahid Nawabi

Sure.

United competitive for my What are earlier, that specific on very Corn market, strong the our establishing terms mentioned is in where Brian, number though, channel. I not those two California the dealers we’re two agricultural Belt involved primarily is remarks which So, States, the also, focused of of that Midwest. of we’re in. In the of dealer reasons, the Central regions on a disclosing the the is we markets market; Valley of we’re dealers,

build and business them And time. training we’re up, to process. grow the we’ll this them signing we’re base onboarding and educating, we’re from We’re there, doing over our going be

– solution our front. you in goal. can to we the break business. But profit also sale and profit provide And from primarily equation end from services businesses, sale down of and reasons. revenue make this individual long-term or of relative we of and Data-as-a-Service to our the margins is do all business. competitive at the up part as not revenue comes business from for see the mentioned Software-as-a-Service to Like software set, really, as that businesses. the margins products, the this segment is referred product, and levels it’s the as value up hardware We And the the In earlier, this details money long-term, our terms Teresa each of margin of intend, to

to So long-term very for the we in. believed from of this that are represents to us components economic which the a beginning equation opportunity have the large related engage business, those

Operator

do [Operator go online. DeNardi have Instructions] we back ahead. Please And Joseph

Wahid Nawabi

Hi, Joe.

Joseph DeNardi

it in market it think really release the think JV where it understanding why the I as as historic. announced SoftBank, I described press would the viewing you Wahid, Yes. don’t historic be historic. you or with is

by of we So can you mean shareholder and the just you in talk about value? should historic what venture what expect from terms joint

Wahid Nawabi

of So, this in in of as uniquely stratospheric Pseudo-Satellite of of which and establish terms have one a the launch strategic world we’re a We, this we Joe, importance a as type well with we And it. best of achievements achieving actually can plus airplane. And in a records, tremendous for kind qualified of this world the I the build a this not who and historical business. decade world. record have significance, this more of of significance after business pursuit have track been as still track design, could company, undoubtedly, and historical venture record; in stands And number High-Attitude you the multiple this arrangement of decades. and venture in an agree the joint

for And so platform over global world’s is this going a this be many broadband communication is only sources. this is we set, based to increase multibillion market always what And changer appetite different of and solution to multi, on in the opportunity. time and game I many, and grow going that believe, mean dollar that by

us And how we’ve And vision time. seen is of we on a based long that and our represents I this tell a partnership I understanding see and to understanding on the that us this a partner – the but both our business. of They exhaustive in parties the global call exactly excited came you can’t well our also this after long speculate the very as the same an market’s very I assessment uniquely business we’re we strategic that, conclusion that it to for opportunity a so to large to run. not very And us. fortunate execute launch the of and significant only as – opportunity search, qualified, on this, are with we’ll have the our what for launch updated will shares you have on for keep progress. right on this ability that And

Joseph DeNardi

it procurement our asked, to be on the Okay. Army next back quarter Is and And missiles then question that that generated that update then FYXXXX the and down just up on maybe think, trend back last expectation? the when goes FYXXXX in first million I give TMS going goes I guys hopefully year. number us of just the tactical that, Army funding, expectation funding? $XX that you fiscal an procurement given Should

Wahid Nawabi

that away healthy, for could opportunity. answer take Well we which business on that have I due-once I that able – give to predict be more loitering way demand the in contract established confident a long-term multibillion of think dollar answer of definitization, new a for munition would munitions, in Net-net, that. is Joe, I systems timing that is so, you the this product. if the of We’ve have would market negotiation I category a is the we’re I the

that developing We’re of variants multiple solution.

and of We’re the tremendous of our progress of with saving lives customers making business. to tactical deploying terms potential the missile portfolio as users has long-term and more well in as significant system a and consumption use as our

the feel wouldn’t on value procurement and for So our the of provide the about to business primarily all of the strong details fourth for DoD. U.S. the fiscal due timing we and able general, more very But creation. that, timing of the in year revenue any prospects I long-term with process quarter be to specific the

Operator

Thank you.

Steve will Gitlin now back closing to We comments. it turn for

Steven Gitlin

thank again quarter’s with news in archived found and your AeroVironment. look attention for for can An We industry our you all all forward to Good today www.avinc.com. filings Brandon, next SEC day. you this relevant results. Thanks, and website, interest company of at your and following version speaking and be call,

Operator

gentlemen, you and you. today’s for joining. concludes Thank Thank Ladies conference. this

You now may disconnect.

AeroVironment (AVAV) 6 Mar 182018 Q3 Earnings call transcript