AVAV - Earnings call transcript Q4 2018

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Operator

Welcome to the AeroVironment, Incorporated Fourth Quarter and Full Fiscal 2018 Earnings Call. My name is Adrianne, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] Please note this conference is being recorded, and I will turn the call over to Steve Gitlin. begin. may you Gitlin, Steve

Steve Gitlin

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

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

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

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

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

Wahid Nawabi

call, year to and to welcome XXXX On conference Steve, intend you, convey four quarter fiscal our we fourth key today's Thank call. and messages. earnings full

continued operational outstanding our to fiscal in and deliver results First, team financial XXXX.

meeting our of a multi-year track developed exceeding our guidance progressing have or and annual value creation we toward long-term record Second, objectives.

opportunities. robotics, connectivity our of results, all on sensors, markets segment. promising reshaping and defense, portfolio information and with stakeholders. our anticipated achievements. against SoftBank, solutions Two that I software Today, will analytics, I reshaping time, of success remained we value exciting based making strategic XXXX we strategic are of to my of of was with Energy role reviewing Then, we AeroVironment. to assume privileged fourth, our and our has And years goals, highlighting divestiture to consisting Efficient our committed discussing team commercial HAPSMobile all telecommunications, current large put summarize Since large will achieving ago, the to solutions. strong our and by our performed fiscal Systems by and performance the focus our Third, business begin our I portfolio serve are our investments and these at venture to on in creating our global realize how financial for discussing formation joint

Teresa provide fiscal for I and your and detailed Steve, goals will discuss questions. of summary more XXXX our a will take Next, financial Teresa, I before performance,

First, and to the take to increased like I our through of a EES business our strategic moment would on our reshaping recently-announced discuss divestiture UAS and portfolio TMS. focus

our UAS Tactical that exciting portfolio shareholders time our given a requires and XXX% HAPS, business in for As or investment the Information for determine Commercial Systems, ongoing Pseudo-Satellite we our of review UAS Solutions, and drive business small will value business a and greatest opportunities High-Altitude result and focus of resources. our UAS, and of Missile strategic the

expect in the discontinued we Given will be quarter, operations statement. of financial anticipated first from our the to divestiture business our earnings EES, be it fiscal in this as reflected which completed

portfolio from financial Consistent of full-year continuing expectations, delivering From highlights; which million; our XX% that from exceeded of year; operations $XXX our standpoint, up by revenue XX% XXXX. XXXX increased from of gross to effectively income operations for million Full-year fiscal range fiscal full-year totaling per determination from financial operations operations of Fiscal million, million our for throughout as $XXX diluted operating guidance. from results strong $XXX.X our $XXX visibility of increased million, grow continuing from XXX% above with year-over-year, full-year million continuing over XXXX book revenue across fiscal previously-stated $XX.X a plus $X.XX guidance XXXX our order strong provides the continuing fiscal follows: resulted discontinued year, share margin we was executed of year-end by backlog operations strategy XX%. businesses continuing in to was record are the over which results a $XXX Now, fiscal prior our operations XXXX. start our earnings

the our contributors margin to the under cost fee in One decline we was fixed development of HAPS this plus and the as significant contract. of increase a system HAPSMobile from development research customer-funded ramp Solar

I potentially funded a than deliver fact more fixed As call. is typically in delivered important new customer R&D almost lower that of carry contracts. gross hardware development in will Solar detail XXXX. fiscal on they and financial all this HAPS later fixed valuable fund the margins capabilities plus lower Most discuss cost measures, projects Across we risks financial reminder, fee HAPS. results like superior price

including East achieved international of in majority latter markets, footprint also UAS international customers. the international UAS domestic business order single momentum, We small stated order objectives our our for the small history valued now and revenue and our in XX largest strong large year. at the increased the We account allied we our nation. $XX.X This a as from continued Middle million nations

to continue in initiatives our importantly orders risk high XXXX, funded XXXX we services. shipping the secured CIS innovative From AV or defense operational in Tactical record UAS solutions information We contribution protect Quantix million our more small agriculture and progress to highly organizations operating our $XXX our Solutions solution and for August we key our to systems U.S. and XXXX backlog, people environments. relating increase Information Switchblade improvements for world. and strategic the and business, the its strategy. our remained orders important government on and through began Missile Commercial new recorded to and from vertical DSS around fiscal integrated into Systems We our harm May to make to choice of Our forces

three achieving customer goals, of our For from us results. prevented we our that XXXX intended fiscal delays experienced

backlog timing grew for significantly Switchblade the did for to those TMS program, of orders. not last army’s First, over our the while year systems through due revenue for orders TMS LMAMS increase we

to orders revenue those drive year. this expect fiscal We

program relocation We to as the Second, this the anticipate fiscal continued redefined U.S. year. program on delays. was experience progress DoD frequency U.S. Army the this that by FCS program

Third, the customers with U.S. us government Security. appropriation budget other from demonstrating fiscal as Homeland government prevented of year delays XXXX such Department meaningful progress

upcoming funding this government year fiscal 'XX awarded opportunities last Factors and SBS million $X.X a incremental small requested month. affected secure the we other program competitor the has that small of see achievement approved goals initial been the an This from to initial army our order, and promising order in program. budget. However, First, a is to include:

opportunities on Second, achieved remain did address not large, we positive among our business. We for for Switchblade we progress developing TMS variants, progress for to others. new variants effectively these achieve our one, focused targeted our while

time, achieved we had year, for goals working that In position which been addition important for towards the our to strategic publicly-stated very growth. continued some milestones we for us several

balance venture establish to First and a called Corporation deploying foremost, our we sheet joint with HAPSMobile. SoftBank began

We telecommunications the for JV HAPS global solar are developing broadband the services. next-generation provide to solution

of This to strong our and AV of ways. creating is for in This of which increase capital, how value opportunity equity software and venture stake of creation. the joint for to AeroVironment is As XX% This at analytics, long-term robotics, great value the strategic in sensors, today, enables. example use our future. opportunities a X% sheet strategic position the two option near of our owns exciting balance intersection has JV connectivity creates up in the represents the another

our progress JV's portion Capital broadband gains increase revenue is long-term manufacturing program. First, of again, The forms. HAPSMobile a cash creation program to financial and through (NYSE:C) opportunities facility as impact deliver participating in, of value forms in to our as to that in around losses the long-term Gross selling margin by by HAPS our of our to sheet continue invest potentially financial the the our Absorbing and I cost described as balance we funded from spending HAPSMobile it plus key in and the contract conformance appears and the the terms; order (NYSE:D) globe. of of JV. build is program. second, two mix Inc's subject one Once capability. equity telecommunications maintain (NYSE:B) business to four our by Using we stake statements to influenced phase overall to HAPSMobile current to services in investment the this impact the value (NYSE:A) anticipated to will seeks in HAPS XG and And the systems and earlier. generate our creation near-term

Need significant mentioned milestone the orders generating XXXX second I that next Operational hardware the of in was for orders Our program Urgent through Switchblade services $XXX Statement and earlier. strategic LMAMS securing Joint DoD tranche in million army's

line totaling fund year XXXX million fiscal procurement government the largest the request, future yet saw we to item Switchblade budget orders. U.S. $XXX Switchblade in Additionally, for nearly

until approved by a the operational Congress the to finalized improvements not supplier As Army the by designation supplier. is reminder, by and of highest have as a A This testament our X the been budget we the U.S. U.S. DoD. to as one recognizes President. us signed was implementing ranking Tier the U.S.

and In this of serve achieve robust. we XXXX, of are upcoming ISO growth quite IGIQ a the summary, achievements UAS at under give Additionally, XX,XXX small contract for seven part certifications, stringent of army These deliver customers selection first AS quality core and and valued UAS of to confidence strong our requirement to up one part orders nearly XXXXD we in as which million. five-year for certification quality are for task important companies are that portfolio our expect our even as compete significant, companies to their business UAS group new and supply choice to and the TMS. April and TMS greater $XXX they XXXX, given

with execution. demand our is also aligned and team investments, strategy, for remains Thanks strategy, growth Our and strong. our to solutions proven

our Teresa Teresa? fiscal Now, will performance summarize XXXX. in financial

Teresa Covington

entered Thank segment liabilities everyone. of EES substantially certain to agreement Charging Energy assets into and which X, Incorporated, good all Systems, the afternoon transfer Systems in June asset purchase you, we On agreed with of business to Webasto the we business. Wahid, XXXX sell and to related Efficient an our

the primarily of continuing quarter in decrease of of $XX.X deliveries $XX.X million. the decrease operations sale, business the $XX.X a a EES of from sales quarter for offset met was margins The for EES quarter fiscal Revenue or million. revenue as million, the an fiscal and fourth increase AeroVironment's service the fourth from from partially margin of to lower XX, or partially held revenue, discussed. increase classification percentage of million of criteria $XXX.X are of in fourth are assets The liabilities to XXXX periods determine fourth of offset million, and by of our for Gross quarter as operations. continuing of XX% million, due $X.X increase $X.X decreased of million results revenue XX% fiscal a to million. for all was follows: compared asset Therefore, revenue a operations product reported was represents for results in discontinued XX% to margin shift XXXX, the of April to Gross business due in operations from fourth for operations the decrease gross $XX.X product by $XXX.X million in increase we margin due sales percentage the as primarily service the of As product was quarter margin or revenue strategic X% of an XXXX a XX%, XXXX. an quarter. in as fourth in and an the that the $X.X

increase XXXX. quarter million compared $X.X fiscal fiscal a loss was or operations fiscal activity share continuing tax of continuing or $XX.X continuing to $X.XX $XX.X activity to of at XXXX fiscal R&D for of or to net $X.XX quarter Equity the SG&A per diluted quarter compared attributable of XX% $X.X million, operations was XXXX. income tax quarter rate XX.X% million compared from of of income per equity compared of quarter revenue, other net income for method from fiscal million fiscal X% fourth compared $XX.X of $X.X million was fiscal tax the decrease was or to $XX.X million of $X,XXX the The continuing XXXX. diluted income XX.X% increase $X the discontinued $XX.X The Loss operations from of fourth of million was continuing or XXXX XXXX revenue, the of of to of or the million, operations share AeroVironment method statement, of quarter million. fourth was gross share. $X.X fourth expense the fourth fiscal from effective lower share, operations quarter AeroVironment income rest SG&A operations fiscal fiscal of for the loss in million XXXX. fourth compared operations revenue, expense fiscal investment was compared $X fourth revenue XX% for as fiscal or attributable from in revenue operations from net the per quarter $X.X XXXX. fourth Looking $X.X million X% of Net million an tax for of other to or of income income the share, million quarter quarter of the from R&D or investment from Net net the tax for fourth compared SG&A the of net of per rate net diluted expense income XXXX XXXX million, the Income XX% million fourth income the in of $X.XX for of XXXX fiscal XXXX revenue $X.XX an of of XXXX fiscal diluted margins of primarily effective for XXXX for fourth expense the of fiscal and R&D to quarter expense fourth of quarter for XXXX. was for for operations for quarter from due the was or of XX% quarter discontinued income diluted to of or to continuing million fourth $X.XX $XX.X to for to of of per for fiscal fourth fourth fourth of loss quarter $X.X the of quarter XXXX. for $X.X and of

$XX.X R&D operations Now, of million. increase deliveries product $X.X margin Gross revenue of service product in fiscal $X decreased million results; decrease in an for in continuing and $XX.X to of The of increase was a in of increase was was of partially XX% Gross in to offset to moving a margin fiscal mix. continuing an by from million, or increase XXXX XXXX of and $X.X primarily an due sales increase $XXX.X The to for operations as full-year margin revenue of product primarily million. XXXX due our of $XX.X $XXX.X work million, to million, XX% fiscal through gross margins revenue customer-funded revenue an service $XX.X fiscal unfavorable from XXXX. million, million. or from revenue revenue, XX% from margin increase was XX% percentage million of for XX%, an increase $XXX.X XXXX due or compared in million

investment diluted impact activity XXXX of method deferred tax Rate blended included an Statutory loss operations as Looking XX% and effective XXXX expense income The was for or XX% resulting million operations XXXX, a per in XXXX to an of income tax operations year the or of of rate tax XXXX diluted provision Tax million XX.X% for The million, continuing for of million for $X.XX was diluted per of $XX.X from net of for taxes was XX.X% of fiscal AeroVironment continuing fiscal tax $X.X R&D million effective to was to from for of activity share. year income XXXX. the of expense revenue $X.X operations for $X.X The SG&A diluted $XX.X XXXX. was million attributable discontinued compared XX.X%, of fiscal income or Cut at an XXXX loss $X.X the income fiscal inclusive XXXX compared XXXX fiscal a XX% assets million loss method XXXX. of to our rate income share, and compared fiscal decrease XXXX Federal XX% discontinued or from XXXX. share, expense gross Net of for compared continuing was per XXXX. for and million fiscal income of for fiscal XXXX to or attributable million XXXX Loss a from X% to partially $X.X for statement, net revenue, diluted to million. $XX.X fiscal estimated per of the from for of XX% of other primarily R&D diluted of million R&D million, from expense increase million, fiscal operations higher million from of and Equity $X in the margins Net revenue, $X.XX for operations $XX.X XXXX in from for net revenue compared revenue fiscal Act due offset $X.X fiscal was investment operations in SG&A liabilities. operations million by was XXXX fiscal per to $XX.X continuing SG&A of re-measurement increase revenue, or equity million from or $X.XX $XX.X compared $X.XX $X.XX $XX.X rest expense of one-time from operations Tax million million from fiscal $X.X the Jobs per fiscal for Income $XX.X loss fiscal or to for income reduction AeroVironment tax share. of fiscal XXXX. loss XX% tax of or of continuing or continuing net compared was $XX.X for $X.XX share for share, to a to $X.X expense or compared to or fiscal

operations continuing fourth order XXX% of $XXX.X fiscal or an of the $XX.X April and XX, increase or third of million an from of XXXX. increase backlog funded from was XXXX, fiscal from $XXX.X million the quarter XXXX as Our XX% of million,

quarter from $XXX.X year fourth of of million, $XXX $XX of of and fiscal fourth cash, of fiscal XXXX the for quarter outstanding of continuing approximately $XX.X operations the from year the sheet; quarter fiscal to year sales the continuing fiscal of outstanding continuing Net receivables million. XXX. payable $XX.X million. increase at $XX.X fourth end decrease balance approximately outstanding XX $XX.X XXXX year days. the year fiscal cash quarter end quarter XX at totaled and of Total our were operations XXXX Net Current continuing quarter accounts for discontinued the XXXX end inventory of million. from XXXX the unbilled end the fourth XXXX. fiscal the XXXX. Current the inventory quarter million million fiscal at compared million end fiscal an end operations million XXXX quarter operations the cash at fourth and the the fiscal approximately from to discontinued from equivalents and fiscal operations was $XX.X million, receivable continuing XXXX operations year $XX.X from Days at XXXX a fiscal XXXX. end at equivalents fiscal to quarter year day XXXX operations investments the end end at totaled at of operations the the end days from fourth was were year from of year were payable of the the cash, of assets fourth Turning million the fourth the XXXX million, liabilities continuing for retention investments was Total from fiscal $X.X compared including from days. was of fourth Accounts $XX.X the the

property companies $X required million of on year continuing the fiscal equipment capital and the to $X.X million expense. and invested and all approximately operations, ASC amortization May Revenue in transition method. public we for for XXX XXXX, depreciation retrospective expenditures; under new We improvements Standard adopted in X, Turning capital XXXX as full recognized Recognition

increase For to was from fiscal cumulative million. year earnings retain $X.X XXXX, continuing approximately operations the

was approximately operations the retained XXXX, a from increase continuing million. increase revenue from year $X.X and fiscal approximately continuing was to cumulative $X.X earnings operations million, For

have prior in primarily Missile years quarter business. in We first our our contracts The with XXXX by fiscal the Tactical driven results. year XXXX our to for Systems is impact fiscal impact will revenue

not potential currently but the We expect assess guidance material. to XXXX, it be continue of do impact this fiscal to for

of QX fourth continuing execute today, that XXXX execute fiscal ending bookings to we XXXX fiscal revenue an operations that up adds from guidance. fiscal and $XXX to at from contracts to or Now, quarter-to-date continuing the of of balance operations the we $XX the $X during this anticipate backlog have million, we operations recognize XX% $XXX of quarter to from million anticipate in of we year our continuing XXXX that visibility; incrementally-funded as million; million. to in revenue midpoint update expect backlog of unfunded

With XX%. we Cut Act, lower range rate operations and effective in to for of the Tax anticipate Jobs XX% full-year a the tax continuing

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

Wahid Nawabi

Thanks, Teresa.

profitable technology multiple opportunities, We our on We reshaping market creation. are with focused in are delivering for position growth solutions. well-positioned global we long-term leading are we our value believe through innovative a large of portfolio from and the

which in fiscal Our and UAS the leadership majority the of First, our maintain XXXX and small as follows: are U.S. the task strategy goals with long-term order dollars, from small consistent Continue new our DoD renewed has are UAS win new our by and footprint program million customers. requirements. recently to by new $XXX upcoming orders international while our expand IDIQ expanding footprint winning small existing UAS securing army contracts

for execute position our variant in for by next expanding production world-class existing our and addressable the U.S. production we Switchblade fulfill work record reliability while maintaining from effectively government customers, adoption opportunity. Second, contracts and TMS Switchblade market demand our greatly to

Congress range up HAPS, million the Air venture Switchblade of and and for fleet their earlier determine bases. on strategic for funding for competition contract Puma position joint provides we our strategy, Systems for proposed to Fourth, working budget solutions $XX full short support expands which and our The $XX proposed progress through additional now market strategic our I business business. Solar for fiscal or government portion procurement Third, systems. to is million equity to adoption. XXXX mentioned the is fiscal our HAPS medium within the includes including that for continue personnel a through And which to government our Force's not will fifth, U.S. for strategy. XX%. strong creates capability a potential $XXX XXXX. its CIS education partnerships The to provide whether business $XX.X for our investments solution of succeed business. for range TMS in and solar ownership help make us million increase strategy, million demonstration request executing XXXX our strong an foundation further The in for to now remaining $XXX accelerate funding army's seeking way proposed Force provides funding for Air pending security for The the Raven the reconnaissance army's potential request robust And the reconnaissance million, This DoD. environment the year's a business

to our We DoD. see customers from the demand international continue strong to U.S. in addition

This per earnings and favorable HAPSMobile level diluted guidance litigation. $X.XX. between share venture operations our gain and As a reminder, in strong joint $X.XX million XXXX and $X.XX share for strong one-time X% visibility fiscal per procurement XX% from with to government of earnings XXXX and $X.XX we assumes solutions, disclosed and $XXX includes previously due to shared our the fiscal $XXX Teresa of guidance longer expect no continuing to that of between EES. our performance, funding a proposed $X.XX ownership With earlier, deliver revenue of million fiscal settlement to includes XXXX

proportion gross higher We revenue. to due expect mainly to of lower revenue margin services this product a year relative

expect also quarterly We R&D our spending revenue. variations in to XX% XX%. see continued of We

our funded our today mainly team operational key expect continue and in first half First, in are: our due Once to messages the first year about results to the fiscal backlog, again However, first outstanding about the revenue revenue this quarter. half half financial of half and deliver year our of fiscal we XXXX. record of in

exceeding creation value objectives. of record a progressing our multi-year developed and long-term annual meeting have we Second, or guidance toward track

focus AeroVironment global telecommunications our reshaping are analytics fourth, Third, AeroVironment to investments sensors, solution. of we on portfolio all these of And large are robotics, to control put making large strategic information software and opportunities. consisting to markets members connectivity promising and serve you the on to our solutions realize all based and exciting you we defense, choosing creation Thank you in help for for will your with people of our certainty of our now take in thank to support of and Steve, team all the efforts holders questions. Teresa, XXXX. outstanding business. stakeholders our stock for potential Thank customers supporting I our to value and to proceed your you and our

Operator

Thank you.

We question session. go our DeNardi from Joseph comes will now from the Instructions] And ahead. [Operator question-and-answer begin Please Stifel. first

Joseph DeNardi

good afternoon everybody. Yes, hi,

Wahid Nawabi

Joseph. Hi,

Joseph DeNardi

last half give that TMS it Wahid, an you last could million, $XX it half of us mentioned you on year was maybe just R&D, fiscal update product-related; like also was what year? looked was that of

Wahid Nawabi

Joe. Sure,

in saw were Tactical record deliver business -- my am Systems those remarks government take said that within such backlog the due timing we we our and fiscal year, products Missiles budgeting delays by As booked government in I of bookings to year of year that request that fiscal on sorry, general, place. we our in that appropriations significant primarily to progress I in given XXXX, the have fiscal achieved fiscal our -- ability XXXX fiscal really XXXX, customers fiscal the did those not the

year we business creation execute and feel So, those very showed robust fiscal the in business prospects strong to as We long-term TMS essentially the showed in long-term. which our backlog, the of up -- XXXX. that revenue order up about value intend

as of Tactical of choice you variants or our several to is As in of there, Systems the that out we fiscal that won customers, U.S. and portfolio the choice my you within intend have of product competitions the heard expand 'XX Missile we remarks. in the successfully know, DoD and also Switchblade product solution the are

government So of budget that I but timing mentioned, year delayed fiscal recognition milestones the that a the lot XXXX. of however, revenue fiscal in we achieved

Joseph DeNardi

for customer-funded is, the what when what it? talk was Yes, TMS about can am I the year last R&D trying of from the you I if Switchblade, to get potential it variants guess at think about you

Wahid Nawabi

during comment its am the So, and particulars, continue said from share on nature those to we We as details indicators revenue not I and programs, positive terms I of delivery our we for demand our on more but our customers both product Analyst my of variants. is due to of which desire those and -- we unfortunately, me have see see Switchblade tomorrow able to will for both as the specifically remarks, to in in booked variants, Day. revenue for Investor business, TMS well as revenue services this and development

Operator

And Peter from our question Please Baird. next Arment ahead. from go

Peter Arment

Wahid, and Yes, Teresa, afternoon, Steve. good

Wahid Nawabi

Peter. Hi,

Peter Arment

earnings the you’ve question you bit maybe it’s the that of I color a regarding fairly the on that? fiscal for like balanced little more way provided through, are of side, the the revenue parts falling line, sounds thanks how you year the hi, the share through given think moving for the per kind on mentioned it bottom Wahid, XXXX, year just of a normally just for the revenue cadence -- on shipments kind little think

Wahid Nawabi

earlier our on my because XXXX of right. the and the of the execute on that to year. first backlog, Peter, approximately fiscal as distribution nature and however, on of have of and fourth have our course is our first-halves, at first-half to comments, my that the quarters remarks seen us our so year's we these the higher so enables revenue the the to as quarters that occur occur in lower overall said fiscal quarter on revenue fiscal generally within throughout I our We Yes. historical speaking we remains would of half – the expect main that that be this said half to contributor we levels backlog of year business, the distribution fluctuating primarily large first revenue I within year, end of year, the that and year. revenue that the And historically, first-half throughout see bookings of of in

that of to disclosed of from -- continued terms have $X.XX one-time a previously $X.XX litigation EPS gain per EPS, provided is only the we range share. from but a include of to $X.XX, and operations that the $X.XX does full-year, for In guidance

Peter Arment

latter, Yes, or know be do just see will the it we do of is terms regarding you first-half through how when officially that…? the expect to it that in -- is in flowing

Wahid Nawabi

the occur, EES Yes, that occur to quarter fiscal year. year, during the the fiscal first gain divestiture this this the occur to we the and during also during expect expect quarter of to close, one-time we of first

Operator

Johnson Nick from from comes question Jaffray. go Please next our ahead. And Piper

Nick Johnson

great congrats Hey guys, fiscal on a XXXX.

Wahid Nawabi

Thank Nick. you,

Nick Johnson

or some government, potentially tariff So great, that have want your opportunities, sounds our on as give doing guys maybe I is potential is on maybe -- the there, international any to internationally would well, domestic touch impact business that going update your I by like just is trade more from and that -- you which just restrictions it been well?

Wahid Nawabi

Sure.

domain we the of So, the within most capabilities products sort public U.S. foreign military in sales see that news the trade and of related to foreign and programmatic related are DoD. to

been we seen last throughout very years our our international that, remain several strong. It's However, given as business results. in said the strong you have -- to expect having

customers customers up existing are of the and our now of to Tactical, internationally amount for is or revenue healthy. new also in We very countries internationally UAS AeroVironment, for terms XX

ever from for largest on Middle remarks saw million. $XX.X booked my also as East We nation the a you order

So, around tremendous capabilities nations see of going momentum our are and in and value that every continue in and our few the see fiscal to governments world, fiscal our diverse, of continue world, from XXXX, I on we going in given and desire every the we and almost years, we XXXX. believe international that is to world. the as allied past the essentially around the expect strong said conflicts The forward demand also that interest region customers, for continent and business type

about So we one of export products. shipments for We have UAS international feel obtain licenses quite single our for do positive to every customers. our

timing fiscal but of We in as don't risk we any before, that on there issues and that very is have that XXXX. be been a to successful expect historically, always

Nick Johnson

Security follow-up, seen as Okay, that in you your there some before. a And thank haven't which opportunity we in also you. mentioned then is Homeland just commentary

and that U.S. of the what of what in size -- the seen in what's Army? So you opportunity comparison maybe to -- have kind

Wahid Nawabi

Sure.

caused other approved of earlier, and I delays dollar So, approved budget year government's the funded already businesses the in already are government's similar the the to some 'XX. the the fiscal those and appropriation that process budget that's in mentioned that fiscal of process -- obligation budget procurement 'XX delay acquisition in

year about Department approved XXXX in Security. government the publicly for worth was the for in documents small fiscal $XX from fiscal these of was in the budget, funding of -- There release however, can which 'XX, there approximately So and million $X million Homeland you fiscal specifically government figures worth our solutions UAS appropriations, government. of

publicly delivered which have systems, shared you the guys several quarters initial we So ago. we with

has DHS, line not the request been However, we demand see with yet, customer obligated demand, working fulfilling the a our believe border the and and They funding it unique value border border solutions. compelling value our from $XX that great patrol continue our We for million of and see and delivers are item we that and the specifically proposition very in security. for through the solutions. customs process to patrol

the appropriation due vary. to could delays timing process the However,

Operator

our And next Brian from from Instructions] [Operator Drexel Hamilton. Ruttenbur comes question

Brian Ruttenbur

Thank very much. Yes. you

if all, if of EES, going just your I little forward, flows a you guidance could breakdown your that fiscal amortization of when figure and cash I cash exclude first depreciation out generation a So the forward talk am EBIDTA about could trying and and XXXX? going you bit get in to for

Teresa Covington

Brian. Hi,

We on cash the in provided guidance have the not past.

of last in amortization. operations, depreciation $X.X On in capital. the we Historically, the XXXX, million capital invested couple years invested and from X% revenue over continuous we side, in have of

X% to to And that the range. been in -- XXXX. in and would it in We X% fiscal be range so expect historically it's

had strong we fiscal cash, cash very from we forecasted Regarding XXXX. cash; haven't operations in

Brian Ruttenbur

Okay.

your amortization EES? is depreciation, forward a going excluding on basis the what So

Teresa Covington

Well, 'XX. we in $X million had fiscal

spending expect XXXX, be range that of capital We the looks in provided haven't a but we of the that forecast do to in revenue. like of X% amount to we what X% are

Brian Ruttenbur

traditional plans getting for on think you certain that of in you that going front of of that? then increased are on million And be operations is in cash, have to $XXX your require demand what use opportunities your this up kind you of outside that outside see cash, CapEx? side, talking there of capital roughly perform capital I about is to Okay. ready to ramping going Do you

Wahid Nawabi

So this good That's is Brian, question. really Wahid. a

and the and and and our said business return quite is in As our capital the strategy capital board that to I our businesses my to quite our review scale we the of leadership And strategy. our foremost, Inherent remarks, that on allocation market timing rigorously. first business place, regularly, are healthy. the those various certain pursuing adoptions cash and still adoptions for and team, demand remains when within if take strong we

for as will. to up some option to in So and capital formation for HAPSMobile a means with cash and have ramp venture you building capacity our is there and secondly, And demonstrate an X% facilities as Corporation, that or joint and methods today we have increase our example, the saw will fiscal to to of utilization the venture we SoftBank two that One, joint of we 'XX certain manufacture from be sell ownership we for of of the joint business. business utilized airplanes our at to AeroVironment XX% then venture, the manufacturing capability time. up still in primarily

to achieve globally. that. publicly, so, will connectivity business. that reports global the telephony dollar of increase and for several, and to of on of is the is And several be The we enablement And opportunity in capabilities that a multibillion to that rollout obviously, if considered that, capital large opportunity a and telecommunication terms center based very XG is HAPSMobile were at mobile this consume additional right

other business, et Systems cash many Missile just our of such business that's example So uses cetera. our one Tactical amongst of as International

Operator

comes next Piper Please from And Jaffray. Nick Johnson the ahead. question from go

Nick Johnson

I know Sorry, business in one split EES, just forward, an past of core between I revenue this out get had maybe quarter, could growth the XXXX? know the of I is in UAS help you EES projected kind we more for here. figures going obviously give follow-up and idea

Wahid Nawabi

this referring for as first quarter? are fiscal Nick, year's operations revenue discontinued EES to you

Nick Johnson

guys the I you have between know previous the No, for quarter, revenue fiscal given in fourth segments. two past here; out this quarter

Teresa Covington

revenue million. In in quarter, the So was $XXX.X. quarter fourth the UAS first 'XX, $XXX.X Nick, revenue UAS of was

Nick Johnson

okay, - I it see. So, was

correct? kind there - total is not So, that the not from of EES,

Teresa Covington

That's correct. operations. continuing That just is the

Wahid Nawabi

balance be of the would the Yes, it EES…

Nick Johnson

Got it.

Wahid Nawabi

-- discontinued operations.

Nick Johnson

thank you. Understood,

Wahid Nawabi

You welcome. are

Operator

to I our turn will back session, call and over for question-and-answer final concludes the Steve Gitlin remarks. This

Steve Gitlin

audio A will company Events news your and site, live webcast Analyst attention again on our you www.avinc.com. filed Time, Web be posted Thank you presentation archive The to your you we today, our version AM Web with quarter's section wish tomorrow's event all and found thank the and day. and at it And begins. filings you, shortly in will of SEC event Eastern industry this all event of at Investor portion for look be and speaking and can of before AeroVironment. of following and can found be good tomorrow, An and tomorrow's Investor the Adrianne, X:XX Presentation We call, results. interest begin relevant the corporate for site. next forward a

Operator

and may this now you you Ladies concludes Thank Thank you. for gentlemen, and disconnect. today's conference. participating,

AeroVironment (AVAV) 26 Jun 182018 Q4 Earnings call transcript