AVAV - Earnings call transcript Q1 2020

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Steven Gitlin

Good afternoon, ladies and gentlemen, and welcome to AeroVironment's First Quarter Fiscal Year 2020 Earnings Call. This is Steven Gitlin, Vice President of Investor Relations for AeroVironment. 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.

XXXX. note statements this the within Litigation Act please presented certain Private begin, Reform forward-looking contains the of we that call, on information Securities Before meaning of

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

but may risks not current on expectations, and and based from governmental uncertainties, statements. involve technological actual our including business the to, are outside statements Forward-looking materially or and limited assumptions forecasts to competitive, cause economic, of that differ strategy forward-looking results factors control our that

in XX-Q information XX-K risks, harbor For on with AeroVironment's statement contained with with to filed and we reports these earnings review along SEC, safe on today SEC, the X-K and filed you associated Form Form release and factors the the Form further encourage periodic the discussed the therein. risk the

events to X, circumstances Company afternoon in that we XXXX. presentation the at as contains statements of today, this occurring September information revision filed website call call. our undertakes only with accurate Presentations make no after conference to our in on remarks or The them posted presentation today reflect update to avinc.com, obligation release our any this contained conference slide and Events The forward-looking earnings content a and any or time-sensitive section. of This is the a to also

Vice President Mrs. Financial President Wahid today Officer, and AeroVironment Teresa Senior Mr. Officer, are me Executive Chief Chief from Joining Covington. and and Nawabi;

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

Wahid Nawabi

Today, earnings refer posted to first welcome XXXX year messages. I charts, with the our our you, our supplemental and to conference and quarter to website important release filed we Thank highlight will earnings fiscal to Steve, call.

messages three I call, today's emphasize supplemental charts. Slide will of X on our that key appear On number

quarter outstanding results. delivered team first our First,

on on remain year will fiscal by and our And discuss initiatives. performance the plan key during continue XXXX Second, objectives. we successfully track strategic fiscal and third, summarizing first year progress our I to we're quarter. achievements quarter XXXX executing our great growth achieve outstanding make our our start to

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

Earnings of diluted fiscal quarter year. X% per of of year. Non-GAAP $XX.X million XXXX $XXX increased Funded and share solutions. Page over last quarter earnings for from over quarter first year demand highlights. of financial diluted our $X.XX. charts fiscal million reflect number year last non-GAAP per first Once million for $X.XX XXXX over of $X.XX EPS on results $X.XX. XX% profit Now financial following. of XXXX execution again, of results quarter of Key summarized the X the our first increased increased strong market our first of backlog share fiscal our decreased Gross diluted team's our last $XX.X diluted of year supplemental XX% outstanding highlights $X.XX sustained of $X.XX focused Revenue over EPS increased year. include

We are maintaining averages. funded continuing our to a a historical multi-quarter backlog as high level compared trend of of

number higher X on profit contributed illustrated strong and versus proportion as volume revenue. of mix to service revenue Favorable a quarter Slide product with higher

Teresa will backlog detail funded shortly. level a of supports strong Our high which visibility,

These the contract a market the for business team that wing $XX we first Slide across further Force partner U.S. included small global promote adoption conduct partner effectiveness addition awareness specialized the from Security award allied great fiscal highlighted made allied our and quarter, of award Army and solutions results, us SFAB. training, Exposing in and with remain supports to nations. of assisting, This was advising, In our Assistance referred and X. appropriations. army Raven for as number expand government systems year our Army's defense units and helps progress nations leader UAS solutions. our particular. fixed the for financial In the more XXXX accompanying the to strong to in systems in enabling Brigades on received operations million Raven We

The capable market position it's The XX In nations and Army of as and our serves the to continue evidence the a in fixed capabilities. solution as demonstrated soldiers and of record and of ruggedness SFAB the of and tools. to selection the UAS with wing and category AeroVironment's Raven U.S. latest with effectiveness around engaged system our advanced world. program allied AeroVironment's in than premier leadership provide small are this organization a track modernization Military further view more the family reliability, most

are number procurement able are to. pursuing information of We actively and providing opportunities forward to international a we when look more

count to excited of We're UAS. helicopter as our part unmanned family new small systems of our VAPOR

to fulfill customer, $XX million defense other to track IDIQ also with contract for on this engaging to while market customers is than team more capability. Our

Aerial intent to U.S. Tactical specified fiscal We sole Missile for our to And anticipate defense funding budget Lethal options. announced AeroVironment government the line, And was by XXXX government source government receiving Systems of appropriations quarter. fiscal fiscal been or and period the two have XX-month Systems, our years $XX federal XXXX through fourth LMAMS, one fiscal XXXX $XXX proposed for Switchblade base award period a Miniature request. Army's million The award Missile million hardware recently performance part government as XX-month and year this XXXX. product the includes production and contract year contract

illustrate On of of fiscal orders. demonstrated government those Slide fiscal year which Past awards have primary can fiscal appropriations years. subsequent spend and that appropriations the have be already XXXX U.S. government procurement X, to converted year in AeroVironment components we number

and production on customer timing. based contract We line are with communication our preparing our anticipated

program And summarized X. our number Slide HAPS on

and HAPSMobile test it program. manufacturing, solar FAA UAS to in continue Lanai, authorization Inc. August, for testing by helping goal Hawaii, paving flight initiation altitude of flight the for We great HAPS digital of our for supplying progress supporting make worlds received the the way announced, HAPSMobile bridge high divide the towards to In

conducting ground Before Lanai, make We and opportunity. to updates providing to in large continue in forward we you operating in more this testing growth look California. progress exciting as flight we are and

will detailed of Now quarter. our financial overview provide Teresa? first a Teresa

Teresa Covington

fiscal increase you, XXXX Thank everyone. million. service fiscal Wahid, a million. first revenue The strong financial partially million, $X.X $X.X and deliveries $XX.X the good afternoon, Revenue decrease $XX from XX% first an of in of by the XXXX. a first quarter of in million, for increase $XX.X We in revenue or product XXXX the continuing performance of million fiscal operations to had was quarter due of quarter an increase of was offset from

UAS $XXX.X related includes is with million million, design and $XX.X development unfunded. million follows, and $X.X as total consist was HAPSMobile or the First quarter of efforts. revenue X%. of or other of contracts, by XX%, revenue major a $XXX.X HAPS remaining is The million was $XX.X was is product for for line/program million or million million value agreement design There $XX.X and fiscal currently which portion XXXX The contracts these preliminary inception that which HAPSMobile other was million or to-date X%, XX%, $XX.X is is on small all $X.X TMS $X.X million. for

to decrease the of million $XX.X Gross or million XXXX. primarily XXXX margin a quarter of compared of service or to compared gross total $X.X million, sales percentage an margin in the XXXX. million. revenue first offset first XX% by Gross fiscal product in increase product partially margin XX% a primarily favorable and revenue were in $XX.X mix total the The to increased in revenue. for of quarter of sales an for XX% proportion margin in product the from due quarter to of XX%, fiscal XX% of first as a increase first due continuing for margin Product quarter operations of to of was was fiscal revenue $X.X the XXXX to of from fiscal increase XX% revenue

income or SG&A million the XXXX of the compared $XX first expense from for XX% first expense of $XX.X operations revenue to statement, continuing of for the at the of or of first revenue million Looking fiscal of was for $X.X revenue XX% quarter R&D of of million expense from expense quarter XXXX SG&A of the first fiscal fiscal was XXXX. XXXX. XX% X% quarter to $X.X operations of the for compared fiscal continuing or R&D or revenue rest million quarter of

expense was Income increase from partially $X.X million XXXX $XX.X million. continuing of fiscal an primarily quarter offset expense the of $X.X for fiscal operations increase for R&D in XXXX. an the million, operations of compared million in first in $X.X to increase million gross SG&A margin due and from was income to of quarter of The an by increase first in $XX.X

of the was due was of $X.X XXXX $X.X quarter Net net fiscal other decrease first for income for net compared a XXXX. the the during primarily in a income quarter fiscal other from XXXX. million income other of quarter of fiscal litigation gain The settlement one-time first million to to first

of The first effective to an for method of $X.X net fiscal for first million XXXX. of million share net continuing XXXX XX.X% operations quarter quarter of tax fiscal rate income Equity was income first fiscal rate the compared activity, XX.X% effective from investment tax XXXX. loss of quarter of per loss tax fiscal for a compared was to quarter of a first the XXXX or the for of $X.XX tax of $X.X diluted the

million for the $X.XX per for first attributable to of operations of diluted first or of our to costs was XXXX diluted diluted of net $X.XX the Non-GAAP share diluted deal, share continuing with the quarter from share for $XX.X quarter per AeroVironment intangible a continuing Aerospace. recent expense fiscal or amortization income income AeroVironment and quarter $X.XX XXXX. per Net million compared of XXXX was $XX.X to attributable exclude share the operations from integration per $X.XX acquisition fiscal associated share Pulse for first diluted earnings per and fiscal

settlement. XXXX first Non-GAAP and fiscal from a per diluted diluted litigation share gain excludes the share per for the quarter of one-time share per $X.XX $X.XX earnings diluted was

million first Our $X.X as XXXX million, $X.X backlog July quarter funded an fiscal quarter the the was from of XXXX, increase and backlog increase $XXX.X $XXX.X an million. fiscal fourth of from of of XX, of of million XXXX,

to as million. the was decrease balance the as end fiscal equivalents, sheet, Aerospace related cash at cash cash restricted end the increased first of from Pulse venture. million, of acquisition equivalents, investments The HAPSMobile million the fiscal a well our investments cash, joint to in Turning of $XX of $XXX.X cash, investment the the cash restricted totaled primarily cash in decrease XXXX of $XXX.X XXXX and and quarter

year receivable, sales approximately $XX.X million. XX accounts unbilled first totaled XXXX. fiscal end year compared of XXXX balance $XX.X unbilled The days the $XX.X and quarter retention the million, Total fiscal amount. Net of was days inclusive receivables from including quarter party fiscal related million to was fourth of outstanding at receivables of for retentions and XXXX the first days operations for of quarter continuing XX the

at Accounts payable year million of million inventory the quarter XX compared quarter Net the $XX XXX year to to fiscal year end XXXX end fiscal outstanding the first XXXX at days end million for days was first year quarter outstanding approximately fourth fourth fiscal was the end the XX quarter for to quarter the the XXXX. days XXXX year compared XXXX first the of fiscal fiscal quarter XXXX. XX payable the $XX.X of was of the fiscal for fourth of the year XXXX. Total of of compared fourth Days at of days fiscal inventory in approximately to quarter fiscal XXXX. compared $XX.X at first days year the year quarter was million for $XX.X

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

the Now an as fiscal Page XXXX of X visibility, our supplemental to chart. update on highlighted

of As of $XX in have fiscal revenue year-to-date we XXXX million. today,

XXXX of to backlog Unfunded XXXX year execute $XX range. balance anticipate $XXX during million. of million. XX% that bookings adds quarter-to-date backlog revenue contracts our or that we QX $XXX recognize from quarter XXXX anticipate $XX to funded revenue anticipate the execute First of ending the we up that fiscal year of fiscal million. we to midpoint in incrementally of This guidance in million fiscal to

full We and equity tax to effective tax anticipate of rate XXXX X%, tax primarily This awards tax due is benefits year fiscal a lower rate full excess approximately of anticipated XX%. other credit higher year from estimate. the than

to things I'd turn to back Now like Wahid.

Wahid Nawabi

Teresa. Thanks,

Our very strong year first to fiscal start a quarter represent results XXXX.

track million reiterate million top on revenue, in our in to guidance and executing midpoint XXXX to range, fiscal diluted and are to third our delivering we $X.XX the non-GAAP We $XXX our and guidance EPS. are our a in to year of plan XX% of diluted EPS, $XXX $X.XX consecutive line of With full revenue to $X.XX to year profitable achieving growth. visibility year objectives, double-digit $X.XX

We of first XX% half about represent anticipate year revenue full to revenue.

margin second as in is to expect gross mix of half compress We the likely in shift lower margins. XXXX fiscal revenue year a

double-digit We effectiveness higher in the also of second line strategic of our profitable investments past the years top plan Two growth consecutive demonstrate investments. half.

expect to year spending full revenue. XX% of We internal be R&D around

full our XX Slide of fiscal our expectations charts. on number summarized have We XXXX year supplemental financial

progress their Once takeaways we key XXXX objectives; on fiscal are and we great again, delivered strategic for on and their plan first, remain stockholders proceed first us, placing quarter trust results; dedicated certainty. We three and initiatives. fiscal your for our track to would our growth in take the third, our you, our our our like our team plans. achieve our for quarter to opportunity confidence and from continue remain first year you this in team successfully employees make to second, our and are, executing to helping customers focus dedication, outstanding thank I with to

Teresa, will now take your I Steve questions. and

Steven Gitlin

Thank you, Wahid.

session. Our question Alembic Instructions] Pete first Pete? [Operator comes We Skibitski begin the now at will from Global. question-and-answer

Pete Skibitski

quarter. guys, nice Hey, good afternoon,

Wahid Nawabi

Thank you, Pete.

Pete Skibitski

was the international it it, -- if sales point balance revenue I we quarter. first wondering very a the like on just was largely year, that the will sounds about, correctly? Am sounds gross the were put just the and the could drove the gross UAS off that tail strength? And of talked won't maybe revenue product year. margin UAS high that the from gross on margins I that's finer small balance that in strong revenue, as of And like margins why Teresa the be it strong characterizing

Teresa Covington

and really is if I the before, One gross the had our in key the about drivers. volume Pete, have volume strong that key we look quarter. we revenue drivers talked margin, at three revenue first

services versus product is mix. one second The

quarter. our before, And mix are I've higher at as the generally product talked high the piece so, third And than percentage margin, the difference. margins our services about product is for gross very XX%

our do of have we So differences products. mix

a the first combination as favorable, products volume, the a in the product all percentage were revenue and had. those the of So quarter, that the mix of of we sales

Your the [ph] other and we talked international. strong UAS first quarter was have strong, at in XX.X sales question in did you very domestic where about, that a small both

small So also in UAS we of the growth did domestic; was have domestic growth most internationally in and side. the

Pete Skibitski

Okay, interesting.

Okay.

kind on at spend Let your see could ask Wahid. of in a is going top-level of DARPA towards. it lot seems up if question, money money one me a to how kind push DoD more for with is and you in wondering is have? maybe touch are And just to approaching efforts that? of view research like, like Wahid, you things we lot of or how you guys complement, and have A of are thoughts of about regard stay wondering are what you UAVs. I'm lot your There or autonomy of I'm in with look big -- guys a to autonomy lab And feel to these already where that kind DoD trend IR&D guys you days, maybe that? wondering wrapped M&A it not, a of lot I'm towards kind talk just headed?

Wahid Nawabi

Sure, -- Steve Pete, I'm sorry.

right we're in of of middle the all absolutely So that.

autonomy calls execution different level I've flight and had and begin with. already include our planning some heavy from very recall in earnings of that mission previous -- a to If today dose automatic you conferences, and systems investor in discussions of

will center as And an recall call, our expanded automatic our of near in to footprint continue from facility, of to analytics. defining very and run, England talented future. primary software Number today of the team systems as market our our our And part have field of with flight differentiation four Midwest. are we and other we It that a missions the and scientists was the continue autonomy our of systems believe as our New for that in be innovation be grow long and last area, expand reasons roadmap. in in -- driver between that geographically and of is Boston one two, and will continue you well the strong also this capabilities one in engineers earnings a if technologies in to the one future

them years very capability invest I or makes price right dose. to to Lastly, non-organic if we at have complements and and that in for the would we timing. say we sense of a number we're area of a in find supplementation can very also for investing healthy where And this continue been space, this it open

observation with far. that. And accurate pleased and is and our so we're your we're very So results performance our very on with track

Pete Skibitski

the color, appreciate I Okay. guys.

Wahid Nawabi

Pete. you, Thank

Steven Gitlin

question at Thanks, comes Pete. And from our Herbert Ken next Canaccord Genuity.

Ken Herbert

everybody. afternoon, good Hi,

Steven Gitlin

Ken, are connection you the there? have lost to We with seem Ken.

on Joe his happy And the don't why come to we'll Stifel. Joe? So DeNardi queue, Ken answer can into questions. back we to be at move

Joe DeNardi

the this Thanks, thanks Thanks. Yes. Steve, slides they were and for helpful. evening,

Steven Gitlin

Joe. welcome, You're

Joe DeNardi

Wahid, mentioned TMS, given sounds three-year the you're expecting. it into award the you visibility better like

have So kind Does LMAMS growth the of award what for just visibility you maybe within visibility you, you variance size can the specifically, the or not talk from with, about that you're provides the suggest TMS? Switchblade expecting? program that that that of you

Wahid Nawabi

Sure, Joe.

-- de requirements, it's for source. to Military. primarily U.S. has and facto the it's the LMAMS year then U.S. So they as engage which offering a roughly, years sole been for standard essentially a be solution mentioned standard that timeline first three-year -- Switchblade remarks, of two we to Switchblade publicly announced the government in I original source and in has are our going auctions of contract, sole continues the my -- And additional the --

with that is with said it's you the 'XX we're to in appropriations of I've 'XX customer. that approximately budgets that And of budgets well consistent consistent what the over working before million fiscal This $XXX $XX several reflected We're with fiscal for proposed actively quarters in as on our capability, in government are year also very as for the plus the this with the all government customer. of million. budget past involved

this we demand this a we requirements. and as customers quite believe there well differentiating. our our covers terms contract work fighters. essentially see and is that expect And their as umbrella that we from Obviously, So of war to will satisfaction, continue customers. we'll strong capability stop signs not to in to for that capability continue We of with be this

With that, supports and ability long-term our I'm our to current in and our for value objectives confident that to expectations, fiscal delivering creation continue set year we results, ourselves. that

Joe DeNardi

then the last that's quarter, year light where on And pretty relative to just or that's revenues TMS recently. in million, $X.X been Okay. the

maybe can of R&D, between speak sense pretty are just the you. of so for So magnitude the TMS of I of to the developing? how some you just variance, Thank a customer And funded there some the you're also get breakdown the Switchblade much that? guys you excited of or kind LMAMS related in opportunity about as the then, just think is maybe can we kind versus terms variance of larger

Wahid Nawabi

Joe. Sure,

in as size revenue, quite you TMS the So lumpy it's on based know, timing.

it of of or that interval the story picture of at -- good product business any or tell look a that specific entire whole it revenue a in line. quarter, usually that does story you not the If

in contract the upward in of that timing the on down will regard. execution based of programs, time-to-time we from our award So numbers see

and that tune or customer the your large look have get grow award million ready of demonstrated if earlier. that working mentioned historically, that could in it to for potential to preparing production be million with the However, plus now $X just we I right that $X you we're our very contract we're business at

of in to mix down given that as But revenue as of mix line sustainment Switchblade, a revenue really both revenue our Now, we specifically well any have time, we of don't for product regards on at services and the development by as product variance. generation new as well our next original that revenue, from deliver break we product basis.

quarters. And variance, I We're We're as available which about make that well have we will with quarter, of last very continue you we I on about we're excited information those to customers. in One development so spoke more will our update effort. of our customers. engaged that. the into and progress the upcoming

and So business color of year. the the TMS Switchblade quarter for the revenue nature versus -- entire our of this that's the

Steven Gitlin

to And a we'll Herbert. your Ken the go sustain connection back Ken, hopefully ask Please you're to question. on that conversation. will

Ken Herbert

you Yes. hear Hi. Can me?

Steven Gitlin

we Yes, can.

Ken Herbert

flight Thanks, and talked and first of Wahid, Wahid. just approval program. timing in with wanted important Steve, And can any program, couple around detail provide about next focused across should you're what HAPS what of a I there? on begin the the are testing Great. more fiscal certification ask the questions or Hawaii, recent and milestones on test you some you the on to that expect the we the to for Teresa, year

Wahid Nawabi

-- Steve Ken. Sure, sure,

-- So very growth of expedite expedite expeditious very, about excited in this progress we're we're an you opportunity product the know. and this very And in or general this line in program. in terms as making HAPS,

In our ability two-year this and to demonstrate number terms in market in develop capability the one. about timeframe, of

a release. that this had notice in earnings couple our in we've it's our two, materials quarter we announcements as and published of you Number

in flight we of for to position very a disclose Lanai, details multi-phase be large AeroVironment the and we've started to received in that in testing facility, testing operations already And in have flight and do we here to this business progress. the approval We a before as specific continue Hawaii. phase ground not of of and Lanai, our But we're from long-term. first able those California we Hawaii, a yet. any Unfortunately, testings obviously, building is testings conduct the

of the fly certified which business then the by development and then actually and demonstration, and We will followed we that airspace. phase testing by airplanes and the in launch, certification, are in design, followed

looking that. you testing. we And into development progress well the to our But partner is and then date are So we're significant more and update design, once on our have stages of and this very will final progress opportunity promising news, call long-term. great forward our what to we I

Ken Herbert

of of the $XX.X be $XX million recognized part mentioned, guess a do all both million Okay. that 'XX? you Teresa what's I and of as And how to left been of that -- funded or was And fiscal set unfunded, to to aside still expect $XX million that I there actually unfunded? in think is part of yet funded? it see be was that's much

Wahid Nawabi

Yes.

part other Teresa So let will take part and the me a question your answer well. of as I let

In has the the program, HAPSMobile to terms Inc., of of ability flexibility our able really execute our this contract with our and be partner is to of outcomes lot and a on program.

of we've structured we intentionally project development complex contract make very and our adjustments progress difficult as So this that with can a that through partner. such that we phase

As date you've contract inception, number one, value. increased has that to contract value since inception the seen, of the total significantly original the

again, yet. have it's is still Number testing, last This significant the design two, The year, continued several we and and production not development to from and deliver amount this production a quarters is for yet. ready airplane not a though revenue quite it. really development contract in of

expect in in to short-term we increases to expect program progress. regard of that So with us profile. execute continue successfully work we HAPSMobile revenue as we don't the And to significant this terms

[indiscernible]. I'll to terms of In that of weigh Teresa percentage unfunded, ask in is what

Teresa Covington

Yes.

funded And fiscal remaining was million in as expect of We -- $XXX our anticipate backlog out in the backlog I visibility million to break remarks, as million unfunded about million $XX and XXXX. on of $XXX is our in was the talked end in my of – prepared unfunded. in the contract as revenue unfunded, revenue and we revenue be visibility, in don't XXXX. portion that that unfunded that our our our we QX that have Ken, which in perhaps noted, funded QX. fiscal at total $XX.X $XX.X we So by our in But we contract. anticipate talked currently expected of million, In

Steven Gitlin

Arment next we Baird to the question. Now ask Peter? invite Peter from

Peter Arment

Thanks and -- the morning Good also. Steve. for Thanks, Wahid afternoon, charts Teresa. Yes. good

lot here required back capex circling now is of for stand potentially, you award. TMS, for on Wahid volume? you've sort investment to to that question you Just visibility spending up a or What to Joe's got this mentioned, of support that here

Wahid Nawabi

Sure.

this So that with and very what disclosed is is said the in or are today the announced shared have is Peter, we compelling engaged with We TMS has problems. line front. looking government very publicly very is consistent product compelling a quarters believe what forward past our you value we that and several in to we're a proposition our customers with -- unique our customers'

really fourth a contract And sometimes quarter we this to looking to into in transition expect that. executing so And we are could that fiscal our forward of year.

comment In cap we're terms think will specifics. But of expecting Teresa regard. don't on But different it. that expenditures, I I'll Teresa on comment substantially let anything in

Teresa Covington

Yes.

there is quarter. unusually an at fiscal XXXX, specifically the fourth in Peter, TMS, related least not spent in as closing So capital. But expectation of of contract to what on in I we commented fiscal the first we for capital that large about quarter, about XXXX $X.X amount on million talked in

Peter Arment

Yes.

Wahid Nawabi

is is contracts. those and and obviously the have all And on past the the particular about, other that's primarily original Peter because it's our acquisition now based in this customer we variance requirement invested that which this Switchblade -- delivering now,

Peter Arment

very that's helpful. as No, just a And follow-up.

in the So a product much mix. you're revenue that quarter. you mentioned change was half second mix different a fiscal year, XX% – And this of this the expecting

So go going of total back that are previous kind XX%-ish to lower we quarters. you've in seen that to

going better half. the to to second are in for margins what look trying like a get Thanks. Just the gross understanding

Wahid Nawabi

Sure.

mix one. to for mentioned about first revenue, year revenue do in terms half in the be XX% product the change our as the I margins visibility Number or the the Peter, versus half primarily of next number as the expect as rest because of three a product in year, we of both So second as on services expect two, change gross from in of well. compress perspective, total in we full we as quarters, mix, mix well to the my the remarks,

any you have to add? specific Teresa, And

Teresa Covington

Yes.

was revenue XX%. we like – of In In about talked guidance in total. were the quarter, first haven't We fiscal at for was what the year percentage. product our the XX% the XXXX,

that So we the in year. to quarters. go future expect specifically what haven't percentage obviously said full we down expect we for But

Peter Arment

Yes.

Steven Gitlin

question DiPalma at comes William from our next And Louie Blair. Louie?

Louie DiPalma

afternoon, and Good Wahid, Teresa, Steve.

Steven Gitlin

Louie. Hello, you? How are

Louie DiPalma

Great.

'XX the full assuming follow-up options expect ceiling the two a of 'XX are of the three-year and various budget? of Switchblade the the Do exercise contract army As just ladder assuming budget, fiscal the will the or fiscal you include the fiscal you amount on that 'XX total the amount questions.

Wahid Nawabi

place So allows Louie, to this intend put we years. our to us customers a three capability that are contract vehicle working for customer to with in to provide customers our the

to So me up seem really engagements can What overall consistent really -- it until on our with that based being approach. complete. government's tell ends our it's it the intent no customer one is that with would

believe we full to -- products a to to a already However, source that is budget year there our government government since that vehicle term. for our 'XX, proposed in three-year that there's funding that putting procure belief interested us customer and in fiscal the fiscal place contract 'XX, is this for expects and continue deliver year sole allows on basis them customers contract in capability, a

-- our set, the goes In future. able as solution keep to meantime, updated plan confident stated ability the this our So our -- in forward this and capability very for that be reiterated guidance we our of we'll as in we're year. execute you the and to

Louie DiPalma

be working LMAMS be a on budget possible Do XXXX the for framework? and related have what three-year XXXX two-year to that budget. this any the for the fiscal this, fiscal incorporated Congress And is apply also would you to sense Okay. contract in would

Wahid Nawabi

not to have Louie, not are position our specifically on disclosed be 'XX. able fiscal yet, anything year related in the to that a customers that We front, to disclose

a likely two-year However, outcome. a to there to now of that that a a theoretically -- if just it than terms right -- described able no government potentially I in the indicators what years. three could the true and anything or having is is But there is more is approval for cover in there if. likely be say that a real expectation plans situation There big our for three-year place customers' DoD is A, is contract budget then government

Steven Gitlin

Joe? And the question to our DeNardi next Joe come queue. will from returned

Joe DeNardi

been you longer was visibility. now Yes. I when you seems now into targets you the about provide than you there have historically. historically visibility like have because of and think HAPS, kind the better visibility think But TMS has Thanks. Wahid, reluctant financial it a term to have environment limited

you do look a talk that targets? maybe And So term this still grow might bit, you can what be for like on a revenue against HAPS, Switchblade think you you about it can you you as just the transition budgets little think because provide position seems working make when given like. longer you LMAMS to some and in

Wahid Nawabi

Joe. Sure,

current our design And our guidance in remarks, actually that's portfolio line as current So top this and guidance double-digit essentially our mark program, phase profitably would of being top number development we at last grow have growth. that years have I've revenue consecutive And – and business, one. with the a we years. can still the consecutive is two two stated in of consecutive line their business the we businesses with grown well demonstrated midpoint and the in already third year have double-digit this our of range,

I'm quarter results it up delivered that two, the and our us sets fiscal how team remainder of with this year. for this Number very pleased the

know so our calendar you fiscal don't will year beyond for As year call. guidance earnings the on next we fiscal do fourth we this – quarter quarter provide and

our that, outstanding Lastly, say I would executing our great results. strategy we're yielding is in And strategy.

earlier. strategy Teresa visibility, terms as we're quarter. business well exciting a We our – and to At as offers on value very not basis. category of long-term very time, strategy lend from terms very revenue a shareholders. very have the on but business in. as profitability, got of the play focused very we in our itself first our in same a creation also growing our high start backlog that for term, long-term categories We've short And only strong a in outlined We're

is years off already we've now of over paying last in And that it pay will our and investments handsomely. many made off several the continue long run to the

and hands. updated visibility much we'll have in you as our can can information based So provide you that provide we the on as we keep you possibly

Joe DeNardi

by in the there the benefit a million -- your you your fiscal mean, in order Yes. given fair, as -- your year this revenue funding sometime $XXX that expectation That's three that to or that, get year it guys million much is associated I -- in just fair Wahid. the 'XX? should in to this in that you $XXX is with in not quarter, start say funding really your FY fourth

Wahid Nawabi

no. and yes Well,

fiscal point it of some accounting probably time Some ASC of versus up standard revenue our up recognized timing year in not definitions. end XXX as will how primarily revenue of in end will because revenues our the end based it year, and on new to fiscal

Teresa Covington

Overtime.

Wahid Nawabi

Overtime, revenue sorry, definitions. I'm

for on key working could progress this is and in it with procurement $XX working we some over year. year updated proposed throughout plus government So additional message But customer is budget may that in as that, the we'll capability. with there us our an the budget. fiscal $XXX of and of And contract a fiscal fall there customers to 'XX the dollars we're million, this year, our fall keep you secure and the 'XX and multi-year a onto million

that are original for dollars demand future. our already those for $XXX and -- represent known this worth million plus foreseeable alone they of So Switchblade about

Steven Gitlin

from take Ken now We'll Herbert Ken? of question a Instructions] again [Operator Canaccord.

Ken Herbert

you've about to Wahid fair – of It follow-up. the steps smoothing talk a about the your seems Can you just maybe line top had cash of a amount like cash or like fourth a you're with talk year. same the of build. ability, the or to any had your wondering this thing again working fiscal doing you because capital significant and efforts second quarter, historically flow quarter cadence your quarters. It through you can across flow Hi, good the cash across generated or flow out in just amount half the year? that you quarter if success the fiscal the the better just I'm seems do revenues But of in

Wahid Nawabi

Ken. Sure,

the results that up pleased year. again, outstanding for delivered our team we're very So with remainder -- this us of quarter our the setting and

and years long-term. continue the have strong very try over seen to we ability that out year also, believe also smoothen this as the last very two last To our results ourselves, your to we expect we we're delivering confident the the revenue, throughout and point, to effort the that you a made be quarters. short-term have We the of expect distributed to to you've year, fiscal fiscal both results about heard out me results fairly evenly in

our there on based nature it's cash challenge -- In of is of the flow, terms really business. the

really collect we of in the of lumpy through invoices. in that the when and And business the time the revenue is when when type size contracts. statements receive recognizing cash be invest actually flows and it, of the versus makes we actually Our contracts and financial dollars building the the

the we time. that our the we make put the make and customers' smoother as our have much also first we efforts So same at the to to business sure absolutely we on we customers' same At time, as we best a and high try needs manage effectively our can. priority then needs satisfy

like you'd Teresa, to anything add?

Teresa Covington

the quarter, as in the acquisition additional used a investment noted well as in venture. joint remarks, And I for portion as my the Ken, some our Pulse also of Aerospace, in HAPSMobile we of cash first

Wahid Nawabi

two affected the the So in cash flow first quarter. those

Ken Herbert

Okay. Thank you.

Wahid Nawabi

welcome. You're

Steven Gitlin

Ken? follow-up, a have you Do

Ken Herbert

that you. it. was Thank No,

Steven Gitlin

An our all Okay. of Thank this thank SEC for you you attention that very again a last forward avinc.com. industry your good can and you our for interest We wish version look And filings you and following question. all news your was found we afternoon. quarter's Company much. to relevant speaking call, archived We and next And on in results. website, AeroVironment. be with

AeroVironment (AVAV) 4 Sep 192020 Q1 Earnings call transcript