AVAV - Earnings call transcript Q3 2022

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the AeroVironment Fiscal Year 2022 Third Quarter Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded for replay purposes.

further Instructions]. any require you assistance, [Operator If I to Jonah like to conference over hand the Teeter-Balin, will now thank you. Please go ahead, sir.

Jonah Teeter-Balin

and year earnings AeroVironment. you to Corporate Development Teeter-Balin, Thank good Relations and of ladies Great. for Investor gentlemen. Senior AeroVironment's Director fiscal This XXXX, call. quarter and third is Jonah afternoon, Welcome

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

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

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

For circumstances obligation to conference is discussed release or also the any no remarks you today, further avinc.com that undertakes our posted as and with information only accurate to on Xrd, update with occurring forward-looking in the we contains call. the the the statement Events after The statements them at reflect Form release safe and today, company Presentations section. slide contained SEC, of afternoon, any our The AeroVironment's with in call time-sensitive make content the of other presentation information harbour reports in or on this risk revision This events therein. contained XX-K filings XXXX. this and along March a to encourage conference earnings to on review website to earnings periodic associated filed these our risks, we presentation factors and

President President, McDonnell. AeroVironment Chairman, Officer, Chief and Wahid Mr. Nawabi, Chief from Senior today Kevin me Joining Officer, and Executive Vice Financial and are Mr.

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

Wahid Nawabi

XXXX, year I Quarter summarizing Third performance achievements. our start by Jonah. quarter's you, fiscal last will Call. Earnings recent Thank to Welcome Conference discuss and

summary which a financial the provide Kevin, of questions. follow will year after goals our take of up more results, fiscal I Kevin and of your will before Next, XXXX remainder detailed Jonah, with a for discussion I

messages three Let our a earnings included on slide key me which few are emphasize of number presentation.

First, like to continued regards supply our businesses many last as and other federal resolution, AeroVironment's, anticipated, the government's in constraints, headwinds with labour industry, market. continuing chain entire quarter notably face

fiscal we results quarter with fourth has fiscal maintaining third our we in were this continue year XXXX. expect and strongest expectations, our our our said, that guidance quarter been stated Second, are trend line year. Historically, for largely previously to that and

expense and this during make capital, Third, even deliver actions, multiple positioned we a challenging fiscal and to reducing solid to reduction with backlog continue increasing managing better and period. year are performance strides we working strong a operational and fiscal fourth, performance year And XXXX. costs, efficiency XXXX in

XX% a Vehicles to me and $XX.X resolution. the the year, quarter. $XXX this Before Despite foundation these compared that year-over-year year-over-year. some a with of moment. negative guidance. per lower content we in of million This results to $XX.X decreased heavier the current detail, break-even year are compared of quarter revenue had quarter quarter lower share $XXX anticipated. growth XX% of for acquisition-led and backlog here performance, year not ongoing was initiatives million with XX% continuing XXXX. We're going of fiscal more of abroad a third Aircraft our shipments, have visibility higher product fiscal we opportunities, $X.XX in for and third margin of segment. organic contract revenue million, with quarter Systems to tempered touch Unmanned for QX Gross the ended increased lay financial profit due which Unmanned line to offset and was million in or to per third themes cost-saving along seeing Ground primarily on the diluted Systems a the for profit XX%, additional our both other mix margin our The the we'll backlog, Net to in increases third impact already reflecting from net the gross the a XXXX. wins revenue. decrease to Aircraft growth compared share, or Small percentage million increase year $X $XX.X let that summarize We We with as sales diluted Medium service was due we're million through for our Unmanned in Further, fiscal delivered income helping $X.X meet -- last from

we to I As dynamic continuing but call, would noted I discussed provide earlier, with earnings an the issues last on are update deal on these to our conditions. like

inventory capital, suppliers logistics necessary, demand. expenses where including negatively underlying The but chain shipments difficulty line times to These like we company's paying fulfilment not under quarter. is material uncertainty, situation ensure we're the would have The the supply supply others surprisingly, appropriate, the customer Not and agreements our areas challenging. certain steps bottom with developing the when pre every -ordering our include and issues us long-term despite took visibility, This help and materially, the higher impacted component certain product chain attacking having in a steps have our way to this marketplace we in we're getting disruption which new First components consolidate that to has that constraints, several is recovered, while in conceivable with levels. working remain results. order additional impacting various lead work-in-progress, improve quantities or as is satisfaction. overall tools changed and been foremost, working

a to in ability certain hiring However, recruit disciplines. labour costs better expanded and our spoke believe in tight Last top along such which also result in as talent constraints we stabilize. continues engineering prices lead visibility near-term I to margins with revenue will market times quarter, about impact

has select which of time, expenses, administrative enabled increased we outsourced While the staffing, our response, still near-term achieve reducing in firms, have this and on there improved, In we At focused remain same gaps our us general headcount non-core our goals. includes which managing are the talent arena. use particularly, in engineering to have in functions. and

we we're initiated During than the to actions business $XX achieve totalling quarter, both in of an approach more savings we future footprint. our cost-savings headcount growth while active In taking facilities objectives ensure annual our and operating can million efficiently. summary,

projects impact Lastly, the Washington on decision-making and awards. continuing resolution to continues contract in

pass the programs are and Act our and our will demand. closely We products are the monitoring soon. that Nevertheless, situation are and Defense prioritized Authorization XXXX hopeful sustained budget reflecting

in with the While our to conditions, continues cope stated ability company and to previously we our meet are changing confident guidance. industrial headlines

believe Our though acquisitions well challenging we challenges unique and presented persist, multi-domain and efficiently well this on creation are intelligent, is portfolio we're in potential to our business environment. of robotic value recent taking growth our capitalize the Even by performing positioned steps multiple to AeroVironment opportunities manage long-term systems.

comment that are at Let on AeroVironment significant We invasion by currently Ukraine. in Russian saddened unfolding Europe. is briefly me truly world of the event the

defending especially to that be our against and are stark allies and ourselves to superior out Moreover, the event ongoing and to those need their heroically this force. such Our authoritarian impacted citizens country our nation crisis, all reminder hearts prepared the Ukraine, of against of is regimes. defend the by unpredictable go who a unreasonable

our defend of around our ready missiles the family assist Our current helping aggressions. to products And allies other ideal stand are and and country loitering and in in against future necessary. world anyway such we

Aircraft to like turning or current largest product on the I line, Unmanned developments lines. some before start Now, call our to SUAS our would with franchise. each our provide I Small of Kevin, within over will product Systems updates

has resolution, next discussed year, lower revenue above, primarily which domestic this the both demand. and next-generation environment, few small focus the army's on driven due be declined years. believe the in As the by this of continuing we expect segment's UAS, is to to completed We this

hand, our and On Puma are enduring from Raven the systems demand other overseas. benefiting

to totalling continued developing of European our capabilities launch us our units we To $XX base domestic and we're and recently Asian franchise in adversaries. across an allies, installed globe, platforms, tens success, weaker As gimbal, near-peer of orders announced international thousands new the night competing recently from demand our of while booked for this position of has allow the million. against those two from we especially iXX the for seen customers. leverage On interest that new which this note, investing strong nearly example, address

Small excited about the our integrating by capabilities, are Tactical products. Systems our UAS products also enhanced achieved which are Missile We with sensor-to-shooter

quarters. there line, and sharing That future domestically look Missile see portion TMS of our technology. R&D additional customers applications continue Systems from where to to over to me believe the of to this reflecting developments Deliveries innovative TMS for coming are opportunities allocate in solutions, solution first are new order product healthy our internationally. and continue SUAS replace to take with We traditional place realize we this to for and Switchblade our or forward growing roadmap Tactical We a sea brings munitions XXX our interest specially strong demand variant. to air, larger products both investment XXX and the for ground, Switchblade increased international for our month, international expected

the have the Switchblade's both unique We actively Additionally, our and engaged met customers we loitering who with with for capabilities. international of export U.S. family missiles. Switchblade authorities are our who recently enabling with support allies multiple the need interest

to from addition, missile which absolutely mission instantly loitering in and mission sensor-to-shooter Upon coordinates error. positive entry target creating video XXX to Switchblade to recently with allowing launch, XXX, our introduced assets solution both the the the to By and PAD Small seamlessly that implementing data provide to to to includes the our transferred operators sensor-to-shooter cognitive full-motion the ensure planning transfer autonomously soldiers Switchblade UAS evaluation, this XXX dissemination Switchblade small position quickly load software. In solution, coordinated able enables Switchblade sequence coordinates navigate to on Switchblade XXX match with we're from target. an everything we data chance of systems. Operators from no of automated the solution, are our handling reduces update needed applications of designated or identification significantly end-to-end interoperability launch plan the Target processing, UAS sensor-to-shooter can a

XXX mission Switchblade Aircraft over Unmanned reduced can that solutions expanding to commitment timelines, JUMP operational how product up of elevate our The breadth and XX to mission increased or world solution available our sensor-to-shooter provides cognitive that now lines will deliver verify streamline, situational solution safety. engagement on UAS this Medium load lead interoperability Systems, Small our product customers. the success. interoperable capabilities our bidder in to demonstrates outcomes innovative AeroVironment's Finally, the and with success does better on built can integration awareness, Switchblade prior move of watch I to different customer Medium our the and between MUAS the line. build UAS our Further,

systems JUMP Tactical previously proposal X. ground dozen As hands U.S. U.S. XX half hearing We the This on for placing FTUAS a for Army or a a JUMP by the Increment technology back UAS the XX brigades Increment forward to more combat for Army's as this submitted in our now. award testing. recently, Future the look of X, announced, serves and day proving contract we any

year, goes contract a in be well, later to Increment on put million up new worked to this our X could we win value. win position us Increment all favourable X Assuming believe $XX will in which

record. availability. submitting autopilot in proposals globe, JUMP limited are a for across several $X expected aggregate meantime, for over by to to with to U.S. budget and As We advancing and numerous we're fiscal million European testing improve of have after funding ability allies conducted Middle over FTUAS is being Army's with environments $XXX to be evaluated over a RFPs billion The overseas. Eastern countries, this valued GPS proposed XX-year U.S. a In reminder, upgrading is potential currently complete. new have calls at allies our the its of XXXX year full demonstrations for and period the and program a the Program XX operate U.S.

systems since synergy built and year efforts with have validating these expect the have acquisition. a see this from international level generated sales installed we a interest our far, international awards first of the our healthy It's exciting So acquisition of XX pipeline and customers base, JUMP to key XXXX. and fiscal

business to Moving the Unmanned line, is product UGV Ground well. performing our or Vehicles

tactical continuing radiological, use programs opportunities to seen have cases. biological, and working coming and has the CBRN domestic interest, business strong customer over to compete we're market Southern chemical, in Further Europe or nuclear, especially the years. the the our We and team Pacific and to for position expand been

in We five-year for agreement the HAPS solid believe shareholders. and Within in the line, SoftBank. move ahead are next-generation our pleased with continue in the our expanding design potential to UGV under master product we the our interest terms our products value aircraft in with of development designing

As aircraft same U.S. to are Phase with we demonstrate we time, last our can perform assess third finally, our unique DUD Solutions programs secured flight swarming various the to AV's build capabilities quarter, artificial opportunities advance partnership, II new flights, a we certification. Works testing, And which we longer that through duration existing leverage we and the progressing to progress during Sunglider's said to products. develop quarter, and of autonomy intelligence. new continues multiple At of will capabilities. Advanced in group In continue FAA applications MacCready the further and autonomy

before ISG swarm Switchblades. acquisition target automatically detect targets these One classy Progeny to technology to coordinates programs our a and of transmitting from leverages of

growth core with but impact the is headwinds reminder, these and and and also our fruit the ahead. advanced difficult autonomy the some products We've we're our our autonomy steps vision global in We're provider perceptive of computer quarter, bearing forward were team positioning of that company. acquisition even In technologies. better services make a a industry further decisions U.S. summary, decisions look ISG years manage related these the creating to for within machine control development us vision, of our through to leader taking our learning, a believe value excited government to had in the is technologies. ISG customers. As and to and in AI-enabled stronger We're -- computer

call competitive company, which more that, for like third generate of would done, is review quarter there the While now for our to robotic advantage Kevin. intelligent work portfolio McDonnell Kevin to shareholder unique provides multi-domain to value. be should turn of our a I financials. long-term systems over a With

Kevin McDonnell

of you, Revenue segment the increase of revenue Slide for which quarter XXXX Wahid. refer comparable release period. will third the available Today, to Thank a the our during I third was our press of earnings the presentation website. occasionally by both be highlights quarter for will presentation earnings of our breakdown performance million, fiscal XX% reviewing and I X prior the provides up year's from $XX.X quarter. on

the $XX.X business by what Reiterating last small $XX.X of with largest segment Our historical reduced U.S. during with spending, in small from the patterns. million demand UAS revenue, was driven while million DoD was dollars quarter UAS year's revenue. down continues primarily Wahid consistent said, international to be

from historical We the term. UAS expect for the in below demand the DoD to levels Small near continue

from Our acquired small of a over the Medium UAS as sales. to service our with as $XX.X the another anticipate be Medium quarter million, UAS Most segment classified second product revenue is of revenue of we solid segment had quarter. growth this increase form revenue in

and build. As FTUAS continues Wahid Program the for XX our JUMP the well-positioned international indicated, we Army's to are for pipeline

million is increased opportunity XXXX which for year-over-year to Telerob ISG million businesses. primarily quarter. in $XX.X million and the Progeny year. The segment remainder or an HAPS TMS result versus the Our said, our QX products. continue Progeny businesses, But impacted for be are $X.X repeat issues sales of Revenue and in of least other Tactical of what revenue issues ISG Wahid at TMS expect $XX we supply TMS UGV acquired contributed includes by quarter. international revenue to to these the the ongoing third and and increased Systems from of chain fiscal business continued to our Missile acquired seeing we during segment from increase fiscal the a

versus gross shows the of Service presentation Slide -- sorry. of margins mix Product revenues, the earnings to Service X Turning margins.

is Service factor of Product and overall mix our margins. gross a Our major in revenues

in decline For QX, third we XX% a mix prior saw down Product, Product in from XX% in the to XX% year quarter. as QX the

level. mix For Service unchanged our historical the remarks. our earnings of negative in and adjusted tracking his down shows original below presentation margins. Product a the Wahid towards trend, XX% trend this our remains full we and as mix year, XX% XX% of X are gross the guidance indicated Product of Slide expectation from Despite

adjusted accounting margins other While small UAS Product slide lower non-cash adjusted X Overall, margins has gross XX in were for intangible amortization Service quarter gross mentioned. to to were and the The quarter GAAP which revenue margins, items. result our traditionally gross as second revenue, lower FYXX. Adjusted mix higher the of the purchase of lower margins gross XX% and down reconciles primary mix our second quarter, quarter margins I'll reflecting gross adjusted in the now lower XX%, product shift the margins. the exclude margin -- speak expense is sequentially sales XX% gross gross XX% just from for the factors adjusted versus product are margins mix. product than in a Product I two

we However, year, for product to is to the in the expect margin the see to remainder of adjusted low-XXs. mid be gross

to XX% adjusted in terms decrease declines reflects and quarter impact year. traditional the Coca acquired are expecting margins, margin from the businesses year-over-year service the feel. service in the In The XX% of end than margins in margins gross a adjusted full XXXX we saw with our service our we to quarter mid-XXs Medium fiscal has also sequentially which business third the of versus up a second lower service UAS

and compared year. the and turning to SG&A amortization operating Next, acquisition-related million was $X.X of intangible just $XX.X third million to expenses million last expenses, quarter expense includes $X.X for

We result past the completed primarily for we amortization acquisitions increase of of over revenue, the the revenue SG&A The XX% amortization $XX.X year-to-date. of from the XX% for an in prior revenue excluding to million and compared expenses, intangible year the of Excluding $XX.X XX% percentage revenue. third intangible was million expenses, the expenses. XX% full quarter three be R&D XX% or was year, to revenue a or the SG&A and period. and was SG&A as intangible expense acquisition-related acquisition-related of again, excluding was Year-to-date, for of amortization acquisition-related and year. quarter XX% third

a QX of as expenses. and includes R&D like took in that business This point, expect measures to this expenses with our in quarter incurred QX, We during included goods reduction headcount we $X.X year. full At to but line into take of be sold cost both note to of the the current operating of to I'd revenue costs percentage reflect guidance of several for XX% impacting other and have reductions our conditions. continue consolidation. some This cost will million guidance. non-recurring in the facility We cost been XX% one-time

quarter income Looking third XXXX line, the $X.X $X.XX of net per $X our GAAP bottom at rounds to share, for share Net the or fiscal million of compared quarter the per diluted income third for to fiscal X.X and XXXX. diluted of

million the in our it in acquisitions. a While significant, large difference related decrease income, wasn't year-over-year the part $XX.X increase in intangible operating of by reflects amortization our driven to

During additional and line just expenses and offset also credits. of R&D the and below operating year-to-date largely of pre quarter, as $XX.X operating cost-savings to million I tax full-year related our by incurred the This was combination losses mentioned. -tax by projected benefit, driven $X.X tax initiatives, we a the million

of of third intangible the our third $X.XX XXXX GAAP 'XX. GAAP per diluted share earnings reconciliation shows In Slide non-GAAP and share The reflects fiscal terms difference of adjusted versus The XX quarter quarter of or for amortization. and $X.XX expenses Company of acquisition-related diluted fiscal the earnings adjusted for and EPS. the earnings posted of non-GAAP between adjusted EPS, presentation per

related seeing costs not added to We expense quarter. the back the during actions cost-saving have one-time

of sheet, the the is investments year. balance of which quarter $XXX.X end slightly from fiscal was cash the third this the quarter second up to Turning total at million,

million balance have We million sheet with of working cash capital dollar $XXX a and continue $XXX to over investments and strong facility.

highlight a current to some our visibility. backlog of like of I'd metrics. X Slide of earnings presentation provides fiscal our Next, XXXX the summary

dollar the XX%. million $XXX dollar today, midpoint our to As million of of range revenue towards $XXX guidance visibility total is

end at the of of third backlog $XXX.X dollars. the funded was quarter million XXXX fiscal Our

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

Wahid Nawabi

Kevin. Thanks,

XXXX key the over questions, points mid-point XX% fiscal turning call are year earlier for of a me stated for our revenue to follows: just visibility we between guidance let few guidance, full $XXX year from With today. Before as previously reiterate diluted net million is $X.XX. non-GAAP million, reaffirming between the $XX between $XX $X.XX, $XXX Loss and share between diluted operations earnings $X.XX and per loss and share EBITDA $XX per and million continuing $X.XX and between adjusted forecasted $X to from million million, be and million, our

While to chain Washington, our by long-term facing the labour we'll a have the constraints, aggressively market, challenges AeroVironment's reduce capital, resolution continuing costs, and caused and and working ongoing we profile. continue manage supply in tight growth improve

the our in opportunities of of -- am I'm progress many shown various the team our I which proud excited and macro while the I'm While challenges, tackling also lie ahead. by

FTUAS believe in in higher that potential is and of presence. solid solid overseas larger will path right as edge the and and operational results. top investing and businesses That provide We customers, Program means demands accelerate yield acquired margins of technologies international performance the expanding an on well from AeroVironment, AeroVironment and when of we're recently Given financial years for the I as future which performance. flow, our leading the the line improved believe growth, for even better will cash

the come speak of and market to that the Kevin, to our and of at our end our approach, questions. So opportunities, your team investors to the customers as expect. fiscal best take I will have new for on abilities, the year and capitalize that AeroVironment resolve serve I returns XXXX, And our entire with we Jonah, now here ensure

Operator

the Q&A Thank RBC please go Please one Capital from you we sir. while that first Herbert we comes of line essence our Ken I ask Due Instructions]. time, roster. limit see question of Please question [Operator one you the the yourselves follow-up. ahead. stand-by Markets. to compile and to from

Ken Herbert

and are Wahid, Jonah, how Kevin, and afternoon, good Hey, you?

Wahid Nawabi

hear to good to from Good are -- Ken. Wonderful, you. see How you?

Ken Herbert

this contract the first Increment question, -- you're with announcements assuming expected more Wahid, Thank that X, fiscal successful more can a you you. importantly of could contribute to the good. the 'XX? what FTUAS and anything, any Very to timing colour Hey, year, on just I if but guess what provide

Wahid Nawabi

planning Sure, told that Ken. right quarter on The making fourth our in that and are us contract awarding U.S. now. Army announcement they sometimes has basically fiscal

probability of Fairly that, by we We X. that Army that for plans after Increment of X, end being the program X, the longer-term award is Increment increases, if good successful of of That's have soon were increases quarter Increment record. are the obviously this for us. that Increment X. wins the to And winning also basically and hopeful outcome success probability also announced it a which the then to for program will of record acquisitions communicated. Whoever become

terms out So contributions, our majority provide year the so award, It that you deliveries and can in fiscal with hope accept happen for near that U.S. assume able in very a that predicated we fast recognize more will being to in strategic we amount of on. we're very that there. the most be very to next a terms to the quarter. we're opportunity of systems on how the in And regular that's 'XX likely fourth this And the sometimes small a basis, may expect And and with quarter. of this by primarily but move deliveries we Army quarter, actual of revenue in in far updates customer engaged actively future. is or deploy and focused large

Ken Herbert

anything, with about Europe or if there 'XX? follow-up you OCO in how business today situation How, some have of currently that fiscal should think a your impacting seen there's maybe to reinstatement that is about in accounts. impact the Europe, situation speculation business potentially the we hopeful. in Eastern That's But

Wahid Nawabi

hearts, is Again, could them game The hard and have Europe and developed, shoot absolutely for XX go very those take automatically of be same that Sure. Small XXX changer and damage as At designed others. such missiles solutions we Ukrainian Switchblade very type or to and Switchblade the target that the We is identify XXX, a minds, them in the recent our the them collateral and perfectly to conflicts. our Ukraine and truly and out, believe military. conflict. events for and suited and UAS of no prayers loitering JUMP and for easily of is types obviously the breaking that our destroy Ukrainian citizens time, a literally and these with disable them family well-situated phenomenally designate ability and things

in it account, a U.S. believe the the business. JUMP positive all contributor the even of budget and do historically for to be besides extremely systems Afghanistan. that OCO as and I UAS like types received a result Small of of be of me these becoming lot for benefited wakeup of of significant military we from that. a well is in I as We that's that right have a whether the and effective And and our amount as Ukraine, the conflicts that, TMS in Middle not during the terms to funding In Europe, East historically our clear that Switchblade both is again case call activity happen future. going in going now to a XX allies that to that on It if vital in does, believe our would now of could complex sort is

Ken Herbert

thanks, Great, Wahid.

Wahid Nawabi

Welcome, Ken.

Operator

you. Thank

go from line comes the question Canaccord. of next Moeller Austin Your ahead. from Please

Austin Moeller

Good afternoon, Wahid.

quarter? Just my last you timing guys component that around chain spoke, was last common first resolved. Do relative have to that I question here. there better supply if into The time the visibility wondering might issues you think now was any when be we any

Wahid Nawabi

to but taken ongoing tend of areas you. answer tend abilities away the constraints. are on have actions basis. shown are that some of think have to we ways best evaluate our of to this. be seen have go existing. visibility suppliers while few ongoing We've effort impact three we challenges chain will And do afternoon, And in improvements, daily supply and a challenge improvement fiscal out hear lack I believe cause general. The to chain, still on and next of an I impact this from related this and into in may lot may issues supply for within those improvements. address of that areas is but that them because incredible situation short to it to addressing be amount supply could the continue job see those due there many is also to we've that basis. of mitigated. going and I and it an some to Good how of our also enormous and we priority the an areas global In issues to how improve overall, But year the I a some six constraints done issues the some we there, some negatively on working is of by Great a Austin. the putting a mentioned to with related we're next of believe my chain taking seen We the that some effort those. Ukraine all in the acquisitions And that don't months. some could defense situation remarks, ours have I to

year that challenge I for it us. ongoing into an continuing see it's So next fiscal

Austin Moeller

helpful. very Okay. there. And a That's just follow-up

relative shipped prioritize Switchblades, TMS other lines in wanted them countries potentially get some just using Europe product said to to for faster? You procure some could that to some you out components

Wahid Nawabi

we can could. we demand. increased that ways Yes, There's potential new that multiple address

U.S. themselves. or First foremost, government customers we defense within inventory have defense some our and

is higher areas relative some And a third, Number if customers activate are those chips. their and working Defense for these and supply of defense our be another others us us key military of we can and of priority put situations of we're directly are useful contractors not backfill Department act military months, to and could those many next type demand, war can item two, of and demands high with those suppliers. and are U.S. that on chain that volumes relationships already the in in more volumes microprocessors here their be needs. AeroVironment from U.S. the these big wait could and of for avenues suppliers the to some priority the to get one. of in that that our Fundamentally, supply see or always number global components higher in all few for for to needs So those provide can

within However, if in will it, on priority give chain a the us general. suppliers and the global priority U.S. it enacted the supply such whole

think ways at were working, that are three. we there can actually there I that. address be So If was of that three all to that least stronger demand can

Austin Moeller

Excellent. Fantastic Wahid. colour,

Wahid Nawabi

You're welcome, Austin.

Operator

Thank.

line Your of Please Ruttenbur from Brian Capital. the go ahead. next comes question from Imperial

Brian Ruttenbur

Yes. Thank much. you very

quarter. helping just is revenue us question going in visibility your First the understand

and now? delays that, cited this I You what fourth chain is things supplies great you to Do know that. ship hand issues, have Do your the have you quarter? supply place in backlogs like continuing resolution like orders you in right the visibility? have in

Wahid Nawabi

our have revenue. as X reasons will on There Number slightly some question. we and suppliers. Are is, that comments, our this for started that about our strong reaffirmed have a to There we on. some that have we quarter. of we and confident able X, extent, our to already And based goes line all the there variables to internally X, short there to for facts to on believe you on the quarter pretty with fourth should Number to visibility full that several be to thank better. still the guidance has feel midpoint of and backlog all today. that's provided we and we be the But we factors are why. a achieve a the always we continue the midpoint fiscal answer little our that the Compared -- risks? is, visibility backlog see, to current that that on on the our and that guidance as year about the guidance. maybe to we that ability visibility. indicators We're as we Brian, Absolutely. for overall, said based our with that and the refer have visibility, see contributes achieving historical for I today process it the levels, based XX% overall, been to And which confirmed the guidance in achieve as conditions much we we the

Brian Ruttenbur

Great.

a slightly as can. follow-up I different if on Just a subject,

I Ukraine right Ukraine? with the to now. XX roughly, past you sold sold didn't countries or systems to In you terms sells if of that have to there -- to in direct Turkey your any exposure sell know is

Wahid Nawabi

to continues absolutely tell Eastern, able Middle Scandinavian, not that that its if I'm I European existing Baltic's, majority, specific Brian, less our not grow. any sensitivity countries what are can in customers positively on countries, comment European, the to is for country So reasons the Northern you of most European, the African Western Eastern

a large one. plus number fact more with world already business Number do around given two, that the our products various the around and to us our helps the countries have portfolio and base, very strategy that's countries installed XX world. we of and execute So provide

customer of fairly of as AeroVironment. And military, because base marines, broad, strong install the feel in services very it's generally base customers actually it a customer etc. our and industry well have unmatched diversified army, one of we internationally. and that We're the suit to totally is diversified in geographically, base about the aspects robust, force, very fortunate many very product good So types navy, of portfolio, of different air as those in

Brian Ruttenbur

Thank you.

Wahid Nawabi

welcome, Brian. You're

Operator

you. [Operator Instruction]. Thank

comes line Burke, Our the Christopher ahead. go please of question Baron from from Riger next

Christopher Riger

the for Wahid, Jonah. Kevin, and afternoon, time. Good Thanks

Wahid Nawabi

Good afternoon.

Kevin McDonnell

Good afternoon.

Jonah Teeter-Balin

afternoon. Good

Christopher Riger

on piggybacking first chain difficulties you like regarding to on experiencing. I'd comment made question, supply you're double-click Just a the Austin's

the better you has to how some the mentioned You best are speak Could specifics from you areas situation can quarter? are and worse. last to changed as some as

Wahid Nawabi

other and referred the technology, use they're of on varies addresses extremely speaking, SWaP, what's of Generally terms size, of because the processing -- some that and extreme performing terms weight, performance. of in we CPUs innovative and most systems that's and are performance Sure. types of semiconductor power and our there in highest to processor units, a graphic cutting-edge GPUs,

So are demand other that these ours. the in in industries besides types of highly, things highly are many

last in a really forecasts, States. good United those very, provided we've it they high carry done Historically forecast. And them the job but of that working with is helped some in our suppliers quarter, X and been What's by weeks an is considerably. years to amount just so three us to from such changed with on time actually requirements supplier our in the have not of improve in improvements. cases of that based only eroded. lead very cutting-edge they've actually And that quoted long-term to two-and-a-half, to lead inventory that, on are based give and able time, see improvements us time leading edge. the beside and that for also some gone the systems as last this we've have might've globally over we them really are general And supply quarter the And some those a that areas

able Overall, of that setbacks there I pockets there's say regard. in been negatives to would come the how far, environment. our and positives, address away. some issues we're given -- also we've been earlier. Overall we full-year up manage forecast effort, to a It's our well-positioned or today discussed dynamic what believe we that daily that it's results and that has So net and of go pockets we've we've but that daily executed so achieve to activity a to

we we're for even fiscal year execute very believe of that I'm third And proud fiscal for but we well and that on not again, to quarter and being teams only deliver positioned So results beyond. the this year, the expected. our XXXX able

Christopher Riger

helpful. margins? Thanks impact could on Very labour outsourced had you And services for just impact? has engineering on your And that. a gears quantify the your material switching here, right. of the front, so, if All utilization

Wahid Nawabi

work, Not Brian, effect. has there's effect. I'm break had of hesitant or knowledge a that which to is we general, which material use some very, We and effort in typically easily. outside had some drivers labour by lot we of of practically it's it but areas could certain engineering transfer, Chris, sorry, very that specific them labourers, has and training But to the some requires Overall, do, work. don't some are resources not down very for the contributors. or very do outsourced high-tech

also So in, headcount and progress on made both actually hiring. some overall, our fronts, outsource but bringing labour increasing we've

of that that These demand engineering. the robotics needs autonomy, to AI, it's design, some we're guidance so And demand those for navigation, mechanical remains Overall, for, air type and and but quarter, are the as challenging the we've we for remain areas we still high competitive of for a made in looking overall. control, and very, the last very and primarily look environment. still be resources progress have

Christopher Riger

Alright, great, thanks. I caller. appreciate the

Wahid Nawabi

Chris. welcome, You're

Operator

go ahead. next Louie our comes I you. line William Please see from from the Thank of question DiPalma Blair.

Louie DiPalma

and afternoon. Jonah good Wahid, Kevin,

Wahid Nawabi

there. Hi,

Louie DiPalma

Switchblade you the Wahid progress and with -- discuss can Hi, opportunities XXX. developmental can the

other discussed to And some missiles strategic have previously of as amongst the been missiles. javelin XXX javelin Ukraine. with how the the relates You lot there and in overlap missiles, is specifically, types it a have news

for just that level. if XXX. So wondering of end different and you types I you could was high discuss The applications see markets the

Wahid Nawabi

Sure.

benefit a so XXX Louie, far, the could and XXX. and today, that a that from and XXX Switchblade it's other So capability and is the missile Switchblade allies Eastern or Europe an Western belief absolutely strong ideal as military Ukrainian Europe of neighbours ours such and particularly loitering And use.

in target differentiators As take type on then conflict areas world is and have capacity. are the plus and Being l in for characteristics, of all it travel able XXX and designated kilometres, Switchblade we all out. of see compelling, Ukraine, weapon unique payload then to other system makes These superior you value the and extremely it warhead performance which they have But Switchblade some the and of missile in similar and know they the warheads competitive, that believe today proposition over possibly have and eventually. site of a other amounts then, to the not visual capacity terms and carry XXX of your its XX superior.

talking is This about years and That's we we and something feel in been then that why for good. invested believe we very So we've it. years.

Department We with for had that latest to you received XXX. one to to the hopeful the to us able favourable engagements And and do that get Switchblade to think really country, the the I very these well, to our Louie customers some with State more to be Again, and will to our able we that, other be export our we're Pentagon, that that's of as I is as things that. and support authorization domestic positive the U.S. the engagements mention key the with we allies. see one and know, export believe of the with they U.S. want us of is processes go time those quarter, the supportive very our of supportive from enabling last very Obviously, officials because Defense the and are terms to that of XXX encouraging where and and our don't in optimism Department giving of are come. that us allies much capability. Department equip we happen of months our with this to military State us the going take overnight. some few positive But department doesn't engagements the in Switchblade -- state allies in U.S. XXX more quite next U.S. is this helping have

Louie DiPalma

Awesome. Thanks, for Wahid, that's it me.

Wahid Nawabi

You're welcome, Louie.

Operator

Thank you.

quarter. I'm a no [Operator for to today's further Ladies concludes the you speaking As questions next Thank in a with showing conference Instructions]. forward this and ask you reminder, we again question, gentlemen, again to look call. participating queue. and

disconnect. You now may

Wahid Nawabi

Thank you.

Kevin McDonnell

you. Thank

AeroVironment (AVAV) 4 Mar 222022 Q3 Earnings call transcript