AVAV - Earnings call transcript Q4 2022

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the AeroVironment Fourth Quarter and Full Fiscal Year 2022 Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded for replay purposes. Instructions]. [Operator like conference now Teeter-Balin. to hand to would over the Jonah I you. Thank Please go ahead, sir.

Jonah Teeter-Balin

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

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

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

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

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

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

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

Wahid Nawabi

a and discuss performance quarter conference fiscal by full Then quarter year achievements. our I'll start before results, will detailed your provide recent and Jonah. XXXX a follow last you, for fourth year Kevin, summarizing and more will of which our call. earnings take our discussion Jonah year fiscal after Thank of up fiscal to Welcome Kevin questions. I I summary gold XXXX with full financial and

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

executed material constraints, year fourth enabling the chain team our us meet supply tight despite well First, to costs during elevated the our guidance continued markets. and quarter, labor for

to fiscal our organic year the be has growth visibility the increased since anticipate missile and company, war solid considerably world year. demand for from And and for focus We Second, most sustained will medium going we're innovative XXXX strong in a spoke. Ukraine systems. our The third, that has forward. UAS, changed last and year tactical given UAS small multiple from domestic including confident solutions, backlog customers we and brought the benefiting international

revenue of quarter. third me greater for quarter million themes, and fiscal from last sequentially $XXX I delivered We million year to results $XX and Before year. in compared summarize of quarter million the an about let our on the $XXX provide detail increase these XX% fourth financial

to $XXX full million the we revenue fiscal year. $XXX record year, For of last achieved compared million fiscal

expected fiscal from supply from the reflects XXXX. impact the million for decreased year fourth Gross as million and acquisitions compared $XX.X ongoing strategic to our This was reduction as median product margin well quarter chain $XX.X XX% due UAS the discussed, from impact of line. shipments which primarily lower product As UAS XXXX line profit XX% to our prior sales previously our in the year and growth product gross was inefficiencies. primarily period, in mix small than offset more higher fiscal year in our to of

However, per reported compared improvement this share income year. adjusted quarter or quarter to performance into for continue of from of summary, net our QX's this to We our $X.XX fourth met XXXX. diluted our improved $XX.X fiscal diluted anticipate and line for year share $X.XX our non-GAAP in results as for per we were and fiscal XXXX. In $X.X largely XX%, significantly million expectations the million year fiscal with guidance or the

dynamics ahead, manage Ukraine constraints will contact Defense fiscal with to market. Office conflict. through continuing and direct We're lead we we're to Intel chain, value as a in working labor last supply improve We regards tight have year Since to With our component directly to our XXXX of beyond. to supply material ability now macroeconomic and events times. quite the world about to and optimistic recent NVIDIA in grow Secretary take deliver further due we chain even the of such Looking headwinds. our more we're also believe continued material quarter, manage our enhance and shareholders to orders with as the raw demand manufacturers to prioritize steps

ahead forecasted to and for Finally, needs beyond. inventory ensure stability current year buy well of this we've our supply to decided of

regard support talent those expect find longer, and we improve our meet tight markets, to we've to our and need increasing for previously our persist through year constraints a supply it's demand this fiscal In we even we top to solutions. labor believe chain growth. challenge additional to steps ability still taken innovative hire continued the these While coming customer and will to

That resources and factors increased passage year. see of the fiscal last the the get to contracting of certain they most year some for we're the of urgency two activities the In government's need. XXXX addition we urgent U.S. remainder programs I now is result budget, fiscal steps the the currently DoD's quarter, in a play. and defense This with in acquisitions ensure to reprioritizing primary outlined said, development the important

The resolution omnibus longer lately relevance attention constrained solutions programs and because on has programs. now task to the government second, U.S. funds finalize our an to within time, obligate First, continuing the there innovative is orders place. an approximately approved no has And a numerous the and three in at urgency that received to in war and of Ukraine. is of the increased in same is by Defense months AeroVironment relation fund remaining of Department the budget

Now as war to significant heightened of target presidential lowering surprisingly, by weapon May I'll before recent and President part and few. Ukraine missiles, Systems military where precision a missile turning experienced slide have any Kevin, line, $XX like U.S. advantages Tactical on is and through I call Defense longer humanitarian ambassador over XX congressional the many quantities. Switchblade within authorizing to Missile which Not aid of update the Defense drawdown wave-off Attache. In with I received capabilities or the current signed the relevant April, for provide capability an recently conflict billion primarily individual help developments our would and patented given including lines. Since current Ukraine. our its time Ukraine, have the orders. legislation product on we then, significant Department has asked additional Ukraine they range, Ukrainian used to interest more provide Loitering the met due with product has to to the should name our on of effectively unique compared other highly in Switchblade its to in start system,

XXX successful more at orders significant to anticipate task have impact While fiscal still XX Switchblades been the proximity. of we pleased given to positive for of inform you is beyond plan year to the Ukraine's attaining timing such being a particularly Switchblade I'm also U.S. to government's we U.S. the that in our countries the European and NATO finalized, sell Army's theater, around approval our procure and world. Switchblade allies to within XXX the than

Switchblade partners increased positive now solution In for and orders Further, to backlog. and XXX other additional and our these time mission XXX summary, XX. encouraging JUMP innovative Raven, increased as allies DCS and Switchblade Northrop demand UAS to Switchblade expanded We're sets. WAS translate interest we're from Puma, take Grumman experiencing and such some will are and into several for industry FMS We fielding develop all sensor solutions. new mature variants shooter such developments to of the platforms and seeing small as from also and XXX and seeking medium for these requests the

of year to them double-digit expect defending combat year, to We're to proud growth Systems assistant provided fiscal threats We remain effectively. and citizens in challenge global in for the we've soon to prepare strong Missile primary be to we ready customers. in solutions supply provide game-changing and into chain Europe remain U.S. our constraints shipped assisting Overall, will and we allies Ukrainian XXXX. demand the converting this the expect already elsewhere this country to Tactical in and to in all our this committed -- our for

Now let product small me our UAS turn line. to

are generation of new quarter, and focused next customers developing on small acquisition last mentioned I UAS. As our requirements the programs domestic for initiating

we DoD UAS programs, While with international the continue our customers our work our on base. these small U.S. to within customer expand of adoption we growing upcoming

a As our Puma Ukraine. order for million quarter, announced we $XX for last an example, systems

already over Additionally, military. Quantix our systems Quantix the Recon Defense. the missions performing XXX aircraft operational and we These systems of are training to of recently donated Recon Ministry Ukrainian Ukraine unmanned services life-saving for

expanded address years. international to our targeted invest the in These to both continue with products few market portfolio of over next solution customer requirements. new U.S. are We DoD several intent future the UAS to and breaking small the solutions

With of by investments, on an product of on XXXX, also medium primarily small providing product base these enhanced Based our UAS now thousands believe I we in uptick international to R&D grow will demand. systems in tens our we move line. continue capability installed to trends, line will will driven fiscal globally. of our year current UAS

its U.S. or stay UAS anticipation X Army award. We future in with continue engaged of to tactical FTUAS Increment the

Army we is win. to to has awarded officially anyone U.S. the not well yet, this believe contract positioned While AeroVironment

DoD but the award now being an suspect announcement the in resources expected contracting by needs. war award Ukraine with urgent negatively U.S. is to by timing impacted We more the allocated that

Army's to aggregate major As about at the remain FTUAS going than be expected forward. valued opportunity $X XX-year is more this a billion period. a We in program U.S. optimistic reminder, over

proposals international in Middle in solution. we are several Europe JUMP XX and allies have our engage international the provided front, who continue On the UAS multiple to interested to with date, East. To we countries medium

providing our in intelligence, We services and growth we should XXXX. also X solid while surveillance fiscal XX reconnaissance program MEUAS with U.S. achieve UAS share year JUMP system. product market median believe leader our remain in Overall, line the SOCOM the

vehicles customer Asia actively to into unmanned are expand strong or product additional our seeing and ground line, and Regarding markets. Europe working we're UGV interest in

UGD our believe more other and potential explosive interest mines Some war devices. are related continue of the where master becoming should development product to year next-generation agreement JUMP HAPS continue to solar XX, line, in for relevant with to we MDDA and under overseas SoftBank. aircraft UGVs product Within with is design our in fiscal on to remove our of we Similar need glider line work the sales grow the XXXX. the our to Ukraine, sun terms this the the

and MDDA, design any based During terms. HAPS its to has the certain manufacture rights term the Sunglider on solar AV variants of exclusive future and of

As testing, additional flight building was flights stated the of progress partnership aircraft making previously, a this involves performing FAA and phase demonstrating certification. third longer-duration towards current and

generate Sunglider's year. We this million tranche of expect million are steps $XX revenue to fiscal advance in to we of $XX second development, on with the which commercial negotiations funding the SoftBank now in next to between

In financing sold JV. and Mobile. owned As minority SoftBank, effort, also restructuring discussed back stake majority of evaluating we we past to options quarter for X% of this AV share a HAPS previously, already which have XX% at furtherance the been this

several Helicopter, SoftBank Group next-generation of the the on success. work Solutions our of with Regardless robotic delivering for to now following now develop potential solar-powered services. remain a Advanced committed MacCready will autonomous directly incredible future multi-domain companies our NASA's HAPS. Propulsion We of fully sale, stratospheric finally, we're to engaged customers Jet the Ingenuity's solutions. Works is Notably, engaged demonstration Mars Laboratory and with And diversion realizing actively fund to telecommunications development and with partnership both market the

Vein XXXX Trophy. Collier Mars engineers our Additionally, the Genuity, of received this Helicopter past March, team and

As award is the in field a Trophy reminder, prestigious the considered the of Collier aviation. most industry

this incredible but We are very we're in achievement, proud team's not stopping of our accomplishments history-making there. talented

this growth solutions for contested spaces heavy demand positioned is in and team now jamming McDonnell momentum year beyond. economy. a enable and managing to experienced to operate the XXXX that, on our organic would continued our AeroVironment to over building like continue systems. industry I of as Kevin? in our Our we quarter greater In summary, financials. is that drive warfare. fiscal same remain the value portfolio future-defining fourth working to electronic committed turn the Kevin highly headwinds also the intelligent battle of review to in We're facing With actively time, presence we call well for and on robotic multi-domain excited capabilities for shareholder of At to robust

Kevin McDonnell

be Adjusted full press and Today, on the gross for reached a reviewing highlights occasionally revenue presentation despite of earnings I supply our line which in was performance, fiscal release during quarter year fourth Thank XXXX you, expectations I available and will margins the our in the both our Wahid. year. continued quarter to chain headwinds. website. our refer Overall, with high will

some and EBITDA we have also during income adjusted solid was positive the Our other quarter. items

$XXX earnings quarter for the fourth the Slide the of of fiscal XXXX of fiscal million, quarter revenue X for revenue fourth decrease from was provides presentation by $XXX.X outlined, quarter. breakdown the million. XXXX revenue Wahid segment a a of X% of of As

segment of with the was during $XX.X largest revenue. Our UAS small quarter million

this from $XX revenue While mentioned. Puma for the million million, quarter FMS $XX.X down order it year's was was the last as included and Wahid a for largest FUAS Ukraine, year for

revenue. a UAS come growth solid program the million in future revenue. service UAS $XX.X is classified including product revenue our segment had Medium sales, to periods medium of as with anticipate FTS segment demand. Most Our We quarter this Army's and international from in of

issues. our 'XX. ongoing of the TMS compared to $XX.X Systems, chain during revenue impacted to Missile continues contributed Tactical Our by segment million million in supply be $XX.X FY TMS quarter

a fiscal in Revenue million segment million $XX quarter. of to we strong In XXXX, Telerob versus contributed XX%. increase includes QX, which $X and year half ISG year fiscal or FY million in million percentage 'XX. $XX.X revenue. service in $XX.X comparable businesses, our the a million fourth in product in an the revenue. 'XX, This significant higher in largely result quarter. to Other to XX% increase revenue prior of and fiscal from today as a This business margin is adjusted which of product a our acquisition of XX% shift in $XXX.X $X.X SUS result decline lower a year Revenue service which had also the impact revenue, segment, product increased gross our Progeny margins product from as on mostly XXXX FY from a $XXX.X the year-over-year is mostly for of ended in Arcturus compared million the for Our mix representing product 'XX, acquired approximately 'XX fiscal shift saw is million a at fiscal

Slide Speaking product the of the gross of earnings presentation margins, shows versus service X revenue. mix of

result purchase adjusted XX trend of favorable including other sales. the presentation expense we the gross adjusted to gross to GAAP this the due quarter higher in third increase in fiscal increase product down of speak in adjusted shows FY earnings gross margins reconciles but to were the while and 'XX. margins, XXXX for XX%, quarter to service accounting an versus the was to and excludes XX% margins. XX% margin adjusted the quarter the SUS noncash Slide margin from quarter. quarter product in amortization gross third X year intangible margins mix. of Overall, the I'll gross XX% sequentially compared the product XX% in of Slide saw is gross which the a Adjusted fourth higher-margin product revenue, QX, product QX, items. were product For up the fourth XX% from for now XX% This mix

year the with adjusted gross, XX% saw gross ended the adjusted quarter increase of fourth in year. an margins, of We of we quarter third in also the the XX.X%. margins versus In service XX% terms to

gross line some a continued to improvement expect next as margins for adjusted will We this be with but from FY in 'XX with mix, year result improvement chain costs. supply product muted of be

last SG&A for SG&A turning fiscal year's operating fourth in million was of quarter. expenses. and million million from QX fourth Next, the $X.X quarter. amortization fiscal down the $X.X to XXXX for $XX.X expense and XXXX acquisition-related quarter intangible $X.X fourth includes expenses million,

for period. fourth the was million XX% expenses, acquisition-related Excluding intangible the also quarter and of revenue $XX.X of $XX.X compared or XX% amortization in million, to year revenue SG&A prior

SG&A, full million or million XX% of XX% revenue intangible or fiscal $XX.X excluding was and of full to XXXX, acquisition-related $XX.X the year amortization XXXX For fiscal expense, of revenue. compared year

full XX% XX% to in We expect expense excluding to the expense, full of XX% the with FY for be revenue XXXX. year SG&A intangible percentage XX% year. XX% our fiscal of fourth revenue quarter amortization and was to guidance was in of R&D R&D of XX% for as line a the for 'XX. revenue

R&D to we products We range meet invest upgrades to in to will customers. needs run the evolving continue of to as the XX% and products XX% our in new existing

fiscal net $X.X net from $X.XX the compared and investment Looking $X.X gains. the of our the sale $X.XX of to million our income bottom related the for fourth both fiscal income XXXX. sale stake diluted per a on of income in $XX.X the XXXX quarter quarter gain share House million fourth at QX or to at share the other GAAP for or $X.X benefited mobile equity line, investment Mobile million JV finished of and JV House million net income diluted of

expense, did resulting which However, during tax on in a the provision the over some pretax represented of our catch-up $XX.X we quarter, XX% million income.

a of of per $XX.X to full $XX.X The due share year million we $X.X net expense adjustments primarily GAAP was acquisitions of result and XXXX, loss $X.XX XXXX. in the gross reduction increase which net in other due non-cash operating or to net changes income million an diluted for million or of amortization a million income sales $X.XX in For previously. compared decrease decrease $XX.X and mix of fiscal margin largely generated intangible mentioned accounting share to a of fiscal from $XX.X the negative in diluted million purchase income, was in

interest the income in versus was tax increased interest had a additional operating in $X $XX.X and of million a million equity benefit sale loss compared the of million of million expense gains stake to income investments 'XX. FY increase method 'XX. a $XXX,XXX expense and and $X.X Also, on versus of full in million of an lower equity 'XX. JV also the $XX.X million of our the the FY by tax $X.X We offset The FY of from partially $X.X expense expense of for other HAPS year

In Slide fourth reconciliation of shows earnings XXXX terms versus of company diluted share non-GAAP EPS. posted and adjusted EPS, our share the the The for quarter fiscal of quarter or per of the fiscal XXXX. of for $X.XX fourth XX $X.XX adjusted presentation, per adjusted diluted earnings of GAAP diluted

excluded of gain our per have stake EPS. the JV a HAPS from We mobile adjusted our sale $X.XX equity in share

earnings Looking per fiscal $X.XX at year, per the of XXXX. versus share diluted for share the diluted adjusted $X.XX posted full fiscal for company XXXX

Before to on stock-based moving to the our additional that balance we expense. sheet, compensation visibility have note I'd like added

will cash EBITDA for adjusted quarters. adjusted now our which compensation On flow. historical is peers presentation, earnings we EBITDA and expense, of more of calculation more with the have representative X last provided exclude Our the consistent the stock-based Slide XX

of operational Total JV and cash the of represented million, a the the our cash to turning quarter. a of HAPS flow. investments increase This balance combination in was proceeds end was the the million from last from of end year Mobile the $XXX.X interest sale which increase Now $XX sheet. at

next the for of terms working remain couple of so around working while capital quarters. level should decline increasing see receivables capital, In the that should inventories we same unbilled

that anticipate because the will products chain buy demand. our and of requires increase continue some increasing that ahead demand for supply inventory to us we to inventories throughout year headwinds However, of

metrics. summary strong XXXX to to earnings like million with cash million the of with continue balance our capital of sheet some and visibility. facility. current working presentation of investments have X backlog fiscal highlights over $XXX our We provides a in a the $XXX I'd conclude of Slide

of of Our of funded XXXX today at fiscal fourth the range. our midpoint guidance quarter visibility our end of was XX% million and backlog at the the is $XXX.X

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

Wahid Nawabi

Kevin. Thanks,

into funded eight as backlog of on ahead healthy XXXX, year and Looking have XX% we a presentation. visibility of fiscal slide number described our total earnings

management solutions, company. another government's share year appropriate for the given global XXXX, and urgency for which of for and demand pleased year increasing U.S. to guidance awareness fiscal with growth innovative to funding continued our our represents the spend headwinds, the you strong XXXX Additionally, I'm our

expenses slide earnings summarized $X.XX $XXX As $XX shipments XX% We revenue the on intangible presentation, double-digit $X.XX anticipate year revenue of and of and excluding we growth, million of acquisition-related of $XX other per representing and at the the non-GAAP half $XX turnaround million first we XXXX of anticipate benefit orders $X.XX and between seven to XX% million, anticipate number and to placed share, and share. costs, diluted in year between amortization second fiscal compared in EBITDA and assets between end million $X.XX. in year organic net about to diluted on-time million fiscal rapid earnings Ukraine. $XX our to of fiscal million as related from income XXXX, or of of of We adjusted the non-GAAP government's $XXX particularly half, per

XXXX mix, chain is impact mainly or are our costs. Kevin year favorable product at This XXXX. by end by gross supply should fiscal offset As fiscal higher slightly driven mentioned, margin of and some above year adjusted up unfavorable volumes

continue emphasize We we expenses, XX% of expect revenue. EBITDA of to and deliver and careful to of adjusted XX% control between

about in of be XX% XXXX. expect to XX% R&D to We year investments internal fiscal revenue

potential While material and the we our cost unmanned solid quite we driven about sustained earlier, global growth organic discussed and by are robotic supply we headwinds for increased demand solutions. actively manage through market chain, for bullish labor

our levels that as likely we in and customer is will remain the it efficiently term as requirements meet inventory to elevated work possible. as near dynamics, such Given ship

focus. just for call the our investors key over two on takeaways which turning should questions, me reiterate let Before

tight the continuing including First, the inflationary labor we many resolution. met XXXX our market chain prolonged revised for pandemic, guidance constraints, challenges, a and supply pressures, fiscal overcoming year

we that looks towards sustainable drive continue future we second, results the to As will XXXX, And long-term fiscal bright AeroVironment. value. improved year work for enter

XXXX backlog, we to our within strong While orders our Missile a entering Tactical platforms. anticipated particularly are anticipate in Medium UAS demand of increasing fiscal across global year and by We're driven the product healthy Systems we by come, with encouraged quarters many lines. growth the

also services grateful product mix to made strong proud United large, solutions going to steadfast work Their over brand defense in we year enjoys industry, even XXXX. results. anticipate all who the not and Congress, very leading orders of shipments their our government's to again we forward, accomplishments dedication and higher shareholders fiscal assistance States, improving of I'm line innovative and bipartisan also leading margins allies the for by our our a have and in other are Our us An support focus overall world. during the for but year difficult and military, improved passion just gross been several bottom the very challenging in should a provide prior with in am end you, thank hard time. share AeroVironment our and longstanding a I and increase support mission. products our calendar I their would incredible able our to like us to for year. throughout Ukraine employees have and the

Kevin, and John take as our benefit questions. in will that do to now our I with as to dedicated that, are well customers we from come. making employees everything We investors the And and your sure years

Operator

with Instructions] comes Our Austin Moeller Thank first from question Canaccord. you. [Operator

proceed. may You

Austin Moeller

And XX-plus Kevin Wahid, supplies for Jonah. on the U.S. and the congratulations Good approval getting afternoon, Switchpoint. for

Wahid Nawabi

you, Thank Austin.

Kevin McDonnell

Thanks, Austin.

Austin Moeller

is question first my So essentially around that. just

visibility around approved supply is chain. the You it here for talked We've about backlog next XX-plus now countries and year. have the got been bottleneck the that

maybe mining much ease, So and into something there's guess, next if available more chain have the or how that issues And I change? so you year? TMS GPUs for cryptocurrency do less could supply there's visibility

Wahid Nawabi

Austin. Sure,

absolutely will resolved one factors I remain timing chain than and to is that the be addressed be believe the gating of going of contracting the fiscal for to rather you're So constraints. XXXX later. right the that sooner supply our

represent healthy for general, Supply for as Our activity opportunity challenge, products my remarks, et be I industries. graphic that get not terms in Missile it innovative the players because a very the consumer Switchblade going is in in tough of to we in growth us. my to and the uses very, semiconductors, proposal we're And our view. cetera, Tactical and other And in to we to in solutions very Systems most fairly consumer general. said that that is is latest and very other long-term have the of believe components, strong. relative biggest also And remains chain greatest large technology and other a processors, these industry

So it is really difficult.

tackling are that on a daily basis. We

a really have unpredictable it's heavy heavy, in focus significantly that on could of that. a We The as quite directions numbers both result change because a very environment.

benefit to another sure growth mitigate we can I that come. think strong going for and that's But And in top us. control line the and make growth However, that those deliver double-digit in we We confident to the provided feel have guidance, it that measure will year. from will to build years very risks it's taken we another pretty single hopefully also will our that possible. much we're a every we as backlog be we importantly, more

Austin Moeller

status? a Great. like follow-up a is to on And being And just order Is with potentially contact still that. DU or Intel that compared cards? the how in DX a NVIDIA, like does direct having

Wahid Nawabi

absolutely. Yeah,

ones are orders, getting that those, The others orders are only from the is DoD deal also who DO and who U.S. we the are with not deal currently do the we're are receive challenge orders. there So them. getting the

currently very Secret Office that. actively the of They positive a be Department working significantly, been would U.S. the Defense, with engaged impact. however, with DX, directly So We're the of on significantly Defense they'll many very, future. basis. literally risks do they've and far, to We're the communication us. those mitigate continue frequent of to in on in weekly with very a them, And a that tried so have

that in minimal, However, change of situation The on has right relative number DX any us that. case, very, DX yet, ecosystem, rating a -- will to put If we're received rated order, U.S. because be have were to is still those not DoD's significantly could the that the the orders us line. order. and we that working very in of receives that of front small type other the the for extremely

obviously So us Austin. list, in will the higher put that much prioritization

Austin Moeller

Congrats. Fantastic. the details. all Okay. thanks And for

Wahid Nawabi

Thank you, Austin.

Operator

[Operator comes RBC. next Instructions] Ken Our Thank with you. Herbert from question

may You proceed.

Ken Herbert

afternoon. good Hey,

Kevin McDonnell

Ken. Hi,

Wahid Nawabi

Hey, Ken.

Ken Herbert

previous Wahid, the to question. supply maybe just the of in expect fiscal you from a sort what chain quantify a revenue be you Hey. 'XX follow-up standpoint? on headwinds Can

Wahid Nawabi

very, related a but challenges daily the issues a basis, is some it change actually components, or in now material on also They even regular the microelectronics, very one from basis, Ken, it lately. and use because the gone subject composites. has direction It fluid and into range issue semiconductors, supply to or topic started in another. we that the the to chain of

material As you is those oil-based. know, of many

going the the and 'XX fiscal So oil oil well. has I of issue prices as going year the and issues affected calendar with even continue that's to of composites. believe supply And 'XX into and year

mean, dollars. that size tens significant, In of of of for us, the it be could of I terms millions

months for risk, can that many, supply and our risk and they're being and rating. strong, commercial is of acquisitions it's allies ability demands the deliver the supplies orders at secondly, and parts at quite move But and those contracts make challenges are requests process really product material. materials timing, related into DoD through Currently, good. we've and X of But secure chain. many those at contract the the since to product for how can to to fast Our remains already quite placed actual for able convert U.S.

a suppliers don't associated is have with they unless rating. our DoD has So at order risk components it today, we're that with a there a those because buying priority

So challenging. little that bit makes a it

this expect to despite be all another factors. year growth we However, year those

Kevin McDonnell

mean I already mean in we've numbers. included that into guidance range. of our included headwinds I our chain we've the supply thought

Wahid Nawabi

That's right.

expect this we well. so another growth year And as

Ken Herbert

to question. to deliver restocking? guess I sense or I you your do in effectively guide related, reflect at those in of the No, Okay. just terms a I will you've that Switchblade of would these rebuild ability inventory XXX, should those? What the the about be headwinds. for as issue guess of levels And but rebuilt. least timing of or perhaps to expect inventory obviously to get other you 'XX derisk it's completely And inventories you the U.S. what timing? tried And terms expect do -- the imagine is looks one

Wahid Nawabi

family So on closely the levels -- have the even maybe in of because the that even answer, short the they pre-Ukraine out Switchblade have the We is the it. systems we're war, the replenishing been maybe and the planning all that yes. which positive, there is signs contact very definitely Ken, efficacy answer that's signals from conflict higher see customer, higher, our U.S. DoD inventory of and our usage extremely going the given relevance on all in with of

factor. that's general, in so And one

some UAS for we made proposal take that The small systems have primarily is acquiring second through FMS all several, both of systems DCS request other also and factor into are should play that Switchblade, and countries, too. medium for several requests and in our cases UAS that there and Europe,

they're difficult and already for engaged to with actual That believe. in take will the will all convert I the eventually And that, into the convert to but to additionally, difficulty it wages the The only domestic have top some will we're for but of orders, XX-plus of approval requests So on depletion countries orders. also switch extent. fulfill and to to them backfill existing that increasing predict. DoD to some made be But those positive from we maybe able to when. and timing demand is exactly see is we've It But of customers, time got sell U.S. moving even not them, many inventories direction. that to. very

Ken Herbert

thank you. Great,

Wahid Nawabi

You’re welcome, Ken.

Operator

question DiPalma comes Blair. Louie with from Our William next

You may proceed.

Louie DiPalma

good Jonah, Wahid, Kevin and afternoon.

Kevin McDonnell

Hi, Louie.

Wahid Nawabi

Louie. Hi,

Louie DiPalma

For the Switchblade XXX? XX-plus export does the the approvals Switchblade Switchblade, cover for to the XXX addition in that

Wahid Nawabi

international Almost allies, countries. Louie. both and XXX approval XX-plus that is from XXX XXX the received includes for Department both U.S. the Switchblade XXX Yes, we've State and the Switchblade request sales every and government and for

Louie DiPalma

Great. to have speak that for the media can you for in XXX. suggest Wahid, progress the about report And the the Switchblade seems the Ukraine, general vast shipments XXX the been as that for majority

is service? need for fully done limitations be more in trials fully has ready? be XXX? it Or ready been the terms shipping any So for there to do it of to And

Wahid Nawabi

Yeah.

Switchblade So has of has for main mostly for The of XXX. is general. the reason U.S. majority presidential has the for availability so the readiness the been far it true the in Ukraine that been order product, been that drawdowns not in inventory of of stockpile Switchblade

it. the been that's So for driver

the In product absolutely, ready. the terms readiness, product of is

the Switchblade XXx believer Switchblade at to Ukrainian important more target web not missile Ukraine Ukrainians in contracting way. standoff that provide the feature to one is them very, its very requested factors. unique be and essentially than the limiting to few of systems XXX distances specialty capability. makes in and We more. have of and much they're And very distances warhead chain military both allows with unique to It's top Javelin where military Switchblade we're military are it. missile Obviously, And a positions XXXs. strategically same continue and alone harm's strong extremely in longer Russian that XXX of has that further take the and ready two supply it the a

Louie DiPalma

you And foreign several sales referenced through the transaction. military to Switchblade looking a how are acquire type Great. countries

how question the be long how does take Switchblade. there think general some France, to mentioned potentially a our long trials? in But to comfortable How it procurement? -- about you doing know evaluate the to was like I allies of last report expect with week like just for do I when. is it Switchblade take allies big acquiring you

Wahid Nawabi

Sure.

pretty are believe, as militaries these these that well XX-plus and already capability they're existing sold and based foreign on U.S. for them of we the of the the interactions allies, all with So and as UAS, are is efficacy for Switchblade. -- DoD have our much -- engagements, and small most on They communication both countries. convinced customers

know quite well. And and so they Switchblade understand

as of efficacy last and in with Switchblade those the the Middle addition, States Afghanistan, witnessing as the been East of the have United In XX Persian, the most years our allies well during theaters.

So doubt in have their that be there is to to very little, it. in my could mind Switch valuable view, or or way evaluate they them concern

to far, that U.S. move provide believe and was through is approval. them an the the process. this the to so I really ability for For awareness going it

are that made were They going requesting they it, going correct be it's understand there It's to a takes are was and buyers are never to they process. do except public France, engaged not that. about acquire adversaries. that for view, anybody's that These They Switchblade. fast time. You us. We're to with some they our news my statements engaged things a process that in DoD. really, they've U.S. overnight. that. the got through And enough It go And take in

to back So is even. going other to to but than maybe customers. initial these not in quarters a years few of only convert that, of orders the And we believe me, are all couple majority next, this that

U.S. with through term, for a they for continue acquire process come program years Just like would and and over requirement to line we them. item will this to the once progress the a fund become they to that the UT, them believe establish I uses longer that that more and continue as

Operator

you. Thank

comes from Pete Alembic Skibitski question Our Global. next with

You may proceed.

Pete Skibitski

guys. afternoon, Hey. Good

Wahid Nawabi

afternoon, Pete. Good

Pete Skibitski

-- between fiscal -- international your your for what expectations how your you firm domestic that Wahid, is your for split Guys, give us and revenue? TMS a 'XX, sense for are can in guidance

Wahid Nawabi

Western provide guidance between demand mix product versus is that is the to different large that. don't international, European, sort of tell signal international Pete, and the European it's for have domestic. both Switchblade specific countries I this -- the and around in so Baltics. of an you each interest fairly world or A can of domestic we What a Eastern line basket overall lot to our countries.

that, the and even and feel And we improve I'm approval to the changes. good throughout sorry, countries engage received But growth year -- conflict with think help coupled sale will is our Now that sale the now, our this encourage approval I internationally, more that's -- in year. in to we've -- keep we're in how a us the be year, the more that over product another for by the about export business, about solve grow, address and of could our biggest we'll Overall, feel sooner of much product not going going growth this going right spot can supply factor contracted our And timing, though, Switchblade and guidance. in as we'll We you is our time, chain regard. Ukraine. line that we good Switchblade's rather other the much constraints. but far, updated we will to that in that on that how good continue to

Pete Skibitski

Okay.

get funding small $XX you be into in Ukraine you any much on this, TMS in how be referenced. able billion there? UAS guys ask Are specifically been Have much to you might you able to kind specific line see initiative of might me fidelity Let How that items? any there? maybe

Wahid Nawabi

And we we expressed the expressed a capabilities are their and Switchblade engaged Switchblade. and we're reasonable need we in specifically and our that more know and they want military to It's that, yes that the Pete, XXX details for their vital XXX to have that to reasons, cautious our Yes, be no. yet today's conflict. Ukraine Switchblade I sure on the to there's very that confidentiality that for that make is are XXX it. could for very from news really We aware And conflict do amount see actually disclosed imperative for specific success. for publicly. customers. of sensitivity in and such as need and The not what's them safety going of

Pete Skibitski

Okay. Thanks, guys.

Wahid Nawabi

welcome. You’re

Kevin McDonnell

Pete. Thanks,

Operator

Thank you.

question Imperial Our with from comes next Ruttenbur Brian Capital.

proceed. You may

Brian Ruttenbur

Thank of a asked venture has the HAPS what sale dollars has solar solar going the now lies high hitting the that your the of you because and of had the potential venture, potentially around millions forward there and lot talked Yes. been altitude about much. joint Ukraine of you joint nobody what really that. happens large interest? of that future sold things you -- and with like Nobody's a very questions anybody But

Wahid Nawabi

Sure.

Brian. question, I that brought my up mentioned you So remarks. I'm because great glad in it

prospects very foremost, to next committed and both long-term remain phase. short-term solar we HAPS Sunglider's and the for the and First

shareholder that of request funded, majority were already them. their as for you venture. our to They large a primarily joint been wanted the reasons, the sell we through And our minority through now JV, us We have SoftBank many know, reasons, for as the various a very sell did to last from they own partner. share years, shares

prospects together that and right to represents tranche sides directly. no both our for However, and next short- We're now of with contract commitment the value way in us. committed engaged does working opportunities be with should long-term the long-term creation that negotiating on SoftBank the actively impact the to of

in venture So regard. just opportunities with are means that HAPS other us. the a for business There really solar it a several contract vehicle us for difference value-creation

We are for still still the have airplane Japan. terms. the still specific the applications, platform manufacturer except the We're joint exclusive of -- exclusive market defense access we exclusive that to airplane. venture designer for globally of with the still We're

very things those do So not about change. I good feel it.

between of to to we as year, do, I that a R&D directly that $XX rather war We million we but my are revenue is $XX talent projects, thing remarks, Ukraine, of the other -- our in resources it the and business SoftBank going expect this most said because needs we're of JV. reprioritized have to than of to have not that million, we more the because from in urgent be urgent some programs customer-funded

feel it, continue to good the course. about very overall, So stay and we we'll

Brian Ruttenbur

Okay. very much. Thank you

Wahid Nawabi

Brian. You’re welcome,

Operator

Thank Ken Instructions] [Operator comes from next Our with RBC. Herbert you. question

You may proceed.

Ken Herbert

Hey, Wahid.

concern the right Just a timing the of impact you or you color for dynamic? that quick that negatively could slips probability Can more further is any there follow-up. to on delays this that that it provide competitive any in potentially And contract with the FTUAS?

Wahid Nawabi

yet. not this program Ken, delays Army's FTUAS. is We that they -- We to communication that our however, delays were award great We any with don't a that very the always frequent strong. believe office did are question. succeeding we're surprised of in Short answer is for positive. program not good. quite be But odds view

towards Our that heavy And that, suspicion needs contracting urgency fit of we that conflict to have for plate and course, Ukraine the it. heavy, mainly because is those. customers do, U.S. contracting the on and the affects we that shift of put that's that feel from urgency, is side, we resources because our feel other resources,

are my delays good never view. in So

the our That that to little to committed we different that program. best performed all is but the committed position like had. risk with And we off far However, in we're Army very our that have fly a We of so solution we are competitors. and bit, they've competitions chances does that well quite believe program. is and FTUAS amongst our There that. like the increase the solution

hard really So their We'll to put when on done latest, they're to to when to get they exactly Based soon going specific they're a trying updated. difficult timing do really be you it's this as able on that it. keep can. as

Ken Herbert

If success There's competition could, a And at back been seems quick look companies selling Okay. in environment had have That's there follow-up more in the that Or risk perhaps marketplace. in the lot that of at one this characterize as because just to helpful. you Ukraine well. It losing as you of recently. -- some Are you be to other I munitions chain water supply getting would now? supply that into chain you be competition what's press on of the how disruptions? holds of seems now? risk share

Wahid Nawabi

actual technical further And The of operational that have unique compelling XXX. as believe that, are very know, basis is take products unmatched. We are Great question, out to as seriously. Switchblade well very incredibly We to we you in we've competitors about our asked same patents the daily question. very, there. a space. there almost. and really that I'm actually not you XXX competitors on XXX that again, do performance, performance that and record, the defend quite We And some think specific Ken. that done and glad from XXX that Switchblade track the that

for So We on patented. own Switchblade patent of that. example, wave is the the of capability

And so that's one thing.

increased is more in that missiles this go for second the competitors and The higher to you market loitering thing awareness and investors absolutely has are demand aggressively. of after right this general, number

demonstrated -- for last aware well is that's that, team say company, of our would very our as that U.S. question. more And really far and also [ph] record that track no But prefer is we, Switchblade war Ukraine prefer our and XXX of odds by to get has I competition, would our think performing going the highly other designed thing that. bodes systems. a switchy U.S.-made as we such such we're allies better XXX like generate and are to and superior as -- and as a U.S. I us. our most The products the in technology

of chances. does like So number more awareness, is larger the it our competitors, larger increase some but the have, of open but sort we advantages those an market, are of market we

Ken Herbert

Great. Thanks, Wahid.

Wahid Nawabi

You’re welcome, Ken.

Operator

Thank you.

Pete with Alembic from Global. question comes next Our Skibitski

proceed. may You

Pete Skibitski

Yeah, thanks.

LMAMS Ken's source of LMAMS I Just talk follow-on recompete that's believe. last do kind think I of my to about to recompete. LMAMS might question, I competition came that overall of notice We When And kind month, crystallize on kind guys out think Army up the a question? you an guess follow guys. of a

Wahid Nawabi

Great question, Pete.

[ph]. to historically, announcement. them Let U.S. competition. we me one, Anytime on needs expect know And have there's rules, -- very our the record you're my been all it There's as we because the and really, likelihood do And strong what what LMAMS is to for And low of however, such that competitions new be our based is capability a Switchblade very a that DoD continue for Number different of a And that always risk just throughout several here the because strong share is we you vehicle, multiyear do capabilities performed they LMAMS very, as such this LMAMS. an Army pretty my and the with the to think AB, they Army. product chance, Yes, think contract vehicle track contract able contract essentially won -- this. in time. really for and order public with to well. to absolutely XX-plus a for open in I there have position is years we our tenure has correct a was the procure estimation. but no for have put U.S. that at that called reason

competition as and game, part but used good. our and satisfaction that. product record And customer to we the we're chances, all like extremely of there's Our is track

Pete Skibitski

the be -- fact a all Yeah. about different Marine Corps people the nervous that system. I at chose mean should

watching I think time, be should Marine X of there? be takeaway point to the What there. of said kind Corps is that going you experience the Army our

Wahid Nawabi

Sure.

solution did we -- that that the organic opportunity fire and referring it or was than Corp acquisition different although opportunity the precision Switchblade And multipack a XXX vehicles. you're and mounted. wasn't that competition, for win not Marine the similar was So a for to contract I think different the larger specific LMAM OPSM but larger was

and we You're have not Marines. determined absolutely outcome to X of with is Army a be the of correct that we're too, of going does the that only And -- pursuing similar our we're also case, that particular our that others we U.S. should separately. we in know not probably with be our our And I won. U.S. that, LMAMS still that sort that chances. take mentioned this like as And have always be There's own The to there, that we tracking. chances of We like requirement and seriously, other the its we're Army. that the but plate, switch I'm don't with But working believe on my those a competition chances. of always shareholders in our variants and for the I but we comments. customers that concerned very risk, like sort

Pete Skibitski

Right.

guys. color, the for Thanks Okay.

Wahid Nawabi

Pete. you, Thank

Operator

you. Thank

Our comes Blair. DiPalma William with Louie from next question

may You proceed.

Louie DiPalma

you your and that third to final Wahid on SoftBank year? aircraft? expect quick your to this calendar Ukraine delayed Kevin, has one. of still one third Hi, Do focus Sunglider Or ship production

Wahid Nawabi

expecting not year, Louie. are this We to aircraft deliver the third

improvements that learned on the of and it the working as development flights. well we've are that the We airplane first three from as

year. yes, beyond engineering achieved, that airplane. of play. What's that catered is is Delivering important for to we currently is based urgent And will we get to that, us airplane take needs. reasons. is will fund in fiscal longer-term the move because the before. on and several SoftBank have it more second, funding will It's a the design One which of like the more and you're get So that months, airplane get from and to that needle really an get that as expect SoftBank more 'XX full not funding out delivery we're that working we year and next and to of through resources mostly have year That two that than said to further more the to much. get be And talent it the will throughout that right fiscal us right. that other this agencies not we certified on, FAA I test going with quickly reprioritize one

but committed, overall, the delivery airplane planned for SoftBank's So the this not though, year. of we're is committed,

Louie DiPalma

Okay. when line And on expect the receive is there certification? any FAA potentially time you to

Wahid Nawabi

it's in is is fiscal to definitely of is process. stratospheric certification knowledge to be further year. this that Louie, of history the pretty going airplane, our going process long It's unmanned this that to airplane a an a than especially time the nature. first That MA certify aviation,

require going It's in engaged XXXX. my with well -- be will them. are fiscal beyond a of lot beyond We but year it to testing, view, it

Louie DiPalma

able for would get to they aircraft Or you be need third that the are the Do third also second applicable the aircraft. certification? aircraft to that and certify

Wahid Nawabi

is the airplane going to need FAA would you it the test No, flight. because

lot approve of also have manufacturing We the be airplane, process process both to besides flight and there's going to as extensive Louie. the to do have well, of they a testing then testing, the design and

Louie DiPalma

thanks, and Wahid. Kevin Thanks, sense. Jonah. And make That

Kevin McDonnell

Louie. you, Thank

Operator

Ladies forward again you with conference you. today's concludes we gentlemen, you participating. quarter. Thank and speaking again look to call. next Thank for And this

now disconnect. You may

Wahid Nawabi

you. Thank

Kevin McDonnell

Thank you.

AeroVironment (AVAV) 29 Jun 222022 Q4 Earnings call transcript