AVAV - Earnings call transcript Q1 2023

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the AeroVironment Fiscal Year 2023 First Quarter Conference Call. At this time all participants' lines 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 call is being recorded for replay purposes. I would now like to hand the conference over to Jonah Teeter-Balin. you. Thank sir. ahead, go Please

Jonah Teeter-Balin

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

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

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

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

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

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

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

Wahid Nawabi

will Kevin first start performance will by the discuss recent year conference summarizing quarter Then you, our to your XXXX financial achievements. and year of detailed questions. expectations of results a more fiscal Thank fiscal and Kevin, I review earnings quarterly which summary our Welcome for XXXXbBefore our our Jonah provide I provide of Jonah. a call. I'll remainder take after

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

quarter leading generally to line expectations to top-line First, our first XXXX in track year above and objectives organic of our year were our results or another on fiscal achieve growth. we're double-digit

to very record than we're strong creation all Second, of for a fiscal August due funded order supply million our manage challenges this and demand across chain successfully is more continues year, primarily ongoing $XXX demonstrated seeing strong of beyond XXth. continued product lines. to as momentum by through AeroVironment even value third, backlog positioned nearly And well

prior revenue delivered quarter of X% first This quarter. results million summarize fiscal million for for year to an $XX.X growth the the higher due Unmanned was to financial our me We first primarily $XXX Small Let period. Systems Missile $XXX.X increase in year-over-year. our of and was first XXXX, product Systems compared year to for quarter million $XX.X our organic compared lines. profit Gross million Tactical demand the Aircraft in

fiscal XXXX. per geographical of Our $X.X increase non-GAAP $X.X a compared for This sales as or to from XXXX. diluted million, higher the loss of fiscal volumes gross increased a as reflects per product as share, favorable year quarter net loss in margin of adjusted share XX% XX% first $X.XX primarily year and well We or to million diluted mix. $X.XX reported

of market. Secretary near-term with and continue constraints, directly times. improve the our to appropriate raw allow material the the in tight demand of most in prioritize programs of activities to our for Pentagon customer build When continued our Defense future confident will to facing and continue to headwinds across funded received resources growing ongoing a ensure Looking prioritize markets, at ahead organization we to disciplines We're to the managing related urgent We're with we'll the we in in remain said, the labor We highly the R&D which still also despite AeroVironment our chain inflationary shareholder ability are and inventory, solutions. growing support of successfully set and to continuing require. work important superior tighter direct innovative suppliers programs. returns, most the especially That remain deliver staffing to engineering office pressures contact additional lead material they us U.S. levels to critical development meet our labor of the needs. our key supply

solutions our innovative Let and for demand me high, overseas. remained both domestically reiterate

UAS Switchblade loitering a small munitions Our the have surge in seen due to Ukraine. conflict demand and both in

and other awareness global are Our lines benefiting adoption product trends this of also ongoing greater unmanned increased robotic systems. from towards

same activity current year. experiencing the award we last contract government's fourth quarter which are the fiscal as quarter, While year with first current in our of coincides quarter, greater remained U.S. the roughly fiscal the backlog quarter

more our our while AeroVironment is and now sustainability available published our stewardship our innovative commitment a built have profile product environmental margin As are wins next developing more mission XXXX. We're years with website. four the responsibility XX additional over Notably, legacy social improve of funded of business mix on in of six fiscal our embedded to in have on of shifting less. customers’ to to highly in corporate sales, about proud deliver we record report backlog to optimistic on our year August XX, solutions which is months. of that higher also inaugural and of missions $XXX than doing is should a our million

solutions designed friendly the Let's overwhelming majority the the solutions fully systems, electric environmentally making of robotic market. our propulsion are forget in greenest not with amongst and most them

like each of current within product would an our provide update I Now, on to developments lines.

first quarter. the year’s small with begin prior which our growth line, me experienced Let UAS product over

growth developing record new plan additional continue in us large AE investing a pursue demand and and within also of solutions products to to for for introduce strength customers. the new fiscal best-in-class year. global multiple enhancements. LE Puma our business, position This advanced this multiple this opportunities, additional will increasing We're the Ukraine. Puma with to future Given of prudently to DoD, Overall, our market international see we while upgrades small U.S. systems opportunities leveraging install in UAS, we base see and programs including UAV for particularly

last government back interest in Switchblade has were XXX reduced its loitering The line also of overall is a product earnings We're long U.S. munitions XXX the continued our on million innovation and their features. defend robust Ukraine. Switchblade and XX% patented wave-off terms of Systems XXX Missile through country. is awarded year-over-year. Tactical both military Army. $XX.X grow Switchblade intent to in this trend strike, drawdowns with it to The accelerating. increasing contract extremely and unique our Ukraine and Switchblade provides loitering for recently sales growth demand Switchblade its fiscal call remains Switchblade for range, this filling Our line proud year. XXX XXX the U.S. We experiencing TMS Since and systems presidential are product support it’s inventories duration precision capabilities to from

the aid orders provided prior and addition, a for has new opportunity $XX the in humanitarian Ukraine. congressional In billion legislation for military authorizing

encouraged Ukraine assist in allies are and Europe. our opportunity other these We by further developments the to and

for DO government, received will necessary for U.S. multiple U.S. a loitering the DO requests recently Additionally, We're by munitions. granted the second purchase proposals and expedite rated from Switchblade priority both which XXX for Switchblade the that our of also rating prioritize DoD. supplies priority XXX highest by vendors. level fielding can additional federal allies order is the be and from of A we

We with and and continue in our expect next contracts for shipments pipeline fiscal sales fiscal year. these continue demand up increase to into customers this additional setting firm year to later fiscal year XXXX year strong their late and XXXX. work into levels and us to interest translate Overall,

you bipartisan As for picking progresses. these remain supply to munitions remain coupled constraints. term Order Switchblade contracts deliveries Switchblade is of for formulating chain We fiscal TMS see, product the budget accelerate term backlog positive maintain growth can as line. long as flow The with expected our to up year key government about the the challenges outlook Congress support our global and products XXXX. meet timing broad the loitering demand near year both we growing with for begins for and this

by MUAS product line. Increment UAS FTUAS. very We're Army U.S. Tactical announce has of this and optimistic delays, that Future officially Government coupled some award. the that U.S. management the as program chain we're challenges, will help medium supply gears our or our operational However, proactive UAS on discuss of our assistance will of switch excited pleased with known AeroVironment now the deliver to important objectives. awarded I also X us after the I'm

near-term, to more As over XX-year FTUAS a XXXX. $XXX funding U.S. is million than $X an is reminder, year In for program, at aggregate the fiscal expected the Army's approximately valued the billion proposed government FTUAS for a be period.

turns XX breadth look on to full Our capabilities next months. demonstrating Army of in very to to this We which program. now we unique important be competing Increment awarded the expect for to focus the the X, forward our U.S.

leverage is JUMP other upcoming we're programs. where Based from enhance Planck across developed San navigation integrated aircraft Aerosystems with we and This further entire especially unique expected a recently solutions ranging applications artificial portfolio Aerosystems, our and to our leading Diego, solutions. that products our and competitive provider has excited solutions to acquired is fully will intelligence. that decade announce addition, for in unmanned advantage of capabilities to guidance, FTUAS unmanned software to to advanced UAV, close In autonomy for navigation, Planck aircraft UAS acquisition for technologies a it applicable embedded XX

engine autonomous particularly Planck, to land will GPS existing will of staff we're Working customers. part enable or products at in as part of depreciated capabilities and to autonomous our as to together the even environments. in into AeroVironment, denied including takeoff and It and of our compelling more product or we sea, its a have company offer MUAS talented our part contested their to our improved addition control great As ACE be thrilled is landing integrated line, solutions team. aerospace on

customers additional the Lastly, our to Middle opportunities, to pursue and including continues Europe XX of through systems international both East. business in MUAS demonstrations our potential JUMP recent

pursuing population. global to to product committed fostered new to unmanned based or and heightened the Both are now also that platform, phase $XX this vision on pleased strong our leveraging partnership our third see product enduring HAPS UGV Regarding certification. services to for endurance remains the companies developing additional obtain year. opportunities line for secured the and to further the This grow to during million Ukraine. interest Within telecommunication product with development abroad are growing of we commercializing line, conflict I'm aircraft flight on SoftBank. continue our by perform an strong vehicles fiscal of line, funding in the continue interest we increased track of our testing, ground We're stratospheric underscoring Sunglider next QX and focused a building with demonstrate announce FAA

of as two which Advanced DoD, send opportunities MacCready additional to Sample U.S. $XX from in million The of solution. revenue In between remain recovery can advanced believe successful analysis flights retrieve Retrieval innovative showcase sample will the Mars has include year provide it $XX science lifetime. original the and on these for missions multiple our developments Ingenuity, announced several surface beyond robotic architecture solutions its benefits is NASA's phase We Laboratory this helicopters from provide the survived last a crucial October, next We a Jet a consecutive the samples addition, this of known fiscal to for Works some JPL capability we mission. to will expected upcoming actively XX which track of over Lander These which engaged we're pursuing about share unmanned AeroVironment will its with year. all humanity. coming Solution secondary the enabling I'll we remain Overall, NASA with retrieval. and to Mars for design plan opportunities believe performed success And product Propulsion to HAPS within valuable flights years to HAPS or Mars. the to helicopters preliminary collection that now scientific Mars solidified, important of Recently, into plans helicopters mineral program agencies to is XX due our solar line. benefit on months. move already expected exciting finally, and ground this our data With on million Mars that space while

track ensure prepared. prototypes for can phase double-digit remains be we complete which this the In During growth mission and through constraints and of We're timelines manufacturing components, organic for managing seeking brightest and year. chain out major program, will underlying more definitive shareholders. best of AeroVironment this engineering and deliver top summary, on after the ongoing line under talent supply to improved the expenses successfully results customers keeping control, our we

combined come. With of for McDonnell and the products demand quarter execution to Solid us to to that, the would review turn robust first services confidence call global like Kevin? over quarters our for now performance in our financials. with gives Kevin for I

Kevin McDonnell

highlighted to done EBITDA his last was and a all on Wahid. growth good fiscal highlights in XXXX first our Today, chain reviewing that’s despite and will to the our terms supply this quarter In Wahid quarter, website. remarks. our I’ll adjusted improvement this be you, which continued occasionally summary, of both our organic earnings Thank performance of through press refer We’ve first presentation available I quarter. revenue both in release versus year’s challenges

turn the revenue quarter Slide increase of revenue Now, the the Revenue detail I’d quarter first more segment was an first provides of like provide for earnings the quarter. a to the breakdown quarter. over to revenue of the $XXX.X of of to million, X% – presentation $XXX X million. fiscal for XXXX for by like

quarter during the of continue last million was Small XX% expect this revenue international the with $XX.X Our $XX approximately to throughout from from of million, quarter trend we UAS up the largest in UAS was segment and year. customers Small revenue, year’s

quarter Despite we Our are TMS compared challenges segment. Tactical Systems strong million first hampered during TMS or the XXXX. the fiscal revenue $XX.X million $XX segment by chain growth, the contributed supply still quarter, in Missile in to of

XXXX Our segment decrease revenues. is The million, million $XX.X of $XX.X revenue Medium of the of program decline to the UAS finished MEUAS fiscal million. result with largely quarter quarter a $X.X compared of first lower

the milestone mentioned, Wahid important quarters. This increased Army’s with Increment division Medium our UAS in X recently UAS as building product revenue is awarded Medium coming program. However, FTUAS was the an over

in segment HAPS million $XX.X in $XX.X million QX contributed the the first in prior year Our line with quarter.

HAPS Most million noted businesses signed our XXXX quarter. from Works of the $X.X contract MacCready a in to to versus Revenue came includes fiscal As Wahid, program we growth for continues million our first $XX.X our by segment, MacCready business, win contracts and advanced with this other of Telerob other which in capabilities. mission Works the SoftBank. increased recently extension year-over-year which for from

from product now up margins, mix non-cash margins, were gross the the XX% we first of shows is first XX%, earnings to year. compared GAAP purchase saw the the Now looking quarter and the year at to SUAS quarter Adjusted margins of gross other presentation earnings for quarter margins, of which reconciles quarter higher versus product the of margins of FYXXXX. XX%, improved versus expense product gross gross to increase the favorable margin adjusted trend in first adjusted the again margins of accounting was in sales. gross XX% to Slide due Slide service X product mix a QX, intangible adjusted were I’ll Overall, service revenue. international the result GAAP the gross to of while excludes XX% quarter our adjusted in presentation product XX geographical gross last of items. first In amortization shows XX% XX% fiscal of the which X speak line mix. the gross This last and Slide margins year-over-year. margins. with

XX% margins. year-over-year Medium margins, due the XX% service adjusted was quarter same to first of during decrease was quarter lower terms last UAS In slight year. gross gross The service the at versus

mix margins, offset higher partially costs. short-term chain in some result will supply As we in XXXX, product increased quarter, gross fiscal be the by improving which mentioned to last expect

by in rules a in expenses. a expense first continue XX% GAAP million quarters to due the million were $X.X improvement of million offset SG&A and I a and items R&D increased loss compared Now $X.X for under million pre-tax $X.X tax was turning current loss in net in million that tax positive will million in increase – tax an a with expenses. of should of a $X.X accounting partially have to increase note $X.X had quarters of net These decrease the pre-tax loss expenses for dollars, $X We GAAP decrease of a year-over-year a earnings. the gross to the of to first in and million a a in approximately income with income in related XXXX. The benefit $X.X fiscal quarter million acquisition $X.X expense taxable margin GAAP cases. million, quarter tax both $XX

XX% the of by was loss adjusted terms net our shows The $XX.X for of XX million FYXXXX, quarter adjusted EPS. loss The presentation QX quarter improved fiscal EBITDA. $X.XX product as of of of of SG&A million prior earnings EBITDA this first million, related adjusted XXXX. $X.XX In adjusted increased an improvement adjusted Slide non-GAAP for the to lower was the and the expense fiscal $X.X Of of EBITDA, GAAP first adjusted and share increase share the GAAP of increase posted partially Slide margins XXXX a over quarter reconciliation of to offset million company spending. million of to reconciliation diluted over diluted was a XXXX $X.X over the year. result gross fiscal $X.X a shows loss R&D or in XX first for for $X.X related versus diluted margins, of

inventories quarter over total were Turning the improvement the saw year inventory buy $X We and cash throughout unbilled supply receivables ahead that will anticipate expected and balances. demand for This continue by headwind an the offset investments end us of million our orders. inventory represents year-end chain to increasing during in partially products some $XXX.X to receivable We requires to due sheet. to increases. The accounts our million. quarter some the at of of increase the balance increase

of million a capital our have $XXX a XX% QX and visibility. conclude X to range. with provides million XX% balance guidance as of summary facility. working presentation visibility. to earnings the historical continue strong I our of cash revenue Visibility We compares with XXXX call our favorably over visibility is midpoint our $XXX Slide revenue investments fiscal like visibility. of The to current FYXXXX product, sheet of today conference the at to would

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

Wahid Nawabi

in confident our beyond. Thanks, our XXXX Kevin. deliver year on ability to for and remain We fiscal expectations

still federal continue fiscal by in robotic XXXX year be unmanned being priorities for are While demand. budget determined advanced strong government are solutions to

we per As net year such, anticipate for again, $XXX to is income $X.XX XXXX, shown We revenue diluted onetime number other and forecast million share of $XX million $XX acquisition-related between organic X. growth non-GAAP previously representing and $X.XX $X.XX $XX fiscal million for diluted per guidance fiscal and million are reiterating between share. our non-GAAP and EBITDA $XXX of million provided or XXXX, assets double-digit excluding We year of on expenses which and Slide amortization intangible of earnings $X.XX. costs, adjusted to and of $XX million between

in XX% be expect awards. second revenue reflecting half to current continue of the We the fiscal timing will and of anticipated this year, of

by the gross higher at Our unfavorable ongoing of slightly mix and should chain year. supply by is mainly driven last margin fiscal or favorable adjusted above This offset expenses. somewhat volumes, impact end product up

and discussed. of to full XX% We as XX% also adjusted year the between of for deliver revenue previously EBITDA expect

key points over our should which takeaway call focus. the turning a reiterate on questions, let investors just for few Before me

line among stable First, fiscal organic improved guidance, our including double-digit bottom growth, things, we year on top and line remain results. track margins XXXX for other

our continues by of funded creation fiscal have Second, I as than quarter. is supporting world. positioned work of continue value year, all and this through their the third, to challenges continued we’re record even ongoing dedication strong And us momentum like chain allies demonstrated seeing August demand more supply to our the XX. successfully very and Their our enabled primarily manage million for the product backlog $XXX employees during well order due AeroVironment to beyond to for would around nearly across strong and military lines. perseverance thank hard

committed the I Similarly, remain goal are you. invaluable the to the our ground And reliable, now coming I will other first to and from RBC. All providing around returns robotic of solutions. unmanned us our at of with is based U.S., Jonah, customers we shareholders. committed the strong allies world innovative, Herbert question Thank and take aerial our most AeroVironment that Kevin, and with Ken [Operator delivering questions. your of for Instructions] have and

Your line is open.

Ken Herbert

everybody. Yes. Hey, afternoon good

Wahid Nawabi

Ken. afternoon, Good

Kevin McDonnell

Ken. Hi,

Ken Herbert

or into called Hey, a the in sales in out Wahid. How Switchblade Ukraine, the just part out. start update of – Can of provide XXX? Ukraine implied Switchblade the maybe XXX into I of in wanted much are an United funded XXXX directly inventories as the on XXX either you’ve with specifically fiscal to backlog revenues maybe or and States. you associated replenishment here just

Wahid Nawabi

mentioned. far product you Ken, to over also remarks, inventories of two, from specific mix Switchblade the new U.S. Ukraine So One, the and that the so reasons Switchblades And six my drawn government far. to Ukraine for lines. of through the more provide already as I they’ve is with help somewhat DoD orders depleted to U.S. two so to more for backfill the evenly the backlog we next divided months to significantly expect four between mentioned on

DoD we have some works the our our I tilted say, of line of additional mix now, and few is into towards visibility So next Switchblade yet, the months. it of orders should and not that as through make heavily would orders that but backlog allies the contracts in distributed. to of U.S. in several It’s evenly the do are

Ken Herbert

what’s your as up, to chain that flows the mean, do Is about helpful. the Is of That’s steady? possible we first it stable? getting is quarter? that’s on year? through a follow as Okay. visibility if I quantify rest it it the the it fiscal maybe of you. think just the better? impact impact fiscal on Thank And supply how And

Wahid Nawabi

Sure.

You’re welcome, Ken.

our of to headwind and no for in that’s a around and as different be world that we for to remains us. industry I chain supply know definitely everyone well, So talk the

DoD, it we’ve our the very U.S. with activities distributors proactively and suppliers other got managing with the the Second suppliers, Defence, the successfully are working that going. of of by office with with many We many,

For results were was expectations. or slightly threefold. One, the our QX, within really it above

for we them So results we’re to as pleased QX expected very with the be.

until continuing resolution of government recall, year timeframe. did you March, for sort up XXXX end April fiscal If not

and lot year, is the of achieve to acquisition two the that’s and a supply was months good next still as year. fiscal as believe this going of now, dollars about is remainder lastly, much funding for remains the have be basically risk, executed put but DoD – to in while in that we there So U.S. secure to our of feel expecting the contract fiscal this to month there’s today this month some we actually can we being overall, XXXX remains this position still government which a as our in why of it. for to We positions managed still last including regard. operational that we’ve prudent And while chain all some well taken, delays in our And in the contracting headwind, that supply building able and year. given plan be bit actions where a it’s as little through advance,

Ken Herbert

you. Thank

Wahid Nawabi

You’re welcome, Ken.

Operator

you. Thank

Baird. will Peter from Our Arment coming next be of question

is Your open. line

Peter Arment

afternoon, Wahid, Jonah. Good Kevin,

Wahid Nawabi

How you? Peter. Hi, are

Peter Arment

Hey, guess as back come Switchblade wanted talk to I to guess, well. I about I

line. what referring of you’re supply interest you is of kind is us that the the had to impacting you’ve sounds summer, lot like product your TMS timeline a could update on think internationally, just particular maybe because there, the I chain it Over

obviously to So of fulfill of demand, kind your some increasing. that’s the ability

Wahid Nawabi

fuse supply the – within Switchblade Peter, you are cetera, know, warhead tell Overall, cetera. strong of are the products Switchblade small for Switchblade as domestic international. because accurate. very of as demand that the very well the chain the – to the et UAS munition, are supply signals both of Overall, the and some our in the I in specifically for activity of arming that that’s particular very, is our and could constraints, the terms it’s by as our overall constraints, somewhat global of but level specific Switchblade some affected electronics most chain you et

with several on to most the contracting engaged remarks more that are on the earlier engagements we into our actively list quite and quarter progressing That’s acquisition contracts are third those this to mentioned process. second and continue and of expect the of through year. continues I grow, my momentum why fiscal should We well and secure countries,

changer of much because our the and and given really lastly, and in what convert actual we’re plans how game looking of and about can interested constraints. awoken the undetermined we the is chain in and good have those an situation are Ukraine feel acquiring we’re they’re that U.S. that able achieve to in by for has still through being for say the actively this, capability. timing And allies then conflict. within pipeline. sales I we been is revenue But our the year to this incredible Switchblade demand we that absolutely supply can the the military visibility course, of them Now, Europe current contracts of this Many of

several on over months them cases. to and And next We’re actively and with both engaged I the continue expect quarters. that FMS DCS

Kevin McDonnell

get of U.S. the we’re add DoD we that – a also that across adoption with lost shouldn’t customers seeing that increased are to it I’d there. broader seeing class

So while side, so whammy. the Ukraine the and international war, is seeing double in demand great also a kind of we’re it’s the U.S.

Peter Arment

related you just on we more grows, should then if Wahid, And get is the up TMS, and the Switchblade just, expect direct international that mix particularly to I a to assume follow a Yes. as improve. this Is that profitability for area conversation this assumption? correct

Wahid Nawabi

Yes.

us, improves. some and why line constraints our the that’s expectations. quarter Usually and slightly that’s So our revenue unprofitable what first the have we and of of that interest I and for top to last way that as that we for in much we be pretty is rates our and the we the – above fiscal fiscal of the And lower really to inflationary but the do supply our believe expect half. I levels, and fiscal continue profitability second first despite fiscal revenue that year, was economy have especially, our XX% half. about be and year we for driving pressures, year a and And we’re backlog, year, first well line and This year full and course, the next demand in quarter expect to over drivers year, a as time better into very momentum macroeconomic profitable the results than well higher year for it beyond. XXXX. expect this fairly believe positioned

Peter Arment

Appreciate thanks, all the and Wahid. call,

Wahid Nawabi

Peter. welcome, You’re

Operator

you. Thank

Moeller from question coming Austin Genuity. Canaccord will next of be Our

Austin Moeller

Hi, and Kevin. good afternoon, Wahid

Kevin McDonnell

Austin. Hey

Wahid Nawabi

Hello there.

Austin Moeller

Hi.

my So of customers first of a state analysts approved as NATO, Europe are touched that months question XX many of specifically the the that for here. has [ph] the million backlog but ago. by few customers part on in by how DoD were department sort of just XX, $XXX within This me, countries before August those a few been

Wahid Nawabi

Austin, well have other a products. as we as of for small growing fairly Switchblade, So customers, for international both list our UAS

But that specifically in expect those contracts of and Majority on primarily what cases, are UAS even not The We’re I million is and unfunded there our I through comment months. also multiple those with of even growing. also the on that the from further which the systems reflected countries and earlier. of customers XX engagements able of is number of healthy, which grow separate disclosure. our to customers backlog, multiple that because coming mentioned demand I medium DCS U.S. tell government the on a but are JUMP and $XXX unfunded is basis, FMS portfolio you those internationally. to the is the activities in is of countries customers I’m engaged is countries can and sensitivity

know, for this I our more and provided than on we prefers government, allies to U.S. Although our of cases FMS through Switchblade munitions believe DCS, are for bullish generally because be type cases. loitering to FMS procured

FMS more Although this but on for we authorizing we the and both have in FMS, letter a sales DCS optimistic general. feel

Austin Moeller

the bundling fire and that the you looking looking medium the That’s wings. with buying And kit at of XXX UAS, how that off can and are at Okay. helpful. XX just then given customers that are it Switchblade some those many JUMP

Wahid Nawabi

several we that have demonstrated interested actually So, customers are in capability, them.

equipped term The but to that engaged discussions. actively Switchblade expect existing JUMP would customers sensitive live medium as years of highly which is Helicopter, interested we well to have in customers, in again our UAS years next be I our two are VAPOR We number to Switchblades, those in multiple Switchblade demonstrated real the both three in as in with our long both be multiple XX our demonstrations life.

the industry Army Switchblade I line. program, be grow other the and of and to product its enabling and think other will platforms common similarly, platforms but only UAS over our the that evidence major So, and medium our more UAS, the years FTUAS as more Switchblade medium of in one will successful evidences, come. And not own become with

Austin Moeller

Okay, great. on that. in Thanks all for filling me

Wahid Nawabi

Austin. you. welcome, Thank You’re

Operator

is Instructions] [Operator The Please next Thank of we you. coming DiPalma question have from Blair. William go Louie ahead.

Louie DiPalma

Wahid, Kevin afternoon. Good Jonah. and

Jonah Teeter-Balin

afternoon, Louie. Good

Wahid Nawabi

Louie. Hi

Kevin McDonnell

Louie. afternoon. Good

Louie DiPalma

contract the responsible Ukraine. closed to the ship Has of widely been has Has manufacture portion in backlog of the for And in yet? month and that AeroVironment XXX that that the XX for August? Switchblade increase during a discussed contract was media to

Wahid Nawabi

Ukraine [indiscernible] as position activities that also to And specific What our four specifically allies. able are signage to one you that Ukraine. XXX on when is comment the award with well Switchblade besides again, backlog some that be I sensitivity. or unfunded not in XXXs They’re a of to, engagements customer other DoD. and a a DCS have several Louie, U.S. contract is as portion due tell also contracts specifically we we can related have for Switchblade I’m the allies that both of near sales to for

DCS, and but I’m with on on XXX sales both the remain our pipeline fronts both XXX general looks Switchblade we again, Switchblade optimistic although so, than and customers more for in quite engaged FMS growing. healthy of and And Switchblade

Louie DiPalma

mix Thanks, the program ultimate Wahid. And Increment the position FTUAS Increment the program of does AeroVironment does you for that record billion can that And remind with how into us, with win successful of record? were you how X X. and fit $X

Wahid Nawabi

Sure.

Future U.S. and So Increment Tactical air far plans Combat is operating award critical has us Louie so the the and buy way as it follows: to is is to U.S. because Army to for UAS systems described X them really set and program the where an who first Brigade. it for the wins that and was them anybody going the vehicles Army and is provide of critical

make far want or one operate the and operators is are take they their they improvements system going need the basically to platform changes is the office Brigade what So have receive within see that is and to so enhancements, Army that and and Combat to to intent for program Army what sure there to U.S. system a selected if going users them. The the really additional or any of inform missions. any U.S. they

the are of aware and Additionally our well meet to requirements the performance to we U.S. Army And acquisition improvements additional goal Increment process. additional those the of competition, the very to ahead add is of. or plans enhancements X, expectations customer’s which

U.S. fielding they are the more so Army, only based according performance. far with forward deliver proceeding and X gets and these with of to only to the happy improve all award, although Increment the ahead better because but give to benefit. advantage competitors to them, they’re with with be Increment and to competition, so in and military. systems X is reason satisfied X, systems us and of competition working for time. capability a to much they look so is position whoever competing the us X get than us this And And are awardee will our b, b, open they engagements And critical terms why we very a, the Increment our the field users with an for Increment Increment that systems are And at in an on X that’ll other

awarded, $X to so which billion process that Pentagon And expected planning U.S. X Increment the is program part to once about U.S. acquisition as gets within Army. budget and be official record, the of and process becomes the in

Louie DiPalma

vendor expect be Great. it be multi-company? like expected that to $X billion to is to or And allocated one you just do

Wahid Nawabi

for to have Louie. is structure one to deploy have set or the based structure great capabilities, the weapon Group a asset for X, options It them or That's system systems Army question, of set because then such multiple or not than a multiple these that of your common whether the combat X, a soldiers for or the it's UAV another U.S. actually you for on for choices, and more carry capabilities. in brigades train

definitively the it plan So low the likelihood In because is to I my and separate extremely their for Could Is way given is U.S. the they operates to change? and and plan and does structure Army that is army although the the practically low likelihood on said Possibly. a think and U.S. that view that two and its impossible likely? reason primarily one not today, awarding okay. doctrine will hasn't that the military maintenance if it for systems support combat and for implement. this brigade having – make is training trains difficult supply,

Louie DiPalma

Right. One final I may. if question

Wahid Nawabi

Sure.

Louie DiPalma

operations that Are you to – for be you Northrop at are able forces Grumman the with they partnership Switchblade it might showcased special discuss I variant very, it's this the your to, but know is premature, able Jackal, conference?

Wahid Nawabi

Munition, a the Northrop should to Switchblade is And solution compelling go referred I very for forward deployed essentially and Long a that large very Range military be as we and specific which a U.S. LRPM, Army's both and compete program, comment and equipped AeroVironment can can we are version that That's that. That with. capability Grumman that U.S. feel with. with Yes. very it's Army partnered we on have the U.S. Northrop Army of Precision a opportunity. certainly

So SOCOM where what the Munition Northrop conference that Jackal prototype first actually you the Loitering displayed at was of public. System in at the saw

with is adoption DoD pleased with also not opportunities very we to significant this in with is believe because going We're not momentum, capability very, example progress there, a the of more us loitering and is with how another validated, the the by We're advantage very engaged position we munition a partnership. decade. and all provider this majority to to pleased compete U.S. and the more are the going next as very to and those important We of in keep that the making our good field already getting to that the them. and marketplace of fortunate forward. leading intend a is if reason in And demonstrated, gives we're why in thousands capitalize that be we able that proven are allies be fielded but

Louie DiPalma

Wahid. Thanks Awesome.

Wahid Nawabi

You're welcome, Louie.

Operator

Thank you.

Capital. of next question Ruttenbur will Our be coming Brian Imperial from

Brian Ruttenbur

you Thank very quick much. Couple of questions. Yes.

the chain the where better get dramatically things six is starting all be chain, are to comment quarters about you're comment still you issues number from there. visibly a least that a should seeing supply months First of chain? made chain of about couple hearing terms of on supply is having, you know Can from back to what we're improved in companies yes, having I the of now. nine what visibility in still to they next at that supply supply you're

Wahid Nawabi

with buy situation of set one material, basis. of prime we a contractor solution microprocessors, et customer, electronics motors, products, are composite a we the chain just a specific and a gimbal on supply extremely really and or lenses, Since our Brian, cetera. daily deal system cameras, not literally we that provider to changes is dynamic variety system of different semiconductors,

cetera. So the et battery packs, battery systems,

and portfolio as So broad pretty is wide large our pretty and need is our well.

a rating our is a U.S. risk priority a mentioned us and and contract the demand That authorization a orders U.S. allows risk Commerce signed two on already those very, at DoD suppliers constraint changes with supply profile to with the have that unprecedented, a chain basis fast and but received for the So the DoD very number of our able Department my paced at the the very go of categories of to Pentagon actual U.S. that authorization, one knowledge on remarks, of Number ahead which orders level. on is every risk non secure DoD given on almost place our that. we Defense, to authorization my one. for authorization. at I months two, and engaged last at is of And of as difficult forecasting U.S. from DO Department has be the that Ukraine we're us for to U.S. all suppliers orders government

about systems, I improvement we highest And cannot go different are areas, working areas the say I that and go into a, need Switchblade would Defense are into stagnant. Switchblade many on we're but clear is Secretary us those, sustainment components that give a many, sufficient areas also while the try that has angles very to you and the very Department two for be is a and solve and of some semiconductors critical Office So of calls suppliers as our us a and some but in position our directly that deliver reaching I a this. phone for feel able warhead. the of year. on said, as well is yet, The working picture, see us from the And making see set helpful, basis to with it's weekly actively to Defense. engaged out still pretty some it still that of as And but we processors be that of confidence ability give expectations this is good able not our been to us to and but and with XXX% acquisition to we

Brian Ruttenbur

and said or as is advance up because chain a margins, to in years of a flat other? the versus you those going lot because slightly is cost or two that is the deliverables prices factors it of the up, rising of follow Right. be to gross is bolt-on it are to combination one a and as price you, supply And that just the arising, of your that,

Wahid Nawabi

It a It's, of Brian. that's basically is both. combination accurate

And So we going is up or more which because and margins. to why slightly dose better products sales, to expect reason year’s also sales the year at, heavier margins domestic be for the margin profile. versus versus a and gives mix us of international sales hardware favorably our services, also revenues above sales last of gross a gross product to fiscal it's be the full the changed

to parts, some by offset expenses, the macroeconomic extent, increases, et material is constrained of some chain, cetera. that expediting of increases pricing in because Now and levels, the, some costs supply costs

customers cases make can, with taken that have we which their already many, with steps our many have said not what is Now, in accordingly they to always we having some immediate. prices adjust where in that, we of but We budgets. to can, in all put sure we plan we can't their active work budgets effect our the

and So to we them that minute, those them can moves the to they accommodate increases we last working with make we do forward. those are at not want and justify surprise sure time can as

why I year. So for it'll year, better hopefully fiscal be slightly think this that's next reason, or the either even above and at,

Brian Ruttenbur

you. Thank

Wahid Nawabi

welcome, You're Brian.

Operator

again for participating Thank you. and thank quarter. you Ladies again you look gentlemen with and we to next forward speaking

evening. a You all wonderful Have disconnect. may

AeroVironment (AVAV) 7 Sep 222023 Q1 Earnings call transcript