Earnings call transcript Q3 2023

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Operator

Good day, and thank you for standing by. Welcome to the AeroVironment Fiscal Year 2023 Third Quarter 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.

to Jonah conference Teeter-Balin. like speaker to now today, for would turn over the your I Please ahead. go

Jonah Teeter-Balin

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

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

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

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

we in Form the on the statement section and review at encourage safe therein. earnings Events these to harbor Presentations also further our release to earnings other our and with XX-K periodic For AeroVironment's SEC, the filings with associated risks, information along you the discussed afternoon, filed reports of release factors risk section. contained and we avinc.com presentations the in presentations slide website posted a This the with and Investors on

call. this no circumstances The forward-looking undertakes information them our after time-sensitive any reflect events only The in today company today, to revision contains X, conference this occurring that to is remarks accurate content XXXX. call or update contained this conference of as of make to statements March or to obligation any

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

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

Wahid Nawabi

summarizing in remainder fiscal Jonah detail. your review to which then our I financial third results provide before a recent performance will call. conference year I our Welcome quarter greater updated start and our Thank after of Kevin the XXXX XXXX year will for take earnings summary our questions. of fiscal by I and Jonah. you, achievements, will expectations Kevin,

jump business drivers me strong across lines. the very fundamentals about and clear demand our all of and The quarter, into Before underlying remain our I robust be one let product thing.

Our over record trending are XX% core significantly businesses operating clearly a adjusted in direction, metrics our EBITDA. on margins gross positive and improvement including better backlog,

Our prospects believe should our have drive I continue industry better. trends short, been sustainable for to for and the growth long-term In profitable AeroVironment business. never

quarter, highlight messages are presentation. a included the will number of three on key few which on slide I earnings Now, our

First, we third in against evidenced expectations our ahead enduring with demand as our quarter with continue our end at funded than backlog million. QX of to record portfolio, the line results of more of plan by solid slightly or across our successfully execute $XXX as were

top Second, are line range solutions. double-digit last XX% given guidance growth robust of adjusted by adjusted our best-in-class fiscal and EBITDA intelligent and solid our representing a narrowing to our profitable our portfolio backlog and our revenue guidance year. with improvement the strong finally, backlog, of we our than And over range, midpoint more EBITDA increasing robotic for of be demand another AeroVironment expect XXXX for we innovative year unmanned year supported global

to contract Sales, last This me prior increase representing the we revenue $XX.X quarter for due to nearly was year higher nearly strong SUAS our let that X and XXXX, a to XX% tripled Military or to record compared $XXX.X The period. improvement AE reflects Puma an tied announced in which Puma delivered LE increase results of quarter. Now, our sales, FMS, third shipments Foreign year summarize primarily We quarter. of fiscal the financial year-over-year. million compared million

and million, million higher volumes $XX.X was year's of mix. was XX% $XX.X percentage rose result gross last a our year. and quarter the for product margin improved XX% margin primarily The than last gross margin favorable Gross from to more double

As acceleration as we sales. revenue more we to remain have previously fiscal discussed, asset and QX expect to XXXX our year in mix elevated shifts in gross favorable further margins improve product excluding

reported We reflecting ended increase and $XX.X to third of increasing in our $X.X solutions. demand a of the EBITDA with quarter adjusted last the quarter $XXX year. million million third million backlog We compared for robust XX% the record year-over-year,

share quarter benefits. was increase was per fiscal EPS operating offsetting diluted expenses, year expenses, than of $X.XX XXXX. and driven for to favorable $X.XX diluted as product primarily by and third non-GAAP share Finally, more compared mix higher increased interest revenues per This the tax a lower

fiscal purposes, third included $XX a comparison year benefit. quarter XXXX tax For million

play for allies, year recent Ukraine its and contract battlefield, fiscal over Ukraine, us demand last performance critical solutions increasing our on in in awards gives the they value ahead, our value strong of robotic multi-domain U.S. has creation innovative positioned and confidence for unique an near-peer this portfolio the year. conflict the showcased that role intelligent of solutions and especially the we're against giving and adversaries. the The beyond Looking advantage

As prepare role our simultaneously in opportunities the its and conflict, to solutions the on this continue U.S. related directly to we for helping expect capitalize while allies Ukraine's play defense, to an essential future.

to hold customers. remains and in diligent with labor a positioned elevated COCO discussions record Demand inflationary global has for remain resulted And services budget our international medium DoD pressures funding tight AeroVironment the a UAS Further DoD ongoing for remains priorities. supply continue backlog. away market. us productive chain and constraints and domestic products managing we 's proposal key U.S. shifting and well we in in finally, activity Despite operations, from new

us have for continuing our while growth needs invest actions scale. Our our the to customers meet across portfolio allowed to of prudent and

and on our product I would switch provide lines. developments now like gears each to within of current update an

funding award X this have We FMS recent Puma $XXX had last Let or with revenue compared systems. reflects $XXX line for ceiling current FMS quarter year million. me value we and primarily small of UAS a newly that record XXX% prior Puma contract begin to product where announced This rose and SUAS maximum our LE of the period. our million, AE now

and production initial the expedited shipped we QX, solid portion a of funded amount. During

funding full with this remain shipments up anticipate to the in quarter XXXX. of pace and expected, the we value fourth the to in fiscal at deliveries contract occurring Additional remaining is current year

prudent This this near-peer year competition, has environment threats DoD been operations. our and growth, that transformation SUAS contested result to upgrades technology focus with line for improved the which in years ahead foundation growth for product strong line new been that us turned has pivotal introductions their and The has for as to system of the product of the especially come. and will product the U.S. consistent resulted of investment, kept allies set

Ukraine that the reliability this again, Suffice systems we I that scouting most that to Defense also targets say on Department our throughout Ukraine U.S. excellent has Puma our to have that system of U.S. ensure team are for are recently solutions. our volumes systems to one received that our provided capability provided to to assets conflict. the effective continually want speaks success of the every has the Puma We've and where the weapon ground feedback visited This the of people to our Ukraine. of note products.

and in systems supplied munitions with battle even combined assessments. U.S. potent other more ISR, weapon damage are Puma when DoD Switchblade targeting loitering for

country's our to be products defense efforts, Our to essential to Ukraine. continue are for of the the and to proven we honored support are people

security U.S. proud we their on rely future are product continue for important We SUAS allies the them products this how line. while become have of the and safety its our across for invest and DoD the to in globe who of

and Tactical Systems, XXX we stockpiles. XX% and our line, the our including on reflects demand. $X Ukraine, XXX or product [ph] Backwell February depleted revenue Total to DoD continued which orders the security continue up systems roughly to Switchblade TMS announced billion package U.S. latest to experience Missile assistance strong TMS, Moving of is support year-over-year, XXth,

of systems team's Order recent many these our over and trip officials requesting degree high year. Ukraine, visibility past and received Switchblade Ukrainian XXX we given On them. XXX military well combat of are reaffirmed more the that have performing elevated, our remains operations activity in are the to

to U.S. of This the past forces. XXXs proven munitions second Disagreement delivery capability. Switchblade the of their Minister Defense purchase country's this switchblade to States the the Lithuanian the Lithuania announced intent United country outside the for with make our for DoD battle would December, loitering of procure

receive it yet but to worth $XX not is U.S. We contract is expected from backlog, this DoD, million. it have be and in our the approximately to reflected

we TMS significant expect and Given our forward. business in level growth of current in demand the switchblade, interest going

in with competition AeroVironment performance, while Puma from products, remains loitering us driving demand. strong munitions unmatched As SUAS a the apart and our reliability setting leader with

product line. discuss now will medium our I or MUAS UAS

or excited UAS share increment We one Army's in continue at U.S. personnel Redstone flight undergoing the FTUAS Germany training selected U.S. Increment Army's to the tactical the while in recently on testing Alabama. Huntsville, of program, to Army AeroVironment We're for X. also U.S. the Arsenal future that work

phase, needs. this its vendors, system with the Army other we compete During will allow best for which several will to select the

have and X contract. the awards X are to of only company Increment We source sole secured this for

phases remain the the we program. selected been FTUAS and awarded Additionally, for all contracts also company of three only who has

today or the will Army of we closely in the and is capable the performance the solution U.S. future. competition, continue phase system its needs, that work class, this mature their enter to exceed we ensure JUMP both most and confident XX As in meet and we're with our to

As package typically not spending, term Increment priority, that for the Increment Ukraine much XX for we near the assistance U.S. outside funding seeing X, including XXs are part MUAS With U.S. remains bright. top security are and said, of programs activity. has latest have additional in Ukraine, long-term JUMP selection of the Army, there for outlook included received an those defense X. Since been and this that opportunities JUMP as from simply utilize award believe our aircraft, for for we initial priority been throughout the

platform U.S. ahead. the international and optimistic the years domestic there JUMP are with grow, and a International interest record large DoD program billion potential continues other $X opportunities, to on XX programs growth horizon MUAS potential we multiple and the about are in in

Moving or to our line, ground vehicles been announced to contract to provide Ukraine. team making and product has our UGV on previously our ground tEODor progress vehicles telemax unmanned

telemax accelerated schedule. a EVO delivered an already under have robots We

are models operation. precision their telemax manipulation, autonomous advanced, record Our and functionality, intuitive for specialized known

a received totaling down quarter, In we record were than number year-over-year, slightly addition, UGV more this orders while $XX of million. sales

released including Kit, controller. mini and this solid product and We've well. XXX several degree accessories growth in sequential anticipate Bluetooth remains new we activity a CBRN as a camera also Proposal recently line

to is Within to contract coming across remain year. infrastructure. contracts provides a compared we this million altitude, defense in to for There time, quarters. our based fully execute objects. benefits and satellites of lead goal next-generation with current persistent potentially SoftBank ground-based telecommunication DoD U.S. commercializing between the security long million our the fiscal with and high product engaged against We developing ISR on for foreign-based same capabilities for unidentified fronts with even the endurance and we stratospheric the HAPS Sunglider, $XX At $XX line, continue that to services. multiple ultra Sunglider could growing need revenue HAPS applications, expect now flying the unique

Crater. the moves future Ingenuity our developments share finally, reached new exciting European the their two helicopter's larger MacCready and and helicopter, initial Advanced February, flights, of mission ahead its the due remarkable this include helicopters. winter. of search of program Helicopter Mars award Ingenuity an evidenced of and Mars next-generation the Jezero has as and for milestone recently some NASA evidence Rover, continued a much original for perseverance, only we optimistic And Works an in Ingenuity's to five helicopter's endurance helping partner life have of by the has called contracts important reliability about that at plans return flights received on scouting extended support this Perseverance so Martian for are become has awakening AeroVironment as altered development I'll Space Solutions. future so manifest the XX the to recent Agency sample NASA In the but forward. from ancient for

capabilities we and will experiencing contested logistics and product -- fiscal Works machine which increasing into product internal as defense integrate intelligence, We artificial our experiment XXXX. demand year across the and external is steady machine and learning, value artificial intelligence many into demand portfolio. Works we continue MacCready agencies see powered federal programs anticipate move MacCready learning to line as that environment

lines and summary, and traction In bright. seeing positive product quarters we're past In the our looks few all to across have elevated set company a clearly future us the our level. new particular, apart

the solution Army's near-peer ever providing for largest X. and conflicts, as year, a unmatched in X best-in-class U.S. Ukraine, the we one and loitering selected positioned and for During FTUAS Increment munitions we've were surveillance in Puma X, Switchblade FMS order reconnaissance

of through to of engineered portfolio utilized and AeroVironment's move lives day every and innovative defend broad is globe millions unmanned advanced breakthroughs the across the help solutions solutions. humanity forward

well-positioned rely largest example, to SUAS, role be critical forward. an going four an innovative and are a we're macro in is how MUAS, all adversaries. playing more our lines, their to on Mars, building believe we unmanned adopt better much Ukrainian it scientists We from as As all TMS, force nations, or to leaders forces solutions part are today's trend relevant product Earth militaries products benefit advantage decisions systems are this as make that against structures, of their of on our whether by UGV and meaningful testament conflicts. bigger a and giving This

the I financials. that, Kevin? a of second McDonnell Kevin over for like call turn With to now quarter to review would

Kevin McDonnell

Thank during will third refer press and both be reviewing the to our our earnings quarter I of release on our which I'll Today highlights you, website. Wahid. presentation occasionally available performance

quarter five of of to the third the Revenue quarter XXXX for of earnings $XX.X segment presentation breakdown of million, Slide was an the revenue increase for XXXX the XX% $XXX.X of provides of million. quarter. third compared fiscal a revenue by fiscal

UAS largest up with -- our from business, the was small of our million. year's finished $XX.X latest quarter segment a Our $XX.X last quarter during million revenue which

of large the result in Ukraine at mentioned was received end revenue Wahid quarter of quarter. the As the the primarily in second increase order the a FMS

was Systems upon was third Missile revenue revenue XXXX. QX. with in caused result the activity by contributed The segment TMS COCO to number higher decrease operated. which $XX.X of XX% quarter the $XX quarter a of time sites during last TMS million The compared turn medium a revenue of year This over a of of increase $XX.X was compared reduction was service million, revenue, recognized or Tactical by UAS fiscal driven MEUAS of million to accounting. level the based a manufacturing the revenue finished in lower decrease quarter, of in which

from to million contributed a from in quarter. year's quarter. segment $X.X decrease third million QX, in million versus Revenue the year the $XX.X third year-over-year segment HAPS last prior in Our million $XX.X other $X.X increased

shows service the mix to gross Turning margins. presentation versus Slide of the of five earnings revenue. product

with as same the versus represented third revenue. quarter half revenues product in This is XX% fiscal shifts a product expectation quarter, that to products result sales service total of to the During our revenues slight of decrease last and second year. XX% in mix line of significantly XXXX closer MUAS in higher a the SUAS back for XX% of

margins, margins other margins, the intangible gross the gross adjusted six items. of the shows trend of adjusted to while earnings and XX slide purchase Slide presentation accounting service GAAP gross product and expense which reconciles amortization excludes non-cash

XX%. to revenue in GAAP product a quarter and third XX% the product segments. the in both margins increased adjusted in UAS year-over-year, to For and from and both TMS margins GAAP be and from gross boost gross XX% can to higher rise gross attributed The increase overall the margins from adjusted small increase mix XX% revenue in

decrease However, offset impact by partially which gross of medium accelerated negative $X.X this depreciation million UAS had a margins. a COCO on was service assets,

overall accelerated the XXXX the gross offset depreciation. our reductions. for year site be depreciation in negative product assets to FY favorable in impact margins assets million and of two from We $X line another last depreciation COCO UAS MUAS COCO Even overall adjusted will the fourth adjusted QX the related in margins medium of accelerated quarter, the quarters our the accelerated as in of gross expect with the with mixes

were the XX% the gross product XX% fiscal the margins to for third product year, the last of quarter of XX% quarter -- Adjusted versus versus in higher quarter in mix. third SUAS due primarily

service In margins, to due quarter year, XX% terms third gross quarter the adjusted primarily the during of last improved same service XX% was versus mix.

terms representing of expenses the gross partially was $XX reconciliation from year. adjusted this a increase of the this EBITDA margins, and offset loss XX earnings of adjusted factor higher million third In adjusted significant investments in of EBITDA, GAAP and was slide million, to net EBITDA. adjusted The contributing increase adjusted the XXXX, SG&A was R&D. fiscal higher shows main $XX by In our presentation of quarter last

the EBITDA expect for and $XX the We midpoint this million, strong Wahid $XX year-over-year adjusted over be range. at mentioned, an year this XX% to to increase very million to as represents of

last same a the the just of gross $XX.X GAAP recorded In to the quarter, experienced versus had margins a million loss company income of breakeven net year. million GAAP a increase turning $X.X of period in earnings. above Now year. in GAAP third versus net significant of We last

was million benefit unrealized rise the SG&A method our tax $X.X offset R&D million and a this $X.X of a However, decrease namely investments, spending million $XX.X a by equity in of interest $X.X million on expenses than increase more a $X.X in and a in million increase and in increase variety and factors, expense. losses a equity

activity of statement and losses XX GAAP EPS. equity excludes versus fiscal is diluted adjusted called EPS method company calculation $X.XX the of and quarter per on posted adjusted our non-GAAP quarter Slide third diluted diluted clearly should per of now from that XXXX. out gains the share is $X.XX EPS the I the earnings note share to and adjusted the for reconciliation or calculation. fiscal XXXX third non-operating. This income adjusted shows The of

is of XXXX. and quarter million, Total balance quarter fiscal our of million investments which decrease end sheet. $XX.X were the cash from second to $XXX.X restricted cash, of Turning at the a the

shortages other manage when available. components to bookings expected support chain critical inventory buying expect inventory as our and to record by we through see working quarters, and increases As and capital we continued indicated in backlog supply prior in

to continue $XXX cash a sheet We with million $XXX under of working balance facility. our capital cash, and investments million restricted approximately have strong and over available

of some fiscal metrics. I'd with backlog earnings visibility. of conclude presentation like our provides our the highlights to XXXX current Slide a summary eight of

XXXX of funded at end mentioned As the quarter $XXX the fiscal was Wahid million. third backlog our record of a

visibility revised to full Our a midpoint the fully words, In guidance. our to our other revenue over as the XXX%. by existing we is backlog year of are achieve guidance range covered of today

continue fiscal expect also for orders of XXXX. to We be the to strong remainder

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

Wahid Nawabi

Thanks Kevin.

year year With of As we backlog given recent record increasing next. board, performance the have our we and fiscal and current this across a the funded visibility approach and financial our end into enhanced we XXXX, adjusted closure, year guidance. have MUAS demand site the

Our to earnings acquisition $X.XX XXXX million is adjusted million. diluted EBITDA as $X.XX is of year and $XXX diluted of $XX $X costs, non-GAAP intangible gain million, and to assets, or and expecting seven of million, updated per per between We're number of share. between amortization follows. $X.XX. outlook for income of revenue $XXX share, on and one-time $X.X other $X.XX We and $XX Non-GAAP between excluding related anticipate now between shown and million fiscal slide million net expenses,

adjusted the is from we COCO the guidance, we of non-cash raising MUAS on is a that the acceleration MUAS reduced our certain want the closure EPS revenue EBITDA primary impact. of a impact to are and depreciation the have from emphasize While of site. closure our assets outlook of and result I and as our GAAP non-GAAP remaining

in U.S. fourth this the on we with earlier, As consolidated in resulted and fiscal priorities quarter results. DoD I impact events no year to shifting XXXX mentioned these from our occur expect

in equity accounting In This tied to investments. venture to greater of expected result net a mark-to-market guidance addition, investments than unrealized as partnerships activities. we our losses occurred strategic and to related have due income reduced

mix gross driven product higher adjusted margins forward, strengthen going believe volumes. and by favorable we will However,

adjusted is between year revenue. XX% revenue R&D We expect deliver for for expected between XX% this investments of to of the XX% remain year. to of EBITDA full fiscal XX% and to fiscal

As the demand business strong globe. across of drivers I and fundamental mentioned before, remain our the robust

decades us have us in processes, battle of visibility we by products, our the well proven investments and our innovation, challenges environments harsh grown, tomorrow. invest in for inventories. of prudently people, front bolstered plus of have These positions opportunities durability continued experience As incredible and in to the elevated

grown going rapidly the focus higher a maintaining have performance foundation We company even efficiency the while forward. for execution, on laying and

call summarize call. the for over points me turning Before today's once the key let from again questions,

by First, quarter greater deliver or we third million. backlog with line than record of a in expectations, performance our $XXX evidenced as

wins backlog year a past our have Second, record quarters, and our over with few and fiscal confidence beyond. high in the value for we degree prospects in key of creation XXXX

persist for are are to chain objectives confident labor our and another as in While the of achieve the needs the our headwinds to we and customers business, deliver our record meet ability we overcoming scale company. these supply challenges year against and

look trends. And to take look as -- we of well portfolio third, we ahead, is macro our advantage positioned

proven the have the solutions and future. Our we continue stand and and now ensuring allies, support the ready to in them its U.S. vital of to safety and

to results. trust thank the this in like protect systems our solutions great their would put make their lives. people's that these every improve I again us quarter. contributions our customers, and achieving instrumental been and and best to who staff shareholders have day employees, in We They for value

And with your Kevin, now I will Jonah questions. and that, take

Operator

Instructions] Thank [Operator you.

question Baird. comes first of R.B. with Arment line Peter from Our the

go Your line ahead. Please is open.

Peter Arment

discussions us update the how supply chain, there an Wahid, I Kevin, Wahid, past some just things you there? give how were Good but know then had can both that's things obviously the better chips, Thanks. been starting on Jonah. Yeah. of that are little afternoon, evolving in get components to small of affecting UAS TMS. there to just with a and think when and a related other we lot are

Wahid Nawabi

chain Sure, slightly. the have general, supply improved overall constraints In Peter.

Although, still basis. a challenge it is a on day-to-day

we care But us fourth for be year, taken receive warhead The challenge are we supply the For chain still Switchblade and on Both two the Systems, some areas annual for addressed Missile constraint. a area where those next quarter chain a highly a basis. XXX, not a important of. to and in there's of still Northrop Tactical warhead beyond supply fiscal demand Grumman. make quarterly fourth from is Dynamics our our which remains and for much those XXX, we quarter, most well that General do supply remains and pretty have

UAS, Besides challenge. quarter as medium UGV overall, to it's has extent, improved still But for products, supply chain semiconductors are the small still other there although since some UAS, ongoing last some warhead and an constraints.

to next that year. expect fiscal throughout continue We

that Although, get last the going seen me quarters things and in optimism are better we've hope couple of the improvements and gives to get to some better. that

Peter Arment

there for as if And is seems type it the a there other back an -- Yeah. just Could sources, Thanks. warhead. that Is opportunity use the products up, similar you alternative you follow mentioned the bit -- of by demand because and your like some warheads? you're being held Javelin that's your a if that long-term? for little discuss

Wahid Nawabi

Peter, great, of there but Certainly alternatives, great little time. a takes Sure. is bit question. that

shares patch Missile started conflict to the We with have that furnishes Javelin the that same well other already the Missile. XXX hits warhead Ukraine, Javelin the anti-tank the to be is, war government Switchblade source it XXX. before The alternative our Switchblade even in as for challenge is XXX, XXX able for both and as

to takes capacity the increase. while for on so, production it And up an a that ramp

that While capabilities Switchblade top how to source and we focused mind other We've us. already on options a not that equivalent while. XXX. multiple, working one, different on for both multiple for warheads on, just that's mission been of even going is that on This XXX have and are warheads other are for

are time, progress we a process speak. it's that towards certification making goal qualification does and longer term selection and the Although, as and take we

Peter Arment

Thanks. Appreciate the color.

Wahid Nawabi

Peter. you, Thank

Operator

you. our moment And question. Thank for next one

Canaccord question on Our line comes of Austin Moeller Genuity. next with the

Your line Please open. is ahead. go

Austin Moeller

Good Wahid. Hi. afternoon,

Wahid Nawabi

Good afternoon.

Austin Moeller

out to XXXs My or DoD sent more are package, have in the produce been as of to you inventory, are coming of first fall? Switchblade aid question here, being the are part able that the those Ukraine the

Wahid Nawabi

Switchblade in Austin, speak. 's continue some There we are we quantities U.S. the So, as inventory. limited DoD XXXs to produce

have It of supplied that inventory -- significant delivering U.S. XXX remains but last quarters. because started Switchblade out in have another And contracts that inventory of warhead couple to DoD it's numbers more Some the course, then very the the customer in there. low, to the And U.S. be producing of those low more we there's new have the been 's general. warhead. produce them. we're been of Ukraine. to we factor is The DoD capacity than plenty gating quite But been one. of has main for to other fairly

on package to Switchblade latest XXth general, JUMP administration announced we and/or and will So, the Biden's deploying would Ukraine some President that XX. was DoD be February then included in them by the they forces. to XXX the the Those U.S. delivering be

Austin Moeller

helpful. first And sales switchblade the you have show you announcement since expect progress quarter the Lithuania, from the what then, other of That's on those and Okay. just FMS in in made to countries, quarter to of some European fourth and do XXXX? up

Wahid Nawabi

foreign all military Austin, So, switchblade been office, sales FMS so far. has sales so far DoD's through the U.S.

announced received them XXX. and Lithuania they're on purchasing Ukraine already, mentioned and I to publicly XXX has that then be going my As Switchblade remarks,

we're not those into months, in other of have to to backlog. or demand next orders, going Most of for weeks several the with. if that's contracts. and that convert not about contracts And orders, pretty and -- a XXXX so we FMS year them, the it continue into that All expect worth be like, that not will our likely engaged switchblade beyond. to seems majority, we fiscal just large all far will FMS be quarters, several that those other over countries is, sales We many and countries, reflected several plus $XX million those is be

know, munitions mind what do seismic as And loitering DoD's conflict event in Ukraine could and a the leaders a we've the mind military specifically you consider leaders real I and shift on shift, them XX minds gotten on U.S. switchblade. and of of to countries Switchblade able and come. coming countries, and see convert years more that more quarters XXX XXX plus in the approval and be and are of to sell will to contracts more requesting and into to those I political

Austin Moeller

Awesome. thanks all the for Great details. quarter and

Wahid Nawabi

Austin. you, Thank

Operator

for Thank one you. next our question. And moment

line Our with on the William Louie DiPalma of Blair. comes next question

Please open. is line ahead. go Your

Louie DiPalma

and Kevin Jonah, Wahid, good afternoon.

Wahid Nawabi

Good afternoon.

Kevin McDonnell

Good afternoon.

Jonah Teeter-Balin

Louie. Hi

Louie DiPalma

metrics pending export you backlog contract obviously and that how that? to a approval. export the the that's That's several of a any very Slide contract potential you Are timing in probability of license eight and the light backlog $XXX the of value. shed with unfunded able third-party in license million disclosed large, total an receiving includes provided Hi. XX-Q a terms

Wahid Nawabi

Sure, Louie.

for absolutely it's is were requested why unfunded foreign a value unfunded And for the -- for them needs on on large such reason allow and for not contract $XXX about right more there because DCS. switchblade contract a U.S. country military about that because see military. initially announcements be contract and asked that sure is of You It's for million the why that a a DCS for are is That's FMS backlog, DoD's a is switchblade sales. from our you to reason roughly them Defense in Department switchblades. U.S. The to them. we willingness and the

on contract DCS So, contract as a exists still backlog, approval am it such our while for in don't much that U.S. count I switchblade. large really unfunded giving DoD for confident about for I sales because less

is not And the has coming still convert a or channels. Now, approved more Department, believe quarter. demand sales I actually still them not that whether sale The avenue customer and that contract if through already requested State there. expect contract and or FMS in FMS same authorized amount, DCS of for that gets the the to to through I the

optimistic out, that traction going and either sales, more more on I sales DCS FMS last gaining more quarters. So, I'm work optimistic couple which we're with have less and to think announcement it's but on itself the occurred in the far way,

Louie DiPalma

Chinese of an another aircraft Great. the in balloon increase in topic, That incident? the been has your wake on was detail fantastic. And for interest there Sunglider

Wahid Nawabi

contract, you U.S. airspace, Chinese Even question. over the is answer The the the plus applications. amount remarks, the some Obviously, Sunglider so. increased within the U.S. applications. a thank for that and to and quarter expect before interest what urgency. that been mission securing capability. us stratospheric, unique that Sunglider year a and conflict and -- great -- And lot balloon urgency am of for DoD to the There's it's has has China longer on Russia with of needs going elevated term I discussions the really elevated initial on And development dramatically. for of defense. balloons get of absolutely a for really and with globe next what's on one, The different its about for it as that a proposition value this And for and well Louie, again contract defense recent a has in DoD my done, around the on yes. Chinese the we've as elevated and level. Sunglider has on other there's ISR engagement U.S. as Ukraine in the or of the be powerful but happen quite it'll events significant to last also and the importance potential going the incredibly it types whole said am more optimistic I events I small I had it

Louie DiPalma

Thanks Great. Jonah. Kevin Thanks and Wahid.

Wahid Nawabi

Thank you.

Jonah Teeter-Balin

Thank you, Louie.

Operator

question. next our for moment one And you. Thank

Ken Herbert of question comes the from line with Capital Our RBC next Markets.

Please ahead. go is open. line Your

Ken Herbert

Yeah. Hi. everybody. Good afternoon

Wahid Nawabi

afternoon. Good

Kevin McDonnell

afternoon. Good

Ken Herbert

business this point, at maybe or to and specifically, maybe this inflect MUAS we gross detail profitability Hey, the significantly start Kevin, business. on next to provide How you see and this should And of the what investing about more point in see off, Wahid, the do year gross a segment profit. revenue year? segment? think to I if in in through I we could you're know little wanted margins start fiscal remainder or maybe this positively really just what maybe at in

Kevin McDonnell

Wahid I'll from a can getting you Ukraine. then large start and basically, order they're in. Well, fill

talking product shifting online here. with more business been that about also to with -- potential FUAS quarters, the they're a coming was last we've anticipated over several As

as gross improving see a of So, their more they become time. over product business margins we

gradual see in should you So, improvement the contribution.

Ken Herbert

Okay.

Wahid Nawabi

Yeah. Ken, primarily business, know, And that again, as you a today. COCO service it's

the UAVs its significant our to than of business Puma COCO Two Our this sort package a that it less announced our that the operations. acquired a first There U.S. And And latest conflict of strategy One relying that far to are given pursuing the Puma on the we that. systems. Xs today. will presidential to sales. Ukraine for workhorse was is we're of the Ukraine increase and JUMP aid other and order Ukraine -- is sales has are to kind by product pathways more potential we're potential that LE achieve several be less international to when and transition that XX. by was was the then the

small selection FTUAS we have After And that then interested a incremental year. we're the announcement What that Navy that little in within our and mention sales. JUMP those a selection billion next end take although lastly, Corps are several place I of also potentially to received, was year. is fiscal programs additional customers than considering, now, term other by for is that U.S. international we just contract, the a longer program. U.S. that this the the are $X should the XX next systems probably forgot Army sometimes there's and product several Marine U.S. The Army

Ken, which with. company will events, the plan those purchased the exactly of improve all was so, had profile the begin margins and when to business, the help of we we And that that

Ken Herbert

specifically Yeah. we through Thanks Wahid. went of as comment into you of this, the how can and as X delivered look obviously but Increment any maybe you we as you or contract, and the aircraft results FTUAS X on positioning the you And if you part is you how on Increment X are moved at and learned, are lessons opportunities? those -- apologize Increment performing helping think

Wahid Nawabi

Sure.

that that early. for Army the fast and has Increment has engagement up goes our our is in out and X. on it track considerably phases. three it's is Germany saying we been in of The is United only based on hardware. point solution. customer, have more training States with have who of advantage X for there Alabama. you record selected still selected we've based now as Huntsville, process their the personnel a to sole We're we and just deploy U.S. quite early perspective, competition important I'm meaning experience experience From because bring really as that Army of it that's and extremely differentiated us as we're testing. one been reason that delivered go, not and that they far far and expected that X our to -- been our our going The source to the based an and we So, are set both extensive with on compelling performance We only in Increment the believe in and slower the so good. so one the is Increment And the taken has

The that final we're deliver for requirements the Army even the FTUAS in now. of capabilities reliability U.S. that Increment vendors the and those that close few terms Army's FTUAS. things delivering that to of other Army on and yet, has a least X for not selection looking are steps ahead on can and Most the we folks at are the U.S.

So, the we have it, in overall, that we we remind take serious we keep, feel granted and ourselves we're past. about multiple every competing with but done work continue good to for going we're also to and players as day nothing execute and

Ken Herbert

the significant with inventory process finally, prepare that JUMP is it ramp? XX balance or just obviously aircraft And of got that on great. That's you for MUAS of level the you portion the as in in sheet, assume the considering amount is the to fair this

Wahid Nawabi

quickly we buying inventory, one, we've the no, is have for overall increasing intentional of been issues. reasons, chain two ahead are Number level We been, these expect because contracts And growth come of but because some year. inventory number as the even expecting year supply more and growth we've soon this in. we experiencing customers has next as to been the take significant two deliveries

products U.S. these are in for and allies. secure on inventory why urgent inventory That's high customers, order our so for and the And up. very and DoD our most those the for is our to of situations priority for

of and and UAS business businesses both fiscal those businesses small TMS, those UAS, mixture going fourth all inventories growing are for some XXXX. to as and we're UGV a require and even well, support So, to quarter

Kevin McDonnell

contract portion quarter. of Remember that only million, $XXX here in Ukraine the Yeah. they was third so the over a delivered

Ken Herbert

Excellent. right. Thanks Nice Kevin. Thanks Wahid. quarter. All

Wahid Nawabi

Thank you Ken.

Operator

One our moment question. for next

the Brian with of from Imperial Ruttenbur Our next question comes line Capital.

open. is go line Please Your ahead.

Brian Ruttenbur

Yes. very much. you Thank good quarter. Very

ending anticipate terms do of I big in quarter quarter, cash? where First cash, drop perspective from of terms you but year had your on to that. all, the to get You in of obviously, wanted a

Kevin McDonnell

should would but balance so end the we quarter. to but year billings, again some the Well, going going of necessarily same predict inventories on I continue bringing I we're at cycle but the large mean, rise, expect the the we at of to don't receivables moving be be some these of the time, year, end cash to we're to Ukraine a with down, the

see fourth the working could some you So, still into quarter. capital usage

Brian Ruttenbur

Okay.

Wahid Nawabi

our watch we Brian, strong And sheet speaking, very We cash balance keep and generally it. an healthy. or that eye and position on

issue to fund business going operations not Our in is ability to our be able to an mind. the be

Brian Ruttenbur

should when the you Absolutely. two should cash but positions like the -- Is you're that lot normalize normalize. of a within growing It should that, normalize, parts, quarters. or anticipate? I what next moving three fast they're know

Kevin McDonnell

but grow think we said, to Wahid to expecting double-digit extent, certain as year. continue next least the Normalize Yeah. do I that. going had -- to grow We're

year-over-year. would imply growth that So a significant

don't usage. as we have pre-buying as continue And working issues and now. over chain right much there efficiencies some of have to these we're potential time capital But as do some supply so some you'll ease, is doing to

Brian Ruttenbur

Great. growth us of And expect greater statement earnings question, EBITDA. double-digit Can going what you that? XXXX, then little you a talk and the line just see fiscal parameters you around growth? in give kind bit but Obviously can obviously, well, last the -- I'm to to any since you on mentioned much terms of the making the growth about in bottom

Wahid Nawabi

now. in very front obviously large quarter We're right that. against we a Brian, have executing of fourth So, us

that in top improvements could line is much of guidance our for updating with next you almost grow. Overall, what pretty I another year be we will think all will I all fiscal our metrics, financial of We say of call. year next on our our expect

the bottom gross mean means scale our margin even and hardware our improve would as which we between and will versus line improve think mixed gain all significantly will scale, slightly some get product will we'll or more of as sales that well. grow that leverage, also versus I services hardware and sustain

tough So, of prosperity. multiple the have against sort company we that very, I headwinds challenges extremely and and well this position for of difficult growth think very and years executed year

much realize at munitions conflicts shift in precision way ground, and to unmanned small I in capabilities be Pretty people the look Missile with future think that switchblade. lethal about a and and to such air, as going it's the going on Tactical general. Systems loitering the and all, is be on systems with UAS

a and hard I that. really of continue even think I a ourselves year getting we're have going great work that. We're beyond. going we're and XXXX positioned We to have for for better year, think to to

Brian Ruttenbur

Great. Thank you.

Wahid Nawabi

welcome, Brian. You're

Operator

Instructions] Thank you. [Operator

comes Our with line Pete next Skibitski Alembic from Global. of question the

line is go open. ahead. Your Please

Pete Skibitski

guys. afternoon good Hey,

Wahid Nawabi

Good afternoon.

Pete Skibitski

thing as of one Ukraine difficult Guys, than that billion, kind you're expecting. that's just I this it's to funding grows, total the $XXX track is, think, it more amount

funding far, rough order initiatives kind you've that estimate of So, is as you announced I'm comb, in tooth even magnitude? as make a of fine any it so of could track much have give an into but a the Ukraine just your of sure yet kind with us backlog, it that terms how been to

Wahid Nawabi

Sure.

good very the and a systems ongoing for it number DoD is on a the to phenomenally regular one, to situation, continues are fluid U.S. demand war So, keeps And basis, Ukraine our those increase. an thing. because of giving Pete, the and it is the efficacy systems

DoD unmanned and other of U.S. more in systems even requesting the outside addition is the neighborhoods While demanding are that, we these have the and same also systems look at And there on and that capabilities. systems to to similar of allies. this have We their backlog neighborhood international Ukraine stockpiles and -- of for realize starting for happening, systems. that's own own to their weapon are

third to would I say, a been bookings far, half and we're into our so getting what's maybe So, backlog. announced our of probably

more Puma DoD's U.S. more beneficiary biggest of The backlog. way, assets to systems, our and have going think which the the they given in it been Ukraine. to of and I workhorse to small and far that by that our the has that's with AE continue so LE UAS is, grow Puma show

has lying We the or Ukraine are to U.S. LEs has given of told DoD Pumas weapon our them. in front that system of Puma every one

it's targets, Ukraine weapon conflict defenses. It then of So, it does for and It and targets And Russia assessments. their it. to then once it actually helps HIMARS scouts done them shoot it systems. other with and against sweetens is the battle workhorse

So, Puma variety LEs U.S. and by for achieved have of different Pumas for effectively and very very and been effectively Ukraine missions cost

is I to think that continue. trend going

only in of our the think of far and seen I backlog we've and come more a so that small year portions to reflecting that on fiscal beyond. XXXX

Kevin McDonnell

recent the our is announcement backlog. And not in

Wahid Nawabi

that heard XXX XXth February of is the None recent Pumas, the Switchblade XXXs the and you Pete, XX JUMP is the of from neither announcements, reflected backlog, the in our systems. or

into All convert of those to we two next backlog expect in the one or quarters.

Pete Skibitski

lot you're And a to your XXXX fiscal CR government backlog seems A funded given growth. backlog? or a extended your does -- think, Yeah. up for DoD ending your mean into follow to full comments year more let I double-digit implies one-third CR at XXXX long-term Is on people, go does it believe we matter me have an XXXX that Okay. just one-half that fiscal on of could least like. potential that -- growth lot CR. the for here, and factored thinking thinking fiscal less in matter I

Wahid Nawabi

over quarter was significantly Even time to matter of end lower $XXX Pete, do about at year But QX. at that, QX lower million CRs much the than was Same $XXX given some extent. that. always the So, was end our last backlog than our backlog, last of million.

times almost third fiscal to in year. increase So, last compared quarter the of about backlog our two we're talking

But gives be and us Obviously, has time ability lot as products year. big as our the of other into availability factor be Going our to achieve much impact, business not of businesses. chain is XXXX, always able lead and some the to of that but think that should overall, in supply going CR fiscal a components. confidence that to -- I to

the backlog -- is I There reason. one said, is like

is U.S. that high I both high Another CR decreasing system see fact the whether in for reason and the general. or a urgency is don't a is priority actually there over isn't that and and time, there Ukraine,

And level UAS I very, as our our in majority, macro our both not forget, international of vast for interested for Tactical as shouldn't very come portion well demand, now vast think drivers for let's now healthy. of significant that Systems majority small the many sales from that a also countries them. sales as demand is business -- say Missile are

looking and combined, -- even strong we're net-net, we're forward of So, in beyond. a I to to year XXXX think those all really going

Pete Skibitski

Great. Okay. Thanks guys.

Wahid Nawabi

Pete. are You welcome,

Jonah Teeter-Balin

Thank you, Pete.

Operator

like Teeter-Balin now would I to further turn any And for conference Jonah back over the you. to remarks. Thank

Jonah Teeter-Balin

once be you AeroVironment. version filings interest to good today's all call on look with next relevant at An results. a your found speaking SEC and again conference forward you call, wish for archive again news and following and Thank you joining quarter's of in can for evening www.avinc.com. We this website our all

Operator

This concludes Thank today's conference call. participating. you for

disconnect. You may now

AeroVironment (AVAV) 6 Mar 232023 Q3 Earnings call transcript