AeroVironment, Inc. (NASDAQ: AVAV) today reported financial
results for its third quarter ended January 28, 2017.
“Strong third quarter order flow produced our third highest
funded backlog of $128 million, significantly increasing our full
year visibility,” said Wahid Nawabi, AeroVironment chief executive
officer. “Our third quarter financial results exceeded our
expectations, with $53.2 million in revenue, favorable revenue mix
and lower spending. Continued strength in the international small
unmanned aircraft systems market, combined with progress in our
Tactical Missile Systems business, position AeroVironment to
achieve our near-term business objectives while creating long-term
shareholder value.”
FISCAL 2017 THIRD QUARTER RESULTS
Revenue for the third quarter of fiscal 2017 was
$53.2 million, a decrease from third quarter fiscal 2016
revenue of $67.6 million. The decrease in revenue resulted from a
decrease in sales in our Unmanned Aircraft Systems (UAS) segment of
$19.2 million, partially offset by an increase in sales in our
Efficient Energy Systems (EES) segment of $4.8 million.
Gross margin for the third quarter of fiscal 2017 was
$19.4 million, a decrease from third quarter fiscal 2016 gross
margin of $26.6 million. The decrease in gross margin was
primarily due to a decrease in product margin of $8.3 million,
partially offset by an increase in service margin of $1.0 million.
As a percentage of revenue, gross margin decreased from 39% to 36%.
The decrease in gross margin percentage was primarily due to an
increase in sustaining engineering activities in support of our
existing products.
Loss from operations for the third quarter of fiscal 2017 was
$1.4 million compared to third quarter fiscal 2016 income from
operations of $5.1 million. The decrease in the year over year
income from operations was a result of a decrease in gross margin
of $7.3 million, partially offset by a decrease in selling, general
and administrative (SGA) expense of $0.5 million and a decrease in
research and development (R&D) expense of $0.3 million.
Other income, net, for the third quarter of fiscal 2017 was $0.3
million compared to other expense, net of $34,000 for the third
quarter of fiscal 2016.
Provision for income taxes for the third quarter of fiscal 2017
was $1.1 million compared to a benefit for income taxes of $1.1
million for the third quarter of fiscal 2016. The increase in
provision for income taxes was primarily due to a decrease in our
estimated fiscal 2017 effective income tax rate and a decrease in
tax credits as a result of federal legislation permanently
reinstating the federal research and development tax credit
retroactive to January 2015 during the three months ended January
30, 2016.
Net loss for the third quarter of fiscal 2017 was
$2.2 million compared to net income for the third quarter of
fiscal 2016 of $6.2 million.
Loss per share for the third quarter of fiscal 2017 was $0.09
compared to earnings per share for the third quarter of fiscal 2016
of $0.27.
FISCAL 2017 YEAR-TO-DATE RESULTS
Revenue for the first nine months of fiscal 2017 was $139.5
million, a decrease from the first nine months’ fiscal 2016 revenue
of $179.3 million. The decrease in revenue resulted from a decrease
in sales in our UAS segment of $44.6 million, partially offset by
an increase in sales in our EES segment of $4.8 million.
Gross margin for the first nine months of fiscal 2017 was $43.5
million, a decrease of 41% from the first nine months’ fiscal 2016
gross margin of $74.2 million. The decrease in gross margin was due
to a decrease in product margin of $32.2 million, partially offset
by an increase in service margin of $1.5 million. As a percentage
of revenue, gross margin decreased to 31% from 41%. The decrease in
gross margin percentage was primarily due to the reserve reversal
of $3.5 million for the settlement of prior year government
incurred cost audits recorded in the first nine months of fiscal
2016, an increase in sustaining engineering activities in support
of our existing products and an increase in warranty related costs
of $2.0 million related to certain small UAS delivered in prior
periods.
Loss from operations for the first nine months of fiscal 2017
was $21.5 million compared to income from operations for the first
nine months of fiscal 2016 of $2.9 million. The increase in loss
from operations was a result of a decrease in gross margin of $30.7
million, partially offset by a decrease in SG&A expense of $3.5
million and a decrease in R&D expense of $2.9 million.
Other income, net, for the first nine months of fiscal 2017 was
$0.7 million compared to other expense, net, for the first nine
months of fiscal 2016 of $2.1 million. The decrease in expense was
primarily due to the recording of an other-than-temporary
impairment loss of $2.2 million on our CybAero equity securities
during the first nine months of fiscal 2016. The CybAero equity
securities were sold during the second quarter of fiscal 2016.
Benefit for income taxes for the first nine months of fiscal
2017 was $2.8 million compared to $2.8 million for the first nine
months of fiscal 2016. The benefit for income taxes was a result of
an increase in loss before income taxes and the reversal of a
reserve for uncertain tax positions due to the settlement of prior
fiscal year audits recorded in the first nine months of fiscal
2017, partially offset by a decrease in tax credits as a result of
federal legislation permanently reinstating the federal research
and development tax credit retroactive to January 2015 during the
three months ended January 30, 2016.
Net loss for the first nine months of fiscal 2017 was $18.0
million compared to net income for the first nine months of fiscal
2016 of $3.6 million.
Loss per share for the first nine months of fiscal 2017 was
$0.78 compared to earnings per share for the first nine months of
fiscal 2016 of $0.16. Earnings per share for the first nine months
of fiscal 2016 decreased by $0.06 due to both the impairment loss
and loss on sale of our CybAero equity securities.
BACKLOG
As of January 28, 2017, funded backlog (unfilled firm orders for
which funding is currently appropriated to us under a customer
contract) was $128.2 million compared to $65.8 million as of
April 30, 2016.
FISCAL 2017 — OUTLOOK FOR THE FULL YEAR
For fiscal 2017, the company now expects to generate revenue and
diluted earnings per share at the low end of their respective
ranges of between $260 million and $280 million in revenue and
fully diluted earnings per share of $0.20 to $0.35.
The foregoing estimates are forward looking and reflect
management's view of current and future market conditions,
including certain assumptions with respect to our ability to obtain
and retain government contracts, changes in the timing and/or
amount of government spending, changes in the demand for our
products and services, activities of competitors, changes in the
regulatory environment, and general economic and business
conditions in the United States and elsewhere in the world.
Investors are reminded that actual results may differ materially
from these estimates.
CONFERENCE CALL
In conjunction with this release, AeroVironment, Inc. will host
a conference call today, Tuesday, March 7, 2017, at 1:30 pm Pacific
Time that will be broadcast live over the Internet. Wahid Nawabi,
president and chief executive officer, Teresa P. Covington, chief
financial officer and Steven A. Gitlin, vice president of investor
relations, will host the call.
4:30 PM ET3:30 PM CT2:30 PM MT1:30 PM PT
Investors may dial into the call at (877) 561-2749 (U.S.) or
(678) 809-1029 (international) five to ten minutes prior to the
start time to allow for registration.
Investors with Internet access may listen to the live audio
webcast via the Investor Relations page of the AeroVironment, Inc.
website, http://investor.avinc.com. Please allow 15 minutes prior
to the call to download and install any necessary audio
software.
Audio Replay Options
An audio replay of the event will be archived on the Investor
Relations page of the company's website, at
http://investor.avinc.com. The audio replay will also be available
via telephone from Tuesday, March 7, 2017, at approximately 4:30
p.m. Pacific Time through Tuesday, March 14, 2017, at 9:00 p.m.
Pacific Time. Dial (855) 859-2056 and enter the passcode 73194979.
International callers should dial (404) 537-3406 and enter the same
passcode number to access the audio replay.
ABOUT AEROVIRONMENT, INC.
AeroVironment (NASDAQ: AVAV) provides customers with more
actionable intelligence so they can proceed with
certainty. Based in California, AeroVironment is a global
leader in unmanned aircraft systems, tactical missile systems and
electric vehicle charging and test systems, and serves militaries,
government agencies, businesses and consumers. For more information
visit www.avinc.com.
FORWARD-LOOKING STATEMENTS
This press release contains “forward-looking statements” as that
term is defined in the Private Securities Litigation Reform Act of
1995. Forward-looking statements include, without limitation, any
statement that may predict, forecast, indicate or imply future
results, performance or achievements, and may contain words such as
“believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,”
“plan,” or words or phrases with similar meaning. Forward-looking
statements are based on current expectations, forecasts and
assumptions that involve risks and uncertainties, including, but
not limited to, economic, competitive, governmental and
technological factors outside of our control, that may cause our
business, strategy or actual results to differ materially from the
forward-looking statements. Factors that could cause actual results
to differ materially from the forward-looking statements include,
but are not limited to, reliance on sales to the U.S. government;
availability of U.S. government funding for defense procurement and
R&D programs; changes in the timing and/or amount of government
spending; risks related to our international business, including
compliance with export control laws; potential need for changes in
our long-term strategy in response to future developments;
unexpected technical and marketing difficulties inherent in major
research and product development efforts; changes in the supply
and/or demand and/or prices for our products and services; the
activities of competitors and increased competition; failure of the
markets in which we operate to grow; failure to remain a market
innovator and create new market opportunities; changes in
significant operating expenses, including components and raw
materials; failure to develop new products; the extensive
regulatory requirements governing our contracts with the U.S.
government; product liability, infringement and other claims;
changes in the regulatory environment; and general economic and
business conditions in the United States and elsewhere in the
world. For a further list and description of such risks and
uncertainties, see the reports we file with the Securities and
Exchange Commission. We do not intend, and undertake no obligation,
to update any forward-looking statements, whether as a result of
new information, future events or otherwise.
AeroVironment, Inc. Consolidated Statements of Operations
(Unaudited) (In thousands except share and per share
data) Three Months Ended Nine
Months Ended January 28, January 30,
January 28, January 30, 2017
2016 2017
2016 Revenue: Product sales $ 36,746 $ 53,305 $
81,833 $ 129,436 Contract services 16,417
14,255 57,664 49,905 53,163
67,560 139,497 179,341 Cost of sales: Product sales 23,641 31,910
58,060 73,477 Contract services 10,171 9,025
37,986 31,683 33,812 40,935
96,046 105,160 Gross margin: Product sales 13,105 21,395 23,773
55,959 Contract services 6,246 5,230
19,678 18,222 19,351 26,625 43,451
74,181 Selling, general and administrative 12,788 13,313 39,838
43,302 Research and development 7,988 8,247
25,105 27,975 (Loss) income from
operations (1,425 ) 5,065 (21,492 ) 2,904 Other income (expense):
Interest income, net 390 181 1,162 673 Other expense, net
(46 ) (215 ) (476 ) (2,796 ) (Loss) income
before income taxes (1,081 ) 5,031 (20,806 ) 781 Provision
(benefit) for income taxes 1,102 (1,133 )
(2,809 ) (2,821 ) Net (loss) income $ (2,183 ) $
6,164 $ (17,997 ) $ 3,602 (Loss) earnings per share
data: Basic $ (0.09 ) $ 0.27 $ (0.78 ) $ 0.16 Diluted $ (0.09 ) $
0.27 $ (0.78 ) $ 0.16 Weighted average shares outstanding: Basic
23,082,974 22,890,484 23,029,546 22,941,354 Diluted 23,082,974
23,083,816 23,029,546 23,139,981
AeroVironment, Inc.
Reconciliation of (Loss) Earnings per Share (Unaudited)
Three Months Ended Nine Months
Ended January 28, January 30, January
28, January 30, 2017
2016 2017 2016
(Loss) earnings per diluted share as adjusted $ (0.09 ) $ 0.27 $
(0.78 ) $ 0.22 Other-than-temporary impairment loss and loss on
sale of stock — — — (0.06
) (Loss) earnings per diluted share as reported $ (0.09 ) $ 0.27 $
(0.78 ) $ 0.16
AeroVironment, Inc.
Consolidated Balance Sheets (In thousands except share
data) January 28, April 30,
2017 2016
(Unaudited) Assets Current assets: Cash and cash
equivalents $ 73,278 $ 124,287 Short-term investments 121,095
103,404 Accounts receivable, net of allowance for doubtful accounts
of $375 at January 28, 2017 and $262 at April 30, 2016 23,121
56,045 Unbilled receivables and retentions 14,820 18,899
Inventories, net 68,806 37,486 Income tax receivable 2,487 —
Prepaid expenses and other current assets 5,341
4,150 Total current assets 308,948 344,271 Long-term
investments 43,749 33,859 Property and equipment, net 18,410 16,762
Deferred income taxes 15,779 15,016 Other assets 570
750 Total assets $ 387,456 $ 410,658
Liabilities and stockholders’ equity Current liabilities:
Accounts payable $ 13,792 $ 17,712 Wages and related accruals
10,967 13,973 Income taxes payable — 943 Customer advances 5,456
2,544 Other current liabilities 7,753 11,173
Total current liabilities 37,968 46,345 Deferred rent 1,769
1,714 Capital lease obligations - net of current portion 218 449
Other non-current liabilities 193 184 Liability for uncertain tax
positions 62 441 Commitments and contingencies Stockholders’
equity: Preferred stock, $0.0001 par value: Authorized
shares—10,000,000; none issued or outstanding at January 28, 2017
and April 30, 2016 — — Common stock, $0.0001 par value: Authorized
shares—100,000,000 Issued and outstanding shares—23,456,561 shares
at January 28, 2017 and 23,359,925 at April 30, 2016 2 2 Additional
paid-in capital 157,960 154,274 Accumulated other comprehensive
loss (169 ) (201 ) Retained earnings 189,453
207,450 Total stockholders’ equity 347,246
361,525 Total liabilities and stockholders’ equity $
387,456 $ 410,658
AeroVironment, Inc.
Consolidated Statements of Cash Flows (Unaudited) (In
thousands) Nine Months Ended January
28, January 30, 2017
2016 Operating activities Net (loss) income $
(17,997 ) $ 3,602 Adjustments to reconcile net loss to cash used in
operating activities: Depreciation and amortization 5,188 4,547
Loss from equity method investments 119 248 Impairment of
available-for-sale securities — 2,186 Provision for doubtful
accounts 115 (252 ) Losses on foreign currency transactions 272 63
Loss on sale of equity securities — 219 Deferred income taxes (698
) 18 Stock-based compensation 2,736 3,170 Tax benefit from exercise
of stock options 22 302 Loss (gain) on disposition of property and
equipment 37 (32 ) Amortization of held-to-maturity investments
1,827 3,086 Changes in operating assets and liabilities: Accounts
receivable 32,553 (5,052 ) Unbilled receivables and retentions
4,079 6,916 Inventories (31,320 ) (7,020 ) Income tax receivable
(2,487 ) (3,952 ) Prepaid expenses and other assets (1,190 ) 455
Accounts payable (3,170 ) (9,457 ) Other liabilities (4,510
) (4,746 ) Net cash used in operating activities (14,424 )
(5,699 )
Investing activities Acquisition of property and
equipment (7,586 ) (4,259 ) Equity method investment — (295 )
Redemptions of held-to-maturity investments 93,208 67,402 Purchases
of held-to-maturity investments (122,978 ) (75,740 ) Proceeds from
the sale of property and equipment 7 — Sales and redemptions of
available-for-sale investments 400 987
Net cash used in investing activities (36,949 ) (11,905 )
Financing activities Purchase and retirement of common stock
— (3,756 ) Principal payments of capital lease obligations (291 )
(341 ) Tax withholding payment related to net settlement of equity
awards — (29 ) Exercise of stock options 655
1,026 Net cash provided by (used in) financing activities
364 (3,100 ) Net decrease in cash and cash
equivalents (51,009 ) (20,704 ) Cash and cash equivalents at
beginning of period 124,287 143,410
Cash and cash equivalents at end of period $ 73,278 $
122,706
Supplemental disclosures of cash flow
information Cash paid during the period for: Income taxes $
1,786 $ 1,539
Non-cash activities Unrealized change in fair
value of long-term investments recorded in accumulated other
comprehensive loss, net of deferred tax expense of $6 and $23,
respectively $ 32 $ 34 Reclassification from share-based liability
compensation to equity $ 307 $ 228 Acquisitions of property and
equipment financed with capital lease obligations $ — $ 694
Acquisitions of property and equipment included in accounts payable
$ 408 $ —
AeroVironment, Inc. Reportable Segment
Results are as Follows (Unaudited) (In thousands)
Three Months Ended Nine Months Ended
January 28, January 30, January 28,
January 30, 2017
2016 2017 2016
Revenue: UAS $ 41,894 $ 61,086 $ 113,220 $ 157,842 EES
11,269 6,474 26,277
21,499 Total 53,163 67,560 139,497 179,341 Cost of
sales: UAS 25,530 36,488 76,549 91,268 EES 8,282
4,447 19,497 13,892 Total
33,812 40,935 96,046
105,160 Gross margin: UAS 16,364 24,598 36,671 66,574
EES 2,987 2,027 6,780
7,607 Total 19,351 26,625
43,451 74,181 Selling, general and
administrative 12,788 13,313 39,838 43,302 Research and development
7,988 8,247 25,105
27,975 (Loss) income from operations (1,425 ) 5,065 (21,492
) 2,904 Other income (expense): Interest income, net 390 181 1,162
673 Other expense, net (46 ) (215 ) (476 )
(2,796 ) (Loss) income before income taxes $ (1,081 ) $
5,031 $ (20,806 ) $ 781
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AeroVironment, Inc.Steven Gitlin+1 (626)
357-9983ir@avinc.com
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