AeroVironment, Inc. (NASDAQ: AVAV) today reported financial
results for its second quarter ended October 28, 2017.
“Our outstanding team delivered another solid quarter of
financial and operational results driven by robust, global customer
demand across our business and continued effective execution,” said
Wahid Nawabi, AeroVironment Chief Executive Officer. “During the
quarter we increased revenue by 47 percent, year over year, and
substantially improved earnings per diluted share to $0.29. Our
innovative solutions continue to lead their markets, as orders for
products and customer-funded research and development programs
boosted our funded backlog to $127 million, a 49 percent increase
over last quarter, significantly increasing our revenue visibility
for the current fiscal year.”
“Additionally, in August the United States Army released its
annual Superior Supplier Incentive Program ranking, which
identifies its top performing industry partners for 2017.
AeroVironment earned the Army’s top tier in this year’s ranking,
based on superior performance in our small UAS and Tactical Missile
Systems businesses. This recognition is a testament to the hard
work and dedication of our entire team. Our strong second quarter
results reflect continued momentum in fiscal 2018 as we execute our
plan effectively and focus on creating value for our stockholders,
employees and customers.”
FISCAL 2018 SECOND QUARTER RESULTS
Revenue for the second quarter of fiscal 2018 was
$73.8 million, an increase of 47% from second quarter fiscal
2017 revenue of $50.1 million. The increase in revenue
resulted from an increase in sales in our Unmanned Aircraft Systems
(UAS) segment of $23.2 million and an increase in sales in our
Efficient Energy Systems (EES) segment of $0.6 million.
Gross margin for the second quarter of fiscal 2018 was
$31.0 million, an increase of 78% from second quarter fiscal
2017 gross margin of $17.4 million. The increase in gross
margin was primarily due to an increase in product margin of
$12.8 million and an increase in service margin of $0.8
million. As a percentage of revenue, gross margin increased to 42%
from 35%. The increase in gross margin percentage was primarily due
to an increase in revenue and an increase in the proportion of
product sales to total revenue.
Income from operations for the second quarter of fiscal 2018 was
$9.3 million, an increase from second quarter fiscal 2017 loss
from operations of $4.5 million. The increase in the year over year
income from operations was primarily a result of an increase in
gross margin of $13.6 million and a decrease in research and
development (R&D) expense of $1.2 million, partially offset by
an increase in selling, general and administrative (SG&A)
expense of $1.1 million. During the second quarter of fiscal 2018,
we recorded impairment charges totaling $1.0 million to the
identifiable intangible assets and goodwill of Altoy, our Turkish
majority owned subsidiary.
Other income, net, for the second quarter of fiscal 2018 was
$0.4 million compared to other income, net of $0.3 million for the
second quarter of fiscal 2017.
Provision for income taxes for the second quarter of fiscal 2018
was $2.8 million compared to a benefit for income taxes of $48,000
for the second quarter of fiscal 2017. The increase in provision
for income taxes was primarily due to an increase in income before
income taxes.
Net income attributable to AeroVironment for the second quarter
of fiscal 2018 was $7.0 million, an increase from second
quarter fiscal 2017 net loss of $4.2 million.
Earnings per diluted share for the second quarter of fiscal 2018
was $0.29 compared to loss per share for the second quarter fiscal
2017 of $0.18.
FISCAL 2018 YEAR-TO-DATE RESULTS
Revenue for the first six months of fiscal 2018 was $117.6
million, an increase of 36% from the first six months’ fiscal 2017
revenue of $86.3 million. The increase in revenue resulted from an
increase in sales in our UAS segment of $28.9 million and an
increase in our EES segment of $2.3 million.
Gross margin for the first six months of fiscal 2018 was $42.6
million, an increase of 77% from the first six months’ fiscal 2017
gross margin of $24.1 million. The increase in gross margin was due
to an increase in product margin of $19.1 million, partially offset
by a decrease in service margin of $0.6 million. As a percentage of
revenue, gross margin increased to 36% from 28%. The increase in
gross margin percentage was primarily due to an increase in revenue
and an increase in the proportion of product sales to total
revenue.
Income from operations for the first six months of fiscal 2018
was $1.1 million, an increase from the first six months of fiscal
2017 loss from operations of $20.1 million. The increase in income
from operations was a result of an increase in gross margin of
$18.5 million and a decrease in R&D expense of $3.4 million,
partially offset by an increase in SG&A expense of $0.7
million.
Other income, net, for the first six months of fiscal 2018 was
$0.9 million compared to other income, net, for the first six
months of fiscal 2017 of $0.3 million.
Benefit for income taxes for the first six months of fiscal 2018
was $0.4 million compared to a benefit for income taxes of $3.9
million for the first six months of fiscal 2017. The decrease in
benefit for income taxes was primarily due to an increase in income
before income taxes.
Net income attributable to AeroVironment for the first six
months of fiscal 2018 was $2.6 million, an increase from the first
six months of fiscal 2017 net loss of $15.8 million.
Earnings per diluted share for the first six months of fiscal
2018 was $0.11 compared to loss per share for the first six months
of fiscal 2017 of $0.69.
BACKLOG
As of October 28, 2017, funded backlog (unfilled firm orders for
which funding is currently appropriated to us under a customer
contract) was $127.1 million compared to $78.0 million as of
April 30, 2017.
FISCAL 2018 — OUTLOOK FOR THE FULL YEAR
For fiscal 2018, the company continues to expect to generate
revenue of between $280 million and $300 million, and earnings per
diluted share of between $0.45 and $0.65.
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, December 5, 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 (800) 708-4540 (U.S.) and
enter the passcode 46018097 or (847) 619-6397 (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, December 5, 2017, at approximately 4:00
p.m. Pacific Time through Tuesday, December 12, 2017, at 11:59 p.m.
Pacific Time. Dial (888) 843-7419 and enter the passcode 46018097.
International callers should dial (630) 652-3042 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; the impact of potential
security and cyber threats; 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; uncertainty in the customer adoption rate
of commercial use unmanned aircraft systems and electric vehicles;
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 Six Months Ended October 28,
October 29, October 28, October 29,
2017 2016 2017
2016 Revenue: Product sales $ 52,933 $ 29,350 $
84,024 $ 45,087 Contract services 20,894
20,766 33,567 41,247 73,827
50,116 117,591 86,334 Cost of sales: Product sales 30,014 19,197
54,231 34,419 Contract services 12,813 13,502
20,730 27,815 42,827 32,699
74,961 62,234 Gross margin: Product sales 22,919 10,153 29,793
10,668 Contract services 8,081 7,264 12,837
13,432 31,000 17,417 42,630 24,100 Selling,
general and administrative 14,464 13,387 27,795 27,050 Research and
development 7,272 8,517 13,733
17,117 Income (loss) from operations 9,264
(4,487 ) 1,102 (20,067 ) Other income (expense): Interest income,
net 432 397 944 772 Other expense, net (55 ) (130 )
(51 ) (430 ) Income (loss) before income taxes 9,641
(4,220 ) 1,995 (19,725 ) Provision (benefit) for income taxes
2,829 (48 ) (351 ) (3,911 ) Net
income (loss) 6,812 $ (4,172 ) 2,346 (15,814 ) Net loss
attributable to noncontrolling interest 206 —
229 — Net income (loss)
attributable to AeroVironment $ 7,018 $ (4,172 ) $ 2,575
$ (15,814 ) Net income (loss) per share attributable to
AeroVironment: Basic $ 0.30 $ (0.18 ) $ 0.11 $ (0.69 ) Diluted $
0.29 $ (0.18 ) $ 0.11 $ (0.69 ) Weighted average shares
outstanding: Basic 23,477,914 23,049,056 23,407,500 23,002,832
Diluted 23,832,959 23,049,056 23,715,997 23,002,832
AeroVironment, Inc. Consolidated Balance Sheets
(In thousands except share data) October
28, April 30, 2017 2017
(Unaudited) Assets Current assets: Cash and cash
equivalents $ 117,109 $ 79,904 Short-term investments 110,751
119,971 Accounts receivable, net of allowance for doubtful accounts
of $1,201 at October 28, 2017 and $291 at April 30, 2017 35,106
74,361 Unbilled receivables and retentions 13,494 14,120
Inventories, net 76,039 60,076 Prepaid expenses and other current
assets 5,175 5,653 Total current assets
357,674 354,085 Long-term investments 33,024 42,096 Property and
equipment, net 21,614 19,220 Deferred income taxes 16,113 15,089
Other assets 838 2,010 Total assets $
429,263 $ 432,500
Liabilities and stockholders’
equity Current liabilities: Accounts payable $ 15,724 $ 20,283
Wages and related accruals 10,415 12,966 Income taxes payable 350
1,418 Customer advances 3,921 3,317 Other current liabilities
7,441 10,079 Total current liabilities
37,851 48,063 Deferred rent 1,637 1,719 Capital lease obligations -
net of current portion 50 161 Other non-current liabilities 184 184
Deferred tax liability 67 116 Liability for uncertain tax positions
64 64 Commitments and contingencies Stockholders’ equity: Preferred
stock, $0.0001 par value: Authorized shares—10,000,000; none issued
or outstanding at October 28, 2017 and April 30, 2017 — — Common
stock, $0.0001 par value: Authorized shares—100,000,000 Issued and
outstanding shares—23,865,335 shares at October 28, 2017 and
23,630,419 at April 30, 2017 2 2 Additional paid-in capital 166,993
162,150 Accumulated other comprehensive loss (98 ) (127 ) Retained
earnings 222,504 219,929 Total
AeroVironment stockholders' equity 389,401
381,954 Noncontrolling interest 9 239 Total equity
389,410 382,193 Total liabilities and
stockholders’ equity $ 429,263 $ 432,500
AeroVironment, Inc. Consolidated
Statements of Cash Flows (Unaudited) (In thousands)
Six Months Ended October 28, October
29, 2017 2016 Operating
activities Net income (loss) $ 2,346 $ (15,814 ) Adjustments to
reconcile net income (loss) to cash provided by (used in) operating
activities: Depreciation and amortization 3,692 3,401 Loss from
equity method investments — 111 Impairment of long-lived assets 255
— Provision for doubtful accounts 943 119 Impairment of intangible
assets and goodwill 1,021 — (Gains) losses on foreign currency
transactions (108 ) 269 Deferred income taxes (1,093 ) (329 )
Stock-based compensation 2,608 1,813 Tax benefit from exercise of
stock options — 22 Loss (Gain) on disposition of property and
equipment 15 (7 ) Amortization of held-to-maturity investments 897
1,259 Changes in operating assets and liabilities: Accounts
receivable 38,440 29,562 Unbilled receivables and retentions 626
2,029 Inventories (15,963 ) (17,682 ) Income tax receivable —
(3,957 ) Prepaid expenses and other assets 468 (555 ) Accounts
payable (4,739 ) 1,413 Other liabilities (5,289 ) (7,933 ) Net cash
provided by (used in) operating activities 24,119 (6,279 )
Investing activities Acquisition of property and equipment
(6,037 ) (4,514 ) Redemptions of held-to-maturity investments
105,758 53,961 Purchases of held-to-maturity investments (88,763 )
(79,052 ) Proceeds from the sale of property and equipment — 7
Sales and redemptions of available-for-sale investments 450
400 Net cash provided by (used in) investing
activities 11,408 (29,198 )
Financing activities Principal
payments of capital lease obligations (173 ) (192 ) Tax withholding
payment related to net settlement of equity awards (313 ) —
Exercise of stock options 2,164 258 Net
cash provided by financing activities 1,678 66
Net increase (decrease) in cash and cash equivalents 37,205
(35,411 ) Cash and cash equivalents at beginning of period
79,904 124,287 Cash and cash equivalents at
end of period $ 117,109 $ 88,876
Supplemental
disclosures of cash flow information Cash paid during the
period for: Income taxes $ 1,803 $ 1,786
Non-cash activities
Unrealized gain on investments, net of deferred tax expense of $19
and $29, respectively $ 29 $ 43 Reclassification from share-based
liability compensation to equity $ 384 $ 307 Acquisitions of
property and equipment included in accounts payable $ 888 $ 704
AeroVironment, Inc. Reportable Segment
Results are as Follows (Unaudited) (In thousands)
Three Months Ended Six Months
Ended October 28, October 29, October 28,
October 29, 2017 2016
2017 2016 Revenue: UAS $ 63,988
$ 40,829 $ 100,238 $ 71,326 EES 9,839 9,287
17,353 15,008 Total 73,827
50,116 117,591 86,334 Cost of sales: UAS 35,817 25,936 62,225
51,019 EES 7,010 6,763 12,736
11,215 Total 42,827
32,699 74,961 62,234 Gross
margin: UAS 28,171 14,893 38,013 20,307 EES 2,829
2,524 4,617 3,793 Total
31,000 17,417 42,630
24,100 Selling, general and administrative 14,464
13,387 27,795 27,050 Research and development 7,272
8,517 13,733 17,117
Income (loss) from operations 9,264 (4,487 ) 1,102 (20,067 ) Other
income (expense): Interest income, net 432 397 944 772 Other
expense, net (55 ) (130 ) (51 ) (430 )
Income (loss) before income taxes $ 9,641 $ (4,220 )
$ 1,995 $ (19,725 )
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AeroVironment, Inc.Steven Gitlin+1 (626)
357-9983ir@avinc.com
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