AeroVironment, Inc. (AVAV) on Q4 2021 Results - Earnings Call Transcript
Steven Gitlin: Good afternoon, ladies and gentlemen and welcome to AeroVironment's Fourth Quarter and Full Fiscal Year 2021 Earnings Call. This is Stephen Gitlin, Chief Marketing Officer and Vice President of Investor Relations for AeroVironment. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session after management's remarks. As a reminder, this conference is being recorded for replay purposes. Before we begin, please note that on this call certain information presented contains forward-looking statements within the meaning of 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. For further information on these risks we encourage you to review the risk factors discussed in AeroVironment's periodic reports on Form 10-K and Form 10-Q filed with the SEC and the Form 8-K filed today with the SEC along with the associated earnings release and the Safe Harbor statement contained therein. This afternoon, we also filed a slide presentation with our earnings release and posted a presentation on our website at avinc.com in the Events & Presentation section. The content of this conference call contains time sensitive information that is accurate only as of today June 29, 2021. The company undertakes no obligation to make any revision to any forward-looking statements contained in our remarks today or to update them to reflect the events or circumstances occurring after this conference call. Joining me today from AeroVironment are President and Chief Executive Officer Mr. Wahid Nawabi; and Senior Vice President and Chief Financial Officer, Mr. Kevin McDonnell. Wahid Nawabi: Thank you, Steve. Welcome to our fourth quarter and full fiscal year 2021 earnings conference call. On today's call, I will emphasize an important message included on slide number 3 of our earnings presentation. That message is this: AeroVironment again delivered on its financial, operational, and strategic commitments despite the continued macroeconomic challenges. In fiscal year 2021, we applied AeroVironment's unique value proposition of innovation, customer intimacy and agility to help our customers succeed. We're proud to have delivered a fourth consecutive year of profitable revenue growth in the midst of the global pandemic. We deployed our balance sheet to expand our solutions portfolio and the value of our addressable markets. We successfully executed our growth strategy and created significant value for our three key stakeholders: our customers, employees, and shareholders. And the demand and preference for our innovative, reliable, and battle-proven solutions remains strong, reflecting our continued global leadership and our chosen market segments. Today, I will summarize our fiscal year 2021 performance and discuss our achievements during the fourth quarter and full fiscal year. Next, Kevin will provide a more detailed summary of our financial performance in the year. And then, I will follow-up with a brief discussion on our goals for fiscal year 2022 before Kevin, Steve, and I, take your questions. Now, let's move to our fiscal year highlights included on slide number 4. Our team has done an incredible job of staying focused on serving our customers and delivering profitable top line growth, despite a full fiscal year operating during the COVID-19 pandemic. We produced record fourth quarter revenue of $136 million and record full year revenue of $395 million. Full fiscal year revenue increased by 7.5%, including contributions from the Arcturus UAV and ISG businesses acquired in the year, which I will discuss in a few moments. While we were able to manage the majority of supply chain issues during the pandemic, some isolated issues prevented us from achieving our revenue objectives for the fourth quarter and the full fiscal year, leaving us slightly below our guidance range. Full year diluted earnings per share were $0.96 compared to $1.72 for fiscal year 2020. Fiscal year 2021 included an impairment of $8.4 million related to HAPS Mobile's investments in Loon LLC and $9.3 million for legal accrual related to our former EES business. Non-GAAP earnings per diluted share for fiscal year 2021 were $2.10 compared to $1.84 for fiscal year 2020, an increase of 14%. Record fiscal year ending funded backlog of $211.8 million rose slightly from the prior year. Kevin McDonnell: Thank you, Wahid. Today, I'll be reviewing the highlights of our fourth quarter and full-year financial performance. I'll be referring to both our press release and earnings presentation available on our website. Revenue for the fourth quarter of fiscal 2021 was $136 million, a slight increase from the fourth quarter FY '20 revenue of $135.2 million. Slide 6 of the earnings presentation provides a breakdown of revenue by product line to the quarter. The headlines here are that the newly acquired Arcturus business which now becomes our Medium UAS product line contributed approximately $6 million of revenue to the quarter and the year. This additional revenue was more than offset by a $16.3 million decline in our HAPS revenue versus last year's fourth quarter, which included the build out of the joint ventures flight test facility. TMS revenue was strong in the quarter at $39.2 million, but down slightly versus a very, very strong fourth quarter in FY '20. Small UAF also ended the year strong with $70.9 million of revenue, which is a $7.8 million or 12% revenue increase year-over-year. Other revenue in the quarter was down $3.5 million from the prior year. Revenue for the full fiscal year 2021 was $394.9 million, an increase of 7.5% from the 2020 revenue of $367.3 million. Reflecting continued leadership in our core products, we experienced strong year-over-year organic growth of 12% for the combined TMS and Small UAS product lines. However, this was largely offset by $21.7 million decline in HAPS and other revenue. As a consequence, overall organic revenue growth netted to 3% for the year. The contribution of newly acquired businesses boosted the overall growth to 7.5% level as previously noted. Turning to gross margin, gross margin for the fourth quarter was $59.7 million or 44% of revenue compared to last year's fourth quarter of $53.2 million or 39% of revenue. Gross margins were and will continue to be negatively impacted by intangible amortization expense, included as part of cost of sales, which was $2.6 million for the quarter versus just over $600,000 in Q4 of FY '20. Wahid Nawabi: Thanks, Kevin. We're planning for the return of many of our team members to our work sites as soon as next month, which is also when we will celebrate AeroVironment's 50th anniversary. Our growth portfolio is rich with opportunity. Our intelligent robotic systems in the air, on the ground, and in the water will work together to achieve mission success faster, safer and more cost effectively than otherwise possible. And that intelligence will be bolstered by our expanded AI and autonomy capabilities. In terms of the U.S. DoD budget environment, the President's Interim National Security Strategic Guidance provides strategic direction to the U.S. DoD and informs the department's priorities as reflected in the fiscal year 2022 budget request. This guidance states, "New technologies like artificial intelligence, autonomy and robotics will change the character of warfare, resulting in a faster, more lethal and more distributed battlefield." Additionally, proposed U.S. government fiscal year 2022 funding for defense procurement and research, development, testing and evaluation or RDT&E for unmanned technologies exceeds $7 billion. This includes $68 million for Army LMAMS procurement where our Switchblade 300 is the incumbent solution, $69 million for Army FTUAS RDT&E, which we are well positioned for with our MAUS JUMP 20 solution. Additionally, the Army added $72 million to their unfunded list in order to accelerate the FTUAS program by two years. Beyond UAS and TMS, Army Ground Robotics funding request total $124 million. In summary, our expanded portfolio of solutions gives us potential access to as much $450 million and the GFY 2022 budget request, a much larger set of DoD opportunities than ever before. Importantly, we have seen no decrease in demand for our solutions as a result of the military drawdown in Afghanistan. This is consistent with the manner in which Small UAS and TMS solutions have become institutionalized into the way our customers plan, train, procure and operate. Our three acquisitions significantly expand our revenue profile along with our growth portfolio contributing to a significant increase in our revenue expectations for fiscal year 2022. Looking ahead, we have very good visibility into fiscal year 2022 with strong funded backlog and total visibility of 61% described on slide number 8 of our earnings presentation. This gives us confidence in our ability to achieve our annual revenue and earnings objectives. As summarized on slide number 9 of our earnings presentation, for fiscal year 2022, we expect to deliver a fifth consecutive year of profitable top line growth with revenue of between $560 million and $580 million, adjusted EBITDA of between $105 million and $110 million and earnings per diluted share of $1.31 to $1.51. We expect non-GAAP earnings per diluted share, which excludes amortization of acquired intangible assets to be between $2.50 and $2.70. This guidance represents a 44% increase in revenue and a 50% increase in adjusted EBITDA. Because of the impact of the pandemic on contract timing, we expect first half revenue to account for approximately 40% of total fiscal year 2022 revenue. We also expect first quarter revenue to represent about 40% of the first half revenue. And our first quarter non-GAAP EPS loss of approximately $0.25 to $0.35 as a result of volume and mix effects. We expect research and development investments to be about 9% to 10% of this fiscal year's revenue. We expect a decline in fiscal year 2021 overall gross margin to about 35% to 37%, as Kevin described in his comments. We are monitoring our supply chain carefully for any risks that could affect our business. As an example, the ongoing global semiconductor chip shortage may impact some of our programs. In summary, to reiterate our main message for today's call, AeroVironment again delivered on its financial, operational, and strategic commitments despite the continued macroeconomic challenges. As I look ahead into the new fiscal year, I see the potential for continued growth and success for our company. Our confidence in the future has never been stronger. We look forward to meeting with many of you in person in fiscal year 2022 and with many others virtually. I would like to express my deep appreciation to our customers for trusting and working with us, as well as we all adapted to the pandemic. Thank you to our incredible expanded AeroVironment team and all its team members. Your dedication to our purpose and to serving our customers has always inspired me, but even more so this past year. You have delivered once more and positioned us for continued momentum in fiscal year 2022. A special thank you to Chairman and former CEO, Tim Conver, who will retire from our Board of Directors effective at our next Annual Meeting. AeroVironment would not be the market leader it is today without Tim's vision and perseverance, and we're all grateful for his contributions. I am grateful for Tim's guidance and mentorship throughout the last decade. The entire AeroVironment team and I wished him and his family the very best. I would like to also express my great appreciation to Steve Gitlin, who is leaving us at the end of this month to pursue opportunities outside of AeroVironment and the robotics industry. Throughout the last two decades, Steve have made significant contributions to AeroVironment's success. Among his many roles and responsibilities, including Chief Marketing Officer, Strategic Planning, Internal Communications and Investor Relations, Steve has always honestly and candidly represented the voice of our shareholders inside AeroVironment. Steve has been instrumental in defining and achieving our future state strategy which positions AeroVironment as an intelligent multi-domain robotic solution provider. We could not have achieved what we have achieved so far without Steve's visionary leadership throughout the last two decades. I wish him well in his future endeavors. With that, Kevin, Steve and I will now take your questions. Steven Gitlin: Thank you, Wahid. Wahid Nawabi: You're welcome, sir. A - Steven Gitlin: Our first question today comes from Pete Skibitski of Alembic Global. Pete? Pete Skibitski: Hey good afternoon, guys. Hope you're doing well. Wahid Nawabi: Hi, Pete. Pete Skibitski: Quick question on fourth quarter revenue. It seemed a little soft versus expectations and just by my model excuse me, it seemed almost completely due to HAPS. I thought the expectation was for half revenue to be kind of stable year-over-year but it looks like it was maybe down about $18 million year-over-year. Was that a surprise to you guys? Was it due to the contract kind of change? And then, into fiscal '22, I know I'm going on, but should we kind of extrapolate the contract awards to think that HAPS will be up to $55 million in fiscal 2022? Wahid Nawabi: So Steve, this is Wahid. Thanks for the comment. In regards to your question, obviously, we're very pleased with the record fourth consecutive year of profitable top line growth, both organically as well as inorganically. And we're also positioned extremely well for fiscal year 2022 with another year of consecutive growth expected. In terms of the fourth quarter, we faced a few challenges on supply chain, which we addressed most of that throughout the entire year extremely, extremely well. We -- given the fact that we were in a pandemic we addressed all those issues quite well. But there were some specific minor issues that caused some delays and a few revenue items that addressed our fourth quarter specifically. Again, record quarter, record year, record backlog, record visibility, and also record sort of top line growth for the past year and next year. And we're looking forward to another very high-growth year, both organically and inorganically, and we'll keep you updated on that. In terms of the HAPS, HAPS revenue should go up a little bit more next year. But really it depends on - that's a customer-funded R&D program, and that program is really - the fluctuations are not significant. But you're right. Year-over-year, the HAPS program was slightly slower, and again, that was affected to some extent by the global pandemic which we have not been able to travel internationally and our customer or partner has not been able to travel either. So, there's been some effect of that as well on the fourth quarter. Pete Skibitski: Okay, got you. Okay, I'll get back into the queue. Thanks, guys. Wahid Nawabi: You're welcome. Steven Gitlin: Our next question comes from Peter Arment at Baird. Peter? Peter Arment: Hey, good afternoon, Wahid, Kevin, Steve. Hey Wahid, on the export for the Switchblade 300, could you maybe talk about -- you mentioned that there were others that were interested. Do you -- when do you expect to see potential orders there and maybe what's the path forward with that program? Wahid Nawabi: Sure, Peter. So obviously, we're very pleased with the performance of our TMS business last year. It's been a growth year for us and they will continue to be a growth year for us next year, as Kevin and I outlined some of that growth toward next year. In terms of the export license for Switchblade 600 -- Switchblade 300, I'm sorry, we did receive the first one and we are expect -- we expect to ship that before the end of this fiscal year. We are talking to multiple other interested countries and allies, all of whom have an interest in this capability and its patented very unique value proposition. The timing of receiving additional export licenses and awards is again very difficult to predict exactly. However, I think that the fact that we received the first export license does position us well and allows us to have a higher probability of success with additional allies. We consider the international markets for Switchblade 300 and Switchblade 600 quite significant. And we believe that as we execute our strategy and progressed throughout the next few years, we'll continue to expand our Switchblade 600 exports internationally,
AeroVironment Shares Gain 5% Following Q4 Earnings
AeroVironment (NASDAQ:AVAV) stock surged more than 5% intra-day today after the company reported its Q4 earnings results, with revenue of $186 million beating the Street estimate of $164.97 million. EPS came in at $0.99, compared to the Street estimate of $1.02.
The company provided its full 2024 year outlook, anticipating EPS to be in the range of $2.30-$2.60, compared to the Street estimate of $2.04, and revenue in the range of $630-$660 million, compared to the Street estimate of $600 million.
CEO Wahid Nawabi expressed confidence in AeroVironment's prospects for strong growth in fiscal 2024, citing the company's record-setting revenue and backlog. Although AeroVironment was not chosen to move forward with increment 2 of FTUAS (Future Tactical Unmanned Aircraft Systems), Nawabi emphasized that the company's current position bodes well for its future. He stated that AeroVironment has never been in better shape in terms of its future outlook than it is today.
AeroVironment Shares Gain 5% Following Q4 Earnings
AeroVironment (NASDAQ:AVAV) stock surged more than 5% intra-day today after the company reported its Q4 earnings results, with revenue of $186 million beating the Street estimate of $164.97 million. EPS came in at $0.99, compared to the Street estimate of $1.02.
The company provided its full 2024 year outlook, anticipating EPS to be in the range of $2.30-$2.60, compared to the Street estimate of $2.04, and revenue in the range of $630-$660 million, compared to the Street estimate of $600 million.
CEO Wahid Nawabi expressed confidence in AeroVironment's prospects for strong growth in fiscal 2024, citing the company's record-setting revenue and backlog. Although AeroVironment was not chosen to move forward with increment 2 of FTUAS (Future Tactical Unmanned Aircraft Systems), Nawabi emphasized that the company's current position bodes well for its future. He stated that AeroVironment has never been in better shape in terms of its future outlook than it is today.
AeroVironment Reports Q2 Miss, Provides Guidance
AeroVironment (NASDAQ:AVAV) reported its Q2 results, with EPS of $0.00 coming in worse than the Street estimate of $0.20. Revenue was $111.6 million (down 9% year-over-year), missing the Street estimate of $113.43 million.
Top-line results were impacted by lower product sales and service revenue primarily due to decreases in SUAS (Small unmanned aircraft systems). The company highlighted $197 million in Q2/23 bookings, with a total backlog approaching approximately $400 million.
The company expects full-year EPS to be in the range of $1.26-$1.58, compared to the Street estimate of $1.57. Revenue is expected in the range of $505-525 million, compared to the Street estimate of $510.24 million.
AeroVironment Reports Q2 Miss, Provides Guidance
AeroVironment (NASDAQ:AVAV) reported its Q2 results, with EPS of $0.00 coming in worse than the Street estimate of $0.20. Revenue was $111.6 million (down 9% year-over-year), missing the Street estimate of $113.43 million.
Top-line results were impacted by lower product sales and service revenue primarily due to decreases in SUAS (Small unmanned aircraft systems). The company highlighted $197 million in Q2/23 bookings, with a total backlog approaching approximately $400 million.
The company expects full-year EPS to be in the range of $1.26-$1.58, compared to the Street estimate of $1.57. Revenue is expected in the range of $505-525 million, compared to the Street estimate of $510.24 million.
AeroVironment Shares Drop 4% on Q4 Miss & Soft 2023 Outlook
AeroVironment, Inc. (NASDAQ:AVAV) shares closed more than 4% lower on Wednesday following the company’s reported Q4 results, with EPS of $0.30 coming in worse than the Street estimate of $0.39. Revenue was $132.6 million, compared to the Street estimate of $135.3 million.
The company provided a relatively soft 2023 outlook, which highlighted continued supply chain disruptions as a significant revenue headwind, especially in its TMS business. For the full year, the company expects EPS to be in the range of $1.35-$1.65, compared to the Street estimate of $1.75, and revenue in the range of $490-520 million, compared to the Street estimate of $513 million.
According to the analysts at RBC Capital, the demand outlook across the company's portfolio is strong, with now over 20 countries approved for the Switchblade. The analysts continue to believe the company has seen a positive inflection in the demand for its small UAS and TMS products, and maintain their outperform rating and $100 price target.
AeroVironment Shares Up 8% Following its Biggest Sell-Off in 12 Years
AeroVironment, Inc. (NASDAQ:AVAV) shares recovered on Wednesday, trading more than 8% higher in the afternoon, following the sell-off yesterday (its biggest selloff in 12 years), which was followed by the company’s reported Q3 results.
Although the Q3 results were strong, with both EPS and revenues of $0.78 and $122.01 million beating the consensus estimates, the company’s 2022 outlook was disappointing.
Much of the revenue growth was due to the 2021 acquisitions of Arcturus (February 2021) and Telerob (May 2021).
The company materially lowered its 2022 outlook, expecting revenue of $450 million, down from prior guidance of $570 million. The EPS estimates were lowered to $1.23 - $1.37. The magnitude of the reduction is surprising considering that the company had visibility on around 66% of its prior full year $570 million revenue guidance exiting fiscal Q1.
