AeroVironment, Inc. (NASDAQ: AVAV) today reported financial
results for its second quarter ended October 29, 2016.
“Strong order flow in the second quarter increased funded
backlog by 60 percent, sequentially, to $119.6 million, supporting
our full year objectives,” said Wahid Nawabi, AeroVironment chief
executive officer. “Second quarter results are in-line with our
previously stated forecast and we have made significant progress
executing against our strategic objectives.”
"Our business remains strong and we expect robust demand for
small unmanned aircraft systems and support services from
international customers across the globe. Our family of Tactical
Missile Systems continues to provide uniquely valuable force
protection capabilities to United States troops in a growing number
of ways. Leveraging our demonstrated and successful UAS expertise
into commercial markets, which represents a large opportunity for
our business, remains an important priority for us. In November we
unveiled our comprehensive commercial information solution,
consisting of the breakthrough Quantix drone, our Decision Support
System software platform and turnkey flight services. As we move
into the second half of fiscal 2017, we anticipate an increase in
work across our portfolio and remain committed to achieving our
financial and strategic objectives and delivering value to our
shareholders,” Mr. Nawabi added.
FISCAL 2017 SECOND QUARTER RESULTS
Revenue for the second quarter of fiscal 2017 was
$50.1 million, a decrease from second quarter fiscal 2016
revenue of $64.7 million. The decrease in revenue resulted
from a decrease in sales in our Unmanned Aircraft Systems (UAS)
segment of $15.8 million, partially offset by an increase in
sales in our Efficient Energy Systems (EES) segment of $1.1
million.
Gross margin for the second quarter of fiscal 2017 was
$17.4 million, a decrease from second quarter fiscal 2016
gross margin of $31.5 million. The decrease in gross margin
was primarily due to a decrease in product margin of
$14.5 million, partially offset by an increase in service
margin of $0.4 million. As a percentage of revenue, gross margin
decreased from 49% to 35%. 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 second quarter of fiscal 2016, a decrease in product sales
volume, which resulted in an increase in the per unit fixed
manufacturing and engineering overhead support cost and an increase
sustaining engineering activities in support of our existing
products of $1.3 million.
Loss from operations for the second quarter of fiscal 2017 was
$4.5 million compared to second quarter fiscal 2016 income
from operations of $6.9 million. The decrease in the year over year
income from operations was a result of a decrease in gross margin
of $14.1 million, partially offset by a decrease in research and
development (R&D) expense of $1.4 million and a decrease in
selling, general and administrative (SGA) expense of $1.3
million.
Other income, net, for the second quarter of fiscal 2017 was
$0.3 million compared to other income, net of $0.1 million for the
second quarter of fiscal 2016.
Benefit for income taxes for the second quarter of fiscal 2017
was $48,000 compared to provision for income taxes of $2.6 million
for the second quarter of fiscal 2016. The decrease in provision
for income taxes was primarily due to a decrease in income before
income taxes, an increase in tax credits as a result of federal
legislation reinstating the federal research and development tax
credit during the three months ended January 30, 2016 and the
reversal of a reserve for uncertain tax positions due to the
settlement of prior fiscal year audits recorded in the first
quarter of fiscal 2017.
Net loss for the second quarter of fiscal 2017 was
$4.2 million compared to net income for the second quarter of
fiscal 2016 of $4.4 million.
Loss per share for the second quarter of fiscal 2017 was $0.18
compared to earnings per share for the second quarter of fiscal
2016 of $0.19.
FISCAL 2017 YEAR-TO-DATE RESULTS
Revenue for the first six months of fiscal 2017 was $86.3
million, a decrease from the first six months’ fiscal 2016 revenue
of $111.8 million. The decrease in revenue resulted from a decrease
in sales in our UAS segment of $25.4 million. Sales in our EES
segment were unchanged at $15.0 million during the first six months
of fiscal 2017 and 2016.
Gross margin for the first six months of fiscal 2017 was $24.1
million, a decrease of 49% from the first six months’ fiscal 2016
gross margin of $47.6 million. The decrease in gross margin was due
to a decrease in product margin of $23.9 million, partially offset
by an increase in service margin of $0.4 million. As a percentage
of revenue, gross margin decreased to 28% from 43%. 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 six months of fiscal
2016, an increase in sustaining engineering activities in support
of our existing products of $2.7 million and an increase in
warranty related costs of $1.7 million related to certain small UAS
delivered in prior periods.
Loss from operations for the first six months of fiscal 2017 was
$20.1 million compared to loss from operations for the first six
months of fiscal 2016 of $2.2 million. The increase in loss from
operations was a result of a decrease in gross margin of $23.5
million, partially offset by a decrease in SG&A expense of $2.9
million and a decrease in R&D expense of $2.6 million.
Other income, net, for the first six months of fiscal 2017 was
$0.3 million compared to other expense, net, for the first six
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 six months of fiscal 2016. The CybAero equity
securities were sold during the second quarter of fiscal 2016.
Benefit for income taxes for the first six months of fiscal 2017
was $3.9 million compared to $1.7 million for the first six months
of fiscal 2016. The increase in benefit for income taxes was
primarily due to an increase in loss before income taxes, partially
offset by an increase in tax credits as a result of federal
legislation reinstating the federal research and development tax
credit during the three months ended January 30, 2016 and the
reversal of a reserve for uncertain tax positions due to the
settlement of prior fiscal year audits recorded in the first six
months of fiscal 2017.
Net loss for the first six months of fiscal 2017 was $15.8
million compared to net loss for the first six months of fiscal
2016 of $2.6 million.
Loss per share for the first six months of fiscal 2017 was $0.69
compared to loss per share for the first six months of fiscal 2016
of $0.11. Loss per share for the first six months of fiscal 2016
increased by $0.06 due to both the impairment loss and loss on sale
of our CybAero equity securities.
BACKLOG
As of October 29, 2016, funded backlog (unfilled firm orders for
which funding is currently appropriated to us under a customer
contract) was $119.6 million compared to $65.8 million as of
April 30, 2016.
FISCAL 2017 — OUTLOOK FOR THE THIRD QUARTER AND THE FULL
YEAR
For the third quarter of fiscal 2017, the company expects to
generate revenue of between $50 million and $52 million, and loss
per fully diluted share of between $0.34 and $0.38.
For fiscal 2017, the company expects to generate revenue of
between $260 million and $280 million, and earnings per fully
diluted share of between $0.20 and $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, December 6, 2016, at 1:30 pm
Pacific Time that will be broadcast live over the Internet. Wahid
Nawabi, president and chief executive officer, Raymond D. Cook,
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, December 6, 2016, at approximately 4:30
p.m. Pacific Time through Tuesday, December 13, 2016, at 9:00 p.m.
Pacific Time. Dial (855) 859-2056 and enter the passcode 13677282.
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 Six
Months Ended October 29, October 31, October
29, October 31, 2016 2015
2016 2015 Revenue: Product sales $
29,350 $ 49,492 $ 45,087 $ 76,131 Contract services 20,766
15,239 41,247 35,650
50,116 64,731 86,334 111,781 Cost of sales: Product sales
19,197 24,802 34,419 41,567 Contract services 13,502
8,396 27,815 22,658
32,699 33,198 62,234 64,225 Gross margin: Product sales 10,153
24,690 10,668 34,564 Contract services 7,264 6,843
13,432 12,992 17,417 31,533 24,100
47,556 Selling, general and administrative 13,387 14,733 27,050
29,989 Research and development 8,517 9,897
17,117 19,728 (Loss) income from
operations (4,487 ) 6,903 (20,067 ) (2,161 ) Other income
(expense): Interest income, net 397 268 772 492 Other expense, net
(130 ) (192 ) (430 ) (2,581 ) (Loss)
income before income taxes (4,220 ) 6,979 (19,725 ) (4,250 )
(Benefit) provision for income taxes (48 ) 2,560
(3,911 ) (1,688 ) Net (loss) income $ (4,172 )
$ 4,419 $ (15,814 ) $ (2,562 ) (Loss) earnings per share
data: Basic $ (0.18 ) $ 0.19 $ (0.69 ) $ (0.11 ) Diluted $ (0.18 )
$ 0.19 $ (0.69 ) $ (0.11 ) Weighted average shares outstanding:
Basic 23,049,056 22,985,956 23,002,832 22,966,513 Diluted
23,049,056 23,148,456 23,002,832 22,966,513
AeroVironment, Inc.
Reconciliation of (Loss) Earnings per
Share (Unaudited)
Three Months Ended Six Months
Ended October 29, October 31, October 29,
October 31, 2016 2015 2016
2015 (Loss) earnings per diluted share as
adjusted $ (0.18 ) $ 0.19 $ (0.69 ) $ (0.05 ) Other-than-temporary
impairment loss and loss on sale of stock — —
— (0.06 ) (Loss) earnings per diluted share as
reported $ (0.18 ) $ 0.19 $ (0.69 ) $ (0.11 )
AeroVironment, Inc.
Consolidated Balance Sheets
(In thousands except share
data)
October 29, April 30, 2016
2016 (Unaudited) Assets Current
assets: Cash and cash equivalents $ 88,876 $ 124,287 Short-term
investments 118,208 103,404 Accounts receivable, net of allowance
for doubtful accounts of $380 at October 29, 2016 and $262 at April
30, 2016 26,102 56,045 Unbilled receivables and retentions 16,870
18,899 Inventories, net 55,168 37,486 Income tax receivable 3,957 —
Prepaid expenses and other current assets 4,706
4,150 Total current assets 313,887 344,271 Long-term
investments 42,559 33,859 Property and equipment, net 17,445 16,762
Deferred income taxes 15,409 15,016 Other assets 598
750 Total assets $ 389,898 $ 410,658
Liabilities and stockholders’ equity Current liabilities:
Accounts payable $ 18,662 $ 17,712 Wages and related accruals
10,021 13,973 Income taxes payable — 943 Customer advances 3,720
2,544 Other current liabilities 6,997 11,173
Total current liabilities 39,400 46,345 Deferred rent 1,820
1,714 Capital lease obligations - net of current portion 276 449
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 — — Common stock,
$0.0001 par value: Authorized shares—100,000,000 Issued and
outstanding shares—23,371,943 shares at October 29, 2016 and
23,359,925 at April 30, 2016 2 2 Additional paid-in capital 156,667
154,274 Accumulated other comprehensive loss (158 ) (201 ) Retained
earnings 191,636 207,450 Total
stockholders’ equity 348,147 361,525
Total liabilities and stockholders’ equity $ 389,898 $
410,658
AeroVironment, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
Six Months Ended October 29, October
31, 2016 2015 Operating
activities Net loss $ (15,814 ) $ (2,562 ) Adjustments to
reconcile net loss to cash used in operating activities:
Depreciation and amortization 3,401 2,765 Loss from equity method
investments 111 122 Impairment of available-for-sale securities —
2,186 Provision for doubtful accounts 119 (231 ) Losses on foreign
currency transactions 269 63 Loss on sale of equity securities —
219 Deferred income taxes (329 ) 215 Stock-based compensation 1,813
2,082 Tax benefit from exercise of stock options 22 196 Gain on
disposition of property and equipment (7 ) — Amortization of
held-to-maturity investments 1,259 2,146 Changes in operating
assets and liabilities: Accounts receivable 29,562 (8,908 )
Unbilled receivables and retentions 2,029 5,558 Inventories (17,682
) (8,922 ) Income tax receivable (3,957 ) (2,887 ) Prepaid expenses
and other assets (555 ) 119 Accounts payable 1,413 (7,653 ) Other
liabilities (7,933 ) (7,417 ) Net cash used in operating activities
(6,279 ) (22,909 )
Investing activities Acquisition of
property and equipment (4,514 ) (2,804 ) Equity method investment —
(186 ) Redemptions of held-to-maturity investments 53,961 55,847
Purchases of held-to-maturity investments (79,052 ) (43,072 )
Proceeds from the sale of property and equipment 7 — Sales and
redemptions of available-for-sale investments 400
987 Net cash (used in) provided by investing
activities (29,198 ) 10,772
Financing activities Purchase
and retirement of common stock — (3,756 ) Principal payments of
capital lease obligations (192 ) — Tax withholding payment related
to net settlement of equity awards — (29 ) Exercise of stock
options 258 544 Net cash provided by
(used in) financing activities 66 (3,241 ) Net
decrease in cash and cash equivalents (35,411 ) (15,378 ) Cash and
cash equivalents at beginning of period 124,287
143,410 Cash and cash equivalents at end of period $
88,876 $ 128,032
Supplemental disclosures of cash
flow information Cash paid during the period for: Income taxes
$ 1,786 $ 1,519
Non-cash activities Unrealized change in
fair value of long-term investments recorded in accumulated other
comprehensive loss, net of deferred tax expense of $29 and $18,
respectively $ 43 $ 27 Reclassification from share-based liability
compensation to equity $ 307 $ 228 Acquisitions of property and
equipment included in accounts payable $ 704 $ —
AeroVironment, Inc.
Reportable Segment Results are as
Follows (Unaudited)
(In thousands)
Three Months Ended Six Months
Ended October 29, October 31, October 29,
October 31, 2016 2015
2016 2015 Revenue: UAS $ 40,829
$ 56,589 $ 71,326 $ 96,756 EES 9,287 8,142
15,008 15,025 Total 50,116
64,731 86,334 111,781 Cost of sales: UAS 25,936 28,314 51,019
54,780 EES 6,763 4,884 11,215
9,445 Total 32,699 33,198
62,234 64,225 Gross margin: UAS
14,893 28,275 20,307 41,976 EES 2,524 3,258
3,793 5,580 Total 17,417
31,533 24,100 47,556
Selling, general and administrative 13,387 14,733 27,050
29,989 Research and development 8,517 9,897
17,117 19,728 (Loss) income from
operations (4,487 ) 6,903 (20,067 ) (2,161 ) Other income
(expense): Interest income, net 397 268 772 492 Other expense, net
(130 ) (192 ) (430 ) (2,581 ) (Loss)
income before income taxes $ (4,220 ) $ 6,979 $ (19,725 ) $
(4,250 )
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AeroVironment, Inc.Steven Gitlin, +1 (626)
357-9983ir@avinc.com
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