AeroVironment, Inc. Announces Fiscal 2015 Second Quarter Results

MONROVIA, Calif.--()--AeroVironment, Inc. (NASDAQ: AVAV) today reported financial results for its second quarter ended November 1, 2014.

"Strong second quarter order flow in our small UAS business increased funded backlog by 50 percent sequentially to $125 million, contributing to 97% visibility and confidence in achieving the midpoint of our expected revenue guidance range for the year," said Tim Conver, AeroVironment chairman and chief executive officer. "We secured important new awards during the quarter, including a $22 million Marine Corps contract for their next generation family of small UAS and a $19 million contract for the DARPA Tern program to continue developing a large new unmanned aircraft system for the Navy. As planned, we also increased investments in three opportunity areas with long-term growth potential, namely, Tactical Missile Systems, Global Observer and Commercial UAS solutions. We remain well positioned for the year and for the long-term."

FISCAL 2015 SECOND QUARTER RESULTS

Revenue for the second quarter of fiscal 2015 was $52.7 million, down 19% from second quarter fiscal 2014 revenue of $64.9 million. The decrease in revenue resulted from decreased sales in our Unmanned Aircraft Systems (UAS) segment of $13.0 million offset by an increase in sales in our Efficient Energy Systems (EES) segment of $0.8 million.

Gross margin for the second quarter of fiscal 2015 was $17.9 million, down 25% from second quarter fiscal 2014 gross margin of $23.9 million. The decrease in gross margin was due to lower product margins of $4.3 million and lower service margins of $1.7 million. As a percentage of revenue, gross margin decreased to 34% from 37%.

Loss from operations for the second quarter of fiscal 2015 was $4.1 million compared to income from operations for the second quarter of fiscal 2014 of $3.9 million. The loss from operations was a result of lower revenue, resulting in $6.0 million lower gross margin, and higher selling, general & administrative (SG&A) expense of $0.4 million and research and development (R&D) expense of $1.7 million.

Other expense, net, for the second quarter of fiscal 2015 was $0.4 million compared to other expense, net, for the second quarter of fiscal 2014 of $2.1 million. The decrease in other expense, net, was primarily due to a decrease of $0.4 million in the fair value of the conversion option of our convertible bond investment and sales of related equity securities during the second quarter of fiscal 2015, compared to a decrease of $2.3 million in the fair value of the conversion option for the second quarter of fiscal 2014.

Net loss for the second quarter of fiscal 2015 was $2.9 million compared to net income for the second quarter of fiscal 2014 of $1.7 million.

Loss per share for the second quarter of fiscal 2015 was $0.13 compared to earnings per diluted share for the second quarter of fiscal 2014 of $0.07. Loss per share for the second quarter of fiscal 2015 increased by $0.01 due to the decrease in fair value of the conversion option of our convertible bond investment and related sales of stock. Earnings per diluted share for the second quarter of fiscal 2014 decreased by $0.07 due to the decrease in fair value of the conversion option of our convertible bond investment.

FISCAL 2015 YEAR-TO-DATE RESULTS

Revenue for the first six months of fiscal 2015 was $104.5 million, down 4% from first six months fiscal 2014 revenue of $109.0 million. The decrease in revenue resulted from decreased sales in our UAS segment of $7.1 million offset by an increase in our EES segment of $2.6 million.

Gross margin for the first six months of fiscal 2015 was $31.9 million, down 12% from first six months fiscal 2014 gross margin of $36.4 million. The decrease in gross margin was due to lower service margins of $5.6 million offset by higher product margins of $1.1 million. As a percentage of revenue, gross margin decreased from 33% to 31%.

Loss from operations for the first six months of fiscal 2015 was $10.6 million compared to loss from operations for the first six months of fiscal 2014 of $3.2 million. The higher loss from operations was the result of lower revenue, resulting in a $4.5 million decrease in gross margin, higher SG&A expense of $1.3 million and higher R&D expense of $1.6 million.

Other income, net, for the first six months of fiscal 2015 was $0.4 million compared to other expense, net, for the first six months of fiscal 2014 of $5.3 million. The increase in other income, net, was primarily due to an increase of $0.4 million in the fair value of the conversion option of our convertible bond investment and sales of related equity securities during the first six months of fiscal 2015, compared to a decrease of $5.7 million in the fair value of the conversion option during the first six months of fiscal 2014.

Net loss for the first six months of fiscal 2015 was $6.5 million compared to net loss for the first six months of fiscal 2014 of $5.6 million.

Loss per share for the first six months of fiscal 2015 was $0.29 compared to loss per share for the first six months of fiscal 2014 of $0.25. Loss per share for the first six months of fiscal 2015 decreased by $0.01 due to the increase in fair value of the conversion option of our convertible bond investment and related sales of stock. Loss per share for the first six months of fiscal 2014 increased by $0.19 due to the decrease in fair value of the conversion option of our convertible bond investment.

BACKLOG

As of November 1, 2014, funded backlog (unfilled firm orders for which funding is currently appropriated to us under a customer contract) was $125.2 million compared to $65.9 million as of April 30, 2014.

FISCAL 2015 — OUTLOOK FOR THE FULL YEAR

For fiscal 2015, the company continues to expect to generate revenue of between $250 million and $270 million and gross profit margin of between 34.5 percent and 37.5 percent at the respective revenue levels. Planned increases in research and development and business development investments for Tactical Missile Systems, Commercial UAS and Global Observer business areas in fiscal 2015 may largely offset operating profit in the current fiscal year.

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, November 25, 2014, at 1:30 pm Pacific Time that will be broadcast live over the Internet. Timothy E. Conver, chairman and chief executive officer, Jikun Kim, chief financial officer and Steven A. Gitlin, vice president of investor relations, will host the call.

4:30 PM ET
3:30 PM CT
2:30 PM MT
1:30 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, November 25, 2014, at approximately 4:30 p.m. Pacific Time through Tuesday, December 2, 2014, at 9:00 p.m. Pacific Time. Dial (855) 859-2056 and enter the passcode 33894573. International callers should dial (404) 537-3406 and enter the same passcode number to access the audio replay.

ABOUT AEROVIRONMENT, INC.

AeroVironment is a technology solutions provider that designs, develops, produces, supports and operates an advanced portfolio of Unmanned Aircraft Systems (UAS) and electric transportation solutions. The company's electric-powered, hand-launched unmanned aircraft systems generate and process data to deliver powerful insight, on-demand, to people engaged in military, public safety and commercial activities around the world. AeroVironment's electric transportation solutions include a comprehensive suite of electric vehicle (EV) charging systems, installation and network services for consumers, automakers, utilities and government agencies, power cycling and test systems for EV developers and industrial electric vehicle charging systems for commercial fleets. More information about AeroVironment is available at 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; changes in the timing and/or amount of government spending; changes in the supply and/or demand and/or prices for our products and services; the activities of competitors; failure of the markets in which we operate to grow; failure to expand into new markets; changes in significant operating expenses, including components and raw materials; failure to develop new products; 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
November 1, October 26, November 1, October 26,
2014 2013 2014 2013
 
Revenue:
Product sales $ 42,874 $ 51,537 $ 85,685 $ 78,711
Contract services 9,790 13,330 18,845 30,273
52,664 64,867 104,530 108,984
Cost of sales:
Product sales 27,779 32,143 58,576 52,698
Contract services 7,014 8,846 14,029 19,863
34,793 40,989 72,605 72,561
Gross margin:
Product sales 15,095 19,394 27,109 26,013
Contract services 2,776 4,484 4,816 10,410
17,871 23,878 31,925 36,423
Selling, general and administrative 13,470 13,084 26,873 25,543
Research and development 8,531 6,861 15,655 14,051
(Loss) income from operations (4,130 ) 3,933 (10,603 ) (3,171 )
Other income (expense):
Interest income 193 195 405 400
Other (expense) income (583 ) (2,307 ) 8 (5,701 )
(Loss) income before income taxes (4,520 ) 1,821 (10,190 ) (8,472 )
(Benefit) provision for income taxes (1,619 ) 166 (3,680 ) (2,917 )
Net (loss) income $ (2,901 ) $ 1,655 $ (6,510 ) $ (5,555 )
(Loss) earnings per share data:
Basic $ (0.13 ) $ 0.07 $ (0.29 ) $ (0.25 )
Diluted $ (0.13 ) $ 0.07 $ (0.29 ) $ (0.25 )
Weighted average shares outstanding:
Basic 22,878,410 22,273,629 22,840,465 22,256,292
Diluted 22,878,410 22,697,590 22,840,465 22,256,292
 

AeroVironment, Inc.

Reconciliation of (Loss) Earnings per Share (Unaudited)

   
Three Months Ended Six Months Ended
November 1,   October 26, November 1,   October 26,
2014   2013   2014   2013  
(Loss) earnings per diluted share as adjusted $ (0.12 ) $ 0.14 $ (0.30 ) $ (0.06 )
(Decrease) increase in fair value of CybAero investment   (0.01 )   (0.07 )   0.01     (0.19 )
(Loss) earnings per diluted share as reported $ (0.13 ) $ 0.07   $ (0.29 ) $ (0.25 )
 

AeroVironment, Inc.

Consolidated Balance Sheets

(In thousands except share data)

 
November 1,
2014
April 30,
2014
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 126,339 $ 126,969
Short-term investments 81,120 70,639
Accounts receivable, net of allowance for doubtful accounts of $635 at November 1, 2014 and $791 at April 30, 2014 31,096 31,739
Unbilled receivables and retentions 7,103 10,929
Inventories, net 51,804 50,699
Income tax receivable 4,876 6,584
Deferred income taxes 4,996 5,038
Prepaid expenses and other current assets 4,233 4,260
Total current assets 311,567 306,857
Long-term investments 49,718 50,505
Property and equipment, net 16,889 19,997
Deferred income taxes 7,118 6,721
Other assets 837 874
Total assets $ 386,129 $ 384,954
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 18,988 $ 13,906
Wages and related accruals 9,889 14,083
Customer advances 4,655 2,984
Other current liabilities 9,709 6,762
Total current liabilities 43,241 37,735
Deferred rent 1,231 1,239
Liability for uncertain tax positions 3,513 3,513
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 — 23,324,276 at November 1, 2014 and 23,176,576 at April 30, 2014 2 2
Additional paid-in capital 146,431 143,648
Accumulated other comprehensive loss (859 ) (263 )
Retained earnings 192,570 199,080
Total stockholders’ equity 338,144 342,467
Total liabilities and stockholders’ equity $ 386,129 $ 384,954
 

AeroVironment, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 
Six Months Ended

November 1,
2014

 

October 26,
2013

Operating activities
Net loss $ (6,510 ) $ (5,555 )
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Depreciation and amortization 4,303 4,504
Provision for doubtful accounts (105 ) 309
Deferred income taxes 42 (233 )
Realized gain on sale of equity securities (347 )
Stock-based compensation 1,745 1,840
Foreign currency losses 281
(Increase) decrease in fair value of conversion feature of convertible bonds (73 ) 5,711
Tax benefit from exercise of stock options 11 151
Excess tax benefit from stock-based compensation (348 )
Changes in operating assets and liabilities:
Accounts receivable 748 (16,777 )
Unbilled receivables and retentions 3,826 4,048
Inventories (1,105 ) 1,932
Income tax receivable 1,708 3,657
Other assets (61 ) 9
Accounts payable 5,082 (4,370 )
Other liabilities 764 (4,899 )
Net cash provided by (used in) operating activities 9,961 (9,673 )
Investing activities
Acquisitions of property and equipment (1,070 ) (6,047 )
Acquisitions of distribution and licensing rights (750 )
Net (purchases) redemptions of held-to-maturity investments (19,586 ) 6,934
Net sales of available-for-sale investments 9,038 175
Net cash (used in) provided by investing activities (11,618 ) 312
Financing activities
Excess tax benefit from exercise of stock options 348
Exercise of stock options 679 155
Net cash provided by financing activities 1,027 155
Net decrease in cash and cash equivalents (630 ) (9,206 )
Cash and cash equivalents at beginning of period 126,969 75,332
Cash and cash equivalents at end of period $ 126,339 $ 66,126
 
Supplemental disclosure:
Unrealized loss (gain) on available-for-sale investments recorded in other comprehensive (loss) income, net of deferred taxes of $397 and $(18), respectively $ 596 $ (29 )
 

Reportable Segment Results are as Follows (Unaudited):

(In thousands)

 
Three Months Ended Six Months Ended
November 1, October 26, November 1, October 26,
2014 2013 2014 2013
Revenue:
UAS $ 43,045 $ 56,079 $ 84,231 $ 91,290
EES 9,619 8,788 20,299 17,694
Total 52,664 64,867 104,530 108,984
Cost of sales:
UAS 27,575 35,280 58,590 59,879
EES 7,218 5,709 14,015 12,682
Total 34,793 40,989 72,605 72,561
Gross margin:
UAS 15,470 20,799 25,641 31,411
EES 2,401 3,079 6,284 5,012
Total 17,871 23,878 31,925 36,423
Selling, general and administrative 13,470 13,084 26,873 25,543
Research and development 8,531 6,861 15,655 14,051
(Loss) income from operations (4,130 ) 3,933 (10,603 ) (3,171 )
Other income (expense):
Interest income 193 195 405 400
Other (expense) income (583 ) (2,307 ) 8 (5,701 )
(Loss) income before income taxes $ (4,520 ) $ 1,821 $ (10,190 ) $ (8,472 )
 

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Contacts

AeroVironment, Inc.
Steven Gitlin, +1 (626) 357-9983
ir@avinc.com

Release Summary

AeroVironment Announces Second Quarter Fiscal 2015 Results

Contacts

AeroVironment, Inc.
Steven Gitlin, +1 (626) 357-9983
ir@avinc.com