AeroVironment, Inc.
(NASDAQ: AVAV) today reported financial results for its second quarter
ended October 26, 2013.
"Continued customer demand and solid execution produced quarterly
revenue of $65 million and fully diluted earnings per share on an
adjusted basis of $0.14, excluding a reduction of $0.07 per share from a
decrease in value of the conversion option of our CybAero convertible
bond investment," said Tim Conver, AeroVironment chairman and chief
executive officer. "Strong order flow produced our second highest
quarterly funded backlog of $134 million, an important metric that
provides us with greater visibility than in prior years and supports our
guidance for fiscal 2014. This visibility represents a solid foundation
for multiple mid-and long-term growth opportunities.”
FISCAL 2014 SECOND QUARTER RESULTS
Revenue for the second quarter of fiscal 2014 was $64.9 million, down
19% from second quarter fiscal 2013 revenue of $80.3 million. The
decrease in revenue resulted from decreased sales in our Unmanned
Aircraft Systems (UAS) segment of $9.3 million and in our Efficient
Energy Systems (EES) segment of $6.1 million.
Income from operations for the second quarter of fiscal 2014 was
$3.9 million compared to income from operations for the second quarter
of fiscal 2013 of $13.1 million. The lower income from operations was a
result of lower revenue and higher cost of goods sold, resulting in
$11.8 million lower gross margin, partially offset by lower research and
development (R&D) expense of $2.5 million.
Other expense, net, for the second quarter of fiscal 2014 was $2.1
million compared to other income for the second quarter of fiscal 2013
of $0.2 million. The increase in other expense, net, was primarily due
to the decrease in fair value of the conversion option in the amount of
$2.3 million of our CybAero convertible bond investment.
Net income for the second quarter of fiscal 2014 was $1.7 million
compared to net income for the second quarter of fiscal 2013 of
$8.7 million.
Earnings per diluted share for the second quarter of fiscal 2014 were
$0.07 compared to earnings per diluted share for the second quarter of
fiscal 2013 of $0.39. Earnings per diluted share for the second quarter
of fiscal 2014 included a reduction of $0.07 per share due to the
decrease in fair value of the conversion option of our CybAero
convertible bond investment. Earnings per diluted share for the second
quarter of fiscal 2013 do not include any changes in the fair value of
the CybAero convertible bonds as the investment was made during the
fourth quarter of fiscal 2013.
FISCAL 2014 YEAR-TO-DATE RESULTS
Revenue for the first six months of fiscal 2014 was $109.0 million, down
22% from the first six months of fiscal 2013 revenue of $139.0 million.
The decrease in revenue resulted from lower sales in our UAS segment of
$23.0 million and in our EES segment of $7.0 million.
Loss from operations for the first six months of fiscal 2014 was
$3.2 million compared to income from operations for the first six months
of fiscal 2013 of $10.8 million. The loss from operations resulted from
lower revenue and higher cost of goods sold, resulting in $18.7 million
lower gross margin, offset by lower R&D expense of $3.5 million and SG&A
expense of $1.3 million.
Other expense, net, for the first six months of fiscal 2014 was $5.3
million compared to other income for the first six months of fiscal 2013
of $0.3 million. The increase in other expense, net, was primarily due
to the decrease in fair value of the conversion option in the amount of
$5.7 million of our CybAero convertible bond investment.
Net loss for the first six months of fiscal 2014 was $5.6 million
compared to net income for the first six months of fiscal 2013 of
$7.4 million.
Loss per share for the first six months of fiscal 2014 was $0.25
compared to earnings per diluted share for the first six months of
fiscal 2013 of $0.33. Loss per share for the first six months of fiscal
2014 included a reduction of $0.19 per share due to the decrease in fair
value of the conversion option of our CybAero convertible bond
investment. Earnings per diluted share for the first six months of
fiscal 2013 do not include any changes in the fair value of the CybAero
convertible bonds as the investment was made during the fourth quarter
of fiscal 2013.
BACKLOG
As of October 26, 2013, funded backlog (unfilled firm orders for which
funding is currently appropriated to us under a customer contract) was
$133.8 million compared to $59.4 million as of April 30, 2013.
FISCAL 2014 — OUTLOOK FOR THE FULL YEAR
For fiscal 2014, the company expects to generate revenue of $230 million
to $250 million, and earnings per diluted share of $0.35 to $0.50,
excluding any change in value of our CybAero convertible bond investment.
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 26, 2013, 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, Tom Herring, chief operating 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 26, 2013, at approximately 4:30 p.m. Pacific Time through
Tuesday, December 3, at 9:00 p.m. Pacific Time. Dial (855) 859-2056 and
enter the passcode 87114227. 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 and supports an advanced portfolio of Unmanned
Aircraft Systems (UAS) and electric transportation solutions.
Agencies of the U.S. Department of Defense and allied military services
use the company’s electric-powered, hand-launched
unmanned aircraft systems extensively to provide situational
awareness to tactical operating units through real-time, airborne
reconnaissance, surveillance and communication. 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.
NON-GAAP FINANCIAL INFORMATION
To supplement the company’s financial statements presented in accordance
with generally accepted accounting principles (GAAP), the company uses
earnings per share (EPS) as adjusted, a non-GAAP financial measure which
represents EPS as adjusted for the per-share impact of the change in
fair value of the conversion option of our CybAero convertible bond
investment. The company believes EPS as adjusted is appropriate to
enhance an overall understanding of the company’s past financial
performance and prospects for the future. In addition, management uses
this non-GAAP financial measure, along with primary GAAP measures, in
analyzing and measuring the performance of the company’s core
operations. The presentation of this additional information is not meant
to be considered in isolation or as a substitute for measures of
financial performance prepared in accordance with GAAP. A reconciliation
of specific adjustments to GAAP results is provided in the table below.
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.
- Financial Tables Follow -
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AeroVironment, Inc.
Consolidated Statements of Operations (Unaudited)
(In thousands except share and per share data)
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Three Months Ended
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Six Months Ended
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October 26,
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October 27,
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October 26,
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October 27,
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2013
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|
|
2012
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|
|
2013
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2012
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Revenue:
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Product sales
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$
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51,537
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$
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52,415
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$
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78,711
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$
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81,105
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Contract services
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13,330
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27,863
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30,273
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57,850
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64,867
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80,278
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108,984
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138,955
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Cost of sales:
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Product sales
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32,143
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28,215
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52,698
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48,774
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Contract services
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8,846
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16,427
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19,863
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35,040
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40,989
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44,642
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72,561
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83,814
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Gross margin
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23,878
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35,636
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36,423
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55,141
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Selling, general and administrative
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13,084
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13,176
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25,543
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26,797
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Research and development
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6,861
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9,386
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14,051
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|
17,522
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Income (loss) from operations
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3,933
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13,074
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(3,171
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)
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10,822
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Other income (expense):
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Interest income
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195
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162
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400
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334
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Other expense
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(2,307
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)
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—
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(5,701
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)
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—
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Income (loss) before income taxes
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1,821
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13,236
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(8,472
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)
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11,156
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Provision (benefit) for income taxes
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|
166
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|
4,498
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(2,917
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)
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|
3,804
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Net income (loss)
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$
|
1,655
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$
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8,738
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|
$
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(5,555
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)
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|
$
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7,352
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Earnings (loss) per share data:
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Basic
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$
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0.07
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$
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0.40
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$
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(0.25
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)
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$
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0.33
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Diluted
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$
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0.07
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$
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0.39
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$
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(0.25
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)
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$
|
0.33
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Weighted average shares outstanding:
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Basic
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22,273,629
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22,030,330
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22,256,292
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21,980,453
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Diluted
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22,697,590
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22,383,791
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22,256,292
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22,353,434
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AeroVironment, Inc.
Reconciliation of Earnings (Loss) per Share (Unaudited)
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Three Months Ended
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Six Months Ended
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|
|
October 26,
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October 27,
|
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October 26,
|
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October 27,
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2013
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2012
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2013
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2012
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Earnings (loss) per diluted share as reported
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$
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0.07
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$
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0.39
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$
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(0.25
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)
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$
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0.33
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Decrease in fair value of conversion option of CybAero convertible
bond investment
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0.07
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—
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0.19
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|
|
—
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Earnings (loss) per diluted share as adjusted
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$
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0.14
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$
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0.39
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$
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(0.06
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)
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$
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0.33
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AeroVironment, Inc.
Consolidated Balance Sheets
(In thousands except share data)
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October 26,
|
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April 30,
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2013
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2013
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(Unaudited)
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Assets
|
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Current assets:
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Cash and cash equivalents
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$
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66,126
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$
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75,332
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Short-term investments
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77,677
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73,241
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Accounts receivable, net of allowance for doubtful accounts of $531
at October 26, 2013
and $936 at April 30, 2013
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36,238
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19,770
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Unbilled receivables and retentions
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|
7,256
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|
11,304
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Inventories, net
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60,629
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|
62,561
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Income tax receivable
|
|
|
8,120
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|
11,777
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Deferred income taxes
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|
|
5,400
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|
5,166
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Prepaid expenses and other current assets
|
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|
4,317
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|
4,303
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Total current assets
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265,763
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263,454
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Long-term investments
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51,707
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68,916
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Property and equipment, net
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26,039
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|
24,429
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Deferred income taxes
|
|
|
5,587
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|
|
5,606
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Other assets
|
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1,720
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|
1,060
|
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Total assets
|
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|
$
|
350,816
|
|
|
$
|
363,465
|
|
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Liabilities and Stockholders’ Equity
|
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Current liabilities:
|
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|
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Accounts payable
|
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$
|
11,774
|
|
|
$
|
16,144
|
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Wages and related accruals
|
|
|
11,669
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|
|
12,116
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Customer advances
|
|
|
3,605
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|
|
7,519
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|
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Other current liabilities
|
|
|
6,261
|
|
|
6,408
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Total current liabilities
|
|
|
33,309
|
|
|
42,187
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|
|
Deferred rent
|
|
|
614
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|
771
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Liability for uncertain tax positions
|
|
|
5,211
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|
|
5,321
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Commitments and contingencies
|
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Stockholders’ equity:
|
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Preferred stock, $0.0001 par value:
|
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Authorized shares — 10,000,000; none issued or outstanding
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|
|
—
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|
|
—
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Common stock, $0.0001 par value:
|
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|
|
|
|
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|
|
Authorized shares — 100,000,000
|
|
|
|
|
|
|
|
|
Issued and outstanding shares — 22,704,189 at October 26, 2013 and
22,614,315 at April 30, 2013
|
|
|
2
|
|
|
2
|
|
|
Additional paid-in capital
|
|
|
132,549
|
|
|
130,527
|
|
|
Accumulated other comprehensive loss
|
|
|
(676
|
)
|
|
(705
|
)
|
|
Retained earnings
|
|
|
179,807
|
|
|
185,362
|
|
|
Total stockholders’ equity
|
|
|
311,682
|
|
|
315,186
|
|
|
Total liabilities and stockholders’ equity
|
|
|
$
|
350,816
|
|
|
$
|
363,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
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AeroVironment, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
|
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|
|
|
|
|
|
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|
|
Six Months Ended
|
|
|
|
|
|
October 26,
|
|
|
October 27,
|
|
|
|
|
|
2013
|
|
|
2012
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
$
|
(5,555
|
)
|
|
$
|
7,352
|
|
|
Adjustments to reconcile net (loss) income to cash (used in)
provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
4,504
|
|
|
5,937
|
|
|
Provision for doubtful accounts
|
|
|
309
|
|
|
566
|
|
|
Deferred income taxes
|
|
|
(233
|
)
|
|
(130
|
)
|
|
Stock-based compensation
|
|
|
1,840
|
|
|
1,642
|
|
|
Change in fair value of conversion feature of convertible bonds
|
|
|
5,711
|
|
|
—
|
|
|
Tax benefit from exercise of stock options
|
|
|
151
|
|
|
1,529
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(16,777
|
)
|
|
7,521
|
|
|
Unbilled receivables and retentions
|
|
|
4,048
|
|
|
5,970
|
|
|
Inventories
|
|
|
1,932
|
|
|
(1,208
|
)
|
|
Income tax receivable
|
|
|
3,657
|
|
|
—
|
|
|
Other assets
|
|
|
9
|
|
|
(836
|
)
|
|
Accounts payable
|
|
|
(4,370
|
)
|
|
(4,783
|
)
|
|
Other liabilities
|
|
|
(4,899
|
)
|
|
(18,772
|
)
|
|
Net cash (used in) provided by operating activities
|
|
|
(9,673
|
)
|
|
4,788
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
Acquisitions of property and equipment
|
|
|
(6,047
|
)
|
|
(4,559
|
)
|
|
Acquisitions of distribution and licensing rights
|
|
|
(750
|
)
|
|
—
|
|
|
Net redemptions of held-to-maturity investments
|
|
|
6,934
|
|
|
5,911
|
|
|
Net sales of available-for-sale investments
|
|
|
175
|
|
|
250
|
|
|
Net cash provided by investing activities
|
|
|
312
|
|
|
1,602
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
155
|
|
|
160
|
|
|
Net cash provided by financing activities
|
|
|
155
|
|
|
160
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
|
(9,206
|
)
|
|
6,550
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
75,332
|
|
|
64,220
|
|
|
Cash and cash equivalents at end of period
|
|
|
$
|
66,126
|
|
|
$
|
70,770
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure:
|
|
|
|
|
|
|
|
|
Unrealized gain on long-term investments recorded in other
comprehensive income (loss), net of deferred taxes of $18 and $17,
respectively
|
|
|
$
|
29
|
|
|
$
|
27
|
|
|
Reclassification from share-based liability compensation to equity
|
|
|
$
|
—
|
|
|
$
|
401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reportable Segment Results are as Follows (Unaudited):
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
|
October 26,
|
|
|
October 27,
|
|
|
October 26,
|
|
|
October 27,
|
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UAS
|
|
|
$
|
56,079
|
|
|
$
|
65,433
|
|
|
$
|
91,290
|
|
|
$
|
114,239
|
|
EES
|
|
|
8,788
|
|
|
14,845
|
|
|
17,694
|
|
|
24,716
|
|
Total
|
|
|
64,867
|
|
|
80,278
|
|
|
108,984
|
|
|
138,955
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UAS
|
|
|
35,280
|
|
|
35,279
|
|
|
59,879
|
|
|
68,035
|
|
EES
|
|
|
5,709
|
|
|
9,363
|
|
|
12,682
|
|
|
15,779
|
|
Total
|
|
|
40,989
|
|
|
44,642
|
|
|
72,561
|
|
|
83,814
|
|
Gross margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UAS
|
|
|
20,799
|
|
|
30,154
|
|
|
31,411
|
|
|
46,204
|
|
EES
|
|
|
3,079
|
|
|
5,482
|
|
|
5,012
|
|
|
8,937
|
|
Total
|
|
|
23,878
|
|
|
35,636
|
|
|
36,423
|
|
|
55,141
|
|
Selling, general and administrative
|
|
|
13,084
|
|
|
13,176
|
|
|
25,543
|
|
|
26,797
|
|
Research and development
|
|
|
6,861
|
|
|
9,386
|
|
|
14,051
|
|
|
17,522
|
|
Income (loss) from operations
|
|
|
3,933
|
|
|
13,074
|
|
|
(3,171
|
)
|
|
10,822
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
195
|
|
|
162
|
|
|
400
|
|
|
334
|
|
Other expense
|
|
|
(2,307
|
)
|
|
—
|
|
|
(5,701
|
)
|
|
—
|
|
Income (loss) before income taxes
|
|
|
$
|
1,821
|
|
|
$
|
13,236
|
|
|
$
|
(8,472
|
)
|
|
$
|
11,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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