AeroVironment (AVAV) 5 Dec 232024 Q2 Earnings call transcript

Good day, and thank you for standing by. Welcome to AeroVironment's Fiscal Year 2024 Second Quarter Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.I would now like to hand the conference over to your speaker today, Jonah Teeter-Balin. Please go ahead, sir.

Thanks, and good afternoon, ladies and gentlemen. Year Quarter Fiscal Call. AeroVironment's to XXXX Earnings Second Welcome this Corporate Senior Investor that This Litigation statements Reform on Private Teeter-Balin, XXXX. of of the certain contains Development meaning within presented Act note is Jonah Securities please Director and the forward-looking begin, Relations.Before information of call we from and These risks could actual expectations. uncertainties statements involve results our cause that many to differ materially ] risks company's the these on of and in and XX-K SEC, other information contained portions the uncertainties Factors Further in Risk with and filings [ statement and particular the is forward-looking filings. such from SEC slide to under section of afternoon available we are and with AeroVironment Events Copies team.This from the Investors and a filed release the presentation presentation website or at the website www.avinc.com also Relations our our the Investor Presentations. our earnings on posted The is that XXXX. time-sensitive content accurate December call only this of X, contains today, of information conference as make our update forward-looking no from any any AeroVironment me The to obligation today reflect to are this them today company remarks occurring conference events or call.Joining President Officer, Chief to Mr. undertakes Executive after revision and circumstances in or Chairman, contained statements to Mr. Senior and Nawabi; Financial Officer, President and Wahid Chief Vice McDonnell. Kevin

We remarks Wahid will from now Nawabi. begin Wahid? with

for year we again our of to and results your including questions.I'm quarter our our pleased to results second expectations, detail. remain that fiscal Jonah about everyone, financial Welcome, summarizing on best Jonah. increased you, year I take exceeded revenue Thank call. information year earnings then for ever. XXXX will will provide outlook, I'll performance and projections the remainder recent in once our will achievements, our I Kevin review Kevin, second and conference fiscal our report then track our by start after XXXX. which quarter

Slide our Our #X which presentation as follows. on included key earnings are of are also messages,

year-over-year, up record AeroVironment. revenue First, million, second $XXX.X to representing quarter XX% a rose for QX

year effective supply on execution our last the posted Robotics, a solid held fiscal have start chain for successfully acquire our our million, the demand, privately healthy strong and strong by visibility Tomahawk of $XXX provides management.Second, backlog than September. and results in call, bottom-line record completed announced powered to intention higher very of we which also we We operating quarters we is ahead.Third, which

enhanced results more but by the military only higher not related for creation reflects ], value a this in said mix our to and and provide effective and country operating frequent of compelling and portfolio the breadth highly demands systems, offers a the allies. solutions to meet unmanned greatest intelligent will our use of updating near-term [ to strategy dynamics [ growth, our we a ravaging acquisition.Overall, very reflecting remain I performance integrate We As review our moment, revenue And well our technology are portfolio. included strong guidance, Tomahawk our in increase we're combined performance acceleration an and across our our businesses, including of fiscal exemplified X to future, we pleased about optimistic this on target, through line comp shareholders.As unmanned proposition.Our are multi-domain quarter, the the global with shift easy value our for first significant and we EBITDA. from half are while ] to fourth, way which record improving which the of long-term the also impact last growing use, top revenue fully year, differentiated depth demand

vital now highly real helping have autonomous unmanned contested testament levels our our are industry effectively high missions.We're our these how also team different as witnessing and could environment and our achieve with solutions innovative be business. to honored as of more Ukraine, all praise. are and progress into contested the their Robotics on not AI-enabled in fully are X effectiveness Tomahawk operations on We integrating receiving solutions, pleased deployed the around and an unmatched members existing platforms are perform incredible a of battlefields.As in leader customers of our well We prouder capabilities governments successfully globe we

Tomahawk, is their of control our segment, a we our reminder, AI-enabled and Systems standard interoperability robotic increasing of a common customers part in now a fleet unmanned successfully our to leader open communications.As easier it are interconnectivity Unmanned systems As making portfolio, systems. company, across and manage for growing

their have current and offer a common unmatched fighter. integrate the received platforms for intend unmanned missions.We this now operating to better already customers feedback from to our an capability and while multiple positive picture We to leverage combination war providing future across domains, support

deliver reasons in XXXX. remain the mentioned, stakeholders our to all For strong confident in we to just value year our ability fiscal

be with the We with come.Now at current years will of our to doubled expect Shipments more within strong our on Systems systems. lines than to cutting-edge for decision-making during our the an demand XX significant government year-over-year. let update JUMP and our Starting in segment, forefront growth our all revenue Puma me product solutions developments provide quarter Unmanned across nearly continued segments. that reflect

Puma Puma of have which completed for follow-on orders industry-leading fulfill additional government to have FMS which LE all to proven are to received We testament this these delivering portion were X large This part year. we order.We systems, Puma nearly later expect Ukraine the and of system. AE another orders direct our sales and the fiscal A of last for of year's Ukraine. Ukraine battle is capabilities the new Ukraine, commercial

confident and expect JUMP part capable in most batch of announced its as million in the that Security quarters. previously class additional XX began Ukraine JUMP the Ukraine delivering fourth system also We award and third the the Initiative.We solution systems XX also the Ukraine shipments to under to $XX of is our initial Assistance remain

of it Additionally, to is highlight recent XX. successful tests important X the JUMP

the we XX launch user we knots QS, in exercise, XX's the a a U.S. First, the intervention. from autonomous vessel moving than more at Navy's and JUMP fleet demonstrated ability without hybrid flight successfully Florida.During fully showcased campaign to recover

we positive, their Poland. the This in a exercise to continue investing response growth supported has allies was our our XX due and of discussed in segment. beyond.Moving platform Arcane previously, JUMP event in our Unmanned been meet to to to our in very deliveries team plus September opportunities, XXXX There Thunder year be of Army's record The to Second, overseas, more even our held as systems this our the several the to the of our about provide of The pipeline segment segment the summary, system for plan reason in U.S. multiple healthy expanding. our demand several utilized modernization fiscal quarter and remainder demonstration customer yet Munitions Loitering at Army optimistic needs.In global in part this are orders is Systems not pipeline, and potential we for future customers' which of reflected are trends initiative. backlog. the

anticipated, As quarter's this revenue approximately was year-over-year. flat

to Ukraine, There sole-source secure for Taiwan, supporting which U.S. in Loitering and negotiations allies in substantial Congress is a to expanding stockpiles Our government demand. proposed ] numerous allied actively also meet inventory continue Ukraine, continuing of Munitions will Israel backfilling shipments pursuing in IDIQ DoD large for Switchblade. opportunities includes contract the which future Namely, shipments and are we're we anticipation and in growing continue DoD sales legislation and to the U.S. record.We're to the the build with additional products, expectations, international the multiyear of our pipeline. U.S. meeting to [indiscernible] countries across funding globe, [

We to progress customers. make international continue with new

These and programs time, We same XX LASSO solicitation organic provide recently The quarter. long-range U.S. capacity. will wish about strike about Switchblade X to we've a approval We're and receive and and real-world Increment the manufacturing ordinance, optimistic of sole-source who and in this customer LMS low or backlog, many XXX the due through integrating testing of significant optimistic future for high-volume platforms, the export reflected of process.At Manned program. onto responded working contract our past about Optionally Humvees, program U.S. business. are this the are or Marine actively summarize, Army program.To to the more stocking yet the engaged munition Fighting multiple also other U.S. program the is acquisitions include and with those DoD XXXs not our remain that opportunities of we currently with next-generation such than to record DoD's this incredible vehicles Corps OPF tanks, Switchblades to and precision U.S. robust precision multiyear pipeline altitude Army's Switchblades countries, of for cases Abrams U.S. the X/X on future for stated RFPs the helicopters AeroVironment performance Switchblades vehicle potential the its as our receive on fires, growth LASSO in fielding.We're for

Works MacCready key in and in future last expect to of segment. stronger We also contributor as a continues was this fiscal revenue the focus year of technologies to LMS growth line the half this year.Moving developing on solutions. our to segment revenue segment Quarterly with fiscal incubating second roughly be

Our team with which to additional Congress. from XXXX continues next-generation perhaps of on the also the is U.S. make progress awaiting approval government fiscal development working a to the benefit on while missions.We full-scale year defense funding Sunglider, expect HAPS DoD by in budget,

a development Capabilities DEVCOM novel X environments.Flight well. underway, we long-range the In XXXX of the program solutions. in as system a development. Massachusetts, addition, provide by Last is Advanced small been to the Natick, we Resupply, large have X on expect SOAR. currently will budget spoke development engagement see or delivery in developing we or be autonomous within Command, precision testing Combat defense contract progressing program, Development its We're DARPA's next-generation now quarter, Phase for Army's of Operations fiscal where strong to funded funded under Phase Squad unmanned about the by continue system awarded first U.S. called government we ancillary aircraft year also and This contested jointly

excited to potential As develop to of call which projects a capabilities, we the and have of business to innovative lines McDonnell the that, review from see, like exciting Kevin? would financials. for the segment.With new MacCready you development and new now over Kevin remain could lead in about Works this I turn many can quarterly pipeline our to

EBITDA second be financial and and highlights will our second of I'll which refer earnings as release adjusted occasionally Today, quarter Wahid. available you, terms margins presentation our and quarter adjusted backlog. the both we strong another Thank during revenue, to the I had in press performance, finished outstanding of website.Overall, quarter gross our on reviewing

Wahid XXXX.Slide $XXX.X million to As the for $XXX.X the of remarks, earnings his fiscal was for the segment for as breakdown XX% revenue million, second of provides revenue fiscal quarter the of a quarter of an by second in of increase quarter. X mentioned the compared XXXX presentation

last from small $XX.X compared demand year businesses. The Tomahawk the decrease from compared Switchblade UMS the during during primary segment added quarter, Our Systems, had of quarter from of was million quarter largest fiscal LMS, which X% is we also driven production X% our introduced as international earlier Switchblade million, year.Revenue systems.As of munitions is began of up Wahid million, UMS, quarter, a to as UAS, last and to which year. of the million, of $XX.X the XXX% during $XX.X Ukraine up came XX million a the QX. combination are the ramp product medium our shipments the of revenue second quarter, contributed $XX.X primarily a XXX growth. JUMP $XX.X recently decrease recorded mentioned, Loitering the in by and Block at million was time, revenue at systems, beginning the to UGV year's in the last to driver MacCready during Unmanned same the XXX the was strong Works product, or we which our to for segment revenue which $XXX.X UAS, the product of revenue improvement XX this

and revenue.On of HAPS continue SoftBank with earnings for government machine lower Slide a of We agencies the offset see U.S. strong to demand product service which various the and X and DoD agencies, learning presentation, was there's U.S. autonomy by revenue. capabilities between breakdown funded

during revenue XX%, of from margins up international GAAP at the notable result product revenue of accounting in to quarter.In product XX%, XX% gross presentation to from previous margins, of the the intangible products our we a margin, Adjusted increase in gross we the amortization shift the of quarter although XX% improvement product product quarter year revenue of of to second and year. XXXX, gross reconciles last during second gross The quarter, XX% UAS of items. of we to products, and substantial terms margins, impacted XX% a operations.For the due revenue. corresponding increase for the gross the was noncash XX% second product a service In total gross gross lower marking consolidated year. earnings of the adjusted of from to total margins recorded international from Slide service small a relative so small in last by XX% was excludes gross gross lesser strong assets, accelerated the mix to strong the revenue increase our a UAS to same our revenues, revenue expense at the other previous margins.Speaking GAAP UAS.Second were reduce quarter while revenues had and reached COCO year. same quarter, factors extent LMS Specifically, as last a year, adjusted to a the service service the the year quarter Last the Slide lower of finished small largely product from in which small This fiscal driven was LMS shows the gross the X fiscal percentage depreciation accounted GAAP product adjusted mix purchase due margins. and product of quarter gross margins gross expect in for remainder margins as we portion quarter from XX% revenue, service have high GAAP XX in the also margins margins gross which XX% be on the expect close same second to adjusted XX% margins, of trend UAS improvement margins margins. from the product gross versus expect for negatively period versus improved

of representing quarter XXXX fiscal the adjusted half year fiscal Systems of the an factors up following of expect earnings quarter terms the and EBITDA, million EBITDA. the million to The dollars fiscal acquisition quarter and XXXX, a revenue last In revenue this Slide both shows million XXs as of was compared year, $XX the percentage prior the net terms were presentation anticipated the our in related Loitering expenses We million, and gross which to in end to $XX XXs high from revenue of year. the margins favorable partially second contributing of compared main revenues.In Munitions adjusted $X increase offset in increase by $XX expense million amortization GAAP second of in intangible XX% total adjusted to mix, in in R&D.SG&A revenue SG&A increase for incremental fiscal the investments second of XX revenue low adjusted year. was second of or expense, EBITDA to XX% the excluding of and $XX or was reconciliation higher income of to

year. XX% revenue in expense corresponding -- a increased R&D terms versus expense of While dollar terms, of of percentage year-over-year R&D as was XX% in in the last quarter

GAAP a mix increase expense, and taxes, rise share meet existing volume the turning offset of year increase of funding We solar $X.X non-GAAP the million a and posted million quarter we expenses our includes our earnings expect R&D shows XXXX. improvements earnings. products In a increase customers. This The of to a and full new to EPS. $X.X to versus products to losses and $XX.X upgrades as for and company also diluted the to a HAPS reconciliation to increase or share continue equity-related internal -- in to fiscal XX evolving aircraft.Now per to partially unrealized the GAAP XX% the intangible $X.X revenue company in $X.X of continue R&D quarter margin $XX.X invest in run diluted a of needs and decrease $X.X closer generated several be loss the spending in million per in same million gross sales last acquisition-related the were other increase SG&A driven a recorded in second year. increase in a versus $X.XX amortization million million the quarter, by in net of The of million second by net for in diluted share in of to namely the second in factors, adjusted income of per of million income $XX.X adjusted million for XXXX attributed $XX.X investments.Slide $X.XX can period net fiscal

with will balance our from term driven investments $XXX.X quarter at million, primarily $X.X million to the carry during of second million and continue which was balance have result for of increased our to XXXX earnings with quarter shipments million X by working of of a risk Inventories over fiscal highlights quarter chain Total Tomahawk the conclude $XX summary in to higher backlog is of sheet $XX the Slide to acquisition. coming sheet. quarters Turning and under minimization.We the presentation inventory Inventories second a as quarter, metrics. the of investments fiscal a in cash levels of our a extra visibility. decrease XXXX, of prepare debt like million. $X these facility.I'd approximately capital at million $XXX as our available supply remain by strong we the $XXX end current our the some XXXX.During of cash million reduced fiscal we provides

As back million. XXXX the funded midpoint like second at at is guidance of of to XX%.Now quarter range backlog of revised end revenue FY Visibility Wahid. our fiscal to to mentioned, 'XX Wahid $XXX finished turn the things the I'd our

Thanks, Kevin.

earnings of to This diluted or $XXX diluted of million $X.XX guidance per Tomahawk Given anticipate to outlook share. share. $XXX per we EBITDA adjusted Net to million follows. Robotics, revenue expenses.Non-GAAP million addition $X.XX of quarter have non-GAAP for increased $XX performance our $XXX to as and fiscal strong our $X.XX revised million $X.XX guidance $XX decrease acquisition-related We the reflects million. XXXX $XXX Tomahawk of and to of year revenues and million income

margin the of Based lower we our of to product the the quarters solutions mix.Lastly, while U.S. midpoint half X and to between And each our second of for now strong revised fiscal in half, than anticipated the distributed the almost of backlog, our full customers split and in to is evenly be record decision-making, first year crucial world. as fiscal to are know this expected, an revenue Washington half second guidance. performance first remaining to on our primarily expect gross due the we We slower around this a led situation half year. visibility have revenue has

resolution the continuing remain a with under The of programs autonomous our which as we continue operating should allies an the customers. to current AI. trends greater through past, future.We meet our now on by that eventually will hope unmanned starts, year achieve our point beyond While drive the year.As down fiscal priorities are pleased enabled that resolved the immense funded. very proposition supporters and value our stated our be growing solutions our will in fiscal that aisle our the see we budget consensus represent program optimistic in nation I've inflection slows growth, of of needs new both midway we get very can demand in are position realizing near and the sides our We distributed

expect for battle-tested with our adoption there an and supporting even of still solutions. will underlying strong down deterrence need growth new many wind We as innovative programs conflicts active the when be further

and threats, lead to with operations, maximum Loitering time industry track real continue in solutions and damage. while contested Munitions We minimizing neutralize can them collateral identify autonomous capability.AeroVironment effectiveness missions in the environment them true

from ensure in key solutions customers' innovative our in invest our once let needed they the to summarize perform again [ when continue environments.Now me points and call. meet today's ] will standards real-world exacting to We

delivered revenue raised quarter XXXX. expectations results, for record fiscal year exceeding we second and our First, outlook

innovative backlog and our reflecting solutions. remains combat-proven demand global strong, our Second, for

Votel over line on well our second to fiscal the the expect of of excited will fiscal extensive to meet Central JSOC, further General General We're Operations demand. for Tomahawk call questions, Joint global and and mission, Third, Special Command, we and in Solutions year are for now outlook of our and to investors thank putting Command, customers and for operations in product AV CENTCOM. our thank execute of the or for helping accelerating of their acquisition military in into fourth, double-digit country improve business segment.And His Board to brings completed their abroad.And current we're be growth Votel the you turning year our top prepared track welcome to unwavering retired the Unmanned this guidance to especially Joseph our XXXX.Before onboarding or Systems instrumental half faith for Directors. AeroVironment the AeroVironment. knowledge continues today's successfully our in to -- and to this needs strategy, Robotics of strength allies future support and lines finally, our and due with you

the solutions, our success and for beyond the products, manner. team supply due talent go strive company's continuously is to Our timely customers' who expeditious meet and effectively needs our improve of new chain and manage in to above our a innovative

Jonah are the We expect that, this will fiscal during honored allies and with now success at to support country further questions. XXXX Kevin, and your we and I time, year remainder take critical beyond.And and our of

[Operator Instructions] Konrad from the line Greg question comes our Jefferies. of from first And

Great the core guidance? to versus higher color the start, any I missed we it, in around the guidance do Tomahawk quarter. but Maybe how from you think about from Or might give Tomahawk contribution did revised have contribution? the and just

part So Unmanned we several break now within we is of because have product down segment. our Systems you Greg, each -- don't the line a product of lines Robotics our of And as them. know, Tomahawk as of details

acquisition believe the product strong our of for businesses terms half of demand in our represented fairly growth Tomahawk. what of line are is say across guidance, demand of is and the as year. our well We the and as attributed guidance terms as well the portion growth the increased second X can business lines these However, equally top is related core to Tomahawk. see of this both I in We both to that of of in our it the that as revenue organic addition

excited very we're both. about So

second staying And on then one, the maybe for Tomahawk. just

when provide how some think road map events? Can synergies of thinking major you're kind you of revenue magnitude integration those and integration. maybe mentioned milestones and and and and that timing you of timing potential about maybe You about

Of course, sure. for

So the able the of been the important particular, in be the acquisition going to deliver has in improving fighter. terms positive in our our for which and far for to the feedback customers' thing operating synergies a extremely war we're customers, picture is so from most me, about experiences common that

In our We're integration, detailed in a have on expanded integration Robotics. schedule. of plan. the of already now terms of of being They're we very very ahead actually and have are managers multiphase X Unmanned now They We're businesses They're business of of of excited terms role our the track. our segment.We Systems about within integrated cofounders of the future. the part AeroVironment. with prospects Tomahawk responsibility general larger our

to of and to products.Our foreseeable we're capabilities our the Tomahawk integrate maps, those. into other third-party future, between to common before be in tremendous now even fact, vehicles would unmanned terms air road namely very working unmanned than or of us controller with well our of excited. In all our this vehicles, we're pretty synergies the actually as Robotics the we're UAVs, integrate going allow effort. able platforms ground as and there's some much And all and products We're already technologies, that were we bullish -- more

want partners, actually for I location in ].The in our resources And too. thing Now their scale integrate -- and Florida, and their in because talent, is and Florida lots from terms last significant even got in lots customers that a They've a opportunities very to even there's but to Eastern [ on-site very and encouraged mention we're effort Southern by integration at tremendous of both multiyear positive also excited there demand engineering for -- in effort us, team. are to is their that -- business. headcount actually going external start for is of We're facilities.

talent our a gives allow our the better grow actually hire as it. requires footprint most are it as and in growth to us as desires East our -- well us customers of where Coast So or

And question our Peter from Arment next Baird. line from the comes of

there's out you XXX? give terms kind us European of the there some articles know of about results. start the to Where I Switchblade take potential countries latest recent Nice Switchblade that the for looking Eastern product. could are Yes. to update of delivery the of status Hey, some Wahid, XXX? the been we of in production

Sure.

many U.S. visit So we've and related as U.S. I'm our leaders production. last leadership as DoD's government to several of in the glad had Switchblade -- to congressional couple the report well that weeks of

now. we We production have of by amount a in. deliver fortunate. were program the deliver invested can We a significant we Switchblade record and at DoD because quality major very which caliber we've maturity. That's plus capacity thousands of And can them and U.S.

us active defense X/X in Secondly, and this as equip Switchblade. is XX high of export Department delivered the engaged XXXs different good an that before Department in, process.So cases there Department and State are About of already these very Defense helping of chunk Switchblade. we're in a organizations the months expect demand U.S. quite so because is countries XXXs in next favorable or are their the of State Switchblade or than several of those -- about will with that terms process those I go faster We've interest and so acquiring approval Switchblade countries towards wanting receive as the far very to X well U.S. of to DoD.

in encouraging spoken X/X also them to a countries Switchblade X those of actively large negotiating for really, with IDIQ U.S. already about AeroVironment then multiyear they've that It is purchase and of cases approval very allies so sole-source There's U.S. ] public multiple in FMS as statements. the for it, the allows but total delivered actively lot. years the we've and I its needs Peter, is fulfill Switchblade and [ export a of we're have it's far process. actively DoD FMS are really and for XX our that, made of from with in programs countries actively want cases.So, the a for very Switchblade time, All stockpiles for and the U.S. some take to that we're and mention actually to DoD that it's well involved encouraging. the gone contract process, remain quantities will Ukraine to cases. There's these which positive.In on A, That that for as addition about DoD be large

the the And comments could to end XXs. gross -- one just that, margin year Maybe of expected I gross quick you that low you Kevin, in margin guess, you for some for a -- on in -- the second just see high LMS guess, kind made you you'd high up adjusted maybe and XXs about the I implies, the to to the primarily be in revenue maybe or margin tied you -- some so. takes that there? you're puts down, come XXs highlight that the Or that maybe of half ramp? could mid-XXs to to of gross year going maybe if Is the

Right.

you revenue a in kind kind lower second by UAS and of the of element of then So half. margin have small little a the bit lower combination that's replaced

Herbert the comes Markets. question from line of next from Capital RBC our Ken And

Works? I the slightly. mean, to down come that year, half specifically fiscal maybe the mix from the LMS impact of growth growth half segment MacCready Wahid, if is for or second finer expectations, year. a flattish put within second I going much outlook to Hey, sort relative your there? of point in mean second the I the to could, second UMS with quarter for What's segment of growth, consistent your of just but half the the How on

asked So question. glad Ken, you that I'm

That's expectation. Munitions overall. First be whole, it whole the as growth of very, to strongest to robust all, this It's for year. our the Loitering driver growth a of be we our going very fiscal year, expect

expected, I first of quarter dominant record play has our had to be half XXX. how very primarily revenue going remember We to which a you growth to it's much quarter large, in the very and the in year for expectations us fiscal half and That and contracts of to we strong terms As to very second is comments, year, because first contracts. shipments my on last the for is allowed quarter, line the had the going and are driver we and and ship according fourth plans.Second XXX if thought our lumpy in bookings. very Switchblade Switchblade a we record as said out,

pipeline terms looks terms primarily exports. But but our revenue I contracting through for process think performance in extremely the second is promising.It also year. of and dominant bookings that the mean nature Loitering half because beyond. revenue not that the fuel be as all of of government fiscal 'XX little and and while going fuel go second we for We going both is robust to have bookings, takes Munitions a in FMS have only XXX a performance the our Switchblade of XXX our and to it's product, overall, to well for these just process Switchblade of the by in pipeline going half as to for approval business, terms I the

investments or year? expect ] significant used mean a of And relief second or your do from Kevin, Or free Do half much [ outlook capital. $XX about year cash in we million of sort half working the in the flow? free I basis? in maybe for what's think year, year we the the Wahid of how your cash full first positive so the through you've full cash

I think much in then start and I FY mean, the you'll in fourth think as come around in a a in lot a 'XX. see stay sales overall down working the least here maybe of mark some up third a fourth percentage this of quarter. third But little on levels improvement, the not will quarter, then the to too quarter bit relief. and And even at little I I'm banking capital

Skibitski next Pete our Alembic Global. of line comes question the from from And Instructions] [Operator

-- guess, that or I are how think margins? improve to to for the the me, And the what's you think that do the guys I one -- -- gross time frame right impact LMS midterm? of major through the kind factors what way about path the

make high of margin small product our as the improving. progress. fairly it's line -- to we far and upper strong a improvement Switchblades the said Switchblade Switchblade commercial -- we're the even lot very, XXs usually to going several because profitability only mid How UAS contracts So seen and those set well a UAS, very to that XXs and most low fairly a customers.So margins or the and sell able to many, be are many a years product profitable not our that for it's small our our we've in invested high line, international item is that, to orders products the AeroVironment. XXs. whole are actually as have of are the and especially continue for in Pete, while strong if last our bar has gross hardwares mid-XXs Having years, relative and just we in industry, in international to more on by gross

of off UAS and it's much improving. that our not it's So small

one in terms Switchblades terms product. the of and strategies improvements, content the We manufacture, Block in that, and production, more much labor managed to in of and volume our we have improving its and making is automation inputs less team of improving next-generation efficient and easier the well.And to in systems course, terms Block the cost second more which, capabilities. has us also XX lowering of activities thing is has manufacturing actually and several the are which allowing cost significant are of that on XX really get actually

already we've some several they'll continue So of pay to activities, as got many going them dividend, have forward which and dividend well. paid

of differ it Army -- coming some meets time I Just of products. IDIQ know that, point? but the how if that LASSO you would win this down LASSO product just is just big understand, from frame don't requirements, sort to how seems I for guys, one contract on at Army, how the Switchblade and that like the similar more terms will for me. assuming pike, want that in

deemed replacement think I that? for about So right a long-term LASSO as know to to if mid the IDIQ? don't is what's Or Switchblade way the

Sure, Pete.

that been our for some color and for allies, that for to as Historically, the let higher, large we for ceiling. as a reached up the have that well the Army add now Switchblades U.S. right case contracting much thing. procuring DoD under So comments this U.S. contract main used or part. office for has has me the contract remains still years. demand a And And bought most has multiple since so gone we to

or [ our basically well undefinitized U.S. the which for for have ] started now actions, government DoD us.What both sole-source to actually is for all multiyear Switchblade, So the -- both items U.S. government as these laborious do contract buys initiate action as large individual IDIQ they very allies. as on to another UCaaS contract well for is as

structures, many UCaaS. So what large the the is effect, feel faster of rate We're to many from into of terms go more of very as those proposals. and lot well DoD it's other that to vehicle to their contract these And is initiative. easier.So sources procurement and terms as versus U.S. want in be larger contract more government goes executed some of but when some fulfill we customers, LASSO much actually I think still situation and in U.S. lot We've and happen contract to Army of contracting based time. through U.S. U.S. awarded bandwidth funding the turned and and a our of a ] that the the very has going with ]. to in volume It's more CR until a in then on if ones, [ multiyear long-term going taken negotiating it But us buy DoD will place, and when resources, of We're allows be that. the [ working we the that we're already pleased a because allows opportunities matter much take actively that while good. that to

us will looking our and It for be to very, that. we're customers. so forward And for very positive

comes of DiPalma Blair. William from line question next from our the Louie And

of up the following several recent questions. on I'm

the that XXX subsequent You LASSO LASSO Phase awarded already XXX AeroVironment the announcing the systems and in in time backlog? program systems. general X those of what's Army expected And mentioned they for Are phases? line terms

Sure.

has it, good potentially, X particular that it the which Louie, position. very, LASSO contract is of I the Number it. a aspects of to very puts So, and one, that's program us in why tranche first highlighted award initial record positive very

be know, first the you as ], eventually, for these is phase and will [ fielding into already and programs go U.S. very Army to very, selected So positive. the on products but testing completed have be

Secondly, that our backlog. is order in not

current backlog. that our backlog is Loitering healthy, while pretty I opportunities Munitions my is reflected our of these business, comments mentioned we Switchblade not and So on -- many on

integrate we're both Internationally, got portfolio Humvees, rather the pace looks XX orders Switchblade, onto, pipeline to XXX. And its expect cetera. in many as programs. domestically, XXX these such terms X also other Switchblade et decrease that we've very as next working additional in months. robust demand on countries, and in than et our and got our and the cetera, continues platforms as fact, increase the OMFV, And of and well for line.So opportunities contracts to that lots Abrams we've are book several of All of we to top to and the

got to lot in of X over next a we've upside XX So all all, orders. in months more Switchblade lines the on our product terms

the XXX international X mentioned those terms Switchblade be be to those will should also and you the of second both of that Switchblade Kevin half think and or year in heavy of I X XXXs Switchblade XXX. second And the And in shipped some international half customers both customers?

Ukraine for of Louie. supplemental for is are in of Congress in items and same and international name billion-plus confidentiality I budget our those respect for XXX Ukraine, Switchblade of Congress those potentially and countries. true $XXX any that of There X that's for for dollars supplemental front both is Israel, customers, item, yes, XXX and customers the front line not Switchblade customers. vast can't Taiwan. XXX. that budget have package is -- The them those and specifically XXX majority, the of because both And But if requested answer is for all Many of desire the

is product significantly much for XXX selling the Switchblade Loitering market, that bigger price obviously, Munitions. And a a so and the XXX. very going as strong ] product long-term, XXX as in new And of us the pretty of its like since large because feel in we terms [ higher of of equally is to a be revenue it's is generator

of like Sunglider if and you, to funding its continue one you continue -- or one on HAPS? to expect And AeroVironment And prepared SoftBank do for last Kevin. you own funding HAPS Do expect is SoftBank SoftBank out? both drops for

Sure.

a, this So, committed SoftBank very program. to is

one, fund discussion and They funding them reduced couple with to the the variables that.Number us. known and progressing that SoftBank situation There's in because et of engaged the continue slightly working them time reason. is them and we're them. affecting very bigger underlying to the for We're very talking are We Japan's of although with actively years. process. all the cetera, We're to committed a that's over regularly, however, last us, that's economic has financial much situation closely. very the pandemic, their But

'XX own to the this macroeconomic strong U.S. So always as down make for desire DoD government I we award It's anytime HAPS in that, long-term this relatively We've we're program over a contract eventually that. support fiscal overall the the we'll year to with initial we on to done there is and and from and faced They're U.S. of is it just our do the 'XX DoD that for speaking, significant contract that we the in do well. lastly, approved, committed And and would the amount There's still not they're U.S. believe funding to capability some is of [ Sunglider funding slowed and soon. situations expect They are year the And platform, that we believe received into our have sure HAPS. stop there they the that with.Secondly, to mission. value when government funding, them fiscal intentionally additional environment. budget they last U.S. funding ] expect years protect. amount, and to very and a X DoD. like involved continue budget we because actively have DoD, transition the of actually, primarily IP working because the small that we budget.So proposition

Markets. question Capital Herbert is Ken follow-up a from next our RBC from And

the the under $X.XX first I wanted the The upper mean, end did I the EPS in in $X guidance second just at just on EPS half. year adjusted to of follow-up you guidance. the half range. $X.XX to of in the implies

half? you as second anything really particular mix, that's driving significant the to down of sales, there Switchblade sort of from EPS else is half Aside in first ramp step

We up the a step half R&D in in second of year. definitely the expect

margins, So for half. step to expense the the little that's you're see second bit of lower part going going equation there to EPS a the you're a R&D of going So be see in to up the

how mix should we would think So R&D, be in that? I guess, about

Yes, that's right. Normally, our reversed years all around. are

there's a So a backwards bit of here. little

DoD considered capabilities those though even accelerate because if those a resolution, we that we make solutions traction. getting the our categories where about. ancillary, not we feeling programs believe SOAR that that contested the my things the And desire very to unique DARPA you large slow of number in sure do those the for the most I innovative the projects are and those to program demand and high. for we're continuing down U.S. remarks, as as on most these ] And Yes. with of lot demand saw, U.S. there's other and logistics efforts the is also very and programs capability. have lot [ Those want for a said OSD Ken, a a we by Army there's an the U.S. and sense that systems, are with including the is the And of strongly exciting capable in very DoD

to to shareholder fuel order creation. ramp growth our future and support to going So investments the value up to in we're those in second R&D actually expect developments half

conclude I'd to session program Jonah This hand for any of question-and-answer program. the to today's back the further like remarks. does

once today's your conference call joining in for Thank you and interest for AeroVironment. again

section As results. forward an speaking under be following with found good version relevant of We quarter's news SEC and a call, look reminder, this a wish you you archived next Investors of filings to website. again evening can and the our

This you, your Thank today's in program. the conclude and conference. for ladies participation gentlemen, does

day. Good disconnect. now may You