UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): March 5, 2019

 

AEROVIRONMENT, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Registrant’s telephone number, including area code: (805)  520-8350

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

Emerging growth company ☐  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐  

 

Item 2.02.  Results of Operations and Financial Condition

 

On March 5, 2019, AeroVironment, Inc. issued a press release announcing first quarter financial results for the period ended January 26, 2019, a copy of which is attached hereto as Exhibit 99.1.

 

The information in this Current Report on Form 8-K, including the exhibit, is furnished pursuant to Item 2.02 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing of AeroVironment, Inc. under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof, except as shall be expressly set forth by specific reference in such filing.

 

In addition to historic information, this report, including the exhibit, contains forward-looking statements regarding events, performance and financial trends. Various factors could affect future results and could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Some of those factors are identified in the exhibit, and in our periodic reports filed with the Securities and Exchange Commission.

 

Item 9.01.  Financial Statements and Exhibits

 

(d)  Exhibits.

 

 

2

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

3

 

Exhibit 99.1

 

 

 

AeroVironment, Inc. Announces Fiscal 2019 Third Quarter Results

 

SIMI VALLEY, Calif., March 5, 2019 — AeroVironment, Inc. (NASDAQ: AVAV) today reported financial results for its third quarter ended January 26, 2019.

 

 

 

 

 

“Our team delivered outstanding financial results in our third fiscal quarter, including $75.3 million in revenue and $0.35 in diluted earnings per share from continuing operations, representing year-over-year increases of 38 percent and $0.37, respectively,” said Wahid Nawabi, AeroVironment president and chief executive officer. “We continue to make strong progress against our financial and operational objectives and have established a strong foundation for fiscal year 2020.”

 

Mr. Nawabi continued, “We also continue to advance our growth portfolio, including exercising the one-time option to increase our ownership of the HAPSMobile, Inc. joint venture from 5 percent to 10 percent. AeroVironment has a strong track record of transforming high-potential innovations and technologies into significant value, and we are excited about realizing the full potential of HAPSMobile and our other growth initiatives.”

 

 

FISCAL 2019 THIRD QUARTER RESULTS

 

Revenue for the third quarter of fiscal 2019 was $75.3 million, an increase of 38%  from third quarter fiscal 2018 revenue of $54.6 million. The increase in revenue was due to an increase in product sales of $10.6 million and an increase in service revenue of $10.1 million.

 

Gross margin for the third quarter of fiscal 2019 was $30.4 million, an increase of 67%  from third quarter fiscal 2018 gross margin of $18.3 million. The increase in gross margin was primarily due to an increase in product margin of $8.7 million and an increase in service margin of $3.5 million. As a percentage of revenue, gross margin increased to 40% from 33%. The increase in gross margin percentage was primarily due to the increase in sales volume.

 

Income from continuing operations for the third quarter of fiscal 2019 was $7.8 million, an increase from third quarter fiscal 2018 of $0.2 million. The increase in income from continuing operations was primarily a result of an increase in gross margin of $12.1 million, partially offset by an increase in selling, general and administrative (“SG&A”) expense of $3.0 million and an increase in research and development (“R&D”) expense of $1.5 million.

 

Other income, net, for the third quarter of fiscal 2019 was $2.2 million compared to other income, net of $0.4 million for the third quarter of fiscal 2018. The increase in other income, net was primarily due to an increase

in interest income and income from transition services performed on behalf of the buyer of the discontinued Efficient Energy Systems (“EES”) business.

 

Provision for income taxes for the third quarter of fiscal 2019 was $0.9 million compared to $0.8 million for the third quarter of fiscal 2018.  The increase in provision for income taxes was primarily due to an increase in income before income taxes, largely offset by a one-time expense of $3.1 million recorded during the third quarter of fiscal 2018 as a result of the Tax Cut and Jobs Act of 2017 and a reduction of the federal statutory tax rate from 30.4% to 21%.

 

Equity method investment activity, net of tax, for the third quarter of fiscal 2019 was a loss of $0.7 million compared to a loss of $0.4 million for the third quarter of fiscal 2018. The equity method loss is associated with our investment in HAPSMobile, Inc. joint venture formed in December 2017.

 

Loss from discontinued operations, net of tax for the third quarter of fiscal 2019 was $0.1 million compared to loss from discontinued operations, net of tax for the third quarter of fiscal 2018 of $0.1 million. 

 

Net income attributable to AeroVironment for the third quarter of fiscal 2019 was  $8.4 million, an increase from third quarter fiscal 2018 net loss attributable to AeroVironment of $0.8 million.

 

Earnings per diluted share from continuing operations attributable to AeroVironment for the third quarter of fiscal 2019 was  $0.35 compared to loss per share from continuing operations attributable to AeroVironment for the third quarter fiscal 2018 of $0.02.

 

FISCAL 2019 YEAR-TO-DATE RESULTS

 

Revenue for the first nine months of fiscal 2019 was $226.3 million, an increase of 46% from the first nine months of fiscal 2018 revenue of $154.8 million. The increase in revenue was due to an increase in product sales of $45.7 million and an increase in service revenue of $25.8 million.

 

Gross margin for the first nine months of fiscal 2019 was $91.4 million, an increase of 60% from the first nine months of fiscal 2018 gross margin of $57.1 million. The increase in gross margin was primarily due to an increase in product margin of $28.6 million and an increase in service margin of $5.7 million. As a percentage of revenue, gross margin increased to 40% from 37%.

 

Income from continuing operations for the first nine months of fiscal 2019 was $28.7 million, an increase from the first nine months of fiscal 2018 income from continuing operations of $2.6 million. The increase in income from continuing operations was primarily a result of an increase in gross margin of $34.3 million, partially offset by an increase in SG&A expense of $4.5 million and an increase in R&D expense of $3.6 million.

 

Other income, net, for the first nine months of fiscal 2019 was $13.9 million compared to other income, net of $1.3 million for the first nine months of fiscal 2018. The increase in other income, net was primarily due to a one-time gain from a litigation settlement, income from transition services performed on behalf of the buyer of the discontinued EES business and an increase in interest income.

 

Provision for income taxes for the first nine months of fiscal 2019 was $4.7 million compared to provision for income taxes of $1.0 million for the first nine months of fiscal 2018.  The increase in provision for income taxes was primarily due to an increase in income before income taxes, partially offset by a one-time expense of $3.1 million recorded during the third quarter of fiscal 2018 as a result of the Tax Cut and Jobs Act of 2017 and a reduction of the federal statutory tax rate from 30.4% to 21%.

 

Equity method investment activity, net of tax, for the first nine months of fiscal 2019 was a loss of $2.1 million compared to a loss of $0.4 million for the first nine months of fiscal 2018. The equity method loss is associated with our investment in HAPSMobile, Inc. joint venture formed in December 2017.

 

Gain on sale of a business, net of tax for the first  nine months of fiscal 2019 was $8.5 million and resulted from the sale of our EES business.

 

Loss from discontinued operations, net of tax for the first nine months of fiscal 2019 was $2.5 million compared to loss from discontinued operations, net of tax for the first nine months of fiscal 2018 of $1.7 million. 

 

Net income attributable to AeroVironment for the first nine months of fiscal 2019 was $41.8 million, an increase from the first nine months of fiscal 2018 net income attributable to AeroVironment of $1.1 million.

 

Earnings per diluted share from continuing operations attributable to AeroVironment for the first nine months of fiscal 2019 was $1.49 compared to earnings per diluted share from continuing operations attributable to AeroVironment for the first nine months of fiscal 2018 of $0.12.

 

BACKLOG

 

As of January 26, 2019,  funded backlog (remaining performance obligations under firm orders for which funding is currently appropriated to us under a customer contract) was $132.5 million compared to $113.3 million as of January 27, 2018.

 

FISCAL 2019 — OUTLOOK FOR THE FULL YEAR

 

For fiscal 2019, the company continues to expect to generate revenue from continuing operations of between $300 million and $310 million. The company has revised its expectations and now expects to generate earnings per diluted share from continuing operations of between $1.60 and  $1.80. The company previously expected earnings per diluted share of between $1.30 and $1.50. The earnings per diluted share range includes a one-time gain of $0.26 from a litigation settlement. On February 9, 2019, the Company elected to purchase 632,800,000 yen (approximately $5,700,000 million) of additional shares of HAPSMobile to increase the Company’s ownership in the joint venture from 5% to 10% pursuant to the terms of the Joint Venture Agreement. The Company anticipates that the purchase of additional shares will be completed during the three months ending April 30, 2019.

 

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,  March 5, 2019, at 1:30 pm Pacific Time that will be broadcast live over the Internet. Wahid Nawabi, president and chief executive officer, Teresa P. Covington, 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 (800) 708-4540 (U.S.) and enter the passcode 48266091 or (847)  619-6397 (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,  March 5, 2019, at approximately 4:00 p.m. Pacific Time through March 12, 2019, at 8:59 p.m. Pacific Time.  Dial (888) 843-7419 and enter the passcode 48266091#. International callers should dial (630) 652-3042 and enter the same passcode number to access the audio replay. 

 

ABOUT AEROVIRONMENT, INC.

 

AeroVironment (NASDAQ: AVAV) provides customers with more actionable intelligence so they can proceed with certainty. Based in California, AeroVironment is a global leader in unmanned aircraft systems and tactical missile systems, and serves defense, government and commercial customers. For more information visit www.avinc.com.

 

FORWARD-LOOKING STATEMENTS

 

This press release contains “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words such as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,” “plan,” or words or phrases with similar meaning. Forward-looking statements are based on current expectations, forecasts and assumptions that involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of our control, that may cause our business, strategy or actual results to differ materially from the forward-looking statements.

 

Factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to, reliance on sales to the U.S. government; availability of U.S. government funding for defense procurement and R&D programs; changes in the timing and/or amount of government spending; our ability to perform under existing contracts and obtain new contracts;  risks related to our international business, including compliance with export control laws; potential need for changes in our long-term strategy in response to future developments; the extensive regulatory requirements governing our contracts with the U.S. Government and international customers; the consequences to our financial position, business and reputation that could result from failing to comply with such regulatory requirements; unexpected technical and marketing difficulties inherent in major research and product development efforts; the impact of potential security and cyber threats; changes in the supply and/or demand and/or prices for our products and services; the activities of competitors and increased competition; failure of the markets in which we operate to grow; uncertainty in the customer adoption rate of commercial use unmanned aircraft systems; failure to remain a market innovator and create new market opportunities; changes in significant operating expenses, including components and raw materials; failure to develop new products; the extensive regulatory requirements governing our contracts with the U.S. government; issues related to transition services and post-transaction matters arising from the sale of our EES business; product liability, infringement and other claims; changes in the regulatory environment; and general economic and business conditions in the United States and elsewhere in the world. For a further list and description of such risks and uncertainties, see the reports we file with the Securities and Exchange Commission. We do not intend, and undertake no obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise.

 

- Financial Tables Follow –

AeroVironment, Inc.

Consolidated Statements of Operations (Unaudited)

(In thousands except share and per share data)

 

 

 

 

AeroVironment, Inc.

Consolidated Balance Sheets

(In thousands except share data)

 

 

 

 

 

AeroVironment, Inc.

Consolidated Statements of Cash Flows

(In thousands)

 

 

 

 

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Contact:

AeroVironment, Inc.

Steven Gitlin

+1 (805)  520-8350

ir@avinc.com