AeroVironment, Inc.
Jun 30, 2015

AeroVironment, Inc. Announces Fiscal 2015 Fourth Quarter and Full Year Results

MONROVIA, Calif.--(BUSINESS WIRE)-- AeroVironment, Inc. (NASDAQ: AVAV) today reported financial results for its fourth quarter ended April 30, 2015.

"Fourth quarter revenue of $86 million increased by 18 percent and gross profit increased by 50 percent year-over-year. During the quarter, we strengthened our market positions, moved key programs forward to generate value, and focused on innovation," said Tim Conver, AeroVironment chairman and chief executive officer. "Throughout fiscal year 2015, our strategic investments helped expand our growth portfolio and position AeroVironment for new market opportunities. In our core business, our team delivered revenue in-line with our expectations and exceeded targeted profitability.

"We continue to deliver certainty and reliability to our customers and remain the leader in electric vehicle testing and charging systems and small unmanned aircraft systems, where we operate with the largest installed base in the global defense industry. We are entering fiscal year 2016 with strong momentum and look forward to driving the business forward and enhancing stockholder value."

FISCAL 2015 FOURTH QUARTER RESULTS

Revenue for the fourth quarter of fiscal 2015 was $86.5 million, up 18% from fourth quarter fiscal 2014 revenue of $73.5 million. The increase in revenue resulted from increased sales in our Unmanned Aircraft Systems (UAS) segment of $18.7 million offset by a decrease in sales in our Efficient Energy Systems (EES) segment of $5.7 million.

Gross margin for the fourth quarter of fiscal 2015 was $45.4 million, up 50% from fourth quarter fiscal 2014 gross margin of $30.1 million. The increase in gross margin was due to an increase in product margin of $9.7 million and service margin of $5.5 million. As a percentage of revenue, gross margin increased to 52% from 41%.

Income from operations for the fourth quarter of fiscal 2015 was $7.5 million compared to income from operations for the fourth quarter of fiscal 2014 of $6.9 million. The increase in income from operations was a result of an increase in gross margin of $15.2 million and a decrease in selling, general & administrative (SG&A) expense of $1.3 million, offset by an increase in research and development (R&D) of $16.0 million.

Other expense, net, for the fourth quarter of fiscal 2015 was $0.5 million compared to other income, net, for the fourth quarter of fiscal 2014 of $2.9 million. The decrease was primarily due to the fourth quarter of fiscal 2014 including a $2.8 million increase in fair value of the embedded conversion feature of our convertible bond investment. During the fourth quarter of fiscal 2015, we did not have any convertible bond investments.

Net income for the fourth quarter of fiscal 2015 was $7.1 million compared to net income for the fourth quarter of fiscal 2014 of $8.1 million.

Earnings per diluted share for the fourth quarter of fiscal 2015 were $0.31 compared to earnings per diluted share for the fourth quarter of fiscal 2014 of $0.35. Earnings per diluted share for the fourth quarter of fiscal 2015 included a loss of $0.01 per share due to losses on our equity investment. Earnings per diluted share for the fourth quarter of fiscal 2014 included an increase of $0.08 per share due to the increase in fair value of the conversion option of our convertible bond investment.

FISCAL 2015 FULL-YEAR RESULTS

Revenue for fiscal 2015 was $259.4 million, up 3% from fiscal 2014 revenue of $251.7 million. The increase in revenue resulted from increased sales in our UAS segment of $12.1 million offset by a decrease in sales in our EES segment of $4.4 million.

Gross margin for fiscal 2015 was $104.3 million, up 11% from fiscal 2014 gross margin of $93.6 million. The increase in gross margin was due to an increase in product margin of $10.3 million and service margin of $0.3 million. As a percentage of revenue, gross margin increased to 40% from 37%.

Income from operations for fiscal 2015 was $2.0 million compared to income from operations for fiscal 2014 of $12.4 million. The decrease in income from operations was a result of an increase in R&D of $21.0 million and SG&A of $0.1 million, offset by an increase in gross margin of $10.7 million.

Other expense, net, for fiscal 2015 was $0.1 million compared to other income, net, for fiscal 2014 of $2.5 million. Fiscal 2014 included a $1.8 million increase in fair value of the embedded conversion feature of our convertible bond investment.

Net income for fiscal 2015 was $2.9 million compared to net income for fiscal 2014 of $13.7 million.

Earnings per diluted share for fiscal 2015 were $0.13 compared to earnings per diluted share for fiscal 2014 of $0.60. Earnings per diluted share for fiscal 2014 included an increase of $0.04 per diluted share, due to the increase in fair value of the conversion option of our convertible bond investment. Earnings per diluted share for fiscal 2015 were not impacted by our convertible bond and related equity investment.

BACKLOG

As of April 30, 2015, funded backlog (unfilled firm orders for which funding is currently appropriated to us under a customer contract) was $64.7 million compared to $65.9 million as of April 30, 2014.

FISCAL 2016 — OUTLOOK FOR THE FULL YEAR

For fiscal 2016, the company expects to generate revenue of between $260 million and $280 million, and a gross profit margin of between 36 percent and 37.5 percent. Planned increases in strategic R&D and SG&A investments for Commercial UAS in fiscal 2016 may largely offset operating profit in the current fiscal year.

The foregoing estimates are forward looking and reflect management's view of current and future market conditions, including certain assumptions with respect to our ability to obtain and retain government contracts, changes in the timing and/or amount of government spending, changes in the demand for our products and services, activities of competitors, changes in the regulatory environment, and general economic and business conditions in the United States and elsewhere in the world. Investors are reminded that actual results may differ materially from these estimates.

CONFERENCE CALL

In conjunction with this release, AeroVironment, Inc. will host a conference call today, Tuesday, June 30, 2015, at 1:30 pm Pacific Time that will be broadcast live over the Internet. Timothy E. Conver, chairman and chief executive officer, Teresa Covington, interim chief financial officer and Steven A. Gitlin, vice president of investor relations, will host the call.

4:30 PM ET
3:30 PM CT
2:30 PM MT
1:30 PM PT

Investors may dial into the call at (877) 561-2749 (U.S.) or (678) 809-1029 (international) five to ten minutes prior to the start time to allow for registration.

Investors with Internet access may listen to the live audio webcast via the Investor Relations page of the AeroVironment, Inc. website, http://investor.avinc.com. Please allow 15 minutes prior to the call to download and install any necessary audio software.

Audio Replay Options

An audio replay of the event will be archived on the Investor Relations page of the company's website, at http://investor.avinc.com. The audio replay will also be available via telephone from Tuesday, June 30, 2015, at approximately 4:30 p.m. Pacific Time through Tuesday, July 7, 2015, at 9:00 p.m. Pacific Time. Dial (855) 859-2056 and enter the passcode 51447512. International callers should dial (404) 537-3406 and enter the same passcode number to access the audio replay.

ABOUT AEROVIRONMENT, INC.

AeroVironment is a technology solutions provider that designs, develops, produces, supports and operates an advanced portfolio of Unmanned Aircraft Systems (UAS) and electric transportation solutions. The company's electric-powered, hand-launched UASs generate and process data to deliver powerful insight, on-demand, to people engaged in military, public safety and commercial activities around the world. AeroVironment's electric transportation solutions include a comprehensive suite of electric vehicle (EV) charging systems, installation and network services for consumers, automakers, utilities and government agencies, power cycling and test systems for EV developers and industrial EV charging systems for commercial fleets. More information about AeroVironment is available at www.avinc.com.

FORWARD-LOOKING STATEMENTS

This press release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words such as "believe," "anticipate," "expect," "estimate," "intend," "project," "plan," or words or phrases with similar meaning. Forward-looking statements are based on current expectations, forecasts and assumptions that involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of our control, that may cause our business, strategy or actual results to differ materially from the forward-looking statements. Factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to, reliance on sales to the U.S. government; changes in the timing and/or amount of government spending; changes in the supply and/or demand and/or prices for our products and services; the activities of competitors; failure of the markets in which we operate to grow; failure to expand into new markets; changes in significant operating expenses, including components and raw materials; failure to develop new products; changes in the regulatory environment; and general economic and business conditions in the United States and elsewhere in the world. For a further list and description of such risks and uncertainties, see the reports we file with the Securities and Exchange Commission. We do not intend, and undertake no obligation, to update any forward-looking statements, whether as a result of new information, future events or otherwise.

AeroVironment, Inc.

Consolidated Statements of Income

(In thousands except share and per share data)

   
Three Months Ended Twelve Months Ended
April 30,   April 30, April 30,   April 30,
2015   2014 2015   2014
(Unaudited)
Revenue:
Product sales $ 63,034 $ 59,244 $ 205,027 $ 194,996
Contract services 23,437   14,254 54,371   56,707
86,471 73,498 259,398 251,703
Cost of sales:
Product sales 27,357 33,246 118,834 119,137
Contract services 13,764   10,114 36,296   38,953
41,121   43,360 155,130   158,090
Gross margin:
Product gross margin 35,677 25,998 86,193 75,859
Contract gross margin 9,673   4,140 18,074   17,754
45,350 30,138 104,268 93,613
Selling, general and administrative 15,622 16,968 55,763 55,679
Research and development 22,259   6,223 46,491   25,515
Income from operations 7,469 6,947 2,014 12,419
Other income (expense):
Interest income 253 258 882 855
Other (expense) income (727 ) 2,648 (1,003 ) 1,622
Income before income taxes 6,995 9,853 1,893 14,896
(Benefit) provision for income taxes (85 ) 1,796 (1,002 ) 1,178
Net income $ 7,080   $ 8,057 $ 2,895   $ 13,718
Earnings per share data:
Basic $ 0.31 $ 0.36 $ 0.13 $ 0.61
Diluted $ 0.31 $ 0.35 $ 0.13 $ 0.60
Weighted average shares outstanding:
Basic 22,905,235 22,571,067 22,868,733 22,354,444
Diluted 23,148,256 22,986,167 23,145,997 22,719,218
 

AeroVironment, Inc.

Reconciliation of Earnings per Share (Unaudited)

   
Three Months Ended Twelve Months Ended
April 30,   April 30, April 30,   April 30,
2015   2014 2015 2014
Earnings per diluted share as adjusted $ 0.32 $ 0.27 $ 0.13 $ 0.56
(Decrease) increase of convertible bond and related equity investment   (0.01 )   0.08     0.04
Earnings per diluted share as reported $ 0.31   $ 0.35 $ 0.13 $ 0.60
 

AeroVironment, Inc.

Consolidated Balance Sheets

(In thousands except share data)

 
April 30,
  2015       2014  
Assets
Current assets:
Cash and cash equivalents $ 143,410 $ 126,969
Short-term investments 85,381 70,639
Accounts receivable, net of allowance for doubtful accounts of $606 at April 30, 2015 and $791 at April 30, 2014 33,607 31,739
Unbilled receivables and retentions 17,356 10,929
Inventories, net 39,414 50,699
Income tax receivable 6,584
Deferred income taxes 5,265 5,038
Prepaid expenses and other current assets   4,599     4,260  
Total current assets 329,032 306,857
Long-term investments 46,769 50,505
Property and equipment, net 13,499 19,997
Deferred income taxes 7,426 6,721
Other assets   741     874  
Total assets $ 397,467   $ 384,954  
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 19,243 $ 13,906
Wages and related accruals 13,395 14,083
Income taxes payable 692
Customer advances 4,235 2,984
Other current liabilities   9,170     6,762  
Total current liabilities 46,735 37,735
Deferred rent 1,381 1,239
Liability for uncertain tax positions 439 3,513
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.0001 par value:
Authorized shares—10,000,000; none issued or outstanding
Common stock, $0.0001 par value:
Authorized shares—100,000,000
Issued and outstanding shares—23,314,640 shares at April 30, 2015 and 23,176,576 at April 30, 2014 2 2
Additional paid-in capital 148,293 143,648
Accumulated other comprehensive loss (1,358 ) (263 )
Retained earnings   201,975     199,080  
Total stockholders' equity   348,912     342,467  
Total liabilities and stockholders' equity $ 397,467   $ 384,954  
 

AEROVIRONMENT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 
 
Year ended April 30,
2015 2014 2013
(Restated)(1) (Restated)(1)
Operating activities
Net income $ 2,895 $ 13,718 $ 10,426
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization 8,366 9,155 10,937
Loss from equity method investments 240 30
Impairment of long-lived assets 438 3,317
Provision for doubtful accounts (106 ) (6 ) 462
Losses on foreign currency transactions 580 21
Loss (gain) on sale of equity securities 209 (4 )
Deferred income taxes (3,382 ) (3,110 ) 3,851
Change in fair value of conversion feature of convertible bonds (73 ) (1,773 ) (6,173 )
Stock-based compensation 3,768 3,622 3,470
Tax benefit from exercise of stock options 52 2,305 1,606
Excess tax benefit from stock-based compensation (162 ) (648 )
Loss on disposition of property and equipment 3,661 18
Amortization of held-to-maturity investments 4,532 5,037 5,237
Changes in operating assets and liabilities:
Accounts receivable (1,762 ) (11,963 ) 36,185
Unbilled receivables and retentions (6,427 ) 375 15,730
Inventories 11,285 11,862 (19,022 )
Income tax receivable 6,584 5,193 (11,777 )
Prepaid expenses and other assets (339 ) 157 (317 )
Accounts payable 5,337 (2,238 ) (4,069 )
Other liabilities 3,717 (1,045 ) (17,320 )
           
Net cash provided by operating activities 39,413 34,005 29,244
Investing activities
Acquisition of property and equipment (5,279 ) (7,143 ) (11,834 )
Equity method investment (395 ) (105 )
Redemptions of held-to-maturity investments 69,387 75,022 84,071
Purchases of held-to-maturity investments (97,464 ) (56,946 ) (87,294 )
Acquisition of intangible assets (150 ) (750 ) (850 )
Purchases of available-for-sale investments (3,037 )
Sales of available-for-sale investments 10,081 360 600
           
Net cash (used in) provided by investing activities (23,820 ) 10,438 (18,344 )
Financing activities
Excess tax benefit from stock-based compensation 162 648
Tax withholding payment related to net settlement of equity awards (36 ) (163 ) (77 )
Exercise of stock options 722 6,709 289
           
Net cash provided by financing activities 848 7,194 212
           
Net increase in cash and cash equivalents 16,441 51,637 11,112
Cash and cash equivalents at beginning of year 126,969 75,332 64,220
           
Cash and cash equivalents at end of year $ 143,410 $ 126,969 $ 75,332
           
 
           
Supplemental disclosures of cash flow information
Cash paid during the year for:
Income taxes $ 700 $ 2,556 $ 15,262
Non-cash activities
Unrealized change in fair value on long-term investments recorded in accumulated other comprehensive loss, net of deferred taxes $ 1,095 $ 442 $ 11
Reclassification from share-based liability compensation to equity $ $ $ 401
Forfeiture of vested stock-based compensation $ 23 $ $
Accrued acquisition of intangible assets $ 250 $ $

(1) We identified a presentation error in our classification of $5.0 million and $5.2 million of amortization/accretion of premiums/discounts related to held-to-maturity investments within the consolidated statement of cash flows for the years ended April 30, 2014 and 2013, respectively. These amounts were previously included in the investing section of the statement of cash flows within the purchases of held-to-maturity investments rather than being properly presented as a reconciling item to net income within the operating section of the statement of cash flows. For the years ended April 30, 2014 and 2013, we presented the change in held-to-maturity investments as net purchases which was not in accordance with GAAP. To conform to the appropriate GAAP presentation for the change in held-to-maturity investments, we have corrected the error by adjusting the amortization of held-to-maturity investments between the investing and operating sections of our consolidated statement of cash flows as well as presenting the gross purchases and gross redemptions in the investing section in our prior year financial statements for the years ended April 30, 2014 and 2013.

These presentation errors did not impact our consolidated balance sheets, consolidated statements of income or the overall change in cash and cash equivalents in our consolidated statements of cash flows for these years. Please see our Annual Report on Form 10-K for the year ended April 30, 2015 for further details.

Reportable Segment Results are as Follows:

(In thousands)

   
Three Months Ended Twelve Months Ended
April 30,   April 30, April 30,   April 30,
2015   2014 2015   2014
(Unaudited)
Revenue:
UAS $ 78,693 $ 60,029 $ 220,950 $ 208,810
EES 7,778   13,469 38,448   42,893
Total 86,471   73,498 259,398   251,703
Cost of sales:
UAS 36,384 34,548 128,233 127,992
EES 4,737   8,812 26,897   30,098
Total 41,121   43,360 155,130   158,090
Gross margin:
UAS 42,309 25,481 92,717 80,818
EES 3,041   4,657 11,551   12,795
Total 45,350   30,138 104,268   93,613
Selling, general and administrative 15,622 16,968 55,763 55,679
Research and development 22,259   6,223 46,491   25,515
Income from operations 7,469 6,947 2,014 12,419
Other income (expense):
Interest income 253 258 882 855
Other (expense) income (727 ) 2,648 (1,003 ) 1,622
Income before income taxes $ 6,995   $ 9,853 $ 1,893   $ 14,896
 

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

Source: AeroVironment, Inc.

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