SEC Filing | AeroVironment, Inc.

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended January 25, 2020

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-33261

AEROVIRONMENT, INC.

(Exact name of registrant as specified in its charter)

Delaware		95-2705790
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

900 Innovators Way
Simi Valley, California		93065
(Address of principal executive offices)		(Zip Code)

(805) 520-8350

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	AVAV	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒		Accelerated filer ☐

Non-accelerated filer ☐		Smaller reporting company ☐

		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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of February 25, 2020, the number of shares outstanding of the registrant’s common stock, $0.0001 par value, was 23,995,109.

Table of Contents

AeroVironment, Inc.

Table of Contents

Item 1.	Financial Statements :
	Consolidated Balance Sheets as of January 25, 2020 (Unaudited) and April 30, 2019	3
	Consolidated Statements of Operations for the three and nine months ended January 25, 2020 (Unaudited) and January 26, 2019 (Unaudited)	4
	Consolidated Statements of Comprehensive (Loss) Income for the three and nine months ended January 25, 2020 (Unaudited) and January 26, 2019 (Unaudited)	5
	Consolidated Statements of Stockholders’ Equity for the three and nine months ended January 25, 2020 (Unaudited) and January 26, 2019 (Unaudited)	6
	Consolidated Statements of Cash Flows for the nine months ended January 25, 2020 (Unaudited) and January 26, 2019 (Unaudited)	8
	Notes to Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	39
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
Signatures		43

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AeroVironment, Inc.

Consolidated Balance Sheets

(In thousands except share and per share data)


	January 25,		April 30,
	2020		2019
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	131,496	$	172,708
Short-term investments		148,502		150,487
Accounts receivable, net of allowance for doubtful accounts of $1,039 at January 25, 2020 and $1,041 at April 30, 2019		27,936		31,051
Unbilled receivables and retentions (inclusive of related party unbilled receivables of $28,849 at January 25, 2020 and $9,028 at April 30, 2019)		77,411		53,047
Inventories		65,156		54,056
Prepaid expenses and other current assets		6,833		7,418
Income taxes receivable		—		821
Total current assets		457,334		469,588
Long-term investments		26,409		9,386
Property and equipment, net		19,877		16,905
Operating lease right-of-use assets		9,472		—
Deferred income taxes		8,296		6,685
Intangibles, net		14,357		459
Goodwill		6,340		—
Other assets		16,995		5,821
Total assets	$	559,080	$	508,844
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	14,269	$	15,972
Wages and related accruals		17,636		18,507
Customer advances		10,633		2,962
Current operating lease liabilities		2,083		—
Income taxes payable		2,809		—
Other current liabilities		13,046		7,425
Total current liabilities		60,476		44,866
Deferred rent		—		1,173
Non-current operating lease liabilities		7,556		—
Other non-current liabilities		250		150
Deferred tax liability		29		29
Liability for uncertain tax positions		51		51
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value:
Authorized shares—10,000,000; none issued or outstanding at January 25, 2020 and April 30, 2019		—		—
Common stock, $0.0001 par value:
Authorized shares—100,000,000
Issued and outstanding shares—23,995,109 shares at January 25, 2020 and 23,946,293 shares at April 30, 2019		2		2
Additional paid-in capital		180,051		176,216
Accumulated other comprehensive loss		69		2
Retained earnings		310,619		286,351
Total AeroVironment stockholders’ equity		490,741		462,571
Noncontrolling interest		(23)		4
Total equity		490,718		462,575
Total liabilities and stockholders’ equity	$	559,080	$	508,844

See accompanying notes to consolidated financial statements (unaudited).

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AeroVironment, Inc.

Consolidated Statements of Operations (Unaudited)

(In thousands except share and per share data)


	Three Months Ended				Nine Months Ended
	January 25,		January 26,		January 25,		January 26,
	2020		2019		2020		2019
Revenue:
Product sales	$	36,432	$	50,024	$	159,657	$	152,393
Contract services (inclusive of related party revenue of $11,762 and $13,586 for the three months ended January 25, 2020 and January 26, 2019, respectively; and $37,491 and $37,981 for the nine months ended January 25, 2020 and January 26, 2019, respectively)		25,459		25,298		72,416		73,951
		61,891		75,322		232,073		226,344
Cost of sales:
Product sales		21,034		26,780		82,244		83,158
Contract services		17,361		18,150		49,895		51,806
		38,395		44,930		132,139		134,964
Gross margin:
Product sales		15,398		23,244		77,413		69,235
Contract services		8,098		7,148		22,521		22,145
		23,496		30,392		99,934		91,380
Selling, general and administrative		13,223		14,464		43,146		40,066
Research and development		11,381		8,087		30,948		22,631
(Loss) income from continuing operations		(1,108)		7,841		25,840		28,683
Other income:
Interest income, net		1,122		1,272		3,717		3,246
Other income, net		120		962		632		10,641
Income from continuing operations before income taxes		134		10,075		30,189		42,570
(Benefit from) provision for income taxes		(38)		946		3,203		4,724
Equity method investment loss, net of tax		(1,200)		(717)		(3,410)		(2,071)
Net (loss) income from continuing operations		(1,028)		8,412		23,576		35,775
Discontinued operations:
Gain on sale of business, net of tax expense of $2,463		—		—		—		8,452
Loss from discontinued operations, net of tax		—		(62)		—		(2,511)
Net (loss) income from discontinued operations		—		(62)		—		5,941
Net (loss) income		(1,028)		8,350		23,576		41,716
Net loss attributable to noncontrolling interest		20		19		27		40
Net (loss) income attributable to AeroVironment	$	(1,008)	$	8,369	$	23,603	$	41,756
Net (loss) income per share attributable to AeroVironment—Basic
Continuing operations	$	(0.04)	$	0.35	$	0.99	$	1.52
Discontinued operations		—		—		—		0.25
Net (loss) income per share attributable to AeroVironment—Basic	$	(0.04)	$	0.35	$	0.99	$	1.77
Net (loss) income per share attributable to AeroVironment—Diluted
Continuing operations	$	(0.04)	$	0.35	$	0.98	$	1.49
Discontinued operations		—		—		—		0.25
Net (loss) income per share attributable to AeroVironment—Diluted	$	(0.04)	$	0.35	$	0.98	$	1.74
Weighted-average shares outstanding:
Basic		23,821,145		23,687,672		23,790,788		23,643,866
Diluted		23,821,145		24,081,819		24,076,195		24,064,008

See accompanying notes to consolidated financial statements (unaudited).

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AeroVironment, Inc.

Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

(In thousands)


	Three Months Ended				Nine Months Ended
	January 25,		January 26,		January 25,		January 26,
	2020		2019		2020		2019
Net (loss) income	$	(1,028)	$	8,350	$	23,576	$	41,716
Other comprehensive (loss) income:
Change in foreign currency translation adjustments		(112)		(1)		67		(32)
Unrealized gain on investments, net of deferred tax expense of $51		—		—		—		57
Total comprehensive (loss) income		(1,140)	$	8,349		23,643		41,741
Net loss attributable to noncontrolling interest		20		19		27		40
Comprehensive (loss) income attributable to AeroVironment	$	(1,120)	$	8,368	$	23,670	$	41,781

See accompanying notes to consolidated financial statements (unaudited).

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AeroVironment, Inc.

Consolidated Statements of Stockholders’ Equity

For the nine months ended January 25, 2020 and January 26, 2019 (Unaudited)

(In thousands except share data)


								Accumulated
				Additional				Other		Total		Non-
	Common Stock			Paid-In		Retained		Comprehensive		AeroVironment		Controlling
	Shares	Amount		Capital		Earnings		Loss		Equity		Interest		Total
Balance at April 30, 2019	23,946,293	$	2	$	176,216	$	286,351	$	2	$	462,571	$	4	$	462,575
Adoption of ASU 2018-09	—		—		—		665		—		665		—		665
Net income (loss)	—		—		—		23,603		—		23,603		(27)		23,576
Foreign currency translation	—		—		—		—		67		67		—		67
Stock options exercised	3,000		—		93		—		—		93		—		93
Restricted stock awards	74,892		—		—		—		—		—		—		—
Restricted stock awards forfeited	(11,769)		—		—		—		—		—		—		—
Tax withholding payment related to net share settlement of equity awards	(17,307)		—		(1,009)		—		—		(1,009)		—		(1,009)
Stock based compensation	—		—		4,751		—		—		4,751		—		4,751
Balance at January 25, 2020	23,995,109	$	2	$	180,051	$	310,619	$	69	$	490,741	$	(23)	$	490,718

								Accumulated
				Additional				Other		Total		Non-
	Common Stock			Paid-In		Retained		Comprehensive		AeroVironment		Controlling
	Shares	Amount		Capital		Earnings		Loss		Equity		Interest		Total
Balance at April 30, 2018	23,908,736	$	2	$	170,139	$	238,913	$	(21)	$	409,033	$	23	$	409,056
Net income (loss)	—		—		—		41,756		—		41,756		(40)		41,716
Unrealized gain on investments	—		—		—		—		57		57		—		57
Foreign currency translation	—		—		—		—		(32)		(32)		—		(32)
Stock options exercised	12,725		—		71		—		—		71		—		71
Restricted stock awards	39,823		—		—		—		—		—		—		—
Restricted stock awards forfeited	(15,100)		—		—		—		—		—		—		—
Tax withholding payment related to net share settlement of equity awards	(13,724)		—		(1,033)		—		—		(1,033)		—		(1,033)
Stock-based compensation	—		—		5,714		—		—		5,714		—		5,714
Balance at January 26, 2019	23,932,460	$	2	$	174,891	$	280,669	$	4	$	455,566	$	(17)	$	455,549

See accompanying notes to consolidated financial statements (unaudited)

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AeroVironment, Inc.

Consolidated Statements of Stockholders’ Equity

For the three months ended January 25, 2020 and January 26, 2019 (Unaudited)

(In thousands except share data)


								Accumulated
				Additional				Other		Total		Non-
	Common Stock			Paid-In		Retained		Comprehensive		AeroVironment		Controlling
	Shares	Amount		Capital		Earnings		Loss		Equity		Interest		Total
Balance at October 26, 2019	23,990,616	$	2	$	178,550	$	311,627	$	181	$	490,360	$	(3)	$	490,357
Net loss	—		—		—		(1,008)		—		(1,008)		(20)		(1,028)
Foreign currency translation	—		—		—		—		(112)		(112)		—		(112)
Restricted stock awards	9,200		—		—		—		—		—		—		—
Restricted stock awards forfeited	(764)		—		—		—		—		—		—		—
Tax withholding payment related to net share settlement of equity awards	(3,943)		—		(266)		—		—		(266)		—		(266)
Stock based compensation	—		—		1,767		—		—		1,767		—		1,767
Balance at January 25, 2020	23,995,109	$	2	$	180,051	$	310,619	$	69	$	490,741	$	(23)	$	490,718

								Accumulated
				Additional				Other		Total		Non-
	Common Stock			Paid-In		Retained		Comprehensive		AeroVironment		Controlling
	Shares	Amount		Capital		Earnings		Loss		Equity		Interest		Total
Balance at October 27, 2018	23,928,373	$	2	$	171,867	$	272,300	$	5	$	444,174	$	2	$	444,176
Net income (loss)	—		—		—		8,369		—		8,369		(19)		8,350
Foreign currency translation	—		—		—		—		(1)		(1)		—		(1)
Restricted stock awards	5,377		—		—		—		—		—		—		—
Restricted stock awards forfeited	(445)		—		—		—		—		—		—		—
Tax withholding payment related to net share settlement of equity awards	(845)		—		(58)		—		—		(58)		—		(58)
Stock-based compensation	—		—		3,082		—		—		3,082		—		3,082
Balance at January 26, 2019	23,932,460	$	2	$	174,891	$	280,669	$	4	$	455,566	$	(17)	$	455,549

See accompanying notes to consolidated financial statements (unaudited).

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AeroVironment, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	Nine Months Ended
	January 25,		January 26,
	2020		2019
Operating activities
Net income	$	23,576	$	41,716
Gain on sale of business, net of tax		—		(8,452)
Loss from discontinued operations, net of tax		—		2,511
Net income from continuing operations		23,576		35,775
Adjustments to reconcile net income from continuing operations to cash provided by operating activities from continuing operations:
Depreciation and amortization		7,107		5,530
Loss from equity method investment		3,410		2,071
Provision for doubtful accounts		(2)		(33)
Other non-cash gain, net		(719)		—
Non-cash lease expense		3,453		—
Gains on foreign currency transactions		—		(10)
Deferred income taxes		(946)		(1,214)
Stock-based compensation		4,751		5,599
(Gain) loss on sale of property and equipment		(71)		51
Amortization of debt securities		(1,291)		(941)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		3,245		22,817
Unbilled receivables and retentions		(24,364)		(34,760)
Inventories		(10,766)