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Table of Contents

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 October 29, 2022

OR

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.)

241 18th Street South, Suite 415

Arlington, Virginia

22202

(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 November 30, 2022, the number of shares outstanding of the registrant’s common stock, $0.0001 par value, was 25,157,316.

Table of Contents

AeroVironment, Inc.

Table of Contents

Item 1.

Financial Statements :

    

Condensed Consolidated Balance Sheets as of October 29, 2022 (Unaudited) and April 30, 2022

3

Condensed Consolidated Statements of Operations for the three and six months ended October 29, 2022 (Unaudited) and October 30, 2021 (Unaudited)

4

Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and six months ended October 29, 2022 (Unaudited) and October 30, 2021 (Unaudited)

5

Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended October 29, 2022 (Unaudited) and October 30, 2021 (Unaudited)

6

Condensed Consolidated Statements of Cash Flows for the six months ended October 29, 2022 (Unaudited) and October 30, 2021 (Unaudited)

8

Notes to Condensed Consolidated Financial Statements (Unaudited)

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

34

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

44

Item 4.

Controls and Procedures

45

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

47

Item 1A.

Risk Factors

47

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

47

Item 3.

Defaults Upon Senior Securities

47

Item 4.

Mine Safety Disclosures

47

Item 5.

Other Information

47

Item 6.

Exhibits

48

Signatures

49

2

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AeroVironment, Inc.

Condensed Consolidated Balance Sheets

(In thousands except share and per share data)

October 29,

    

April 30,

2022

2022

    

(Unaudited)

 

Assets

Current assets:

Cash and cash equivalents

$

101,417

$

77,231

Short-term investments

24,716

Accounts receivable, net of allowance for doubtful accounts of $74 at October 29, 2022 and $592 at April 30, 2022

 

31,664

 

60,170

Unbilled receivables and retentions (inclusive of related party unbilled receivables of $2,229 at April 30, 2022)

 

92,457

 

104,194

Inventories, net

 

109,810

 

90,629

Income taxes receivable

8,940

442

Prepaid expenses and other current assets

 

13,244

 

11,527

Total current assets

 

357,532

 

368,909

Long-term investments

22,462

15,433

Property and equipment, net

 

52,415

 

62,296

Operating lease right-of-use assets

25,580

26,769

Deferred income taxes

 

8,098

 

7,290

Intangibles, net

88,660

97,224

Goodwill

334,963

334,347

Other assets

 

1,972

 

1,932

Total assets

$

891,682

$

914,200

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

26,317

$

19,244

Wages and related accruals

 

25,049

 

25,398

Customer advances

 

7,074

 

8,968

Current portion of long-term debt

10,000

10,000

Current operating lease liabilities

7,564

6,819

Income taxes payable

26

759

Other current liabilities

 

27,824

 

30,203

Total current liabilities

 

103,854

 

101,391

Long-term debt, net of current portion

155,622

177,840

Non-current operating lease liabilities

20,043

21,915

Other non-current liabilities

748

768

Liability for uncertain tax positions

 

1,450

 

1,450

Deferred income taxes

2,482

2,626

Commitments and contingencies

Stockholders’ equity:

Preferred stock, $0.0001 par value:

Authorized shares—10,000,000; none issued or outstanding at October 29, 2022 and April 30, 2022

 

 

Common stock, $0.0001 par value:

Authorized shares—100,000,000

Issued and outstanding shares—25,157,618 shares at October 29, 2022 and 24,951,287 shares at April 30, 2022

 

4

 

2

Additional paid-in capital

 

283,789

 

267,248

Accumulated other comprehensive loss

 

(8,480)

 

(6,514)

Retained earnings

 

332,170

 

347,233

Total AeroVironment, Inc. stockholders’ equity

 

607,483

 

607,969

Noncontrolling interest

241

Total equity

607,483

608,210

Total liabilities and stockholders’ equity

$

891,682

$

914,200

See accompanying notes to condensed consolidated financial statements (unaudited).

3

Table of Contents

AeroVironment, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands except share and per share data)

Three Months Ended

Six Months Ended

October 29,

October 30,

October 29,

October 30,

    

2022

    

2021

    

2022

    

2021

 

Revenue:

Product sales

$

62,343

$

70,998

$

120,317

$

124,114

Contract services (inclusive of related party revenue of $10,342 and $20,694 for the three and six months ended October 30, 2021, respectively)

 

49,241

 

51,010

 

99,783

 

98,903

 

111,584

 

122,008

 

220,100

 

223,017

Cost of sales:

Product sales

 

39,445

 

38,937

 

72,344

 

71,527

Contract services

 

46,249

 

40,616

 

88,152

 

80,312

 

85,694

 

79,553

 

160,496

 

151,839

Gross margin:

 

 

Product sales

22,898

32,061

47,973

52,587

Contract services

2,992

10,394

11,631

18,591

25,890

42,455

 

59,604

 

71,178

Selling, general and administrative

 

23,613

 

24,819

 

45,556

 

51,947

Research and development

 

16,591

 

14,297

 

31,636

 

28,005

(Loss) income from operations

 

(14,314)

 

3,339

 

(17,588)

 

(8,774)

Other (loss) income:

Interest expense, net

 

(2,309)

 

(1,379)

 

(3,912)

 

(2,654)

Other income (expense), net

 

810

 

(10,048)

 

404

 

(10,394)

Loss before income taxes

 

(15,813)

 

(8,088)

 

(21,096)

 

(21,822)

Benefit from income taxes

(10,457)

(9,511)

 

(7,851)

 

(10,468)

Equity method investment (loss) income, net of tax

 

(1,273)

 

1,133

 

(1,773)

 

(8)

Net (loss) income

(6,629)

2,556

(15,018)

(11,362)

Net income attributable to noncontrolling interest

(39)

(31)

(45)

(94)

Net (loss) income attributable to AeroVironment, Inc.

$

(6,668)

$

2,525

$

(15,063)

$

(11,456)

Net (loss) income per share attributable to AeroVironment, Inc.

Basic

$

(0.27)

$

0.10

$

(0.61)

$

(0.47)

Diluted

(0.27)

0.10

$

(0.61)

$

(0.47)

Weighted-average shares outstanding:

Basic

 

24,900,873

 

24,641,614

 

24,852,219

 

24,630,838

Diluted

 

24,900,873

 

24,885,870

 

24,852,219

 

24,630,838

See accompanying notes to condensed consolidated financial statements (unaudited).

4

Table of Contents

AeroVironment, Inc.

Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

(In thousands)

Three Months Ended

Six Months Ended

October 29,

October 30,

October 29,

October 30,

    

2022

    

2021

    

2022

    

2021

 

Net (loss) income

$

(6,629)

$

2,556

$

(15,018)

$

(11,362)

Other comprehensive income (loss):

Unrealized gain (loss) on available-for-sale investments, net of deferred tax expense of $0 for the three and six months ended October 29, 2022 and October 30, 2021, respectively

 

6

 

1

 

26

 

(3)

Change in foreign currency translation adjustments

(928)

(1,284)

(1,992)

(2,017)

Total comprehensive (loss) income

(7,551)

1,273

(16,984)

(13,382)

Net income attributable to noncontrolling interest

(39)

(31)

(45)

(94)

Comprehensive (loss) income attributable to AeroVironment, Inc.

$

(7,590)

$

1,242

$

(17,029)

$

(13,476)

See accompanying notes to condensed consolidated financial statements (unaudited).

5

Table of Contents

AeroVironment, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

For the six months ended October 29, 2022 and October 30, 2021 (Unaudited)

(In thousands except share data)

Accumulated

 

Additional

Other

Total

Non-

 

Common Stock

Paid-In

Retained

Comprehensive

AeroVironment, Inc.

Controlling

 

    

Shares

    

Amount

    

Capital

    

Earnings

    

Income (Loss)

Equity

Interest

    

Total

 

Balance at April 30, 2022

 

24,951,287

$

2

$

267,248

$

347,233

$

(6,514)

$

607,969

$

241

$

608,210

Net (loss) income

 

 

 

 

(15,063)

 

(15,063)

45

 

(15,018)

Unrealized gain on investments

 

 

 

 

26

26

 

26

Foreign currency translation

 

 

 

 

(1,992)

(1,992)

 

(1,992)

Stock options exercised

25,000

682

682

682

Restricted stock awards

 

75,357

 

 

 

 

Restricted stock awards forfeited

 

(8,744)

 

 

 

 

Tax withholding payment related to net share settlement of equity awards

 

(10,723)

 

 

(853)

 

(853)

 

(853)

Shares issued, net of issuance costs

125,441

2

12,310

12,312

12,312

Deconsolidation of previously controlled subsidiary

(286)

(286)

Stock based compensation

 

 

 

4,402

 

4,402

 

4,402

Balance at October 29, 2022

 

25,157,618

$

4

$

283,789

$

332,170

$

(8,480)

$

607,483

$

$

607,483

Accumulated

Additional

Other

Total

Non-

Common Stock

Paid-In

Retained

Comprehensive

AeroVironment, Inc.

Controlling

    

Shares

    

Amount

    

Capital

    

Earnings

    

Income (Loss)

Equity

Interest

    

Total

Balance at April 30, 2021

 

24,777,295

$

2

$

260,327

$

351,421

$

343

$

612,093

$

14

$

612,107

Net (loss) income

 

 

 

 

(11,456)

 

(11,456)

94

 

(11,362)

Unrealized loss on investments

 

 

 

 

(3)

(3)

 

(3)

Foreign currency translation

 

 

 

 

(2,017)

(2,017)

 

(2,017)

Stock options exercised

 

4,000

 

 

119

 

119

 

119

Restricted stock awards

 

52,226

 

 

 

 

Restricted stock awards forfeited

 

(15,751)

 

 

 

 

Tax withholding payment related to net share settlement of equity awards

 

(11,941)

 

 

(1,176)

 

(1,176)

 

(1,176)

Change in non-controlling interest

224

224

Stock based compensation

 

 

2,342

 

2,342

 

2,342

Balance at October 30, 2021

 

24,805,829

$

2

$

261,612

$

339,965

$

(1,677)

$

599,902

$

332

$

600,234

6

Table of Contents

AeroVironment, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

For the three months ended October 29, 2022 and October 30, 2021 (Unaudited)

(In thousands except share data)

<

Accumulated

Additional

Other

Total

Non-

Common Stock

Paid-In

Retained

Comprehensive

AeroVironment, Inc.

Controlling

    

Shares

    

Amount

    

Capital

    

Earnings

    

(Loss) Income

Equity

Interest

    

Total

Balance at July 30, 2022

 

24,990,590

$

2

$

268,641

$

338,838

$

(7,558)

$

599,923

$

247

$

600,170

Net income (loss)

 

 

 

 

(6,668)

 

(6,668)

39

 

(6,629)

Unrealized gain on investments

 

 

 

 

 

6

6

 

6

Foreign currency translation

(928)

(928)

(928)

Stock options exercised

25,000

682

682

682

Restricted stock awards

19,540

Restricted stock awards forfeited

 

(2,606)

 

 

 

 

Tax withholding payment related to net share settlement of equity awards

(347)

(29)

(29)

(29)

Shares issued, net of issuance costs

125,441

2

12,310

12,312

12,312

Deconsolidation of previously controlled subsidiary

(286)

(286)

Stock based compensation

 

 

 

2,185

 

2,185

 

2,185

Balance at October 29, 2022

 

25,157,618

$

4

$

283,789

$

332,170

$

(8,480)

$

607,483

$

$

607,483

Accumulated

Additional

Other

Total

Non-

Common Stock

Paid-In

Retained

Comprehensive

AeroVironment, Inc.

Controlling

    

Shares

    

Amount

    

Capital

    

Earnings

    

Income (Loss)

Equity

Interest

    

Total

Balance at July 31, 2021

 

24,811,802

2

261,192

337,440

(394)

598,240

77

598,317

Net income

 

 

 

 

2,525

 

2,525

31

 

2,556

Unrealized gain on investments

1

1

1

Foreign currency translation

(1,284)

(1,284)

(1,284)

Restricted stock awards

3,638

Restricted stock awards forfeited

 

(9,611)

 

 

 

Change in non-controlling interest

 

 

 

 

224

 

224

Stock based compensation