Part I [**Item 1. Financial Statements (Unaudited)**](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited Q2 FY2025 financials show total assets at $1.019 billion, revenue growth with declining net income, and improved six-month operating cash flow [**Condensed Consolidated Balance Sheets**](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets slightly increased to $1.019 billion, liabilities decreased to $160.7 million due to term loan repayment, and equity rose to $858.4 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | Oct 26, 2024 (Unaudited) | Apr 30, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $514,845 | $515,581 | | **Total Assets** | **$1,019,085** | **$1,015,860** | | **Total Current Liabilities** | $111,611 | $144,879 | | **Total Liabilities** | **$160,688** | **$193,115** | | **Total Stockholders' Equity** | **$858,397** | **$822,745** | [**Condensed Consolidated Statements of Operations**](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 FY2025 revenue grew 4.2% to $188.5 million, but operating income and net income significantly declined, while six-month revenue increased 13.4% Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended Oct 26, 2024 | Three Months Ended Oct 28, 2023 | Six Months Ended Oct 26, 2024 | Six Months Ended Oct 28, 2023 | | :--- | :--- | :--- | :--- | :--- | | **Total Revenue** | $188,458 | $180,816 | $377,941 | $333,163 | | **Gross Margin** | $73,638 | $75,350 | $155,105 | $141,010 | | **Income from Operations** | $7,006 | $25,178 | $30,065 | $51,545 | | **Net Income** | $7,543 | $17,840 | $28,709 | $39,735 | | **Diluted EPS** | $0.27 | $0.66 | $1.02 | $1.50 | [**Condensed Consolidated Statements of Cash Flows**](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Six-month operating cash flow improved to a $24.7 million inflow, investing cash outflow decreased, and financing cash flow shifted to a $17.5 million outflow Cash Flow Summary for the Six Months Ended (in thousands) | Cash Flow Activity | Oct 26, 2024 | Oct 28, 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $24,709 | $(25,590) | | Net cash used in investing activities | $(11,630) | $(37,635) | | Net cash (used in) provided by financing activities | $(17,471) | $31,544 | | **Net decrease in cash and cash equivalents** | **$(4,341)** | **$(31,951)** | [**Notes to Condensed Consolidated Financial Statements (Unaudited)**](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Notes detail segment reorganization into UxS, LMS, MW, the BlueHalo acquisition, credit facility amendment, and goodwill impairment risk - Effective May 1, 2023, the company reorganized into three reportable segments: Uncrewed Systems (UxS), Loitering Munitions Systems (LMS), and MacCready Works (MW) to drive operational improvements and synergies[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) - As of October 26, 2024, the company had approximately **$467.1 million** of remaining performance obligations (funded backlog), with **72%** expected to be recognized as revenue in fiscal 2025[44](index=44&type=chunk) - The MUAS reporting unit, with a goodwill balance of **$135.8 million**, is considered at an increased risk of failing future goodwill impairment tests as its fair value exceeded its carrying value by only **10%** at the last annual test[94](index=94&type=chunk)[188](index=188&type=chunk) - On October 4, 2024, the company amended its credit agreement, increasing the revolving credit facility to **$200 million** and repaying the existing Term Loan Facility in full As of October 26, 2024, **$175.2 million** was available under the revolving facility[106](index=106&type=chunk)[109](index=109&type=chunk) - On November 19, 2024, the company announced a definitive agreement to acquire BlueHalo in an all-stock transaction, issuing **18,548,698** shares of common stock[155](index=155&type=chunk)[156](index=156&type=chunk) - In connection with the BlueHalo acquisition, the company secured a debt commitment for a new **$700 million** Term Loan A facility to refinance a portion of BlueHalo's debt[164](index=164&type=chunk)[252](index=252&type=chunk) [**Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations**](index=47&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses 13% six-month revenue growth driven by LMS, offset by UxS decline, decreased gross margin, increased operating expenses, and strong liquidity [**Results of Operations**](index=53&type=section&id=Results%20of%20Operations) Q2 revenue grew 4% YoY, driven by LMS segment's 157% increase, offset by UxS decline, with gross margin falling and operating expenses rising Revenue by Segment - Three Months Ended (in millions) | Segment | Q2 FY25 (Oct 26, 2024) | Q2 FY24 (Oct 28, 2023) | % Change | | :--- | :--- | :--- | :--- | | Uncrewed Systems (UxS) | $85.4 | $132.8 | (36%) | | Loitering Munitions (LMS) | $77.7 | $30.2 | 157% | | MacCready Works (MW) | $25.3 | $17.8 | 42% | | **Total Revenue** | **$188.5** | **$180.8** | **4%** | - The increase in Q2 revenue was primarily driven by a **$47.9 million** increase in Switchblade product production, reflecting strong global demand and a **$9.9 million** cumulative catch-up adjustment from the definitization of LMS contracts[196](index=196&type=chunk)[210](index=210&type=chunk) - The decrease in Q2 UxS revenue was primarily due to a **$41.8 million** drop in product deliveries, mainly from reduced international sales compared to the prior year[196](index=196&type=chunk)[206](index=206&type=chunk) - SG&A expense for Q2 increased by **$9.8 million** (**35%** YoY) due to higher employee-related costs, increased sales and marketing efforts, and acquisition-related expenses[199](index=199&type=chunk) - R&D expense for Q2 increased by **$6.7 million** (**30%** YoY) due to heightened development activities for product enhancements, new product lines, and support for acquired businesses[200](index=200&type=chunk) [**Liquidity and Capital Resources**](index=67&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity is strong with positive operating cash flow and an amended $200 million revolving credit facility, but future indebtedness will increase with the BlueHalo acquisition - Funded backlog increased to **$467.1 million** as of October 26, 2024, up from **$400.2 million** as of April 30, 2024 Unfunded backlog stood at **$1.83 billion**[241](index=241&type=chunk)[242](index=242&type=chunk) - The company amended its credit facility, increasing the revolving credit line to **$200 million** and repaying the term loan As of October 26, 2024, **$175.2 million** was available for borrowing[248](index=248&type=chunk) - Cash flow from operations for the six-month period was a positive **$24.7 million**, a **$50.3 million** improvement from the negative **$25.6 million** in the prior-year period, primarily due to favorable changes in working capital[255](index=255&type=chunk) [**Item 3. Quantitative and Qualitative Disclosures About Market Risk**](index=71&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rate fluctuations on its variable-rate credit facility and foreign currency exposure from Euro-denominated cash - The company has interest rate risk due to its **$15.0 million** outstanding balance on a variable-rate revolving credit facility[262](index=262&type=chunk) - Foreign currency exchange rate risk exists as the acquisition of Telerob resulted in a portion of the company's cash balance being held in Euros[263](index=263&type=chunk) [**Item 4. Controls and Procedures**](index=71&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of October 26, 2024, with no material changes to internal controls - The CEO and CFO concluded that as of October 26, 2024, the company's disclosure controls and procedures were effective[267](index=267&type=chunk) - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[268](index=268&type=chunk) Part II [**Item 1. Legal Proceedings**](index=73&type=section&id=Item%201.%20Legal%20Proceedings) The company faces two ongoing legal proceedings in California from former employees regarding alleged labor code violations - The company is facing a class action complaint filed by a former employee in California alleging violations of the state's Labor Code regarding wages, meal breaks, and overtime[271](index=271&type=chunk) - A separate complaint was filed by another former employee seeking penalties under California's Private Attorney General Act (PAGA) for similar labor code violations[272](index=272&type=chunk) [**Item 1A. Risk Factors**](index=73&type=section&id=Item%201A.%20Risk%20Factors) New risk factors include BlueHalo acquisition completion uncertainty, integration challenges, failure to realize synergies, increased indebtedness, and stockholder dilution - The acquisition of BlueHalo is subject to numerous closing conditions, including regulatory and shareholder approvals, and may be terminated, potentially requiring AeroVironment to pay a **$200 million** termination fee under certain circumstances[275](index=275&type=chunk)[277](index=277&type=chunk)[280](index=280&type=chunk) - Integrating BlueHalo's business may be more difficult, costly, or time-consuming than expected, and the combined company may fail to realize the anticipated synergies and benefits, which could adversely affect business results[308](index=308&type=chunk)[311](index=311&type=chunk) - The company will incur substantial non-recurring costs associated with the transaction and integration, and its consolidated indebtedness is expected to increase substantially, heightening financial risks[302](index=302&type=chunk)[337](index=337&type=chunk)[338](index=338&type=chunk) - Current AeroVironment stockholders will experience significant ownership dilution, owning approximately **60.5%** of the combined company post-transaction, and may not realize a commensurate benefit if synergies are not achieved[331](index=331&type=chunk)[336](index=336&type=chunk) - Following the closing, funds affiliated with Arlington Capital Partners are expected to own approximately **26.2%** of the company's common stock and will have the right to designate up to two directors, allowing them to exert significant influence[326](index=326&type=chunk)[328](index=328&type=chunk) [**Item 5. Other Information**](index=91&type=section&id=Item%205.%20Other%20Information) The Compensation Committee approved an amended Executive Severance Plan for top executives and a new Executive Transaction Severance Plan - The company's Board approved an amended and restated Executive Severance Plan for its CEO, CFO, General Counsel, and Chief Accounting Officer[344](index=344&type=chunk)[346](index=346&type=chunk) - A new Executive Transaction Severance Plan was also approved for three Senior Vice Presidents, providing severance benefits upon termination without cause on or before November 18, 2025[348](index=348&type=chunk)[349](index=349&type=chunk) [**Item 6. Exhibits**](index=95&type=section&id=Item%206.%20Exhibits) Key exhibits filed include the BlueHalo merger agreement, credit agreement amendment, and new executive severance plans - Key exhibits filed include the merger agreement with BlueHalo, the third amendment to the credit agreement, and new executive severance plans[354](index=354&type=chunk)

PROCEED WITH CERTAINTY SECOND QUARTER Fiscal Year 2025 EARNINGS PRESENTATION December 4, 2024 SECOND QUARTER FISCAL YEAR 2025 Safe Harbor Statement Certain words in this presentation may contain "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," "anti ...

Financial Performance - Record second quarter revenue of $188.5 million, up 4% year-over-year from $180.8 million[3] - Net income for the second quarter was $7.5 million, or $0.27 per diluted share, compared to $17.8 million, or $0.66 per diluted share in the prior-year period[9] - Non-GAAP adjusted EBITDA for the second quarter was $25.9 million, down from $39.5 million in the same period last year[10] - Income from operations for the second quarter was $7.0 million, down from $25.2 million in the prior-year period[6] - Net income for the three months ended October 26, 2024, was $7.543 million, a decrease of 57.7% compared to $17.840 million for the same period last year[32] - Basic net income per share for the three months ended October 26, 2024, was $0.27, down from $0.66 in the same period last year, representing a decline of 59.1%[32] - Net income for the six months ended October 26, 2024, was $28.7 million, a decrease of 27.8% from $39.7 million for the same period in 2023[37] Revenue Segments - Revenue growth in Loitering Munitions Systems segment was 157%, while UnCrewed Systems segment saw a decrease of 35% year-over-year[4] - Product sales for the three months ended October 26, 2024, were $151.231 million, a 3.2% increase from $145.779 million for the same period last year[32] - Contract services revenue for the six months ended October 26, 2024, was $188.458 million, compared to $180.816 million for the same period last year, reflecting a 3.6% increase[32] - Total revenue for the three months ended October 26, 2024, was $188.5 million, compared to $180.8 million for the same period in 2023, representing a growth of 4.6%[40] Margins and Expenses - Gross margin for the second quarter decreased to 39% from 42%, reflecting a decrease in product gross margin[5] - Gross margin for product sales was $64.179 million for the three months ended October 26, 2024, down from $66.747 million in the same period last year, indicating a decrease of 3.9%[32] - Research and development expenses for the three months ended October 26, 2024, were $28.716 million, up from $22.025 million in the same period last year, reflecting a 30.3% increase[32] - Selling, general and administrative expenses for the three months ended October 26, 2024, were $37.916 million, compared to $28.147 million for the same period last year, indicating a 34.5% increase[32] - Adjusted EBITDA for the six months ended October 26, 2024, was $63.1 million, down from $76.8 million for the same period in 2023, reflecting a decrease of 17.9%[44] Assets and Liabilities - Total assets as of October 26, 2024, were $1,019.085 million, slightly up from $1,015.860 million as of April 30, 2024[35] - Total current liabilities decreased to $111.611 million as of October 26, 2024, from $144.879 million as of April 30, 2024[35] - Stockholders' equity increased to $858.397 million as of October 26, 2024, compared to $822.745 million as of April 30, 2024[35] Cash Flow and Investments - Cash and cash equivalents at the end of the period were $68.96 million, down from $100.91 million at the end of the same period in 2023, indicating a decrease of 31.6%[37] - The company reported a net cash provided by operating activities of $24.7 million for the six months ended October 26, 2024, compared to a net cash used of $25.6 million for the same period in 2023[37] - The company reported a net cash used in investing activities of $11.6 million for the six months ended October 26, 2024, compared to $37.6 million for the same period in 2023, indicating a decrease of 69.1%[37] Acquisition Activity - AeroVironment announced an agreement to acquire BlueHalo in an all-stock transaction valued at approximately $4.1 billion[3] - The company anticipates significant acquisition-related expenses contingent upon the closing of the BlueHalo acquisition[13] - The company incurred acquisition-related expenses of $3.7 million for the three months ended October 26, 2024, compared to $1.1 million for the same period in 2023[44] Other Financial Metrics - The segment adjusted gross margin for UxS was $41.4 million for the three months ended October 26, 2024, compared to $30.2 million for the same period in 2023, showing an increase of 37.0%[40] - The company experienced a loss on disposal of property and equipment amounting to $201,000 for the six months ended October 26, 2024[37]

Wall Street analysts expect AeroVironment (AVAV) to post quarterly earnings of $0.66 per share in its upcoming report, which indicates a year-over-year decline of 32%. Revenues are expected to be $178.96 million, down 1% from the year-ago quarter.The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. This reflects how the analysts covering the stock have collectively reevaluated their initial estimates during this timeframe.Before a company reveals its earnings, it is vital ...

Company Overview - AeroVironment announced plans to acquire BlueHalo for $4.1 billion in stock, leading to a nearly 2% drop in its stock price initially, but a subsequent recovery of about 3% as investors reassess the deal [1][2]. Acquisition Details - The acquisition involves BlueHalo, a private-equity-owned defense company specializing in advanced technologies such as Space Technologies, Counter-Uncrewed Aircraft Systems, Directed Energy, Electronic Warfare, Cyber, Artificial Intelligence, and Uncrewed Underwater Vehicles [4]. - AeroVironment believes that the technologies from BlueHalo are complementary to its own military drone specialization, aiming to drive innovation and redefine future defense solutions [4]. Financial Analysis - AeroVironment's stock has risen 49% over the past year, with a current market capitalization of $5.5 billion, which is comparable to the acquisition cost of BlueHalo [3]. - BlueHalo is projected to generate over $900 million in revenue this year, significantly higher than AeroVironment's trailing revenue of $754 million [5]. - The valuation for the acquisition is approximately 4.6 times BlueHalo's 2024 sales, which is more attractive compared to AeroVironment's own valuation of 7.3 times sales [5][6].

In the latest trading session, AeroVironment (AVAV) closed at $194.89, marking a -1.11% move from the previous day. The stock trailed the S&P 500, which registered a daily gain of 0.4%. On the other hand, the Dow registered a loss of 0.28%, and the technology-centric Nasdaq increased by 1.04%.The maker of unmanned aircrafts's shares have seen a decrease of 10.63% over the last month, not keeping up with the Aerospace sector's loss of 4.35% and the S&P 500's gain of 0.62%.The investment community will be pay ...

This defense tech leader will look to keep its momentum going in 2025.It's been a banner year for defense contractor AeroVironment (AVAV -1.79%), which posted record sales and profitability. At the time of this writing, the stock is up 57% in 2024 with the market cheering the strong demand for the company's lineup of high-tech warfare systems.On the other hand, a backdrop of high expectations against a lofty valuation has added a layer of uncertainty for investors to think about. Despite the big rally this ...

Defense stocks shouldn't cost this much.AeroVironment (AVAV -8.57%) stock fell 5.1% through 10:10 a.m. ET Tuesday after investment bank Jefferies lowered its rating on the manufacturer of military drone aircraft.Reports indicate that Jefferies analyst Greg Konrad downgraded AeroVironment stock from buy to hold primarily on valuation concerns, citing the stock's 87% increase in share price so far this year. The effect of the "post-Trump bump"Konrad sees "improving fundamentals" driving AeroVironment's gains ...

Group 1 - The stock of AeroVironment, Inc. (AVAV) is experiencing significant attention due to high implied volatility in the options market, particularly the Dec. 20, 2024 $300 Put option [1] - Implied volatility indicates the market's expectation of future price movement, suggesting that investors anticipate a significant change in AeroVironment's stock price, potentially due to an upcoming event [2] - AeroVironment currently holds a Zacks Rank 4 (Sell) in the Aerospace - Defense Equipment industry, which is in the bottom 32% of the Zacks Industry Rank, with recent earnings estimates being revised downward [3] Group 2 - The high implied volatility surrounding AeroVironment may indicate a trading opportunity, as options traders often seek to sell premium on options with elevated implied volatility, aiming to benefit from time decay [4]

The latest trading session saw AeroVironment (AVAV) ending at $220.80, denoting a -0.05% adjustment from its last day's close. The stock's change was less than the S&P 500's daily gain of 0.27%. Meanwhile, the Dow experienced a rise of 0.65%, and the technology-dominated Nasdaq saw an increase of 0.26%. The maker of unmanned aircrafts's shares have seen an increase of 10.88% over the last month, surpassing the Aerospace sector's loss of 4.51% and the S&P 500's gain of 2%. Market participants will be closely ...