AeroVironment, Inc. (NASDAQ:AVAV) Q3 2025 Earnings Conference Call March 4, 2025 4:30 PM ET Company Participants Jonah Teeter-Balin - Vice President, Corporate Development and Investor Relations Wahid Nawabi - Chairman, President and Chief Executive Officer Kevin McDonnell - Senior Vice President and Chief Financial Officer Conference Call Participants Gregory Konrad - Jefferies Peter Arment - Baird Louie DiPalma - William Blair Andre Madrid - BTIG Operator Thank you for standing by. Welcome to the AeroViro ...

Financial Data and Key Metrics Changes - Revenue for Q3 fiscal 2025 was $167.6 million, a decrease of 10% compared to $186.6 million in Q3 fiscal 2024 [39] - Adjusted EBITDA for Q3 was $21.8 million, down from $28.8 million in the same quarter last year [45] - The company reported a net loss of $1.8 million for Q3, compared to a net income of $13.9 million in the same period last year [49] - Funded backlog at the end of Q3 reached a record $763.5 million [54] Business Segment Data and Key Metrics Changes - The Loitering Munitions Systems (LMS) segment recorded revenue of $83.9 million, a 46% increase from $57.7 million in the previous year [40] - The Uncrewed Systems (UXS) segment generated $53.8 million in revenue, down 44% from $113.3 million, primarily due to a decrease in Ukraine-related revenue [41] - Revenue from the Macready Works segment was $20 million, an increase of 28% compared to $15.6 million in the same quarter last year [43] Market Data and Key Metrics Changes - Approximately $40 million worth of Switchblade 600 deployments in Ukraine resulted in the destruction of nearly $3 billion worth of enemy military assets [15] - Shipments to Ukraine are expected to represent only 17% of revenues for the full fiscal year, down from 38% last fiscal year [15] Company Strategy and Development Direction - The company is focused on expanding production capacity and launching innovative products while leveraging acquisitions to strengthen market leadership [10] - The BlueHalo transaction is expected to enhance the company's technology and capabilities, adding space technologies, counter-UAS, directed energy, electronic warfare, and cyber solutions to its portfolio [17] - The company aims to achieve more than 10% revenue growth and $1 billion in orders in fiscal year 2025 [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged short-term challenges due to unprecedented high winds and fires in Los Angeles, which impacted operations and financial performance [20][21] - Despite these challenges, management remains confident in achieving record fourth-quarter revenue and accelerating growth in fiscal year 2026 [10][56] - The evolving global security landscape is driving demand for cost-effective AI-driven autonomous defense solutions, aligning with the company's core offerings [12] Other Important Information - The company has received stop work orders on four foreign military sales contracts, representing about $13 million in orders [22] - The company is preparing for the integration of BlueHalo and has secured key regulatory approvals for the transaction [18] Q&A Session Summary Question: Thoughts on fiscal year 2026 growth - Management expressed confidence in achieving strong growth in fiscal year 2026, supported by a record backlog and expected revenue run rate of $240 to $250 million in Q4 [65][66] Question: Details on BlueHalo growth areas - Management highlighted excitement around BlueHalo's counter-UAS business, space communication capabilities, and advanced cyber solutions as key growth areas post-acquisition [70][72] Question: Clarification on work stoppage for FMS contracts - Management indicated that the stop work orders are related to foreign military sales contracts and are currently unclear if they are temporary or permanent [78][80] Question: Demand environment for uncrewed systems - Management expressed confidence in the uncrewed systems business, citing strong demand drivers and new capabilities expected to drive growth over the next several years [84][85] Question: Update on international sales and negotiations - Management reported firm orders from approximately six countries and ongoing engagement with an additional twenty countries for Switchblade systems [112][114]

AeroVironment (AVAV) came out with quarterly earnings of $0.30 per share, missing the Zacks Consensus Estimate of $0.58 per share. This compares to earnings of $0.63 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of -48.28%. A quarter ago, it was expected that this maker of unmanned aircrafts would post earnings of $0.66 per share when it actually produced earnings of $0.47, delivering a surprise of -28.79%.Over the last four qu ...

THIRD QUARTER Fiscal Year 2025 March 4, 2025 Slide 1 © 2025 AeroVironment, Inc. 093024 THIRD 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," "anticipate," ...

Financial Performance - Revenue for the third quarter of fiscal 2025 was $167.6 million, a decrease of 10% compared to $186.6 million in the same quarter of fiscal 2024[3] - The company reported a net loss of $(1.8) million, or $(0.06) per diluted share, compared to net income of $13.9 million, or $0.50 per diluted share, in the prior-year period[7] - Non-GAAP adjusted EBITDA for the third quarter was $21.8 million, down from $28.8 million in the same quarter of fiscal 2024[8] - The gross margin for the third quarter was $63.2 million, a decrease of 6% from $67.3 million in the prior year, with a gross margin percentage increase to 38% from 36%[4] - Total revenue for the three months ended January 25, 2025, was $167.636 million, a decrease of 10.1% compared to $186.578 million for the same period in 2024[26] - Product sales revenue decreased to $139.753 million from $155.923 million, representing a decline of 10.4% year-over-year[26] - Gross margin for the three months ended January 25, 2025, was $63.199 million, down from $67.287 million, reflecting a gross margin percentage of 37.7%[26] - Net loss for the three months ended January 25, 2025, was $1.754 million, compared to net income of $13.885 million for the same period in 2024[26] - Adjusted EBITDA for the three months ended January 25, 2025, was $21.8 million, down from $28.8 million in the prior year, representing a decrease of 24.4%[36] - EBITDA (non-GAAP) for the nine months ended January 25, 2025, was $56.0 million, down 35.2% from $86.4 million for the same period last year[36] Backlog and Orders - The funded backlog reached a record $763.5 million as of January 25, 2025, up from $400.2 million as of April 30, 2024[9] - Record orders for Switchblade and Jump-20 products contributed to the backlog expansion[2] Future Outlook - The company expects full-year fiscal 2025 revenue to be between $780 million and $795 million, with non-GAAP adjusted EBITDA between $135 million and $142 million[10] - Significant progress was made towards the acquisition of BlueHalo, expected to close in the second quarter of calendar year 2025[2] Operational Developments - The company announced a new manufacturing facility in Utah, which will more than double Switchblade production capacity[2] - The third quarter was impacted by high winds and fires in Southern California, affecting revenue generation[3] Expenses and Cash Flow - Research and development expenses increased to $22.498 million from $25.127 million, indicating a focus on innovation despite overall revenue decline[26] - Cash and cash equivalents at the end of the period were $47.000 million, down from $73.301 million at the beginning of the period[30] - The company reported a net cash used in operating activities of $1.054 million for the nine months ended January 25, 2025, compared to cash provided of $26.965 million for the same period in 2024[30] Assets and Liabilities - Total current assets increased to $543.886 million from $515.581 million, showing a positive trend in asset management[28] - The company’s total assets increased to $1,048.143 million as of January 25, 2025, compared to $1,015.860 million as of April 30, 2024[28] Shareholder Information - The weighted-average shares outstanding for diluted earnings per share were 28,171,089 for the nine months ended January 25, 2025[26] Other Financial Metrics - Interest expense for the nine months ended January 25, 2025, was $1.2 million, a decrease of 70.7% compared to $4.1 million for the same period last year[36] - Stock-based compensation for the three months ended January 25, 2025, was $5.4 million, an increase of 28.6% from $4.2 million in the same period last year[36] - Depreciation and amortization for the nine months ended January 25, 2025, was $27.1 million, an increase of 8.4% compared to $25.0 million for the same period last year[36] - Acquisition-related expenses for the three months ended January 25, 2025, were $10.0 million, compared to $(0.1) million in the same period last year[36] - The company reported a net benefit from provision for income taxes of $(0.6) million for the three months ended January 25, 2025, compared to a provision of $1.3 million in the same period last year[36] Non-GAAP Measures - The company emphasizes that non-GAAP measures provide useful information for understanding long-term profitability trends and comparing results with peers[37] - Adjusted EBITDA is defined as net income before interest, taxes, and depreciation, adjusted for non-cash items, and is frequently used for evaluating performance in the industry[39]

Core Viewpoint - AeroVironment, Inc. (AVAV) is expected to report its third-quarter fiscal 2025 results on March 4, 2025, after market close, with a projected revenue growth despite higher expenses impacting earnings [1][6]. Revenue Segments - The Loitering Munitions Systems (LMS) segment is anticipated to show strong sales, with quarterly revenues estimated at $92.3 million, reflecting a 60% increase year-over-year [3]. - The MacCready Works (MW) segment is also expected to perform well, with revenues projected at $21.1 million, indicating a 35% growth compared to the same quarter last year [4]. - Conversely, the Uncrewed Systems (UxS) unit is likely to report disappointing figures due to declining product shipments and lower international sales, particularly to Ukraine [5]. Overall Financial Expectations - The overall revenue for AeroVironment in the fiscal third quarter is estimated at $189.3 million, suggesting a 1.4% increase from the previous year [6]. - Despite solid revenue projections, increased sales and marketing expenses, along with higher employee-related costs, may negatively impact operating margins and overall earnings [7]. - The earnings consensus estimate is set at 58 cents per share, indicating a decline of 7.9% from the prior year's figure [8]. Earnings Prediction Model - The current model does not predict a definitive earnings beat for AeroVironment, as the Earnings ESP stands at 0.00% [9]. - AeroVironment holds a Zacks Rank 1 (Strong Buy), indicating a favorable outlook despite the earnings prediction challenges [10].

Core Insights - AeroVironment (AVAV) is expected to report quarterly earnings of $0.58 per share, reflecting a decline of 7.9% year-over-year, while revenues are forecasted to be $189.25 million, indicating a 1.4% increase compared to the previous year [1] - The consensus EPS estimate has remained unchanged over the last 30 days, suggesting stability in analysts' projections [1] Revenue Estimates - The consensus estimate for 'Revenue- Contract Services' is $35.79 million, representing a year-over-year increase of 16.7% [4] - 'Revenue- Product Sales' is expected to reach $160.30 million, indicating a year-over-year change of 2.8% [4] Gross Margin Estimates - Analysts project 'Gross margin- Contract services' to be approximately $8.96 million, down from $10.85 million reported in the same quarter last year [4] - The estimated 'Gross margin- Product sales' is $64.91 million, an increase from $56.44 million reported in the same quarter of the previous year [5] Stock Performance - AeroVironment shares have decreased by 10.3% over the past month, contrasting with the Zacks S&P 500 composite's decline of 2.2% [6] - The company holds a Zacks Rank 1 (Strong Buy), indicating expectations of outperforming the overall market in the near term [6]

Company Performance - AeroVironment (AVAV) closed at $158.13, reflecting a -0.45% change from the previous day, underperforming the S&P 500's loss of 0.43% [1] - Over the past month, AeroVironment's shares have decreased by 10.7%, significantly trailing the Aerospace sector's loss of 1.55% and the S&P 500's gain of 2.6% [1] Upcoming Earnings - The upcoming earnings report for AeroVironment is scheduled for March 4, 2025, with an expected EPS of $0.58, indicating a 7.94% decline year-over-year [2] - Revenue is projected to be $189.25 million, representing a 1.43% increase compared to the same quarter last year [2] Full Year Projections - For the full year, earnings are estimated at $3.38 per share and revenue at $811.51 million, reflecting increases of +13.04% and +13.23% respectively from the prior year [3] Analyst Estimates - Recent changes in analyst estimates for AeroVironment are crucial as they indicate shifts in near-term business trends, with upward revisions suggesting positive sentiment towards the company's operations [4] - The Zacks Rank system, which incorporates these estimate changes, currently ranks AeroVironment as 1 (Strong Buy) [6] Valuation Metrics - AeroVironment has a Forward P/E ratio of 46.95, which is a premium compared to the industry average Forward P/E of 30.64 [7] - The Aerospace - Defense Equipment industry, part of the Aerospace sector, holds a Zacks Industry Rank of 129, placing it in the bottom 49% of over 250 industries [7]

Group 1: Stock Performance - AeroVironment's stock closed at $179.35, reflecting a -1.54% change from the previous day, underperforming the S&P 500's gain of 0.03% [1] - The stock has increased by 12.36% over the past month, outperforming the Aerospace sector's gain of 4.66% and the S&P 500's gain of 4.19% [1] Group 2: Upcoming Financial Results - AeroVironment is expected to report earnings of $0.58 per share, indicating a year-over-year decline of 7.94% [2] - The projected revenue for the upcoming release is $189.25 million, which represents a 1.43% increase from the previous year [2] Group 3: Annual Forecasts - For the entire year, earnings are forecasted at $3.38 per share and revenue at $811.51 million, reflecting increases of +13.04% and +13.23% respectively compared to the previous year [3] - Recent analyst estimate revisions suggest a positive outlook for the company's business [3] Group 4: Valuation Metrics - AeroVironment has a Forward P/E ratio of 53.84, which is a premium compared to the industry's average Forward P/E of 30.79 [6] - The Aerospace - Defense Equipment industry ranks in the bottom 44% of all industries, with a current Zacks Industry Rank of 141 [6] Group 5: Zacks Rank System - AeroVironment currently holds a Zacks Rank of 3 (Hold), with the Zacks Consensus EPS estimate remaining steady over the past month [5] - The Zacks Rank system has a history of outperforming, with 1 stocks returning an average annual gain of +25% since 1988 [5]

Company Performance - AeroVironment (AVAV) closed at $185.96, reflecting a slight decrease of -0.09% from the previous day, underperforming compared to the S&P 500's gain of 0.39% [1] - Over the last month, AeroVironment's shares increased by 14.16%, significantly outperforming the Aerospace sector's gain of 2.81% and the S&P 500's gain of 1.7% [1] Upcoming Earnings - The upcoming earnings per share (EPS) for AeroVironment is projected at $0.58, indicating a 7.94% decline compared to the same quarter last year [2] - Revenue is anticipated to be $189.25 million, reflecting a 1.43% increase from the same quarter last year [2] Full Year Estimates - For the full year, Zacks Consensus Estimates project earnings of $3.38 per share and revenue of $811.51 million, showing increases of +13.04% and +13.23% respectively from the previous year [3] - Recent changes to analyst estimates for AeroVironment may indicate a shifting business landscape, with positive revisions suggesting optimism about the company's outlook [3] Valuation Metrics - AeroVironment's current Forward P/E ratio is 55.01, which is a premium compared to the industry average Forward P/E of 29.93 [6] - The Aerospace - Defense Equipment industry, to which AeroVironment belongs, has a Zacks Industry Rank of 136, placing it in the bottom 46% of over 250 industries [6] Zacks Rank System - The Zacks Rank system, which ranges from 1 (Strong Buy) to 5 (Strong Sell), currently rates AeroVironment at 3 (Hold) [5] - The Zacks Rank has a historical track record of outperforming expectations, with 1 rated stocks delivering an average annual return of +25% since 1988 [5]