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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 28, 2023

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 March 1, 2023, the number of shares outstanding of the registrant’s common stock, $0.0001 par value, was 25,264,025.

AeroVironment, Inc.

Table of Contents

Item 1.

Financial Statements :

    

Condensed Consolidated Balance Sheets as of January 28, 2023 (Unaudited) and April 30, 2022

3

Condensed Consolidated Statements of Operations for the three and nine months ended January 28, 2023 (Unaudited) and January 29, 2022 (Unaudited)

4

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended January 28, 2023 (Unaudited) and January 29, 2022 (Unaudited)

5

Condensed Consolidated Statements of Stockholders’ Equity for the three and nine months ended January 28, 2023 (Unaudited) and January 29, 2022 (Unaudited)

6

Condensed Consolidated Statements of Cash Flows for the nine months ended January 28, 2023 (Unaudited) and January 29, 2022 (Unaudited)

8

Notes to Condensed Consolidated Financial Statements (Unaudited)

9

Item 2.

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

35

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

46

Item 4.

Controls and Procedures

47

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

49

Item 1A.

Risk Factors

49

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

50

Item 3.

Defaults Upon Senior Securities

50

Item 4.

Mine Safety Disclosures

51

Item 5.

Other Information

51

Item 6.

Exhibits

51

Signatures

51

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AeroVironment, Inc.

Condensed Consolidated Balance Sheets

(In thousands except share and per share data)

January 28,

    

April 30,

2023

2022

    

(Unaudited)

 

Assets

Current assets:

Cash and cash equivalents

$

78,276

$

77,231

Short-term investments

24,716

Accounts receivable, net of allowance for doubtful accounts of $61 at January 28, 2023 and $592 at April 30, 2022

 

52,871

 

60,170

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

 

109,289

 

104,194

Inventories, net

 

125,942

 

90,629

Income taxes receivable

9,180

442

Prepaid expenses and other current assets

 

15,323

 

11,527

Total current assets

 

390,881

 

368,909

Long-term investments

19,319

15,433

Property and equipment, net

 

45,388

 

62,296

Operating lease right-of-use assets

28,336

26,769

Deferred income taxes

 

8,540

 

7,290

Intangibles, net

83,442

97,224

Goodwill

336,555

334,347

Other assets

 

8,741

 

1,932

Total assets

$

921,202

$

914,200

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

26,420

$

19,244

Wages and related accruals

 

27,135

 

25,398

Customer advances

 

22,553

 

8,968

Current portion of long-term debt

10,000

10,000

Current operating lease liabilities

7,794

6,819

Income taxes payable

26

759

Other current liabilities

 

22,469

 

30,203

Total current liabilities

 

116,397

 

101,391

Long-term debt, net of current portion

155,763

177,840

Non-current operating lease liabilities

22,630

21,915

Other non-current liabilities

742

768

Liability for uncertain tax positions

 

1,450

 

1,450

Deferred income taxes

2,707

2,626

Commitments and contingencies

Stockholders’ equity:

Preferred stock, $0.0001 par value:

Authorized shares—10,000,000; none issued or outstanding at January 28, 2023 and April 30, 2022

 

 

Common stock, $0.0001 par value:

Authorized shares—100,000,000

Issued and outstanding shares—25,264,025 shares at January 28, 2023 and 24,951,287 shares at April 30, 2022

 

4

 

2

Additional paid-in capital

 

295,070

 

267,248

Accumulated other comprehensive loss

 

(5,055)

 

(6,514)

Retained earnings

 

331,494

 

347,233

Total AeroVironment, Inc. stockholders’ equity

 

621,513

 

607,969

Noncontrolling interest

241

Total equity

621,513

608,210

Total liabilities and stockholders’ equity

$

921,202

$

914,200

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

3

AeroVironment, Inc.

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands except share and per share data)

Three Months Ended

Nine Months Ended

January 28,

January 29,

January 28,

January 29,

    

2023

    

2022

    

2023

    

2022

 

Revenue:

Product sales

$

91,216

$

42,599

$

211,533

$

166,713

Contract services (inclusive of related party revenue of $9,543 and $30,237 for the three and nine months ended January 29, 2022, respectively)

 

43,179

 

47,494

 

142,962

 

146,397

 

134,395

 

90,093

 

354,495

 

313,110

Cost of sales:

Product sales

 

54,866

 

29,294

 

127,210

 

100,821

Contract services

 

34,019

 

39,363

 

122,171

 

119,675

 

88,885

 

68,657

 

249,381

 

220,496

Gross margin:

 

 

Product sales

36,350

13,305

84,323

65,892

Contract services

9,160

8,131

20,791

26,722

45,510

21,436

 

105,114

 

92,614

Selling, general and administrative

 

24,746

 

22,549

 

70,302

 

74,496

Research and development

 

16,157

 

13,013

 

47,793

 

41,018

Income (loss) from operations

 

4,607

 

(14,126)

 

(12,981)

 

(22,900)

Other (loss) income:

Interest expense, net

 

(2,810)

 

(1,510)

 

(6,722)

 

(4,164)

Other (expense) income, net

 

(2,587)

 

34

 

(2,183)

 

(10,360)

Loss before income taxes

 

(790)

 

(15,602)

 

(21,886)

 

(37,424)

Benefit from income taxes

(531)

(15,396)

 

(8,382)

 

(25,864)

Equity method investment (loss) income, net of tax

 

(417)

 

171

 

(2,190)

 

163

Net loss

(676)

(35)

(15,694)

(11,397)

Net loss (income) attributable to noncontrolling interest

45

(45)

(49)

Net (loss) income attributable to AeroVironment, Inc.

$

(676)

$

10

$

(15,739)

$

(11,446)

Net loss per share attributable to AeroVironment, Inc.

Basic

$

(0.03)

$

$

(0.63)

$

(0.46)

Diluted

(0.03)

$

(0.63)

$

(0.46)

Weighted-average shares outstanding:

Basic

 

25,012,412

 

24,710,991

 

24,906,977

 

24,657,846

Diluted

 

25,012,412

 

24,879,643

 

24,906,977

 

24,657,846

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

4

AeroVironment, Inc.

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

(In thousands)

Three Months Ended

Nine Months Ended

January 28,

January 29,

January 28,

January 29,

    

2023

    

2022

    

2023

    

2022

 

Net loss

$

(676)

$

(35)

$

(15,694)

$

(11,397)

Other comprehensive income (loss):

Unrealized (loss) gain on available-for-sale investments, net of deferred tax expense of $0 and $1 for the three months ended January 28, 2023 and January 29, 2022, respectively; and $0 and $1 for the nine months ended January 28, 2023 and January 29, 2022, respectively

 

 

(3)

 

26

 

(6)

Change in foreign currency translation adjustments

3,425

(1,754)

1,433

(3,771)

Total comprehensive income (loss)

2,749

(1,792)

(14,235)

(15,174)

Net loss (income) attributable to noncontrolling interest

45

(45)

(49)

Comprehensive income (loss) attributable to AeroVironment, Inc.

$

2,749

$

(1,747)

$

(14,280)

$

(15,223)

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

5

AeroVironment, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

For the nine months ended January 28, 2023 and January 29, 2022 (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 April 30, 2022

 

24,951,287

$

2

$

267,248

$

347,233

$

(6,514)

$

607,969

$

241

$

608,210

Net (loss) income

 

 

 

 

(15,739)

 

(15,739)

45

 

(15,694)

Unrealized gain on investments

 

 

 

 

26

26

 

26

Foreign currency translation

 

 

 

 

1,433

1,433

 

1,433

Stock options exercised

35,000

868

868

868

Restricted stock awards

 

77,169

 

 

 

 

Restricted stock awards forfeited

 

(10,679)

 

 

 

 

Tax withholding payment related to net share settlement of equity awards

 

(10,723)

 

 

(853)

 

(853)

 

(853)

Shares issued, net of issuance costs

221,971

2

20,699

20,701

20,701

Deconsolidation of previously controlled subsidiary

(286)

(286)

Stock based compensation

 

 

 

7,108

 

7,108

 

7,108

Balance at January 28, 2023

 

25,264,025

$

4

$

295,070

$

331,494

$

(5,055)

$

621,513

$

$

621,513

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

 

 

 

 

(11,446)

 

(11,446)

49

 

(11,397)

Unrealized loss on investments

 

 

 

 

(6)

(6)

 

(6)

Foreign currency translation

 

 

 

 

(3,771)

(3,771)

 

(3,771)

Stock options exercised

 

114,362

 

 

2,777

 

2,777

 

2,777

Restricted stock awards

 

55,592

 

 

 

 

Restricted stock awards forfeited

 

(20,203)

 

 

 

 

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

 

 

3,957

 

3,957

 

3,957

Balance at January 29, 2022

 

24,915,105

$

2

$

265,885

$

339,975

$

(3,434)

$

602,428

$

287

$

602,715

6

AeroVironment, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

For the three months ended January 28, 2023 and January 29, 2022 (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 October 29, 2022

 

25,157,618

$

4

$

283,789

$

332,170

$

(8,480)

$

607,483

$

$

607,483

Net loss

 

 

 

 

(676)

 

(676)

 

(676)

Foreign currency translation

3,425

3,425

3,425

Stock options exercised

10,000

186

186

186

Restricted stock awards

1,812

Restricted stock awards forfeited

 

(1,935)

 

 

 

 

Shares issued, net of issuance costs

96,530

8,389

8,389

8,389

Stock based compensation

 

 

 

2,706

 

2,706

 

2,706

Balance at January 28, 2023

 

25,264,025

$

4

$

295,070

$

331,494

$

(5,055)

$

621,513

$

$

621,513

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 October 30, 2021

 

24,805,829

2

261,612

339,965

(1,677)

599,902

332

600,234

Net income (loss)

 

 

 

 

10

 

10

(45)

 

(35)

Unrealized loss on investments

(3)

(3)

(3)

Foreign currency translation

(1,754)

(1,754)

(1,754)

Stock options exercised

110,362

2,657

2,657

2,657

Restricted stock awards

3,366

Restricted stock awards forfeited

 

(4,452)