Release Date: June 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AeroVironment Inc (AVAV, Financial) reported a record-breaking fiscal year with a 33% increase in revenue, reaching $717 million.
- The Loitering Munitions Systems (LMS) segment saw a 60% increase in revenue, totaling $193 million for the fiscal year.
- The company expects continued growth with projected revenues between $790 million and $820 million for fiscal year 2025.
- AeroVironment Inc (AVAV) has expanded its manufacturing capacity to support more than $500 million in annual product revenue.
- The company added three strong directors to its Board and key leaders at its headquarters to enhance customer engagement and future requirements.
Negative Points
- Revenue for the Uncooled Systems segment was slightly down in the fourth quarter compared to the same period last year due to award timing.
- The McCreedy Works segment's growth was negatively impacted by U.S. government budget authorization delays.
- The company's funded backlog at the end of fiscal year 2024 was lower than recent years, reflecting some uncertainty in the government contracting process.
- Adjusted EBITDA for the fourth quarter of fiscal 2024 decreased by 52% compared to the same period last year due to higher R&D and SG&A expenses.
- The company expects adjusted overall gross margin to be slightly down in fiscal year 2025.
Q & A Highlights
Q: You called out annual production capacity for LMS greater than $500 million, which is about 2.5 times the fiscal year 24 sales. Can you give a timeline for reaching that annual production capacity?
A: We continue to expand capacity and production rates almost monthly. We expect to reach about half of the $1 billion worth of production capacity soon, aligning with our customers' demand signals and expected orders in the next couple of quarters. β Wahid Nawabi, CEO
Q: Can you talk about the drivers behind the expected EBITDA margin expansion in fiscal year 25?
A: Despite a significant mix shift between our small UAS demand and our faster-growing LMS business, we expect margins to remain healthy. We are negotiating new contracts with improved margins and increasing production capacity, which should translate into similar margins to 2024 for the full year. β Wahid Nawabi, CEO and Kevin McDonnell, CFO
Q: How should we think about the $300 million in potential orders for LMS and their impact on fiscal year 25?
A: We expect all of the $300 million in potential orders to materialize into contracts this fiscal year. The timing of these contracts will dictate our ability to recognize revenue this year or next year. β Wahid Nawabi, CEO and Kevin McDonnell, CFO
Q: How do you view the competitive landscape and AeroVironment's strengths in the market?
A: While the market is growing and attracting more competitors, our battle-tested solutions and ability to deliver in high volumes set us apart. We have a strong track record and are ready to meet demand, especially in time-sensitive conflicts. β Wahid Nawabi, CEO
Q: Can you provide more details on the P50 aircraft and its differentiation from other products?
A: The P50 is our next-generation Group 1/2 UAS designed for the U.S. Army's long-range reconnaissance program. It enhances the mission capabilities of our JUMP 20 and Puma, continuing our innovation and leadership in the market. β Wahid Nawabi, CEO
Q: How marketable is Switchblade in the Indo-Pacific region given its range limitations?
A: Switchblade 600 is part of the U.S. DoD's replicator program, focused on the Indo-Pacific theater. Our solutions are battle-proven and can be delivered in high volumes, making them highly marketable in the region. β Wahid Nawabi, CEO
Q: Can you provide quantitative metrics on the interest and demand for international sales?
A: We have received approval to market to up to 50 allies and have active engagements with several countries. We expect many of these engagements to convert into orders in the next 12 to 24 months. β Wahid Nawabi, CEO
Q: How do you expect the unbilled receivables to trend in fiscal 25?
A: We expect some fluctuations in the near term, but overall, we should be in about the same place as we are now. The new contracts will help reduce unbilled receivables over time. β Kevin McDonnell, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
