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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 31, 2020

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.)

900 Innovators Way

Simi Valley, California

93065

(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 December 2, 2020, the number of shares outstanding of the registrant’s common stock, $0.0001 par value, was 24,103,980.

Table of Contents

AeroVironment, Inc.

Table of Contents

Item 1.

Financial Statements :

    

Consolidated Balance Sheets as of October 31, 2020 (Unaudited) and April 30, 2020

3

Consolidated Statements of Operations for the three and six months ended October 31, 2020 (Unaudited) and October 26, 2019 (Unaudited)

4

Consolidated Statements of Comprehensive Income for the three and six months ended October 31, 2020 (Unaudited) and October 26, 2019 (Unaudited)

5

Consolidated Statements of Stockholders’ Equity for the three and six months ended October 31, 2020 (Unaudited) and October 26, 2019 (Unaudited)

7

Consolidated Statements of Cash Flows for the six months ended October 31, 2020 (Unaudited) and October 26, 2019 (Unaudited)

8

Notes to Consolidated Financial Statements (Unaudited)

9

Item 2.

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

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

34

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

35

Item 1A.

Risk Factors

35

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

37

Item 3.

Defaults Upon Senior Securities

37

Item 4.

Mine Safety Disclosures

37

Item 5.

Other Information

38

Item 6.

Exhibits

38

Signatures

39

2

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AeroVironment, Inc.

Consolidated Balance Sheets

(In thousands except share and per share data)

October 31,

    

April 30,

2020

2020

    

(Unaudited)

 

Assets

Current assets:

Cash and cash equivalents

$

280,099

$

255,142

Short-term investments

67,137

47,507

Accounts receivable, net of allowance for doubtful accounts of $561 at October 31, 2020 and $1,190 at April 30, 2020

 

30,701

 

73,660

Unbilled receivables and retentions (inclusive of related party unbilled receivables of $14,974 at October 31, 2020 and $15,779 at April 30, 2020)

 

70,573

 

75,837

Inventories

 

51,779

 

45,535

Prepaid expenses and other current assets

 

7,310

 

6,246

Total current assets

 

507,599

 

503,927

Long-term investments

20,976

15,030

Property and equipment, net

 

22,868

 

21,694

Operating lease right-of-use assets

12,363

8,793

Deferred income taxes

 

5,546

 

4,928

Intangibles, net

12,213

13,637

Goodwill

6,340

6,340

Other assets

 

102

 

10,605

Total assets

$

588,007

$

584,954

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable

$

14,225

$

19,859

Wages and related accruals

 

18,737

 

23,972

Customer advances

 

2,957

 

7,899

Current operating lease liabilities

4,030

3,380

Income taxes payable

3,018

1,065

Other current liabilities

 

10,511

 

10,778

Total current liabilities

 

53,478

 

66,953

Non-current operating lease liabilities

9,422

6,833

Other non-current liabilities

243

250

Liability for uncertain tax positions

 

1,017

 

1,017

Commitments and contingencies

Stockholders’ equity:

Preferred stock, $0.0001 par value:

Authorized shares—10,000,000; none issued or outstanding at October 31, 2020 and April 30, 2020

 

 

Common stock, $0.0001 par value:

Authorized shares—100,000,000

Issued and outstanding shares—24,103,980 shares at October 31, 2020 and 24,063,639 shares at April 30, 2020

 

2

 

2

Additional paid-in capital

 

183,298

 

181,481

Accumulated other comprehensive income

 

342

 

328

Retained earnings

 

340,264

 

328,090

Total AeroVironment, Inc. stockholders’ equity

 

523,906

 

509,901

Noncontrolling interest

(59)

Total equity

523,847

509,901

Total liabilities and stockholders’ equity

$

588,007

$

584,954

See accompanying notes to consolidated financial statements (unaudited).

3

Table of Contents

AeroVironment, Inc.

Consolidated Statements of Operations (Unaudited)

(In thousands except share and per share data)

Three Months Ended

Six Months Ended

October 31,

October 26,

October 31,

October 26,

    

2020

    

2019

    

2020

    

2019

 

Revenue:

Product sales

$

65,528

$

57,386

$

123,885

$

123,225

Contract services (inclusive of related party revenue of $11,452 and $13,393 for the three months ended October 31, 2020 and October 26, 2019, respectively; and $27,838 and $25,728 for the six months ended October 31, 2020 and October 26, 2019, respectively)

 

27,137

 

25,885

 

56,230

 

46,957

 

92,665

 

83,271

 

180,115

 

170,182

Cost of sales:

Product sales

 

34,209

 

30,802

 

66,293

 

61,210

Contract services

 

17,605

 

17,303

 

37,560

 

32,534

 

51,814

 

48,105

 

103,853

 

93,744

Gross margin:

 

 

Product sales

31,319

26,584

57,592

62,015

Contract services

9,532

8,582

18,670

14,423

40,851

35,166

 

76,262

 

76,438

Selling, general and administrative

 

14,977

 

16,255

 

26,988

 

29,923

Research and development

 

11,976

 

10,858

 

23,079

 

19,567

Income from operations

 

13,898

 

8,053

 

26,195

 

26,948

Other income:

Interest income, net

 

115

 

1,266

 

323

 

2,595

Other income, net

 

72

 

157

 

105

 

512

Income before income taxes

 

14,085

 

9,476

 

26,623

 

30,055

Provision for income taxes

2,491

1,108

 

3,698

 

3,241

Equity method investment loss, net of tax

 

(9,522)

 

(863)

 

(10,810)

 

(2,210)

Net income

2,072

7,505

12,115

24,604

Net loss (income) attributable to noncontrolling interest

22

(4)

59

7

Net income attributable to AeroVironment, Inc.

$

2,094

$

7,501

$

12,174

$

24,611

Net income per share attributable to AeroVironment, Inc.

Basic

$

0.09

$

0.32

$

0.51

$

1.04

Diluted

$

0.09

$

0.31

$

0.50

$

1.02

Weighted-average shares outstanding:

Basic

 

23,936,950

 

23,804,364

 

23,914,737

 

23,775,355

Diluted

 

24,196,912

 

24,061,810

 

24,190,316

 

24,063,775

See accompanying notes to consolidated financial statements (unaudited).

4

Table of Contents

AeroVironment, Inc.

Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)

Three Months Ended

Six Months Ended

October 31,

October 26,

October 31,

October 26,

    

2020

    

2019

    

2020

    

2019

 

Net income

$

2,072

$

7,505

$

12,115

$

24,604

Other comprehensive income:

Change in foreign currency translation adjustments

10

75

179

Unrealized loss on available-for-sale investments, net of deferred tax (expense) benefit of ($3) and $1 for the three and six months ended October 31, 2020, respectively

 

(9)

 

 

(61)

 

Total comprehensive income

2,063

$

7,515

12,129

24,783

Net loss (income) attributable to noncontrolling interest

22

(4)

59

7

Comprehensive income attributable to AeroVironment, Inc.

$

2,085

$

7,511

$

12,188

$

24,790

See accompanying notes to consolidated financial statements (unaudited).

5

Table of Contents

AeroVironment, Inc.

Consolidated Statements of Stockholders’ Equity

For the six months ended October 31, 2020 and October 26, 2019 (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

Equity

Interest

    

Total

 

Balance at April 30, 2020

 

24,063,639

$

2

$

181,481

$

328,090

$

328

$

509,901

$

$

509,901

Net income (loss)

 

 

 

 

12,174

 

12,174

(59)

 

12,115

Unrealized loss on investments

 

 

 

 

(61)

(61)

 

(61)

Foreign currency translation

 

 

 

 

75

75

 

75

Stock options exercised

 

3,500

 

 

86

 

86

 

86

Restricted stock awards

 

60,592

 

 

 

 

Restricted stock awards forfeited

 

(515)

 

 

 

 

Tax withholding payment related to net share settlement of equity awards

 

(23,236)

 

 

(1,778)

 

(1,778)

 

(1,778)

Stock based compensation

 

 

 

3,509

 

3,509

 

3,509

Balance at October 31, 2020

 

24,103,980

$

2

$

183,298

$

340,264

$

342

$

523,906

$

(59)

$

523,847

Accumulated

Additional

Other

Total

Non-

Common Stock

Paid-In

Retained

Comprehensive

AeroVironment, Inc.

Controlling

    

Shares

    

Amount

    

Capital

    

Earnings

    

Loss

Equity

Interest

    

Total

Balance at April 30, 2019

 

23,946,293

$

2

$

176,216

$

286,351

$

2

$

462,571

$

4

$

462,575

Adoption of ASU 2018-09

665

665

665

Net income (loss)

 

 

 

 

24,611

 

24,611

(7)

 

24,604

Unrealized gain on investments

 

 

 

 

 

 

Foreign currency translation

 

 

 

 

179

179

 

179

Stock options exercised

 

3,000

 

 

93

 

93

 

93

Restricted stock awards

 

65,692

 

 

 

 

Restricted stock awards forfeited

 

(11,005)

 

 

 

 

Tax withholding payment related to net share settlement of equity awards

 

(13,364)

 

 

(743)

 

(743)

 

(743)

Stock based compensation

 

 

2,984

 

2,984

 

2,984

Balance at October 26, 2019

 

23,990,616

$

2

$

178,550

$

311,627

$

181

$

490,360

$

(3)

$

490,357

See accompanying notes to consolidated financial statements (unaudited).

6

Table of Contents

AeroVironment, Inc.

Consolidated Statements of Stockholders’ Equity

For the three months ended October 31, 2020 and October 26, 2019 (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

Equity

Interest

    

Total

Balance at August 1, 2020

 

24,104,564

$

2

$

181,406

$

338,170

$

351

$

519,929

$

(37)

$

519,892

Net income (loss)

 

 

 

 

2,094

 

2,094

(22)

 

2,072

Unrealized loss on investments

 

 

 

 

 

(9)

(9)

 

(9)

Restricted stock awards forfeited

 

(245)

 

 

 

 

Tax withholding payment related to net share settlement of equity awards

 

(339)

 

 

(22)

 

(22)

 

(22)

Stock based compensation

 

 

 

1,914

 

1,914

 

1,914

Balance at October 31, 2020

 

24,103,980

$

2

$

183,298

$

340,264

$

342

$

523,906

$

(59)

$

523,847

Accumulated

Additional

Other

Total

Non-

Common Stock

Paid-In

Retained

Comprehensive

AeroVironment, Inc.

Controlling

    

Shares

    

Amount

    

Capital

    

Earnings

    

Income

Equity

Interest

    

Total

Balance at July 27, 2019

 

23,990,459

2

177,207

304,126

171

481,506

(7)

481,499

Net income

 

 

 

 

7,501

 

7,501

4

 

7,505

Foreign currency translation

 

 

 

 

10

10

 

10

Restricted stock awards

 

7,831

 

 

 

 

Restricted stock awards forfeited

 

(6,285)

 

 

 

Tax withholding payment related to net share settlement of equity awards

 

(1,389)

 

 

(75)

 

(75)

 

(75)

Stock-based compensation

 

 

1,418

 

1,418

 

1,418

Balance at October 26, 2019

 

23,990,616

$

2

$

178,550

$

311,627

$

181

$

490,360

$

(3)

$

490,357

See accompanying notes to consolidated financial statements (unaudited).

7

Table of Contents

AeroVironment, Inc.

Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

Six Months Ended

    

October 31,

    

October 26,

 

2020

2019

Operating activities

Net income

$

12,115

$

24,604

Adjustments to reconcile net income to cash provided by operating activities:

Depreciation and amortization

 

5,693

 

4,486

Losses from equity method investments

10,810

2,210

Realized gain from sale of available-for-sale investments

(11)

Provision for doubtful accounts

 

(156)

 

14

Other non-cash (income) expense

(473)

81

Non-cash lease expense

2,393

2,255

Loss on foreign currency transactions

 

2

 

1

Deferred income taxes

 

(621)

 

(669)

Stock-based compensation

 

3,509

 

2,984

Loss (gain) on sale of property and equipment

2

(75)

Amortization of debt securities

(12)

(984)

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

 

43,115

 

(9,400)

Unbilled receivables and retentions

 

5,264

 

(9,350)

Inventories

 

(6,244)

 

1,621

Income tax receivable

821

Prepaid expenses and other assets

 

(1,029)

 

(1,051)

Accounts payable

 

(5,028)

 

(5,046)

Other liabilities

(10,736)

(4,583)

Net cash provided by operating activities

 

58,593

 

7,919

Investing activities

Acquisition of property and equipment

 

(6,052)

 

(6,850)

Equity method investments

(1,173)

(4,569)

Business acquisition, net of cash acquired

(18,641)

Proceeds from sale of property and equipment

81

Redemptions of held-to-maturity investments

 

 

159,839

Purchases of held-to-maturity investments

(169,148)

Redemptions of available-for-sale investments

 

92,226

 

Purchases of available-for-sale investments

(116,945)

(4,947)

Net cash used in investing activities

 

(31,944)

 

(44,235)

Financing activities

Tax withholding payment related to net settlement of equity awards

(1,778)

(743)

Exercise of stock options

 

86

 

93

Net cash used in financing activities

 

(1,692)

 

(650)

Net increase (decrease) in cash, cash equivalents, and restricted cash

 

24,957

 

(36,966)

Cash, cash equivalents and restricted cash at beginning of period

 

255,142

 

172,708

Cash, cash equivalents and restricted cash at end of period

$

280,099

$

135,742

Supplemental disclosures of cash flow information

Cash paid, net during the period for:

Income taxes

$

2,364

$

518

Non-cash activities