Q4 2020 AeroVironment Inc Earnings Call
We will conduct a question and answer session. After management's remarks as a reminder, this conference is being recorded for replay purposes.
Before we begin please note that on this call certain information presented contains forward looking statements within the meaning of the private Securities Litigation Reform Act 1995.
Forward looking statements include without limitation any statement they may predict forecast indicated or implied future results performance or achievements and may contain words, such as believe anticipate expect estimate intend to project plan or words or phrases with similar meeting.
We're looking statements are based on current expectations forecasts and assumptions that involve risks and uncertainties, including but not limited to economic competitive governmental and technological factors outside of our control that may cause our business strategy or actual results to differ materially from the forward looking statements.
For further information on these risks we encourage you to review the risk factors disgusted Aerovironments periodic reports on form 10-K, and form 10-Q filed with the FCC and the form 8-K filed today with the FCC along with the associated earnings release, and the Safe Harbor statement contained therein.
This afternoon, we also filed a slide presentation with our earnings release and posted a presentation to our website at <unk> dot com any events and presentations section.
The content of this conference call contains time sensitive information that is accurate only as of today June 20, Threerd 2020.
The company undertakes no obligation to make any revision to any forward looking statements contained in our remarks today were to update them to reflect the events or circumstances occurring after this conference call.
Joining me today from Aerovironment in a socially just didnt matter, our president and Chief Executive Officer, Mr., Wahid, Nawabi, and senior Vice President and Chief Financial Officer, Mr., Kevin Mcdonnell we will now begin with remarks from Wahid Nawabi well here.
Thank you Steve welcome to our fourth quarter and full fiscal year 2020 earnings conference call.
Before we discuss or strong fourth quarter in fiscal year 2020 performance I would like to comment on recent events.
We had aerovironment have spend time, reflecting on the tragic that's of George Boy, we own a Taylor Ahmad Arberry and too many others and on the protests that a follow.
Let us be clear there is no place for discrimination racism out aerovironment or in our society at large.
We strongly believe that diversity enriches, our business and contributes to the best results for our customers business partners and other stakeholders.
We seek to most talented people to join our team regardless of race gender religious belief it necessity country of origin sexual orientation or political view.
However, as a country and a company there is more we can all due to extend justice to all citizens.
To that end, we have created an internal committee on inclusion and diversity to evaluate ideas from our people and others to determine the steps we can take that can contribute to positive change.
As a global leader in robotics sensors software analytics and connectivity technologies, we believe that we're in a unique position to share our passion for science technology engineering in mathematics, or stem with you, especially those in underserved communities and help influence the next generation of innovators engineers and science.
Yes.
As part of our initial efforts we plan to increase our outreach to of African American and other underrepresented groups to further diversify our team.
We welcome the input of all our employees to help us achieve an even more diverse and inclusive work environment.
Now shifting to our fiscal fourth quarter and full year results on todays call I will emphasize three key messages also included on slide number three of our earnings presentation.
First our team delivered record results and a third consecutive year of profitable double digit top line growth.
Second we secured several key opportunities, which have further strengthens our leadership positions and third we have high confidence in our ability to create long term value by progressing or strategic growth opportunities.
I'll start by summarizing our strong fiscal year 2020 performance included on slide number four of our earnings presentation and discuss our notable achievements during the fourth quarter in fiscal year.
Next Kevin will provide a more detailed summary of financial performance on the year and then I will discuss our goals for fiscal year 2021, before Kevin Stephen I take your questions.
I am incredibly proud of our team and their efforts to deliver solid growth. Despite the impact of cobot 19, we delivered record fourth quarter revenue of $135.2 million and produced record full year revenue of $367.3 million.
These results represent an increase of 54% and 17% over the full prior fourth quarter and fiscal year.
Well you're diluted earnings per share from continuing operations was one dollar and 72 cents compared to one dollar and 74 cents for fiscal year 2019.
As a reminder, fiscal year 2019 included a onetime gain from a litigation settlement of 26 cents per diluted share.
Non-GAAP earnings per diluted share from continuing operations for fiscal year, 2020 was $1.84 cents compared to $1.48 cents for fiscal year, 2019, which excludes a onetime gain from an litigation settlement of 26 cents per diluted share.
We entered fiscal year 2021 with record funded backlog of $208.1 million, providing strong momentum toward a fourth consecutive year of profitable growth.
Across the board or outstanding results reflect excellent execution of our plans by our team and strong global demand for Aerovironments highly differentiated solutions.
Now I will review our business achievements in fiscal year 2020, many of which we've highlighted and slide number six of our earnings presentation.
Or small unmanned aircraft systems product line represented 62% of total revenue in the fiscal year, and we introduced new products that reinforce and expand our leadership position.
In October we introduced Puma, Ellie, which offers group to capabilities and an economical group one footprint.
We have already received orders for Puma Alley, and have delivered them to multiple customers.
We are actively engaged with several additional customers who are interested in Puma Ellie unmatched performance capabilities.
Continuing on our new product introductions in April we unveiled Quantix recon, which offers fully automated mapping and the option of radio silent operation to minimize detectability.
We recorded our first order for this new product before the end of the fiscal year.
Based on our Quantico, Mapper Quants ICSC recon provides unique capabilities for gaining situational awareness had the battlefields edge, while minimizing the cognitive load on frontline truce.
We secured a number of significant contract awards during the fiscal year. These include the large Raven system Award from the U.S. armies Security forces assistance Brigade, or S fab, which we announced last year.
This award contributed to a very strong year for small your way, yes, totaling $226 million and revenue.
In addition, we won the flight control systems or FCS domain Award for the US Army small U.S. program in June 2019, with a potential value of up to $55 million.
The competitive bid was part of the Army's 248.5 million dollar five your idea Q small UAS sustainment contract announced in April of 2018.
And February the U.S. Marine Corps awarded US a 10.7 million dollar contract for Puma 380 systems expanding their fleet of Aerovironments small your way yes.
In August we secured a $5.2 million follow on order from the U.S. customs and border patrol for Puma 380 systems, providing another tool to help secure our border and protect our border patrol agents.
We successfully transitioned the production of our vapor unmanned helicopters towards Simi Valley manufacturing facility during the fiscal year following our acquisition of pulse aerospace.
We also successfully delivered on a portion of the existing 13 million dollar contract for vapor 35, and 55 systems to a defense customer.
We are pursuing follow on opportunities with that and multiple other customers.
And our international business, we now have a total of 50 international Allied customers and have won numerous contract awards and both foreign military sales and direct commercial sales contracts.
Military sales in direct commercial sales contracts.
Sorry.
We continue to see sustained demand for our solutions with multiple international customers and multiple continents.
For example, the United Kingdom is now our largest international customer in terms of revenue and orders and represents a significant long term adoption opportunity.
And our tactical missile systems product line, we secured the first year of 146 million dollar multiyear us army contract for lethal miniature aerial missile systems or elements with our Switchblade loitering missile system.
The first year of this contract is valued at $76 million, making it the largest Omams award our largest Switchblade award and the largest single award and Aerovironments history.
This is a very significant milestone because it establishes the switchblade as the L. me I'm solution with a contract vehicle and funding for a multiyear period institutionalizing Switchblade entered the planning and operations of the Army and Marine Corps.
We continue to position ourselves for U.S. government approval of Switchblade exports to international allies.
An important part of that positioning includes our ongoing engagements with multiple use allies regarding regarding future exports of switchblade to their military forces.
As part of the expansion of our family of Tactical missile systems that is disrupting the multi billion dollar legacy missile market, we achieved more success and critical user evaluations of our larger switchblade variants during the fiscal year.
As I've stated before this larger varian is capable of addressing larger targets.
Delivering more significant effects on those targets and flying longer and further as compared to our original switchblade.
As a result, this varian enables us to address a much larger market segment. Currently served by legacy missiles, such as javelin tow and help buyer.
This game changing new capability represents significant new potential opportunity for aerovironment in the years to come to follow.
Also within our Tms product line, our engagements with Kratos in general dynamic land systems continue to advance both of these efforts are long term in nature, and we look forward to supporting our teammates and these initiatives.
As you can see from our progress we're well on our way to disrupting the legacy missile business with our patented disruptive switchblade family of Loitering missile systems.
Moving now to house, which represented 17% of fiscal year 2020 revenue. We successfully completed the first phase of Hawk 30 flight test in fiscal year 2020.
We have established a test facility at Spaceport America, and New Mexico for the next phase of Hawk, Thirtys low altitude and high altitude flight testing.
While Spaceport America will host our next series a flight test this summer, Hawaii remains and our mid and long term testing and operational plans.
The value of our House program was also increased by $18 million and April 20 inception to date total of $166 million.
We plan to transition this program to a testing and certification phase within the next fiscal year, which if successful should maintain our current annual run rate of customer funded R&D revenue.
Haps continues to represent a potentially transformational growth opportunity for aerovironment as we and our partner move forward toward the goal of providing commercial conductivity using networks of Hawk 30 aircraft.
Introduced in February they have alliance represents a broad global consortium of telecom.
Aerospace and technology companies, including Aerovironment as one of its founding members committed to delivering the benefits of haps and creating value from it.
Over the last few months the corporate 19 pandemic brought great uncertainty us all but also brought out the very best in our company's leaders and in our people as the adapted quickly to the new normal.
Like all companies Aerovironment was affected by the global pandemic and I'm extremely proud of the way. Our team has responded to these unprecedented events.
Aerovironment qualifies as an essential business with customers, who rely on the solutions, we produce and support.
In March we transitioned quickly to a hybrid worked structure, we're roughly 80% of our workforce shifted to working remotely.
Being an agile technology company, we had already implemented tele presence tools, which enabled us to move rapidly to a productive remote work arrangement.
For those employees, who are unable to work remotely we enhance safety procedures throughout our facilities, including temperature scanning social distancing and continuous sanitization activities.
By minimizing the number of people working on site, we were able to safely balance our commitments to our team members our customers and our community.
Not only did we continue to execute on our strategy. During these unprecedented times, but we also contributed to the fight against Cobot 19.
Our fast prototyping teams quickly began producing medical base yields more than 1000 today and we have donated them to local medical facilities and professionals on the front line.
In addition, our strong leadership relationship with NASA JPL resulted in an Aerovironment engineering teams supporting the development of vital and innovative new lower costs and much lower parts count ventilator design that the government has made available for commercial manufacturers to produce.
This new and innovative ventilator was designed in less than two months and we're proud to have been part of the NASA and JPL team and this important effort.
Additionally, we take great pride in the fact that our products have also played a role in combat and Cobot 19.
For example, in the Netherlands public safety officials are operating Aerovironments Puma AE tactical UAS as part of an integrated multi domain response team.
And another example in Italy officials are deploying Aerovironments Raven unmanned systems.
In a similar fashion to monitor traffic and areas heavily impacted by the krona buyers pandemic, we believe our solutions offer compelling value in the fight against this pandemic.
In summary, despite all the challenges our team remains focused on executing our fiscal year 2020 plans and delivered outstanding results that met or our heightened objectives for the year and positioned us for success in fiscal year 2021 and beyond.
Now I will turn the call over to Kevin Mcdonnell for a summary of the quarter and full year financials. Kevin. Thank you achieve revenue for the fourth quarter fiscal 2020 was $135.2 million, an increase of $47.3 million or 54% from the fourth quarter of fiscal 2019 revs.
I knew of $87.9 billion. The increase was due to an increase in product revenue of $37.4 million and the increase in contract service reps services revenue of $9.9 million fourth quarter fiscal 2020 revenue by major product line is as follows small UAS was $63 million.
Were 47% of the total revenue Tms was $42.4 million, but 31% Halfs was $23.4 million or 17%, which include the onetime revenue from the construction of the flight test facility as well he mentioned in his remarks, and other was $6.5 million or.
5%.
Let me take a moment to outline the current status of the Haps program.
Concessions date revenue under contract for the House program as $138.4 million. The total value of all contracts for the house program in the $166.1 billion or a 74, a $17.5 million increase from last quarter.
Turning back to the financial performance for the quarter gross margin for the fourth quarter fiscal 2020 was $53.2 million compared to $37 million for the fourth quarter fiscal 2019 gross margin as a percentage of revenue decreased from 42% to 39% primarily due to unfavorable product mix.
In addition, we had an increase to intangible asset amortization expense associated with our acquisition of pulse aerospace in fiscal 2020.
Looking at the rest the income statement Sq they expense for the fourth quarter fiscal 2020 was $16.3 million or 12% of revenue compared to sq the expense of $20.3 million or 23% of revenue for the fourth quarter fiscal 2019. The decrease in asked you. There was primarily due to a 4.4 million dollar fixed.
Asset impairment charge booked in the fourth quarter fiscal 2019.
R&D R&D expense for the fourth quarter fiscal 2020 was $15.5 billion or 11% of revenue compared to R&D expense of $11.6 billion or 13% of revenue for the fourth quarter fiscal 2019.
Net other income for the fourth quarter fiscal 2020 was $1.2 billion compared to net other income of $2.8 billion for the fourth quarter fiscal 2019. The decrease in net other income was due to the lower transition services income for services performed for the buyer of our former.
Efficient energy systems business, coupled with lower interest income on our investments.
We expect a lower interest income trend to continue enough by 21 as a result of lower interest rates in a more conservative portfolio strategy.
In terms the bottom line results net income from continuing operations attributable TV for the fourth quarter fiscal 2020 was $70.7 million or 73 cents per diluted share compared to income from continuing operations attributable to avi of $6.1 million or 26 cents per diluted share for the fourth.
Quarter fiscal 2019.
Non-GAAP diluted earnings per share from continuing operations for the fourth quarter fiscal 2020 was 75 cents per diluted share and excludes two cents per diluted share for intangible amortization expense associated with our acquisition of both aerospace non-GAAP diluted earnings per share from continuing operations for the fourth quarter fiscal 2019 was too.
26 cents.
Now moving through to our results for the full fiscal year 2020.
Revenue for fiscal 2020 was $367.3 million, an increase of $53 million compared to $314.3 million for fiscal 2019. The increase in revenue was due to an increase in product revenue of $44.7 million and the increase in contract service revenue of $8.3 million.
Yes.
Fiscal 2020 revenue by major product line is as follows small UAS was $225.9 billion or 62% in total revenue.
Combats was $63.8 billion or 17% half was $60.9 million or 17% and other was $16.8 million or 5%.
Gross margin for fiscal 2020 was $153.1 million as compared to $128.4 million for fiscal 2019 gross.
Gross margin as a percentage of revenue increased from 41% to 42% primarily due to two an increase in the proportion of product revenue total revenue, partially offset by a $2.5 million increase in intangible asset amortization expense associated with our acquisition of pulls aerospace gross park Mark.
As did decline from 46.5% in fiscal 2019% to 45.8% in fiscal 2020, we expect product margins continue to decline as result of product mix in fiscal 21.
In terms of fiscal 2020 bottom line net income from continuing operations attributable Avi was $41.3 million or $1.72 per diluted share compared to $41.9 billion or $1.74 per diluted share for fiscal 2019.
Over fiscal 2019 includes a onetime gain from a litigation settlement equal to 26 cents per diluted share.
I should also note that the tax rate for fiscal 2020 ended up 11.1% up from 9.2% of fiscal 2019, we expect a full year tax rate of approximately 12% in fiscal 2021.
Non-GAAP diluted earnings per share from continued operations attributable to Avi for the full year fiscal 2020 was $1.84 per share and it's good 12 cents per share for intangible amortization expense as well deal and integration costs associated with our acquisition of pulse Aerospace non-GAAP diluted earnings per share from continuing.
Operation AAA be for the full year of fiscal 2019 was $1.48 and excludes the 26 cents per share from a onetime litigation settlement gain in fiscal 2019 as noted above.
Our funded backlog as of April Thirtyth, 2020 was an AB record $208.1 billion, an increase of $43.7 million from the fourth quarter fiscal 2019, and an increase of $82.1 billion from the third quarter fiscal 2020 backlog of 126 month third quarter fiscal 2020 backlog.
Of $126 million.
Turning to our balance sheet cash cash equivalents investments and of the fourth quarter fiscal 2020 totaled 317 point.
$370.7 million a decrease in $14.9 million from the end of fiscal 2019 of $332.6 million. The decrease in cash cash equivalents and investment was primarily related to our acquisition of pulse aerospace as well as our increased investment in half, perhaps mobile joint venture.
Net accounts receivable, including Unbilled receivables and retention at the end of fiscal 2020 totaled $149.5 million.
Unbilled receivables and Retentions was $75.8 million inclusive inclusive of $15.8 million of related party amounts the increase in accounts receivable and Unbilled receivables was driven by the timing of revenue during the fourth quarter fiscal 2020.
Total days outstanding for the fourth quarter fiscal 2020 was approximately 85 days compared to 87 days for the fourth quarter fiscal 2019.
Net inventory at the end of fiscal 2020 was $45.5 million compared to $54.1 billion at the end of fiscal 2019.
The decrease in inventory in Q4 reflects a significant increase in product revenue that occurred in the fourth quarter fiscal 2020 days in inventory outstanding for the fourth quarter fiscal 2020 was approximately 61 days compared to 92 days for the fourth quarter fiscal 2019.
Turning to capital expenditures in fiscal 2020, we invested approximately $11.2 million and property improvement than capital equipment to support our growth. This is the increase at 26% over the $8.9 billion. We capitalized in fiscal 2019, we expect capital expenditures to increase in F. By 21, primarily as result of investment fund.
Phillies manufacturing and I'd.
Expects capital expenditures to be 4% to 5% of revenue in fiscal 2001.
Now for our fiscal 2021 visibility as highlighted on page seven of the supplemental charts.
As of today, we have ending backlog that we anticipate to execute in fiscal 2021 of $200.3 million.
Q1 quarter to date bookings that we anticipate to execute in fiscal 2021 of $9.1 million and unfunded backlog from incrementally funded contracts that we anticipate to recognize revenue during the balance a year of $31.1 million.
This adds up to $240.5 million or 60% of our fiscal 2021 midpoint revenue guidance range.
Now I'd like to turn it back call them back to wait.
Thanks, Kevin July 17, 2021 will be Aerovironments fiftyth anniversary.
While we celebrate our past and accomplishments to date, we're just getting started and are excited for the future of Aerovironment.
Aerovironment remains the leader and our chosen markets, we're delivering outstanding financial results, our financial position is strong and our growth portfolio is advancing toward even larger market opportunities.
As we look ahead, we envision a future where intelligent robotic systems in the air on the ground and in the water work together to suits to achieve mission success quicker safer and more cost effectively than what can be accomplished today.
This future state requires advances in autonomy and it's enabling technologies, which our team has already achieving as we add valuable new capabilities to our solutions.
Our strong balance sheet provides financial flexibility to execute on our strategy and build long term shareholder value.
Currently we have strong visibility into fiscal year 2021 with record funded backlog in total visibility you have 60% described on slide number seven of our earnings presentation, which is higher than the 55% at this time last year.
This gives us confidence in our ability to achieve our annual revenue and earnings objectives.
Additionally, proposed us government fiscal year 2021 defense procurement funding over approximately $90 million for Aerovironment solutions adds to our confidence in achieving this year's objectives.
However, it is important to note that we are operating in an unprecedented macro environment did duration and magnitude of the corporate 19, Pandemics impact on the global economy, and what longer term effects that may have on customer funding and procurement decisions is unknown.
We are beginning to see some delays and our supply chain, but its impact has not yet been significant to our business.
Our customers are also grappling with remote work scenarios, just like the rest of us.
This in turn has contributed to some delays in decision, making and contract timing.
These factors contribute to our expectation for a slightly lower topline growth rate this fiscal year.
As always we will continue to monitor the current environment and take all actions necessary to protect and grow our business.
As we all know we're living in some unprecedented times with the global corporate 19 pandemic.
As summarized on slide number eight of our earnings presentation for fiscal year 2021.
We expect to generate revenue between $390 million and $410 million with an operating margin of between 12% and 12.5% and earnings per diluted share of $1.65 cents to $1.85 cents.
This financial guidance assumes approximately 7% ownership of the apps mobile joint venture.
We expect non-GAAP earnings per diluted share, which excludes the amortization of acquired intangible assets to be between $1.74 cents and $1.94 cents.
Because of the impact of the pandemic on contract timing, we expect first half revenue to account for approximately 40% of total fiscal year 2021 revenue.
Based on our current plans revenue mix will result in a lower gross margin percentage in fiscal year 2021, as compared to the prior year.
We expect research and development investments to be between 11% and 12% of revenue this fiscal year.
In summary to reiterate our main points for today's call first our team delivered record results in a third consecutive year of profitable double digit top line growth.
Second we secured several key opportunities.
Which have further strengthen our market leading positions.
Third we have high confidence in our ability to create long term value by progressing our strategic growth opportunities.
Thank you to our customers who place their trust and Aerovironment to support their critical missions.
Thank you to our shareholders for recognizing the value creation potential of our people and our company.
And a special thanks to each and every member of our team who worked so hard throughout this past year. Despite all the obstacles and challenges to deliver these outstanding results for our customers and shareholders and who positioned us for continued momentum in fiscal year 2021.
Kevin Steve and I will now take your questions.
Thank you our heat and Kevin we will now begin the question and answer session.
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If you are using a speaker phone you may need to pick up your handset first before pressing the numbers.
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Once again to ask your question. Please press Star then one on your Touchtone phone.
Our first question comes from Peter Arment of Baird Peter.
Good morning, guys, you've actually got Eric route and on the line for Peter This afternoon.
Hi, Eric.
So my question just a quick one on the guidance can you just give a bit more color on the moving pieces there it looks like going to be more of a back half weighted here is any of that due to ramp up and the switch blood contract I was there any color you could provide currently just on the quarterly cadence. There just just what you expect on the ramp up thanks.
Sure. Erik this is why heat up good to talk to you and I Hope Everything's. Okay. On you ended a world.
The guidance that we provided I basically said that for the revenue range that weve guided speeds, which is between 390 in $410 million. We expect the first half two represent about 40% of that approximately.
And obviously, the second half will be roughly 60% of that.
We have.
A very diverse portfolio of portfolio products and customers and contract side that vary in the timing of those always fluctuate.
So.
And based on that we provided the.
Yes, GAAP and non-GAAP adjusted EPS guidance that I, just mentioned earlier as well.
And so again, it's not heavily back end loaded as just slightly and it's pretty.
I would argue that's pretty well level loaded wealthy relative to that many previous years in general.
Okay. Appreciate obviously everyone. Thanks.
Okay. Thank you very much welcome.
We'll now take your question from Pete Skibitski at Olympic Global Pete.
Yes, good afternoon guys.
I guess I'll start with.
Can you give us some more color on what's the biggest driver to growth will be in fiscal 2001 is is it small uli answers at Tms.
International particular factor there.
And I just have one follow up after that.
Sure. Pete This is why good to talk to you in terms of the revenue for the year and by product.
We have a number of different I know, we're very blessed to have.
Quite diversified portfolio products now as well as customers geographies contracts types.
So it allows us to have flexibility and diversified portfolio in general the growth. The majority of the growth for fiscal year 21 is going to come from.
Small UAS and our tactical missile systems business, we expect the half business to be roughly flat because of the.
Nature of the business being a customer funded R&D R&D programs so for fiscal 21.
Okay. So no tip off that as to whether you asked for Tms will grow faster.
As I said, it really depends on the quarter and on the timing of all these contracts I think thats that we have a lots of customers were very we wouldn't working on this intentionally over the years as you know to grow the diverse and diversify our portfolio and there is lots of different opportunities that we're pursuing internationally as well as.
Domestically as I highlighted on the call and that allowed us to deliver outstanding results for fiscal 20, yes, and we again expect to grow in fiscal 2001 as I I've provided the guidance, which.
Again speaks to the strength of our business and the diversity of our portfolio solutions into demand for products.
Okay Fair enough and then my follow up.
If we do have been continuing resolution for DMD, then I think is widely expected at least for a quarter.
Could impact could be.
Now continue through most of your third quarter fiscal 2001, I think should we see that thats going to impact you guys in any way or have you kind of taking account of that in your guidance sure. So we have taken that in many other factors into account and if you will see.
We have very strong backlog $208.1 million worth the funded backlog in our visibility is higher than even last year. This time last year, 60%, so pretty darn.
Remarkable achievements on for the team so far giving those and given all the aspects of these other risks we believe that based on what we know today and all the risks we're confident about our ability to achieve the guidance that we provided this time, obviously, we live and an unprecedented times, there's all kinds of risks related to the pandemic VCR situation change.
Jim cards within that administration.
The impact of corporate 19 on the economy.
Et cetera et cetera, so all of those ill given all of that if anything changes, we'll keep you updated but we feel confident at the moment based on all the factors. The we see that we can achieve the expectations. We've sat. Additionally, I will mention it that we have now at third consecutive year double digit topline profitable growth and we have achieved or exceeded our expectation.
And several years now.
And within what the expectations, we provided the beginning of year. So.
I feel good about our odd, but there's always risks that we don't know about that's going on around us and we'll keep you updated.
Okay I appreciate it guys. Thank you.
Youre welcome.
Thank you Pete and our next question is coming from Ken Herbert at Canaccord Genuity Ken.
Yeah, Hi, thanks.
Well I guess covenants, Steve Yeah, Hey, Wahid I just wanted to sorry, one more question on the guidance are you guided to call. It 10% topline growth in 21 with with basically flat earnings growth and I know you called out.
Some some coping 19 related timing another disruptions and then of course just mix can you provide sort of any more granularity on maybe the relative impact as those two items and I would guess from your mix comments. It would imply maybe a little better growth fund Tms in 21, considering the.
Margin contribution from Tms relative to small UAS, but any more discussion around that would be helpful.
Sure. So can you you are right based on the comments that I made that we do expect fiscal year 21 revenue mix to be slightly unfavorable in terms of gross margins as I mentioned.
And.
The reason for that really is a multitude of factors primarily related to mix and what I say, what I mean by that is that we have a very diverse portfolio of products now customers geographies contract types and all of that really changes the profitability or group.
Margin profile of any of our contracts.
And so it varies fluctuates based on what time of the year or quarter or month, you look at our.
Lance.
However, we know what ended a day, we still believe that we're going to able to grow our business this year and deliver another year of profitable growth.
And the mix overall as a little bit unfavorable in terms of the margins, we still believe that the underlying demand drivers for solutions are strong.
We have accounted for the potential impact of Colby 19 to the degree that we can but you know it's an unknown, but no one really knows the impact fully and as things changes. We'll keep you updated as we go forward and I'll just add that this is Kevin we do see good operating income growth, but we are having some negative impacts on it.
Interest income because of interest rates and our tax rate. So theres some noise happening below the operating income line, that's impacting our EPS guidance.
Right.
Got it that's helpful and if I could wahid or Kevin.
You see.
Tms do factor any international sales into the fiscal 2001 outlook I know, there's clearly been some move by the current administration to try and promote more.
International sales across the unmanned spectrum can you just give an update on where you are with efforts and Tms and if fiscal year 21 might that you are we start to see some of those efforts succeed.
So Kevin as I mentioned, yes, we we are very fortunate that over the years, we've grown our portfolio to a very large number of customers internationally as I mentioned on the call earlier on my remark that we now have 55 zero international allies as our customers for small U.S. products, we believe.
Weve, a similar opportunity exists for us for Tms and as I mentioned, we are actively engaged with both U.S. government as well as multiple allies and their interests on Switchblade and acquisition over the next portability of it we believe it's a matter of wind versus it but the timing of that is really really difficult to nail down specifically.
Yeah.
We expect to obviously this year, we have a number of opportunities at any given time for our small you with internationally and you know the timing of that it's been affected to some extent, but you know again no one really knows very fully the impact of the Corbett 19 in general.
We still have a very diversified portfolio and we're really pleased with the results so far and I believe that we can deliver another year of growth and profitability. Despite all the challenges and headwinds that everyone else is dealing with in this difficult times.
Thanks.
Youre welcome Ken. Thank you Ken Our next question is from Joe Denardi at Stifel Joe.
Hey, thanks.
Good evening Wahid.
Something giving effect to abate.
The guidance kind of considering.
And maybe the growth rate being moderated as a result to that like what would the guidance that bad.
Couple of months ago without beloved how much of what's the magnitude of the impact.
Sure. So as you saw from our results we delivered outstanding results, a third year of double digit topline profitable growth.
And we looked at we do this a very regular systematic and methodical way, we looked at our pipeline of opportunities in the customer timing individually as we build our outlook and rebuild our forecast and we realize that there are some delays there not significant but there is some delays that we've been able to manage both in terms of supplier delays and.
Parts that we can procure as well as timing of international contracts as you know international travelers come completed to screeching halt and new doing business with 50 countries. There's a lot of unknown. There in terms of Windows pass will open up and when greet actually.
Continue to progress that we still believe the we can deliver another year of profitable growth and Thats why we provided the guidance based on our very strong backlog historically record level of backlog and visibility again.
So.
We've taken all better the consideration, but we have accounted to some degree.
For the unknown impacts of Cobot 19 in these delays and to our guidance, which we provided.
And this will mark another year of growth for us and very strong profitability as Kevin mentioned also on the operating income Brian very healthy strong operating income because theres lots of other things that are going on below the operating income level.
That we wanted to bring your attention.
Okay would you be able to grow 20% instead of 10% I'm just trying to understand what like what the magnitude as a little bit if you have a sense.
So look I'm, so proud of the achievements of our team and the fourth quarter and the fiscal year, Joe. Despite these incredible events, our team as able to deliver a record quarter.
Record backlog incredible visibility for the next year and paying off phenomenal financial performance for the year.
And set us up beautifully for next year, we're in a better position now in terms of our visibility relative to fiscal 21 than we were that last year. This time.
And could we grow higher of course, our team is.
Genetically program. If you ask me to grow as fast as best we can and delivered the maximum amount of value for customers and our shareholders.
We never rest for anything less than that so but given all the variables. We feel confident about the outlook that I provided and our ability to execute on our plan to deliver again at this time.
Thank you Joe next question is from Louie Dipalma at William Blair Louie.
Good good afternoon, Wahid, Kevin and Steve.
Good afternoon highly.
Hello, I know.
You guys said that helps mobile.
Revenue for the fiscal year should be flattish, but it definitely seems that you're making progress what are the next milestones that investors should be looking forward to with haps mobile and secondly, what are the biggest challenge the challenges that you expect to face every day.
The next couple of years with Haps mobile development.
Sure So as I mentioned on the remarks, we've had.
Outstanding year in terms of our performance in execution on Haps mobile in fiscal 2000, we were able to achieve our initial low altitude flights we established a.
Flight test facility and space potent in Mexico, where our people are there today and actively working the flight testing schedule that we haven't as a part of the program.
And we also I said that we expect this revenue if all goes according to our plan to continue to be similar in fiscal 2001 again to has program right now it's on the first phase of its business plan, which is design development and demonstration of the two airplanes.
And the capability, which were coming towards the end of that milestone roughly and we will smoothly transition over to the extensive what I called testing and certification face. The challenges of course on that basis. This is I've never been done before endeavor as from the beginning the opportunities are massive long term, but the challenges are.
Equally as thick and eight we have demonstrated over the years that were the best company in the world with them the best talent and know how and qualifications to be able to tackle this challenge and overcome it and so far we've got a tremendous track record.
And testing and certification of this kind of an aircraft, which is our intention with the epay and other authorities is obviously a significant risk, but both our partner and we are very.
Positive about the outlooks, we believe that this has a tremendous opportunity long term and we keep executing against that plan and we keep making progress. So we look forward to another successful and.
Positive.
Progress here.
Sounds good and do you have any sense of how long the second phase being the testing and certification phase should should last.
Sure. So again, because this has never been done before and the stratosphere with this type of an airplane. It's all speculative and we are very familiar with the process because of all worked with with that at Bay and other agencies in this area.
However, if you look at comparable things or something similar to this and the commercial airline space. It's a several your effort.
And again I emphasize heavily that this is never been done before and it is.
First time ever so what we're familiar with it we have a plan we understand what needs to be done and we're working that plan and as you can see from our track record. So far we've been able to achieve the expectations that we have set for ourselves and our partner and executed well against our plants and delivered on those so far.
Thanks Bye.
Great. Good luck on before we jump to the next question.
Kevin It might be helpful. Based on a previous question. If we can provide any kind of color as to the expectation of.
Quarterly revenue percentage for the first half of the year, Yeah, why why he mentioned, 40% in the first half and 60% in the second half and we would just say roughly 50 50 between first quarter second quarter for that first half revenue.
Great. Thank you now we'll get a follow up question from Ken Herbert at Canaccord Ken.
Yes, Hi, Wahid, just just a question.
I think it's been about a year since you did the wholesale acquisition and I remember at the time, you've talked a little bit more about looking for maybe inorganic growth opportunities being a little higher priority and you obviously have a very strong balance sheets can you just talk about your current view on on capital allocation when you think about acquisitions.
Are you seeing maybe any color around the pipeline or what you're looking at or how we should think about that moving forward.
And your and the potential there to deploy capital.
Ken. Thank you for asking that question Thats, a very critical question and important one for us in order to our board, we assess that on a very regular basis number one number to let me make some comments on this and give you guys. Some color, which is we're very fortunate to have a strong balance sheet zero debt and the future for systems and the prospects for.
Unmanned systems at the intersection of Robotics software analytics conductivity and.
Sensors is very bright whether you look at it from the commercial perspectives ordinary defense perspective, it's very bright very promising so we're positioned really well and being at the place. We are in the financial position that we have I would argue that these are the better time for us to be more.
Looking out for potential distressed assets or more better deals where it makes sense to our strategy. It makes sense and to support our strategy. So we're actively looking as I've said before and I give you guys an update on our post acquisition and what progress we've made which is very satisfactory.
To me based on what we established as our own performance criteria as part of that acquisition and we're making progress. There. So we look forward to updating you have obviously, we're looking at a number of options at any time.
But if there was anything meaningful.
To share and let you guys know inform you we'll keep you updated on that.
Great. Thank you very much.
Thank you Ken.
Once again to ask your question. Please press Star then one on your Touchtone phone.
We'll now take a question from Joe Denardi as a follow up Joe.
Thanks, Kevin what were international sales in the quarter for the year.
The ones that from here so.
Total international revenue for the year was 166.2 million and for the quarter was 50.6 million.
And I believe that included the haps revenue would write international right.
Okay, yes, so while he and I guess all along those lines of you just look at the international business, excluding half just kind of I guess, what you guys get selling them and Raven internationally, it's more than I think what you get selling that to the us.
Yes.
Just given the conversations you're having around Switchblade internationally do you think that there is a similar.
Opportunity there longer term or is the more market it kind of more.
Constrained just given export restrictions longer term, what what are your thoughts there.
I know I would say that I expect our I will leave that our international sales of Switchblade as a matter of wind versus a really.
Number one number two doesn't have the same potential I believe so I believe that we have proven domestically similar to our small yes. If you look at the history of these two businesses or product lines. They're very similar we came up with a game changing capability introduce it to the customer they loved it and since then has been grown to.
Large business and then we have introduced to allies and has taken a little bit of time for them to adopt but we've grown that now internationally to 50, plus 50 countries now.
That's an impressive.
Achievement and.
I I.
Accomplishments by our team.
I believe the Switchblade has a similar value proposition if not even stronger in some cases for most of our allies that were involved in these complex. So we still believe or not and you can see from our.
Progress with the us at dealers.
[music] Us army and the multiyear contract will receive board or Switchblade and as I mentioned on the call. We also have progressed the larger variance of switchblade quite very well successfully in the fourth quarter and throughout the year.
And I believe that in fact, it increases our size of the market opportunity for us as we prepare to introduce that's the marketing future. So overall I do believe that our tactical missile systems business has a similar profile of the band and opportunities internationally as our small youre yes.
Do you see all of your foreign customers now being eligible to purchase Switchblade eventually.
I believe that Theres. So today currently I can tell you that were involved with multiple customers multiple allies that'll have an interest in this.
Whether that list is equal to our small UAS im not able to comment on that specifically by what I can tell you is that our initial foray into small UAS wasn't as probably as margins in a city either so over time it keeps growing.
Adoption takes place more and more customers will fall into that and we continue to grow as you see see from a year ago. We've increased our number of international cash for some small U.S. So we continue to grow even small yes.
Our portfolio of customers internationally.
Okay, Thanks, guys nice quarter.
Welcome. Thank you. Thank you Joe.
That was our final question, we really appreciate your engagement and your interest in Aerovironment.
An archive version of this call as SEC filings and relevant company and industry news can be found on our website Avi I and see dotcom. We wish you continued good health a good day and we look forward to speak with you again following next quarter's results good day.
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