Q2 2021 AeroVironment Inc Earnings Call
Welcome to Aerovironment second quarter fiscal year 2021 earnings call. This the Stephen get one Chief marketing Officer, and Vice President of the Investor Relations for Aerovironment. At this time all participants are in the listen only mode. We will conduct a question and answer session. After managements remarks as a reminder of this conference is being recorded for replay purpose.
The.
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 of 1995.
Forward looking statements include without limitation any statement that may predict forecast indicate for imply future results performance or achievements and may contain words, such as believe anticipate expect estimate intend project plan for words or phrases with similar meeting for.
Forward looking statements are based on current expectations for cash and assumptions that involve risks and uncertainties, including but not limited to the 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 discussed and Aerovironment is periodic reports on form 10-K on 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 the.
This afternoon, we also filed the slide presentation with our earnings release and posted the presentation on our website at <unk> Dot com in the events and presentation section.
The content of this conference call contains time sensitive information that is accurate only as of today December eight 2020 the.
The company undertakes no obligation to make any revisions to any forward looking statements contained in our remarks today for the update them to reflect the events or circumstances occurring after this conference call.
Joining me today from Aerovironment, <unk>, President and Chief Executive Officer, Mr., Wahid, Nawabi, Senior Vice President and Chief Financial Officer, Mr., Kevin Macdonald.
We will now begin with remarks from Wahid Nawabi Wahid.
Thank you Steve welcome to our second quarter fiscal year 2021 earnings Conference call.
Before we discuss our business achievements on the second quarter I would like to address our acquisition of the German Robotics company tell the route which we announced the few moments ago and is summarized on slide number three of our earnings presentation.
Tell about is the leader in advanced ground robotic systems with the strong global customer base and a best in class portfolio of unmanned ground vehicles or you GBS, serving defense Force response home on security in other markets.
This is on outstanding growing business in its own right that is poised for further success in the United States and globally and we're excited for the then to join our team to support our customers and expand on global footprint.
I don't know volume in our goal is to drive superior shareholder value by developing and maintaining leadership positions in intelligent multi domain robotic systems for the fence civil and commercial customers.
Our broad portfolio include unmanned aircraft in tactical missile systems that are aerial robots with increasing levels of intelligence on autonomy that the right from our ongoing investments.
Tolerable outstanding team best in class product portfolio long track record of success and extensive customer base represent an ideal complimentary set of capabilities that the liver the ground element of our multi domain portfolio.
Tell the Rob was found that more than 25 years ago and its management team has extensive robotics experience the dates back to the 19 seventies the.
The Telo Rob team has built an impressive list of customers around the world by applying the innovative robotics technologies to multiple growing applications and the end markets.
I would tell of all as part of Aerovironment, we will offer a broader set of solutions and capabilities for customers.
Once the transaction closes we plan to integrate our technology roadmaps to develop Ariel and ground system solutions that deliver more capability and more complex M operating environments to customers and the difference in defense and other applications.
With this powerful multi domain solution offering we will introduce aerovironment to tell the rovs existing customer base, which spans 45 nations and introduce pillar of unique portfolio, the or volume its customers and the U.S. and 50 nations.
To this point in November we submitted a joint proposal what teller up to the U.S. Air Force for a large new multiyear explosive ordinance disposal of robotics program, where aerovironment will be the prime contractor.
The other force has not disclosed the potential value of this program, but it is significant.
We will also pursue additional significant domestic UGI the opportunities with the United States Navy Marine Corps Air National Guard and various police forces.
Specific international opportunities include you GBS for airport security and the middle Eastern I like nation, and multiple of U.S. programs with the German Federal Ministry of Defense, which a local presence would support.
As you can see the opportunities between our two teams are numerous and have the potential to produce significant value for aerovironment shareholders and the near and long term.
Upon German government clearance of the transaction, which we expect by spring 2021 tell the Rob will operate as a wholly owned subsidiary of Aerovironment.
We plan to retain the entire teller AWP team.
We expect this acquisition to be GAAP EPS accretive in year end, two years and non-GAAP EPS accretive in fiscal year 2022, excluding intangible amortization and integration costs.
Under the terms of the agreement we are investing approximately $45.4 million in cash plus the three year milestone based earn out of up to $7.3 million.
We will also pay off $9.4 million and debt from teller up at closing.
Our acquisition of Telegraph supports our objectives of deploying our strong balance sheet to grow our business expanding the value props proposition of our offerings and creating long term shareholder value.
I look forward to sharing more with you as we proceed toward closing.
Now I will summarize our second quarter results.
On today's call I will emphasize three key messages included on slide number four of our earnings presentation.
First our team continues to deliver strong results during the unprecedented and challenging COVID-19 pandemic keeping us on track to achieve our fiscal year 2021 objectives.
Second we achieved significant milestones during the quarter and our key growth initiatives within tactical UAS tactical missile systems and haps.
And third we are successfully executing our long term growth strategy supported by our strong balance sheet, while delivering significant value to our shareholders.
Now, let's review our financial performance on the quarter, which is outlined on slide number five of our earnings presentation.
We delivered second quarter revenue of $92.7 million, an increase of 11% year over year and consistent with our expectations.
Earnings per diluted share of nine cents decline from 31 cents in the prior year, primarily due to on accounting impairment related to our portion of the write down and haps mobiles ex equity investment and Loon LLC.
Kevin will provide more information on this item in his prepared comments.
Non-GAAP earnings per diluted share for the second quarter was 48 cents, an increase of 14 cents or 41% year over year.
Now I will review, our business achievements and the second quarter.
First our small unmanned aircraft systems product lines represent of 63% of total revenue in the second quarter and we remain the leader in the global market for small UAS.
We continue to partner with industry leaders to deliver more valuable solutions for customers.
In October we announced the contract with Viastat two develop an on demand type one encrypted communications network the liver by small UAS for the U.S. Army.
This is another example of our applied innovation, creating greater value for our customers and shareholders.
Next our tactical missile systems product lines represented about 20% of second quarter revenue.
We continue to execute against the large army only on its contract with the our Switchblade 300 during the quarter.
In recent years deal with the procurement budgets have provided strong funding for army elements procurement.
This funding has driven programmatic adoption of Switchblade 300 via the U.S. Army.
And its fiscal year 2021 procurement request the U.S. Department of defense budget proposed about $85 million the funding to support the army on this program.
Senate and house of Representatives Appropriations committees recently proposed reducing or eliminating M. Atvs funding and government fiscal year 2021 part of me because significant funding remains from prior budgets for Elmi on procurement.
We expect the entire $85 million to be removed by the time the budget is enacted into law, but well not know for certain until then.
It is important to note that a new multi year competitive elements program is planned to begin after fiscal year 2021.
We believe we are well positioned to compete for and secured that award.
In October we unveiled our switchblade family of Loitering missile systems, including our new Switchblade 600, which is the larger variant we have previously discussed.
Switchblade 600 waste 50 pounds carries a much larger warhead than switchblade 300 is capable of more than 40 minutes of endorphins and delivers precision the effect against armored vehicles and other of hardened targets over greater distance all while maintaining its product portability.
And patent the wave of and recommit capabilities.
As part of the Switchblade 600 system. We also introduced a new tablet touch control that improves the user experience and makes training even faster and easier.
What Switchblade 600, we're targeting a tactical missiles market segment valued at more than $1 billion annually based on current U.S. do the procurement of Hellfire javelin until missiles.
Develop and part of what customer funding, we believe that Switchblade 600 is well positioned for the U.S. Marine Corps organic precision buyers mounted on Oh P. M M program.
Supporting more competition for all P. M. M. We received a 5 million dollar award late last fiscal year and another 1 million dollar award in the second quarter.
We are now one of for suppliers, who will compete as soon as this February for a down select award.
That award what's fund continued development that could lead to low rate production and the volume of procurement over a multi year period.
Moving now to haps, which represented 12% of second quarter revenue, we achieved the significant project milestone in September when the Sun gliders sold or perhaps the way, yes. So award in the stratosphere for hours during the 20 hour mission of Spaceport America in New Mexico.
During the successful test flight, we also demonstrated broadband connectivity via an L.P.E. payload carried on board the Sun glider.
In fact, we conducted the video calls from new Mexico, the connected us the Tokyo Silicon Valley, and Washington, D.C., using a standard Android smartphone.
The quality of the beauty of call was as good if not better than most of video meetings I have participated in from my office.
This milestone offers a glimpse into the exciting possibilities haps represents for connecting the billions of people around the world, who lack of basic broadband access.
We remain confident the this partnership will deliver strong returns for our shareholders.
We expect the haps program to transition to a testing and certification phase toward the end of our current fiscal year 2021.
We expect this testing and certification phase to continue for multiple years until we transition to production and commercial business launch.
Now I will turn to the impact of the COVID-19 pandemic on our business.
We continue to experience some delays in customer contracting decisions as our domestic and international customers operating an unprecedented remote work situations.
We're also experiencing some delays in limited areas of our supply chain, resulting from the impact of the pandemic.
However, our teams accomplishments in the important milestones the achieved during the quarter are particularly noteworthy given the challenges of the COVID-19 pandemic the.
The majority of our team members continue to work remotely and I am incredibly proud of the way they have continued to support each other and our customers.
All of us on Aerovironment are United in our commitment to delivering strong operating and financial results, while maintaining a safe work environment.
This was the solid quarter of achievements.
We're very excited about our acquisition of teller up and the progress toward our multi domain intelligent robotic portfolio It will drive.
And as you can see we're not standing still we continue to invest in the future of the finding technologies that will drive higher levels of autonomy and capability for our customers and greater returns for our shareholders.
Now I will turn the call over to Kevin Macdonald for a summary of second quarter financials Kevin.
Thank you Wahid today I'll be reviewing the highlights of our second quarter and year to date financial performance I'll be referring to both our press release and earnings presentation available on our website.
Similar to last quarter, I will only be addressing the key financial metrics of my remarks, and leaving some of the details of the press release and earnings presentation.
Revenue for the second quarter fiscal 2021 was $92.7 million, an increase of 11% from the second quarter of fiscal 2020 revenue of $83.3 million.
The breakdown of revenue by product area is contained on slide six of the quarterly earnings presentation.
During the quarter, we showed strong performance on our Tms product line, which was up 139% from the same period last year. This was partially offset by lower haps mobile service revenue and lower small UAS product revenue.
Revenue for the first half of fiscal 2021 was the $180.1 million an increase of 6% from the first half of fiscal 2020 revenue of $170.2 million again, the increase in revenue was largely due to an increase in Tms revenue, partially offset by reduced small UAS product revenue.
Turning the gross margin slide seven of the quarterly earnings presentation shows our product service mix on overall gross margin trends over the past five quarters.
Gross margin for the second quarter was $40.9 million for 44% of revenue compared to $35.2 million or 42% of revenue for the second quarter last fiscal year.
Gross margin for the first half of fiscal 2021 was $76.3 million or 42% of revenue compared to $76.4 million or 45% of revenue for the first half of fiscal 2020.
As we indicated last quarter, we do expect second half margins to be lower than the first half margins due to a less favorable product mix.
Now I will turn to operating expense.
Actually the expense for the second quarter was $15 million or 16% of revenue compared the SGN expense of $16.3 million or 20% of revenue for the second core.
Quarter of F y 20.
SGN expense for the first half of fiscal 2021 was $27 million for 15% of revenue compared to $29.9 million for 18% of revenue for the first half of fiscal 2020.
The lower spend on current quarter on year to date.
Yes, you know the is in large part related to the reduction in travel and trade show expenses, resulting from coal, but really the restrictions.
R&D expense for the second quarter was $12 million for 13% of revenue compared to R&D expense of $10.9 million or 13% of revenue for the second quarter F Y 20 on.
R&D expense for the first half of fiscal 2021 was $23.1 million or 30% of revenue compared to $19.6 million or 11% of revenue for the first half of fiscal 2020.
We continue to make significant R&D investments. These investments include the enhancements to current products new variance within our product lines.
And product additions, we believe these investments will enable our continued leadership in the small U.S. space and drive growth in both small UAS and Tms product lines in the new for your future and longer term.
Before I talk about the lot bottom line I'd like to discuss the impact of the haps mobile JV on our income statement.
As a reminder, we own approximately 7% of haps mobile of the house mobile joint venture in.
In the second quarter of fiscal 2021 recorded a loss of $9.5 million related to our investment in the <unk> in the haps mobile JV. This.
This includes an $8.4 million impairment losses, which represents our for port proportionate share of the haps mobile write down of its investment in alphabet Loons subsidiary.
In the first half we recognize the total of $10.8 million.
Total of the $10.8 million loss on our income statement related to our house mobile investment compared to a loss of $2.2 million for the first half of fiscal 20.
Finally, I should note that our accumulated losses on the JV have resulted in the carrying amount of our investment on the balance sheet to be zero as at the end of the second quarter and therefore, we will not recognize any for their losses related to our investments to date in the how small the JV in future periods.
Looking at the bottom line.
Net income attributable to the arrow barrel environments for the second quarter fiscal 2021 was $2.1 million or nine cents for live the diluted share compared to $7.5 million or 31 cents per diluted share for the second quarter of fiscal 2020.
The $5.4 million reduction in net income was largely the result of our proportionate portion of the haps mobile impairment of its investment the loon of $8.4 million higher tax provision of $1.4 million increased R&D investments of $1.1 million and reduced interest income of $1.2 million. These reductions were part.
Actually offset by higher gross margins of $5.7 million and lower EPS year, ne spending of $1.3 million.
For the first half of fiscal 2021 net.
The income attributable Aerovironment was $12.2 million for 50 cents per diluted share compared to $24.6 million or a dollar or two per diluted share for the first half of fiscal 2020, the $12.4 million reduction net income is again, primarily due to the 8.4 million dollar loss from our portion of the haps mobile.
The impairment of its investment the loon together with higher R&D spending of $3.5 million and lower interest income of $2.3 million, partially offset by lower EPS DNA spending of $2.9 million.
In terms of adjusted EPS Slide 12 shows the reconciliation of GAAP and adjusted or non-GAAP diluted earnings per share.
Non-GAAP diluted earnings per share for the second quarter of fiscal 2021 was 48 cents per diluted share and excludes 35 cents per diluted share for our portion of the haps mobile impairment of us invest the loon and two cents per diluted share of intangible amortization expense associated with our pulse aerospace acquisition.
And an additional two cents for a little bit diluted share for acquisition related expenses non.
Non-GAAP diluted earnings per share of for the second quarter fiscal 2020 was 34 cents per diluted share and excludes three cents per diluted share of deal integration costs and intangible amortization expenses associated with our pulse aerospace acquisition.
For the first half of fiscal 2021, non-GAAP diluted earnings per share was 91 cents per diluted share and excludes the 35 cents related to our portion of the haps mobile impairment of its investment Loon as well of six cents for limited share of acquisition related amortization expenses.
Non-GAAP diluted earnings per share of for the first half of fiscal 2020 was the $1.80 per diluted share excludes six cents per diluted share of related to the deal integration costs and intangible amortization expense associated with our acquisition of wholesale space.
Turning to the balance sheet, we continue to maintain a strong cash position cash cash equivalents of investments. The end of the second quarter fiscal 2021 totaled $368.2 million, an increase of $50.5 million from the end of fiscal 2020 told.
Total cash flow from operating activities. During the first half of the year was 58.6 million of which 25.3 million was the result of working capital improvements and the remainder of from operating activities. The.
Working capital improvement came primarily from lower accounts receivables and on Billables, partially offset by lower accounts payable accrued liabilities and the higher inventories.
In terms of capital expenditures, we spent $6.1 million during the first half of fiscal 2021.
Next I'd like to highlight some of our backlog of metrics.
Our funded backlog at the end of Q2 was $130.6 million a decrease of $16.1 million from the second quarter of fiscal 2020, and a decrease of $77.5 million for the fourth quarter of fiscal 2020 backlog of $208.1 million the.
The backlog decline is in part due to delays in orders the result of the cobot impacts.
In terms of fiscal 2021 visibility, which is highlighted on slide eight of the earnings presentation.
As of today, we have year to date revenue in fiscal 2021 of $180 million.
Second quarter, ending backlog that we anticipate to execute the fiscal 2021 of $120 million.
Q3 quarter day bookings that we anticipate to execute in fiscal 2021 of $4 million.
Unfunded backlog from internally funded contract. So we anticipate the recognize revenue during the balance of the year of $26 million.
This adds up to $330 million or 83% of our fiscal 2021 midpoint revenue guidance range.
Now I'd like to turn it back to what he.
Thanks, Kevin.
As we noted we're strengthening our leading market positions achieving critical milestone in the development and introduction of potentially valuable new capabilities, expanding our offering deploying our balance sheet to grow our business strategically and delivering on our commitments to our customers.
We're developing the solutions and capabilities, our defense customers need to confront insurgencies as well as peer and near peer adversaries in both permissive and can test the environments.
And we continue to execute our strategy to offer a multi domain portfolio of intelligent unmanned solutions and capabilities integrating robotics sensors software analytics and connectivity technologies to equip our defense and other customers with the tools to win.
By doing so we believe we will continue to deliver even greater value to our shareholders and our customers.
Supported by 83% visibility to the midpoint of our guidance range. We are reaffirming our full fiscal year 2021 guidance of revenue of between $390 million and $410 million as summarized on slide number 10 of our earnings presentation.
We expect to deliver operating margin of between 12% and 12.5% and now expect revised earnings per diluted share of $1.28 cents to $1.48 cents as the result of haps mobile ex impairment of an equity investment in Loon LLC.
We continue to expect non-GAAP earnings per diluted share, which excludes acquisition related expenses amortization of acquired intangible assets and the apps mobile investment impairment of between one dollar and 74 cents and $1.94 cents.
[noise] similar to last year, we expect about one third of second half revenue and our third quarter based on the midpoint of our revenue guidance range and we expect on EPS losses, similar to the third quarter of our fiscal year 2020.
As Kevin mentioned earlier revenue mix will result in a lower gross margin percentage in fiscal year 2021, as compared to the prior year we.
We also expect research and development investments to range between 11% and 12% of revenue this fiscal year.
In summary to reiterate our main points for today's call.
First our team continues to deliver strong results during the unprecedented and challenging COVID-19 pandemic keeping us on track to achieve our fiscal year 2021 objectives.
Second we achieved significant milestones during the quarter and other key growth initiatives within tactical UAS tactical missile systems and haps.
And third we're successfully executing on our long term growth strategy, including deploying our strong balance sheet as we did with the tell the Rob acquisition, while delivering significant value to our shareholders.
Before we open the call. It the Q1 day I want to say, thank you to our customers our team members and our shareholders for your ongoing engagement and for challenging as always to deliver excellence.
We continue to focus on delivering on our promise to help you proceed with certainty.
Kevin Steve and I will now take your questions.
Thank you Wahid, we will now begin the question and answer session of today's call.
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Our first question of this afternoon comes from Ken Herbert at Canaccord Genuity Ken.
Hi, Steve Good afternoon, everybody.
Good afternoon, Ken.
Well I just wanted to first ask on the on the Omams. If in fact, the fiscal 21 budget zeroed out of the funding can you just remind us how much of the appropriated money has not yet been spent and what that contribution you think for your full year 21 on what the guidance implies.
From the on man's contract for the year.
Sure Ken So as I mentioned on my remark. The original budget line item request was roughly about $85 million of the house of representatives of recommend that $69 million roughly and then the Senate as actually put it at zero on that line item.
The recommendation now none of this the final so the actual authorization of still lives around the $69 million, but what gets appropriate weighted is what's going to matter no. One really knows exactly what would be appropriate, but it wasn't very close contact with our customer there's still lots of what we're planning on we expect will play.
Moving on it being zeroed out essentially however, the reason why I said on my remarks that there's still significant funds. The remaining there because we've had significant dollars of funding on fiscal 19 fiscal 20, even beyond before that there is a significant amount of dollars that are not still awarded to us.
As part of the existing drew on his contract the we have.
That's number one number two we do have the details in terms of how much revenue. We recognized I believe Steve you have the specific details of that the chicken or just at a rate for this year, but we are still expecting to achieve our full fiscal your expectation on a on the Switchblade 300 based on the contract. The we have today, so there's not going to be.
In our view no change on that as of today, we believe that were going to able to execute on that and we're currently executing that as we speak of anyway.
Okay, great and if I could just to follow up really quickly on top of Rob looks like a nice acquisition can you provide any more details in terms of how is the business been growing sort of in line with the with the 15% that you called out for the UGI the industry or anything we should we can.
Think about in terms of the potential revenue contribution of this business. Once the deal is closed thank you sure.
For Ken So we are I'm personally extremely excited and bullish about this of acquisition. It makes a whole of a lot of sense in terms of long term debt is shareholder value creation. It's the right move for us. The huge deeply then there's a tremendous amount of synergies on the revenue side and on the top line in terms of the business itself first and foremost.
It's a very well established business that had been around for decades. They have made a very strong name for themselves they're known for very best in class technology, They've got some very unique technology and IP related to their design of their systems number one number two.
40, plus countries they do business with already the business is growing has been growing in the past few years.
Obviously the company is private right now and we cannot get into the details of that until the deal is deal closes, which we expect that the happens sometimes the and the spring.
Early next calendar year, but we believe it is going to be accretive GAAP wise on the <unk> in two years and it will be non-GAAP. The P.S. accrete of at our fiscal year 2022 really depending on when the close actually takes place the number one criteria for the close is really the approval of the German government for the.
The acquisition to the go through we have worked that for a while we're very familiar with the company. We've been working with these guys for a significant amount of time, we assess the market. We believe there are very well positioned to compete in both the domestic opportunities as well as international ones and a great exam.
Sample of of that is just recently not more than a few weeks ago, two or three weeks ago. We submitted a joint proposal for a a U.S. Air Force robotics.
The RFP, which aerovironment is acting as the prime contractor. So we could not announce of the details of that at that time.
Due to its up and.
The disclosure issues, but we believe that long term. This is a very very good acquisition for both our short term as well as long term strategy and value creation.
Thank you.
You're welcome. Thank you Ken and before we go on in response to your question Wahid as we said in the first quarter earnings call a quarter ago, we expect about $42 million revenue. This year from the army elements contract that was announced on a.
Couple of Thirtyth of this year, so that hopefully the fills in the at the answered that question well now turn to on to Pete Skibitski from Olympic Global for our next questions Pete.
Yeah, Thanks, guys nice quarter.
Just a follow up on Switchblade on this perforations issue is it reasonable for us the to expect that you know fiscal 22 Switchblade revenue for you. The you know the 300, the Omams will decline.
Or or how you know how should we think about the.
The next thanks, Pete this is why he'd so in terms of fiscal 22, we are going to provide guidance on that on our fourth quarter earnings. However.
However, this is not something that we believe is going to affect us in terms of our revenue on our relationship into the the adoption of Switchblade 300, as you know.
We've been very successful over the last decade to continue to grow that business.
We have been the the by far the almost the sole source provider of this capability to do U.S. military on a number of competitions works. We have won those hands down across the board in the last several several years.
There is significant amount of dollars already in the budget plus process from the government fiscal year, 18, 19, and 20 as I mentioned.
A significant portion of the that is still not contracted and awarded to US and we expect to get those awards, sometimes this fiscal year or the beginning of next fiscal year, the pending really on how the government of.
Proceeds and the Cobi situation continues so I personally do not consider this to be a major issue I just wanted to communicate to all of you. What we have learned so far what's out there. So you're aware of it. Additionally, last point I want to make on this the U.S. Army already has a potential competition plan for the phase.
Beyond this drew on the we have a three year contract on so we're working with our customer to make sure that we compete for that and we believe the we're positioned very well for that so when that a war takes place sometimes the probably the next calendar year, then it'll be a smooth transition from the existing contract.
On the revenue stream, the we have and the awards. The we've received to continue beyond that so our position is that hey, we've had significant revenue strong growth.
And B, we believe that there is so significant dollars on awarded yet, which we are expecting to receive that which will sort of bridge the gap between our fiscal year 21, and the government fiscal year 21, which will then get to the next competition on an ex the war hopefully.
Okay got it I guess, just one follow up for me on a different topic.
There's some chatter out there I think on the Navy submarine launched the way be program that there's been a lot of exercises and progress has been made and I think there was an aura Fi out there.
Can you maybe update us on are you expecting maybe in calendar 2021 to see maybe a competition.
You know for that for that missionary as well sure. So the specific Navy submarine launch you Avi that you're referring to is very much geared towards our blackwing platform and variant of Switchblade.
As you know in the past couple of years I have been providing updates on our success and our progress with the new the Navy on piloting this and actually doing field trials in the sea with various submarines.
So we continue to make progress there we've had a lot of really good success in terms of trials and real demonstrations and field deployments.
Obviously, it's a very critical of growth opportunity for us, but the the dips the adoption rate within the <unk> Navy submarine is quite slow so.
So we expect in that Navy submarine launch or a fight that you see that we will be able to compete for positioned really well and we continue to make progress on that front with our customer so.
Expect us to obviously compete on that again, and we're very well aware of it engaged with it and we've already delivered.
That certain number of units to our customer throughout the last year and a half for two.
Thank you Pete our next question comes from Peter Arment at Baird Theater Yep.
Good afternoon, my Kevin even why the question I guess on the on the Switchblade 600, you mentioned the February kind of timeframe for a potential decision. There can you maybe just describe what you're expecting there in terms of competition show.
Sure. So I think Peter are you, referring to the of Marine Corps, Oh, PFM organic precision fire mounted a potential program in competition as I mentioned on my remarks, we have already received about $5 million, what the funding as part of a selection process last fiscal year.
And we see this past quarter. This year. We've also received an additional $1 million to keep improving the capability, which involves the our switchblade 600 with our customer being the Marine Corps. We think the we're positioned very well, but there are other competitors that are also competing in this competition.
However, as you know Switchblade 600, the capability is very unique and very very compelling.
We also have a tremendous I would call it the leg up for a net.
Sort of I.
Advanced progress because of our track record, what our original Switchblade and the field. So the customer on tends to have the competition and fly off sometimes in February of this year, which obviously because of the Kobe didn't it's not guaranteed but that's what where we expect that the happened as of now and once they do that they expect the.
Down select the the most mature solution and the best solution to go proceed further there was approximately $20 million ish or so and the government fiscal year 21 budget for the O. PFM program and it continues after that to the come into the initial rate of low initial.
The product production and then beyond that the U.S. Marine Corps has publicly stated that they would like to get into a full production eventually as the result of this competition and down select so the.
The short of it is Peter that we believe a we're positioned really well be on our progress and our success. So far gives us a unique advantage in my view to be able to compete just like we've always done on this in the space and three it is the long term long term programs that we're really keeping an eye on that but.
We think it's a good starting point for Switchblade 600, amongst other opportunities and we will keep you updated as we make progress that's really helpful. Color. Thanks for you just as a follow up Kevin you mentioned I'm, sorry, if I missed the as you said that there was some delays tied to comment on the orders did you quantify that or if you can give us a little color that'd be helpful. Thanks.
No. We don't have the exact quantification of that but the you.
You know we are maintaining our guidance for the year and the but obviously with the cobot restrictions, there's been situations where demos on things like this gets delayed.
Just to add to the Kevins point, Peter as we said on our remarks, we expect that some of these delays are during our fourth quarter earnings call, which was the beginning or our fiscal year 21, and we provided that and we actually planned for that as part of our objectives and guidance that we provided.
Obviously, the scope at 19 pandemic has been beyond belief a more difficult and also at the extended the for their longer Oh, none of it's actually been outside of our scope and prospective and forecast. The we expected however, given that the current pandemic still can.
The news, we still expect some delays I am so proud of our team the job they have done in terms of the addressing both the contracting at obstacles and delays. The we have been experiencing with customers as well as the supply chain issues, the weve experienced with some suppliers not.
I'll, just very select from some of them. So overall, we're making great progress we're on track and as you can see from our results of that supports it and then also for the second half of the year, we are positioned well, although we just want to give you all of the color as to what the landscape looks like going into the second half of this year and we'll keep you updated.
Thank you Peter.
Once again to ask a question. Please press star and the number one on your Touchtone phone our.
Our next question comes from Joe Denardi at Stifel True.
Hey, good afternoon everybody.
Joe Wahid.
You mentioned that you're not expecting I guess, the the omams funding issue to impact.
I guess revenue for next year, but as it relates to some of the order delays that you're seeing now should we take that into account as we think about next years revenue is that of potential risk are you assuming that that does kind of negative negatively impact the business next year. So Joe I mean, we are very.
Very very.
Focused on executing our fiscal year 21, right now we will provide specific color to fiscal 22 on on fourth quarter earnings call I do however on the under the under a line or emphasize that our three consecutive years of you know topline growth and profitability show.
Shows the diversification and the resiliency of our portfolio now of course as many years ago not only do we have a diversified customer base, but also in terms of countries geography product line portfolio and opportunities we feel very good about our chances of long term value.
Creation and growth I believe that there are several factors that we're looking forward to at updating you as we progressed in terms of opportunities. The we have but I think the long term picture for US right now as of today looks quite good I mean, I really like on cars, given what's going on in the world and what our customers need and what on.
Opportunities, we've got in front of us irrespective of the elements I think that that's going to be.
It's just one element of many many other growth opportunities. The we have and even in that goes up for any we've been growing we've been willing or l. maps business for several years, there's significant dollars on the pipeline of.
We're talking to our customer is very very regularly obviously remotely and we think that we're going to overcome the issue, especially now that the current vaccines are becoming available of question.
Okay, and then well he is there any update on on the international Switchblade opportunities timing.
The that I'm the reality for real.
Nothing really has changed materially since last quarter, because we're still engaged with customers. Obviously this covert situation has made it difficult I engaging with international customers and having them to work with our the department of state as well as the Pentagon, but we still see potential you know multiple countries.
Is that our interest that engaged and as we have more updates. We'll let you know it's just a matter of when versus if you ask me so nothing as sick materially changed from that we'll continue to make progress, but at a slower rate due to the cobot.
Thank you for your questions true as a reminder, if you'd like to ask the question or a follow up question for you. Please press Star then one on your Touchtone phone on.
We'll now take the next question from Louie Dipalma from William Blair Louie.
Well I hate Kevin and Steve Good afternoon.
Good afternoon Louis.
Regarding the Switchblade 600 bake off for the organic precision fires mounted program I was wondering how strong our on Aerovironment Pat.
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For the the Switchblade way of capability.
A very very good question and great insight. The we are wave of is a one of the most important patents on or switchblade portfolio, but it's not the only one we believe the that patent is very critical it's very defensible Oh, we have multiple patents both in terms of.
Specific narrow technology patents that you know address the specifics you know very deep narrowed technology area, but also quite broad ones like the wave off so we have when we make these investments in R&D to develop these capabilities, we always think about how to make sure how we defend that.
And we also have a track record of defending our technology and our IP as youve seen from a previous gains that we've had and litigations are of similar type of matters matters. So again, I think that our technology strong I think our position and our progress. So far gives US also an advantage of.
But we're not relying just on that we believed that we want to make sure irrespective of technology that our solution as the best solution for our customers when it comes to their selection.
And we feel good about it so when we look forward to the competition as we always do up that's the business that we're very familiar with competing and having the high win rate on our competition.
Sounds good and you you guys made great progress with the Sun glider and you spoke about the the video call on high quality of resolution.
And Kevin you indicated that on the haps mobile had or a write down associated with its investment in Loon and I was wondering what are the implication of the.
Google potentially no longer looking to fund.
Loon and like is there an opportunity for aerovironment, a potentially acquire like on doing technology assets on the north to have that intellectual property for you know the telecom that's involved and you know the radio access layer and.
You know from pattern activity. Thanks. So Louis this is why heat up Ed Great question again in terms of the impairment. It was really just on accounting exercise on our side. It was related to an investment that haps mobile made into Luna they'll see that based on.
Alphabet, and Luna and Lcvs own the.
Decision and process accounting process.
Triggered a devaluation.
Devaluation of that investment, which then triggered a impairment in our side a onetime of course, and it's sort of ex expedited the the impairment the losses of our investments into haps mobile. So it has nothing to do with our business the operation.
Operations, particularly in the husband almost literally having to do with the haps mobiles <unk> relationship with us of Aerovironment and terms of Lou and that's really a question related to alphabet in Luna themselves I'm not in a position to have insight into that obviously, we are not involved in their business.
We feel very good about on relationship in general as they are sort of like a supplier to us on the payload of the haps mobile.
We flew that payload we demonstrated the capability, we continue to talk and work together and all of US both Softbank and Aerovironment is quite bullish about our beliefs and the Sun gliders prospects for success on the long run we've always believed on that I think that our track record of success of.
For substantiates and supports and proves the fact that this is a very viable platform for the kind of activity of the global population of the of human being on on the <unk> on the <unk> on the flow. So we look forward to that.
Thank you for the we will now turn back to Joe Denardi from Stifel with follow on question Joe.
Okay. So just just to for Kevin I think can you give us what the international sales were in the quarter, just total international including EPS.
The total international is actually split 50 50, it was just around 46 million lower.
The lower 40, so kind of him.
Great and you talked about kind of lower DNA I guess is the results of travel and trade shows how much of that is structural I mean, how material could that be on the other side of this do you expect the could be for.
For most of it the come back on to be reinvested elsewhere. Thank you.
It's difficult to say when the come back will happen so.
But obviously there would be some reinvestment at that time on we're not really putting the put the number on the right now.
Thanks for the follow on question Joe.
Yes, we appreciate it and at this point, we have no further questions. Today, we thank you for your attention and for your interest in Aerovironment, an archived version of this call all FCC filings and relevant company and industry news can be found on our website Avi Inc. Dotcom, we wish you a joyous and a healthy holiday season, the new year, and we look forward to speaking with you.
Again following next quarter's results good day.
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