Q4 2023 AeroVironment Inc Earnings Call
Good day, and thank you for standing by welcome to the Aerovironment fiscal year 2023 fourth quarter and full year conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session you will need.
Press Star one one on your telephone please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Joe Teater Balan with Aerovironment. Please go ahead.
Yeah.
Thanks, and good afternoon, ladies and gentlemen, welcome to Aerovironment for fiscal year, 2023 fourth quarter and full year earnings call. This is John a cheater Balan senior director of corporate development and Investor Relations.
Before we begin please note that certain information presented on this call contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095 each.
These statements involve many risks and uncertainties that could cause actual results to differ materially from our expectations.
The company undertakes no obligation to make any revision to any forward looking statements contained in our remarks today or to update them to reflect the events or circumstances occurring after this conference call joining.
Joining me today from Aerovironment, our chairman, President and Chief Executive Officer, Mr. Wahid, the lobby and senior Vice President and Chief Financial Officer, Mr. Kevin Mcdonnell.
We will now begin with remarks from Wahid Wahid Wahid.
Thank you Joanna.
Welcome everyone to our fiscal year 2023 fourth quarter earnings Conference call.
I will start by summarizing our performance and recent achievements after which Kevin will review our financial results in greater detail I.
I will then provide information related to our expectations for fiscal year, 2024, after which Kevin John and I will take your questions.
I'm pleased to report that the fourth quarter.
Results exceeded most of our expectations and we set records across many key financial metrics.
Our key messages, which are included on slide number three of our earnings presentation are as follows.
Fourth quarter revenue rose to $186 million, a 40% increase compared to fiscal year 2022 fourth quarter, while the product revenue nearly doubled year over year to just under a $142 million.
Second for the full year revenue increased to $541 million versus $446 million last year, representing 21% growth.
This makes it six consecutive years of top line growth.
Third our funded backlog also doubled from fiscal year 2022 to set another record at $424 million.
This backlog was driven by more than $750 million in bookings throughout fiscal year 2023, reflecting strong demand for our solutions led by our small UAS or S UAS and tactical missile systems or Tms businesses.
And fourth given recent performance trends.
Visibility into coming quarters, we're providing fiscal year 2024 guidance that reflects nearly 20% growth in revenue.
Our margins and improve bottom line results.
The fundamentals of our business are strong and we're well positioned for significant expansion and value creation in fiscal year 2024 and beyond.
The improvement in our fourth quarter revenue was primarily due to a higher S UAS and Tms sales up 60% and more than 100%, respectively compared to the prior year period.
Yeah.
These results reflect ongoing demand for our switchblade and Puma products.
Gross margin for the fourth quarter was $68 4 million, an increase of 41% versus last fiscal year was $48 $6 million.
Our gross margin as a percentage of sales was approximately 37% in both periods.
As previously discussed we expect gross margins to remain strong in fiscal year 2024, as our revenue mix continues to shift to more favorable product sales.
As Kevin will cover in a moment, our pro forma bottom line profitability metrics were also much stronger this quarter.
This improvement was primarily driven by higher revenues, which more than offset increased operating expenses.
This quarter capped a record year for Aerovironment.
I carefully managing through challenges of the past few years, such as supply chain constraints labor shortages and inflationary pressures, we have accelerated our growth and success.
Given our current backlog and robust demand for the Companys broad portfolio of innovative unmanned solutions, we stand at the inflection point of a new phase of growth.
I wanted to thank our investors for their continued support, especially as we enter this new chapter.
As always we're committed to delivering value to our shareholders and visibility into our progress.
Finally, we're deeply honored and extremely proud of the growing level of assistance, we have provided to our country and allies, including Ukraine.
Before we discuss each segment I want to address the recent news that Aerovironment was not selected by the U S. Army to proceed further with increment two of the future tactical unmanned aircraft systems, otherwise known as FTE OAS.
While we're disappointed we are fully assessed the U S. Army's evaluation process and submitted a request for further clarification.
We remain confident that the jumped 20 UAS is the most versatile and cost effective solution and the group two three UAS market today and will continue to focus on meeting the current needs of our customers.
We're humbled and honored to support the Ukraine defense efforts as the only group to three UAS solution named in the recent U S aid package.
The F T U S. Increments, we had been awarded to date did not comprise significant revenue for Aerovironment.
We recorded a noncash charge of $190 2 million in the fourth quarter related to the N UAS business and Kevin will discuss its details further shortly.
Importantly, the Army's decision will not have a material impact on near term revenue growth.
As we look ahead, we will focus on areas, where we can improve to ensure we meet our customers' needs.
Further we remain focused on winning other key programs by continuing to leverage the strength of our robust portfolio of innovative unmanned solutions.
Okay.
Despite our exit from Ft U S. Increment two we remain bullish on our medium UAS R. M UAS product line.
<unk> 'twenty stands apart in its ability to perform in contested environments with an unmatched capacity to carry our own payloads and we believe it's the best group two three solution on the market today.
There are multiple domestic and international opportunities, which we are currently pursuing that presents significant growth potential in the coming years.
Now shifting gears to other product lines are suas business delivered a record year of performance on the back of our largest ever foreign military sales award and support of Ukraine.
We're proud that our Puma systems have gained again and again proven themselves on the battlefield and are providing scouting and support for all U S supplied artillery weapon systems deployed in Ukraine.
We expect SaaS revenue to remain strong in fiscal year 2024.
We have also launched several new products and additional enhancements to our suas portfolio and expect sales of these solutions to be a meaningful component of future revenues.
Our Tms business product line.
It presents a significant growth opportunity for the company.
Total Tms revenue for the quarter more than doubled year over year, but this is only the start.
The conflict in Ukraine, and our Switchblade success on the battlefield has accelerated the global trend towards increased adoption of loitering munitions.
We now have orders from for Allied Nations.
More importantly, the U S. Government has recently approved us to market and sell Switchblade to nearly 50 Allied countries up from 20 countries last year.
Given the current level of global interest our record backlog and growing demand in Switchblade, we expect our Tms business to be a leading growth driver for the company moving forward.
Our unmanned ground vehicles or <unk> product line achieved record levels of performance in the fourth quarter.
Similar to our Tms segment, <unk> revenue more than doubled year over year, resulting in the units best year since its inception.
We're also making marking solid progress, providing telematics and Theodore ground vehicles to Ukraine under an accelerated schedule and these vehicles are performing well on the battlefield.
We expect another growth year for this business in fiscal year 2024.
Our <unk> product line continues to make solid progress in the development of next generation Southern glider the successfully commercialized stratospheric based telecommunications services and partnership with Softbank.
We also recently received our first contract from the U S. Dod for this unique capability and are actively pursuing multiple other defense opportunities.
Given the current conflicts around the world, we believe that the defense market for Haps represents a multibillion dollar long term growth opportunity and we are well positioned to supply this large market with our highly differentiated solar haps solution.
Okay.
And finally, our Maccready works advanced solutions continues to establish Aerovironment as a leading global supplier of AI machine learning and autonomy powered unmanned systems.
With the support of this team.
As designing systems that will anticipate and evolve with the needs of our military.
These units and these include expandable autonomous capabilities that allow our UAS to continue operations without persistent radio link and advanced artificial intelligence and machine learning algorithms that can sense analyze and navigate the battle space.
We have deployed some of these capabilities within our product lines already and expect more in the future.
This segment also continues to pursue new and exciting lines of business, such as space robotics and protests in logistics that could become new business segments of their own for Aerovironment.
But creating works grew significantly in fiscal year 2023, and we expect to see additional top line growth in fiscal year 2024.
Before turning the call over to Kevin I would like to note that starting in Q1 of this fiscal year Aerovironment will define our segments differently to reflect a larger broader nature of our products and services and their associated end markets.
Okay.
Going forward, we will provide color on three segments.
Combining our suas and UAS and <unk> product lines.
We will be combined into a new unmanned systems segment.
Our tactical missile systems will now become loitering munition systems.
And our Maccready works segment will include the current liquidity works operations, along with Haps and other customer funded R&D programs.
We look forward to sharing more on this new segmentation next quarter.
With that I would like to now turn the call over to Kevin Mcdonald for a review of the fourth quarter financials, Kevin. Thank.
Thank you Wahid today I'll be reviewing the highlights of our fourth quarter and full year fiscal 2023 performance during which I will occasionally refer to our press release and earnings presentation available on our website.
We ended the year extremely strong in terms of bookings backlog revenue adjusted gross margins and adjusted EBITDA. While he will go over the guidance for FY 'twenty for next but we are set up for a strong revenue and EBITDA growth in FY 'twenty four.
However, as Wahid mentioned, we recorded a non noncash charges in the fourth quarter related to our medium UAS business I will cover these shortly.
Begin by providing some more detail on the quarter revenue on a quarter.
Revenue for the fourth quarter of fiscal 2023 was that a new record level of $186 million, an increase of 40% from the fourth quarter of fiscal 2022 slide five of the earnings presentation provides a breakdown of revenue by segment for the quarter, our largest segment during the quarter was small UAS with a rep.
Third $94 $6 million of revenue up from last year's $59 2 million.
We saw a healthy mix of business within small UAS with reclaimed shipments just over 40% and the remainder from new customers and upgrades to existing customers.
We are seeing strong demand beyond just Ukraine.
Tactical missile systems, or Tms recorded revenue of $42 5 million compared to $22 million last year. During Q4. It is also worth noting that we received $125 million of orders for our Tms products in Q4, bringing the total for the year to just over 230 million showing the strength of domestic and global demand.
For the Switchblade products.
<unk> from the other segment, which includes <unk> have some equating works businesses increased year over year.
The $40 6 million versus $30 1 million in the fourth quarter of fiscal 2022.
Our medium UAS segment finished with revenue for the quarter of $8 3 million or 33% decrease compared to the fourth quarter of fiscal year 'twenty two.
<unk> revenue result of the lower focus cocoa service replication.
For the year revenues hit a record 540.
$5 million, which is 21% higher than fiscal 2022.
Also had record bookings for the year at over $750 million.
This is mostly organic revenue growth reflects the strong global demand for our products.
Turning to gross margins in slide five of the earnings presentation, We show a breakdown between product and service revenue specifically during the fourth quarter product revenues accounted for 76% of total revenues an increase from 56% in the corresponding quarter of the previous year.
The product mix shift was expected due to the substantial increase in sales, so small UAS and Tms products.
Slide six of the earnings presentation shows the trend of adjusted product and the service gross margins, while slide 12 reconciles the GAAP gross margin margins to the adjusted gross margins, which excludes intangible amortization expense and <unk>.
And other noncash purchase accounting items in.
In the fourth quarter GAAP gross margins remained steady at 37% identical to the fourth quarter of the previous year on the other hand, the non-GAAP adjusted gross margin slightly decreased to 39% from 40% in the prior year.
Adjusted gross product margins for the quarter were 47% versus 49% in the fourth quarter of last fiscal year the year over year decline in adjusted product gross margin can be attributed to the higher mix of Tms revenue.
Terms of adjusted service gross margins the fourth quarter was up 13% versus 28% during the same quarter last year, primarily due to the accelerated accretion depreciation charges related to our cocoa service assets of $4 4 million.
For the full year GAAP gross margins ended at 32% in fiscal 2023.
Same level as last fiscal year, and adjusted gross margins decreased from to 35% from 36%.
The decrease in adjusted gross margins is primarily due to the $10 $5 million.
Accelerated depreciation from our medium UAS Coco assets.
Expected, we expect justice gross margins to improve to the high thirties.
24, with the shift to more product revenues and transition and transition of service margins to a more normal level.
In terms of adjusted EBITDA Slide 13 of our earnings presentation shows the reconciliation of the GAAP net loss to adjusted EBITDA.
In the fourth quarter of fiscal 2023, adjusted EBITDA was $46 million.
Representing an increase of over 60% from last year. The main factor contributing to this increase was higher sales volumes.
Which was partially offset by increased SG&A expenses and investments in R&D for the full fiscal year 2023, adjusted EBITDA was $90 million representing.
The increase of 43% from last year.
SG&A expense, including excluding intangible amortization and acquisition related expenses for the fourth quarter was 13% of revenue and 15% of revenue for the fiscal year 2023 appear to full fiscal year 2022 of 16% of revenue.
R&D expense for the fourth quarter was 9% of revenue and 12% for full fiscal year 2023, we will continue to run R&D in the 10% to 12% range as we invest in new products and upgrades of existing products to meet the evolving needs of our customers.
Now turning to GAAP earnings during the fourth quarter the company in Canada net loss of $160 5 million of which a $190 1 million.
A noncash noncash charges related to the medium UAS business of the total noncash charge $34 1 million was the acceleration of intangible asset amortization related to a particular customer this.
The accelerated amortization was reported SG&A expense in the quarter.
<unk> hundred 56 million of the total noncash charge was the goodwill adjustment from the reevaluation of the medium UAS goodwill from the Arcturus acquisition as a result of recasting of the future cash flows as a result of the EFT UAS increment two loss, although we remain optimistic about the medium UAS business in both the short and long.
<unk> current business conditions dictate these adjustments.
Slide 10 shows the reconciliation of GAAP and adjusted or non-GAAP diluted EPS GAAP EPS loss was $6 31 per share in the quarter and a loss of $7 <unk> per share for the year, both reflecting the noncash charges discussed previously.
Terms of non-GAAP EPS the company posted adjusted earnings per diluted share of 99 for the fourth quarter of fiscal 2023 versus 12 cents per diluted share for the fourth quarter of fiscal 2022 full year. Adjusted EPS was $1 26 per share versus $1 six per share in fiscal 2022.
Turning to our balance sheet total cash restricted cash and investments at the end of the quarter was $156 5 million, which is an increase of 51 point not.
<unk> 9 million from the third quarter of fiscal 2023. In addition, we reduced our debt by over $50 million. During fiscal 2023, we did see an increase in working capital during the fourth quarter, driven primarily by increased accounts receivable related to the higher sales volume as we indicated in prior quarters, we expect to see kantar.
The increase in inventories and other working capital to support a higher level of business and minimize exposure to the supply chain issues and long lead times.
We continue to have a strong balance sheet with over $150 million of cash restricted cash and investments and 100 million working capital facility, but no outstanding balance now I'd like to turn things back to <unk>.
Thanks, Kevin the macro environment continues to support greater adoption of unmanned solutions.
The Ukraine conflict has accelerated existing trends towards greater adoption of distributed solutions, such as small drones and loitering munitions by demonstrating their effectiveness against well equipped adversaries.
These solutions are highly impactful, but typically far less expensive have shorter lead times and enabled an agile cost structure compared with larger traditional manned systems.
Further these solutions enable countries with smaller defense budgets to secure effective defensive capabilities and provide a deterrent to adversaries.
We believe these global trends combined with our market, leading technology, driven unmanned solutions will support our growth in fiscal year 2024 and for years to come.
I'm now pleased to provide our guidance for fiscal year 2024 shown on slide number seven as follows.
We anticipate revenue of between $630 million and $660 million.
We forecast net income between $50 million to $58 million.
Or $1 91 to $2 two 2021 per diluted share.
non-GAAP adjusted EBITDA of between $110 million and $120 million.
And non-GAAP earnings per diluted share excluding acquisition related costs amortization of intangible assets and other one time expenses of between $2 30, and $2 60.
We expect to deliver adjusted EBITDA of between 16% and 18% of revenue for the full fiscal year.
While R&D investment is anticipated to remain between 10% to 12% of revenue.
Our funded backlog at the end of fiscal year 2023 was a record $424 million.
As a result visibility to the midpoint of our fiscal year 2004 revenue guidance range is at 78%.
This visibility sets us up for a strong fiscal year 2024.
We expect first half revenue to represent almost 50% of the full fiscal year.
Further Q1 revenue should account for nearly 40% of first half revenues.
Before turning the call over for questions. Let me once again summarize the key points from today's call.
First we delivered record fourth quarter performance and met or exceeded our expectations.
Second full year revenue was also a record marking our sixth consecutive year of topline growth.
Third our funded backlog is at record levels, reflecting strong global demand for our solutions.
And fourth the fundamentals of our business are as strong as they've ever been and we expect fiscal year 2024 to be yet another record setting year for the company.
I'm also excited to inform you that admiral filled Davidson recently joined our board of directors.
Admiral David since outstanding qualifications and credentials speak for themselves.
His guidance and formed by his extensive and relevant military expertise will be key and enabling us to better support our customers while capitalizing on the significant opportunities in front of us.
I would like to thank our talented team for their dedication and hard work and helping our customers achieve their vital missions.
Based on their perseverance, the faith and trust in us by our customers and the ongoing support of our investors. We believe we are in the best shape ever for a record setting fiscal year 2024.
We remain committed to delivering superior returns.
Our investors.
And with that Kevin and John and I will now take your questions.
Thank you as a reminder to ask a question you will need to press star one on your telephone. Please stand by while we compile the Q&A roster. We respectfully ask that you stick to a two question limit and return to the queue to ask further questions.
Our first question comes from Ken Herbert with RBC capital markets. You May proceed.
Yeah, Hey, good afternoon.
Wahid and Kevin and Joseph.
Good afternoon, Kevin Hi, Ken.
Hey.
Nice nice end of the fiscal year Wahid I wondered if you could provide a little more granularity on the revenue guidance for fiscal 'twenty four and specifically can you comment on the implied assumptions for growth within sort of the current Tms and suas segments.
Thanks, Ken and of course, our team did a fantastic job, we're proud of the achievements.
Especially given the challenges that we've had in the large quarter record year in terms of backlog revenue all across the board pretty much very strong results for fiscal 'twenty, three and more importantly, as you mentioned it sets us up really really well for fiscal year 'twenty four.
Again, another record funded backlog and 78% visibility toward the midpoint of our guidance in terms of growth, we expect both Tms and <unk>.
Unmanned systems, our SaaS product lines to have significant growth in the <unk>.
Coming year.
Demand for our systems and our products are pretty broad across the board.
And not just the United States, but also internationally. So it's a pretty diversified set of customers opportunities and product portfolio, that's driving and fueling our growth.
We obviously.
Expect to grow very significantly next year close to almost $100 million.
On top of a very strong growth year and the <unk>.
Other thing Thats really important also to note is that the strong backlog and visibility is allowing us to level load the quarters, which allows us to have app roughly evenly first half second half maybe first half was slightly lower than 50%, but close to it and then first quarter being almost 40% of the first.
<unk> revenue so all of those things as a result of really strong demand for our products across the market and a change in the paradigm I see an inflection point here in the market, where small unmanned systems as well as loitering munitions is really changing the way that military think about getting prepared to defend them.
Selves and fight wars in the future.
Yeah. Thanks, Wahid I think you mentioned that your you have gotten approval now to sell the switchblade into I think 50 countries can you just comment on actually how many countries you have been selling the system into and what what's the runway as you think about sort of capturing or obviously.
Getting sales eventually into all 50 of those countries.
Sure So Ken as I mentioned.
Have.
Orders, so far that we have booked from for allied countries.
Yes.
To date.
However, the list your rights as grown the list of countries that the U S. Dod and the state Department has given us an approval.
Two market and eventually sell too.
Basically more than doubled from 'twenty before last year to close to 50 countries now.
Actively involved so thats by by itself is a very large increase and it shows that there are lots of countries that are.
In need of this and they would like to have this capability and be our track record and performance in Ukraine.
The U S military has demonstrated the capability and the value of this system and so <unk> been very encouraging and positive in supporting us to increase that list of 50 countries in terms of.
How many countries do I think it's going to happen I think this is going to follow a very similar trend, although it might be a little bit faster.
Our small UAS has gone through over the last decade over the last decade. If you recall, our small UAS has grown from very small number of countries to well over 50 countries now and I think that the Tms business, our loitering munition that we kind of call. It in the future at a similar potential.
Actively engaged with several countries several countries across the world.
Europe , and Asia, and many of them have interest and acquiring and.
Getting this capability.
So I think over the next year or two we're going to continue to increase the number of countries and this business is set up for very healthy growth in the years to come.
Great. Thanks, Mohit I'll pass it back there.
You're welcome Ken Thanks, Ken.
Thank you.
Our next question comes from Louis Dipalma with William Blair You May proceed.
Go ahead, Kevin and John and good afternoon.
Hi, Louis.
Hey.
Wahid at your Analyst Day, you just Paul.
You're working on development of several new products, including <unk>.
Vertical takeoff and landing Puma.
Our helicopter capable off.
Being a small munitions payload and also the the Jackal Turbo jet Air launched loitering Munition can you provide an update on the development of some of these new products.
Sure Louise that is very much accurate what you just mentioned we have introduced several new products in our last analyst day.
We are.
Pleased to report that we've actually.
Started to ship some of those products to our customers and received orders for them as well.
And so as I mentioned in my remarks.
I see.
Decent portion of our future Suas product line revenue will be base.
Based on these new enhancements and new products that we're launching to the market. Obviously, it's going to take some time for that to ramp up because of the customers' acquisition cycle and timeframes, but so far the feedback from our customers has been very strong.
The the products also our category industry best in terms of their performance of vapor Max 55 that we just launched it as a helicopter electrically powered that is.
We have even demonstrated its capability to launch switchblade off of it so.
That by itself is a clearly a pretty critical capability that is so far to my knowledge has not really matched in that size and cheap form.
Jack will of course is a product that we're partnering with Northrop Grumman for a specific opportunity with the U S Army program of record name called.
Long range precision munition Adelaar pm.
And obviously, we're making solid progress that is in the years to come it's not immediate.
It is a large program that we're going after that and Thats obviously a.
<unk>.
Our version of Switchblade as roughly the size of the Switchblade 600 that is more of a strength lawyers. So it actually travels on high speeds and then when it gets to the destination of our targeted slows down which gives us an edge.
A significant other set of capabilities and advantages in the battlefield.
And obviously, the Puma VTOL allows us to launch <unk> without one way and without hand launching them. So these products amongst many others is where we've been investing in the years ahead and will continue to invest because we see the need for these systems in our customers' demand for them going up not down and we're in a great position to capitalize on that especially given a V.
Very large installed base of customers.
So.
I also want to mention that another area that we've been investing over the last several years that I mentioned on my remarks is our AI autonomy and software analytics, allowing these systems to work in GPS denied operations without communications at all and being able to find targets and do automatic target recognition and in fact work cohesively as a team.
<unk> Puma can identify a target pass on that information to our switchblade, operator automatically where for the switchblade to be launched so these capabilities is really to some extent unique and gives us an advantage against our competitors because we have the largest family of system solutions that are integrated and interoperable and intelligent as a whole so that's really where our.
Our investments have been going and we look forward to reporting more progress in these areas in the quarters to come.
Thanks.
And Kevin you mentioned that I think there are $230 million worth of.
Tms orders for physical.
Fiscal 2023 are you able to share roughly how much of that was related to the switchblade 600.
Obviously, a lot of investor excitement over the 600 investors are looking for data points in terms of how that.
<unk> is progressing.
Thanks for the question Louis, but we don't really break out the.
Orders or backlog by the particular products I think both products have different markets.
We hope they both sell really really well.
Yes, and we have had very strong success, so far with our both all three models of our Switchblade variants Switchblade 300, Switchblade 600, Louis as well as the <unk> as you know, it's fairly well received product within this up by U S submarine community, but Switchblade 600, we feel very good about the market for that is very large.
We have shipped the product to our customers and are quite happy with that and we continue to do.
Increased capacity and production to meet the growing needs of our customers.
Sounds good thanks, Brian and thanks, Kevin.
Thank you. Thank you Louis.
Thank you.
Our next question comes from Greg Konrad with Jefferies. You May proceed.
Good evening and nice quarter.
Thank you, Greg that's correct Greg.
Maybe just to start on Tms Tms you called out revenue doubling in the quarter and only being the start how are you thinking about supply chain into fiscal year, 'twenty, four and how is that balance with demand and the ability to ramp and given the commentary around international does that have any impact on <unk>.
<unk> mix within the segment going forward is as those international awards do ramp.
So Greg yes.
Yes, we're very pleased with the progress we've been making on Tms as I said I consider this to be also an inflection point for loitering munitions in general.
Our loitering munitions product line.
The most battle proven.
Product in the market.
There is nothing out there that can match its track record and success.
And battle proven.
Sort of performance so far number one number two we do expect significant growth in fiscal year 'twenty four on Tms, even though we had a very strong year last year.
Our backlog is very very strong for Tms, but that's just the beginning in my view I think over the next several years at Tms business is going to continue to grow.
Really we are in an inflection point in this market. We've got a lot of customer indicators indicators and engagements that tells us that the demand for this could be very large it's a multibillion dollar market in my view worldwide and it's going to continue to grow.
And we haven't even.
Address the market. So far are penetrated the market for air launch effects the capability of switchblade to come off of such as <unk>.
Helicopters next generation helicopters next generation fighter Jets.
As well as from ground vehicles, such as the optionally manned fighting vehicle in terms of the lead times that continues to be.
Slight challenge at the lead times for some of our products is for the supply chain is a little long.
And we constantly are working on that but that does put some limitation into how much growth. We can have this year versus next year. So nonetheless.
We expect a very strong healthy growth this year fiscal 'twenty four and I believe that that's going to continue beyond fiscal 'twenty four and we're at an inflection point in our business and we're very excited about the opportunities for growth in the coming years.
We have line of sight on the supply chain necessary to meet our guidance levels for this year, yes, yes.
And then.
We've seen the advances around AI and I think you've called out.
A number of areas of progress.
How do you think about monetizing that going forward either through selling more systems or is there upgrade opportunities just trying to get a sense of what that can mean for the portfolio is that advances.
Sure. So that's a really really critical and important question, Greg that you're asking I'm glad you're asking it because.
I think that Theres, a lot of hype in the market with a lot of different players who.
Claim that they have.
A lot of capability in terms of autonomy and all this.
Aerovironment is been somewhat what I call.
Wyatt and humble in this area in terms of actually developing the capability and making sure that we deliver that capability in real world with our capability, but our solutions one of the first products that we launched in the space. This past year was called Puma visual navigation system, It's essentially a modular kit that you can buy.
That can be installed on all of our existing Puma systems, essentially and it allows our puma system to not rely on GPS signal at all it can literally find its location in space.
And chart, a way to get to where it needs to go to based on an operator's instructions without reliance on GPS. So that's just the beginning and we have the ability to do a lot more in this area.
Expect us over the next several years to continue to grow this capability and announce additional enhancements and new keeps our products both hardware and software in this space.
Today as you know our business is primarily made up of.
Hardware and services.
We expect that to change over time and impact in fact, it eventually include software.
As <unk>.
Selling items, whether that could be a subscription or a license TBD and it depends on really on our customer acquisition process, but I feel really good about it and we really have a lot of good positive momentum in this area that I think sets us apart from our competitors.
Thank you.
Yes.
Thank you.
Our next question comes from Jan Friends Engelbrecht with Baird You May proceed.
Good afternoon, Wahid, Kevin and Jenna on for Peter today.
Yeah.
Good afternoon.
Hey, good afternoon, Greg Congrats.
Congrats on a great quarter. So just wanted to get a quick question on the Switchblade 300, and sort of can you give us an indication of where you sit in terms of the Doj replenishment.
Initially <unk> seven hundreds.
Good runs with the majority being 300 billion.
And we just saw that $65 million order come in.
Couple of months ago can you sort of give us a sense of.
Is that fully been replenished because we don't really know the full breakdown of.
How much friends will be getting and also the other unnamed.
Allied nation.
Latest order.
So john's fronts. Thank.
Thank you for that question so far.
Have not really fully replenish the U S dod's.
Inventory and there's a few dynamics thats happening there number one.
We have delivered so far.
Quite a lot of number of switchblade to USD <unk>, who in turn has been provided them to the Ukraine forces.
<unk> been very happy with them and they are asking for more and more of them.
So we continue to do that.
The process to replenish the USD is most likely going to be more than a one year process.
It's going to continue beyond our fiscal year 'twenty for in my opinion, and we're working on several fronts with the USDA to fulfill that need.
A the need will be bigger than before.
They have really exhausted there.
Inventories and we need to replenish them and see there is also additional demand from several additional countries and so as those countries grow and they get to use the product in their adoption grows I think that our switchblade family of products is going to benefit and experience very healthy growth and next year as well as next.
Couple of years.
And obviously this year to some extent.
Limited based on lead times of primarily the warhead as to how many warheads. We can get we have secured our needs for this year, but for beyond this year's needs. We're still working on that so I think overall, both switchblade 306 hundred is going to benefit from several demand.
Drivers replenishment.
To deploy to your point, yes.
Your claim Ukraine more.
U S inventories will go up the number of variance is now two of them versus one in the water has a higher.
Average selling price and then of course, all the international demand and lastly, other platforms such as.
<unk> <unk> or <unk> with the <unk> all of those other programs and platforms are going to be an additional layer of demand for our switchblade family of systems.
Perfect. Thanks.
It's really helping if I can just have a quick follow up.
Just in terms of the jumped 20 system in the <unk> segment as a whole 2024 wouldn't have had a material revenue contribution from <unk>, but sort of by all accounts. The jumped 20 system has been highly durable lot of hours flown.
So obviously a surprising decision there, but can you just give us a sense of how youre thinking beyond 2024 for the system in the EMEA segment as a whole in terms of sort of plugging the shortfall.
If I missed orders.
It seems like Theres a lot of interest from.
From foreign Nations, but if you could just tell us how you're thinking sort of 335 onwards for that segment and products.
Sure. It's Fran so absolutely we're still very bullish on our medium UAS category. The group two three UAE UAS number one this was one opportunity with respect to our customer decision, but we're already engaged in asking them to provide more clarification as to why we are really really surprised by that but we have several.
Other potential opportunities internationally that were currently engaged in.
USDA specifically.
Selected jumped 22, the only two three UAB to provide to Ukraine.
They're conflict.
And we have several other programs of record the world chasing as well besides the U S Army programs. So while we're disappointed with that outcome of that competition.
We're going to continue to invest in it because we believe it's the best capability in the market.
Please group two three UAS actually is going to be a very strong growth market.
Specifically, given the kind of complex that are going on around the world.
Ultra long endurance and persistent ISR as a whole is a very large market and it's going to have even a greater multibillion dollar total addressable market.
Tam for group, two or three especially the jumped 20 system is fairly large and it's actually growing faster than many other UAS markets.
There is even an opportunity on the group two three category for us to conduct missions of group four five UAS at a fraction of the cost and at a fraction of the logistical footprint. So overall, our investment thesis and group two three UAS and in our medium UAS business still is intact and it's very bullish.
We're going to continue to invest in it we have a series of enhancements and improvements.
Upgrades that we have planned to do in this space and we're also engaged with multiple customers internationally.
To capitalize on those opportunities and as you said many of them.
I haven't have experimented and evaluated all the competitive offerings and they do believe that the jumped 20 as the best in class when it comes to its capable of leading value proposition against all competitors. So we feel bullish about that store.
Okay, great. Thanks for the detail really appreciate it I'll jump back in the queue.
Youre welcome yards.
Thank you and as a reminder to ask a question you will need to press star one one on your telephone.
And I would now like to turn the call back over to John a teeter Balan for any closing remarks.
Thank you and thank you once again for joining today's conference call and for your interest in Aerovironment. As a reminder, an archived version of this call all SEC filings and relevant news can be found on our website at <unk> Dot Com. We wish you a good evening and look forward to speaking with you again following next quarter's results.
Thank you everybody.
Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
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