AeroVironment Flies After a Strong Quarter

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AeroVironment (NASDAQ: AVAV) announced stronger-than-expected fiscal first-quarter 2018 results on Tuesday after the market closed, highlighting solid revenue increases, greater visibility with a growing funded backlog, and narrower bottom-line loss.

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With shares up nearly 10% in after-hours trading as of this writing, let's take a closer look at how the unmanned aircraft systems specialist kicked off its new fiscal year.

AeroVironment results: The raw numbers

Metric

Fiscal Q1 2018*

Fiscal Q1 2017

Year-Over-Year Growth

Revenue

$43.8 million

$36.2 million

21%

Net income (loss) attributable to AeroVironment

($4.4 million)

($11.6 million)

N/A

Net income (loss) per share attributable to AeroVironment

($0.19)

($0.51)

N/A

What happened with AeroVironment this quarter?

  • The first quarter is typically AeroVironment's lowest in terms of revenue and profits. Even so, these results compared favorably with its most recent guidance (provided in May), which called for quarterly revenue in the range of $40 million to $44 million and a wider per-share loss of $0.32 to $0.40.
  • The smaller-than-expected loss stemmed from a combination of favorable revenue mix of products and services, lower-than-expected operating expenses given a higher number of customer-funded research and development projects, and a $1 million income tax benefit related to the company's equity incentive plan.
  • Unmanned Aircraft Systems (UAS) revenue increased 18.9% year over year to $36.3 million.
  • Efficient Energy Systems (EES) revenue rose 31.3% to $7.5 million.
  • Funded backlog at the end of the quarter -- which includes "unfilled firm orders for which funding is currently appropriated [...] under a customer contract" -- grew a "healthy" 9.4% sequentially from last quarter to $85.3 million. Thus, AeroVironment's visibility into the midpoint of its full-year revenue guidance increased to 53%.

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What management had to say

AeroVironment CEO Wahid Nawabi stated:

The AeroVironment team successfully executed our plan in the first quarter[...]. A nine percent increase in funded backlog enhances our visibility and positions us to deliver on our fiscal 2018 goals. We remain focused on making continued progress on our long-term growth initiatives as we work to deliver results, capitalize on opportunities and create value for customers, employees and stockholders.

During the subsequent conference call, management offered several notable business highlights for its primary segments.

Within the small UAS segment, the company delivered its first 30 Snipe systems to its U.S. Department of Defense customer and shipped its first Puma AE and Raven systems to the U.S. Customs and and Border Patrol. In addition, AeroVironment looks forward to competing for the U.S. Army Soldier Borne Sensor program later this fiscal year. The company also continues to pursue the DoD frequency relocation program, which aims to modify all small UAS within the DoD fleet to operate on new radio frequencies.

Outside the U.S., AeroVironment added one new customer in the Middle East during the quarter, and secured a multiyear contract with the Australian Defense Force for Wasp AE systems and related services.

"We continue to experience growing international demand for our family of small UAS," Nawabi stated, "and we expect this demand to contribute meaningfully to our fiscal 2018 results."

Within the EES segment, AeroVironment's industrial EV charging business won a new contract and started shipments for an unnamed global carrier at one of the country's largest international airports. It also completed shipments to a major Asian airport with full network charging and ground support equipment battery management systems. On the passenger EV charging business, AeroVironment exceeded 61,000 level-two charging systems in North America, while delivering TurboCords to a new customer in Europe and commencing pilot shipments to China and Europe for Volvo.

Looking forward

Finally, AeroVironment reiterated its previous guidance for full fiscal-year revenue of between $280 million and $300 million and for earnings per diluted share of between $0.45 and $0.65.

That may seen odd given AeroVironment's relative outperformance in its fiscal first quarter. But given the one-time tax benefit, in particular, management clarified that its narrower loss relative to expectations in this light quarter won't necessarily equate to greater-than-expected earnings for full year.

"While we will continue to manage expenses carefully," added Nawabi, "we expect operating expenses to increase in the balance of the year, and revenue mix will continue to move around within quarters."

In the end, this was still a solid, if slightly better-than-anticipated, performance from Aerovironment, and it's hard for investors to ask much more as we delve deeper into the new fiscal year.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends AeroVironment. The Motley Fool has a disclosure policy.