What changed in this filing

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Item 1. Financial Statements

2020-12-09 compared with 2020-09-10 · 170 added, 93 removed, 520 unchanged (34% of the section changed)

6 unchanged sentences

Short-term investments

Accounts receivable, net of allowance for doubtful accounts of $ 1,054 at August 1, 2020 and $ 1,190 at April 30, 2020

Unbilled receivables and retentions (inclusive of related party unbilled receivables of $ 28,143 at August 1, 2020 and $ 15,779 at April 30, 2020)

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

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

Prepaid expenses and other current assets

21 unchanged sentences

Authorized shares— 10,000,000 ;

none issued or outstanding at August 1, 2020 and April 30, 2020

none issued or outstanding at October 31, 2020 and April 30, 2020

Common stock, $ 0.0001 par value:

Authorized shares— 100,000,000

Issued and outstanding shares— 24,104,564 shares at August 1, 2020 and 24,063,639 shares at April 30, 2020

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

Additional paid-in capital

10 unchanged sentences

Three Months Ended

Six Months Ended

Product sales

Contract services (inclusive of related party revenue of $ 16,386 and $ 12,335 for the three months ended August 1, 2020 and July 27, 2019, respectively)

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

and $ 27,838 and $ 25,728 for the six months ended October 31, 2020 and October 26, 2019, respectively)

Cost of sales:

13 unchanged sentences

Equity method investment loss, net of tax

Net loss attributable to noncontrolling interest

Net loss (income) attributable to noncontrolling interest

Net income attributable to AeroVironment, Inc.

6 unchanged sentences

Three Months Ended

Six Months Ended

Other comprehensive income:

Change in foreign currency translation adjustments

Unrealized loss on investments, net of deferred tax expense of $ 4 for the three months ended August 1, 2020

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

Total comprehensive income

Net loss attributable to noncontrolling interest

Net loss (income) attributable to noncontrolling interest

Comprehensive income attributable to AeroVironment, Inc.

2 unchanged sentences

Consolidated Statements of Stockholders’ Equity

For the three months ended August 1, 2020 and July 27, 2019 (Unaudited)

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

(In thousands except share data)

2 unchanged sentences

Balance at April 30, 2020

Net income (loss)

Unrealized loss on investments

5 unchanged sentences

Stock based compensation

Balance at August 1, 2020

Balance at October 31, 2020

Comprehensive

2 unchanged sentences

Adoption of ASU 2018-09

Net income (loss)

Unrealized gain on investments

Foreign currency translation

4 unchanged sentences

Stock based compensation

Balance at October 26, 2019

See accompanying notes to consolidated financial statements (unaudited).

AeroVironment, Inc.

Consolidated Statements of Stockholders’ Equity

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

(In thousands except share data)

Comprehensive

AeroVironment, Inc.

Balance at August 1, 2020

Net income (loss)

Unrealized loss on investments

Restricted stock awards forfeited

Tax withholding payment related to net share settlement of equity awards

Stock based compensation

Balance at October 31, 2020

Comprehensive

AeroVironment, Inc.

Balance at July 27, 2019

Foreign currency translation

Restricted stock awards

Restricted stock awards forfeited

Tax withholding payment related to net share settlement of equity awards

Stock-based compensation

Balance at October 26, 2019

See accompanying notes to consolidated financial statements (unaudited).

2 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Operating activities

4 unchanged sentences

Provision for doubtful accounts

Other non-cash expense

Non-cash lease expense (income)

Other non-cash (income) expense

Non-cash lease expense

Loss on foreign currency transactions

25 unchanged sentences

Net cash used in financing activities

Net decrease in cash, cash equivalents, and restricted cash

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

Cash, cash equivalents and restricted cash at beginning of period

1 unchanged sentence

Supplemental disclosures of cash flow information

Cash refunded (paid), net during the period for:

Cash paid, net during the period for:

Non-cash activities

Unrealized loss on investments, net of deferred tax expense of $ 4 for the three months ended August 1, 2020

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

Change in foreign currency translation adjustments

11 unchanged sentences

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation with respect to the interim financial statements have been included.

The results of operations for the three months ended August 1, 2020 are not necessarily indicative of the results for the full year ending April 30, 2021.

The results of operations for the three and six months ended October 31, 2020 are not necessarily indicative of the results for the full year ending April 30, 2021.

For further information, refer to the consolidated financial statements and footnotes thereto for the year ended April 30, 2020, included in the Company’s Annual Report on Form 10-K.

8 unchanged sentences

As the Company has the ability to exercise significant influence over the operating and financial policies of HAPSMobile, the Company’s investment has been accounted for as an equity method investment.

The Company has presented its proportion of HAPSMobile’s net loss in equity method investment activity, net of tax in the consolidated statements of operations.

The Company has presented its proportion of HAPSMobile’s net loss in equity method investment loss, net of tax in the consolidated statements of operations.

The carrying value of the investment in HAPSMobile was recorded in other assets.

During the three months ended October 31, 2020, the Company recorded its proportion of a loss for HAPSMobile’s impairment of its investment in Loon LLC in the amount of $ 8,363,000 .

Refer to Note 6—Equity Method Investments for further details.

7 unchanged sentences

CECL requires the reporting entity to estimate expected credit losses over the life of a financial asset.

CECL requires the credit loss to be recognized upon initial recognition of the financial asset.

CECL requires the credit loss to be recognized upon initial

recognition of the financial asset.

ASU 2016-13 requires the entity to adopt CECL using the modified retrospective transition approach through a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

As part of the assessment of the adequacy of the Company’s allowances for credit losses, the Company

considered a number of factors including, but not limited to, customer credit ratings, age of receivables, and expected loss rates.

As part of the assessment of the adequacy of the Company’s allowances for credit losses, the Company considered a number of factors including, but not limited to, customer credit ratings, age of receivables, and expected loss rates.

However, the adoption of CECL did not have a material impact to retained earnings for the Company.

17 unchanged sentences

In most instances, contract modifications are for additional goods and/or services that are distinct and, therefore, accounted for as new contracts.

The Company’s performance obligations are satisfied over time or at a point in time, which accounted for 38% and 62% of revenue during the three months ended August 1, 2020, respectively.

The Company’s performance obligations are satisfied over time or at a point in time.

Performance obligations are satisfied over time if the customer receives the benefits as the Company performs, if the customer controls the asset as it is being developed or produced, or if the product being produced for the customer has no alternative use and the Company has a contractual right to payment for the Company’s costs incurred to date plus a reasonable margin.

8 unchanged sentences

Contract costs include labor, materials, subcontractors’ costs, other direct costs, and indirect costs applicable on government and commercial contracts.

For performance obligations which are not satisfied over time per the aforementioned criteria above, revenue is

recognized at the point in time in which each performance obligation is fully satisfied.

For performance obligations which are not satisfied over time per the aforementioned criteria above, revenue is recognized at the point in time in which each performance obligation is fully satisfied.

The Company’s small UAS product sales revenue is composed of revenue recognized on contracts for the delivery of small UAS systems and spare parts.

Revenue is recognized at the point in time when control transfers to the customer, which generally occurs when title and risk of loss have passed to the customer.

On August 1, 2020, the Company had approximately $ 154,418,000 of remaining performance obligations under fully funded contracts with its customers, which the Company also refers to as funded backlog.

Performance obligations satisfied over time accounted for 40 % and 39 % of revenue during the three and six months ended October 31, 2020, respectively.

Performance obligations satisfied at a point in time accounted for 60 % and 61 % of revenue during the three and six months ended October 31, 2020, respectively.

On October 31, 2020, the Company had approximately $ 130,588,000 of remaining performance obligations under fully funded contracts with its customers, which the Company also refers to as funded backlog.

The Company currently expects to recognize approximately 92 % of the remaining performance obligations as revenue in fiscal 2021 , an additional 8 % in fiscal 2022, and the balance thereafter.

17 unchanged sentences

The impact of adjustments in contract estimates on the Company’s operating earnings can be reflected in either operating costs and expenses, or revenue.

The aggregate impact of adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was not significant for the three month period ended August 1, 2020 or the three month period ended July 27, 2019.

No adjustment on any one contract was material to the Company’s unaudited consolidated financial statements for the three month period ended August 1, 2020 or the three month period ended and July 27, 2019.

The aggregate impact of adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was not significant for the three or six month periods ended October 31, 2020 or the three or six month periods ended October 26, 2019.

No adjustment on any one

contract was material to the Company’s unaudited consolidated financial statements for the three or six month periods ended October 31, 2020.

During the three and six month periods ended October 26, 2019, the Company revised its estimates of the total expected costs to complete a contract associated with a design and development agreement.

The impact of the revised estimate on this contract on revenue related to performance obligations satisfied or partially satisfied in previous periods was an increase of approximately $ 1,118,000 and $ 976,000 , respectively.

Revenue by Category

1 unchanged sentence

Three Months Ended

Six Months Ended

Revenue by major product line/program

1 unchanged sentence

Three Months Ended

Six Months Ended

Revenue by contract type

7 unchanged sentences

Three Months Ended

Six Months Ended

Revenue by customer category

1 unchanged sentence

Three Months Ended

Six Months Ended

Revenue by geographic location

4 unchanged sentences

In the Company’s services contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals, which is generally monthly, or upon the achievement of contractual milestones.

Generally, billing occurs subsequent to revenue recognition, resulting in contract assets recorded in unbilled receivables and retentions on the consolidated balance sheet.

Generally, billing occurs subsequent to

revenue recognition, resulting in contract assets recorded in unbilled receivables and retentions on the consolidated balance sheet.

However, the Company sometimes receives advances or deposits from its customers before revenue is recognized, resulting in contract liabilities recorded in customer advances on the consolidated balance sheet.

1 unchanged sentence

These assets and liabilities are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period.

For the Company’s

product revenue, the Company generally receives cash payments subsequent to satisfying the performance obligation via delivery of the product, resulting in billed accounts receivable.

Changes in the contract asset and liability balances during the three month period ended August 1, 2020 were not materially impacted by any other factors.

For the Company’s product revenue, the Company generally receives cash payments subsequent to satisfying the performance obligation via delivery of the product, resulting in billed accounts receivable.

Changes in the contract asset and liability balances during the six month period ended October 31, 2020 were not materially impacted by any other factors.

For the Company’s contracts, there are no significant gaps between the receipt of payment and the transfer of the associated goods and services to the customer for material amounts of consideration.

Revenue recognized for the three month periods ended August 1, 2020 and July 27, 2019 that was included in contract liability balances at the beginning of each year was $ 1,973,000 and $ 830,000 , respectively.

Revenue recognized for the three and six month periods ended October 31, 2020 that was included in contract liability balances at the beginning of each year was $ 3,451,000 and $ 5,423,000 , respectively;

and revenue recognized for the three and six month periods ended October 26, 2019 that was included in contract liability balances at the beginning of each year was $ 828,000 and $ 1,658,000 , respectively.

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing performance.

17 unchanged sentences

The cost audits result in the negotiation and determination of the final indirect cost rates that the Company may use for the period(s) audited.

The final rates, if different from the provisional rates, may create an additional receivable or liability for the Company for CPFF and T&M contracts.

The final rates, if different from the provisional rates, may create an additional receivable or liability for the Company for

CPFF and T&M contracts.

For example, during the course of its audits, the DCAA may question the Company’s incurred costs, and if the DCAA believes the Company has accounted for such costs in a manner inconsistent with the requirements under Federal Acquisition Regulations, the DCAA auditor may recommend to the Company’s administrative contracting officer to disallow such costs.

3 unchanged sentences

During the fiscal year ended April 30, 2020, the Company settled rates for its incurred cost claims with the DCAA for fiscal year 2015 for an amount not significant.

At August 1, 2020 and April 30, 2020, the Company had no reserve for incurred cost claim audits.

At October 31, 2020 and April 30, 2020, the Company had no reserve for incurred cost claim audits.

Earnings Per Share

2 unchanged sentences

Three Months Ended

August 1, 2020

July 27, 2019

Six Months Ended

October 31, 2020

October 26, 2019

October 31, 2020

October 26, 2019

Denominator for basic earnings per share:

2 unchanged sentences

Denominator for diluted earnings per share

Potentially dilutive shares not included in the computation of diluted weighted-average common shares because their effect would have been anti-dilutive were 844 and 3,675 for the three months ended August 1, 2020 and July 27, 2019,

respectively.

Potentially dilutive shares not included in the computation of diluted weighted-average common shares because their effect would have been anti-dilutive were 23 and 269 for the three and six months ended October 31, 2020.

Potentially dilutive shares not included in the computation of diluted weighted-average common shares because their effect would have been anti-dilutive were 8,402 and 4,358 for the three and six months ended October 26, 2019, respectively.

Recently Issued Accounting Standards

11 unchanged sentences

Discontinued Operations

On June 29, 2018, the Company completed the sale of the substantially all of the assets and related liabilities of its efficient energy systems business segment (the “EES Business”) to Webasto Charging Systems, Inc.

On June 29, 2018, the Company completed the sale of substantially all of the assets and related liabilities of its efficient energy systems business segment (the “EES Business”) to Webasto Charging Systems, Inc.

(“Webasto”) pursuant to an Asset Purchase Agreement (the “Purchase Agreement”) between Webasto and the Company.

1 unchanged sentence

During the year ended April 30, 2019, the Company recorded a reduction to the gain resulting from a working capital adjustment of $ 486,000 .

During the year ended April 30, 2020, the Company and Webasto engaged an independent accounting firm to resolve a

working capital dispute with a maximum exposure of $ 922,000 pursuant to the terms of the Purchase Agreement.

In June 2020, the independent accounting firm determined the final adjustment to the working capital dispute to be $ 341,000 which has been recorded net of tax as discontinued operations in the consolidated statements of income for the year ended April 30, 2020.

During the year ended April 30, 2020, the Company and Webasto engaged an independent accounting firm to resolve a working capital dispute with a maximum exposure of $ 922,000 pursuant to the terms of the Purchase Agreement.

In June 2020, the independent accounting firm determined the final adjustment to the working capital dispute to be $ 341,000 which has been recorded net of tax as a loss of discontinued operations in the consolidated statements of income for the year ended April 30, 2020.

The Company is entitled to receive additional cash consideration of $ 6,500,000 (the “Holdback”) upon tendering consents to assignment of two remaining customer contracts to Webasto.

The Holdback was not recorded in the Company’s consolidated financial statements as the amount was not realized or realizable as of August 1, 2020.

The Holdback was not recorded in the Company’s consolidated financial statements as the amount was not realized or realizable as of October 31, 2020.

The Company’s satisfaction of the requirements for the payment of the Holdback is currently in dispute.

14 unchanged sentences

Concurrent with the execution of the Purchase Agreement, the Company entered into a transition services agreement (the “TSA”) to provide certain general and administrative services to Webasto for a defined period.

Income from performing services under the TSA was $ 38,000 and $ 444,000 and has been recorded in other income, net in the consolidated statements of income for three months ended August 1, 2020 and July 27, 2019, respectively.

Income from performing services under the TSA was $ 0 and $ 38,000 and has been recorded in other income, net in the consolidated statements of operations for three and six months ended October 31, 2020, respectively, and $ 45,000 and $ 489,000 for three and six months ended October 26, 2019, respectively.

Investments consist of the following (in thousands):

15 unchanged sentences

Available-For-Sale Securities

As of August 1, 2020 and April 30, 2020, the balance of available-for-sale securities consisted of state and local government municipal securities, U.S.

As of October 31, 2020 and April 30, 2020, the balance of available-for-sale securities consisted of state and local government municipal securities, U.S.

government securities, U.S.

2 unchanged sentences

Realized gains on sales of these investments on the basis of specific identification is recorded in interest income.

The following table is a summary of the activity related to the available-for-sale investments recorded in short-term and long-term investments as of August 1, 2020 and April 30, 2020, respectively (in thousands):

August 1, 2020

The following table is a summary of the activity related to the available-for-sale investments recorded in short-term and long-term investments as of October 31, 2020 and April 30, 2020, respectively (in thousands):

October 31, 2020

Municipal securities

7 unchanged sentences

Total available-for-sale investments

The amortized cost and fair value of the available-for-sale debt securities by contractual maturity at August 1, 2020 were as follows (in thousands):

The amortized cost and fair value of the available-for-sale debt securities by contractual maturity at October 31, 2020 were as follows (in thousands):

Due within one year

6 unchanged sentences

● Level 3—Inputs to the valuation that are unobservable inputs for the asset or liability.

The Company’s financial assets measured at fair value on a recurring basis at August 1, 2020, were as follows (in thousands):

The Company’s financial assets measured at fair value on a recurring basis at October 31, 2020, were as follows (in thousands):

Fair Value Measurement Using

19 unchanged sentences

In December of 2017, the Company and SoftBank formed a joint venture, HAPSMobile, which is a Japanese corporation.

As of August 1, 2020, the Company’s ownership stake in HAPSMobile was approximately 7 %, with the remaining 93 % held by SoftBank.

As of October 31, 2020, the Company’s ownership stake in HAPSMobile was approximately 7 %, with the remaining 93 % held by SoftBank.

In connection with the formation of the joint venture on December 27, 2017, the Company initially purchased shares of HAPSMobile representing a 5 % ownership interest in exchange for an investment of 210,000,000 yen ($ 1,860,000 ).

6 unchanged sentences

As the Company has the ability to exercise significant influence over the operating and financial policies of HAPSMobile pursuant to the applicable Joint Venture Agreement and related organizational documents, the Company’s investment is accounted for as an equity method investment.

For the three months ended August 1, 2020 and July 27, 2019, the Company recorded its ownership percentage of the net loss of HAPSMobile, or $ 1,008,000 and $ 1,347,000 , respectively, in equity method investment loss, net of tax in the unaudited consolidated statement of income.

At August 1, 2020 and April 30, 2020, the carrying value of the investment in HAPSMobile of $ 9,522,000 and $ 10,455,000 , respectively, was recorded in other assets.

For the three and six months ended October 31, 2020, the Company recorded its ownership percentage of the net loss of HAPSMobile, or $ 9,522,000 and $ 10,810,000 , respectively, in equity method investment loss, net of tax in the unaudited consolidated statement of income, of which $ 8,363,000 related to the Company’s proportion of a loss for HAPSMobile’s impairment of its investment in Loon LLC.

HAPSMobile initially made its investment in Loon LLC in April 2019.

For the three and six months ended October 26, 2019, the Company recorded its ownership percentage of the net loss of HAPSMobile, or $ 863,000 and $ 2,210,000 , respectively, in equity method investment loss, net of tax in the unaudited consolidated statement of operations.

At October 31, 2020 and April 30, 2020, the carrying value of the investment in HAPSMobile of $ 0 and $ 10,455,000 , respectively, was recorded in other assets.

As the Company’s investment has been written down to zero, no future losses of HAPSMobile Inc.

will be recorded in equity method investment loss, net of tax in subsequent periods.

Investment in Limited Partnership Fund

3 unchanged sentences

The Company accounts for investments in limited partnerships as equity method investments as the Company is deemed to have influence when it holds more than a minor interest.

For the three months ended August 1, 2020, the Company recorded its ownership percentage of the net loss of the limited partnership, or $ 280,000 , in equity method investment loss in the consolidated statements of income.

For the three months ended July 27, 2019, the Company recorded no net loss of the limited partnership.

At August 1, 2020 and April 30, 2020, the carrying value of the investment in the limited partnership of $ 5,334,000 and $ 4,442,000 , respectively, was recorded in long-term investments.

For the three and six months ended October 31, 2020, the Company recorded its ownership percentage of the net loss of the limited partnership, or $ 0 and $ 280,000 , respectively, in equity method investment loss in the consolidated statements of income.

For the three and six months ended October 26, 2019, the Company recorded no net loss of the limited partnership.

At October 31, 2020 and April 30, 2020, the carrying value of the investment in the

limited partnership of $ 5,335,000 and $ 4,442,000 , respectively, was recorded in long-term investments.

Warranty Reserves

1 unchanged sentence

The warranty reserve is included in other current liabilities.

The related expense is

included in cost of sales.

Warranty reserve activity is summarized as follows for the three months ended August 1, 2020 and July 27, 2019, respectively (in thousands):

The related expense is included in cost of sales.

Warranty reserve activity is summarized as follows for the three and six months ended October 31, 2020 and October 26, 2019, respectively (in thousands):

Three Months Ended

Six Months Ended

Beginning balance

12 unchanged sentences

Intangibles, net

The weighted average amortization period at August 1, 2020 and April 30, 2020 was four years .

Amortization expense for the three months ended August 1, 2020 and July 27, 2019 was $ 709,000 and $ 552,000 , respectively.

The weighted average amortization period at October 31, 2020 and April 30, 2020 was four years .

Amortization expense for the three and six months ended October 31, 2020 was $ 715,000 and $ 1,424,000 , respectively.

Amortization expense for the three and six months ended October 26, 2019 was $ 755,000 and $ 1,327,000 , respectively.

Technology, in-process research and development, customer relationships, trademarks and tradenames, and non-compete agreements were recognized in conjunction with the Company’s acquisition of Pulse on June 10, 2019.

1 unchanged sentence

Estimated amortization expense for the next five years is as follows (in thousands):

At August 1, 2020 and April 30, 2020, the goodwill balance was $ 6,340,000 , which represents the goodwill attributable to the acquisition of Pulse.

At October 31, 2020 and April 30, 2020, the goodwill balance was $ 6,340,000 , which represents the goodwill attributable to the acquisition of Pulse.

Refer to Note 17—Business Acquisitions for further details.

17 unchanged sentences

The components of lease costs recorded in cost of sales for product sales and contract services and selling, general and administrative (“SG&A”) expense were as follows (in thousands):

Three Months Ended

Six Months Ended

Operating lease cost

4 unchanged sentences

Supplemental lease information were as follows:

Three Months Ended

Six Months Ended

(In thousands)

4 unchanged sentences

Weighted average discount rate

Maturities of operating lease liabilities as of August 1, 2020 were as follows (in thousands):

Maturities of operating lease liabilities as of October 31, 2020 were as follows (in thousands):

Total lease payments

3 unchanged sentences

The components of accumulated other comprehensive income and adjustments are as follows (in thousands):

Three Months Ended

Six Months Ended

Balance, net of $ 0 deferred taxes, as of April 30, 2020 and April 30, 2019

Changes in foreign currency translation adjustments

Unrealized losses, net of $ 4 of deferred taxes for the three months ended August 1, 2020

Balance, net of $ 4 and $ 0 deferred taxes, as of August 1, 2020 and July 27, 2019, respectively

Unrealized losses, net of $ 1 of deferred taxes for the six months ended October 31, 2020

Balance, net of $ 1 and $ 0 deferred taxes, as of October 31, 2020 and October 26, 2019, respectively

Customer-Funded Research & Development

Customer-funded R&D costs are incurred pursuant to contracts (revenue arrangements) to perform R&D activities according to customer specifications.

These costs are direct contract costs and are expensed to cost of sales as costs are incurred.

These costs are direct contract costs and are expensed to cost of sales as costs are

Revenue from customer-funded R&D contracts are recognized in accordance with Topic 606 over time as costs are incurred.

Revenue from customer-funded R&D was approximately $ 23,426,000 and $ 15,120,000 for the three months ended August 1, 2020 and July 27, 2019, respectively.

Revenue from customer-funded R&D was approximately $ 20,742,000 and $ 44,168,000 for the three and six months ended October 31, 2020, respectively.

Revenue from customer-funded R&D was approximately $ 17,506,000 and $ 32,626,000 for the three and six months ended October 26, 2019, respectively.

Long-Term Incentive Awards

6 unchanged sentences

Settlement of the PRSUs will be made in fully-vested shares of common stock.

For the three months ended August 1, 2020, the Company recorded $ 91,000 of compensation expense related to the Fiscal 2021 LTIP.

At August 1, 2020, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2021 LTIP is $ 7,946,000 .

For the three and six months ended October 31, 2020, the Company recorded $ 347,000 and $ 438,000 of compensation expense related to the Fiscal 2021 LTIP.

The Company recorded no compensation expense related to the Fiscal 2021 LTIP for the three and six months ended October 26, 2019.

At October 31, 2020, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2021 LTIP is $ 7,946,000 .

During the three months ended July 27, 2019, the Company granted awards under the Restated 2006 Plan to key employees (“Fiscal 2020 LTIP”).

Awards under the Fiscal 2020 LTIP consist of:

(i) time-based restricted stock awards,

which vest in equal tranches in July 2020, July 2021 and July 2022, and (ii) PRSUs, which vest based on the Company’s achievement of revenue and operating income targets for the three-year period ending April 30, 2022.

(i) time-based restricted stock awards, which vest in equal tranches in July 2020, July 2021 and July 2022, and (ii) PRSUs, which vest based on the Company’s achievement of revenue and operating income targets for the three-year period ending April 30, 2022.

At the award date, target achievement levels for each of the financial performance metrics were established for the PRSUs, at which levels the PRSUs would vest at 100 % for each such metric.

2 unchanged sentences

Settlement of the PRSUs will be made in fully-vested shares of common stock.

For the three months ended August 1, 2020 and July 27, 2019, the Company recorded $ 80,000 and $ 131,000 of compensation expense related to the Fiscal 2020 LTIP, respectively.

At August 1, 2020, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2020 LTIP is $ 4,263,000 .

For the three and six months ended October 31, 2020, the Company recorded $ 264,000 and $ 345,000 of compensation expense related to the Fiscal 2020 LTIP, respectively.

For the three and six months ended October 26, 2019, the Company recorded $166,000 and $297,000 of compensation expense related to the Fiscal 2020 LTIP, respectively.

At October 31, 2020, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2020 LTIP is $ 4,263,000 .

During the three months ended July 28, 2018, the Company also granted awards under the Restated 2006 Plan to key employees (“Fiscal 2019 LTIP”).

5 unchanged sentences

Settlement of the PRSUs will be made in fully-vested shares of common stock.

For the three months ended August 1, 2020 and July 27, 2019, the Company recorded $ 75,000 and $ 33,000 of compensation expense related to the Fiscal 2019 LTIP, respectively.

At August 1, 2020, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2019 LTIP is $ 2,478,000 .

During the three months ended July 29, 2017, the Company also granted awards under the Restated 2006 Plan to key employees (“Fiscal 2018 LTIP”).

For the three and six months ended October 31, 2020, the Company recorded $ 189,000 and $ 264,000 of compensation expense related to the Fiscal 2019 LTIP, respectively.

For the three and six months ended October 26, 2019, the Company recorded $ 16,000 and $ 48,000 of compensation expense related to the Fiscal 2019 LTIP, respectively.

At October 31, 2020, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2019 LTIP is $ 2,478,000 .

During the three months ended July 29, 2017, the Company also granted awards under the Restated 2006 Plan to key

employees (“Fiscal 2018 LTIP”).

Awards under the Fiscal 2018 LTIP consist of:

1 unchanged sentence

During the three months ended August 1, 2020, the Company issued a total of 16,228 fully-vested shares of common stock to settle the PRSUs in the Fiscal 2018 LTIP.

For the three months ended August 1, 2020 and July 27, 2019, the Company recorded no compensation expense and $ 8,000 of compensation expense related to the Fiscal 2018 LTIP, respectively.

At August 1, 2020 and April 30, 2020, the Company recorded cumulative stock-based compensation expense from the Fiscal 2021 LTIP, Fiscal 2020 LTIP and Fiscal 2019 LTIP of $ 1,853,000 and $ 1,607,000 , respectively.

For the three and six months ended October 31, 2020, the Company recorded no compensation expense.

For the three and six months ended October 26, 2019, the Company reversed $ 46,000 and $ 39,000 of compensation expense related to the Fiscal 2018 LTIP, respectively.

At October 31, 2020 and April 30, 2020, the Company recorded cumulative stock-based compensation expense from the Fiscal 2021 LTIP, Fiscal 2020 LTIP and Fiscal 2019 LTIP of $ 2,653,000 and $ 1,607,000 , respectively.

At each reporting period, the Company reassesses the probability of achieving the performance targets for the PRSUs.

1 unchanged sentence

No compensation cost is ultimately recognized for awards for which employees do not render the requisite service and are forfeited.

For the three months ended August 1, 2020 and July 27, 2019, the Company recorded a provision for income taxes of $ 1,207,000 and $ 2,133,000 , respectively, yielding an effective tax rate of 9.6 % and 10.4 %, respectively.

The variance from statutory rates for the three months ended August 1, 2020 was primarily due to federal R&D credits, foreign derived intangible income deductions and the recording of discrete excess tax benefits resulting from the vesting of restricted stock awards and exercises of stock options.

The variance from statutory rates for the three months ended July 27, 2019 was primarily due to federal R&D credits, foreign derived intangible income deduction and the recording of discrete excess tax benefits, resulting from the vesting of restricted stock awards and exercises of stock options.

For the three and six months ended October 31, 2020, the Company recorded a provision for income taxes of $ 2,491,000 and $ 3,698,000 , respectively, yielding an effective tax rate of 17.7 % and 13.9 %, respectively.

For the three and six months ended October 26, 2019, the Company recorded a provision for income taxes of $ 1,108,000 and $ 3,241,000 , respectively, yielding an effective tax rate of 11.7 % and 10.8 %, respectively.

The variance from statutory rates for the three and six months ended October 31, 2020 was primarily due to federal R&D credits, foreign derived intangible income deductions and the recording of discrete excess tax benefits resulting from the vesting of restricted stock awards and exercises of stock options.

The variance from statutory rates for the three and six months ended October 26, 2019 was primarily due to federal R&D credits, foreign derived intangible income deduction and the recording of discrete excess tax benefits resulting from the vesting of restricted stock awards and exercises of stock options.

Share Repurchase

In September 2015, the Company’s Board of Directors authorized a program to repurchase up to $ 25,000,000 of the Company’s common stock with no specified termination date for the program.

No shares were repurchased under the program during the three months ended August 1, 2020 or July 27, 2019.

As of August 1, 2020 and April 30, 2020, approximately $ 21,200,000 remained authorized for future repurchases under this program.

No shares were repurchased under the program during the three and six months ended October 31, 2020 or October 26, 2019.

As of October 31, 2020 and April 30, 2020, approximately $ 21,200,000 remained authorized for future repurchases under this program.

Related Party Transactions

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Under the DDA and related efforts, the Company will use its best efforts, up to a maximum net value of $ 173,820,000 , to design and build prototype solar powered high altitude aircraft and ground control stations for HAPSMobile and conduct low altitude and high altitude flight tests of the prototype aircraft.

The Company recorded revenue under the DDA and preliminary design agreements between the Company and SoftBank of $ 16,386,000 and $ 12,335,000 for the three months ended August 1, 2020 and July 27, 2019, respectively.

At August 1, 2020 and April 30, 2020, the Company had unbilled related party receivables from HAPSMobile of $ 28,143,000 and $ 15,779,000 recorded in unbilled receivables and retentions on the consolidated balance sheets, respectively.

The Company recorded revenue under the DDA and preliminary design agreements between the Company and SoftBank of $ 11,452,000 and $ 27,838,000 for the three and six months ended October 31, 2020, respectively.

The Company recorded revenue under the DDA and preliminary design agreements between the Company and SoftBank of $ 13,393,000 and $ 25,728,000 for the three and six months ended October 26, 2019, respectively.

At October 31, 2020 and April 30, 2020, the Company had unbilled related party receivables from HAPSMobile of $ 14,974,000 and $ 15,779,000 recorded in unbilled receivables and retentions on the consolidated balance sheets, respectively.

At April 30, 2019, the Company owned a 10 % stake in accordance with the Joint Venture Agreement which was diluted to approximately 5 % during the first three months ended July 27, 2019.

On December 4, 2019, the Company purchased 540,050,000 yen ($ 4,982,000 ) of additional shares of HAPSMobile to increase its ownership stake to approximately 7 %.

On December 4, 2019, the Company purchased

540,050,000 yen ($ 4,982,000 ) of additional shares of HAPSMobile to increase its ownership stake to approximately 7 %.

Refer to Note 6—Equity Method Investments for further details.

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Three Months Ended

Six Months Ended

Net income attributable to AeroVironment, Inc.

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These pro forma amounts have been calculated by applying the Company’s accounting policies, assuming transaction costs had been incurred during the three months ended July 28, 2018, reflecting the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied from May 1, 2018 with the consequential tax effects, and including the results of Pulse prior to acquisition.

The Company incurred approximately $ 341,000 of acquisition-related expenses for the three months ended July 27, 2019.

These expenses are included in selling, general and administrative, research and development, and product cost of sales on the Company’s consolidated income statement.

The Company incurred approximately $ 18,000 and $ 359,000 of acquisition-related expenses for the three and six months ended October 26, 2019, respectively.

These expenses are included in selling, general and administrative, research and development, and product cost of sales on the Company’s consolidated statement of operations.

The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes are reasonable and are not necessarily indicative of the results that have been realized had the acquisitions been consolidated in the tables above as of May 1, 2018, nor are they indicative of results of operations that may occur in the future.

Subsequent Events

On December 3, 2020, the Company entered into a Share Purchase Agreement (the “Purchase Agreement”) with Unmanned Systems Investments GmbH, a German limited liability company incorporated under the laws of Germany (the “Seller”), and each of the unit holders of the Seller (collectively, the “Shareholders”), to purchase 100 % of the issued and outstanding shares of Seller’s wholly-owned subsidiary, Telerob Gesellschaft für Fernhantierungstechnik mbH, a German company based in Ostfildern (near Stuttgart), Germany (“Telerob”), including Telerob’s wholly owned subsidiary, Telerob USA, Inc.

(“Telerob USA,” and collectively with Telerob, the “Telerob Group”).

The Telerob Group develops, manufactures, sells, and services remote-controlled ground robots and transport vehicles for civil and defense applications.

Upon closing of the transactions contemplated by the Purchase Agreement, Telerob will become a wholly-owned subsidiary of the Company.

Pursuant to the Purchase Agreement, the Company will pay approximately € 37,455,000 (approximately $ 45.4 million) in cash at the closing to the Seller, subject to certain purchase price adjustments, less (a) € 3,000,000 (approximately $ 3.6 million) to be held in escrow for breaches of the Seller’s warranties;

(b) transaction-related fees and costs incurred by the Seller;

and (d) payments to Shareholders or outside the ordinary course of business if made after September 30, 2020.

In addition, at closing the Company will pay off approximately € 7.8 million (approximately $ 9.4 million) of certain indebtedness of the Telerob Group.

This indebtedness may be offset by any cash on hand at the Telerob Group at closing.

The escrow amount is to be released to the Seller, less any amounts paid or reserved, 30 months following the closing date.

In addition, the Seller may receive up to a total of € 6,000,000 (approximately $ 7.3 million) in additional cash consideration over a three year period contingent upon the achievement of three distinct milestones.

The first two milestones are the achievement of specific revenue targets and the third milestone is obtaining certain contract awards from the U.S.

military are achieved.

The transactions contemplated by the Purchase Agreement are subject to certain closing conditions, including:

(i) clearance by the German government;

(ii) the accuracy of each party’s warranties (subject to customary materiality qualifiers);

(iii) each party’s compliance with its covenants and agreements contained in the Purchase Agreement (subject to customary materiality qualifiers);

and (iv) other customary closing conditions.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements