What changed in this filing

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Item 1. Business

2021-06-29 compared with 2020-06-24 · 252 added, 100 removed, 403 unchanged (47% of the section changed)

Sale of EES Business Segment

On June 29, 2018, we 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 AeroVironment.

As of April 30, 2018, we determined that the EES Business met the criterion for classification as an asset held for sale and represented a strategic shift in our operations.

Therefore, the assets and liabilities and the results of operations of the EES Business are reported in this Annual Report as discontinued operations for all periods presented.

The disclosures and references in this Annual Report, including financial data, the description of our business operations in this Item 1, and risk factors related to our operations included in Item 1A relate to our continuing operations, unless otherwise specifically noted.

We design, develop, produce and support a technologically-advanced portfolio of products and services for government agencies and businesses.

We supply unmanned aircraft systems (“UAS”) and related services primarily to organizations within the U.S.

Department of Defense (“DoD”) and to international allied governments, and tactical missile systems and related services to organizations within the U.S.

We derive the majority of our revenue from these business areas and we believe that the markets for these solutions have significant growth potential.

Additionally, we believe that some of the innovative potential products and services in our research and development pipeline will emerge as new growth platforms in the future, creating additional market opportunities.

Our success with current products and services stems from our investment in research and development and our ability to invent and deliver advanced solutions, utilizing proprietary and commercially available technologies, to help our government and commercial customers operate more effectively and efficiently.

We develop these highly innovative solutions by working very closely with our key customers to solve their most important challenges related to our areas of expertise.

Acquisition of Telerob GmbH

On May 3, 2021, we purchased 100% of the issued and outstanding shares of 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”) pursuant to a share 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.

The disclosures and references in this Annual Report, including financial data, the description of our business operations in this Item 1, and risk factors related to our operations included in Item 1A include the Telerob Group acquisition, unless otherwise specifically noted.

The assets, liabilities and results of operations of the Telerob Group have not been consolidated into our results as of and for the period ended April 30, 2021 or any of the historical periods presented.

We design, develop, produce, deliver and support a technologically-advanced portfolio of intelligent, multi-domain robotic systems and related services for government agencies and businesses.

We supply unmanned aircraft systems (“UAS”), tactical missile systems (“TMS”), unmanned ground vehicles (“UGV”) and related services primarily to organizations within the U.S.

Department of Defense (“DoD”) and to international allied governments.

We derive the majority of our revenue from these business areas and we believe that the markets for these solutions offer the potential for significant long-term growth.

Additionally, we believe that some of the innovative potential products, services and technologies in our research and development pipeline will emerge as new growth platforms in the future, creating additional market opportunities.

Our success with our current product and service offering stems from our investments in research and development to invent and deliver advanced solutions, utilizing proprietary and commercially available technologies, and in acquiring leading businesses that help our customers achieve their desired outcomes.

We develop and acquire these highly innovative solutions by working very closely with our key customers to solve their most important challenges related to our areas of expertise.

Our core technological capabilities, developed through more than 45 years of innovation, include robotics and robotics systems autonomy;

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miniature, low power wireless digital communications;

lightweight aerostructures;

aerostructures;

high-altitude systems design, integration and operations;

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human-machine interface development;

and integrated mission solutions for austere environments.

Our business focuses primarily on the design, development, production, marketing, support and operation of innovative UAS and tactical missile systems that provide situational awareness, remote sensing, multi-band

communications, force protection and other information and mission effects to increase the safety and effectiveness of our customers’ operations.

As a technology solutions provider, our strategy is to grow our business by developing and acquiring innovative, safe and reliable new solutions that provide customers with valuable capabilities.

Delivering these capabilities will enable us to create new markets or market segments, gain market share and grow as market adoption increases.

We believe that by introducing new solutions that provide customers with compelling value we are able to create new markets or market segments and then grow our positions within those markets or market segments profitably, instead of entering established, existing markets and competing directly against large, incumbent competitors that may possess advantages in scope, scale, resources and relationships.

We intend to grow our business by preserving a leadership position in our core UAS and tactical missile systems markets, and by creating new solutions that enable us to create and establish leadership positions in new markets.

and integrated mission solutions for austere or extreme environments.

Our business focuses primarily on the design, development, production, marketing, support and operation of innovative UAS, TMS and UGV that provide situational awareness, remote sensing, multi-band communications, force protection and other information and mission effects to increase the safety and effectiveness of our customers’ operations.

As a technology solutions provider, our strategy is to grow our business by delivering innovative, safe and reliable multi-domain solutions that provide customers with valuable capabilities.

Delivering these capabilities will enable us to create new markets or market segments, gain share in existing markets and grow as market adoption increases.

We believe that by introducing new solutions, or acquiring differentiated solutions developed by others, that provide customers with compelling value, we can grow our business profitably, both in new and existing markets.

By providing differentiated solutions we believe we can compete effectively against large, incumbent competitors that may possess advantages in scope, scale, resources and relationships.

We intend to grow our business by preserving a leadership position in our core UAS, TMS and UGV markets, and by creating or acquiring new solutions and capabilities that enable us to establish leadership positions in new markets.

Key components of this strategy include the following:

Expand the market penetration of existing products and services.

Our small UAS and tactical missile systems enjoy leading positions in their respective markets.

We intend to increase the penetration of our small UAS products and services within the U.S.

military, the military forces of allied nations, other government agencies and non-government organizations, including commercial entities, and to increase the penetration of our tactical missile systems within the U.S.

Our small and medium UAS, TMS and UGV enjoy leading positions in their respective markets.

We intend to increase the penetration of our small and medium UAS and UGV products and services within the U.S.

military, the military forces of allied nations, other government agencies and non-government organizations, including commercial entities, and to increase the penetration of our TMS within the U.S.

military and within the military forces of allied nations.

We believe that the broad adoption of our small UAS by the U.S.

We believe that the broad adoption of our small and medium UAS and TMS by the U.S.

military will continue to spur demand by allied nations, and that our efforts to pursue new applications are creating opportunities beyond the early adopter military market.

Similarly, we expect the adoption of our UGV solutions to expand our presence in the U.S.

military market.

Deliver innovative new solutions into existing and new markets.

Customer-focused innovation is the primary driver of our growth.

We plan to continue pursuing internal and customer-funded research and development to develop better, more capable products, services and business models, both in response to and in anticipation of emerging customer needs.

We plan to continue investing in internally-funded research and development projects while expanding our pursuit of customer-funded research and development projects to generate revenue and develop better, more capable products, services and business models, both in response to and in anticipation of emerging customer needs.

In some cases, these innovations result in upgrades to existing offerings, expanding their value among existing customers and markets.

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We believe focused research and development investments will allow us to deliver innovative new products and services that address market needs within and outside of our current target markets, and enable us to create new opportunities for growth.

We view strategic partnerships as a means by which to further the reach of our innovative solutions through access to new markets, customers and complementary capabilities.

We also consider the acquisition of third-party assets as a potential method to obtain valuable products or technologies that can enable our growth strategy.

We view strategic partnerships as means by which to further the reach of our innovative solutions through access to new markets, customers and complementary capabilities.

We also consider acquisitions as a method to obtain valuable products or technologies that can further enable our growth strategy.

Foster our entrepreneurial culture and continue to attract, develop and retain highly-skilled personnel.

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Our values of “customer commitment,” “trust and teamwork,” “innovate and simplify,” and “ownership and results” serve as the foundation of our culture.

We believe that our values help to guide the behavior of our people and serve to maintain a positive work environment that inspires loyalty among our employees and customers.

We believe that our values help to guide the behavior of our team members and serve to maintain a positive work

environment that inspires loyalty among them and customers.

We also believe that our values facilitate the integration of new team members who join us as a result of acquisitions.

Preserve our agility and flexibility.

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Our production and development programs and services present numerous investment opportunities that we believe will deliver long-term growth by providing our customers with valuable new capabilities.

We evaluate each opportunity independently and within the

context of other investment opportunities to determine its relative timing and potential, and thereby its priority.

This process helps us to make informed decisions regarding potential growth capital requirements and supports our allocation of resources based on relative risks and returns to maximize long-term value creation, which is a key element of our growth strategy.

We evaluate each opportunity independently and within the context of other investment opportunities to determine its relative cost, timing and potential for generation of returns, and thereby its priority.

We also review our portfolio on a regular basis to determine if and when to narrow our focus on the highest potential growth opportunities.

We sell the majority of our UAS and services to organizations within the DoD, including the U.S.

We sell the majority of our UAS and services to organizations within the U.S.

DoD, including the U.S.

Army, Marine Corps, Special Operations Command, Air Force and Navy, and to allied governments.

We sell our tactical missile systems to organizations within the U.S.

We also develop High Altitude Pseudo-Satellite (“HAPS”) systems for HAPSMobile Inc., a commercial joint venture of which we own approximately 7%.

We sell our TMS and services to organizations within the U.S.

DoD and allied military forces.

We sell our UGV and services to U.S.

and allied government military and public safety agencies as well as to commercial entities.

We also develop High Altitude Pseudo-Satellite (“HAPS”) systems for SoftBank Corp.

and HAPSMobile Inc., a commercial joint venture of which we own approximately 7%.

During our fiscal year ended April 30, 2021, we generated approximately 34% of our revenue from the U.S.

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and Blackwing™, the first submarine-launched unmanned aircraft system deployed by the U.S.

Navy and a considerable portion of JPL/NASA’s Mars Ingenuity Helicopter, the first aircraft to perform a powered flight on another planet.

The Smithsonian Institution possesses seven vehicles developed by our company or our founder in its permanent collection.

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government has licenses to some of our intellectual property that was specifically developed in performance of government contracts, and may use or authorize others to use this intellectual property.

In some cases we

fund the development of certain intellectual property to maximize its value and limit its use by potential competitors.

In some cases, we fund the development of certain intellectual property to maximize its value and limit its use by potential competitors.

While we consider the development and protection of our intellectual property to be integral to the future success of our business, at this time we do not believe that a loss or limitation of rights to any particular piece of our intellectual property would have a material adverse effect on our overall business.

Research, Development and Commercialization Projects

A core component of our business strategy is the focused development and commercialization of innovative solutions that we believe can become new products or services that enable us to create large new markets or accelerate the growth of our current products and services.

We invest in an active pipeline of these commercialization projects that range in maturity from technology validation to early market adoption.

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Sales and Marketing

Our marketing strategy is based on developing leadership positions in new markets that we create through the introduction of innovation solutions that improve customer operational effectiveness and efficiency.

Our marketing strategy is based on establishing leadership positions in new markets that we create through the introduction or acquisition of innovation solutions that improve customer operational effectiveness and efficiency.

Our ability to operate in an agile, flexible manner helps us achieve first mover advantage and work closely with early customers to achieve the successful adoption of our solutions.

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We have many U.S.

registered trademarks including those for AeroVironment, AV, Switchblade, Raven, Wasp, Quantix, and VAPOR, and have several pending applications for trademark registration.

registered trademarks including those for AeroVironment, AV, Switchblade, Raven, Wasp, Quantix, VAPOR, ArcturusUAV and Jump and have several pending applications for trademark registration.

International Sales

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We outsource certain production activities, such as the fabrication of certain aerostructures, the manufacture and assembly of electronic printed circuit boards, and payload components to qualified suppliers, with many of whom we have long-term relationships.

This outsourcing enables us to focus on our core expertise of final assembly, system

integration and test processes for our products, ensuring high levels of quality and reliability.

This outsourcing enables us to focus on our core expertise of final assembly, system integration and test processes for our products, ensuring high levels of quality and reliability.

We forge strong relationships with key suppliers based on their ability to grow with our production needs and support our growth plans.

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We rely on both single and multiple suppliers for certain components and subassemblies.

(See “Risk Factors—If critical components or raw materials used to manufacture our products become scarce or unavailable, then we may incur delays in manufacturing and delivery of our products, which could damage our business” for more information.) All of our production systems operate in accordance with our AS9100D registered Quality Management System, which is focused on continuous improvement in order to increase acceptance rates, reduce lead times and lower cost.

(See “Risk Factors—If critical components or raw materials used to manufacture our products become scarce or unavailable, then we may incur delays in manufacturing and delivery of our products, which could damage our business” for more information.) A majority of our production systems operate in accordance with our AS9100D registered Quality Management System, which is focused on continuous improvement in order to increase acceptance rates, reduce lead times and lower cost.

Customer Funded Research and Development

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Special Operations Command, for projects that we believe have the potential for future procurement.

In some cases commercial enterprises may fund our research and development activities, as with our HAPSMobile Inc.

development program.

In some cases, commercial enterprises may fund our research and development activities, as with our HAPS UAS development program.

Providing these services contributes to the development and enhancement of our technical competencies.

In an effort to manage the ability of our key technical personnel to support multiple, high-value research and development initiatives, we attempt to limit the volume of customer funded research and development projects that we accept.

This process enables us to focus these personnel on projects we believe offer the greatest current and future value to our business.

We carefully manage the volume of customer funded research and development projects based on projects’ available resources, and expect to expand our team to support growth in this area of our business.

Historically our revenue in the second half of our fiscal years has exceeded our revenue in the first half of our fiscal years.

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Raw Materials and Suppliers

Historically, we have not experienced significant delays in the supply or availability of our key raw materials or components provided by our suppliers, nor have we experienced a significant price increase for raw materials or components.

We do not presently anticipate any such delays or significant price increases in our fiscal year 2021.

Historically, we have not experienced significant delays in the supply or availability of our key raw materials or components provided by our suppliers;

however, we have recently experienced shortages of certain components in our TMS product line which caused short term delays in production.

Historically, we not experienced a significant price increase for raw materials or components.

We believe all of these raw materials and components are available to meet our needs from various suppliers.

We have not yet been materially impacted by the global shortage in semiconductor chips, but if the shortage were to worsen or continue for an extended period of time, we could experience material delays.

The table below shows our revenue for the periods indicated by major product line:

Fiscal Year Ended

Medium UAS ("MUAS")

The table below shows our revenue for the periods indicated by contract type, including both government and commercial sales:

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Time-and-materials contracts

Human Capital Resources

We acknowledge that our employees are the Company’s most valuable asset and the driving force behind our success.

For this reason, we aspire to be an employer that is known for cultivating a positive and welcoming work environment – one that fosters growth, provides a safe place to work, supports diversity and embraces inclusion.

We believe that this kind of corporate culture results in employees who are happier, more creative, and more productive, supporting our ongoing innovation.

We work to make our employees’ experience a priority, and we take tremendous pride in being certified by Great Place to Work Institute, Inc.

as a Great Place to Work.

Workforce Demographics

As of April 30, 2021, we had 1,165 full time employees and 12 part time employees, of whom 404 were in research and development and engineering, 62 were in sales and marketing, 493 were in operations and 218 were general and administrative personnel.

We believe that we have a good relationship with our employees.

Not included in the above totals are 94 full time employees who joined AeroVironment as part of our acquisition of Telerob in May 2021.

Talent Acquisition, Retention and Development

Our ability to attract, develop and retain top talent, particularly those with technical and engineering backgrounds or experience, is critical for us to execute our strategy and grow our businesses.

We continuously monitor the hiring, retention and management of our employees.

An integral part of our people strategy is early career hiring through college and intern pipelines, particularly in technical fields.

We regularly conduct confidential surveys to seek feedback from our employees and use those results to improve our workplace.

We attract and reward our employees by providing market competitive compensation and benefit practices, including incentives and recognition plans that extend to all levels in our organization.

We invest in our workforce through education, training and development programs and offering tuition assistance programs for continuing education or industry certifications.

Additionally, we regularly conduct succession planning to ensure that we continue to cultivate the leadership pipeline of talent needed to execute our strategy.

Diversity and Inclusion

At AeroVironment, creating a culture of diversity and inclusion is something we work on every day.

We believe that a diverse workforce and an inclusive workplace is a major catalyst for driving innovation.

We have focused our diversity and inclusion initiatives on employee recruitment, including investments in minority-serving institutions and outreach, employee training and development, such as efforts focused on expanding the diverse talent pipeline, and employee engagement, including through participation in employee focus groups on various topics related to diversity and inclusion.

Employee Safety and Health

Our safety and health program seeks to optimize our operations through targeted safety, health and wellness opportunities designed to ensure safe work conditions, create a healthy work environment, promote workforce resiliency and enhance business value.

We have taken extraordinary measures to protect our workforce in response to the COVID-19 pandemic.

We implemented extensive safety protocols to support our essential employees required to work onsite.

Within our production and office areas we have established a number of safety protocols, including face covering and physical distance requirements, enhanced cleaning, encouraging daily self-health checks and voluntary temperature screening stations.

We have implemented a flexible teleworking policy for employees who can meet our customer commitments remotely;

a significant portion of our workforce began teleworking in mid-March 2020 and were continuing to telework as of June 15, 2021.

In addition, we have sought to ensure that they have the technology, flexible work schedules, office equipment and other services needed during this time to enable them to work effectively from home.

We have also implemented a coronavirus reporting mechanism for illness or exposure and positive COVID-19 tests.

As part of that reporting process, we have developed a robust contact tracing program to identify employees who were in close contact with the ill employee in the workplace.

We provide several channels for all employees to speak up, ask for guidance, and report concerns related ethics or safety violations.

We address employee concerns and take appropriate actions that uphold our AeroVironment values.

Consistent with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), we define backlog as remaining unsatisfied performance obligations under firm orders for which work has not been performed.

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We expect that approximately 94% of our backlog will be recognized as revenue during our fiscal year ending April 30, 2022.

In addition to our backlog, we had unfunded backlog of $122.0 million and $45.2 million as of April 30, 2020 and 2019, respectively.

In addition to our funded backlog, we also had unfunded backlog of $143.2 million and $122.0 million as of April 30, 2021 and 2020, respectively.

Unfunded backlog does not meet the definition of a performance obligation under ASC Topic 606.

We define unfunded backlog as the total remaining potential order amounts under cost reimbursable and fixed price contracts with (i) multiple one-year options and indefinite delivery, indefinite quantity (“IDIQ”) contracts, or (ii) incremental funding.

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Army IDIQ-type contract for small UAS because values for each of the other domains within the contract have not been disclosed by the customer, and we cannot be certain that we will secure all task orders issued against the contract.

Additionally, unfunded backlog on the SOCOM MEUAS contract reflects only those sites which have been awarded to Arcturus UAV, Inc.

(“Arcturus”) and does not include the remaining potential value associated with the entire SOCOM MEUAV III/IV contract.

Because of possible future changes in delivery schedules and/or cancellations of orders, backlog at any particular date is not necessarily representative of actual sales to be expected for any succeeding period, and actual sales for the year may not meet or exceed the backlog represented.

Our backlog is typically subject to large variations from quarter to quarter as existing contracts expire, are renewed, or new contracts are awarded.

A portion of our contracts, specifically our IDIQ contracts, do not obligate the U.S.

Our backlog is typically subject to large variations from quarter to quarter as existing contracts expire or are renewed or new contracts are awarded.

A majority of our contracts, specifically our IDIQ contracts, do not currently obligate the U.S.

government to purchase any goods or services.

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was originally incorporated in California in July 1971 and reincorporated in Delaware in 2006.

Our principal executive offices are located at 900 Innovators Way, Simi Valley, California 93065.

Effective June 2021, our principal executive offices are located at 241 18 th Street South, Suite 415 Arlington, Virginia 22202.

Our telephone number is (805) 520-8350.

Our website home page is http://www.avinc.com .

We make our website content

available for information purposes only.

We make our website content available for information purposes only.

It should not be relied upon for investment purposes, nor is it incorporated by reference into this Annual Report.

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The SEC also maintains a web site at www.sec.gov that contains our reports, proxy statements and other information regarding us.

Our business addresses the increasing economic and security value of distributed, network-centric intelligence, surveillance and reconnaissance (“ISR”), communications, remote sensing and effects delivery with innovative UAS and tactical missile system solutions.

Our business addresses the increasing value of intelligent, multi-domain robotic systems providing distributed, network-centric intelligence, surveillance and reconnaissance (“ISR”), communications, remote sensing, effects delivery and remote materials handling with innovative UAS, TMS and UGV solutions.

With respect to the defense applications for these technologies, nearly 20 years of counterinsurgency operations in regions where U.S.

and allied forces benefit from air and technical superiority have driven the demand for a variety of unmanned systems in the air and on the ground.

The recent shift of U.S.

and allied defense planning toward countering peer and near-peer adversaries requires a portfolio of capabilities that can operate effectively in areas where the battlespace, including the air, radio frequency spectrum and Global Positioning Satellite (“GPS”) signals, may be contested, driving the need for more intelligent robotic systems capable of autonomous operation.

Industry Background

The defense market for small UAS has grown significantly since the early 2000s, driven largely by the demands associated with the global threat environment and resulting procurement by military customers, the early adopters for this technology.

Small UAS now represent an accepted and enduring capability for the military.

Small and Medium UAS

The defense market for small and medium UAS has grown significantly since the early 2000s, driven largely by the demands associated with the global threat environment and resulting procurement by military customers, the early adopters for this technology.

Small and medium UAS now represent accepted and enduring capabilities for military forces around the world.

military’s transformation into a smaller, more agile force that operates via a network of observation, communication and precision targeting technologies accelerated following the terrorist attacks of September 11, 2001, as it required improved, distributed observation and targeting of enemy combatants who operate in small groups, often embedded in dense population centers or dispersed in remote locations, to operate effectively in a counterinsurgency threat environment.

We believe that UAS, which range from large systems, such as Northrop Grumman’s Global Hawk and General Atomics’ Predator , Sky Warrior , Reaper and Gray Eagle , to small systems, such as our Raven, Wasp AE, Puma AE, and VAPOR serve as integral components of today’s military force.

These systems provide critical observation and communications capabilities serving the increasing demand for actionable intelligence, while reducing risk to individual “warfighters.” Small UAS can provide real-time observation and communication capabilities to the small units who control them.

We believe that UAS, which range from large systems, such as Northrop Grumman’s Global Hawk and General Atomics’ Predator , Sky Warrior , Reaper and Gray Eagle , to medium systems such as our Puma LE, T-20 and JUMP 20, Boeing’s ScanEagle and Integrator and Textron’s Shadow , to small systems, such as our Raven, Wasp AE, Puma AE, and VAPOR serve as integral components of today’s military force.

These systems provide critical observation and communications capabilities serving the increasing demand for actionable intelligence, while reducing risk to individual “warfighters.” Small and medium UAS can provide real-time observation and communication capabilities to commanders and directly to the small units who control them.

As airspace regulations in the U.S.

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A rapidly deployable solution could address emerging requirements beyond ground engagements for use in other types of missions and from a variety of sea, air and land platforms.

We believe that embedding a precision lethal payload into a remotely controlled, man-portable delivery system provides warfighters with a valuable and more cost-effective alternative to existing munition and missile systems.

We believe that embedding a precision lethal payload into a remotely controlled, portable delivery system provides warfighters with a valuable and more cost-effective alternative to existing munition and missile systems.

Unmanned Ground Vehicles

In situations where improvised explosive devices (“IEDs”), caustic chemicals, radiological or biological hazards or violent individuals represent significant danger to humans, UGVs can help responders remove, contain or neutralize these hazards without putting people in harm’s way.

We believe that as enabling technologies continue to advance, UGVs will become more autonomous, more capable and more effective in dealing with hazardous threats, expanding the market potential for this set of applications to include non-defense applications such as facility security, infrastructure inspection, delivery of goods and many others.

High-Altitude Pseudo-Satellite (“HAPS”) UAS

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Next generation mobile telephony, referred to as 5G, can use higher frequencies than those currently employed by 4G and LTE networks.

These higher frequencies are

not capable of traveling long distances as compared to the frequencies associated with existing networks.

These higher frequencies are not capable of traveling long distances as compared to the frequencies associated with existing networks.

As a result, 5G deployment requires the installation of a large number of base stations and cellular towers to complement existing infrastructure, resulting in a significant investment of time, resources and capital.

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UAS that are capable of operating in an affordable manner for extended periods of time over an area of interest without gaps in availability while carrying a communications or observation payload could help to satisfy this need.

Advanced Artificial Intelligence and Autonomy

Robotic systems designed to operate in complex environments, such as contested battlespaces or urban locations, will require advanced artificial intelligence capabilities to enable non-GPS navigation and higher levels of autonomy.

For defense applications, this could require other navigation methods to ensure location accuracy and incorporating computer vision capabilities to respond to changes on the ground or in the air.

Such higher levels of autonomy will become increasingly valuable to enable the effective use of robotic systems.

Our Solutions

We supply our UAS products and services to multiple customers within and outside of the United States and our tactical missile systems products and services to organizations within the U.S.

We supply our UAS and TMS products and services to multiple customers within and outside of the United States, our TMS products and services to organizations within the U.S.

government and allied nations and our UGV solutions to organizations in the U.S.

and allied nations.

Small UAS Products

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Moreover, by providing this information, our systems reduce the risk to warfighters and to the surrounding population by providing the ability to tailor the military response to the threat.

military personnel regularly use our small UAS, such as Raven, for

missions such as force protection, combat observation and damage assessment.

military personnel regularly use our small UAS, such as Raven, for missions such as force protection, combat observation and damage assessment.

These reusable systems are easy to transport, assemble and operate and are relatively quiet when flying at typical altitudes of 300 to 500 feet above ground level, as a result of our efficient electric propulsion systems.

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We provide training by our highly-skilled instructors, who typically possess extensive military experience, and continuous refurbishment and repair services for our products.

By maintaining close contact with our customers and users in the field, we gather critical feedback on our products and incorporate that information into ongoing product development and research and development efforts.

By maintaining close contact with our customers and users in the field, we gather critical feedback on our products and incorporate that information

into ongoing product development and research and development efforts.

This approach enables us to improve our solutions in response to, and in anticipation of, evolving customer needs.

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Launch and Recovery

Hand or bungee launch and autonomous/manual skid landing (ground or water)

Hand or bungee launch and autonomous skid landing (ground or water)

Mechanical pan, tilt, zoom and digital zoom electro-optical and infrared

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Our DDL is integrated into Puma LE, Puma AE, Raven and Wasp AE systems, enhancing their capabilities, and ultimately, the utility of our small UAS by enabling more efficient radio spectrum utilization and communications security.

Small UAS incorporating our DDL are optimized for the low-power, low-latency, and

streaming bandwidth efficiency required for UAS.

Small UAS incorporating our DDL are optimized for the low-power, low-latency, and streaming bandwidth efficiency required for UAS.

Additionally, our DDL enables each air vehicle to operate as an Internet-Protocol addressable hub capable of routing and relaying video, voice and data to and from multiple other nodes on this ad hoc network.

This capability enables beyond line-of-sight operation of our small UAS, further enhancing their value proposition to our customers.

Medium UAS Products

Providing similar capabilities to our small UAS, our field-deployable medium UAS, including T-20 and JUMP 20, deliver extended endurance and expanded payload capacity to support a broader set of missions that benefit from aerial surveillance and the use of specialized payloads.

The portable, hand or bungee-launched Puma LE can operate in ground and maritime environments.

The internal combustion-powered T-20 and JUMP 20 offer significantly greater endurance and payload capacity than our small UAS, with larger airframes that can also accommodate a wider variety of payloads.

The JUMP 20 launches and lands vertically as a result of its vertical take-off and landing (“VTOL”) rotors, minimizing the amount of space required for its operation.

The T-20 launches from a catapult, lands on a short runway and provides more than 24 hours of endurance.

Puma LE operates from the same ground control system as our small UAS, making it interoperable with Puma AE, Raven and Wasp AE.

T-20 and JUMP 20 operate from their own portable common ground control system.

Rotor Diameter

Capacity (lbs.)

Launch and Recovery

225 (includes fuel and payload)

Catapult launch, skid landing

Multiple EO, IR and other payloads available based on mission requirements

215 (includes fuel and payload)

Multiple EO, IR and other payloads available based on mission requirements

Tactical Missile Systems Products

Our tactical missile systems consist of tube-launched aircraft that deploy with the push of a button, fly at higher speeds than our small UAS, and perform either effects delivery or reconnaissance missions.

Switchblade, the first of our tactical missile systems products, can be transported in its launch tube, within a backpack, and deployed within minutes to defend against lethal threats such as snipers and mortar launchers.

Our TMS consist of tube-launched aircraft that deploy with the push of a button, fly at higher speeds than our small UAS, and perform either effects delivery or reconnaissance missions.

Switchblade 300, the first of our TMS products, can be transported in its launch tube, within a backpack, and deployed within minutes to defend against lethal threats such as snipers and mortar launchers.

With a high level of precision, including a customized warhead, patented wave-off, loiter and re-engagement capabilities, Switchblade 300 can neutralize a target rapidly and accurately without causing collateral damage.

Furthermore, because it streams live electro-optical and thermal video to its operator, Switchblade 300 can be called off in the final moments prior to a strike should the situation require, potentially eliminating damage to non-combatants.

Blackwing, a variant of Switchblade, launches from a submerged submarine and carries extra batteries instead of a warhead, providing longer flight time for reconnaissance operations.

Switchblade 600 is a larger version of Switchblade 300 that can fly for a longer period of time and over a longer distance while carrying a larger, more powerful, anti-armor warhead.

Blackwing, a variant of Switchblade 300, launches from a submerged submarine and carries extra batteries instead of a warhead, providing longer flight time for extended maritime reconnaissance operations.

Missile System

Differentiators

Launch and Recovery

Switchblade 300

Patented wave-off and recommit

5.5 (includes munition, payload, launcher and transport bag)

Single or multi-pack tube launch, single use loitering munition

Dual front and side look EO cameras and IR nose camera with stabilized electronic pan-tilt-zoom

Switchblade 600

Patented wave-off and recommit;

anti-armor warhead

120 (includes case, launcher, munition)

Single or multi-pack tube launch, single use loitering munition

2-axis, 4-sensor gimbal (Dual EO and IR) integrated sensor suite

Deployed from submerged submarine

Multi-pack tube launch or underwater-to-surface delivery canister;

launch tube, single use

EO/IR sensor suite

Not disclosed

We currently operate our medium UAS, such as JUMP 20, in overseas locations to support U.S.

military operations under ISR services contracts.

Under these services contracts we deliver the information our medium UAS produce to our customers, who use that information to support their missions.

These contracts specify a location and number of hours per month of services to perform.

This contractor-owned, contractor-operated (“COCO”) arrangement represents a new business model for AeroVironment as a result of the acquisition of Arcturus and provides access to alternative customer funding sources, while also providing a way for customers who may not wish to own and operate their UAS to benefit from their differentiated capabilities.

This COCO business model may expand to include other AeroVironment solutions in the future.

Unmanned Ground Vehicle Products

Our UGV support a variety of missions and applications, ranging from explosive ordnance disposal to hazardous materials handling and law enforcement operations.

All of our UGVs feature secure communications, multi-axis manipulators and automatic tool exchange, which eliminates the need for the UGV to return to its operator to switch the tool attached to its manipulator arm.

We also offer fully equipped service vehicles for the transport, service and operation of our UGV solutions.

All of our UGVs feature the intuitive and operationally simplified Robo Command Ground Control System (GCS) with multi-touch screen, pre-programmed motion sequences and ergonomically designed hand controllers for precision control of the robot, manipulator and accessories.

Select Unmanned

Ground Vehicle

Duration (hrs.)

HD pan/tilt/zoom cameras;

four video feeds

Dual-track independent high-torque motors

telemax EVO PLUS

HD pan/tilt/zoom cameras;

four video feeds

4-track running gear with individually adjustable flippers

telemax EVO HYBRID

HD pan/tilt/zoom cameras;

four video feeds

4-track running gear with individually adjustable flippers and optional wheels

telemax EVO PRO

HD pan/tilt/zoom cameras;

four video feeds

4-track running gear with individually adjustable flippers and optional wheels

MacCready Works Advanced Solutions

We created MacCready Works Advanced Solutions, named for our founder, Dr.

MacCready, Jr., to ensure that creativity and long-term thinking remain at the core of our culture.

With a focus on the future, this group of select, visionary scientists and engineers partners with our customers to explore breakthrough technologies that open new, more powerful ways to tackle difficult challenges.

Together, they research and develop advanced technologies in robotics, sensors, software analytics and connectivity to identify innovative solutions that push beyond the current applications.

These revenue-generating projects significantly contribute to the growth of the company and stretch our imaginations to spawn new inventions.

With the addition of the Progeny ISG team we are accelerating our development of advanced Artificial Intelligence, computer vision and active perception technologies to boost the intelligence and autonomy of our robotic systems.

Support Services

In support of our small UAS for defense applications we offer a suite of services that help to ensure the successful operation of our products by our customers.

In support of our products we offer a suite of services that help to ensure the successful operation of our products by our customers.

These services generate incremental revenue for us and provide us with continuous feedback to understand the performance of our systems, anticipate our customers’ needs and develop additional customer insights.

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We provide spare parts as well as repair, refurbishment and replacement services in a manner that seeks to minimize supply chain delays and support our customers whenever and wherever needed.

Our facilities in Simi Valley, CA also serve as primary depots for repairs and spare parts.

We provide comprehensive training services to support all of our small UAS and tactical missile systems for defense applications.

Our facilities in Simi Valley, CA also serve as primary depots for small UAS and Puma LE repairs and spare parts, while we support our medium UAS from our Petaluma, CA facilities and our UGV solutions from our Erie, PA and Stuttgart, Germany facilities.

We provide comprehensive training services to support all of our small UAS and TMS for defense applications.

Our highly-skilled instructors typically have extensive military experience.

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● integrated mission solutions for austere environments .

Two of our UAS and tactical missile systems development initiatives are described below:

Two of our UAS and TMS development initiatives are described below:

Tactical Missile System Variants.

We pioneered our first rapidly deployable, high-precision tactical missile system, named Switchblade, for use by defense ground forces.

We pioneered our first rapidly deployable, high-precision TMS, named Switchblade, for use by defense ground forces.

Switchblade 300 is now deployed by the U.S.

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We performed a number of successful demonstrations and are now developing several variants of Switchblade 300 for new customers and applications, including deployment from sea and air vehicles.

Blackwing, a submarine-launched reconnaissance system, represents one of the variants.

Another variant is a larger version of Switchblade that delivers longer endurance, greater range, a larger payload and more significant mission effects.

We believe these new variants have the potential to expand our tactical missile systems opportunities significantly.

Blackwing, a submarine-

launched reconnaissance system, represents one of the variants that has now generated meaningful procurement demand.

Another variant is Switchblade 600, a larger version that delivers longer endurance, greater range, a larger payload and more significant mission effects.

We believe these new variants have the potential to expand our TMS opportunities significantly.

HAPS Unmanned Aircraft Systems.

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HAPSMobile Inc.

possesses exclusive rights to market the solar HAPS UAS for commercial

markets globally, while AeroVironment possesses exclusive rights to market the solar HAPS UAS for non-commercial markets globally, with the exception of Japan.

possesses exclusive rights to market the solar HAPS UAS for commercial markets globally, while AeroVironment possesses exclusive rights to market the solar HAPS UAS for non-commercial markets globally, with the exception of Japan.

Sales and Marketing

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Continued investment in infrastructure has established our manufacturing capability to meet demand with scalable capacity.

We have the manufacturing infrastructure to produce products at rates higher than our historical volumes, support initial low rate production for new UAS development programs and tactical missile systems and execute initial low-rate production of large UAS.

We have the manufacturing infrastructure to produce products at rates higher than our historical volumes, support initial low rate production for new UAS development programs and TMS and execute initial low-rate production of large UAS.

By drawing upon experienced personnel across various manufacturing industries including aerospace, automotive and volume commodities, we have instituted lean production systems and leverage our International Organization for Standardization (“ISO”) certification for Quality Management, integrated supply chain strategy, document control systems and process control methodologies for production.

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Some companies and government agencies view ISO certification as a positive factor in supplier assessments.

The market for defense small UAS continues to evolve in response to changing technologies, shifting customer needs and expectations and the potential introduction of new products.

The defense market for small UAS continues to evolve in response to changing technologies, shifting customer needs and expectations and the potential introduction of new products.

We believe that a number of established domestic and international defense contractors have developed or are developing small UAS that continue to compete, or will compete, directly with our products.

Some of these contractors have significantly greater financial and other resources than we possess.

Our current principal small UAS competitors include Elbit Systems Ltd., FLIR Systems, Inc., L3 Technologies, Inc., and Lockheed Martin Corporation.

We do not view large UAS such as Northrop Grumman Corporation’s Global Hawk , General Atomics, Inc.’s Predator and its derivatives, The Boeing Company’s ScanEagle and Textron Inc.’s Shadow as direct competitors to our small UAS because they perform different missions, do not typically deliver their information directly to front-line ground forces and are not hand-launched and controlled.

Our current principal small UAS competitors include Elbit Systems Ltd., Teledyne Technologies, Inc., L3 Technologies, Inc., and Lockheed Martin Corporation.

We do not view large UAS such as Northrop Grumman Corporation’s Global Hawk or General Atomics, Inc.’s Predator and its derivatives as direct competitors to our small

UAS because they perform different missions, do not typically deliver their information directly to front-line ground forces and are not hand-launched and controlled.

However, we cannot be certain that these platforms will not become direct competitors in the future.

Potential competition from consumer-focused drone manufacturers is emerging as their capabilities increase and their prices remain low relative to existing defense solutions, which is resulting in some level of military consideration even if such drones do not meet traditional military performance or security specifications.

Such potential competitors include Skydio, Inc.

and Shield AI.

defense market for medium UAS has been addressed primarily by The Boeing Company’s ScanEagle and Textron Inc.’s Shadow UAS.

Our current principal medium UAS competitors include those competing with us for the U.S.

Army’s Future Tactical UAS (FTUAS) program:

Martin UAV and Northrop Grumman’s V-Bat , Textron’s Aerosonde and L3Harris’ FVR-90 .

International medium UAS competitors include Elbit Systems Ltd.

and Israeli Aircraft Industries.

We do not view large UAS such as Northrop Grumman Corporation’s Global Hawk or General Atomics, Inc.’s Predator and its derivatives as direct competitors to our medium UAS because they perform different missions, require a larger logistical footprint and cost considerably more to procure and operate.

However, we cannot be certain that these platforms will not become direct competitors in the future as we expand the capabilities of our medium UAS products to, potentially, impinge upon the lower end of the large UAS market segment.

The market for UGV spans the global defense, first responder, security and logistics market segments.

The UGV opportunity in the U.S.

Department of Defense has grown with recent U.S.

Army procurement awards and a pending U.S.

Air Force program.

Competitors in the U.S.

UGV market include L3Harris Technologies, Inc., Teledyne Technologies, Inc., QinetiQ North America, Inc., Peraton/Remotec, ICOR and Boston Dynamics.

Initial adoption of UGVs for law enforcement and other government agencies is also progressing in the U.S.

and globally, as well as applications in hazardous materials handling.

The market for HAPS UAS is in an early stage of development.

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Companies pursuing airships (high altitude aircraft that are kept buoyant by a body of gas that is lighter than air) as a solution for this market include Lockheed Martin Corporation and Northrop Grumman Corporation.

Loon LLC is pursuing the deployment of lighter-than-air high-altitude

balloons without propulsion to create networks that can provide connectivity.

A number of telecommunications, aerospace and technology companies, including AeroVironment, HAPSMobile Inc.

and Loon LLC launched the HAPS Alliance to promote the benefits of HAPS to the global population.

A number of telecommunications, aerospace and technology companies, including AeroVironment and HAPSMobile Inc.

launched the HAPS Alliance to promote the benefits of HAPS to the global population.

Companies pursuing conventional satellites as a solution for this market include The Boeing Company, Lockheed Martin Corporation, General Dynamics Corporation, EADS N.V., Ball Corporation and Northrop Grumman Corporation.

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and SBA Communications Corporation.

The market for tactical missile systems is in an early stage of development, but it is evolving rapidly.

Competitors in this market include Textron Inc., Raytheon Technologies and Lockheed Martin Corporation.

The market for TMS is in an early stage of development, but it is evolving rapidly.

Competitors in this market include Textron Inc., Raytheon Technologies, Lockheed Martin Corporation and Uvision.

The market for commercial UAS products and services is in an early stage of development, but is evolving rapidly, generating a great deal of interest as government regulations evolve to accommodate commercial UAS operations in the National Airspace System and in the airspace systems of other countries.

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Potential additional competitors include start-up companies providing low cost solutions.

We believe that the principal competitive factors in the markets for our UAS products and services include product performance, features, acquisition cost, lifetime operating cost, including maintenance and support, ease of use, integration with existing equipment and processes, quality, reliability, customer support, brand and reputation.

We believe that the principal competitive factors in the markets for our UAS, TMS and UGV products and services include product performance;

acquisition cost;

lifetime operating cost, including maintenance and support;

integration with existing equipment and processes;

customer support, brand and reputation.

Due to the fact that we contract with the DoD and other agencies of the U.S.

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The public comment period for the proposed rules expired on March 2, 2020.

On April 21, 2021, the final rule for remote identification of UAS went into effect.

On the same day, the final rule for operation of small UAS over people also went into effect.

This rule permits routine operations of small unmanned aircraft over people, moving vehicles, and at night under certain conditions.

The final rule also makes changes to the recurrent testing framework and expands the list of persons who may request the presentation of a remote pilot certificate.

Additionally, in February 2020, the FAA issued a public request for comment on its proposed policy for the creation of a new type certification of certain UAS as a special class of aircraft under FAA regulations.

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larger UAS and operations of small UAS outside the scope of the Part 107 Rules require a waiver from the FAA.

The FAA’s proposed policy proposes a new special class of UAS for which airworthiness certification can be obtained, however, the proposed policy only applies to the procedures for the type certification of the new class of UAS, not the criteria that will be needed for the UAS or the flight operations to be followed to operate.

The FAA’s proposed policy proposes a new

special class of UAS for which airworthiness certification can be obtained, however, the proposed policy only applies to the procedures for the type certification of the new class of UAS, not the criteria that will be needed for the UAS or the flight operations to be followed to operate.

Further rulemaking by the FAA is anticipated regarding the particular criteria for the airworthiness certification standards under the new special class proposed by the new policy.

The comment period for the FAA’s proposed policy expired on March 4, 2020.

While it is currently anticipated that the enactment of remote identification and a new airworthiness certification process for a newly created special class of UAS will help formalize the process for manufacturing and obtaining airworthiness certification for UAS within the newly created class and accelerate the development of commercial UAS in the U.S., it is uncertain whether the FAA’s actions, if any, will have such effects.

While it is currently anticipated that the enactment of remote identification, operation of small UAS over people, and a new airworthiness certification process for a newly created special class of UAS will help formalize the process for manufacturing and obtaining airworthiness certification for UAS within the newly created class and accelerate the development of commercial UAS in the U.S., it is uncertain whether the FAA’s actions, if any, will have such effects.

Additionally, it is unclear when, if ever, the FAA will implement final rules regarding remote UAS identification and whether they will differ from the proposed rules.

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Government Contracting Process

We sell the significant majority of our small UAS and tactical missile system products and services as the prime contractor under contracts with the U.S.

We sell the significant majority of our small and medium UAS and TMS products and services as the prime contractor under contracts with the U.S.

Certain important aspects of our government contracts are described below.

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We risk reduced profitability if our actual costs exceed the costs incorporated into the fixed hourly labor rate.

One variation of a standard time-and-materials contract is

a time-and-materials, award fee contract.

One variation of a standard time-and-materials contract is a time-and-materials, award fee contract.

Under this type of contract, a positive or negative incentive can be earned based on achievement against specific performance metrics.

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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-K

Item 1. Business