What changed in this filing

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Item 1. Financial Statements

2022-03-04 compared with 2021-12-08 · 197 added, 185 removed, 741 unchanged (34% of the section changed)

6 unchanged sentences

Short-term investments

Accounts receivable, net of allowance for doubtful accounts of $ 566 at October 30, 2021 and $ 595 at April 30, 2021

Unbilled receivables and retentions (inclusive of related party unbilled receivables of $ 9,215 at October 30, 2021 and $ 544 at April 30, 2021)

Accounts receivable, net of allowance for doubtful accounts of $ 577 at January 29, 2022 and $ 595 at April 30, 2021

Unbilled receivables and retentions (inclusive of related party unbilled receivables of $ 5,944 at January 29, 2022 and $ 544 at April 30, 2021)

Income taxes receivable

25 unchanged sentences

Authorized shares— 10,000,000 ;

none issued or outstanding at October 30, 2021 and April 30, 2021

none issued or outstanding at January 29, 2022 and April 30, 2021

Common stock, $ 0.0001 par value:

Authorized shares— 100,000,000

Issued and outstanding shares— 24,805,829 shares at October 30, 2021 and 24,777,295 shares at April 30, 2021

Issued and outstanding shares— 24,915,105 shares at January 29, 2022 and 24,777,295 shares at April 30, 2021

Additional paid-in capital

10 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Product sales

Contract services (inclusive of related party revenue of $ 10,342 and $ 11,452 for the three months ended October 30, 2021 and October 31, 2020, respectively;

and $ 20,694 and $ 27,838 for the six months ended October 30, 2021 and October 31, 2020, respectively)

Contract services (inclusive of related party revenue of $ 9,543 and $ 7,480 for the three months ended January 29, 2022 and January 30, 2021, respectively;

and $ 30,237 and $ 35,318 for the nine months ended January 29, 2022 and January 30, 2021, respectively)

Cost of sales:

6 unchanged sentences

Research and development

Income (loss) from operations

(Loss) income from operations

Other (loss) income:

Interest (expense) income, net

Other (expense) income, net

Other income (expense), net

(Loss) income before income taxes

1 unchanged sentence

Equity method investment income (loss), net of tax

Net income (loss)

Net (income) loss attributable to noncontrolling interest

Net (loss) income

Net loss (income) attributable to noncontrolling interest

Net income (loss) attributable to AeroVironment, Inc.

3 unchanged sentences

AeroVironment, Inc.

Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

(In thousands)

Three Months Ended

Six Months Ended

Net income (loss)

Other comprehensive income (loss):

Unrealized gain (loss) on available-for-sale investments, net of deferred tax (expense) benefit of $ 0 and $( 3 ) for the three months ended October 30, 2021 and October 31, 2020, respectively;

and $ 0 and $ 1 for the six months ended October 30, 2021 and October 31, 2020, respectively

Nine Months Ended

Net (loss) income

Other comprehensive (loss) income:

Unrealized (loss) gain on available-for-sale investments, net of deferred tax benefit of $ 1 and $ 2 for the three months ended January 29, 2022 and January 30, 2021, respectively;

and $ 1 and $ 2 for the nine months ended January 29, 2022 and January 30, 2021, respectively

Change in foreign currency translation adjustments

Total comprehensive income (loss)

Net (income) loss attributable to noncontrolling interest

Comprehensive income (loss) attributable to AeroVironment, Inc.

Total comprehensive (loss) income

Net loss (income) attributable to noncontrolling interest

Comprehensive (loss) income attributable to AeroVironment, Inc.

See accompanying notes to consolidated financial statements (unaudited).

1 unchanged sentence

Consolidated Statements of Stockholders’ Equity

For the six months ended October 30, 2021 and October 31, 2020 (Unaudited)

For the nine months ended January 29, 2022 and January 30, 2021 (Unaudited)

(In thousands except share data)

12 unchanged sentences

Stock based compensation

Balance at October 30, 2021

Balance at January 29, 2022

Comprehensive

10 unchanged sentences

Stock based compensation

Balance at October 31, 2020

Balance at January 30, 2021

AeroVironment, Inc.

Consolidated Statements of Stockholders’ Equity

For the three months ended October 30, 2021 and October 31, 2020 (Unaudited)

For the three months ended January 29, 2022 and January 30, 2021 (Unaudited)

(In thousands except share data)

2 unchanged sentences

(Loss) Income

Balance at July 31, 2021

Unrealized gain on investments

Balance at October 30, 2021

Net income (loss)

Unrealized loss on investments

Foreign currency translation

Stock options exercised

Restricted stock awards

Restricted stock awards forfeited

Change in non-controlling interest

Stock based compensation

Balance at October 30, 2021

Balance at January 29, 2022

Comprehensive

1 unchanged sentence

Income (Loss)

Balance at August 1, 2020

Net income (loss)

Unrealized loss on investments

Balance at October 31, 2020

Unrealized gain on investments

Restricted stock awards

Restricted stock awards forfeited

1 unchanged sentence

Stock based compensation

Balance at October 31, 2020

Balance at January 30, 2021

See accompanying notes to consolidated financial statements (unaudited).

2 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

Operating activities

2 unchanged sentences

Depreciation and amortization

(Income) losses from equity method investments, net

(Income) loss from equity method investments, net

Amortization of debt issuance costs

24 unchanged sentences

Financing activities

Principal payment of loan

Principal payments of loan

Holdback and retention payments for business acquisition

9 unchanged sentences

Non-cash activities

Unrealized loss on available-for-sale investments, net of deferred tax benefit of $ 0 and $ 1 for the six months ended October 30, 2021 and October 31, 2020, respectively

Unrealized loss on available-for-sale investments, net of deferred tax benefit of $ 1 and $ 2 for the nine months ended January 29, 2022 and January 30, 2021, respectively

Change in foreign currency translation adjustments

15 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 and six months ended October 30, 2021 are not necessarily indicative of the results for the full year ending April 30, 2022.

The results of operations for the three and nine months ended January 29, 2022 are not necessarily indicative of the results for the full year ending April 30, 2022.

For further information, refer to the consolidated financial statements and footnotes thereto for the year ended April 30, 2021, included in the Company’s Annual Report on Form 10-K.

18 unchanged sentences

As a result of the sale, the Company decreased its interest in Altoy from 85 % to 50 %.

The Company is considered to still have control of Altoy and therefore consolidates Altoy into the consolidated financial statements of the Company as of October 30, 2021.

Under the terms of the Purchase Agreement, the Company is expected to sell additional shares to Toygun in fiscal year 2023 at which point the Company will no longer control and therefore will no longer consolidate Altoy in the Company’s consolidated financial statements.

At that time, the Company will account for its investment in Altoy as an equity method investment and record its proportion of any gains or losses of Altoy in equity method investments, net of tax.

The Company is considered to still have control of Altoy and therefore consolidates Altoy into the consolidated financial statements of the Company as of January 29, 2022.

Under the terms of the Purchase Agreement, the Company is expected to sell additional shares to Toygun during the fiscal year ending April 30, 2023 at which point the Company is expected to no longer control, and therefore, expected to no longer consolidate Altoy in the Company’s consolidated financial statements.

At that time, the Company is expected to account for its investment in Altoy as an equity method investment and record its proportion of any gains or losses of Altoy in equity method investments, net of tax.

Recently Adopted Accounting Standards

6 unchanged sentences

These contracts may be firm fixed price (“FFP”), cost plus fixed fee (“CPFF”), or time and materials (“T&M”).

The Company considers all such contracts to be within the scope of ASC Topic 606.

The Company considers all such contracts to be within the scope of ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”).

Performance Obligations

9 unchanged sentences

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.

The contractual right to payment is generally supported by termination for convenience clauses that allow the customer to

unilaterally terminate the contract for convenience, pay the Company for costs incurred plus a reasonable profit, and take control of any work in process.

contractual right to payment is generally supported by termination for convenience clauses that allow the customer to unilaterally terminate the contract for convenience, pay the Company for costs incurred plus a reasonable profit, and take control of any work in process.

Revenue for TMS product deliveries and Customer-Funded Research and Development contracts is recognized over time as costs are incurred.

11 unchanged sentences

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.

Performance obligations satisfied over time accounted for 51 % and 55 % of revenue during the three and six months ended October 30, 2021, respectively.

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 49 % and 45 % of revenue during the three and six months ended October 30, 2021, 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 30, 2021, the Company had approximately $ 252,036,000 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 68 % of the remaining performance obligations as revenue in fiscal 2022 and an additional 32 % in fiscal 2023 .

Performance obligations satisfied over time accounted for 66 % and 58 % of revenue during the three and nine months ended January 29, 2022, respectively.

Performance obligations satisfied over time accounted for 39 % of revenue during the three and nine months ended January 30, 2021.

Performance obligations satisfied at a point in time accounted for 34 % and 42 % of revenue during the three and nine months ended January 29, 2022, respectively.

Performance obligations satisfied at a point in time accounted for 61 % of revenue during the three and nine months ended January 30, 2021.

On January 29, 2022, the Company had approximately $ 226,318,000 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 48 % of the remaining performance obligations as revenue in fiscal 2022 and the remaining 52 % in fiscal 2023 .

The Company collects sales, value added, and other taxes concurrent with revenue producing activities, which are excluded from revenue when they are both imposed on a specific transaction and collected from a customer.

6 unchanged sentences

Contract estimates are based on various assumptions to project the outcome of future events that may span several years.

These assumptions include labor productivity and availability, the complexity of the work to be performed, the cost and

availability of materials, the performance of subcontractors, and the availability and timing of funding from the customer.

These assumptions include labor productivity and availability, the complexity of the work to be performed, the cost and availability of materials, the performance of subcontractors, and the availability and timing of funding from the customer.

The nature of the Company’s contracts gives rise to several types of variable consideration, including penalty fees and incentive awards generally for late delivery and early delivery, respectively.

7 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 or six month periods ended October 30, 2021 and October 31, 2020.

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 30, 2021 and the three or six month periods ended October 31, 2020.

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 nine month periods ended January 29, 2022 and January 30, 2021.

No adjustment on any one contract was material to the Company’s unaudited consolidated financial statements for the three or nine month periods ended January 29, 2022 and the three or nine month periods ended January 30, 2021.

Revenue by Category

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

Revenue by major product line/program

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

Revenue by contract type

7 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Revenue by customer category

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

Revenue by geographic location

9 unchanged sentences

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 30, 2021 were not materially impacted by any other factors.

Changes in the contract asset and liability balances during the nine month period ended January 29, 2022 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 and six month periods ended October 30, 2021 that was included in contract liability balances at the beginning of April 30, 2021 was $ 580,000 and $ 889,000 , and revenue recognized for the three and six month periods ended October 31, 2020 that was included in contract liability balances at the beginning of April 30, 2020 was $ 3,451,000 and $ 5,423,000 .

Revenue recognized for the three and nine month periods ended January 29, 2022 that was included in contract liability balances at the beginning of April 30, 2021 was $ 1,521,000 and $ 2,409,000 , and revenue recognized for the three and nine month periods ended January 30, 2021 that was included in contract liability balances at the beginning of April 30, 2020 was $ 0 and $ 5,423,000 .

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 assess performance.

The Company’s CODM, collectively the Chief Executive Officer and Chief Operations Officer, makes operating decisions, assesses performance and makes resource allocation decisions, including the allocation for research and development (“R&D”).

As of January 29, 2022, the Company’s CODM, collectively the Chief Executive Officer and Chief Operations Officer, makes operating decisions, assesses performance and makes resource allocation decisions, including the allocation for research and development (“R&D”).

Accordingly, the Company identifies three reportable segments.

Refer to Note 20—Segments for further details.

Subsequent to January 29, 2022, the Company's Chief Executive Officer functions as the CODM, concurrent with the stepping down of the Chief Operations Officer.

The Company does not expect any changes to its reportable segments.

Restricted Cash

The Company classifies cash accounts which are not available for general use as restricted cash.

Pursuant to the terms of

the Arcturus Purchase Agreement, the Company maintains escrow accounts to address final purchase price adjustments post-Arcturus Closing, if any and to address Arcturus UAV’s and/or the Sellers’ indemnification obligations.

Pursuant to the terms of the Arcturus Purchase Agreement, the Company maintains escrow accounts to address final purchase price adjustments post-Arcturus Closing, if any and to address Arcturus UAV’s and/or the Sellers’ indemnification obligations.

The restricted funds in the escrow account are recorded in other assets on the consolidated balance sheet.

As of October 30, 2021 and April 30, 2021 restricted cash was $ 1,823,000 and $ 8,322,000 , respectively.

As of January 29, 2022 and April 30, 2021 restricted cash was $ 1,823,000 and $ 8,322,000 , respectively.

The Company’s investments are accounted for as available-for-sale and are reported at fair value.

12 unchanged sentences

The Company’s revenue recognition policy calls for revenue recognized on all cost reimbursable government contracts to be recorded at actual rates unless collectability is not reasonably assured.

At October 30, 2021 and April 30, 2021, the Company had no reserve for incurred cost claim audits.

At January 29, 2022 and April 30, 2021, the Company had no reserve for incurred cost claim audits.

Earnings (Loss) Per Share

2 unchanged sentences

Three Months Ended

Six Months Ended

October 30, 2021

October 31, 2020

October 30, 2021

October 31, 2020

Nine Months Ended

January 29, 2022

January 30, 2021

January 29, 2022

January 30, 2021

Net income (loss) attributable to AeroVironment, Inc.

3 unchanged sentences

Denominator for diluted earnings (loss) per share

Due to the net loss for the six months ended October 30, 2021, no shares reserved for issuance upon exercise of stock

options or shares of unvested restricted stock were included in the computation of diluted loss per share as their inclusion would have been anti-dilutive.

Potentially dilutive shares not included in the computation of diluted weighted-average common shares because their effect would have been anti-dilutive were 4,742 and 266,077 for the three and six months ended October 30, 2021, 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, respectively.

Potentially dilutive shares not included in the computation of diluted weighted-average common shares because their effect would have been anti-dilutive were 20,554 for the three months ended January 29, 2022.

Due to the net loss for the nine months ended January 29, 2022, no shares reserved for issuance upon exercise of stock options or shares of unvested restricted stock were included in the computation of diluted loss per share as their inclusion would have been anti-dilutive.

Potentially dilutive shares not included in the computation of diluted weighted-average common shares because their effect would have been anti-dilutive 237,909 for the nine months ended January 29, 2022.

Potentially dilutive shares not included in the computation of diluted weighted-average common shares because their effect would have been anti-dilutive were 0 and 24 for the three and nine months ended January 30, 2021, respectively.

Recently Issued Accounting Standards

Accounting pronouncements issued but not effective until after October 30, 2021 are not expected to be applicable to the Company.

Accounting pronouncements issued but not effective until after January 29, 2022 are not expected to be applicable to the Company.

Discontinued Operations

2 unchanged sentences

In accordance with the terms of the Purchase Agreement, as amended by a side letter agreement executed at the closing, the Company received cash consideration of $ 31,994,000 upon closing, which resulted in a gain of $ 11,420,000 and has been recorded in gain on sale of business, net of tax in the consolidated statements of operations.

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 a loss of discontinued operations in the consolidated statements of operations for the year ended April 30, 2020.

The Company was 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 unaudited consolidated financial statements as the amount was not realized or realizable as of October 30, 2021.

The Holdback was not recorded in the Company’s unaudited consolidated financial statements as the amount was not realized or realizable as of January 29, 2022.

During the three months ended October 27, 2018, Webasto filed a recall report with the National Highway Traffic Safety Administration that named certain of the Company’s EES products as subject to the recall.

6 unchanged sentences

Benchmark withdrew its Notice of Arbitration against Webasto and the Company, but reserved its right to pursue indemnity claims against suppliers.

The recall remains a significant part of the Webasto lawsuit described below.

On February 22, 2019, Webasto filed a lawsuit, which was amended in April 2019, alleging several claims against the Company for breach of contract, indemnity, and bad faith, including allegations regarding inaccuracy of certain diligence disclosures and failure to provide certain consents to contract assignments, and related to a previously announced product recall.

7 unchanged sentences

however, as a result of the preparation of the good faith offer and the Company’s willingness to pursue settlement for that amount, the Company recorded litigation reserve expenses in the amount of $ 9,300,000 during the year ended April 30, 2021 recorded in other expense on the consolidated statements of operations and in other non-current liabilities on the consolidated balance sheet.

In December 2021, the Company agreed in principle subject to formal documentation with Webasto to settle all existing claims related to the sale of our former EES business for $ 20,000,000 and Webasto keeping the Holdback.

Under the terms of the expected written settlement agreement that is being negotiated by the Company and Webasto, the Company’s payment of the settlement amount will occur over a 24 month period after the execution of the settlement agreement.

As a result of the agreement in principle to settlement the litigation, the Company recorded additional litigation reserve expenses in the amount of $ 10,000,000 during the three months ended October 30, 2021 recorded in other expense on the consolidated statements of operations and in other current liabilities on the consolidated balance sheet.

Should the Company not be able to negotiate and sign a mutually acceptable settlement agreement with Webasto, the Company will continue with discovery in the litigation and defend itself vigorously.

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 $ 0 for the three and six months ended October 30, 2021, and $ 0 and $ 38,000 and has been recorded in other (expense) income, net in the unaudited consolidated statements of operations for the three and six months ended October 31, 2020, respectively.

On December 2, 2021, the Company agreed in principle, subject to formal documentation with Webasto, to settle all existing claims related to the sale of our former EES business for $ 20,000,000 and Webasto keeping the Holdback.

As a result of the agreement in principle to settle the litigation, the Company recorded additional litigation reserve expenses in the amount of $ 10,000,000 during the three months ended October 30, 2021 in other expense on the consolidated statements of operations and in other current liabilities on the consolidated balance sheet.

The Company executed a written settlement agreement with Webasto effective December 16, 2021 to officially and fully settle all claims in the lawsuit.

Under the terms of the written settlement agreement, the Company’s payment of the settlement amount of $ 20,000,000 will occur over a 24 month period from the effective date of the settlement agreement and Webasto will retain the Holdback.

As of January 29, 2022, $ 5,000,000 of the settlement has been paid.

Investments consist of the following (in thousands):

15 unchanged sentences

Available-For-Sale Securities

As of October 30, 2021 and April 30, 2021, the balance of available-for-sale securities consisted of state and local government municipal securities, U.S.

As of January 29, 2022 and April 30, 2021, the balance of available-for-sale securities consisted of state and local government municipal securities, U.S.

government securities, U.S.

government agency securities, and investment grade corporate bonds.

government agency securities, and investment grade

corporate bonds.

Interest earned from these investments is recorded in interest income.

Realized gains on sales of these investments on the basis of specific identification are recorded in interest (expense) 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 October 30, 2021 and April 30, 2021, respectively (in thousands):

October 30, 2021

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 January 29, 2022 and April 30, 2021, respectively (in thousands):

January 29, 2022

Municipal securities

5 unchanged sentences

Total available-for-sale investments

The amortized cost and fair value of the available-for-sale debt securities by contractual maturity at October 30, 2021 were as follows (in thousands):

The amortized cost and fair value of the available-for-sale debt securities by contractual maturity at January 29, 2022 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 October 30, 2021, were as follows (in thousands):

The Company’s financial assets measured at fair value on a recurring basis at January 29, 2022, were as follows (in thousands):

Fair Value Measurement Using

4 unchanged sentences

Contingently returnable consideration

The Company’s financial liabilities measured at fair value on a recurring basis at October 30, 2021, were as follows (in thousands):

The Company’s financial liabilities measured at fair value on a recurring basis at January 29, 2022, were as follows (in thousands):

Fair Value Measurement Using

10 unchanged sentences

Contingently returnable consideration

The following table provides a reconciliation between the beginning and ending balances of items measured at fair value on a recurring basis that used significant unobservable inputs (Level 3) (in thousands):

The following table provides a reconciliation between the beginning and ending balances of items measured at fair value

on a recurring basis that used significant unobservable inputs (Level 3) (in thousands):

Measurements Using

7 unchanged sentences

Included in selling, general and administrative

Balance at October 30, 2021

The amount of total (gains) or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at October 30, 2021

Balance at January 29, 2022

The amount of total (gains) or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at January 29, 2022

The fair value measurement tables above have been corrected to present the fair value of the contingently returnable consideration associated with the acquisition of ISG of $ 479,000 as of April 30, 2021 and subsequent changes in fair value, which is recorded in other assets on the consolidated balance sheet.

4 unchanged sentences

The analysis considered, among other items, contractual terms of the ISG Purchase Agreement, the Company’s discount rate, the timing of expected future cash flows and the probability that the revenue targets required for payment of the contingent consideration will be achieved.

During the three months ended October 30, 2021, the target for the first year was achieved, and the related consideration of $ 2,000,000 is expected to be released from an escrow account that is not controlled by the Company and therefore not recorded on the consolidated balance sheet, during the three months ended January 29, 2022.

During the three months ended October 30, 2021, the target for the first year was achieved.

During the three months ended January 29, 2022, the related consideration of $ 2,000,000 was released from an escrow account that is not controlled by the Company and therefore not recorded on the consolidated balance sheet.

The fair value of the contingently returnable consideration is equal to the difference between the maximum value of the contingent consideration and the fair value of the contingent consideration and is recorded in other assets on the consolidated balance sheet.

2 unchanged sentences

The analysis considered, among other items, contractual terms of the Telerob Purchase Agreement, the Company’s discount rate, the timing of expected future cash flows and the probability that the revenue and contract award targets required for payment of the contingent consideration will be achieved.

The fair value of the contingent consideration is recorded in other accrued liabilities on the consolidated balance sheet.

The fair value of the contingent consideration is recorded in other current liabilities on the consolidated balance sheet.

Refer to Note 18—Business Acquisitions.

12 unchanged sentences

Concurrent with the formation of HAPSMobile, the Company executed a Design and Development Agreement (the “DDA”) with HAPSMobile.

As of October 30, 2021, the Company’s ownership stake in HAPSMobile was approximately 7 %, with the remaining 93 % held by SoftBank.

As of January 29, 2022, 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

On May 29, 2021, the Company entered into an amendment to the DDA with HAPSMobile.

The parties agreed to the amendment in anticipation of the Company and SoftBank entering into a Master Design and Development Agreement

(“MDDA”) with each other to continue the design and development of the Solar High Altitude Pseudo-Satellite (“Solar HAPS”) aircraft developed under the DDA.

The parties agreed to the amendment in anticipation of the Company and SoftBank entering into a Master Design and Development Agreement (“MDDA”) with each other to continue the design and development of the Solar High Altitude Pseudo-Satellite (“Solar HAPS”) aircraft developed under the DDA.

On May 29, 2021, the Company and SoftBank entered into a MDDA to continue the development of Solar HAPS.

6 unchanged sentences

On October 29, 2021, the Company made the final payment under the loan agreement in the amount of 190,000,000 yen ($ 1,674,000 ).

On March 1, 2022, HAPSMobile repaid the Company the loan in full plus accrued interest in the amount of 503,832,000 yen ($ 4,345,000 ).

The repayment results in a gain for the Company during the three months ended April 30, 2022, offsetting the losses recorded for the nine months ended January 29, 2022.

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 and six months ended October 30, 2021, the Company recorded its proportionate net loss of HAPSMobile, or $ 190,000 and $ 1,845,000 , respectively, in equity method investment loss, net of tax in the unaudited consolidated statement of operations.

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 operations, of which $ 8,363,000 related to the Company’s proportion of a loss for HAPSMobile’s impairment of its investment in Loon LLC.

At October 30, 2021 and April 30, 2021, the carrying value of the investment in HAPSMobile was $ 2,661,000 and $ 0 , respectively, was recorded in other assets.

For the three and nine months ended January 29, 2022, the

Company recorded its proportionate net loss of HAPSMobile, or $ 200,000 and $ 2,044,000 , respectively, in equity method investment loss, net of tax in the unaudited consolidated statement of operations.

For the three and nine months ended January 30, 2021, the Company recorded its ownership percentage of the net loss of HAPSMobile, or $ 0 and $ 10,810,000 , respectively, in equity method investment income (loss), net of tax in the unaudited consolidated statement of operations, of which $ 8,363,000 related to the Company’s proportion of a loss for HAPSMobile’s impairment of its investment in Loon LLC.

At January 29, 2022 and April 30, 2021, the carrying value of the investment in HAPSMobile was $ 2,435,000 and $ 0 , respectively, was recorded in other assets on the unaudited consolidated balance sheet.

Investment in Limited Partnership Fund

In July 2019, the Company made its initial capital contribution to a limited partnership fund focusing on highly relevant technologies and start-up companies serving defense and industrial markets.

During the six months ended October 30, 2021 and October 31, 2020, the Company made additional contributions of $ 1,738,000 and $ 1,173,000 , respectively.

Under the terms of the limited partnership agreement, the Company has committed to make additional capital contributions of $ 639,000 to the fund.

During the nine months ended January 29, 2022 and January 30, 2021, the Company made additional contributions of $ 2,377,000 and $ 2,150,000 , respectively.

Under the terms of the limited partnership agreement, there are no further contribution commitments to the fund as of January 29, 2022.

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 and six months ended October 30, 2021, the Company recorded its ownership percentage of the net gain of the limited partnership, or $ 1,852,000 and $ 2,365,000 , respectively, net of $ 529,000 of tax expense, respectively, in equity method investment income (loss) in the unaudited consolidated statements of operations.

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 income (loss) in the unaudited consolidated statements of operations.

At October 30, 2021 and April 30, 2021, the carrying value of the investment in the limited partnership of $ 11,271,000 and $ 7,168,000 , respectively, was recorded in long-term investments.

For the three and nine months ended January 29, 2022, the Company recorded its ownership percentage of the net gain of the limited partnership, or $ 478,000 and $ 2,843,000 , respectively, net of $ 108,000 and $ 636,000 of tax expense, respectively, in equity method investment income (loss) in the unaudited consolidated statements of operations.

For the three and nine months ended January 30, 2021, the Company recorded its ownership percentage of the net loss of the limited partnership, or $ 81,000 and $ 361,000 , respectively, in equity method investment income (loss) in the unaudited consolidated statements of operations.

At January 29, 2022 and April 30, 2021, the carrying value of the investment in the limited partnership of $ 12,388,000 and $ 7,168,000 , respectively, was recorded in long-term investments on the unaudited consolidated balance sheet.

Warranty Reserves

The Company accrues an estimate of its exposure to warranty claims based upon both current and historical product sales data and warranty costs incurred.

The warranty reserve is included in other current liabilities.

The warranty reserve is included in other current liabilities on the unaudited consolidated balance sheet.

The related expense is included in cost of sales.

Warranty reserve activity is summarized as follows for the three and six months ended October

30, 2021 and October 31, 2020, respectively (in thousands):

Warranty reserve activity is summarized as follows for the three and nine months ended January 29, 2022 and January 30, 2021, respectively (in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

Beginning balance

12 unchanged sentences

Intangibles, net

The weighted average amortization period at October 30, 2021 and April 30, 2021 was five years , respectively.

Amortization expense for the three and six months ended October 30, 2021 was $ 6,843,000 and $ 13,816,000 , respectively.

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

The weighted average amortization period at January 29, 2022 and April 30, 2021 was four and five years , respectively.

Amortization expense for the three and nine months ended January 29, 2022 was $ 6,911,000 and $ 20,486,000 , respectively.

Amortization expense for the three and nine months ended January 30, 2021 was $ 622,000 and $ 2,086,000 , respectively.

Technology, backlog and customer relationship intangible assets were recognized in conjunction with the Company’s acquisition of Telerob on May 3, 2021.

The intangibles recognized in conjunction with the acquisition of Telerob are recorded in Euros, and the balances change in accordance with the foreign currency translation at reporting date.

Technology and customer relationship intangible assets were recognized in conjunction with the Company’s acquisition of Arcturus on February 19, 2021.

6 unchanged sentences

Impairment of goodwill

Balance at October 30, 2021

Balance at January 29, 2022

The goodwill balance at April 30, 2021 is attributable to the acquisitions of Pulse, ISG, and Arcturus acquisitions.

The MUAS addition to goodwill relates to measurement period adjustments for pre-acquisition tax returns.

The addition to All other goodwill is attributable to the Telerob acquisition.

The addition to

All other goodwill is attributable to the Telerob acquisition, which was recorded in Euros and translated to dollars at each reporting date.

Refer to Note 18—Business Acquisitions for further details.

7 unchanged sentences

Borrowings under the Revolving Facility may be used for working capital and other general corporate purposes.

The Credit Facilities provide the Company with a choice of interest rates between (a) LIBOR (with a 0 % floor) plus the Applicable Margin;

or (b) Base Rate (defined as the highest of (a) the Federal Funds Rate plus one-half percent ( 0.50 %), (b) the Bank of America prime rate, and (c) the one (1) month LIBOR plus one percent ( 1.00 %) plus the Applicable Margin.

The Applicable Margin is based upon the Consolidated Leverage Ratio (as defined in the Credit Agreement) and whether the Company elects LIBOR (ranging from 1.50 - 2.25 %) or Base Rate (ranging from 0.50 - 1.25 %).

The Company is also responsible for certain commitment fees from 0.20 - 0.35 % depending on the Consolidated Leverage Ratio, and administrative agent expenses incurred in relation to the Credit Facilities.

In the event of a default, an additional 2 % default interest rate in addition to the applicable rate if specified or the Base Rate plus Applicable Margin if an applicable rate is not specified.

Any borrowing under the Credit Agreement may be repaid, in whole or in part, at any time and from time to time without premium or penalty other than customary breakage costs, and any amounts repaid under the Revolving Facility may be reborrowed.

1 unchanged sentence

Mandatory prepayments are also required in connection with the disposition of assets to the extent not reinvested and unpermitted debt transactions.

In support of its obligations pursuant to the Credit Facilities, the Company has granted security interests in substantially all of the personal property of the Company and its domestic subsidiaries, including a pledge of the equity interests in its subsidiaries (limited to 65 % of outstanding equity interests in the case of foreign subsidiaries), and the proceeds thereof,

with customary exclusions and exceptions.

The Company’s existing and future domestic subsidiaries, including Arcturus, are guarantors for the Credit Facilities.

1 unchanged sentence

In addition, the Credit Agreement includes certain financial maintenance covenants, requiring that (x) the Consolidated Leverage Ratio (as defined in the Credit Agreement) shall not be more than 3.00 to 1.00 as of the end of any fiscal quarter and (y) the Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Agreement) shall not be less than 1.25 to 1.00 as of the end of any fiscal quarter.

As of October 30, 2021, the Company is in compliance with all covenants.

Based upon the Company’s revised projections, there is a substantial risk that it may be required to make a prepayment to reduce the outstanding balance of its Term Loan Facility or to obtain an amendment to the Credit Agreement to remain in compliance with all of the financial covenants in the Credit Agreement during the fiscal quarter ending January 29, 2022.

The Company currently estimates the range of the potentially required prepayment to be $ 50,000,000 to $ 60,000,000 .

The Company is in discussion with the lenders regarding obtaining an amendment to the Credit Agreement to allow it to remain in compliance with the financial covenants;

however, if the Company is not able to obtain such an amendment to the Credit Agreement, it has both the ability and intent to make any required prepayment.

The Company expects to be in compliance with all financial covenants under the terms of its Credit Agreement, including any amendment to such agreement, during the quarter ending April 30, 2022 regardless of whether a required prepayment is made or loan amendment is obtained.

The Credit Agreement contains certain customary events of default, which include failure to make payments when due thereunder, the material inaccuracy of representations or warranties, failure to observe or perform certain covenants, cross-defaults, bankruptcy and insolvency-related events, certain judgments, certain ERISA-related events, invalidity of loan documents, or a Change of Control (as defined in the Credit Agreement).

On February 4, 2022, the Company entered into a First Amendment to Credit Agreement and Waiver relating to its existing Credit Agreement (the “First Amendment to Credit Agreement”).

The First Amendment to Credit Agreement waives any event of default that may have occurred as a result of the potential failure by the Company to comply with the consolidated leverage ratio covenant set forth in the Credit Agreement for the fiscal quarter ended January 29, 2022.

In addition, the parties amended the maximum permitted Consolidated Leverage Ratio, such that such ratio may not exceed 4.00 to 1.00 for the Company’s fiscal quarters ended January 29, 2022 and April 30, 2022;

3.50 to 1.00 for any of the Company’s fiscal quarters ending during the period from May 1, 2022 to October 31, 2022;

and 3.00 to 1.00 for any fiscal quarter ending thereafter.

The First Amendment to Credit Agreement also implemented certain secured overnight financing rate (SOFR) interest rate mechanics and interest rate reference benchmark replacement provisions in order to effectuate the transition from

LIBOR as a reference interest rate.

Following the First Amendment to Credit Agreement, the Company has a choice of interest rates between (a) Term SOFR (with a 0 % floor) plus the Applicable Margin;

or (b) Base Rate (defined as the highest of (a) the Federal Funds Rate plus one-half percent ( 0.50 %), (b) the Bank of America prime rate, and (c) the one (1) month SOFR plus one percent ( 1.00 %)) plus the Applicable Margin.

The Applicable Margin is based upon the Consolidated Leverage Ratio (as defined in the Credit Agreement) and whether the Company elects SOFR (ranging from 1.50 - 2.50 %) or Base Rate (ranging from 0.50 - 1.50 %).

The Company may choose interest periods of one, three or six months with respect to Term SOFR and all such rates will include a 0.10 % SOFR adjustment.

The Company also remains responsible for certain commitment fees from 0.20 - 0.35 % depending on the Consolidated Leverage Ratio, and administrative agent expenses incurred in relation to the Credit Facilities.

In the event of a default, an additional 2 % default interest rate in addition to the applicable rate if specified or the Base Rate plus Applicable Margin if an applicable rate is not specified.

As of January 29, 2022, the Company is in compliance with all amended covenants.

The Credit Agreement Amendment also implemented certain secured overnight financing rate (SOFR) interest rate mechanics and interest rate reference benchmark replacement provisions in order to effectuate the transition from LIBOR as a reference interest rate.

Following the Credit Agreement Amendment, the Company has a choice of interest rates between (a) Term SOFR (with a 0 % floor) plus the Applicable Margin;

The Company may choose interest periods of one, three or six months with respect to Term SOFR and all such rates will include a .10 % SOFR adjustment.

In the event of a default, an additional 2 % default interest rate in addition to the applicable rate if specified or the Base Rate plus Applicable Margin if an applicable rate is not specified.

The Credit Agreement, as amended by the First Amendment to Credit Agreement, contains certain customary events of default, which include failure to make payments when due thereunder, the material inaccuracy of representations or warranties, failure to observe or perform certain covenants, cross-defaults, bankruptcy and insolvency-related events, certain judgments, certain ERISA-related events, invalidity of loan documents, or a Change of Control (as defined in the Credit Agreement).

Upon the occurrence and continuation of an event of default, the Lenders may cease making future loans under the Credit Agreement and may declare all amounts owing under the Credit Agreement to be immediately due and payable.

Long-term debt and the current period interest rates were as follows:

Six Months Ended

Nine Months Ended

(In thousands)

6 unchanged sentences

Current period interest rate

Future long-term debt principal payments at October 30, 2021 were as follows:

Future long-term debt principal payments at January 29, 2022 were as follows:

(In thousands)

1 unchanged sentence

At contract inception the Company determines whether the contract is, or contains, a lease and whether the lease should be classified as an operating or a financing lease.

Operating leases are recorded in operating lease right-of-use assets, current operating lease liabilities and non-current operating lease liabilities.

Operating leases are recorded in operating lease right-of-use assets, current operating lease liabilities and non-current operating lease liabilities on the unaudited consolidated balance sheet.

The Company recognizes operating lease right-of-use assets and operating lease liabilities based on the present value of the future minimum lease payments over the lease term at commencement date.

12 unchanged sentences

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

Six Months Ended

Nine Months Ended

Operating lease cost

4 unchanged sentences

Supplemental lease information were as follows:

Six Months Ended

Nine Months Ended

(In thousands)

4 unchanged sentences

Weighted average discount rate

Maturities of operating lease liabilities as of October 30, 2021 were as follows (in thousands):

Maturities of operating lease liabilities as of January 29, 2022 were as follows (in thousands):

Total lease payments

3 unchanged sentences

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

Six Months Ended

Nine Months Ended

Balance, net of $ 1 and $ 0 deferred taxes, as of April 30, 2021 and April 30, 2020, respectively

Unrealized loss on available-for-sale investments, net of deferred tax benefit of $ 0 and $ 1 for the six months ended October 30, 2021 and October 31, 2020, respectively

Unrealized loss on available-for-sale investments, net of deferred tax benefit of $ 1 and $ 2 for the nine months ended January 29, 2022 and January 30, 2021, respectively

Change in foreign currency translation adjustments

Balance, net of $ 1 and $ 1 deferred taxes, as of October 30, 2021 and October 31, 2020, respectively

Balance, net of $ 2 and $ 2 deferred taxes, as of January 29, 2022 and January 30, 2021, respectively

Customer-Funded Research & Development

2 unchanged sentences

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

Revenue from customer-funded R&D was approximately $ 19,175,000 and $ 36,086,000 for the three and six months ended October 30, 2021, 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 $ 20,451,000 and $ 56,537,000 for the three and nine months ended January 29, 2022, respectively.

Revenue from customer-funded R&D was approximately $ 14,811,000 and $ 58,979,000 for the three and nine months ended January 30, 2021, 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 and six months ended October 30, 2021, the Company recorded $ 201,000 and $ 509,000 of compensation expense related to the Fiscal 2022 LTIP.

The Company recorded no compensation expense related to the Fiscal 2022 LTIP for the three and six months ended October 31, 2020.

At October 30, 2021, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2022 LTIP is $ 13,111,000 .

For the three and nine months ended January 29, 2022, the Company recorded $ 205,000 and $ 714,000 of compensation expense related to the Fiscal 2022 LTIP.

The Company recorded no compensation expense related to the Fiscal 2022 LTIP for the three and nine months ended January 30, 2021.

At January 29, 2022, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2022 LTIP is $ 12,704,000 .

During the three months ended August 1, 2020, the Company granted awards under its amended and restated 2006 Equity Incentive Plan (the “Restated 2006 Plan”) to key employees (“Fiscal 2021 LTIP”).

5 unchanged sentences

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

For the three and six months ended October 30, 2021, the Company recorded a reversal of $( 572,000 ) and $( 507,000 ) of compensation expense related to the Fiscal 2021 LTIP, respectively, due to a change in estimate resulting from a decrease in the estimated achievement.

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, respectively.

At October 30, 2021, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2021 LTIP is $ 7,337,000 .

For the three and nine months ended January 29, 2022, the Company recorded a reversal of $( 29,000 ) and $( 536,000 ) of compensation expense related to the Fiscal 2021 LTIP, respectively.

For the three and nine months ended January 30.

2021, the Company recorded $ 126,000 and $ 564,000 of compensation expense related to the Fiscal 2021 LTIP, respectively.

At January 29, 2022, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2021 LTIP is $ 6,931,000 .

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

5 unchanged sentences

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

For the three and six months ended October 30, 2021, the Company recorded a reversal of $( 617,000 ) and $( 619,000 ) of compensation expense

related to the Fiscal 2020 LTIP, respectively, due to a change in estimate resulting from a decrease in the estimated achievement.

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.

At October 30, 2021, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2020 LTIP is $ 3,983,000 .

For the three and nine months ended January 29, 2022, the Company recorded a reversal of $( 30,000 ) and $( 648,000 ) of compensation expense related to the Fiscal 2020 LTIP, respectively.

For the three months ended January 30, 2021, the Company recorded a reversal of

$( 26,000 ) of compensation expense related to the Fiscal 2020 LTIP, and for the nine months ended January 30, 2021, the Company recorded $ 319,000 of compensation expense related to the Fiscal 2020 LTIP.

At January 29, 2022, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2020 LTIP is $ 3,758,000 .

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

2 unchanged sentences

During the three months ended July 31, 2021, the Company issued a total of 12,101 fully-vested shares of common stock to settle the PRSUs in the Fiscal 2019 LTIP.

For the three and six months ended October 30, 2021, the Company recorded no compensation expense.

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 nine months ended January 29, 2022, the Company recorded no compensation expense.

For the three and nine months ended January 30, 2021, the Company recorded $ 27,000 and $ 291,000 of compensation expense related to the Fiscal 2019 LTIP, 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 and six months ended October 30, 2021, the Company recorded a benefit from income taxes of $( 9,511,000 ) and $( 10,468,000 ), respectively, yielding effective tax rates of 117.6 % and 48.0 %, respectively.

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 effective tax rates of 17.7 % and 13.9 %, respectively.

The variance from statutory rates for the three months ended October 30, 2021 was primarily due to a change in estimate of full year projected income (loss) before income taxes, federal R&D credits 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 six months ended October 30, 2021 was primarily due to federal R&D credits 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 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.

For the three and nine months ended January 29, 2022, the Company recorded a benefit from income taxes of $( 15,396,000 ) and $( 25,864,000 ), respectively, yielding effective tax rates of 98.7 % and 69.1 %, respectively.

For the three and nine months ended January 30, 2021, the Company recorded a (benefit from) and provision for income taxes of $( 924,000 ) and $ 2,774,000 , respectively, yielding effective tax rates of 157.9 % and 10.7 %, respectively.

The variance from statutory rates for the three and nine months ended January 29, 2022 was primarily due to federal R&D credits 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 nine months ended January 30, 2021 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.

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 and six months ended October 30, 2021 or October 31, 2020.

As of October 30, 2021 and April 30, 2021, approximately $ 21,200,000 remained authorized for future repurchases under this program.

No shares were repurchased under the program during the three and nine months ended January 29, 2022 or January 30, 2021.

As of January 29, 2022 and April 30, 2021, approximately $ 21,200,000 remained authorized for future repurchases under this program.

Related Party Transactions

5 unchanged sentences

Upon the execution of the MDDA, SoftBank issued the first order under the MDDA, which has a maximum value of approximately $ 51,200,000 .

The Company recorded revenue under both the MDDA and DDA of $ 10,342,000 and $ 20,694,000 for the three and six months ended October 30, 2021, 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.

At October 30, 2021 and April 30, 2021, the Company had unbilled related party receivables from HAPSMobile of $ 9,215,000 and $ 544,000 recorded in unbilled receivables and retentions on the consolidated balance sheets, respectively.

The Company recorded revenue under both the MDDA and DDA of $ 9,543,000 and $ 30,237,000 for the three and nine months ended January 29, 2022, respectively.

The Company recorded revenue under the DDA and preliminary design agreements between the Company and SoftBank of $ 7,480,000 and $ 35,318,000 for the three and nine months ended January 30, 2021, respectively.

At January 29, 2022 and April 30, 2021, the Company had unbilled related party

receivables from HAPSMobile of $ 5,944,000 and $ 544,000 recorded in unbilled receivables and retentions on the consolidated balance sheets, respectively.

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

45 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Net (loss) income attributable to AeroVironment, Inc.

1 unchanged sentence

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 August 1, 2020, reflecting the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied from May 1, 2020 with the consequential tax effects and including the results of Telerob prior to acquisition.

The Company incurred approximately $ 137,000 and $ 548,000 of acquisition-related expenses for the three and six months ended October 30, 2021.

The Company incurred approximately $ 113,000 and $ 661,000 of acquisition-related expenses for the three and nine months ended January 29, 2022.

These expenses are included in selling, general and administrative on the Company’s unaudited consolidated statement of operations.

40 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Net income attributable to AeroVironment, Inc.

1 unchanged sentence

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 27, 2019, reflecting the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied from May 1, 2019 with the consequential tax effects, and including the results of Arcturus prior to acquisition.

The Company incurred approximately $ 108,000 and $ 1,492,000 acquisition-related expenses for the three and six months ended October 30, 2021, respectively.

The Company incurred approximately $ 41,000 and $ 1,533,000 acquisition-related expenses for the three and nine months ended January 29, 2022, respectively.

These expenses are included in selling, general and administrative expense on the Company’s unaudited consolidated statement of operations.

4 unchanged sentences

In connection with the ISG Acquisition, the Company (i) paid a base purchase price of $ 29,700,000 in cash at closing and (ii) may pay additional cash consideration of up to $ 6,000,000 , which is held in escrow account not controlled by the Company, based on the achievement of certain revenue targets by ISG during the 3 years following closing, in each case, subject to the terms and conditions of the ISG Purchase Agreement, including certain customary adjustments.

During the three months ended October 30, 2021, the revenue target for the first year was achieved and $ 2,000,000 of the additional cash consideration was earned.

During the three months ended October 30, 2021, the target for the first year was achieved.

During the three months ended January 29, 2022 the related consideration of $ 2,000,000 was released from an escrow account that is not controlled by the Company and, therefore, not recorded on the consolidated balance sheet.

As a condition to closing pursuant to the ISG Purchase Agreement, the Company and the ISG Seller entered into certain ancillary agreements, including a transition services agreement and two subleases pursuant to which the ISG Seller will provide the Company certain services and facilities space to accommodate the transition of ISG to the Company.

16 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Net income attributable to AeroVironment, Inc.

1 unchanged sentence

The Company incurred approximately $ 85,000 and $ 736,000 acquisition-related expenses for the three and six months ended October 30, 2021, respectively.

The Company incurred approximately $ 42,000 and $ 778,000 acquisition-related expenses for the three and nine months ended January 29, 2022, respectively.

These expenses are included in selling, general and administrative expenses on the Company’s unaudited consolidated statement of operations.

1 unchanged sentence

As part of the Telerob acquisition, the Company acquired a small foreign-based defined benefit pension plan.

The Rheinmetall-Zusatzversorgung (“RZV”) service plan covers three employees based on individual contracts issued to the employees.

The Rheinmetall-Zusatzversorgung (“RZV”) service plan covers three former employees based on individual contracts issued to the employees.

No other employees are eligible to participate.

2 unchanged sentences

The table below includes the projected benefit obligation and fair value of plan assets as of May 3, 2021.

The net projected benefit obligation (in thousands) is recorded in other non-current liabilities.

The net projected benefit obligation (in thousands) is recorded in other non-current liabilities on the unaudited consolidated balance sheet.

Projected benefit obligation

1 unchanged sentence

Unfunded status of the plan

The projected benefit obligation includes assumptions of a discount rate of 1 % and pension increase for in-payment benefits of 1.5 % for May 3, 2021 and October 30, 2021.

The projected benefit obligation includes assumptions of a discount rate of 1 % and pension increase for in-payment benefits of 1.5 % for May 3, 2021 and January 29, 2022.

The accumulated benefit obligation is approximately equal to our projected benefit obligation.

2 unchanged sentences

The Company does not expect to make any contributions to the Plan in the fiscal year ending April 30, 2022.

The Company assumed expected return on plan assets of 2.15% for May 3, 2021 and October 30, 2021.

The Company assumed expected return on plan assets of 2.15 % for May 3, 2021 and January 29, 2022.

Expected benefits payments as of May 3, 2021 (in thousands):

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(In thousands)

4 unchanged sentences

Net periodic benefit cost

The Company’s product segments are as follows:

The Company’s reportable segments are as follows:

Small Unmanned Aircraft Systems —The Small UAS segment focuses primarily on products designed to operate reliably at very low altitudes in a wide range of environmental conditions, providing a vantage point from which to collect and deliver valuable information as well as related support services including training, spare parts, product repair, product replacement, and the customer contracted operation.

6 unchanged sentences

Adjusted operating (loss) income is defined as operating (loss) income before intangible amortization, amortization of purchase accounting adjustment related to increasing the carrying value of certain assets to fair value, and acquisition related expenses.

Three Months Ended October 30, 2021

Three Months Ended January 29, 2022

Income (loss) from operations

2 unchanged sentences

Adjusted income (loss) from operations

Three Months Ended October 31, 2020

Three Months Ended January 30, 2021

Income (loss) from operations

2 unchanged sentences

Adjusted income (loss) from operations

Six Months Ended October 30, 2021

Nine Months Ended January 29, 2022

Income (loss) from operations

2 unchanged sentences

Adjusted income (loss) from operations

Six Months Ended October 31, 2020

Nine Months Ended January 30, 2021

Income (loss) from operations

4 unchanged sentences

Corporate assets primarily consist of cash and cash equivalents, short-term investments, prepaid expenses and other current assets, long-term investments, property and equipment, net, operating lease right-of-use assets, deferred income taxes and other assets managed centrally on behalf of the business segments.

October 30, 2021

January 29, 2022

Identifiable assets

2 unchanged sentences

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