AeroVironment Inc 10-Q

ITEM 1. FINANCIAL STATEMENTS ​ AeroVironment, Inc. Consolidated Balance Sheet s (In thousands except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ January 29, April 30, ​ ​ ​ 2022 ​ 2021 ​ ​ (Unaudited) ​ ​ ​ Assets ​ ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 82,528 ​ $ 148,741 ​ Short-term investments ​ ​ 3,969 ​ ​ 31,971 ​ Accounts receivable, net of allowance for doubtful accounts of $ 577 at January 29, 2022 and $ 595 at April 30, 2021 ​ 41,739 ​ 62,647 ​ Unbilled receivables and retentions (inclusive of related party unbilled receivables of $ 5,944 at January 29, 2022 and $ 544 at April 30, 2021) ​ 97,993 ​ 71,632 ​ Inventories ​ 89,616 ​ 71,646 ​ Income taxes receivable ​ ​ 26,578 ​ ​ — ​ Prepaid expenses and other current assets ​ 12,099 ​ 15,001 ​ Total current assets ​ 354,522 ​ 401,638 ​ Long-term investments ​ ​ 12,388 ​ ​ 12,156 ​ Property and equipment, net ​ 65,377 ​ 58,896 ​ Operating lease right-of-use assets ​ ​ 24,848 ​ ​ 22,902 ​ Deferred income taxes ​ 3,258 ​ 2,061 ​ Intangibles, net ​ ​ 103,825 ​ ​ 106,268 ​ Goodwill ​ ​ 335,164 ​ ​ 314,205 ​ Other assets ​ 5,881 ​ 10,440 ​ Total assets ​ $ 905,263 ​ $ 928,566 ​ Liabilities and stockholders’ equity ​ ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 15,118 ​ $ 24,841 ​ Wages and related accruals ​ 21,207 ​ 28,068 ​ Customer advances ​ 6,864 ​ 7,183 ​ Current portion of long-term debt ​ ​ 10,000 ​ ​ 10,000 ​ Current operating lease liabilities ​ ​ 6,150 ​ ​ 6,154 ​ Income taxes payable ​ ​ 247 ​ ​ 861 ​ Other current liabilities ​ 27,897 ​ 19,078 ​ Total current liabilities ​ 87,483 ​ 96,185 ​ Long-term debt, net of current portion ​ ​ 180,398 ​ ​ 187,512 ​ Non-current operating lease liabilities ​ ​ 20,678 ​ ​ 19,103 ​ Other non-current liabilities ​ ​ 5,273 ​ ​ 10,141 ​ Liability for uncertain tax positions ​ 3,518 ​ 3,518 ​ Deferred income taxes ​ ​ 5,198 ​ ​ — ​ Commitments and contingencies ​ ​ ​ ​ ​ ​ ​ Stockholders’ equity: ​ ​ ​ ​ ​ ​ ​ Preferred stock, $ 0.0001 par value: ​ ​ ​ ​ ​ ​ ​ Authorized shares— 10,000,000 ; 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— 24,915,105 shares at January 29, 2022 and 24,777,295 shares at April 30, 2021 ​ 2 ​ 2 ​ Additional paid-in capital ​ 265,885 ​ 260,327 ​ Accumulated other comprehensive (loss) income ​ ( 3,434 ) ​ 343 ​ Retained earnings ​ 339,975 ​ 351,421 ​ Total AeroVironment, Inc. stockholders’ equity ​ 602,428 ​ 612,093 ​ Noncontrolling interest ​ ​ 287 ​ ​ 14 ​ Total equity ​ ​ 602,715 ​ ​ 612,107 ​ Total liabilities and stockholders’ equity ​ $ 905,263 ​ $ 928,566 ​ ​ See accompanying notes to consolidated financial statements (unaudited). ​ 3 Table of Contents AeroVironment, Inc. Consolidated Statements of Operation s (Unaudited) (In thousands except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ ​ January 29, ​ January 30, ​ January 29, ​ January 30, ​ ​ 2022 2021 2022 2021 Revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product sales ​ $ 42,599 ​ $ 58,348 ​ $ 166,713 ​ $ 182,233 ​ 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) ​ 47,494 ​ 20,434 ​ 146,397 ​ 76,664 ​ ​ ​ 90,093 ​ 78,782 ​ 313,110 ​ 258,897 ​ Cost of sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product sales ​ 29,294 ​ 35,746 ​ 100,821 ​ 102,039 ​ Contract services ​ 39,363 ​ 14,395 ​ 119,675 ​ 51,955 ​ ​ ​ 68,657 ​ 50,141 ​ 220,496 ​ 153,994 ​ Gross margin: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product sales ​ ​ 13,305 ​ ​ 22,602 ​ ​ 65,892 ​ ​ 80,194 ​ Contract services ​ ​ 8,131 ​ ​ 6,039 ​ ​ 26,722 ​ ​ 24,709 ​ ​ ​ ​ 21,436 ​ ​ 28,641 ​ 92,614 ​ 104,903 ​ Selling, general and administrative ​ 22,549 ​ 15,652 ​ 74,496 ​ 42,640 ​ Research and development ​ 13,013 ​ 13,631 ​ 41,018 ​ 36,710 ​ (Loss) income from operations ​ ( 14,126 ) ​ ( 642 ) ​ ( 22,900 ) ​ 25,553 ​ Other (loss) income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest (expense) income, net ​ ( 1,510 ) ​ 94 ​ ( 4,164 ) ​ 417 ​ Other income (expense), net ​ 34 ​ ( 37 ) ​ ( 10,360 ) ​ 68 ​ (Loss) income before income taxes ​ ( 15,602 ) ​ ( 585 ) ​ ( 37,424 ) ​ 26,038 ​ (Benefit from) provision for income taxes ​ ​ ( 15,396 ) ​ ​ ( 924 ) ​ ( 25,864 ) ​ 2,774 ​ Equity method investment income (loss), net of tax ​ 171 ​ ( 81 ) ​ 163 ​ ( 10,891 ) ​ Net (loss) income ​ ​ ( 35 ) ​ ​ 258 ​ ​ ( 11,397 ) ​ ​ 12,373 ​ Net loss (income) attributable to noncontrolling interest ​ ​ 45 ​ ​ ( 47 ) ​ ​ ( 49 ) ​ ​ 12 ​ Net income (loss) attributable to AeroVironment, Inc. ​ $ 10 ​ $ 211 ​ $ ( 11,446 ) ​ $ 12,385 ​ Net income (loss) per share attributable to AeroVironment, Inc. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ — ​ $ 0.01 ​ $ ( 0.46 ) ​ $ 0.52 ​ Diluted ​ $ — ​ $ 0.01 ​ $ ( 0.46 ) ​ $ 0.51 ​ Weighted-average shares outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ 24,710,991 ​ 23,942,782 ​ 24,657,846 ​ 23,924,017 ​ Diluted ​ 24,879,643 ​ 24,260,874 ​ 24,657,846 ​ 24,216,371 ​ ​ See accompanying notes to consolidated financial statements (unaudited). ​ ​ 4 Table of Contents AeroVironment, Inc. Consolidated Statements of Comprehensive (Loss) Income (Unaudited) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ ​ January 29, ​ January 30, ​ January 29, ​ January 30, ​ ​ 2022 2021 2022 2021 Net (loss) income ​ $ ( 35 ) ​ $ 258 ​ $ ( 11,397 ) ​ $ 12,373 ​ 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 ​ ( 3 ) ​ 5 ​ ( 6 ) ​ ( 56 ) ​ Change in foreign currency translation adjustments ​ ​ ( 1,754 ) ​ ​ — ​ ​ ( 3,771 ) ​ ​ 75 ​ Total comprehensive (loss) income ​ ​ ( 1,792 ) ​ ​ 263 ​ ​ ( 15,174 ) ​ ​ 12,392 ​ Net loss (income) attributable to noncontrolling interest ​ ​ 45 ​ ​ ( 47 ) ​ ​ ( 49 ) ​ ​ 12 ​ Comprehensive (loss) income attributable to AeroVironment, Inc. ​ $ ( 1,747 ) ​ $ 216 ​ $ ( 15,223 ) ​ $ 12,404 ​ ​ See accompanying notes to consolidated financial statements (unaudited). ​ 5 Table of Contents ​ AeroVironment, Inc. Consolidated Statements of Stockholders’ Equity For the nine months ended January 29, 2022 and January 30, 2021 (Unaudited) (In thousands except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ Total ​ Non- ​ ​ ​ ​ ​ Common Stock ​ Paid-In ​ Retained ​ Comprehensive ​ AeroVironment, Inc. ​ Controlling ​ ​ ​ ​ Shares Amount Capital Earnings Income (Loss) ​ Equity ​ Interest Total Balance at April 30, 2021 24,777,295 ​ $ 2 ​ $ 260,327 ​ $ 351,421 ​ $ 343 ​ $ 612,093 ​ $ 14 ​ $ 612,107 ​ Net (loss) income — ​ — ​ — ​ ( 11,446 ) ​ — ​ ​ ( 11,446 ) ​ ​ 49 ​ ( 11,397 ) ​ Unrealized loss on investments ​ — ​ — ​ — ​ — ​ ( 6 ) ​ ​ ( 6 ) ​ ​ — ​ ( 6 ) ​ Foreign currency translation ​ — ​ — ​ — ​ — ​ ( 3,771 ) ​ ​ ( 3,771 ) ​ ​ — ​ ( 3,771 ) ​ Stock options exercised 114,362 ​ — ​ 2,777 ​ — ​ ​ — ​ ​ 2,777 ​ ​ — ​ 2,777 ​ Restricted stock awards 55,592 ​ — ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ Restricted stock awards forfeited ( 20,203 ) ​ — ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ Tax withholding payment related to net share settlement of equity awards ( 11,941 ) ​ — ​ ( 1,176 ) ​ — ​ ​ — ​ ​ ( 1,176 ) ​ ​ — ​ ( 1,176 ) ​ Change in non-controlling interest ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 224 ​ ​ 224 ​ Stock based compensation — ​ — ​ 3,957 ​ — ​ ​ — ​ ​ 3,957 ​ ​ — ​ 3,957 ​ Balance at January 29, 2022 24,915,105 ​ $ 2 ​ $ 265,885 ​ $ 339,975 ​ $ ( 3,434 ) ​ $ 602,428 ​ $ 287 ​ $ 602,715 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ Total ​ Non- ​ ​ ​ ​ ​ ​ Common Stock ​ Paid-In ​ Retained ​ Comprehensive ​ AeroVironment, Inc. ​ Controlling ​ ​ ​ ​ ​ Shares Amount Capital Earnings Income (Loss) ​ Equity ​ Interest Total ​ Balance at April 30, 2020 24,063,639 ​ $ 2 ​ $ 181,481 ​ $ 328,090 ​ $ 328 ​ $ 509,901 ​ $ — ​ $ 509,901 ​ Net income (loss) — ​ — ​ — ​ 12,385 ​ — ​ ​ 12,385 ​ ​ ( 12 ) ​ 12,373 ​ Unrealized loss on investments ​ — ​ — ​ — ​ — ​ ( 56 ) ​ ​ ( 56 ) ​ ​ — ​ ( 56 ) ​ Foreign currency translation ​ — ​ — ​ — ​ — ​ 75 ​ ​ 75 ​ ​ — ​ 75 ​ Stock options exercised 3,500 ​ — ​ 86 ​ — ​ ​ — ​ ​ 86 ​ ​ — ​ 86 ​ Restricted stock awards 62,675 ​ — ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ Restricted stock awards forfeited ( 1,833 ) ​ — ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ — ​ Tax withholding payment related to net share settlement of equity awards ( 25,290 ) ​ — ​ ( 1,955 ) ​ — ​ ​ — ​ ​ ( 1,955 ) ​ ​ — ​ ( 1,955 ) ​ Stock based compensation ​ — ​ — ​ 4,754 ​ — ​ ​ — ​ ​ 4,754 ​ ​ — ​ 4,754 ​ Balance at January 30, 2021 24,102,691 ​ $ 2 ​ $ 184,366 ​ $ 340,475 ​ $ 347 ​ $ 525,190 ​ $ ( 12 ) ​ $ 525,178 ​ ​ ​ ​ 6 Table of Contents AeroVironment, Inc. Consolidated Statements of Stockholders’ Equity For the three months ended January 29, 2022 and January 30, 2021 (Unaudited) (In thousands except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ Total ​ Non- ​ ​ ​ ​ ​ Common Stock ​ Paid-In ​ Retained ​ Comprehensive ​ AeroVironment, Inc. ​ Controlling ​ ​ ​ ​ Shares Amount Capital Earnings (Loss) Income ​ Equity ​ Interest Total Balance at October 30, 2021 24,805,829 ​ $ 2 ​ $ 261,612 ​ $ 339,965 ​ $ ( 1,677 ) ​ $ 599,902 ​ $ 332 ​ $ 600,234 Net income (loss) — ​ — ​ — ​ 10 ​ — ​ ​ 10 ​ ​ ( 45 ) ​ ( 35 ) Unrealized loss on investments — ​ — ​ — ​ — ​ ( 3 ) ​ ​ ( 3 ) ​ ​ — ​ ( 3 ) Foreign currency translation ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 1,754 ) ​ ​ ( 1,754 ) ​ ​ — ​ ​ ( 1,754 ) Stock options exercised ​ 110,362 ​ — ​ 2,657 ​ — ​ — ​ ​ 2,657 ​ ​ — ​ 2,657 Restricted stock awards ​ 3,366 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Restricted stock awards forfeited ( 4,452 ) ​ — ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ — Stock based compensation — ​ — ​ 1,616 ​ — ​ ​ — ​ ​ 1,616 ​ ​ — ​ 1,616 Balance at January 29, 2022 24,915,105 ​ $ 2 ​ $ 265,885 ​ $ 339,975 ​ $ ( 3,434 ) ​ $ 602,428 ​ $ 287 ​ $ 602,715 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ Total ​ Non- ​ ​ ​ ​ ​ Common Stock ​ Paid-In ​ Retained ​ Comprehensive ​ AeroVironment, Inc. ​ Controlling ​ ​ ​ ​ Shares Amount Capital Earnings Income (Loss) ​ Equity ​ Interest Total Balance at October 31, 2020 24,103,980 ​ ​ 2 ​ ​ 183,298 ​ ​ 340,264 ​ ​ 342 ​ ​ 523,906 ​ ​ ( 59 ) ​ ​ 523,847 Net income — ​ — ​ — ​ 211 ​ — ​ ​ 211 ​ ​ 47 ​ 258 Unrealized gain on investments ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 5 ​ ​ 5 ​ ​ — ​ ​ 5 Restricted stock awards ​ 2,083 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Restricted stock awards forfeited ( 1,318 ) ​ ​ — ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ — Tax withholding payment related to net share settlement of equity awards ( 2,054 ) ​ — ​ ( 177 ) ​ — ​ ​ — ​ ​ ( 177 ) ​ ​ — ​ ( 177 ) Stock based compensation ​ — ​ — ​ 1,245 ​ — ​ ​ — ​ ​ 1,245 ​ ​ — ​ 1,245 Balance at January 30, 2021 24,102,691 ​ $ 2 ​ $ 184,366 ​ $ 340,475 ​ $ 347 ​ $ 525,190 ​ $ ( 12 ) ​ $ 525,178 ​ See accompanying notes to consolidated financial statements (unaudited). ​ ​ 7 Table of Contents AeroVironment, Inc. Consolidated Statements of Cash Flow s (Unaudited) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ January 29, January 30, ​ ​ 2022 ​ 2021 ​ Operating activities ​ ​ ​ ​ ​ ​ Net (loss) income ​ $ ( 11,397 ) ​ $ 12,373 ​ Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities: ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 47,437 ​ 8,650 ​ (Income) loss from equity method investments, net ​ ​ ( 799 ) ​ ​ 10,891 ​ Amortization of debt issuance costs ​ ​ 386 ​ ​ — ​ Realized gain from sale of available-for-sale investments ​ ​ — ​ ​ ( 11 ) ​ Provision for doubtful accounts ​ ( 20 ) ​ ( 145 ) ​ Other non-cash expense (income) ​ ​ 440 ​ ​ ( 473 ) ​ Non-cash lease expense ​ ​ 5,033 ​ ​ 3,592 ​ Loss on foreign currency transactions ​ 34 ​ 1 ​ Deferred income taxes ​ ( 1,195 ) ​ ( 897 ) ​ Stock-based compensation ​ 3,957 ​ 4,754 ​ Loss on disposal of property and equipment ​ ​ 5,063 ​ ​ 2 ​ Amortization of debt securities ​ ​ 117 ​ ​ 143 ​ Changes in operating assets and liabilities, net of acquisitions: ​ ​ ​ ​ ​ ​ ​ Accounts receivable ​ 21,901 ​ 47,184 ​ Unbilled receivables and retentions ​ ( 25,597 ) ​ 14,753 ​ Inventories ​ ( 21,590 ) ​ ( 7,569 ) ​ Income taxes receivable ​ ​ ( 26,208 ) ​ ​ — ​ Prepaid expenses and other assets ​ 1,789 ​ ( 1,622 ) ​ Accounts payable ​ ( 10,720 ) ​ ( 3,346 ) ​ Other liabilities ​ ​ ( 11,807 ) ​ ​ ( 9,318 ) ​ Net cash (used in) provided by operating activities ​ ( 23,176 ) ​ 78,962 ​ Investing activities ​ ​ ​ ​ ​ ​ ​ Acquisition of property and equipment ​ ( 17,064 ) ​ ( 8,472 ) ​ Equity method investments ​ ​ ( 6,884 ) ​ ​ ( 2,150 ) ​ Business acquisitions, net of cash acquired ​ ​ ( 46,150 ) ​ ​ — ​ Redemptions of available-for-sale investments ​ 35,851 ​ 130,066 ​ Purchases of available-for-sale investments ​ ​ ( 2,987 ) ​ ​ ( 125,644 ) ​ Other ​ ​ 225 ​ ​ — ​ Net cash used in investing activities ​ ( 37,009 ) ​ ( 6,200 ) ​ Financing activities ​ ​ ​ ​ ​ ​ ​ Principal payments of loan ​ ​ ( 7,500 ) ​ ​ — ​ Holdback and retention payments for business acquisition ​ ​ ( 5,991 ) ​ ​ ( 1,492 ) ​ Tax withholding payment related to net settlement of equity awards ​ ​ ( 1,176 ) ​ ​ ( 1,955 ) ​ Exercise of stock options ​ 2,776 ​ 86 ​ Other ​ ​ ( 23 ) ​ ​ — ​ Net cash used in financing activities ​ ( 11,914 ) ​ ( 3,361 ) ​ Effects of currency translation on cash and cash equivalents ​ ​ ( 613 ) ​ ​ — ​ Net (decrease) increase in cash, cash equivalents, and restricted cash ​ ( 72,712 ) ​ 69,401 ​ Cash, cash equivalents and restricted cash at beginning of period ​ 157,063 ​ 255,142 ​ Cash, cash equivalents and restricted cash at end of period ​ $ 84,351 ​ $ 324,543 ​ Supplemental disclosures of cash flow information ​ ​ ​ ​ ​ ​ ​ Cash paid, net during the period for: ​ ​ ​ ​ ​ ​ ​ Income taxes ​ $ 1,923 ​ $ 2,364 ​ Interest ​ $ 3,465 ​ $ — ​ Non-cash activities ​ ​ ​ ​ ​ ​ ​ 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 ​ $ 6 ​ $ 56 ​ Change in foreign currency translation adjustments ​ $ ( 3,771 ) ​ $ 75 ​ Issuances of inventory to property and equipment, ISR in-service assets ​ $ 16,680 ​ $ — ​ Acquisitions of property and equipment included in accounts payable ​ $ 626 ​ $ 746 ​ ​ See accompanying notes to consolidated financial statements (unaudited). ​ ​ ​ 8 Table of Contents ​ ​ ​ ​ ​ AeroVironment, Inc. Notes to Consolidated Financia l Statements (Unaudited) ​ 1. Organization and Significant Accounting Policies ​ Organization ​ AeroVironment, Inc., a Delaware corporation (the “Company”), is engaged in the design, development, production, delivery and support of a technologically advanced portfolio of intelligent, multi-domain robotic systems and related services for government agencies and businesses. AeroVironment, Inc. supplies 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. ​ Basis of Presentation ​ The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. 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 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. ​ The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions, including estimates of anticipated contract costs and revenue utilized in the revenue recognition process, that affect the reported amounts in the unaudited consolidated financial statements and accompanying notes. Actual results could differ from those estimates. ​ The Company’s unaudited consolidated financial statements include the assets, liabilities and operating results of wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated. ​ On February 19, 2021, the Company closed its acquisition of Arcturus UAV, Inc. (“Arcturus”), a California corporation, pursuant to a Stock Purchase Agreement (the “Arcturus Purchase Agreement”) with Arcturus and each of the shareholders and other equity interest holders of Arcturus (collectively, the “Arcturus Sellers”), purchasing 100 % of the issued and outstanding equity interests of Arcturus (the “Arcturus Acquisition”). The assets, liabilities and operating results of Arcturus have been included in the Company’s unaudited consolidated financial statements. Refer to Note 18—Business Acquisitions for further details. ​ On February 23, 2021, the Company purchased certain assets of, and assumed certain liabilities of, the Intelligent Systems Group business segment (“ISG”) of Progeny Systems Corporation, a Virginia corporation (the “ISG Seller”), pursuant to the terms of an Asset Purchase Agreement (the “ISG Purchase Agreement”) of the same date, by and among the Company, ISG Seller and the sole shareholder of ISG Seller (the “Beneficial Owner,” and such acquisition of ISG, the “ISG Acquisition”). The assets, liabilities and operating results of ISG have been included in the Company’s unaudited consolidated financial statements. Refer to Note 18—Business Acquisitions for further details. ​ On May 3, 2021, the Company closed its acquisition of Telerob Gesellschaft für Fernhantierungstechnik mbH, a German company based in Ostfildern (near Stuttgart), Germany (“Telerob GmbH”), including Telerob GmbH’s wholly-owned 9 Table of Contents subsidiary, Telerob USA, Inc. (“Telerob USA,” and collectively with Telerob GmbH, “Telerob”) pursuant to its previously announced Share Purchase Agreement (the “Telerob Purchase Agreement”) with Unmanned Systems Investments GmbH, a German limited liability company incorporated under the laws of Germany (the “Telerob Seller”), and each of the unit holders of the Seller (collectively, the “Telerob Shareholders”), to purchase 100% of the issued and outstanding shares of Telerob Seller’s wholly-owned subsidiary Telerob GmbH (the “Telerob Acquisition”). The assets, liabilities and operating results of Telerob GmbH have been included in the Company’s unaudited consolidated financial statements. Refer to Note 18—Business Acquisitions for further details. ​ On September 15, 2021, the Company entered into a Share Sale and Purchase Agreement (the “Purchase Agreement”) with Toygun Savunma Sanayi ve Havacilik Anonim Sirketi (“Toygun”) whereby the Company sold 35 % of the common shares of Altoy to Toygun. 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 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 ​ Effective May 1, 2021, the Company adopted ASU 2019-12 , Simplifying the Accounting for Income Taxes (Topic 740). This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 including removing the requirement to limit income tax expense (benefit) in an interim period to the full year projected amounts. The Company adopted ASU 2019-12 using the prospective method, applying the new guidance accounting for income taxes after adoption. The adoption of ASU 2019-12 did not have an impact on the Company’s consolidated financial statements. ​ Revenue Recognition ​ The Company’s revenue is generated pursuant to written contractual arrangements to design, develop, manufacture and/or modify complex products and to provide related engineering, technical and other services according to the specifications of the customers. 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, Revenue from Contracts with Customers (“ASC 606”). ​ Performance Obligations ​ A performance obligation is a promise in a contract to transfer distinct goods or services to a customer, and it is the unit of account in ASC Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and revenue is recognized when each performance obligation under the terms of a contract is satisfied. Revenue is measured at the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation using its observable standalone selling price for products and services. When the standalone selling price is not directly observable, the Company uses its best estimate of the standalone selling price of each distinct good or service in the contract using the cost plus margin approach. This approach estimates the Company’s expected costs of satisfying the performance obligation and then adds an appropriate margin for that distinct good or service. ​ Contract modifications are routine in the performance of the Company’s contracts. In most instances, contract modifications are for additional goods and/or services that are distinct and, therefore, accounted for as new contracts. ​ The Company’s performance obligations are satisfied over time or at a point in time. 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 10 Table of Contents 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. Contract services revenue is composed of revenue recognized on contracts for the provision of services, including repairs and maintenance, training, engineering design, development and prototyping activities, and technical support services. Contract services revenue is recognized over time as services are rendered. Typically, revenue is recognized over time using an input measure (e.g., costs incurred to date relative to total estimated costs at completion) to measure progress. Contract services revenue, including revenue from intelligence, surveillance, and reconnaissance (“ISR”) services, is recognized over time as services are rendered. In accordance with ASC Topic 606, the Company elected the right to invoice practical expedient in which if an entity has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date, such as flight hours for ISR services, the entity may recognize revenue in the amount to which the entity has a right to invoice. Training services are recognized over time using an output method based on days of training completed. ​ For performance obligations satisfied over time, revenue is generally recognized using costs incurred to date relative to total estimated costs at completion to measure progress. Incurred costs represent work performed, which correspond with, and thereby best depict, transfer of control to the customer. Contract costs include labor, materials, subcontractors’ costs, other direct costs, and indirect costs applicable on government and commercial contracts. ​ For performance obligations which are not satisfied over time per the aforementioned criteria above, revenue is recognized at the point in time in which each performance obligation is fully satisfied. The Company’s small UAS, medium UAS (“MUAS”) and UGV product sales revenue is composed of revenue recognized on contracts for the delivery of small UAS, MUAS and UGV systems and spare parts, respectively. 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 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. ​ Contract Estimates ​ Accounting for contracts and programs primarily with a duration of less than six months involves the use of various techniques to estimate total contract revenue and costs. For long-term contracts, the Company estimates the total expected costs to complete the contract and recognizes revenue based on the percentage of costs incurred at period end. Typically, revenue is recognized over time using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying the Company’s performance obligations. Incurred costs represent work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, materials, subcontractors’ costs, other direct costs, and indirect costs applicable on government and commercial contracts. ​ Contract estimates are based on various assumptions to project the outcome of future events that may span several years. 11 Table of Contents 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. The Company generally estimates such variable consideration as the most likely amount. In addition, the Company includes the estimated variable consideration to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the related uncertainty is resolved. These estimates are based on historical award experience, anticipated performance and the Company’s best judgment at the time. Based on experience in estimating these amounts, they are included in the transaction price of the Company’s contracts and the associated remaining performance obligations. ​ As a significant change in one or more of these estimates could affect the profitability of the Company’s contracts, the Company regularly reviews and updates its contract-related estimates. Changes in cumulative revenue estimates, due to changes in the estimated transaction price or cost estimates, are recorded using a cumulative catch-up adjustment in the period identified for contracts with performance obligations recognized over time. If at any time the estimate of contract profitability indicates an anticipated loss on the contract, the Company recognizes the total loss in the quarter it is identified, and it is recorded in other current liabilities. ​ 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 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 ​ The following tables present the Company’s revenue disaggregated by major product line, contract type, customer category and geographic location (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Nine Months Ended ​ ​ January 29, ​ January 30, January 29, ​ January 30, ​ Revenue by major product line/program ​ 2022 2021 2022 2021 ​ Small UAS ​ $ 24,366 ​ $ 50,536 ​ $ 119,004 ​ $ 165,003 ​ TMS ​ ​ 18,603 ​ ​ 19,598 ​ ​ 56,197 ​ ​ 48,093 ​ MUAS ​ ​ 21,168 ​ ​ — ​ ​ 70,072 ​ ​ — ​ Other ​ 25,956 ​ 8,648 ​ 67,837 ​ 45,801 ​ Total revenue ​ $ 90,093 ​ $ 78,782 ​ $ 313,110 ​ $ 258,897 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ January 29, ​ January 30, January 29, ​ January 30, ​ Revenue by contract type ​ 2022 2021 ​ 2022 2021 ​ FFP ​ $ 66,639 ​ $ 61,230 ​ $ 245,798 ​ $ 190,530 ​ CPFF ​ ​ 21,788 ​ ​ 17,530 ​ ​ 62,499 ​ ​ 68,329 ​ T&M ​ 1,666 ​ 22 4,813 ​ 38 ​ Total revenue ​ $ 90,093 ​ $ 78,782 ​ $ 313,110 ​ $ 258,897 ​ ​ 12 Table of Contents Each of these contract types presents advantages and disadvantages. Typically, the Company assumes more risk with FFP contracts. However, these types of contracts generally offer additional profits when the Company completes the work for less than originally estimated. CPFF contracts generally subject the Company to lower risk. Accordingly, the associated base fees are usually lower than fees on FFP contracts. Under T&M contracts, the Company’s profit may vary if actual labor hour rates vary significantly from the negotiated rates. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ January 29, ​ January 30, January 29, ​ January 30, ​ Revenue by customer category ​ 2022 2021 ​ 2022 2021 ​ U.S. government ​ $ 60,956 ​ $ 60,633 ​ $ 204,107 ​ $ 170,023 ​ Non-U.S. government ​ ​ 29,137 ​ ​ 18,149 ​ ​ 109,003 ​ ​ 88,874 ​ Total revenue ​ $ 90,093 ​ $ 78,782 ​ $ 313,110 ​ $ 258,897 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ ​ January 29, ​ January 30, ​ January 29, ​ January 30, ​ Revenue by geographic location ​ 2022 2021 ​ 2022 2021 ​ Domestic ​ $ 56,480 ​ $ 51,062 ​ $ 193,531 ​ $ 150,890 ​ International ​ ​ 33,613 ​ ​ 27,720 ​ ​ 119,579 ​ ​ 108,007 ​ Total revenue ​ $ 90,093 ​ $ 78,782 ​ $ 313,110 ​ $ 258,897 ​ ​ Contract Balances ​ The timing of revenue recognition, billings, and cash collections results in billed accounts receivable, unbilled receivables, and customer advances and deposits on the consolidated balance sheet. In the Company’s services contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals, which is generally monthly, or upon the achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets recorded in unbilled receivables and retentions on the consolidated balance sheet. However, the Company sometimes receives advances or deposits from its customers before revenue is recognized, resulting in contract liabilities recorded in customer advances on the consolidated balance sheet. Contract liabilities are not a significant financing component as they are generally utilized to pay for contract costs within a one-year period or are used to ensure the customer meets contractual requirements. These assets and liabilities are reported on the consolidated balance sheet on a contract-by-contract basis at the end of each reporting period. For the Company’s product revenue, the Company generally receives cash payments subsequent to satisfying the performance obligation via delivery of the product, resulting in billed accounts receivable. Changes in the contract asset and liability balances during the 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 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 . ​ Segments ​ 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. 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. ​ 13 Table of Contents 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. The restricted funds in the escrow account are recorded in other assets on the consolidated balance sheet. As of January 29, 2022 and April 30, 2021 restricted cash was $ 1,823,000 and $ 8,322,000 , respectively. ​ Investments ​ The Company’s investments are accounted for as available-for-sale and are reported at fair value. Unrealized gains and losses are excluded from earnings and reported as a separate component of stockholders’ equity, net of deferred income taxes for available-for-sale investments. Gains and losses realized on the disposition of investment securities are determined on the specific identification basis and credited or charged to income. Management determines the appropriate classification of securities at the time of purchase and reevaluates such designation as of each balance sheet date. ​ Fair Values of Financial Instruments ​ Fair values of cash and cash equivalents, accounts receivable, unbilled receivables and retentions, and accounts payable approximate cost due to the short period of time to maturity. ​ Government Contracts ​ Payments to the Company on government CPFF or T&M contracts are based on provisional, or estimated indirect rates, which are subject to an annual audit by the Defense Contract Audit Agency (“DCAA”). The cost audits result in the negotiation and determination of the final indirect cost rates that the Company may use for the period(s) audited. The final rates, if different from the provisional rates, may create an additional receivable or liability for the Company for CPFF and T&M contracts. ​ For example, during the course of its audits, the DCAA may question the Company’s incurred costs, and if the DCAA believes the Company has accounted for such costs in a manner inconsistent with the requirements under Federal Acquisition Regulations, the DCAA auditor may recommend to the Company’s administrative contracting officer to disallow such costs. Historically, the Company has not experienced material disallowed costs as a result of government audits. However, the Company can provide no assurance that the DCAA or other government audits will not result in material disallowances for incurred costs in the future. 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 January 29, 2022 and April 30, 2021, the Company had no reserve for incurred cost claim audits. ​ Earnings (Loss) Per Share ​ Basic earnings (loss) per share is computed using the weighted-average number of common shares outstanding, excluding shares of unvested restricted stock. ​ 14 Table of Contents The reconciliation of basic to diluted shares is as follows (in thousands except share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ Nine Months Ended ​ January 29, 2022 January 30, 2021 January 29, 2022 January 30, 2021 Net income (loss) attributable to AeroVironment, Inc. ​ $ 10 ​ $ 211 ​ $ ( 11,446 ) ​ $ 12,385 ​ Denominator for basic earnings (loss) per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average common shares ​ 24,710,991 ​ 23,942,782 ​ 24,657,846 ​ 23,924,017 ​ Dilutive effect of employee stock options, restricted stock and restricted stock units ​ 168,652 ​ 318,092 ​ — ​ 292,354 ​ Denominator for diluted earnings (loss) per share ​ ​ 24,879,643 ​ ​ 24,260,874 ​ ​ 24,657,846 ​ ​ 24,216,371 ​ ​ 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 January 29, 2022 are not expected to be applicable to the Company. ​ ​ 2. Discontinued Operations ​ On June 29, 2018, the Company completed the sale of substantially all of the assets and related liabilities of its efficient energy systems business segment (the “EES Business”) to Webasto Charging Systems, Inc. (“Webasto”) pursuant to an Asset Purchase Agreement (the “Purchase Agreement”) between Webasto and the Company. 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. ​ 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 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. Under the terms of the Purchase Agreement, the Company may be responsible for certain costs of such recall of named products the Company manufactured, sold or serviced prior to the closing of the sale of the EES Business. On August 14, 2019, Benchmark Electronics, Inc. (“Benchmark”), the company that assembled the products subject to the recall, served a demand for arbitration to the Company and Webasto, and a third-party part supplier pursuant to its contracts with the Company and Webasto, respectively. The Company filed a responsive pleading in the Benchmark arbitration on October 29, 2019, consisting of a general denial, affirmative defenses, and a reservation of the right to file counter-claims at a later date. Webasto challenged the validity of the Benchmark arbitration by filing an action in New York Superior Court. In December 2019, Webasto and Benchmark reached a settlement of their disputed claims. Benchmark withdrew its Notice of Arbitration against Webasto and the Company, but reserved its right to pursue indemnity claims against suppliers. ​ 15 Table of Contents 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. Webasto seeks to recover the costs of the recall and other damages totaling a minimum of $ 6,500,000 in addition to attorneys’ fees, costs, and punitive damages. On August 16, 2019, the Company filed a counterclaim against Webasto seeking payment of the Holdback and declaratory relief regarding Webasto’s cancellation of an assigned contract. Webasto again amended the complaint in May 2021 to include additional claims. On June 2, 2021, the Company filed an answer to Webasto’s second amended complaint filed in May 2021. ​ In order to avoid the future cost, expense, and distraction of continued litigation, the Company engaged in settlement negotiations with Webasto in May 2021. While the negotiations did not result in a settlement of any of the Company’s or Webasto’s claims at such time, as a result of the settlement negotiations, the Company established a litigation reserve, which reflected the scope of a rejected offer intended to communicate the Company’s serious and good faith intention to attempt to reach a settlement for the stated purposes. The offer did not reflect the Company’s view of the merits of the claims made; 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. 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. ​ 3. Investments ​ Investments consist of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ January 29, ​ April 30, ​ ​ 2022 2021 Short-term investments: ​ ​ ​ ​ ​ ​ ​ Available-for-sale securities: ​ ​ ​ ​ ​ ​ ​ Municipal securities ​ ​ 3,969 ​ ​ 22,245 ​ U.S. government securities ​ ​ — ​ ​ 4,009 ​ Corporate bonds ​ ​ — ​ ​ 5,717 ​ Total short-term investments ​ $ 3,969 ​ $ 31,971 ​ Long-term investments: ​ ​ ​ ​ ​ ​ ​ Available-for-sale securities: ​ ​ ​ ​ ​ ​ ​ Municipal securities ​ ​ — ​ ​ 988 ​ U.S. government securities ​ ​ — ​ ​ 4,000 ​ Total long-term available-for-sale investments ​ — ​ 4,988 ​ Equity method investments ​ ​ ​ ​ ​ ​ ​ Investment in limited partnership fund ​ 12,388 ​ 7,168 ​ Total equity method investments ​ 12,388 ​ 7,168 ​ Total long-term investments ​ $ 12,388 ​ $ 12,156 ​ ​ Available-For-Sale Securities ​ 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 16 Table of Contents 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 January 29, 2022 and April 30, 2021, respectively (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ January 29, 2022 ​ ​ ​ ​ ​ Gross Gross ​ ​ ​ ​ Amortized ​ Unrealized ​ Unrealized ​ Fair ​ ​ ​ ​ Cost ​ Gains ​ Losses ​ Value ​ ​ Municipal securities ​ $ 3,972 ​ $ — ​ $ ( 3 ) ​ $ 3,969 ​ ​ Total available-for-sale investments ​ $ 3,972 ​ $ — ​ $ ( 3 ) ​ $ 3,969 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ April 30, 2021 ​ ​ ​ ​ ​ ​ Gross ​ Gross ​ ​ ​ ​ ​ ​ Amortized ​ Unrealized ​ Unrealized ​ Fair ​ ​ Cost Gains ​ Losses Value Municipal securities $ 23,227 ​ $ 8 ​ $ ( 2 ) ​ $ 23,233 ​ U.S. government securities ​ 8,008 ​ ​ 1 ​ ​ — ​ ​ 8,009 ​ Corporate bonds ​ 5,718 ​ ​ — ​ ​ ( 1 ) ​ ​ 5,717 ​ Total available-for-sale investments $ 36,953 $ 9 ​ $ ( 3 ) $ 36,959 ​ ​ 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost Fair Value Due within one year ​ $ 3,972 ​ $ 3,969 ​ Due after one year through five years ​ — ​ — ​ Total ​ $ 3,972 ​ $ 3,969 ​ ​ ​ 4. Fair Value Measurements ​ Fair value is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy contains three levels as follows: ​ ● Level 1—Inputs to the valuation based upon quoted prices (unadjusted) for identical assets or liabilities in active markets that are accessible as of the measurement date. ​ ● Level 2—Inputs to the valuation include quoted prices in either markets that are not active, or in active markets for similar assets or liabilities, inputs other than quoted prices that are observable, and inputs that are derived principally from or corroborated by observable market data. ​ ● Level 3—Inputs to the valuation that are unobservable inputs for the asset or liability. ​ 17 Table of Contents 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 ​ ​ ​ Significant ​ ​ ​ ​ ​ ​ Quoted prices in ​ other ​ Significant ​ ​ ​ ​ ​ active markets for ​ observable ​ unobservable ​ ​ ​ ​ ​ identical assets ​ inputs ​ inputs ​ ​ ​ Description ​ (Level 1) ​ (Level 2) ​ (Level 3) ​ Total Available-for-sale securities ​ $ — ​ $ 3,969 ​ $ — ​ $ 3,969 ​ Contingently returnable consideration ​ ​ — ​ ​ — ​ ​ 216 ​ ​ 216 ​ Total ​ $ — ​ $ 3,969 ​ $ 216 ​ $ 4,185 ​ ​ ​ ​ ​ 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 ​ ​ ​ Significant ​ ​ ​ ​ ​ ​ Quoted prices in ​ other ​ Significant ​ ​ ​ ​ ​ active markets for ​ observable ​ unobservable ​ ​ ​ ​ ​ identical assets ​ inputs ​ inputs ​ ​ ​ Description ​ (Level 1) ​ (Level 2) ​ (Level 3) ​ Total Contingent consideration ​ $ — ​ $ — ​ $ 889 ​ $ 889 ​ Total ​ $ — ​ $ — ​ $ 889 ​ $ 889 ​ ​ The Company’s financial assets measured at fair value on a recurring basis at April 30, 2021, were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurement Using ​ ​ ​ Significant ​ ​ ​ ​ ​ ​ Quoted prices in ​ other ​ Significant ​ ​ ​ ​ ​ active markets for ​ observable ​ unobservable ​ ​ ​ ​ ​ identical assets ​ inputs ​ inputs ​ ​ ​ Description ​ (Level 1) ​ (Level 2) ​ (Level 3) ​ Total Available-for-sale securities ​ $ — ​ $ 36,959 ​ $ — ​ $ 36,959 Contingently returnable consideration ​ ​ — ​ ​ — ​ ​ 479 ​ ​ 479 Total ​ $ — ​ $ 36,959 ​ $ 479 ​ $ 37,438 ​ The following table provides a reconciliation between the beginning and ending balances of items measured at fair value 18 Table of Contents on a recurring basis that used significant unobservable inputs (Level 3) (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value ​ Fair Value ​ ​ Measurements Using ​ Measurements Using ​ ​ Significant ​ Significant ​ ​ Unobservable Inputs ​ Unobservable Inputs ​ ​ ​ Assets ​ ​ Liabilities ​ Description ​ (Level 3) ​ (Level 3) Balance at May 1, 2021 ​ $ 479 ​ $ — ​ Business acquisition ​ ​ — ​ ​ 889 ​ Transfers to Level 3 ​ — ​ — ​ Total losses (realized or unrealized) ​ ​ ​ ​ ​ ​ ​ Included in selling, general and administrative ​ ​ 263 ​ ​ — ​ Settlements ​ — ​ — ​ Balance at January 29, 2022 ​ $ 216 ​ $ 889 ​ 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. The tables previously included the fair value of the contingent consideration, rather than the returnable contingent consideration. The returnable contingent consideration represents the difference between the $ 6,000,000 cash consideration paid to the sellers in escrow and the fair value of the contingent consideration of $ 5,521,000 as of April 30, 2021. ​ Pursuant to the ISG Purchase Agreement, the sellers may receive up to a maximum of $ 6,000,000 in additional cash consideration (“contingent consideration”), if certain revenue targets are achieved during the 3 years following closing. The contingent consideration was valued using a Black-Scholes option-pricing model. 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. 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. ​ Pursuant to the Telerob Purchase Agreement, the Telerob Sellers may receive up to a maximum of € 6,000,000 (approximately $ 7,272,000 ) in additional cash consideration if specific revenue and contract award targets for Telerob are achieved during the 36 month period after closing. The contingent consideration was valued using a Black-Scholes option-pricing model. 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 current liabilities on the consolidated balance sheet. ​ Refer to Note 18—Business Acquisitions. ​ 19 Table of Contents 5. Inventories, net ​ Inventories consist of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ January 29, ​ April 30, ​ ​ 2022 2021 ​ ​ ​ ​ Raw materials ​ $ 37,898 ​ $ 23,997 ​ Work in process ​ 24,695 ​ 13,825 ​ Finished goods ​ 39,939 ​ 44,113 ​ Inventories, gross ​ 102,532 ​ 81,935 ​ Reserve for inventory excess and obsolescence ​ ( 12,916 ) ​ ( 10,289 ) ​ Inventories, net ​ $ 89,616 ​ $ 71,646 ​ ​ ​ 6. Equity Method Investments ​ In December 2017, the Company and SoftBank Corp. (“Softbank”) formed a joint venture, HAPSMobile Inc. (“HAPSMobile”), which is a Japanese corporation. Concurrent with the formation of HAPSMobile, the Company executed a Design and Development Agreement (the “DDA”) with HAPSMobile. 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 ). The Company subsequently purchased additional shares of HAPSMobile in order to maintain a 5 % ownership stake in the joint venture. The first such purchase occurred on April 17, 2018, at which time the Company invested 150,000,000 yen ($ 1,407,000 ) for the purchase of additional shares of HAPSMobile. On January 29, 2019, the Company invested an additional 209,500,000 yen ($ 1,926,000 ) to maintain its 5 % ownership stake. On February 9, 2019, the Company elected to purchase 632,800,000 yen ($ 5,671,000 ) of additional shares of HAPSMobile to increase the Company’s ownership in the joint venture from 5 % to 10 %, and on May 10, 2019, the Company purchased 500,000,000 yen ($ 4,569,000 ) of additional shares of HAPSMobile to maintain its 10 % ownership stake. The Company’s ownership percentage was subsequently diluted from 10 % to approximately 5 %. On December 4, 2019, the Company purchased 540,050,000 yen ($ 4,982,000 ) of additional shares of HAPSMobile to increase its ownership stake to approximately 7 %. ​ On 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. ​ On May 29, 2021, the Company and SoftBank entered into a MDDA to continue the development of Solar HAPS. Pursuant to the MDDA, which has a five-year term, SoftBank will issue orders to the Company for the Company to perform design and development services and produce deliverables as specified in the applicable order(s). Upon the execution of the MDDA, SoftBank issued to the Company, and the Company accepted, the first order under the MDDA which has a maximum value of approximately $ 51,200,000 . Concurrent with the execution of the MDDA, each of SoftBank and the Company agreed to lend HAPSMobile loans which are convertible into shares of HAPSMobile under certain conditions, and to cooperate with each other to explore restructuring and financing options for HAPSMobile to continue the development of Solar HAPS. The Company committed to lend 500,000,000 yen. On June 7, 2021 the Company funded 130,000,000 yen ($ 1,195,000 ) of the loan agreement. On August 13, 2021, the Company made the second payment of the loan agreement in the amount of 180,000,000 yen ($ 1,638,000 ). 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 nine months ended January 29, 2022, the 20 Table of Contents 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 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 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. ​ ​ 7. 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 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 nine months ended January 29, 2022 and January 30, 2021, respectively (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ January 29, ​ ​ January 30, ​ January 29, ​ January 30, ​ ​ ​ 2022 2021 2022 2021 ​ Beginning balance ​ $ 2,650 ​ $ 2,126 ​ $ 2,341 ​ $ 2,015 ​ Balance acquired from acquisition ​ ​ — ​ ​ — ​ ​ 256 ​ ​ — ​ Warranty expense ​ ( 192 ) ​ 277 ​ 704 ​ 1,038 ​ Warranty costs settled ​ ( 352 ) ​ ( 231 ) ​ ( 1,195 ) ​ ( 881 ) ​ Ending balance ​ $ 2,106 ​ $ 2,172 ​ $ 2,106 ​ $ 2,172 ​ ​ ​ 21 Table of Contents 8. Intangibles, net ​ The components of intangibles are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ January 29, ​ April 30, ​ ​ 2022 2021 ​ Technology ​ $ 57,495 ​ $ 46,850 ​ Licenses ​ ​ 1,008 ​ ​ 1,008 ​ Customer relationships ​ ​ 72,702 ​ ​ 68,073 ​ Backlog ​ ​ 2,223 ​ ​ — ​ In-process research and development ​ ​ 550 ​ ​ 550 ​ Non-compete agreements ​ ​ 320 ​ ​ 320 ​ Trademarks and tradenames ​ ​ 68 ​ ​ 68 ​ Other ​ ​ 105 ​ ​ 3 ​ Intangibles, gross ​ ​ 134,471 ​ ​ 116,872 ​ Less accumulated amortization ​ ( 30,646 ) ​ ( 10,604 ) ​ Intangibles, net ​ $ 103,825 ​ $ 106,268 ​ ​ 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. Technology and customer relationship intangible assets were recognized in conjunction with the Company’s acquisition of ISG on February 23, 2021. Refer to Note 18—Business Acquisitions for further details. ​ Estimated amortization expense for the next five years is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ Year ending ​ ​ April 30, 2022 ​ $ 7,565 ​ 2023 ​ 27,719 ​ 2024 ​ 26,870 ​ 2025 ​ 18,156 ​ 2026 ​ 13,114 ​ ​ ​ $ 93,424 ​ ​ ​ 9. Goodwill ​ The following table presents the changes in the Company’s goodwill balance (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Small UAS ​ TMS ​ MUAS ​ All other ​ Total Balance at April 30, 2021 ​ $ 6,340 ​ $ — ​ $ 288,611 ​ $ 19,254 ​ $ 314,205 Additions to goodwill ​ ​ — ​ ​ — ​ ​ 1,395 ​ ​ 19,564 ​ ​ 20,959 Impairment of goodwill ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Balance at January 29, 2022 ​ $ 6,340 ​ $ - ​ $ 290,006 ​ $ 38,818 ​ $ 335,164 ​ 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 22 Table of Contents 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. ​ 10. Debt ​ In connection with the consummation of the Arcturus Acquisition on February 19, 2021, the Company, as borrower, and Arcturus, as guarantor, entered into a Credit Agreement with certain lenders, letter of credit issuers, Bank of America, N.A., as the administrative agent and the swingline lender, and BofA Securities, Inc., JPMorgan Chase Bank, N.A., and U.S. Bank National Association, as joint lead arrangers and joint bookrunners (the “Credit Agreement”). ​ The Credit Agreement and its associated Security and Pledge Agreement set forth the terms and conditions for (i) a five-year $ 100 million revolving credit facility, which includes a $ 10 million sublimit for the issuance of standby and commercial letters of credit (the “Revolving Facility”), and (ii) a five-year amortized $ 200 million term A loan (the “Term Loan Facility”, and together with the Revolving Facility, the “Credit Facilities”). Certain existing letters of credit issued by JPMorgan Chase Bank were reserved for under the Revolving Facility at closing and remain outstanding under the terms thereof. Upon execution of the Credit Agreement, the Company drew the full principal of the Term Loan Facility for use in the acquisition of Arcturus. The Term Loan Facility requires payment of 5 % of the outstanding obligations in each of the first four loan years, with the remaining 80 % payable in loan year five, consisting of three quarterly payments of 1.25 % each, with the remaining outstanding principal amount of the Term Loan Facility due and payable on the final maturity date. Proceeds from the Term Loan Facility were used in part to finance a portion of the cash consideration for the Arcturus Acquisition. Borrowings under the Revolving Facility may be used for working capital and other general corporate purposes. ​ 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. Mandatory prepayments are required under the revolving loans when borrowings and letter of credit usage exceed the aggregate revolving commitments of all lenders. 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. ​ The Credit Agreement contains certain customary representations and warranties and affirmative and negative covenants, including certain restrictions on the ability of the Company and its subsidiaries (as defined in the Credit Agreement) to incur any additional indebtedness or guarantee indebtedness of others, to create liens on properties or assets, or to enter into certain asset and stock-based transactions. 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. ​ 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 23 Table of Contents 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; 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 .10 % SOFR adjustment. 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. ​ 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: ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ January 29, ​ ​ 2022 ​ ​ (In thousands) Term loans ​ $ 192,500 Revolving credit facility ​ ​ — Total debt ​ ​ 192,500 Less current portion ​ ​ 10,000 Total long-term debt, less current portion ​ ​ 182,500 Less unamortized debt issuance costs - term loans ​ ​ 2,102 Total long-term debt, net of unamortized debt issuance costs - term loans ​ $ 180,398 Unamortized debt issuance costs - revolving credit facility ​ $ 1,046 Current period interest rate ​ ​ 2.5 % ​ 24 Table of Contents Future long-term debt principal payments at January 29, 2022 were as follows: ​ ​ ​ ​ ​ ​ ​ (In thousands) 2022 ​ $ 2,500 2023 ​ 10,000 2024 ​ 10,000 2025 ​ 10,000 2026 ​ 160,000 ​ ​ $ 192,500 ​ ​ 11. Leases ​ The Company leases certain buildings, land and equipment. 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 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. The Company uses its incremental borrowing rate based on the information available at commencement date to determine the present value of future payments and the appropriate lease classification. The Company defines the initial lease term to include renewal options determined to be reasonably certain. The Company’s leases have remaining lease terms of less than one year to six years , some of which may include options to extend the lease for up to 10 years , and some of which may include options to terminate the lease after two years . If the Company determines the option to extend or terminate is reasonably certain, it is included in the determination of lease assets and liabilities. For operating leases, the Company recognizes lease expense for these leases on a straight-line basis over the lease term. ​ Many of the Company’s real estate lease agreements contain incentives for tenant improvements, rent holidays, or rent escalation clauses. For tenant improvement incentives, if the incentive is determined to be a leasehold improvement owned by the lessee, the Company generally records incentive as a reduction to fixed lease payments thereby reducing rent expense. For rent holidays and rent escalation clauses during the lease term, the Company records rental expense on a straight-line basis over the term of the lease. For these lease incentives, the Company uses the date of initial possession as the commencement date, which is generally when the Company is given the right of access to the space and begins to make improvements in preparation for intended use. ​ The Company does not have any material restrictions or covenants in its lease agreements, sale-leaseback transactions, land easements or residual value guarantees. ​ In determining the inputs to the incremental borrowing rate calculation, the Company makes judgments about the value of the leased asset, its credit rating and the lease term including the probability of its exercising options to extend or terminate the underlying lease. Additionally, the Company makes judgments around contractual asset substitution rights in determining whether a contract contains a lease. ​ 25 Table of Contents The components of lease costs recorded in cost of sales and selling, general and administrative (“SG&A”) expense were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ Nine Months Ended ​ ​ January 29, ​ January 30, ​ 2022 ​ 2021 Operating lease cost ​ $ 5,033 ​ $ 3,592 Short term lease cost ​ ​ 684 ​ ​ 369 Variable lease cost ​ ​ 434 ​ ​ 3 Sublease income ​ ​ ( 132 ) ​ ​ ( 48 ) Total lease costs, net ​ $ 6,019 ​ $ 3,916 ​ Supplemental lease information were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ Nine Months Ended ​ ​ January 29, ​ January 30, ​ 2022 ​ 2021 ​ ​ (In thousands) ​ (In thousands) Cash paid for amounts included in the measurement of operating lease liabilities ​ $ 5,119 ​ $ 3,470 Right-of-use assets obtained in exchange for new lease liabilities ​ $ 6,705 ​ $ 5,760 ​ ​ ​ ​ ​ ​ ​ Weighted average remaining lease term ​ ​ 67 months ​ ​ 43 months Weighted average discount rate ​ ​ 3.4 % ​ ​ 3.4 % ​ Maturities of operating lease liabilities as of January 29, 2022 were as follows (in thousands): ​ ​ ​ ​ ​ 2022 ​ $ 1,301 2023 ​ 6,453 2024 ​ 5,750 2025 ​ 4,795 2026 ​ 3,472 Thereafter ​ ​ 8,025 Total lease payments ​ ​ 29,796 Less: imputed interest ​ ​ ( 2,968 ) Total present value of operating lease liabilities ​ $ 26,828 ​ ​ 12. Accumulated Other Comprehensive Income (Loss) and Reclassifications Adjustments ​ The components of accumulated other comprehensive income (loss) and adjustments are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ Nine Months Ended ​ ​ January 29, ​ January 30, ​ 2022 2021 Balance, net of $ 1 and $ 0 deferred taxes, as of April 30, 2021 and April 30, 2020, respectively $ 343 ​ $ 328 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 ​ ​ ( 6 ) ​ ​ ( 56 ) Change in foreign currency translation adjustments ​ ​ ( 3,771 ) ​ ​ 75 Balance, net of $ 2 and $ 2 deferred taxes, as of January 29, 2022 and January 30, 2021, respectively $ ( 3,434 ) ​ $ 347 ​ ​ 26 Table of Contents 13. Customer-Funded Research & Development ​ Customer-funded R&D costs are incurred pursuant to contracts (revenue arrangements) to perform R&D activities according to customer specifications. These costs are direct contract costs and are expensed to cost of sales as costs are incurred. 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 $ 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. ​ 14. Long-Term Incentive Awards ​ During the three months ended July 31, 2021, the Company granted awards under its amended and restated 2006 Equity Incentive Plan (the “Restated 2006 Plan”) to key employees (“Fiscal 2022 LTIP”). Awards under the Fiscal 2022 LTIP consist of: (i) time-based restricted stock awards and time-based restricted stock units, which vest in equal tranches in July 2022, July 2023 and July 2024, and (ii) performance-based restricted stock units (“PRSUs”), which vest based on the Company’s achievement of revenue and operating income targets for the three-year period ending April 30, 2024. At the award date, target achievement levels for each of the financial performance metrics were established for the PRSUs, at which levels the PRSUs would vest at 100 % for each such metric. Threshold achievement levels for which the PRSUs would vest at 50 % for each such metric and maximum achievement levels for which such awards would vest at 250 % for each such metric were also established. The actual payout for the PRSUs at the end of the performance period will be calculated based upon the Company’s achievement of the established revenue and operating income targets for the performance period. Settlement of the PRSUs will be made in fully-vested shares of common stock. 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”). Awards under the Fiscal 2021 LTIP consist of: (i) time-based restricted stock awards, which vest in equal tranches in July 2021, July 2022 and July 2023, and (ii) performance-based restricted stock units (“PRSUs”), which vest based on the Company’s achievement of revenue and operating income targets for the three-year period ending April 30, 2023. At the award date, target achievement levels for each of the financial performance metrics were established for the PRSUs, at which levels the PRSUs would vest at 100 % for each such metric. Threshold achievement levels for which the PRSUs would vest at 50 % for each such metric and maximum achievement levels for which such awards would vest at 250 % for each such metric were also established. The actual payout for the PRSUs at the end of the performance period will be calculated based upon the Company’s achievement of the established revenue and operating income targets for the performance period. Settlement of the PRSUs will be made in fully-vested shares of common stock. 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”). Awards under the Fiscal 2020 LTIP consist of: (i) time-based restricted stock awards, which vest in equal tranches in July 2020, July 2021 and July 2022, and (ii) PRSUs, which vest based on the Company’s achievement of revenue and operating income targets for the three-year period ending April 30, 2022. At the award date, target achievement levels for each of the financial performance metrics were established for the PRSUs, at which levels the PRSUs would vest at 100 % for each such metric. Threshold achievement levels for which the PRSUs would vest at 50 % for each such metric and maximum achievement levels for which such awards would vest at 200 % for each such metric were also established. The actual payout for the PRSUs at the end of the performance period will be calculated based upon the Company’s achievement of the established revenue and operating income targets for the performance period. Settlement of the PRSUs will be made in fully-vested shares of common stock. 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 27 Table of Contents $( 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”). Awards under the Fiscal 2019 LTIP consist of: (i) time-based restricted stock awards, which vest in equal tranches in July 2019, July 2020 and July 2021, and (ii) PRSUs, which vest based on the Company’s achievement of revenue and operating income targets for the three-year period ending April 30, 2021. 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 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. The estimation of whether the performance targets will be achieved requires judgment, and to the extent actual results or updated estimates differ from the Company’s current estimates, the cumulative effect on current and prior periods of those changes will be recorded in the period estimates are revised. No compensation cost is ultimately recognized for awards for which employees do not render the requisite service and are forfeited. ​ 15. Income Taxes ​ 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. ​ 16. 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 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. ​ 17. Related Party Transactions ​ Related party transactions are defined as transactions between the Company and entities either controlled by the Company or that the Company can significantly influence. Although SoftBank has a controlling interest in HAPSMobile, the Company determined that it has the ability to exercise significant influence over HAPSMobile. As such, HAPSMobile and SoftBank are considered related parties of the Company. Under the DDA and related efforts with HAPSMobile, the Company designed and built prototype solar powered high altitude aircraft and ground control stations for HAPSMobile and conducted low altitude and high altitude flight tests of the prototype aircraft on a best efforts basis, up to a maximum net value of $ 185,202,000 . The Company will continue the development of Solar HAPS with Softbank under the MDDA. 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 $ 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 28 Table of Contents 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. ​ 18. Business Acquisitions ​ Telerob Acquisition ​ On May 3, 2021, the Company closed its acquisition of Telerob pursuant to the terms of the Telerob Purchase Agreement. Telerob develops, manufactures, sells, and services remote-controlled unmanned ground robots and transport vehicles for civil and defense applications. ​ Pursuant to the Telerob Purchase Agreement at closing, the Company paid € 37,455,000 (approximately $ 45,400,000 ) in cash to the Telerob Seller (subject to certain purchase price adjustments as set forth in the Telerob Purchase Agreement), less (a) € 3,000,000 (approximately $ 3,636,000 ) to be held in escrow for breaches of the Telerob Seller’s fundamental warranties or any other of Telerob Seller’s warranties to the extent not covered by a representation and warranty insurance policy (the “RWI Policy”) obtained by the Company in support of certain indemnifications provided by the Telerob Seller; (b) transaction-related fees and costs incurred by the Telerob Seller, including change in control payments triggered by the transaction; and (c) 50% of the cost of obtaining the RWI Policy. In addition, at closing the Company paid off approximately € 7,811,000 (approximately $ 9,468,000 ), of certain indebtedness of Telerob, which amount was paid in combination to the Telerob Seller and the lender under an agreement between Telerob GmbH and the lender providing for a reduced payoff amount. This indebtedness was offset by cash on hand at Telerob at closing. The escrow amount is to be released to the Telerob Seller, less any amounts paid or reserved, 30 months following the closing date. ​ In addition to the consideration paid at closing, the Telerob Seller may receive € 2,000,000 (approximately $ 2,424,000 ) in additional cash consideration if specific revenue targets for Telerob are achieved during the 12 month period after closing beginning on the first day of the calendar month following the closing (the “First Earnout Year”) and an additional € 2,000,000 (approximately $ 2,424,000 ) in cash consideration if specific revenue targets for Telerob are achieved in the 12 month period following the First Earnout Year. The Telerob Seller may also receive up to € 2,000,000 (approximately $ 2,424,000 ) in additional cash consideration if specific awards and/or orders from the U.S. military are achieved prior to the end of a 36-month post-closing period. ​ 29 Table of Contents The following table summarizes the provisional allocation of the purchase price over the estimated fair value of the assets and liabilities assumed in the acquisition of Telerob (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ May 3, ​ ​ ​ 2021 ​ Fair value of assets acquired: ​ ​ ​ ​ Accounts receivable $ 1,045 ​ Unbilled receivable ​ ​ 829 ​ Inventories, net ​ ​ 15,074 ​ Prepaid and other current assets ​ ​ 314 ​ Property and equipment, net ​ ​ 1,571 ​ Operating lease assets ​ ​ 1,508 ​ Other assets ​ ​ 154 ​ Technology ​ ​ 11,500 ​ Backlog ​ ​ 2,400 ​ Customer relationships ​ ​ 5,000 ​ Other intangible assets ​ ​ 102 ​ Goodwill ​ ​ 21,140 ​ Total assets acquired ​ $ 60,637 ​ ​ ​ ​ ​ ​ Fair value of liabilities assumed: ​ ​ ​ ​ Accounts payable ​ $ 1,136 ​ Wages and related accruals ​ ​ 560 ​ Customer advances ​ ​ 1,243 ​ Current operating lease liabilities ​ ​ 361 ​ Other current liabilities ​ ​ 3,310 ​ Non-current operating lease liabilities ​ ​ 1,147 ​ Other non-current liabilities ​ ​ 224 ​ Deferred income taxes ​ ​ 5,617 ​ Total liabilities assumed ​ ​ 13,598 ​ Total identifiable net assets ​ $ 47,039 ​ ​ ​ ​ ​ ​ Fair value of consideration: ​ ​ ​ ​ Cash consideration, net of cash acquired ​ $ 46,150 ​ Contingent consideration ​ ​ 889 ​ Total ​ $ 47,039 ​ ​ Determining the fair value of the intangible assets acquired requires significant judgment, including the amount and timing of expected future cash flows, long-term growth rates and discount rates. The fair value of the intangibles assets was determined using a discounted cash flow analysis, which were based on the Company’s best estimate of future sales, earnings and cash flows after considering such factors as general market conditions, anticipated customer demand, changes in working capital, long term business plans and recent operating performance. Use of different estimates and judgments could yield materially different results. ​ The goodwill is attributable to the synergies the Company expects to achieve through leveraging the acquired technology to its existing customers, the workforce of Telerob and expected future customers in the UGV market. For tax purposes the acquisition was treated as a stock purchase and the goodwill is not deductible. ​ 30 Table of Contents Telerob Supplemental Pro Forma Information (unaudited) ​ The following unaudited pro forma summary presents consolidated information of the Company as if the business acquisition had occurred on May 1, 2020 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ January 29, ​ January 30, ​ January 29, ​ January 30, ​ 2022 2021 ​ 2022 2021 Revenue ​ $ 90,093 ​ $ 92,538 ​ $ 313,110 ​ $ 288,762 Net (loss) income attributable to AeroVironment, Inc. ​ $ 1,753 ​ $ 1,187 ​ $ ( 6,091 ) ​ $ 10,319 ​ The Company did not have any material, nonrecurring pro forma adjustments directly attributable to the business acquisition included in the reported pro forma revenue and earnings. ​ 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 $ 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. ​ The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes are reasonable and are not necessarily indicative of the results that have been realized had the acquisition been consolidated in the tables above as of May 1, 2020, nor are they indicative of results of operations that may occur in the future. ​ Arcturus Acquisition ​ On February 19, 2021, the Company closed its acquisition of Arcturus pursuant to the terms of the Arcturus Purchase Agreement. Arcturus, headquartered in Petaluma, California, designs, engineers, tools, and manufactures unmanned aerial and aircraft systems including airborne platforms, payloads and payload integration, ground control systems, and ground support equipment and other items and services related generally to unmanned aircraft systems. ​ Pursuant to the Arcturus Purchase Agreement at the closing of the Arcturus Acquisition, the Company paid approximately $ 422,602,000 , net of cash acquired (subject to certain customary adjustments and escrow arrangements set forth in the Arcturus Purchase Agreement), financed with a combination of approximately $ 150,218,000 of cash-on-hand, $ 200,000,000 of financing pursuant to the Term Loan Facility and the issuance of approximately $ 72,384,000 of unregistered, restricted shares of common stock. As specified in the Arcturus Purchase agreement, the number of shares issued was determined based on a value of $ 50,000,000 and a calculated average price as of the last business day prior to execution of the Arcturus Purchase Agreement. ​ The final cash consideration is subject to certain customary adjustments, including for net working capital, cash, debt and unpaid transaction expenses (including change in control related payments triggered by the transaction) of Arcturus at the Arcturus closing, less $ 6,500,000 to be held in escrow to address final purchase price adjustments post-Arcturus closing, if any (the “Adjustment Escrow”), and $ 1,822,500 to be held in escrow to address Arcturus’s and/or the Sellers’ indemnification obligations (the “Indemnification Escrow”). During the three months ended July 31, 2021, the Adjustment Escrow of $ 6,500,000 , less $ 509,000 of post-closing adjustments, was released to the Arcturus Sellers. To further address potential breaches of Arcturus’s and the Sellers’ representations and warranties beyond the application of the Indemnification Escrow, the Company also obtained representation and warranty insurance policies providing $ 40,000,000 in coverage, subject to customary terms, exclusions and retention amounts. ​ 31 Table of Contents The following table summarizes the allocation of the purchase price over the estimated fair value of the assets and liabilities assumed in the acquisition of Arcturus (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ February 19, ​ ​ ​ 2021 ​ Fair value of assets acquired: ​ ​ ​ ​ Accounts receivable ​ $ 6,050 ​ Unbilled receivable ​ ​ 4,176 ​ Inventories, net ​ ​ 21,701 ​ Prepaid and other current assets ​ ​ 2,709 ​ Property and equipment, net ​ ​ 38,739 ​ Operating lease assets ​ ​ 11,429 ​ Other assets ​ ​ 136 ​ Technology ​ ​ 20,500 ​ Customer relationships ​ ​ 62,700 ​ Goodwill ​ ​ 290,006 ​ Total assets acquired ​ $ 458,146 ​ ​ ​ ​ ​ ​ Fair value of liabilities assumed: ​ ​ ​ ​ Accounts payable ​ $ 3,085 ​ Wages and related accruals ​ ​ 1,698 ​ Customer advances ​ ​ 1,818 ​ Other current liabilities ​ ​ 9,562 ​ Operating lease liabilities ​ ​ 12,297 ​ Other non-current liabilities ​ ​ 1,190 ​ Deferred income taxes, net ​ ​ 5,869 ​ Total liabilities assumed ​ ​ 35,519 ​ Total identifiable net assets ​ $ 422,627 ​ ​ ​ ​ ​ ​ Fair value of consideration transferred: ​ ​ ​ Cash consideration, net of cash acquired ​ $ 350,243 ​ Equity consideration ​ ​ 72,384 ​ Total consideration ​ $ 422,627 ​ ​ Determining the fair value of the intangible assets acquired requires significant judgment, including the amount and timing of expected future cash flows, long-term growth rates and discount rates. The fair value of the intangibles assets was determined using a discounted cash flow analysis, which were based on the Company’s preliminary estimates of future sales, earnings and cash flows after considering such factors as general market conditions, anticipated customer demand, changes in working capital, long term business plans and recent operating performance. Use of different estimates and judgments could yield materially different results. ​ The goodwill is attributable to the synergies the Company expects to achieve through leveraging the acquired technology to its existing customers, the workforce of Arcturus and expected future customers in the MUAS market. For tax purposes the acquisition was treated as a stock purchase and the goodwill is not deductible. ​ 32 Table of Contents Arcturus Supplemental Pro Forma Information (unaudited) ​ The following unaudited pro forma summary presents consolidated information of the Company as if the business acquisition had occurred on May 1, 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ Nine Months Ended ​ ​ ​ ​ ​ January 30, ​ ​ ​ ​ January 30, ​ ​ ​ 2021 ​ ​ ​ 2021 Revenue ​ ​ ​ ​ $ 110,425 ​ ​ ​ ​ $ 339,115 Net income attributable to AeroVironment, Inc. ​ ​ ​ ​ $ ( 4,945 ) ​ ​ ​ ​ $ 16,065 ​ The Company did not have any material, nonrecurring pro forma adjustments directly attributable to the business acquisition included in the reported pro forma revenue and earnings. ​ 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 $ 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. ​ The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes are reasonable and are not necessarily indicative of the results that have been realized had the acquisition been consolidated in the tables above as of May 1, 2019, nor are they indicative of results of operations that may occur in the future. ​ ISG Acquisition ​ On February 23, 2021, the Company purchased certain assets of, and assumed certain liabilities of, ISG pursuant to the terms of the ISG Purchase Agreement. ISG is engaged in development of artificial intelligence-enabled computer vision, machine learning and perceptive autonomy technologies and provides related services to United States government customers. ​ 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 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. ​ The parties to the ISG Purchase Agreement have made representations, warranties, and covenants that are customary for a transaction of this type, including, among other things, restrictions on the ISG Seller and the Beneficial Owner from engaging in certain competitive activities, as well as mutual indemnification obligations between the Company and the ISG Seller. To supplement certain indemnifications provided by the ISG Seller, the Company obtained a representation and warranty insurance policy. ​ 33 Table of Contents The following table summarizes the allocation of the purchase price over the estimated fair value of the assets and liabilities assumed in the ISG Acquisition (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ February 23, ​ ​ ​ 2021 ​ Fair value of assets acquired: ​ ​ ​ ​ Technology $ 11,400 ​ Customer relationships ​ ​ 4,500 ​ Other assets ​ ​ 217 ​ Goodwill ​ ​ 19,254 ​ Total identifiable net assets ​ $ 35,371 ​ ​ ​ ​ ​ ​ Fair value of consideration transferred: ​ ​ ​ ​ Cash ​ $ 29,700 ​ Holdback ​ ​ 150 ​ Contingent consideration ​ ​ 5,521 ​ Total consideration ​ $ 35,371 ​ ​ Determining the fair value of the intangible assets acquired requires significant judgment, including the amount and timing of expected future cash flows, long-term growth rates and discount rates. The fair value of the intangibles assets was determined using a discounted cash flow analysis, which were based on the Company’s preliminary estimates of future sales, earnings and cash flows after considering such factors as general market conditions, anticipated customer demand, changes in working capital, long term business plans and recent operating performance. Use of different estimates and judgments could yield materially different results. ​ The goodwill is attributable to the synergies the Company expects to achieve through leveraging the acquired technology to its existing customers. For tax purposes the acquisition was treated as an asset purchase and the goodwill is deductible ratably over a period of fifteen years. ​ ISG Supplemental Pro Forma Information (unaudited) ​ The following unaudited pro forma summary presents consolidated information of the Company as if the business acquisition had occurred on May 1, 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ ​ Nine Months Ended ​ ​ ​ ​ ​ January 30, ​ ​ ​ ​ January 30, ​ ​ ​ 2021 ​ ​ ​ 2021 Revenue ​ ​ ​ ​ $ 81,665 ​ ​ ​ ​ $ 267,546 Net income attributable to AeroVironment, Inc. ​ ​ ​ ​ $ 517 ​ ​ ​ ​ $ 13,303 ​ The Company did not have any material, nonrecurring pro forma adjustments directly attributable to the business acquisition included in the reported pro forma revenue and earnings. ​ 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 ISG prior to acquisition. ​ 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. ​ 34 Table of Contents The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes are reasonable and are not necessarily indicative of the results that have been realized had the acquisition been consolidated in the tables above as of May 1, 2019, nor are they indicative of results of operations that may occur in the future. ​ 19. Pension ​ 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 former employees based on individual contracts issued to the employees. No other employees are eligible to participate. The Company has reinsurance policies were taken out for participating former employees, which were pledged to the employees. The measurement date for the Company’s pension plan was May 3, 2021 in conjunction with the acquisition. ​ 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 on the unaudited consolidated balance sheet. ​ ​ ​ ​ ​ Projected benefit obligation ​ $ ( 4,126 ) Fair value of plan assets ​ 3,951 Unfunded status of the plan ​ $ ( 175 ) ​ 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. The plan assets consist of reinsurance policies for each of the three pension commitments. The reinsurance policies are fixed-income investments considered a level 2 fair value hierarchy based on observable inputs of the policy. 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 January 29, 2022. ​ Expected benefits payments as of May 3, 2021 (in thousands): ​ ​ ​ ​ ​ 2022 ​ $ 182 2023 ​ ​ 183 2024 ​ 183 2025 ​ 184 2026 ​ ​ 184 2027-2031 ​ 920 Total expected benefit payments ​ $ 1,836 ​ Net periodic benefit cost (in thousands) is recorded in interest (expense) income, net. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ January 29, ​ January 29, ​ ​ 2022 ​ 2022 ​ ​ (In thousands) ​ (In thousands) Expected return on plan assets ​ $ 30 ​ $ 93 Interest cost ​ ( 14 ) ​ ( 44 ) Foreign currency exchange rate changes ​ ​ 4 ​ ​ 10 Net periodic benefit cost ​ $ 20 ​ $ 59 ​ ​ ​ ​ 35 Table of Contents 20. Segments ​ 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. ​ Tactical Missile Systems – The TMS segment focuses primarily on TMS products, which are tube-launched aircraft that deploy with the push of a button, fly at higher speeds than small UAS products, and perform either effects delivery or reconnaissance missions, and related support services including training, spare parts, product repair, and product replacement. The TMS segment also includes customer-funded research and development programs. ​ Medium Unmanned Aircraft Systems—The MUAS segment, which originates with the acquisition of Arcturus, focuses on designs, engineers, tools, and manufactures unmanned aerial and aircraft systems including airborne platforms, payloads and payload integration, ground control systems, and ground support equipment and other items and services related generally to unmanned aircraft systems including ISR services. ​ All other—All other segments include HAPS, MacCready Works and the recently acquired ISG and Telerob businesses. ​ The accounting policies of the segments are the same as those described in Note 1, “Organization and Significant Accounting Policies.” The operating segments do not make sales to each other. The following table (in thousands) sets forth segment revenue, gross margin, operating (loss) income and adjusted operating (loss) income from operations for the periods indicated. 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 January 29, 2022 ​ Small UAS TMS MUAS All other Total Revenue ​ $ 24,366 ​ $ 18,603 ​ $ 21,168 ​ $ 25,956 ​ $ 90,093 Gross margin ​ ​ 8,656 ​ ​ 5,209 ​ ​ 335 ​ ​ 7,236 ​ ​ 21,436 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations ​ ​ ( 3,606 ) ​ ​ ( 1,289 ) ​ ​ ( 8,623 ) ​ ​ ( 608 ) ​ ​ ( 14,126 ) Acquisition-related expenses ​ ​ 99 ​ ​ 54 ​ ​ 41 ​ ​ 174 ​ ​ 368 Amortization of acquired intangible assets and other purchase accounting adjustments ​ ​ 707 ​ ​ - ​ ​ 5,641 ​ ​ 3,035 ​ ​ 9,383 Adjusted income (loss) from operations ​ $ ( 2,800 ) ​ $ ( 1,235 ) ​ $ ( 2,941 ) ​ $ 2,601 ​ $ ( 4,375 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended January 30, 2021 ​ ​ Small UAS TMS MUAS All other Total Revenue ​ $ 50,536 ​ $ 19,598 ​ $ - ​ $ 8,648 ​ $ 78,782 Gross margin ​ ​ 22,017 ​ ​ 4,889 ​ ​ - ​ ​ 1,735 ​ ​ 28,641 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations ​ ​ 6,702 ​ ​ ( 2,314 ) ​ ​ - ​ ​ ( 5,030 ) ​ ​ ( 642 ) Acquisition-related expenses ​ ​ 1,408 ​ ​ 773 ​ ​ 477 ​ ​ 750 ​ ​ 3,408 Amortization of acquired intangible assets and other purchase accounting adjustments ​ ​ 661 ​ ​ - ​ ​ - ​ ​ 1 ​ ​ 662 Adjusted income (loss) from operations ​ $ 8,771 ​ $ ( 1,541 ) ​ $ 477 ​ $ ( 4,279 ) ​ $ 3,428 ​ 36 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended January 29, 2022 ​ Small UAS TMS MUAS All other Total Revenue ​ $ 119,004 ​ $ 56,197 ​ $ 70,072 ​ $ 67,837 ​ $ 313,110 Gross margin ​ ​ 53,330 ​ ​ 17,420 ​ ​ 5,739 ​ ​ 16,125 ​ ​ 92,614 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations ​ ​ 11,729 ​ ​ ( 1,705 ) ​ ​ ( 22,004 ) ​ ​ ( 10,920 ) ​ ​ ( 22,900 ) Acquisition-related expenses ​ ​ 819 ​ ​ 468 ​ ​ 1,533 ​ ​ 1,649 ​ ​ 4,469 Amortization of acquired intangible assets and other purchase accounting adjustments ​ ​ 2,121 ​ ​ - ​ ​ 17,190 ​ ​ 9,526 ​ ​ 28,837 Adjusted income (loss) from operations ​ $ 14,669 ​ $ ( 1,237 ) ​ $ ( 3,281 ) ​ $ 255 ​ $ 10,406 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended January 30, 2021 ​ ​ Small UAS TMS MUAS All other Total Revenue ​ $ 165,003 ​ $ 48,093 ​ $ - ​ $ 45,801 ​ $ 258,897 Gross margin ​ ​ 79,195 ​ ​ 12,752 ​ ​ - ​ ​ 12,956 ​ ​ 104,903 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations ​ ​ 37,285 ​ ​ ( 7,454 ) ​ ​ - ​ ​ ( 4,278 ) ​ ​ 25,553 Acquisition-related expenses ​ ​ 1,579 ​ ​ 867 ​ ​ 535 ​ ​ 841 ​ ​ 3,822 Amortization of acquired intangible assets and other purchase accounting adjustments ​ ​ 2,037 ​ ​ - ​ ​ - ​ ​ - ​ ​ 2,037 Adjusted income (loss) from operations ​ $ 40,901 ​ $ ( 6,587 ) ​ $ 535 ​ $ ( 3,437 ) ​ $ 31,412 ​ Segment assets are summarized in the table below. 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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ January 29, 2022 ​ ​ Small UAS TMS MUAS All other Corporate ​ Total ​ Identifiable assets ​ $ 85,119 ​ $ 89,497 ​ $ 388,833 ​ $ 104,889 ​ $ 236,925 ​ $ 905,263 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ April 30, 2021 ​ ​ Small UAS TMS MUAS All other Corporate ​ Total ​ Identifiable assets ​ $ 113,072 ​ $ 71,707 ​ $ 402,037 ​ $ 39,581 ​ $ 302,169 ​ $ 928,566 ​ ​ ​ ​ ​ ​ ​