What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-09-08 compared with 2022-03-04 · 242 added, 420 removed, 518 unchanged (56% of the section changed)

1 unchanged sentence

AeroVironment, Inc.

Consolidated Balance Sheet s

Condensed Consolidated Balance Sheet s

(In thousands except share and per share data)

2 unchanged sentences

Short-term investments

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

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

Accounts receivable, net of allowance for doubtful accounts of $ 615 at July 30, 2022 and $ 592 at April 30, 2022

Unbilled receivables and retentions (inclusive of related party unbilled receivables of $ 2,229 at April 30, 2022)

Income taxes receivable

25 unchanged sentences

Authorized shares— 10,000,000 ;

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

none issued or outstanding at July 30, 2022 and April 30, 2022

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

Issued and outstanding shares— 24,990,590 shares at July 30, 2022 and 24,951,287 shares at April 30, 2022

Additional paid-in capital

Accumulated other comprehensive (loss) income

Accumulated other comprehensive loss

Retained earnings

3 unchanged sentences

Total liabilities and stockholders’ equity

See accompanying notes to consolidated financial statements (unaudited).

See accompanying notes to condensed consolidated financial statements (unaudited).

AeroVironment, Inc.

Consolidated Statements of Operation s (Unaudited)

Condensed Consolidated Statements of Operation s (Unaudited)

(In thousands except share and per share data)

Three Months Ended

Nine Months Ended

Product sales

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)

Contract services (inclusive of related party revenue of $ 10,352 for the three months ended July 31, 2021)

Cost of sales:

6 unchanged sentences

Research and development

(Loss) income from operations

Other (loss) income:

Interest (expense) income, net

Other income (expense), net

(Loss) income before income taxes

(Benefit from) provision for income taxes

Equity method investment income (loss), net of tax

Net (loss) income

Net loss (income) attributable to noncontrolling interest

Net income (loss) attributable to AeroVironment, Inc.

Net income (loss) per share attributable to AeroVironment, Inc.

Loss from operations

Interest expense, net

Other expense, net

Loss before income taxes

Provision for (benefit from) income taxes

Equity method investment loss, net of tax

Net income attributable to noncontrolling interest

Net loss attributable to AeroVironment, Inc.

Net loss per share attributable to AeroVironment, Inc.

Weighted-average shares outstanding:

See accompanying notes to consolidated financial statements (unaudited).

See accompanying notes to condensed consolidated financial statements (unaudited).

AeroVironment, Inc.

Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

Condensed Consolidated Statements of Comprehensive Loss (Unaudited)

(In thousands)

Three Months Ended

Nine Months Ended

Net (loss) income

Other comprehensive (loss) income:

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

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

Other comprehensive income (loss):

Unrealized gain (loss) on available-for-sale investments, net of deferred tax expense of $ 6 and $ 0 for the three months ended July 30, 2022 and July 31, 2021, respectively

Change in foreign currency translation adjustments

Total comprehensive (loss) income

Net loss (income) attributable to noncontrolling interest

Comprehensive (loss) income attributable to AeroVironment, Inc.

See accompanying notes to consolidated financial statements (unaudited).

Total comprehensive loss

Net income attributable to noncontrolling interest

Comprehensive loss attributable to AeroVironment, Inc.

See accompanying notes to condensed consolidated financial statements (unaudited).

AeroVironment, Inc.

Consolidated Statements of Stockholders’ Equity

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

Condensed Consolidated Statements of Stockholders’ Equity

For the three months ended July 30, 2022 and July 31, 2021 (Unaudited)

(In thousands except share data)

4 unchanged sentences

Net (loss) income

Unrealized loss on investments

Unrealized gain on investments

Foreign currency translation

Stock options exercised

Restricted stock awards

1 unchanged sentence

Tax withholding payment related to net share settlement of equity awards

Change in non-controlling interest

Stock based compensation

Balance at January 29, 2022

Balance at July 30, 2022

Comprehensive

2 unchanged sentences

Balance at April 30, 2021

Net income (loss)

Unrealized loss on investments

Foreign currency translation

Stock options exercised

Restricted stock awards

Restricted stock awards forfeited

Tax withholding payment related to net share settlement of equity awards

Stock based compensation

Balance at January 30, 2021

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)

Comprehensive

AeroVironment, Inc.

(Loss) Income

Balance at October 30, 2021

Net income (loss)

Net (loss) income

Unrealized loss on investments

3 unchanged sentences

Restricted stock awards forfeited

Stock based compensation

Balance at January 29, 2022

Comprehensive

AeroVironment, Inc.

Income (Loss)

Balance at October 31, 2020

Unrealized gain on investments

Restricted stock awards

Restricted stock awards forfeited

Tax withholding payment related to net share settlement of equity awards

Stock based compensation

Balance at January 30, 2021

See accompanying notes to consolidated financial statements (unaudited).

Balance at July 31, 2021

AeroVironment, Inc.

Consolidated Statements of Cash Flow s (Unaudited)

Condensed Consolidated Statements of Cash Flow s (Unaudited)

(In thousands)

Nine Months Ended

Three Months Ended

Operating activities

Net (loss) income

Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities:

Adjustments to reconcile net loss from operations to cash provided by (used in) operating activities:

Depreciation and amortization

(Income) loss from equity method investments, net

Loss from equity method investments

Amortization of debt issuance costs

Realized gain from sale of available-for-sale investments

Provision for doubtful accounts

Other non-cash expense (income)

Other non-cash expense, net

Non-cash lease expense

Loss on foreign currency transactions

(Gain) loss on foreign currency transactions

Deferred income taxes

9 unchanged sentences

Other liabilities

Net cash (used in) provided by operating activities

Net cash provided by (used in) operating activities

Investing activities

4 unchanged sentences

Purchases of available-for-sale investments

Net cash used in investing activities

Net cash provided by (used in) investing activities

Financing activities

Principal payments of loan

Holdback and retention payments for business acquisition

Principal payments of term loan

Tax withholding payment related to net settlement of equity awards

Holdback and retention payments for business acquisition

Exercise of stock options

1 unchanged sentence

Effects of currency translation on cash and cash equivalents

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

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

Cash, cash equivalents and restricted cash at beginning of period

3 unchanged sentences

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

Unrealized (gain) loss on available-for-sale investments, net of deferred tax expense of $ 6 and $ 0 for the three months ended July 30, 2022 and July 31, 2021, respectively

Change in foreign currency translation adjustments

1 unchanged sentence

Acquisitions of property and equipment included in accounts payable

See accompanying notes to consolidated financial statements (unaudited).

See accompanying notes to condensed consolidated financial statements (unaudited).

AeroVironment, Inc.

Notes to Consolidated Financia l Statements (Unaudited)

Notes to Condensed Consolidated Financia l Statements (Unaudited)

Organization and Significant Accounting Policies

4 unchanged sentences

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.

The accompanying unaudited condensed 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.

2 unchanged sentences

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

The results of operations for the three and 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 results of operations for the three months ended July 30, 2022 are not necessarily indicative of the results for the full year ending April 30, 2023.

For further information, refer to the condensed consolidated financial statements and footnotes thereto for the year ended April 30, 2022, 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.

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 condensed 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.

The Company’s unaudited condensed 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

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.

(“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, 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 condensed 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.

On September 15, 2021, the Company entered into a Share Sale and 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.

The Company is considered to still have control of Altoy and therefore consolidates Altoy into the condensed consolidated financial statements of the Company as of July 30, 2022.

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.

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”).

ASU 2021-08 requires an acquirer to apply the guidance in ASC 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities in a business combination, rather than using fair value.

On May 1, 2022, the Company early adopted ASU 2021-08.

ASU 2021-08 is adopted prospectively and could impact future acquisitions.

Revenue Recognition

3 unchanged sentences

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 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 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.

7 unchanged sentences

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

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.

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

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

3 unchanged sentences

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.

In accordance with ASC 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.

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.

3 unchanged sentences

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

Performance obligations satisfied over time accounted for 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.

Performance obligations satisfied over time accounted for 60 % and 61 % of revenue during the three months ended July 30, 2022 and July 31, 2021, respectively.

Performance obligations satisfied at a point in time accounted for 40 % and 39 % of revenue during the three months ended July 30, 2022 and July 31, 2021, respectively.

On July 30, 2022, the Company had approximately $ 203,877,000 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 88 % of the remaining performance obligations as revenue in fiscal 2023 and the remaining 12 % in fiscal 2024 .

17 unchanged sentences

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

The aggregate impact of adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was not significant for the three 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.

The aggregate impact of adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was not significant for the three month periods ended July 30, 2022 or the three month period ended July 31, 2021.

During the three months ended July 30, 2022, the Company revised its estimates of the total expected costs to complete a TMS variant contract.

The aggregate impact of these adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was a decrease to revenue of approximately $ 1,146,000 .

No adjustment on any one contract was material to the Company’s unaudited condensed consolidated financial statements for the three month ended July 31, 2021.

Revenue by Category

1 unchanged sentence

Three Months Ended

Nine Months Ended

Revenue by major product line/program

Revenue by segment

Total revenue

Three Months Ended

Nine Months Ended

Revenue by contract type

7 unchanged sentences

Three Months Ended

Nine Months Ended

Revenue by customer category

1 unchanged sentence

Three Months Ended

Nine Months Ended

Revenue by geographic location

2 unchanged sentences

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.

The timing of revenue recognition, billings, and cash collections results in billed accounts receivable, unbilled receivables, and customer advances and deposits on the condensed 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.

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

These assets and liabilities are reported on the condensed 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.

Changes in the contract asset and liability balances during the three month period ended July 30, 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 .

Revenue recognized for the three month periods ended July 30, 2022 that was included in contract liability balances as of April 30, 2022 was $ 1,925,000 , and revenue recognized for the three month periods ended July 31, 2021 that was included in contract liability balances as of April 30, 2021 was $ 309,000 .

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

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.

As of July 30, 2022, the Company’s CODM, the Chief Executive Officer, makes operating decisions, assesses performance and makes resource allocation decisions, including the allocation for research and development (“R&D”).

Accordingly, the Company identifies four reportable segments.

Refer to Note 20—Segments for further details.

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

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

Restricted Cash

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

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

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.

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

8 unchanged sentences

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.

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.

1 unchanged sentence

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.

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

Loss Per Share

Basic loss per share is computed using the weighted-average number of common shares outstanding, excluding shares of unvested restricted stock.

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.

Denominator for basic earnings (loss) per share:

July 30, 2022

July 31, 2021

Net loss attributable to AeroVironment, Inc.

Denominator for basic loss per share:

Weighted average common shares

Dilutive effect of employee stock options, restricted stock and restricted stock units

Denominator for diluted earnings (loss) per share

Potentially dilutive shares not included in the computation of diluted weighted-average common shares because their effect would have been anti-dilutive were 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.

Denominator for diluted loss per share

Due to the net loss for the three months ended July 30, 2022 and July 31, 2021, no shares reserved for issuance upon exercise of stock options or shares of unvested restricted stock were included in the computation of diluted loss per share as their inclusion would have been anti-dilutive.

Potentially dilutive shares not included in the computation of diluted weighted-average common shares because their effect would have been anti-dilutive were 164,312 and 279,978 for the three months ended July 30, 2022 and July 31, 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.

No recently issued accounting standards expected to impact the Company.

Discontinued Operations

1 unchanged sentence

(“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.

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 sought 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 $ 6,500,000 in additional cash consideration due under the Purchase Agreement (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.

2 unchanged sentences

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 offer did not reflect the Company’s view of the merits of the

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 condensed consolidated statements of operations and in other current liabilities on the condensed 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 its 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 condensed consolidated statements of operations and in other current liabilities on the condensed 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.

As of July 30, 2022, $ 10,000,000 of the settlement has been paid.

Investments consist of the following (in thousands):

3 unchanged sentences

government securities

Corporate bonds

Total short-term investments

Long-term investments:

Available-for-sale securities:

Municipal securities

government securities

Total long-term available-for-sale investments

Equity method investments

Investment in limited partnership fund

Investments in limited partnership funds

Total equity method investments

1 unchanged sentence

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

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

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

government securities and U.S.

government agency securities.

Interest earned from these investments is recorded in interest expense, net.

Realized gains on sales of these investments on the basis of specific identification are recorded in interest expense, net.

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 July 30, 2022 and April 30, 2022, respectively (in thousands):

July 30, 2022

Municipal securities

government securities

Total available-for-sale investments

2 unchanged sentences

government securities

Corporate bonds

Total available-for-sale investments

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):

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

Due within one year

6 unchanged sentences

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

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

The Company’s financial assets measured at fair value on a recurring basis at July 30, 2022, were as follows (in thousands):

Fair Value Measurement Using

4 unchanged sentences

Contingently returnable consideration

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

The Company’s financial liabilities measured at fair value on a recurring basis at July 30, 2022, were as follows (in thousands):

Fair Value Measurement Using

10 unchanged sentences

Contingently returnable consideration

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

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

The Company’s financial liabilities measured at fair value on a recurring basis at April 30, 2022, were as follows (in thousands):

Fair Value Measurement Using

Quoted prices in

active markets for

identical assets

Contingent consideration

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

Measurements Using

5 unchanged sentences

Transfers to Level 3

Total losses (realized or unrealized)

Total fair value measurement adjustments (realized or unrealized)

Included in selling, general and administrative

Balance at January 29, 2022

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

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

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.

Balance at July 30, 2022

The amount of total (gains) or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at July 30, 2022

Pursuant to the Intelligent Systems Group business segment (“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 three 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.

During the fiscal year ended April 30, 2022, the targets for the first and second year were achieved, and the related consideration of $ 2,000,000 for the first target was released from an escrow account that is not controlled by the Company and therefore not recorded on the condensed consolidated balance sheet.

During the three months ended July 30, 2022, the related consideration of $ 2,000,000 for the second target was released from an escrow account that is not controlled by the Company and therefore not recorded on the condensed 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.

1 unchanged sentence

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.

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

The first year earnout of € 2,000,000 (approximately $ 2,424,000 ) was not achieved.

Refer to Note 18—Business Acquisitions for further details.

Inventories, net

11 unchanged sentences

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 %.

In connection with the formation of the joint venture on December 27, 2017, the Company initially purchased shares of HAPSMobile representing a 5 % ownership.

On December 4, 2019, the Company purchased additional shares of HAPSMobile to increase its ownership stake to approximately 7 %.

In March 2022, the Company sold its 7 % equity interest in HAPSMobile to SoftBank, for 808,008,000 yen ($ 6,497,000 ) and a gain was recorded in sale of ownership in HAPSMobile Inc.

joint venture.

Following the sale, SoftBank owns 100 % of HAPSMobile, and, therefore, the Company no longer applies the equity method of accounting.

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

9 unchanged sentences

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

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 repayment resulted in equity method income during the fiscal year ended April 30, 2022 up to the extent of the previously recognized equity method losses associate with the loan.

Prior to the sale of the equity interest, the Company had 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, and therefore, the Company’s investment was accounted for as an equity method investment.

For the three months ended July 31, 2021, the Company recorded its ownership percentage of the net loss of HAPSMobile, or $ 1,655,000 , in equity method investment loss, net of tax in the condensed consolidated statements of income.

Investments in Limited Partnership Funds

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.

Under the terms of the limited partnership agreement, the Company contributed $ 10,000,000 during the fiscal years ended April 30, 2021 and 2022, and there were no further contribution commitments to this fund as of April 30, 2022.

In March 2022, the Company entered into a limited partnership agreement with a second limited partnership fund also focusing on highly relevant technologies and start-up companies serving defense and industrial markets.

Under the terms of the limited partnership agreement, the Company is committed to contributions totaling $ 20,000,000 over an expected five year period.

During the three months ended July 30, 2022, the Company made its initial contribution of $ 2,774,000 .

Under the terms of the limited partnership agreement, the Company has committed to make additional capital contributions of $ 17,226,000 to the fund.

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.

For the three months ended July 30, 2022 and July 31, 2021, the Company recorded its ownership percentage of the net (loss) gain of the limited partnership, or $( 500,000 ) and $ 514,000 , respectively, in equity method investment loss, net of tax in the unaudited condensed consolidated statements of operations.

At July 30, 2022 and April 30, 2022, the carrying value of the investment in the limited partnership of $ 17,707,000 and $ 15,433,000 , respectively, was recorded in long-term investments on the unaudited condensed consolidated balance sheet.

Warranty Reserves

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

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

The warranty reserve is included in other current liabilities on the unaudited condensed 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):

Warranty reserve activity is summarized as follows for the three months ended July 30, 2022 and July 31, 2021, respectively (in thousands):

Three Months Ended

Nine Months Ended

Beginning balance

12 unchanged sentences

Intangibles, net

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.

The weighted average amortization period at July 30, 2022 and April 30, 2022 was four years .

Amortization expense for the three months ended July 30, 2022 and July 31, 2021 was $ 5,869,000 and $ 6,973,000 , 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.

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.

Refer to Note 18—Business Acquisitions for further details.

3 unchanged sentences

Additions to goodwill

Impairment of goodwill

Balance at January 29, 2022

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

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

The addition to

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

Balance at July 30, 2022

The goodwill additions to the column entitled “All other” is attributable to the Telerob acquisition recorded in Euros and translated to dollars at each reporting date.

Refer to Note 18—Business Acquisitions for further details.

10 unchanged sentences

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.

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.

6 unchanged sentences

and 3.00 to 1.00 for any fiscal quarter ending thereafter.

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

LIBOR as a reference interest rate.

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.

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

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

4 unchanged sentences

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.

As of July 30, 2022, the Company is in compliance with all amended covenants.

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

Nine Months Ended

(In thousands)

Revolving credit facility

5 unchanged sentences

Current period interest rate

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

Future long-term debt principal payments at July 30, 2022 were as follows:

(In thousands)

1 unchanged sentence

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

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

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

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

12 unchanged sentences

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

Nine Months Ended

Three Months Ended

Operating lease cost

4 unchanged sentences

Supplemental lease information were as follows:

Nine Months Ended

Three Months Ended

(In thousands)

4 unchanged sentences

Weighted average discount rate

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

Maturities of operating lease liabilities as of July 30, 2022 were as follows (in thousands):

Total lease payments

3 unchanged sentences

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

Nine Months Ended

Three Months Ended

Balance, net of $ 8 and $ 1 deferred taxes, as of April 30, 2022 and April 30, 2021, respectively

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

Unrealized gain (loss) on available-for-sale investments, net of deferred tax expense of $ 6 and $ 0 for the three months ended July 30, 2022 and July 31, 2021, respectively

Change in foreign currency translation adjustments

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

Balance, net of $ 2 and $ 1 deferred taxes, as of July 30, 2022 and July 31, 2021, respectively

Customer-Funded Research & Development

1 unchanged sentence

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.

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

Revenue from customer-funded R&D was approximately $ 22,999,000 and $ 16,911,000 for the three months ended July 30, 2022 and July 31, 2021, respectively.

Long-Term Incentive Awards

1 unchanged sentence

Awards under the Fiscal 2023 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.

(i) time-based restricted stock awards and time-based restricted stock units, which vest in equal tranches in July 2023, July 2024 and July 2025, and (ii) performance-based restricted stock units (“PRSUs”), which vest based on the Company’s achievement of revenue and non-GAAP operating income targets for the three-year period ending April 30, 2025.

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”).

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 non-GAAP operating income targets for the performance period.

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

For the three months ended July 30, 2022, the Company recorded $ 397,000 of compensation expense related to the Fiscal 2023 LTIP.

The Company recorded no compensation expense related to the Fiscal 2023 LTIP for the three months ended July 31, 2021.

At July 30, 2022, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2023 LTIP is $ 12,829,000 .

During the three months ended July 31, 2021, the Company granted awards under the Restated 2006 Plan to key employees (“Fiscal 2022 LTIP”).

Awards under the Fiscal 2022 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.

(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) PRSUs, which vest based on the Company’s achievement of revenue and non-GAAP 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.

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”).

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

For the three months ended July 30, 2022 and July 31, 2021, the Company recorded $ 195,000 and $ 308,000 of compensation expense related to the Fiscal 2022 LTIP, respectively.

At July 30, 2022, the maximum compensation expense that may be recorded for the performance-based

portion of the Fiscal 2022 LTIP is $ 10,148,000 .

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

Awards under the Fiscal 2021 LTIP consist of:

3 unchanged sentences

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

$( 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 .

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

For the three months ended July 30, 2022 and July 31, 2021, the Company recorded $ 76,000 and $ 65,000 of compensation expense related to the Fiscal 2021 LTIP, respectively.

At July 30, 2022, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2021 LTIP is $ 5,858,000 .

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

1 unchanged sentence

(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.

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.

During the three months ended July 31, 2022, the Company issued a total of 5,678 fully-vested shares of the Company’s common stock to settle the PRSUs in the Fiscal 2020 LTIP.

For the three months ended July 30, 2022 and July 31, 2021, the Company recorded no compensation expense and a reversal of $( 1,000 ) of compensation expense related to the Fiscal 2020 LTIP, respectively.

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

1 unchanged sentence

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

For the three and 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.

For the three months ended July 30, 2022, the Company recorded a provision for income taxes of $ 2,606,000 yielding an effective tax rate of ( 49.3 )%.

For the three months ended July 31, 2021, the Company recorded a benefit from income taxes of $( 957,000 ) yielding an effective tax rate of 7.0 %.

The variance from statutory rates for the three months ended July 30, 2022 was primarily due to a combination of federal R&D credits and the foreign-derived intangible income deduction and projected fiscal 2023 pre-tax income.

The variance from statutory rates for the three months ended July 31, 2021 was primarily due to federal R&D credits, foreign derived intangible income deductions and the recording of discrete excess tax benefits resulting from the vesting of restricted stock awards and exercises of stock options.

Share Repurchase

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

No shares were repurchased under the program during the three and 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.

No shares were repurchased under the program during the three months ended July 30, 2022 or July 31, 2021.

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

In September 2022, the Company’s Board of Directors terminated the repurchase program effective immediately.

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 .

Prior to the Company’s sale of all of its equity interest in HAPSMobile in March 2022, the Company determined that it had the ability to exercise significant influence over HAPSMobile.

As such, HAPSMobile and SoftBank were considered related parties of the Company prior to the sale.

Subsequent to the sale, the Company had no ownership stake in HAPSMobile and SoftBank and HAPSMobile are no longer considered related parties.

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

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.

The Company recorded revenue under both the MDDA and DDA of $ 10,352,000 for the three months ended July 31, 2021.

Business Acquisitions

11 unchanged sentences

military are achieved prior to the end of a 36-month post-closing period.

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):

The first year earnout of € 2,000,000 (approximately $ 2,424,000 ) was not achieved.

The Company accounted for the acquisition under the acquisition method of accounting for business combinations.

During the fiscal year ended April 30, 2022, the Company finalized its determination of the fair value of the assets and liabilities assumed as of the acquisition date, which is summarized in the following table (in thousands):

Fair value of assets acquired:

28 unchanged sentences

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):

The following unaudited pro forma summary presents condensed consolidated information of the Company as if the business acquisition had occurred on May 1, 2020 (in thousands):

Three Months Ended

Nine Months Ended

Net (loss) income attributable to AeroVironment, Inc.

Net loss attributable to AeroVironment, Inc.

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.

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):

Fair value of assets acquired:

Accounts receivable

Unbilled receivable

Inventories, net

Prepaid and other current assets

Property and equipment, net

Operating lease assets

Customer relationships

Total assets acquired

Fair value of liabilities assumed:

Accounts payable

Wages and related accruals

Customer advances

Other current liabilities

Operating lease liabilities

Other non-current liabilities

Deferred income taxes, net

Total liabilities assumed

Total identifiable net assets

Fair value of consideration transferred:

Cash consideration, net of cash acquired

Equity consideration

Total consideration

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.

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

Net income attributable to AeroVironment, Inc.

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.

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):

Fair value of assets acquired:

Customer relationships

Total identifiable net assets

Fair value of consideration transferred:

Contingent consideration

Total consideration

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.

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

Net income attributable to AeroVironment, Inc.

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.

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.

The Company incurred approximately $ 411,000 of acquisition-related expenses for the three months ended July 31,2021.

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

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.

The Rheinmetall-Zusatzversorgung 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.

The Company has reinsurance policies that were taken out for participating former employees, which were pledged to the employees.

The measurement date for the Company’s pension plan was April 30, 2022.

The table below includes the projected benefit obligation and fair value of plan assets as of April 30, 2022.

The net projected benefit obligation (in thousands) is recorded in other assets on the unaudited condensed consolidated balance sheet.

Projected benefit obligation

Fair value of plan assets

Unfunded status of the plan

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

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

Funded status of the plan

The projected benefit obligation includes assumptions of a discount rate of 1.7 % and pension increase for in-payment benefits of 1.5 % for July 30, 2022 and April 30, 2022.

The accumulated benefit obligation is approximately equal to the Company’s projected benefit obligation.

The plan assets consist of reinsurance policies for each of the three pension commitments.

1 unchanged sentence

The Company does not expect to make any contributions to the Plan in the fiscal year ending April 30, 2023.

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):

The Company assumed expected return on plan assets of 2.9 % for July 30, 2022 and April 30, 2022.

Expected benefits payments as of April 30, 2022 (in thousands):

Total expected benefit payments

Net periodic benefit cost (in thousands) is recorded in interest (expense) income, net.

Net periodic benefit cost (in thousands) is recorded in interest expense, net.

Three Months Ended

Nine Months Ended

Three Months Ended

(In thousands)

2 unchanged sentences

Interest cost

Foreign currency exchange rate changes

Actuarial gain

Net periodic benefit cost

4 unchanged sentences

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.

High Altitude Pseudo-Satellite Unmanned Aircraft Systems (“HAPS”)—The HAPS segment consists of the Company’s existing development of High Altitude Pseudo-Satellite systems in conjunction with SoftBank.

All other —All other segments include MacCready Works (which includes the recently acquired ISG business) and Telerob.

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

Income (loss) from operations

Acquisition-related expenses

Amortization of acquired intangible assets and other purchase accounting adjustments

Adjusted income (loss) from operations

Three Months Ended January 30, 2021

Income (loss) from operations

Acquisition-related expenses

Amortization of acquired intangible assets and other purchase accounting adjustments

Adjusted income (loss) from operations

Nine Months Ended January 29, 2022

The following table (in thousands) sets forth segment revenue, gross margin, income (loss) from operations and adjusted income (loss) from operations for the periods indicated.

Adjusted income (loss) from operations is defined as income (loss) from operations 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 July 30, 2022

Income (loss) from operations

2 unchanged sentences

Adjusted income (loss) from operations

Nine Months Ended January 30, 2021

Three Months Ended July 31, 2021

Income (loss) from operations

4 unchanged sentences

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

January 29, 2022

July 30, 2022

Identifiable assets

1 unchanged sentence

Identifiable assets

Subsequent Events

On August 17, 2022 the Company closed its acquisition of Planck Aerosystems, Inc.

(“Planck”), a leading provider of advanced unmanned aircraft navigation solutions based in San Diego, California.

Pursuant to the purchase agreement, the Company paid a total purchase price of $ 5,600,000 from cash-on-hand for certain assets of Planck.

Planck is a small technology company and post-acquisition will be incorporated into AeroVironment’s MUAS segment to focus on integrating its flight autonomy solutions, such as ACE™, or Autonomous Control Engine, into the Company’s offerings to enable safe, autonomous takeoff and landing from moving platforms on land or at sea in GPS-denied environments.

Other solutions include AVEM™, a fully integrated mobile tethered sensor platform designed for persistent autonomous operation from moving vehicles and vessels in any environment, and a suite of machine-learning object detection and tracking systems that are customized for specific end-user needs.

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

What changed 10-Q

Item 1. Financial Statements