What changed in this filing

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Item 1. Financial Statements

2024-03-05 compared with 2023-12-06 · 198 added, 174 removed, 675 unchanged (36% of the section changed)

5 unchanged sentences

Cash and cash equivalents

Accounts receivable, net of allowance for doubtful accounts of $ 158 at October 28, 2023 and $ 156 at April 30, 2023

Accounts receivable, net of allowance for doubtful accounts of $ 88 at January 27, 2024 and $ 156 at April 30, 2023

Unbilled receivables and retentions

27 unchanged sentences

Authorized shares— 10,000,000 ;

none issued or outstanding at October 28, 2023 and April 30, 2023

none issued or outstanding at January 27, 2024 and April 30, 2023

Common stock, $ 0.0001 par value:

Authorized shares— 100,000,000

Issued and outstanding shares— 28,135,539 shares at October 28, 2023 and 26,216,897 shares at April 30, 2023

Issued and outstanding shares— 28,136,735 shares at January 27, 2024 and 26,216,897 shares at April 30, 2023

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Product sales

9 unchanged sentences

Income (loss) from operations

Other (loss) income:

Other income (loss):

Interest expense, net

Other (expense) income, net

Other income (expense), net

Income (loss) before income taxes

11 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Net income (loss)

Other comprehensive income (loss):

Unrealized gain on available-for-sale investments, net of deferred tax expense of $ 0 for the three and six months ended October 29, 2022, respectively

Unrealized gain on available-for-sale investments, net of deferred tax expense of $ 0 for the three and nine months ended January 28, 2023, respectively

Change in foreign currency translation adjustments

5 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Equity

For the three months ended October 28, 2023 and October 29, 2022 (Unaudited)

For the three months ended January 27, 2024 and January 28, 2023 (Unaudited)

(In thousands except share data)

1 unchanged sentence

AeroVironment, Inc.

Balance at July 29, 2023

Balance at October 28, 2023

Foreign currency translation

1 unchanged sentence

Restricted stock awards forfeited

Tax withholding payment related to net share settlement of equity awards

Shares issued, net of issuance costs

Issuance of common stock for business acquisition

Stock based compensation

Balance at October 28, 2023

Balance at January 27, 2024

Comprehensive

AeroVironment, Inc.

Balance at July 30, 2022

Net (loss) income

Unrealized gain on investments

Balance at October 29, 2022

Foreign currency translation

2 unchanged sentences

Restricted stock awards forfeited

Tax withholding payment related to net share settlement of equity awards

Shares issued, net of issuance costs

Deconsolidation of previously controlled subsidiary

Stock based compensation

Balance at October 29, 2022

Balance at January 28, 2023

AeroVironment, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

For the six months ended October 28, 2023 and October 29, 2022 (Unaudited)

For the nine months ended January 27, 2024 and January 28, 2023 (Unaudited)

(In thousands except share data)

9 unchanged sentences

Stock based compensation

Balance at October 28, 2023

Balance at January 27, 2024

Comprehensive

11 unchanged sentences

Stock based compensation

Balance at October 29, 2022

Balance at January 28, 2023

AeroVironment, Inc.

1 unchanged sentence

(In thousands)

Six Months Ended

Nine Months Ended

Operating activities

Net income (loss)

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

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

Depreciation and amortization

6 unchanged sentences

Non-cash lease expense

Gain on foreign currency transactions

Unrealized loss (gain) on available-for-sale equity securities, net

Loss on foreign currency transactions

Unrealized loss on available-for-sale equity securities, net

Deferred income taxes

9 unchanged sentences

Other liabilities

Net cash (used in) provided by operating activities

Net cash provided by operating activities

Investing activities

11 unchanged sentences

Holdback and retention payments for business acquisition

Payment of contingent consideration

Proceeds from shares issued, net of issuance costs

2 unchanged sentences

Exercise of stock options

Net cash provided by (used in) financing activities

Net cash used in financing activities

Effects of currency translation on cash and cash equivalents

6 unchanged sentences

Issuance of common stock for business acquisition

Unrealized gain on available-for-sale investments, net of deferred tax expense of $ 0 for the six months ended October 28, 2023 and October 29, 2022, respectively

Unrealized gain on available-for-sale investments, net of deferred tax expense of $ 0 for the nine months ended January 27, 2024 and January 28, 2023, respectively

Change in foreign currency translation adjustments

15 unchanged sentences

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

The results of operations for the three and six months ended October 28, 2023 are not necessarily indicative of the results for the full year ending April 30, 2024.

The results of operations for the three and nine months ended January 27, 2024 are not necessarily indicative of the results for the full year ending April 30, 2024.

For further information, refer to the consolidated financial statements and footnotes thereto for the year ended April 30, 2023, included in the Company’s Annual Report on Form 10-K.

19 unchanged sentences

Recently Adopted Accounting Standards

The Company did not adopt any accounting standards during the six months ended October 28, 2023.

The Company did not adopt any accounting standards during the nine months ended January 27, 2024.

Reclassifications

1 unchanged sentence

Specifically, the Company’s reserves for inventory excess and obsolescence have been reclassified from changes in inventories to non-cash adjustments within operating activities on the consolidated statements of cash flows for all periods presented.

Reportable segment presentation for the three and six months ended October 29, 2022 has been reclassified to conform to the current year reportable segments:

Reportable segment presentation for the three and nine months ended January 28, 2023 has been reclassified to conform to the current year reportable segments:

UMS, LMS and MacCready Works (“MW”) resulting from the Company’s reorganization, which was effective May 1, 2023.

21 unchanged sentences

Contract services revenue, which historically included revenue from intelligence, surveillance, and reconnaissance (“ISR”) services, is recognized over time as services are rendered.

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.

amount to which the entity has a right to invoice.

In the past, the Company operated its medium unmanned aircraft systems (“MUAS”) in overseas locations to support U.S.

military operations under ISR services contracts under a

contractor-owned, contractor-operated (“COCO”) arrangement.

military operations under ISR services contracts under a contractor-owned, contractor-operated (“COCO”) arrangement.

During the year ended April 30, 2023, all COCO sites were closed.

6 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 39 % of revenue during each of the three and six months ended October 28, 2023.

Performance obligations satisfied over time accounted for 65% and 63% of revenue during the three and six months ended October 29, 2022, respectively.

Performance obligations satisfied at a point in time accounted for 61 % of revenue during each of the three and six months ended October 28, 2023.

Performance obligations satisfied at a point in time accounted for 35% and 37% of revenue during the three and six months ended October 29, 2022, respectively.

On October 28, 2023, the Company had approximately $ 487,030,000 of remaining performance obligations under fully funded contracts with its customers, which the Company also refers to as funded backlog.

Three Months Ended

Nine Months Ended

Revenue percentage by recognition method

Point in time

Total revenue

On January 27, 2024, the Company had approximately $ 462,787,000 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 35 % of the remaining performance obligations as revenue in fiscal 2024 and the remaining 65 % in fiscal 2025 .

11 unchanged sentences

In addition, the Company includes the estimated variable consideration to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the related uncertainty is resolved.

These estimates are based on historical award experience, anticipated performance and the Company’s best judgment at the time.

These estimates are based on historical award experience, anticipated

performance and the Company’s best judgment at the time.

Based on experience in estimating these amounts, they are included in the transaction price of the Company’s contracts and the associated remaining performance obligations.

4 unchanged sentences

If at any time the estimate of contract profitability indicates an anticipated loss on the contract, the Company recognizes the total loss in the quarter it is identified, and it is recorded in other current liabilities.

The balance of forward loss reserves as of October 28, 2023 and April 30, 2023 was $ 1,792,000 and $ 1,878,000 , respectively.

The Company recorded the forward loss reserves as the total estimated costs to complete the contracts are in excess of the total remaining consideration of the contracts.

No adjustment on the forward loss reserve for any one contract was material to the Company’s unaudited condensed consolidated financial statements for the three and six months ended October 28, 2023, respectively.

During the three months ended October 29, 2022, the Company recognized forward loss reserves on two MUAS ISR contracts totaling $ 1,952,000 related to unfavorable changes in the estimated costs to complete the contracts.

The balance of forward loss reserves as of January 27, 2024 and April 30, 2023 was $ 1,052,000 and $ 1,878,000 , respectively.

The Company recorded the forward loss reserves as the total estimated costs to complete the contracts are in excess of the total remaining consideration of the contracts.

The aggregate impact of the change in estimate decreased net income by $ 1,500,000 and diluted loss per share by $ 0.06 .

No adjustment on the forward loss reserve for any one contract was material to the Company’s unaudited condensed consolidated financial statements for the six months ended October 29, 2022, respectively.

No adjustment on the forward loss reserve for any one contract was material to the Company’s unaudited condensed consolidated financial statements for the three and nine months ended January 27, 2024, respectively.

During the three months ended January 28, 2023, the Company recognized a decrease in the forward loss reserves on two MUAS ISR contracts of $ 2,424,000 due to decreases in the estimated costs to complete the contracts and an increase in the forward loss reserve of an MUAS products contract of $ 1,593,000 due to increases in the estimated costs to complete the contract.

No adjustment on the forward loss reserve for any one contract was material to the Company’s unaudited condensed consolidated financial statements for the nine months ended January 28, 2023.

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

The aggregate impact of adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was not significant for the three or six month periods ended October 28, 2023 or October 29, 2022.

During the three and six months ended October 28, 2023, the Company revised its estimates of the total expected costs to complete an LMS 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 an increase to revenue of approximately $ 1,716,000 and $ 1,439,000 , respectively.

During the three months ended October 29, 2022, the Company revised its estimates of the total expected costs to complete an LMS variant contract.

The aggregate impact of adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was $ 4,398,000 and $ 5,087,000 for the three and nine month periods ended January 27, 2024, respectively.

During the three months ended January 27, 2024, the Company revised its estimates to reflect a favorable definitization of an LMS contract.

During the six months ended October 29, 2022, the Company revised its estimates of the total expected costs to complete two LMS variant contracts.

During the nine months ended January 27, 2024, the Company revised its estimates of the total expected costs to complete a different LMS contract.

No adjustment on any one contract was material to the Company’s unaudited condensed consolidated financial statements for the three month period ended January 28, 2023.

During the nine months ended January 28, 2023, the Company revised its estimates of the total expected costs to complete two LMS variant contracts.

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 $ 2,448,000 .

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Revenue by segment

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

Revenue by contract type

7 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Revenue by customer category

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

Revenue by geographic location

9 unchanged sentences

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

Changes in the contract asset and liability balances during the three and six month period ended October 28, 2023 were not materially impacted by any other factors.

Changes in the contract asset and liability balances during the three and nine month periods ended January 27, 2024 were not materially impacted by any other factors.

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

Revenue recognized for the three and six month periods ended October 28, 2023 that was included in customer advances balances as of April 30, 2023 was $ 696,000 and $ 2,416,000 , and revenue recognized for the three and six month periods ended October 29, 2022 that was included in customer advances balances as of April 30, 2022 was $ 1,080,000 and $ 3,004,000 , respectively.

Revenue recognized for the three and nine month periods ended January 27, 2024 that was included in customer advances balances as of April 30, 2023 was $ 610,000 and $ 3,026,000 , and revenue recognized for the three and nine month periods ended January 28, 2023 that was included in customer advances balances as of April 30, 2022 was $ 369,000 and $ 3,374,000 , respectively.

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

As of October 28, 2023, 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”).

As of January 27, 2024, 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 three reportable segments.

15 unchanged sentences

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

At October 28, 2023 and April 30, 2023, the Company had no reserve for incurred cost claim audits.

At January 27, 2024 and April 30, 2023, the Company had no reserve for incurred cost claim audits.

Earnings (Loss) Per Share

2 unchanged sentences

Three Months Ended

Six Months Ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

Nine Months Ended

January 27, 2024

January 28, 2023

January 27, 2024

January 28, 2023

Net income (loss) attributable to AeroVironment, Inc.

3 unchanged sentences

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 1,284 and 1,082 for the three and six months ended October 28, 2023.

Due to the net loss for the three and six months ended October 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 were 148,196 and 156,625 for the three and six months ended October 29, 2022, respectively.

Potentially dilutive shares not included in the computation of diluted weighted-average common shares because their effect would have been anti-dilutive were 72 and 606 for the three and nine months ended January 27, 2024.

Due to the net loss for the three and nine months ended January 28, 2023, 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 145,793 and 152,047 for the three and nine months ended January 28, 2023, respectively.

Recently Issued Accounting Standards

No recently issued accounting standards are expected to impact the Company.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU 2023-07”).

ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses reported to the CODM.

ASU 2023-07 also requires all segment profit or loss and assets disclosures to be provided on an annual and interim basis.

The new standard is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

ASU 2023-07 is adopted retrospectively.

The Company is evaluating the potential impact of this adoption on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures (“ASU 2023-09”).

ASU 2023-09 requires updates to the rate reconciliation, income taxes paid and other disclosures.

The new standard is effective for fiscal years beginning after December 15, 2024 and interim periods within fiscal years beginning after December 15, 2025, with early adoption permitted.

ASU 2023-09 is adopted retrospectively.

The Company is evaluating the potential impact of this adoption on its consolidated financial statements.

Investments consist of the following (in thousands):

12 unchanged sentences

Three Months Ended

Six Months Ended

October 28, 2023

October 29, 2022

October 28, 2023

October 29, 2022

Net (losses) gains recognized during the period on equity securities

Nine Months Ended

January 27, 2024

January 28, 2023

January 27, 2024

January 28, 2023

Net gains (losses) recognized during the period on equity securities

Net loss recognized during the period on equity securities sold during the period

Unrealized loss recognized during the period on equity securities still held at the reporting date

Unrealized gain (loss) recognized during the period on equity securities still held at the reporting date

Fair Value Measurements

4 unchanged sentences

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

The Company’s financial assets measured at fair value on a recurring basis at October 28, 2023, were as follows (in thousands):

The Company’s financial assets measured at fair value on a recurring basis at January 27, 2024, were as follows (in thousands):

Fair Value Measurement Using

3 unchanged sentences

Equity securities

The Company’s financial liabilities measured at fair value on a recurring basis at October 28, 2023, were as follows (in thousands):

Fair Value Measurement Using

Quoted prices in

active markets for

identical assets

Contingent consideration

The Company had no financial liabilities measured at fair value on a recurring basis at January 27, 2024.

The Company’s financial assets measured at fair value on a recurring basis at April 30, 2023, were as follows (in thousands):

18 unchanged sentences

Included in selling, general and administrative

Balance at October 28, 2023

The amount of total (gains) or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets or liabilities still held at October 28, 2023

Balance at January 27, 2024

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 27, 2024

On May 3, 2021, the Company closed its acquisition of Telerob Gesellschaft für Fernhantierungstechnik mbH (“Telerob GmbH”), including Telerob GmbH’s wholly-owned subsidiary, Telerob USA, Inc.

(“Telerob USA,” and collectively with Telerob GmbH, “Telerob”) pursuant to its Share Purchase Agreement (the “Telerob Purchase Agreement”) with Unmanned Systems Investments GmbH (the “Telerob Seller”).

Pursuant to the Telerob Purchase Agreement, the Telerob Sellers may receive up to a maximum of € 6,000,000 (approximately $ 6,339,000 ) in additional cash consideration if specific revenue and contract award targets for Telerob are achieved during the 36 month period after closing.

Pursuant to the Telerob Purchase Agreement, the Telerob Sellers may receive up to a maximum of € 6,000,000 (approximately $ 6,511,000 ) in additional cash consideration if specific revenue and contract award targets for Telerob were achieved during the 36 month period after closing.

The contingent consideration was valued using a Black-Scholes option-pricing model.

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

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

consideration will be achieved.

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

The first year earnout of € 2,000,000 (approximately $ 2,170,000 ) was not achieved.

24 unchanged sentences

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

For the three and six months ended October 28, 2023, the Company recorded its ownership percentage of the net losses of the limited partnerships, or $( 1,393,000 ) and $( 1,414,000 ), respectively, in equity method investment loss, net of $ 0 tax in the unaudited condensed consolidated statements of operations, respectively.

For the three and six months ended October 29, 2022, the Company recorded its

ownership percentage of the net loss of the limited partnership, or $( 1,273,000 ) and $( 1,773,000 ), respectively, in equity method investment loss, net of $ 0 tax in the unaudited condensed consolidated statements of operations, respectively.

At October 28, 2023 and April 30, 2023, the carrying value of the investments in the limited partnership funds of $ 19,106,000 and $ 18,644,000 , respectively, was recorded in long-term investments on the unaudited condensed consolidated balance sheet.

For the three and nine months ended January 27, 2024, the Company recorded its ownership percentage of the net losses of the limited partnerships, or $( 80,000 ) and $( 1,494,000 ), respectively, in equity method investment loss, net of $ 0 tax in the unaudited condensed consolidated statements of operations, respectively.

For the three and nine months ended January 28, 2023, the Company recorded its ownership percentage of the net loss of the limited partnership, or $( 417,000 ) and $( 2,190,000 ), respectively, in equity method investment loss, net of $ 0 tax in the unaudited condensed consolidated statements of operations, respectively.

At January 27, 2024 and April 30, 2023, the carrying value of the investments in the limited partnership funds of $ 19,022,000 and $ 18,644,000 , respectively, which is recorded in long-term investments on the unaudited condensed consolidated balance sheet.

Investment in Altoy

4 unchanged sentences

The Company maintains significant influence, accounts for its investment in Altoy as an equity method investment and records its proportion of any gains or losses of Altoy in equity method investment loss, net of tax.

For the three and six months ended October 28, 2023 and October 29, 2022, the Company recorded $ 0 for its ownership percentage of the net loss of Altoy in equity method investment loss, net of tax in the unaudited condensed consolidated statements of operations.

At October 28, 2023 and April 30, 2023, the carrying value of the investment in Altoy of $ 71,000 and $ 114,000 , respectively, was recorded in other assets on the unaudited condensed consolidated balance sheet.

For the three and nine months ended January 27, 2024 and January 28, 2023, the Company recorded $ 0 for its ownership percentage of the net loss of Altoy in equity method investment loss, net of tax in the unaudited condensed consolidated statements of operations.

At January 27, 2024 and April 30, 2023, the carrying value of the investment in Altoy of $ 71,000 and $ 114,000 , respectively, was recorded in other assets on the unaudited condensed consolidated balance sheet.

Warranty Reserves

2 unchanged sentences

The related expense is included in cost of sales.

Warranty reserve activity is summarized as follows for the three and six months ended October 28, 2023 and October 29, 2022, respectively (in thousands):

Warranty reserve activity is summarized as follows for the three and nine months ended January 27, 2024 and January 28, 2023, respectively (in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

Beginning balance

15 unchanged sentences

In addition, during the three months ended October 28, 2023, AeroVironment acquired technology intellectual property of $ 1,500,000 through an asset purchase agreement with Windward Performance, Ltd.

Under the asset purchase agreement AeroVironment acquired intellectual property related to unmanned aircraft for $ 3,000,000 consisting of $ 1,500,000 paid at close plus two payments of $ 750,000 on the first and second anniversaries of the purchase agreement.

Under the asset purchase agreement, AeroVironment acquired intellectual property related to unmanned aircraft for $ 3,000,000 consisting of $ 1,500,000 paid at closing plus two payments of $ 750,000 on the first and second anniversaries of the purchase agreement.

The additional payments will be expensed to R&D on a straight-line basis over the two year term.

The weighted average amortization period at each of October 28, 2023 and April 30, 2023 was four years .

Amortization expense for the three and six months ended October 28, 2023 was $ 4,262,000 and $ 7,276,000 , respectively.

Amortization expense for the three and six months ended October 29, 2022 was $ 5,983,000 and $ 11,852,000 , respectively.

The weighted average amortization period at each of January 27, 2024 and April 30, 2023 was four years .

Amortization expense for the three and nine months ended January 27, 2024 was $ 5,445,000 and $ 12,721,000 , respectively.

Amortization expense for the three and nine months ended January 28, 2023 was $ 6,073,000 and $ 17,925,000 , respectively.

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

3 unchanged sentences

Change to goodwill

Balance at October 28, 2023

Balance at January 27, 2024

Effective May 1, 2023, the reporting segments for goodwill are UMS, LMS and MW.

5 unchanged sentences

The MW segment includes goodwill from the purchase of certain assets of Intelligent Systems Group business segment (“ISG”) of Progeny Systems Corporation.

The MUAS reporting unit, included in the UMS reportable segment, is considered at an increased risk of failing future quantitative goodwill impairment tests as an impairment was recorded during the most recent annual goodwill impairment test performed during the fourth quarter ended April 30, 2023.

As of October 28, 2023, the company has not identified any events or circumstances that could trigger an impairment review prior to the Company’s annual impairment test.

The MUAS reporting unit, the renamed Arcturus acquisition included in the UMS reportable segment, has a goodwill balance of $ 134,140,000 as of January 27, 2024.

The estimated fair value of the MUAS reporting unit does not substantially exceed its carrying value due to the impairment recorded during the most recent annual goodwill impairment test performed during the fourth quarter ended April 30, 2023, resulting in carrying value being equal to estimated fair value.

Fair value determinations utilized in the quantitative goodwill impairment test require considerable judgment and are sensitive to changes in underlying assumptions, estimates, and market factors.

Estimating the fair value of individual reporting units requires the Company to make assumptions and estimates regarding future plans, as well as industry, economic, and regulatory conditions.

These assumptions and estimates include estimated future annual net cash flows, income tax rates, discount rates, growth rates, and other market factors.

Estimated future annual net cash flows based in part upon the Company’s ability to obtain contracts from the U.S.

Department of Defense and foreign allied nations and negotiate the estimated pricing are considered the most significant, sensitive assumptions.

If current expectations of future growth rates and margins are not met, if market factors outside of the Company’s control, such as discount rates, income tax rates, or inflation, change, or if management’s expectations or plans otherwise change, including updates to long-term operating plans, then MUAS may become impaired in the future.

Accordingly, the MUAS reporting unit is considered at an increased risk of failing future quantitative goodwill impairment tests.

During the most recent annual impairment test during the fourth quarter of fiscal year 2023 the estimated fair value of all reporting units, other than MUAS, substantially exceeded their carrying value.

As of January 27, 2024, the company has not identified any events or circumstances that could trigger an impairment review prior to the Company’s annual impairment test.

The annual impairment test for the fiscal year ending April 30, 2024 will be performed during the fourth quarter.

The intangibles included in the MUAS reporting unit of $ 15,668,000 as of October 28, 2023 will also be evaluated for potential impairment during the fourth quarter.

The intangibles included in the MUAS reporting unit of $ 14,636,000 as of January 27, 2024 will also be evaluated for potential impairment during the fourth quarter.

In connection with the consummation of the acquisition of Arcturus, a California corporation, pursuant to a Stock Purchase Agreement with Arcturus and each of the shareholders and other equity interest holders of Arcturus, to purchase 100 % of the issued and outstanding equity of Arcturus (the “Arcturus Acquisition”) on February 19, 2021, the Company, as borrower, and Arcturus, as guarantor, entered into a Credit Agreement with certain lenders, letter of credit issuers, Bank of America, N.A., as the administrative agent and the swingline lender, and BofA Securities, Inc., JPMorgan Chase Bank, N.A., and U.S.

16 unchanged sentences

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

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

3.50 to 1.00 for any of

the Company’s fiscal quarters ending during the period from May 1, 2022 to October 31, 2022;

and 3.00 to 1.00 for any fiscal quarter ending thereafter.

9 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 October 28, 2023, the Company is in compliance with all amended covenants.

As of January 27, 2024, the Company is in compliance with all amended covenants.

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

8 unchanged sentences

Current period interest rate

Future long-term debt principal payments at October 28, 2023 were as follows:

Future contractual long-term debt principal payments at January 27, 2024 were as follows:

(In thousands)

16 unchanged sentences

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

Six Months Ended

Nine Months Ended

Operating lease cost

4 unchanged sentences

Supplemental lease information was as follows:

Six Months Ended

Nine Months Ended

(In thousands)

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Weighted average discount rate

Maturities of operating lease liabilities as of October 28, 2023 were as follows (in thousands):

Maturities of operating lease liabilities as of January 27, 2024 were as follows (in thousands):

Total lease payments

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

Six Months Ended

Nine Months Ended

Balance, net of $ 0 and $ 8 deferred taxes, as of April 30, 2023 and April 30, 2022, respectively

Unrealized gain on available-for-sale investments, net of deferred tax expense of $ 0 for the six months ended October 28, 2023 and October 29, 2022, respectively

Unrealized gain on available-for-sale investments, net of deferred tax expense of $ 0 for the nine months ended January 27, 2024 and January 28, 2023, respectively

Change in foreign currency translation adjustments

Balance, net of $ 0 deferred taxes, as of October 28, 2023 and October 29, 2022, respectively

Balance, net of $ 0 deferred taxes, as of January 27, 2024 and January 28, 2023, respectively

Customer-Funded Research & Development

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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 $ 19,078,000 and $ 43,461,000 for the three and six months ended October 28, 2023.

Revenue from customer-funded R&D was approximately $ 24,937,000 and $ 47,936,000 for the three and six months ended October 29, 2022, respectively.

Revenue from customer-funded R&D was approximately $ 17,617,000 and $ 61,078,000 for the three and nine months ended January 27, 2024.

Revenue from customer-funded R&D was approximately $ 23,193,000 and $ 71,129,000 for the three and nine months ended January 28, 2023, respectively.

Long-Term Incentive Awards

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

For the three and six months ended October 28, 2023, the Company recorded $ 1,200,000 and $ 1,834,000 of compensation expense related to the Fiscal 2024 LTIP, respectively.

The Company recorded no compensation expense related to the Fiscal 2024 LTIP for the three and six months ended October 29, 2022.

At October 28, 2023, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2024 LTIP is $ 16,201,000 .

For the three and nine months ended January 27, 2024, the Company recorded $ 965,000 and $ 2,798,000 of compensation expense related to the Fiscal 2024 LTIP, respectively.

The Company recorded no compensation expense related to the Fiscal 2024 LTIP for the three and nine months ended January 28, 2023.

At January 27, 2024, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2024 LTIP is $ 15,836,000 .

During the three months ended July 30, 2022, the Company granted awards under the 2021 Plan to key employees (“Fiscal 2023 LTIP”).

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

For the three and six months ended October 28, 2023, the Company recorded $ 1,191,000 and $ 1,852,000 of compensation expense related to the Fiscal 2023 LTIP, respectively.

For the three and six months ended October 29, 2022, the Company recorded $ 664,000 and $ 1,061,000 of compensation expense related to the Fiscal 2023 LTIP.

At October 28, 2023, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2023 LTIP is $ 11,895,000 .

For the three and nine months ended January 27, 2024, the Company recorded $ 702,000 and $ 2,554,000 of compensation expense related to the Fiscal 2023 LTIP, respectively.

For the three and nine months ended January 28, 2023, the Company recorded $ 642,000 and $ 1,703,000 of compensation expense related to the Fiscal 2023 LTIP.

At January 27, 2024, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2023 LTIP is $ 11,611,000 .

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

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

For the three and six months ended October 28, 2023, the Company recorded $ 356,000 and $ 488,000 of compensation expense related to the Fiscal 2022 LTIP, respectively.

For the three and six months ended October 29, 2022, the Company recorded a reversal of $( 311,000 ) and $( 116,000 ) of compensation expense related to the Fiscal 2022 LTIP, respectively.

At October 28, 2023, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2022 LTIP is $ 9,458,000 .

For the three and nine months ended January 27, 2024, the Company recorded $ 125,000 and $ 613,000 of compensation expense related to the Fiscal 2022 LTIP, respectively.

For the three months ended January 28, 2023, the Company recorded $ 84,000 of compensation expense.

For the nine months ended January 28, 2023, the Company recorded a reversal of $( 31,000 ) of compensation expense related to the Fiscal 2022 LTIP.

At January 27, 2024, the maximum compensation expense that may be recorded for the performance-based portion of the Fiscal 2022 LTIP is $ 9,214,000 .

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

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settle the PRSUs in the Fiscal 2021 LTIP.

For the three and six months ended October 29, 2022, the Company recorded $ 116,000 and $ 192,000 of compensation expense related to the Fiscal 2021 LTIP, respectively.

For the three and nine months ended January 28, 2023, the Company recorded $ 36,000 and $ 228,000 of compensation expense related to the Fiscal 2021 LTIP, respectively.

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

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

For the three and six months ended October 28, 2023, the Company recorded a provision for income taxes of $ 1,137,000 and $ 2,451,000 , respectively, yielding an effective tax rate of 5.6 % for both periods.

For the three and six months ended October 29, 2022, the Company recorded a benefit from income taxes of $( 10,457,000 ) and $( 7,851,000 ) yielding an effective tax rate of 66.1 % and 37.2 %, respectively.

The variance from statutory rates for the three and six months ended October 28, 2023 was primarily due to foreign derived intangible income deductions and to federal R&D credits.

For the three and nine months ended January 27, 2024, the Company recorded a provision for income taxes of $ 1,259,000 and $ 3,710,000 , yielding an effective tax rate of 8.3 % and 6.3 %, respectively.

For the three and nine months ended January 28, 2023, the Company recorded a benefit from income taxes of $( 531,000 ) and $( 8,382,000 ) yielding an effective tax rate of 67.2 % and 38.3 %, respectively.

The variance from statutory rates for the three and nine months ended January 27, 2024 was primarily due to foreign-derived intangible income (“FDII”) deductions and to federal R&D credits.

Historically, the Company calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate (“AETR”) for the full fiscal year to the pretax income or loss for the interim reporting period.

For the three and six months ended October 29, 2022, the Company calculated the provision for income taxes using a discrete effective tax rate (“ETR”) method.

The Company determined that due to the fact small changes in the Company’s estimated pretax income or loss would result in significant changes in the estimated AETR, the historical method would not provide a reliable estimate for the three and six months ended October 29, 2022.

The variance from statutory rates for the three and six months ended October 29, 2022 was primarily due to a combination of federal R&D credits and the foreign-derived intangible income deduction.

For the three and nine months ended January 28, 2023, the Company calculated the provision for income taxes using a discrete effective tax rate (“ETR”) method.

The Company determined that due to the fact that small changes in the Company’s estimated pretax income or loss would result in significant changes in the estimated AETR, the historical method would not provide a reliable estimate for the three and nine months ended January 28, 2023.

The variance from statutory rates for the three and nine months ended January 28, 2023 was primarily due to a combination of federal R&D credits, the FDII deduction and discrete excess tax benefits resulting from the vesting of restricted stock awards and exercises of stock options.

Share Repurchase Plan and Issuances

The Company’s share repurchase program announced September 2015 was terminated by the Company’s Board of Directors in September 2022.

There were no repurchases of the Company’s common stock during the six months ended October 29, 2022.

There were no repurchases of the Company’s common stock during the nine months ended January 28, 2023.

On September 8, 2022, the Company filed an S-3 shelf registration statement to offer and sell shares of the Company’s common stock, including a prospectus supplement in relation to an Open Market Sale Agreement SM , also dated September 8, 2022, with Jefferies LLC relating to the proposed offer and sale of shares of our common stock having an aggregate offering price of up to $ 200,000,000 from time to time through Jefferies LLC as the sales agent.

During the three and six months ended October 28, 2023, the Company sold 807,370 shares for total gross proceeds of $ 91,313,000 , total proceeds received of $ 88,574,000 , net of commission expense and $ 88,437,000 net of equity issuance costs.

During the three and six months ended October 29, 2022, the Company sold 125,441 of its shares for total gross proceeds of $ 12,700,000 , total proceeds received of $ 12,347,000 , net of commission expense and $ 11,778,000 net of equity issuance costs.

As of October 28, 2023, the Company has completed the Open Market Sale Agreement SM and sold 1,917,100 of its shares for total gross proceeds of $ 200,000,000 , total proceeds received of $ 193,999,000 , net of commission expense and $ 193,086,000 net of equity issuance costs.

During the six months ended October 28, 2023, the Company completed the Open Market Sale Agreement SM .

During the six months ended October 28, 2023 the Company sold 807,370 shares, for total gross proceeds of $ 91,313,000 , total proceeds received of $ 88,574,000 , net of commission expense, and $ 88,437,000 net of equity issuance costs.

During the three and nine months ended January 28, 2023, the Company sold 96,530 and 221,971 of its shares, respectively, for total gross proceeds of $ 8,710,000 and $ 21,439,000 , respectively, total proceeds received of $ 8,449,000 and $ 20,796,000 , net of commission expense, respectively, and $ 8,325,000 and $ 20,104,000 net of equity issuance costs, respectively.

As of January 27, 2024, the Company has completed the Open Market Sale Agreement SM and sold 1,917,100 of its shares for total gross proceeds of $ 200,000,000 , total proceeds received of $ 193,999,000 , net of commission expense and $ 193,086,000 net of equity issuance costs.

Business Acquisitions

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On September 15, 2023, the Company closed its acquisition of Tomahawk Robotics, Inc., a leader in AI-enabled robotic control systems.

Pursuant to the merger agreement, the Company paid a total purchase price of $ 134,467,000 consisting of 985,999 in restricted common stock of the Company valued at $ 109,820,000 and $ 27,205,000 cash-on-hand, net of $ 3,048,000 cash acquired, plus a $ 490,000 holdback for 100 % of Tomahawk equity.

Pursuant to the merger agreement, the Company acquired 100 % of Tomahawk equity for an aggregate purchase price of $ 134,467,000 consisting of 985,999 shares of restricted common stock of the Company valued at $ 109,820,000 and $ 27,205,000 cash-on-hand, net of $ 3,048,000 cash acquired, plus a $ 490,000 holdback.

During the three months ended January 27, 2024, the holdback was decreased $ 100,000 as part of the working capital adjustment,

and the total purchase price and goodwill, therefore, decreased by $ 100,000 as well.

The fair value of the shares issued was the closing price on September 15, 2023, the close of the Tomahawk purchase agreement.

Tomahawk is incorporated into AeroVironment’s UMS segment.

The acquisition will enable deeper integration of both companies’ technology, leading to enhanced interoperability and interconnectivity of unmanned systems through a singular platform

with similar control features.

The acquisition will enable deeper integration of both companies’ technology, leading to enhanced interoperability and interconnectivity of unmanned systems through a singular platform with similar control features.

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

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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.

The fair value of the intangible 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.

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Tomahawk Supplemental Pro Forma Information (unaudited)

Tomahawk revenue and loss from operations for the three months ended October 28, 2023 since acquisition on September 15, 2023 was $ 3,342,000 and $( 2,045,000 ), respectively.

Tomahawk revenue and loss from operations since acquisition on September 15, 2023 was $ 13,319,000 and $( 1,169,000 ) as of January 27, 2024, respectively.

The following unaudited pro forma summary presents condensed consolidated information of the Company as if the business acquisition had occurred on May 1, 2022 (in thousands):

Three Months Ended

Six Months Ended

Nine Months Ended

Net income (loss) attributable to AeroVironment, Inc.

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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.

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Three Months Ended

Six Months Ended

Nine Months Ended

Net loss attributable to AeroVironment, Inc.

Planck revenue for the three months ended October 29, 2022 since acquisition on August 17, 2022 was $ 68,000 .

Planck revenue since acquisition on August 17, 2022 was $ 76,000 .

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.

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Funded status of the plan

The projected benefit obligation includes assumptions of a discount rate of 2.4 % and pension increase for in-payment benefits of 1.5 % for October 28, 2023 and April 30, 2023.

The projected benefit obligation includes assumptions of a discount rate of 2.4 % and pension increase for in-payment benefits of 1.5 % for January 27, 2024 and April 30, 2023.

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

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The Company does not expect to make any contributions to the plan in the fiscal year ending April 30, 2024.

The Company assumed expected return on plan assets of 2.9 % for October 28, 2023 and April 30, 2023.

Expected benefits payments as of April 30, 2023 (in thousands):

The Company assumed expected return on plan assets of 2.9 % for January 27, 2024 and April 30, 2023.

Expected benefit payments as of April 30, 2023 (in thousands):

Total expected benefit payments

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

(In thousands)

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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, 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 October 28, 2023

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 October 29, 2022

(Loss) income from operations

Acquisition-related expenses

Amortization of acquired intangible assets and other purchase accounting adjustments

Adjusted (loss) income from operations

Six Months Ended October 28, 2023

Income (loss) from operations

Acquisition-related expenses

Segment adjusted income (loss) from operations is the measure of profitability used by the CODM for purposes of making decisions about allocating resources to the segments and assessing performance.

Three Months Ended January 27, 2024

Product sales

Contract services

Segment adjusted income (loss) from operations

Depreciation and amortization

Three Months Ended January 28, 2023

Product sales

Contract services

Segment adjusted income (loss) from operations

Depreciation and amortization

Nine Months Ended January 27, 2024

Product sales

Contract services

Segment adjusted income (loss) from operations

Depreciation and amortization

Nine Months Ended January 28, 2023

Product sales

Contract services

Segment adjusted income from operations

Depreciation and amortization

The following table (in thousands) provides a reconciliation from segment adjusted income from operations to income (loss) before taxes:

Three Months Ended

Nine Months Ended

Segment adjusted income from operations

Amortization of acquired intangible assets and other purchase accounting adjustments

Adjusted income (loss) from operations

Six Months Ended October 29, 2022

(Loss) income from operations

Acquisition-related expenses

Amortization of acquired intangible assets and other purchase accounting adjustments

Adjusted (loss) income from operations

Other income (expense), net

Interest expense, net

Income (loss) before income taxes

Segment assets are summarized in the table below.

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

October 28, 2023

January 27, 2024

Identifiable assets

2 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements