What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-06-27 compared with 2023-06-28 · 244 added, 143 removed, 258 unchanged (60% of the section changed)

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

We supply UAS, TMS, UGV and related services primarily to organizations within the U.S.

DoD and to international allied governments.

We supply uncrewed aircraft and ground robot systems, loitering munitions systems and related services primarily to organizations within or supplying the U.S.

DoD, other federal agencies and to international allied governments.

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

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

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

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

The success of our current product and service offerings stems from our investments in R&D to invent and deliver advanced solutions, utilizing proprietary and commercially available technologies, and in acquiring leading businesses that help our customers achieve their desired outcomes.

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

Our core technological capabilities, developed through more than 50 years of innovation or acquired through acquisitions, include robotics and robotics systems autonomy;

sensor design, development, miniaturization and integration;

modular open systems architecture, sensor design, development, miniaturization and integration;

embedded software and firmware;

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machine vision, machine learning and autonomy;

land, maritime and air deployment of missile and aircraft systems;

land, maritime and air deployment of munitions and aircraft systems;

design and qualification for robotics in extreme terrestrial and space environments;

miniature internal combustion engine propulsion design and integration;

missile systems warhead integration;

munitions systems warhead integration;

low SWaP (Size, Weight and Power) system design and integration;

manned-unmanned teaming and unmanned-unmanned teaming;

collaborative multi-robotic crewed and uncrewed mission operation;

power electronics and electric propulsion systems;

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controls and systems integration;

vertical takeoff and landing flight, fixed wing flight and hybrid aircraft flight;

vertical takeoff and landing for fixed wing and hybrid aircraft and rotocraft systems;

image stabilization and target tracking;

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human-machine interface development;

and integrated mission solutions for austere or extreme environments.

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

We generate our revenue primarily from the sale, support, design and operation of our UAS, TMS, HAPS and UGV.

Support for our SUAS and TMS customers includes training, spare parts, product repair, product replacement, and the customer-contracted operation of our MUAS by our personnel.

Under historical ISR services contracts we have delivered the information our MUAS produce to our customers, who use that information to support their missions, however these services are no longer a primary revenue driver.

modular dismounted, networked multi-domain robotic control interfaces and analytic processing architecture;

and integrated mission solutions for austere environments.

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

We generate our revenue primarily from the sale, support, design and operation of our UxS and LMS and HAPS.

Support for our SUAS, MUAS and LMS customers includes training, spare parts, product repair and product replacement.

Under historical ISR services contracts we have delivered the information our MUAS produce to our customers, who use that information to support their missions;

however, these services are no longer a revenue driver.

We refer to these support activities, in conjunction with customer-funded R&D, as our services operation.

We derive most of our SUAS, MUAS, HAPS, and TMS revenue from fixed-price and cost-plus-fee contracts with the U.S.

government and allied foreign governments.

most of our SUAS, MUAS, LMS and HAPS revenue from fixed-price and cost-plus-fee contracts with the majority from U.S.

government and allied foreign governments for SUAS, MUAS, and LMS.

Cost of Sales

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Subsequent to the performance of our annual goodwill impairment test, in May 2023 a trigger event was identified that indicated that the carrying value of the MUAS reporting unit exceeded its fair value.

Specifically, we received notification that we were not down selected for a US DOD program of record which resulted in a significant decrease in the projected future cash flows of the MUAS reporting unit.

Specifically, we received notification that we were not down selected for a U.S.

DoD program of record which resulted in a significant decrease in the projected future cash flows of the MUAS reporting unit.

As a result, we updated our estimates of long-term future cash flows to reflect lower revenue and EBITDA growth rate expectations used in the valuation of the MUAS reporting unit.

These changes in estimates, resulted in the recognition of a goodwill impairment charge of $156.0 million.

These changes in estimates, resulted in the recognition of a goodwill impairment charge of $156.0 million recorded during the year ended April 30, 2023.

We determined that it was more likely than not that the fair value of the other reporting units were more than their carrying values as of the annual goodwill impairment test date.

Other (Loss) Income, net

Other expense, net includes unrealized losses associated with decreases in the fair market value for equity security investments, the gain on the sale of our equity interest in HAPSMobile, legal accruals related to our former EES Business, interest income, and interest expense.

(Benefit from) Provision for Income Taxes

Our effective tax rates are lower than the statutory rates primarily due to the R&D tax credits, foreign derived intangible income (FDII) deduction, and excess tax benefit of equity awards in relation to income (loss) before income taxes.

Other (loss) income, net includes unrealized losses associated with decreases in the fair market value for equity security investments, the gain on the sale of our equity interest in HAPSMobile, legal accruals related to our former efficient energy systems (“EES”) business, interest income, and interest expense.

Provision for (Benefit from) Income Taxes

Our effective tax rates are lower than the statutory rates primarily due to foreign derived intangible income (“FDII”) deductions, R&D tax credits and excess tax benefits from equity awards.

Equity Method Investment (Loss) Income, Net of Tax

Equity method investment (loss) income, net of tax, includes equity method income or loss related to our investment in limited partnership funds for which we have concluded we have influence for holding more than a minor interest.

Beginning October 14, 2022 equity method investment (loss) income, net of tax also includes our proportion of any gains or losses of our Turkish joint venture, Altoy Savunma Sanayi ve Havacilik Anonim Sirketi (“Altoy”), due to our share sale in which we decreased our ownership interest to 15% but concluded we retain significant influence.

Beginning October 14, 2022, equity method investment (loss) income, net of tax also includes our proportion of any gains or losses of our Turkish joint venture, Altoy Savunma Sanayi ve Havacilik Anonim Sirketi (“Altoy”), due to our share sale in which we decreased our ownership interest to 15% but concluded we retain the ability to exercise significant influence.

As of March 2022, equity method investment (loss) income, net of tax, no longer includes equity method income or loss related the HAPSMobile joint venture we formed in December 2017 with SoftBank as we sold our entire equity interest in HAPSMobile.

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The first of those key factors is that the terms of our contracts are typically less than six months.

The short-term nature of such contracts reduces the risk that material changes in accounting estimates will occur on the basis of market conditions

or other factors.

The second key factor is that we have hundreds of contracts in any given accounting period, which reduces the risk that any one change in an accounting estimate on one or several contracts would have a material impact on our consolidated financial statements.

The short-term nature of such contracts reduces the risk that material changes in accounting estimates will occur on the basis of market conditions or other factors.

The second key factor is that we have hundreds of contracts in any given accounting period, which

reduces the risk that any one change in an accounting estimate on one or several contracts would have a material impact on our consolidated financial statements.

The substantial majority of our revenue is generated pursuant to written contractual arrangements to design, develop, manufacture and/or modify complex products, and to provide related engineering, technical and other services according to customer specifications.

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Our performance obligations are satisfied over time or at a point in time.

Revenue for TMS product deliveries, customization of UGV transport vehicles and customer-funded R&D contracts is recognized over time as costs are incurred.

Revenue for LMS product deliveries, customization of UGV transport vehicles and customer-funded R&D contracts is recognized over time as costs are incurred.

Contract services revenue is composed of revenue recognized on contracts for the provision of services, including repairs and maintenance, training, engineering design, development and prototyping activities, and technical support services.

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For performance obligations which are not satisfied over time per the aforementioned criteria above, revenue is recognized at the point in time in which each performance obligation is fully satisfied.

Our SUAS, MUAS and UGV product sales revenue is composed of revenue recognized on contracts for the delivery of SUAS, MUAS and UGV systems and spare parts, respectively.

Our UxS product sales revenue is primarily composed of revenue recognized on contracts for the delivery of UxS systems and spare parts, respectively.

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

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For the same period, unfavorable cumulative catch up adjustments of $2.0 million were primarily related to higher than expected costs on 11 contracts.

During the year ended April 30, 2023, we revised our 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 $1.9 million.

During the year ended April 30, 2024, we revised our estimates of the total expected costs to complete two LMS contracts.

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 $2.7 million.

For the year ended April 30, 2023, favorable cumulative catch up adjustments of $2.9 million were primarily due to final cost adjustments on 23 contracts, which individually were not material.

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For the year ended April 30, 2022, favorable cumulative catch up adjustments of $1.3 million were primarily due to final cost adjustments on 19 contracts, which individually were not material.

For the same period, unfavorable cumulative catch up adjustments of $2.2 million were primarily related to higher than expected costs on nine contracts.

During the year ended April 30, 2021, we revised our estimates of the total expected costs to complete a TMS variant contract.

For the same period, unfavorable cumulative catch up adjustments of $2.9 million were primarily related to higher than expected costs on 10 contracts.

During the year ended April 30, 2022, we revised our estimates of the total expected costs to complete a LMS contract.

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Due to the closure of all of our MUAS COCO sites during the three months ended April 30, 2023, we revised the estimated useful life for MUAS customer relationships which resulted in accelerated intangible amortization expenses of $34.1 million during the fiscal year ended April 30, 2023.

Additionally, in conjunction with the goodwill

impairment test performed during the year ended April 30, 2023, the remaining intangibles in the MUAS reporting unit were tested for recoverability.

The asset recoverability test did not result in an impairment for the remaining intangibles in the MUAS reporting unit.

Refer to Note 6—Goodwill for further details.

Goodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets.

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Subsequent to the performance of our annual goodwill impairment test, in May 2023, a trigger event was identified that indicated that the carrying value of the MUAS reporting unit exceeded its fair value.

Specifically, we received notification that we were not down selected for a US DoD program of record which resulted in a significant decrease in the projected future cash flows of the MUAS reporting unit.

Specifically, we received notification that we were not down selected for a U.S.

DoD program of record which resulted in a significant decrease in the projected future cash flows of the MUAS reporting unit.

As a result, we updated our estimates of long-term future cash flows to reflect lower revenue and EBITDA growth rate expectations used in the valuation of the MUAS reporting unit.

These changes in estimates, resulted in the recognition of a goodwill impairment charge of $156.0 million in the MUAS reporting unit.

These changes in estimates, resulted in the recognition of a goodwill impairment charge of $156.0 million in the MUAS reporting unit recorded during the fiscal year ended April 30, 2023.

As of April 30, 2024, our MUAS reporting unit has a goodwill balance of $135.8 million.

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

The fair value of the MUAS reporting unit exceeded the carrying value by 10% as of January 28, 2024, the date of the most recent annual goodwill impairment test.

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 us 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 our ability to obtain contracts from the U.S.

DoD 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 our 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 2024, the estimated fair value of all reporting units, other than MUAS, substantially exceeded their carrying value.

The estimates and assumptions used to determine the fair value of our reporting units are highly subjective in nature.

Actual results can be materially different from the estimates and assumptions.

If actual market conditions are less

favorable than those projected by the industry or by us, or if events occur or circumstances change that would reduce the estimated fair value of our indefinite-lived intangible assets below the carrying amounts, we could recognize future impairment charges, the amount of which could be material.

Our income tax provision and related income tax assets and liabilities are based on actual and expected future income, U.S.

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federal, state, local, and foreign tax positions related primarily to tax credits claimed and tax nexus.

For each reporting period, we apply a consistent methodology to measure unrecognized tax benefits and all unrecognized tax benefits are reviewed periodically and adjusted as circumstances

For each reporting period, we apply a consistent methodology to measure unrecognized tax benefits and all unrecognized tax benefits are reviewed periodically and adjusted as circumstances warrant.

Our measurement of our unrecognized tax benefits is based on our assessment of all relevant information, including prior audit experience, the status of audits, conclusions of tax audits, lapsing of applicable statutes of limitations, identification of new issues, and any administrative guidance or developments.

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Impairment of goodwill

(Loss) income from continuing operations

Income (loss) from continuing operations

Interest expense, net

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joint venture

(Loss) income before income taxes

(Benefit from) provision for income taxes

Income (loss) before income taxes

Provision for (benefit from) income taxes

Equity method investment (loss) income, net of tax

Net (loss) income

Net income (loss)

Net income attributable to noncontrolling interest

Net (loss) income attributable to AeroVironment, Inc.

The Company identifies three reportable segments, SUAS, TMS, and MUAS as well as “All other”.

The SUAS segment consists of our existing SUAS product lines.

The TMS segment consists of our existing tactical missile systems product lines.

The MUAS segment consists of the acquired Arcturus business.

“All other” includes HAPS systems, MacCready Works and UGV, the acquired Telerob business.

Net income (loss) attributable to AeroVironment, Inc.

Effective May 1, 2023, the Company reorganized its product lines into the following segments:

Unmanned Systems segment consisting of SUAS, MUAS and UGV product lines;

Loitering Munition Systems segment, the renamed TMS segment;

and the MacCready Works segment, consisting of the HAPS and the MacCready Works businesses.

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

UnCrewed Systems (“UxS”) segment, our renamed Unmanned Systems segment, consisting of SUAS, including our recent Tomahawk acquisition, MUAS and UGV product lines;

Loitering Munition Systems (“LMS”) segment;

and the MacCready Works (“MW”) segment, consisting of the HAPS and the MacCready Works businesses.

The following table (in thousands) sets forth our revenue and adjusted operating income (loss) from operations generated by each reporting segment for the periods indicated.

Adjusted operating income is defined as operating income before impairment of goodwill and accelerated amortization, intangible amortization, amortization of purchase accounting adjustments, and acquisition related expenses.

Year Ended April 30, 2024

Income (loss) from operations

Impairment of goodwill and accelerated amortization

Acquisition-related expenses

Amortization of acquired intangible assets and other purchase accounting adjustments

Adjusted income (loss) from operations

Product sales

Contract services

Segment adjusted income (loss) from operations

Year Ended April 30, 2023

Income (loss) from operations

Acquisition-related expenses

Amortization of acquired intangible assets and other purchase accounting adjustments

Adjusted income (loss) from operations

Product sales

Contract services

Segment adjusted income from operations

Year Ended April 30, 2022

Income (loss) from continuing operations

Acquisition-related expenses

Amortization of acquired intangible assets and other purchase accounting adjustments

Adjusted income (loss) from operations

The Company recorded intangible amortization expense and other purchase accounting adjustments in the following categories on the accompanying consolidated statements of (loss) income:

Product sales

Contract services

Segment adjusted income (loss) from operations

The Company recorded intangible amortization expense and other purchase accounting adjustments in the following categories on the accompanying consolidated statements of income (loss):

Year Ended April 30,

Cost of sales:

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The increase in revenue was due to an increase in product revenue of $232.7 million, partially offset by a decrease in service revenue of $56.5 million.

The increase in product revenue was due to increases in SUAS, TMS, MUAS and All other product revenue, primarily driven by increases in UGV product revenue.

The decrease in service revenue was primarily due to a decrease in MUAS service revenue, partially offset by an increase in All other customer-funded R&D, TMS and SUAS service revenue.

We expect the lower levels of MUAS service revenues to continue into fiscal 2024 due to the closure of all of our MUAS COCO operations site locations.

Due to the higher backlog, the increase in the small UAS product revenues as compared to the prior year is expected to continue through the at least first half of the fiscal year ending April 30, 2024.

The increase in product revenue was primarily due to an increase of $147.1 million of product deliveries of our UxS products, including $10.6 million associated with the recent Tomahawk acquisition, and an increase of $84.2 million from the production of our Switchblade products.

These increases were primarily driven by increased global demand for our uncrewed systems and loitering munitions systems associated with the current global conflicts as well as U.S.

DoD resupply.

The decrease in service revenue was primarily due to a decrease of $49.7 million due to the closure of all COCO site locations during fiscal year 2023 and a decrease of $11.1 million in other engineering services and customer-funded R&D activities primarily associated with the shift from development to production of certain LMS products, partially offset by $5.3 million associated with the recent Tomahawk acquisition.

We expect the increases in LMS product sales to continue into the fiscal year ending April 30, 2025.

Cost of Sales.

Cost of sales for the fiscal year ended April 30, 2024 was $432.8 million, as compared to $367.0 million for the fiscal year ended April 30, 2023, representing an increase of $65.8 million, or 18%.

The increase in cost of sales was a result of an increase in product cost of sales of $62.8 million and an increase in service costs of sales of $0.3 million.

The increase in product cost of sales was primarily due to the increase in product revenues.

The increase in service costs of sales was primarily due to accelerated depreciation charges of certain deployed fixed assets related to the closure of all of our MUAS site locations of $11.5 million, largely offset by a decrease in service revenue and a decrease in intangible amortization expense and other purchase accounting adjustments.

The increase in cost of sales was a result of an increase in product cost of sales of $136.8 million, partially offset by a decrease in service costs of sales of $71.0 million.

The increase of $136.8 million in product cost of sales was primarily due to approximately $126 million associated with the increase in product sales volume, an increase in inventory reserve charges of $5.8 million primarily related to the introduction of our next generation products and an increase of $4.1 million in intangible amortization expense primarily resulting from the Tomahawk acquisition.

The decrease of $71.0 million in service costs of sales was primarily due to approximately $47 million associated with the decreased service volume, of which $44.4 million is due to the closure of all COCO site locations in the prior year, mix shift of approximately $20 million due to the continuation of services with higher margins than the ceased COCO services, and a decrease of $4.6 million in intangible amortization expense due to intangible assets being fully amortized.

Cost of sales for the fiscal year ended April 30, 2024 included $13.5 million of intangible amortization and other related non-cash purchase accounting expenses as compared to $14.0 million for the fiscal year ended April 30, 2023.

As a percentage of revenue, cost of sales remained consistent at 68%, with an increase in the proportion of product revenue to total revenues offset by the MUAS accelerated depreciation charges.

As a percentage of revenue, cost of sales decreased from 68% to 60%, primarily due to an increase in the proportion of product revenue to total revenue and the prior year COCO accelerated depreciation and amortization expenses resulting in an increase in gross margin from 32% to 40%.

Gross Margin.

Gross margin for the fiscal year ended April 30, 2023 was $173.5 million, as compared to $141.2 million for the fiscal year ended April 30, 2022, representing an increase of $32.3 million, or 23%.

The increase in gross margin was due to an increase in product margin of $49.6 million, partially offset by a decrease in service margin of $17.3 million.

The increase in product margin was primarily due to the increase in product revenue.

The decrease in service margin was primarily due to the decrease in service revenue and accelerated depreciation charges of certain deployed fixed assets related to the closure of all of our MUAS site locations of $11.5 million, partially offset by a decrease in intangible amortization expense and other purchase accounting adjustments.

As a percentage of revenue, gross margin remained consistent at 32%, primarily due to an increase in the proportion of product revenue to total revenues offset by the MUAS accelerated depreciation charges.

Gross margin is equal to revenue minus cost of sales.

Selling, General and Administrative.

SG&A expense for the fiscal year ended April 30, 2023 was $131.9 million, or 24% of revenue, as compared to SG&A expense of $96.4 million, or 22% of revenue, for the fiscal year ended April 30, 2022.

The increase in SG&A expense was primarily due to accelerated amortization charges of certain intangibles related to the MUAS segment of $34.1 million and an increase in employee related expenses, partially offset by a decrease in acquisition-related expenses.

SG&A included $50.9 million, inclusive of $34.1 million of MUAS accelerated intangible asset amortization expenses, and $22.9 million of intangible amortization expenses and acquisition-related expenses for the fiscal year ended April 30, 2023 and 2022, respectively.

SG&A expense for the fiscal year ended April 30, 2024 was $114.4 million, or 16% of revenue, as compared to SG&A expense of $131.9 million, or 24% of revenue, for the fiscal year

ended April 30, 2023.

The decrease in SG&A expense was primarily due to a decrease of $44.6 million in intangible amortization and other non-cash purchase accounting expenses.

The decrease in intangible amortization expense was primarily driven by a decrease in COCO customer relationship amortization of $46.5 million due to the accelerated amortization of COCO customer relationships recorded during the three months ended April 30, 2023, partially offset by an increase of $1.7 million resulting from the Tomahawk acquisition.

The decrease in SG&A expense was partially offset by an increase in employee related expenses of $15.7 million driven by an increase in average headcount and expansion of our global business development team, an increase in sales and marketing expense of $6.4 million primarily due to an increase in bid and proposal efforts and an increase in depreciation expense of $1.4 million driven by increased capital requirements to support our growth.

Research and Development.

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Impairment of Goodwill.

In May 2023 a trigger event was identified that indicated that the carrying value of the MUAS reporting unit exceeded its fair value.

As a result, we updated our estimates of long-term future cash flows to reflect lower revenue and EBITDA growth rate expectations used in the valuation of the MUAS reporting unit.

These changes in estimates, resulted in the recognition of a goodwill impairment charge of $156.0 million in the MUAS reporting unit

During the fiscal year ended April 30, 2023, we recorded a goodwill impairment charge of $156.0 million in the MUAS reporting unit due to a trigger event identified once we received notification that we were not down selected for a U.S.

DoD program of record which resulted in a significant decrease in the projected future cash flows of the MUAS reporting unit.

Interest Expense, net.

Interest expense, net for the fiscal year ended April 30, 2024 was $4.2 million, as compared to interest expense net of $9.4 million for the fiscal year ended April 30, 2023.

The increase in interest expense, net was primarily due to an increase in interest expense resulting from higher interest rates on our debt facility, partially offset by lower average outstanding balances.

The decrease in interest expense, net was primarily due to an increase of $2.7 million in interest income due to an increase in the average interest rate earned on our cash balances and a decrease in interest expense of $2.5 million due to lower average outstanding balances on our debt facility, partially offset by higher interest rates applicable to our debt facility.

Other Expense, net.

Other expense, net for the fiscal year ended April 30, 2024 was $4.4 million, as compared to other expense, net of $0.3 million for the fiscal year ended April 30, 2023.

Other expense, net for the fiscal year ended April 30, 2023 included unrealized losses associated with decreases in the fair market value for equity security investments.

Other expense, net for the fiscal year ended April 30, 2022 included $10.0 million of expense related to the Webasto legal settlement.

Sale of ownership in HAPSMobile Inc.

joint venture.

Sale of ownership in HAPSMobile Inc.

joint venture for the fiscal year ended April 30, 2022 was $6.5 million gain related to the sale of our equity interest in HAPSMobile.

The increase in other expense, net is primarily due to unrealized losses associated with decreases in fair market value for equity security investments of $3.9 million.

Income Taxes.

Our effective income tax rate was 3.0% for the fiscal year ended April 30, 2024, as compared to 7.8% for the fiscal year ended April 30, 2023.

The decrease in our effective tax rate was primarily due to the loss before income taxes, non-deductible goodwill impairment expense, and foreign-derived intangible income deduction, partially offset by R&D tax credits.

Equity method investment (loss) income, net of tax.

Equity method investment loss, net of tax for the fiscal year ended April 30, 2023 was $(2.5) million, as compared to equity method investment income, net of $4.6 million for the fiscal year ended April 30, 2022.

In March 2022, the Company sold its 7% equity interest in HAPSMobile to SoftBank.

Subsequent to the equity interest sale in HAPSMobile during the three months ended April 30, 2022, equity method investment loss, net of tax relates to activity of the investments in limited partnership funds.

The decrease in our effective tax rate was primarily due to the prior year’s loss before income taxes, an increase in the foreign-derived intangible income deduction and an increase in R&D tax credits, partially offset by the prior year non-deductible goodwill impairment expense.

Equity method investment loss, net of tax.

Equity method investment loss, net of tax for the fiscal year ended April 30, 2024 was $1.7 million, as compared to $2.5 million for the fiscal year ended April 30, 2023.

Business Segment Results of Operations

UnCrewed Systems

Product sales

Contract services

Segment adjusted income from operations

UxS revenue for the fiscal year ended April 30, 2024 was $448.0 million, as compared to $343.9 million for the fiscal year ended April 30, 2023, representing an increase of $104.1 million, or 30%.

The increase in revenue was due to an increase in product revenue of $147.1 million, partially offset by a decrease in service revenue of $43.0 million.

The increase in product revenue was primarily due to $136.1 million from increased product shipments of our SUAS family of systems and Jump 20 product systems driven by increased global demand for our uncrewed systems associated with the current global conflicts as well as U.S.

DoD resupply and $10.6 million associated with the recent Tomahawk acquisition.

The decrease in service revenue was primarily due to decreases of $49.7 million from the closure of all COCO site locations during fiscal year 2023, partially offset by an increase of $5.3 million associated with the recent Tomahawk acquisition.

UxS Segment Adjusted Income from Operations.

UxS segment adjusted income from operations for the fiscal year ended April 30, 2024 was $93.1 million, as compared to $30.6 million for the fiscal year ended April 30, 2023, representing an increase of $62.5 million.

The increase in UxS segment adjusted income from operations was primarily due to an increase of $104.1 million in revenue, partially offset by an increase of $18.3 million in cost of sales excluding intangible amortization.

The increase of $18.3 million in costs of sales excluding intangible amortization is primarily due to an increase of approximately $65 million associated with the increased sales volume and $6.0 million from an increase in inventory reserve charges primarily related to the introduction of our next generation products, partially offset by shift in mix of approximately $53 million due to a higher proportion of international products sales and lower levels of COCO service revenue.

The increase in revenue was also partially offset by an increase in SG&A excluding intangible amortization of $14.6 million, driven by an increase in sales and marketing expense and employee related expenses of $3.4 million and $2.8 million, respectively.

The sales and marketing and employee related expenses were associated with the increase in average headcount to support our growth and expansion of our global business development team, and an increase in R&D of $8.7 million due to development activities regarding enhanced capabilities for our products.

Loitering Munitions Systems

Product sales

Contract services

Segment adjusted income from operations

LMS revenue for the fiscal year ended April 30, 2024 was $192.6 million, as compared to $120.6 million for the fiscal year ended April 30, 2023, representing an increase of $72.0 million, or 60%.

The increase in revenue was due to an increase in product revenue of $84.2 million, partially offset by a decrease in service revenue of $12.2 million.

The increase in product revenue was primarily due to increased production of our LMS systems due to global demand for our LMS systems associated with the current global conflicts as well as U.S.

DoD resupply.

The decrease in service revenue was primarily due to a decrease of $11.9 million in customer-funded R&D activities primarily associated with the shift from development to production of certain Switchblade products.

LMS Segment Adjusted Income from Operations.

LMS segment adjusted income from operations for the fiscal year ended April 30, 2024 was $24.1 million, as compared to $8.1 million for the fiscal year ended April 30, 2023, representing an increase of $16.0 million.

The increase in LMS segment adjusted income from operations was primarily due to an increase of $72.0 million in revenue;

partially offset by an increase of $46.5 million in cost of sales excluding amortization of intangibles, of which approximately $46 million is associated with the increased sales volume.

The increase in revenue was also partially offset by an increase in SG&A excluding amortization of intangibles of $6.9 million, driven by an increase in sales and marketing expense and employee related expenses of $2.5 million and $2.3 million, respectively, associated with the increase in average headcount to support our growth and expansion of our global business development team.

The increase in revenue was also partially offset by an increase in R&D of $2.6 million due to development activities regarding enhanced capabilities for our products.

MacCready Works

Product sales

Contract services

Segment adjusted (loss) income from operations

MW revenue for the fiscal year ended April 30, 2024 was $76.1 million, as compared to $76.0 million for the fiscal year ended April 30, 2023, representing an increase of $0.1 million.

The increase in revenue was primarily due to an increase of $1.5 million in product sales, partially offset by a decrease of $1.4 million in service revenue.

The increase in product sales is primarily due to the shift from development to early-stage production of certain products.

The decrease in service revenue is primarily due to a decrease in engineering services and customer-funded R&D due to delays in anticipated contract awards associated with the government budget authorization process.

MW Segment Adjusted (Loss) Income from Operations.

MW segment adjusted loss from operations for the fiscal year ended April 30, 2024 was $24.7 million, as compared to MW segment adjusted income from operations of $3.7 million for the fiscal year ended April 30, 2023, representing an increased loss of $28.4 million.

The increase in MW adjusted loss from operations was primarily due to an increase in R&D of $22.2 million due to increased investments largely related to HAPS development efforts to support the decrease in customer-funded R&D programs in part due to delays in the establishment of the government fiscal year 2024 budget, an increase in SG&A excluding amortization of intangibles of $4.8 million driven by increased employee related expenses of $2.4 million associated with the increase in average headcount to support our growth and expansion and an increase of $1.5 million in cost of sales excluding amortization of intangibles driven by increased sales mix of approximately $1 million due to the shift from development to early-stage production of certain products.

Fiscal Year Ended April 30, 2023 Compared to Fiscal Year Ended April 30, 2022

Revenue for the fiscal year ended April 30, 2023 was $540.5 million, as compared to $445.7 million for the fiscal year ended April 30, 2022, representing an increase of $94.8 million, or 21%.

The increase in revenue was due to an increase in service revenue of $89.0 million, partially offset by a decrease in product revenue of $38.2 million.

The increase in service revenue was primarily due to an increase in MUAS service revenue, resulting from our acquisition of Arcturus in February 2021, and an increase in customer-funded R&D largely resulting from our acquisition of ISG.

The decrease in product revenue was primarily due to decreases in SUAS and TMS product revenue, partially offset by increases in UGV and MUAS product revenue, resulting from our acquisitions of Telerob and Arcturus.

The increase in revenue was due to an increase in product revenue of $112.4 million, partially offset by a decrease in service revenue of $17.6 million.

The increase in product revenue was due to an increase of $73.5 million of product deliveries of our UxS

products and an increase of $38.5 million from the production of our Switchblade products.

These increases were primarily driven by increased global demand for our uncrewed systems and loitering munitions associated with the current global conflicts.

The decrease in service revenue was primarily due to a decrease of $38.3 million due to the closure of all COCO site locations during fiscal year 2023, partially offset by an increase of $17.0 million in customer-funded R&D and engineering services primarily due to an increase in development activities related to the creation of new capabilities for customers and an increase in training and repair services of $3.7 million associated with the increased sales volume.

We expect the lower levels of MUAS service revenues to continue into fiscal 2024 due to the closure of all of our MUAS COCO operations site locations.

Due to the higher backlog, the increase in the UxS product revenues as compared to the prior year is expected to continue through the at least first half of the fiscal year ending April 30, 2024.

Cost of Sales.

Cost of sales for the fiscal year ended April 30, 2023 was $367.0 million, as compared to $304.5 million for the fiscal year ended April 30, 2022, representing an increase of $62.5 million, or 21%.

The increase in cost of sales was a result of an increase in service cost of sales of $83.3 million, partially offset by a decrease in product costs of sales of $9.1 million.

The increase in service cost of sales was primarily due to the increase in service revenues resulting from the acquisitions of Arcturus and ISG, and an increase in intangible amortization expense and other purchase accounting adjustments.

The decrease in product costs of sales was primarily due to the decrease in product

revenue, unfavorable product mix and an increase in intangible amortization expense and other purchase accounting adjustments.

The increase in cost of sales was a result of an increase in product cost of sales of $62.8 million, partially offset by a decrease in service costs of sales of $0.3 million.

The increase in product cost of sales was primarily due to an increase of approximately $61 million associated with the increase in product revenue and an increase of $5.9 million in inventory reserve charges primarily related to the introduction of our next generation products, partially offset by a decrease of $4.2 million in intangible amortization primarily due to intangible assets and other purchase accounting adjustments being fully amortized.

The decrease of $0.3 million in service costs of sales was primarily related to approximately $13 million associated with the decreased service volume, driven by the closure of all COCO site locations, largely offset by accelerated depreciation charges of certain deployed fixed assets related to the closure of all of our MUAS site locations of $11.5 million.

Cost of sales for the fiscal year ended April 30, 2023 included $14.0 million of intangible amortization and other related non-cash purchase accounting expenses as compared to $18.6 million for the fiscal year ended April 30, 2022.

As a percentage of revenue, cost of sales increased from 58% to 68%, primarily due to an increase in the proportion of service revenue to total revenues resulting from the acquisitions of Arcturus and ISG, an increase in intangible amortization expense and other purchase accounting adjustments, and an unfavorable product mix.

As a percentage of revenue, cost of sales remained consistent at 68%, with an increase in the proportion of product revenue to total revenues offset by the MUAS accelerated depreciation charges resulting in gross margin remaining consistent at 32%.

Gross Margin.

Gross margin for the fiscal year ended April 30, 2022 was $141.2 million, as compared to $164.6 million for the fiscal year ended April 30, 2021, representing a decrease of $23.3 million, or 14%.

The decrease in gross margin was due to a decrease in product margin of $29.1 million, partially offset by an increase in service margin of $5.8 million.

The decrease in product margin was primarily due to the decrease in product revenue, unfavorable product mix and an increase in intangible amortization expense and other purchase accounting adjustments.

The increase in service margin was primarily due to the increase in service revenue, partially offset by an increase in intangible amortization expense and other purchase accounting adjustments.

As a percentage of revenue, gross margin decreased from 42% to 32%, primarily due to an increase in the proportion of service revenue to total revenues resulting from the acquisitions of Arcturus and ISG, an increase in intangible amortization expense and other purchase accounting adjustments, and an unfavorable product mix.

With the acquisitions of Arcturus and ISG we expect that we will continue to experience a higher proportion of service revenue, which generally has lower gross margins than our product revenue, in future quarters as compared to our historical trends.

Additionally, we expect inflationary and supply chain constraint trends to continue throughout our fiscal year 2023, which will negatively impact our gross margin.

Gross margin is equal to revenue minus cost of sales.

Selling, General and Administrative.

SG&A expense for the fiscal year ended April 30, 2023 was $131.9 million, or 24% of revenue, as compared to SG&A expense of $96.4 million, or 22% of revenue, for the fiscal year ended April 30, 2022.

The increase in SG&A expense was primarily due to an increase in headcount and related costs associated with our Arcturus, ISG and Telerob acquisitions and an increase in intangible amortization and acquisition related expenses.

SG&A included $22.9 million and $11.0 million of intangible amortization expenses and acquisition-related expenses for the fiscal year ended April 30, 2022 and April 30, 2021, respectively.

The increase in SG&A expense was primarily due to the $31.4 million of accelerated amortization of COCO customer relationships recorded during the three months ended April 30, 2023 and an increase in employee related expenses of $3.9 million driven by the acquisitions of acquisitions of Arcturus, ISG and Telerob, partially offset by a decrease of $3.5 million in acquisition-related expenses for those acquisitions incurred during fiscal year ended April 30, 2022.

Research and Development.

R&D expense for the fiscal year ended April 30, 2023 was $64.3 million, or 12% of revenue, as compared to R&D expense of $54.7 million, or 12% of revenue, for the fiscal year ended April 30, 2022.

R&D expense increased by $0.9 million, or 2%, for the fiscal year ended April 30, 2022, primarily due to an increase in development activities regarding enhanced capabilities for our products, development of new product lines and to support our recently acquired businesses.

R&D expense increased by $9.6 million, or 17%, for the fiscal year ended April 30, 2023, primarily due to an increase in development activities regarding enhanced capabilities for our products, development of new product lines and to support our acquired businesses.

Impairment of Goodwill.

In May 2023, a trigger event was identified that indicated that the carrying value of the MUAS reporting unit exceeded its fair value.

Specifically, we received notification that we were not down selected for a U.S.

DoD program of record which resulted in a significant decrease in the projected future cash flows of the MUAS reporting unit.

As a result, we updated our estimates of long-term future cash flows to reflect lower revenue and EBITDA growth rate expectations used in the valuation of the MUAS reporting unit.

These changes in estimates, resulted in the recognition of a goodwill impairment charge of $156.0 million in the MUAS reporting unit.

Interest Expense, net.

Interest expense, net for the fiscal year ended April 30, 2023 was $9.4 million, as compared to interest expense net of $5.4 million for the fiscal year ended April 30, 2022.

The increase in interest expense was primarily due to an increase in interest expense resulting from the term debt issued concurrent with the acquisition of Arcturus.

The increase in interest

expense, net was primarily due to an increase of $4.8 million in interest expense resulting from higher interest rates on our debt facility, partially offset by lower average outstanding balances.

Other Expense, net.

Other expense, net for the fiscal year ended April 30, 2023 was $0.3 million, as compared to other expense, net of $10.3 million for the fiscal year ended April 30, 2022.

Other expense, net for the fiscal year ended April 30, 2023 included unrealized losses associated with decreases in the fair market value for equity security investments.

Other expense, net for the fiscal year ended April 30, 2022 included $10.0 million of expense related to the Webasto legal settlement.

Other expense, net for the fiscal year ended April 30, 2021 included $9.3 million of expense related to the Webasto legal accrual.

Sale of ownership in HAPSMobile Inc.

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Our effective income tax rate was 7.8% for the fiscal year ended April 30, 2023, as compared to 54.2% for the fiscal year ended April 30, 2022.

The increase in our effective tax rate was primarily due to the decrease in income before income taxes and an increase in certain federal income tax credits.

Equity method investment income (loss), net of tax.

Equity method investment income, net of tax for the fiscal year ended April 30, 2022 was $4.6 million, as compared to equity method investment loss, net of $(10.5) million for the fiscal year ended April 30, 2021.

The increase in equity method investment income, net of tax was primarily due to our

proportionate share of the income from our limited partnership investment fund for the fiscal year ended April 30, 2022 and a loss of $8.4 million for our proportionate share of the HAPSMobile joint venture’s impairment of its investment in Loon LLC in the fiscal year ended April 30, 2021.

With the sale of our equity interest in HAPSMobile during the fiscal year ended April 30, 2022, no future joint venture equity income or losses for HAPSMobile will be recorded.

Equity method investment (loss) income, net of tax.

In March 2022, the Company sold its 7% equity interest in HAPSMobile to SoftBank.

Business Segment Results of Operations

UnCrewed Systems

Product sales

Contract services

Segment adjusted income from operations

UxS revenue for the fiscal year ended April 30, 2023 was $343.9 million, as compared to $300.7 million for the fiscal year ended April 30, 2023, representing an increase of $43.2 million, or 14%.

The increase in revenue was due to an increase in product revenue of $73.5 million, partially offset by a decrease in service revenue of $30.3 million.

The increase in product revenue was primarily due to increased product shipments of our SUAS, UGV and Jump 20 family of systems driven by increased global demand for our uncrewed systems associated with the current global conflicts as well as U.S.

DoD resupply.

The decrease in service revenue was primarily due to decreases of $38.3 million from the closure of all COCO site locations during fiscal year 2023, partially offset by an increase in customer-funded R&D and engineering services of $4.5 million primarily due to expanded services provided by MUAS and an increase in training and repair services of $3.4 million associated with the increased sales volume.

UxS Segment adjusted income from operations.

UxS segment adjusted income from operations for the fiscal year ended April 30, 2023 was $30.6 million, as compared to $28.7 million for the fiscal year ended April 30, 2022, representing an increase of $1.9 million.

The increase in UxS segment adjusted income from operations was primarily due to an increase of $43.2 million in revenue, partially offset by an increase of $33.4 million in cost of sales excluding intangible amortization.

The increase in cost of sales excluding intangible amortization was primarily related to approximately $27 million associated with the increased sales volume, accelerated depreciation charges of $11.5 million for certain deployed fixed assets related to the closure of all of our MUAS site locations, and an increase in inventory reserve charges of $3.8 million primarily related to the introduction of our next generation products, partially offset by a shift in

mix of approximately $9 million due to a higher proportion of international products sales and lower levels of COCO service revenue.

The increase in revenue was also partially offset by an in increase in R&D of $7.9 million due to development activities regarding enhanced capabilities for our products.

Loitering Munitions Systems

Product sales

Contract services

Segment adjusted income (loss) from operations

LMS revenue for the fiscal year ended April 30, 2023 was $120.6 million, as compared to $76.4 million for the fiscal year ended April 30, 2022, representing an increase of $44.2 million, or 58%.

The increase in revenue was due to an increase in product revenue of $38.5 million and an increase in service revenue of $5.7 million.

The increase in product revenue was primarily due to increased production of our LMS systems primarily due to increased global demand for our LMS systems associated with the current global conflicts as well as U.S.

DoD resupply.

The increase in service revenue was primarily due to an increase of $5.4 million in engineering services and customer-funded R&D activities primarily associated with development activities regarding enhanced capabilities for our customers.

LMS Segment adjusted income (loss) from operations.

LMS segment adjusted income from operations for the fiscal year ended April 30, 2023 was $8.1 million, as compared to LMS segment adjusted loss from operations of ($2.8) million for the fiscal year ended April 30, 2022, representing an increase of $10.9 million.

The increase in LMS segment adjusted income from operations was primarily due to an increase of $44.2 million in revenue, partially offset by an increase of $26.0 million in cost of sales excluding intangible amortization was primarily related to approximately $30 million associated with the increased sales volume, partially offset by sales mix of approximately $4 million due to new contract awards with higher estimated margins.

The increase in revenue was also partially offset by an increase in SG&A excluding intangible amortization of $4.4 million driven by increased sales and marketing activity in support of additional bid and proposal efforts, and an increase in R&D of $2.9 million due to increased development activities regarding enhanced capabilities for our products.

MacCready Works

Product sales

Contract services

Segment adjusted income from operations

MW revenue for the fiscal year ended April 30, 2023 was $76.0 million, as compared to $68.6 million for the fiscal year ended April 30, 2022, representing an increase of $7.4 million, or 11%.

The increase in revenue was primarily due to an increase of $7.1 million in service revenue.

The increase in service revenue is primarily due to an increase in engineering services and customer-funded R&D efforts of $7.1 million due to an increase in development activities related to the creation of new capabilities for customers.

MW Segment adjusted income from operations.

MW segment adjusted income from operations for the fiscal year ended April 30, 2023 was $3.7 million, as compared to $5.8 million for the fiscal year ended April 30, 2022, representing a decrease of $2.1 million.

The decrease in MW adjusted income from operations was primarily due to an increase of $7.9 million in cost of sales primarily due to approximately $5 million associated with the increased service volume and sales mix of approximately $3 million due to higher margins on newer service contracts.

The decrease in MW segment adjusted income from operations was also driven by an increase in SG&A excluding amortization of $2.8 million driven by $3.8 million in increased employee related expenses and sales and marketing activity driven by the ISG acquisition, partially offset by an increase of $7.4 million in revenue and a decrease in R&D of $1.2 million due to a decrease in internally developed capabilities for our products.

Liquidity and Capital Resources

On September 8, 2022, we filed an S-3 shelf registration statement to offer and sell shares of our 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 $200.0 million from time to time through Jefferies LLC as our sales agent.

As of April 30, 2023, we have sold 1,109,730 of our shares for total gross proceeds of $108.7 million and $105.4 million proceeds received, net of commission expense and $104.6 million net of equity issuance costs.

We have $91.3 million aggregate offering price remaining available under the registration.

As of October 28, 2023, we completed the Open Market Sale Agreement SM and sold 1,917,100 of our shares for total gross proceeds of $200.0 million and $194.0 million proceeds received, net of commission expense and $193.1 million proceeds received, net of equity issuance costs.

During the fiscal year ended April 30, 2024, we sold 807,370 shares for total gross proceeds of $91.3 million, total proceeds received of $88.6 million, net of commission expense and $88.4 million net of equity issuance costs.

On February 19, 2021 in connection with the consummation of the Arcturus acquisition, we entered into a credit agreement (as amended February 4, 2022 and June 6, 2023, the “Credit Agreement”) for (i) a five-year $100 million revolving credit facility, which includes a $25 million sublimit for the issuance of standby and commercial letters of credit (the “Revolving Facility”), and (ii) a five-year amortized $200 million term A loan (the “Term Loan Facility,” and together with the Revolving Credit Facility, the “Credit Facilities”).

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In addition, Telerob has a line of credit of €5.5 million (approximately $5.9 million) available for issuing letters of credit of which €0.1 million (approximately $0.1 million) was outstanding as of April 30, 2024.

We anticipate funding our normal recurring trade payables, accrued expenses, ongoing R&D costs and obligations under the Credit Facilities through our existing working capital and funds provided by operating activities including those provided by our acquisitions of Arcturus, ISG, Telerob and Planck.

The majority of our purchase obligations are pursuant to funded contractual arrangements with our customers.

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If we are unable to generate sufficient cash flow from operations, then we may be required to sell assets, reduce capital expenditures or draw on our Credit Facilities.

We anticipate that existing sources of liquidity, Credit Facilities, and cash flows from operations will be sufficient to satisfy our cash needs for the foreseeable future.

anticipate that existing sources of liquidity, Credit Facilities, and cash flows from operations will be sufficient to satisfy our cash needs for the foreseeable future.

Our primary liquidity needs are for financing working capital, investing in capital expenditures, supporting product development efforts, support our credit facility, introducing new products and enhancing existing products, marketing acceptance and adoption of our products and services.

Our future capital requirements, to a certain extent, are also subject to general conditions in or affecting the defense industry and are subject to general economic, political, financial, competitive, legislative and regulatory factors that are beyond our control.

Moreover, to the extent that existing cash, cash equivalents, cash from operations, and cash from our Credit Facilities and ATM shelf registration are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing, subject to the limitations specified in our Credit Agreement.

Moreover, to the extent that existing cash, cash equivalents, cash from operations, and cash from our Credit Facilities are insufficient to fund our future activities, we may need to raise additional funds through public or private equity or debt financing, subject to the limitations specified in our Credit Agreement.

In addition, we may also need to seek additional equity funding or debt financing if we become a party to any agreement or letter of intent for potential investments in, or acquisitions of, businesses, services or technologies.

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Under the terms of the new limited partnership agreement, we have committed to make capital contributions to such fund totaling $20.0 million, inclusive of the expected reinvestment of distributions from our existing limited partnership fund, of which $11.1 million was remaining at April 30, 2024.

The remaining contributions are anticipated to be paid over the next four fiscal years.

During the fiscal year ended April 30, 2022, the Telerob Seller earned the second year earnout of €2,000,000 (approximately $2,203,000) which we expect to pay during the first half of our fiscal year ending April 30, 2024.

The remaining contributions are anticipated to be paid over the next three fiscal years.

During the fiscal year ended April 30, 2022, the Telerob Seller earned the second year earnout of €2.0 million (approximately $2.1 million) was paid in November 2023.

The Tomahawk acquisition closed on September 15, 2023, and we paid a total purchase price of $134.4 million consisting of $109.8 million in stock and $24.2 million from cash on hand, net of cash acquired.

Due to the new internal revenue service tax capitalization rules, Section 174, which requires R&D expenditures to be capitalized and amortized over a 5-year period for tax return purposes, we experienced an increase in cash paid for U.S.

federal income taxes during the fiscal year ended April 30, 2024 and expect higher levels of cash taxes in in future fiscal years relative to historical periods.

On May 31, 2024, we prepaid $8.0 million of the Term Loan principle.

The following table provides our cash flow data from continuing operations for the periods ended:

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Net cash used in investing activities

Net cash provided by (used in) financing activities

Net cash (used in) provided by financing activities

Cash Provided by (Used in) Operating Activities.

Net cash provided by operating activities for the fiscal year ended April 30, 2024 increased by $3.9 million to $15.3 million, as compared to $11.4 million for the fiscal year ended April 30, 2023.

This increase in net cash provided by operating activities was primarily due an increase in net income of $235.8 million, partially offset by a decrease in non-cash expenses of $209.3 million, primarily due to a goodwill impairment of $156.0 million in the fiscal year ended April 30, 2023 and a decrease in depreciation and amortization, largely due to $34.1 million of accelerated MUAS intangible amortization expenses in the prior year end, partially offset by an increase in stock-based compensation and an in increase in inventory reserve charges primarily related to the introduction of our next generation products and an increase in the cash used as a result of changes in operating assets and liabilities largely resulting from increases in unbilled receivables and retentions and prepaid expenses and other assets, partially offset by decreases in accounts receivables and inventory due to year over year timing differences.

Net cash provided by operating activities for the fiscal year ended April 30, 2023 increased by $21.0 million to $11.4 million, compared to net cash used in operating activities of $9.6 million for the fiscal year ended April 30, 2022.

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The increase in non-cash expenses was partially offset by an increase in net loss of $172.0 million and an increase in the cash used as a result of changes in operating assets and liabilities largely resulting from increases in accounts receivable and inventory primarily due to year over year timing differences, partially offset by decreases in unbilled receivables and retentions and increases in accounts payable due to year over year timing differences.

Net cash used in operating activities for the fiscal year ended April 30, 2022 increased by $96.2 million to $9.6 million, compared to net cash provided by operating activities of $86.5 million for the fiscal year ended April 30, 2021.

This increase in net cash used in operating activities was primarily due to an increase in the cash used as a result of changes in operating assets and liabilities of $98.5 million largely resulting from increases in accounts receivable and unbilled retentions and receivables due to year over year timing differences, increases in inventory primarily due to year over year timing differences in purchases to support anticipated product deliveries, and increases in accounts payable due to year over year timing differences, and an increase in net loss of $27.5 million, partially offset by an increase in non-cash expenses of $29.9 million primarily due to an increase in depreciation and amortization, partially offset by gains from equity method investments.

Cash Used in Investing Activities.

Net cash used in investing activities decreased by $45.3 million to $7.0 million for the fiscal year ended April 30, 2023, compared to net cash used in investing activities of $52.3 million for the fiscal year ended April 30, 2022.

The decrease in net cash used in investing activities was primarily due to a decrease in business acquisitions, net of cash acquired of $41.0 million, a decrease in net purchases of available-for-sale investments of $12.8 million and a decrease in the acquisition of property and equipment of $7.4 million, partially offset by an increase in equity security investments of $5.1 million, and a decrease in the proceeds from the sale of ownership in equity method investment and from loan repayment of $6.5 million and $4.3 million, respectively.

Net cash used in investing activities increased by $44.7 million to $51.7 million for the fiscal year ended April 30, 2024, compared to $7.0 million for the fiscal year ended April 30, 2023.

The increase in net cash used in investing activities was primarily due to a decrease in net redemptions of available-for-sale investments of $24.7 million, an increase in business acquisitions, net of cash acquired of $19.1 million, and an increase in the acquisition of property and equipment of $8.1 million, partially offset by a decrease in equity security investments of $5.1 million.

During the fiscal years ended April 30, 2024 and 2023, we used cash to purchase property and equipment totaling $23.0 million and $14.9 million, respectively.

The decrease in net cash used in investing activities was primarily due to the acquisitions of Arcturus and ISG, net of cash for $385.6 million in fiscal year ended April 30, 2021, partially offset by the acquisition of Telerob, net of cash for $46.2 million, and a decrease in purchases of available-for-sale investments of $101.8 million, partially offset by a decrease in redemptions of available-for-sale investments of $110.6 million and an increase in the acquisition of property and equipment of $11.0 million to support our existing and newly acquired businesses.

During the fiscal years ended April 30, 2023 and 2022, we used cash to purchase property and equipment totaling $14.9 million and $22.3 million, respectively.

Cash Provided by (Used in) Financing Activities.

Cash (Used in) Provided by Financing Activities.

Net cash used in financing activities increased by $73.7 million to $22.9 million for the fiscal year ended April 30, 2024, compared to net cash provided by financing activities of $50.8 million for the fiscal year ended April 30, 2023.

The increase in net cash used in financing activities was primarily due to an increase in the principal payments on the debt facility of $52.0 million and a decrease in the proceeds from shares issued, net of issuance costs of $16.2 million in the fiscal year ended April 30, 2023, a decrease in the exercise of stock options of $2.3 million and increase in the payment of contingent consideration of $2.1 million.

Net cash provided by financing activities increased by $67.4 million to $50.8 million for the fiscal year ended April 30, 2023, compared to net cash used in financing activities of $16.6 million for the fiscal year ended April 30, 2022.

The increase in net cash provided by financing activities was primarily due to the proceeds from shares issued, net of issuance costs of $104.6 million in the fiscal year ended April 30, 2022 and a decrease in holdback and retention payments of $7.8 million, partially offset by an increase in the principal payments on the debt facility of $45.0 million.

Net cash used in financing activities increased by $210.8 million to $16.6 million for the fiscal year ended April 30, 2022, compared to net cash provided by financing activities of $194.2 million for the fiscal year ended April 30, 2021.

The increase in net cash provided by financing activities was primarily due to the proceeds of long-term debt of $200.0 million in the fiscal year ended April 30, 2021 and the principal payment of the loan in the fiscal year ended April 30, 2022 of $10.0 million.

Contractual Obligations

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Recently Adopted Accounting Standards

In October 2021, the Financial Accounting Standards Board issued Accounting Standard Update (“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, to recognize and measure contract assets and contract liabilities in a business combination, rather than using fair value.

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

ASU 2021-08 was adopted prospectively and did not have a material impact on our consolidated financial statements.

The Company did not adopt any accounting standards during the fiscal year ended April 30, 2024.

New 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.

We are evaluating the potential impact of this adoption on our disclosures.

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.

We are evaluating the potential impact of this adoption on its consolidated financial statements.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis