AeroVironment, Inc.

Good day and thank you for standing by. Welcome to the AeroVironment fiscal year 2023 fourth quarter and full year conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jonah Teter-Baylen with AeroVironment. Please go ahead.

Thanks and good afternoon, ladies and gentlemen. Welcome to AeroVironment's fiscal year 2023 fourth quarter and full year earnings call. This is Jonah Teeter-Balin, Senior Director of Corporate Development and Investor Relations. Before we begin, please note that certain information presented on this call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve many risks and uncertainties that could cause actual results to differ materially from our expectations. Further information on these risks and uncertainties is contained in the company's 10-K and other filings with the SEC, in particular in the risk factors and forward-looking statement sections of each such filing. Copies are available from the SEC on the Air Environment website or from our investor relations team. This afternoon, we also filed a slide presentation with our earnings release and posted the presentation to the investor section of our website at avinc.com under Events and Presentations. The content of this conference call contains time-sensitive information that is accurate only as of today, June 27, 2023. The company undertakes no obligation to make any revision to any forward-looking statements contained in our remarks today or to update them to reflect the events or circumstances occurring after this conference call. Joining me today from AeroVironment are Chairman, President, and Chief Executive Officer, Mr. Waheed Nawabi, and Senior Vice President and Chief Financial Officer, Mr. Kevin MacDonald. We will now begin with remarks from Wahid Nawabi. Wahid?

Thank you, Jonah. Welcome everyone to our fiscal year 2023 fourth quarter earnings conference call. I will start by summarizing our performance and recent achievements, after which Kevin will review our financial results in greater detail. I will then provide information related to our expectations for fiscal year 2024, after which Kevin, Jonah, and I will take your questions. I'm pleased to report that the fourth quarter results exceeded most of our expectations, and we set records across many key financial metrics. Our key messages, which are included on slide number three of our earnings presentation, are as follows. Fourth quarter revenue rose to $186 million, a 40% increase compared to fiscal year 2022 fourth quarter, while product revenue nearly doubled year over year to just under $142 million. Second, for the full year, revenue increased to $541 million versus $446 million last year, representing 21% growth. This makes it 6%. consecutive years of top line growth. Third, our funded backlog also doubled from fiscal year 2022 to set another record at $424 million. This backlog was driven by more than $750 million in bookings throughout fiscal year 2023, reflecting strong demand for our solutions led by our small UAS or SUAS and tactical missile systems or TMS businesses. And fourth, given recent performance trends and our visibility into coming quarters, we're providing fiscal year 2024 guidance that reflects nearly 20% growth in revenue, higher margins, and improved bottom line results. The fundamentals of our business are strong and we're well positioned for significant expansion and value creation in fiscal year 2024 and beyond. The improvement in the fourth quarter revenue was primarily due to higher SUIS and TMS sales, up 68% and more than 100%, respectively, compared to the prior year period. These results reflect ongoing demand for our Switchblade and PUMA products. Gross margin for the fourth quarter was $68.4 million, an increase of 41% versus last fiscal year's $48.6 million. Our gross margin as a percentage of sales was approximately 37% in both periods. As previously discussed, we expect gross margins to remain strong in fiscal year 2024 as our revenue mix continues to shift to more favorable product sales. As Kevin will cover in a moment, our pro forma bottom line profitability metrics were also much stronger this quarter. This improvement was primarily driven by higher revenues, which more than offset increased operating expenses. This quarter caps a record year for our environment. By carefully managing through challenges of the past few years, such as supply chain constraints, labor shortages, and inflationary pressures, we have accelerated our growth and success. Given our current backlog and robust demand for the company's broad portfolio of innovative unmanned solutions, we stand at the inflection point of a new phase of growth. I want to thank our investors for their continued support, especially as we enter this new chapter. As always, we're committed to delivering value to our shareholders and visibility into our progress. Finally, we're deeply honored and extremely proud of the growing level of assistance we have provided to our country and allies, including Ukraine. Before we discuss each segment, I want to address the recent news that AeroViman was not selected by the U.S. Army to proceed further with Increment 2 of the Future Tactical Unmanned Aircraft Systems, otherwise known as FT-UAS. While we're disappointed, we have fully assessed the U.S. Army's evaluation process and submitted a request for further clarification. We remain confident that the Jump 20 UAS is the most versatile and cost-effective solution in the Group 2-3 UAS market today and will continue to focus on meeting the current needs of our customers. We're humbled and honored to support the Ukraine defense efforts as the only Group 2-3 UAS solution named in the recent USAID package. The FTUS increments we had been awarded to date did not comprise significant revenue for our environment. We recorded a non-cash charge of $190.2 million in the fourth quarter related to the MUIS business, and Kevin will discuss its details further shortly. Importantly, the Army's decision will not have a material impact on near-term revenue growth. As we look ahead, we will focus on areas where we can improve to ensure we meet our customers' needs. Further, we'll remain focused on winning other key programs by continuing to leverage the strength of our robust portfolio of innovative unmanned solutions. Despite our exit from F2 UAS Increment 2, we remain bullish on our medium UAS or MUAS product line. The Jump 20 stands apart in its ability to perform in contested environments with an unmatched capacity to carry on payloads, and we believe it's the best Group 2-3 solution on the market today. There are multiple domestic and international opportunities which we are currently pursuing that presents significant growth potential in the coming years. Now shifting gears to other product lines, our SUAS business delivered a record year of performance on the back of our largest ever foreign military sales award in support of Ukraine. We're proud that our Puma systems have again and again proven themselves on the battlefield and are providing scouting and support for all U.S. supplied artillery weapon systems deployed in Ukraine. We expect SUAS revenue to remain strong in fiscal year 2024. We have also launched several new products and additional enhancements to our SUIS portfolio and expect sales of these solutions to be a meaningful component of future revenues. Our TMS business product line represents a significant growth opportunity for the company. Total TMS revenue for the quarter more than doubled year over year, but this is only the start. The conflict in Ukraine and our switchblade success on the battlefield has accelerated the global trend towards increased adoption of loitering munitions. We now have orders from four allied nations. More importantly, the U.S. government has recently approved us to market and sell switchblades to nearly 50 allied countries, up from 20 countries last year. Given the current level of global interest, record backlog, and growing demand in switchblade, we expect our TMS business to be a leading growth driver for the company moving forward. Our unmanned ground vehicles, or UGV product line, achieved record levels of performance in the fourth quarter. Similar to our TMS segment, UGV revenue more than doubled year over year, resulting in the unit's best year since its inception. We're also marking solid progress providing Telemacs and Theodore ground vehicles to Ukraine under an accelerated schedule, and these vehicles are performing well on the battlefield. We expect another growth year for this business in fiscal year 2024. Our HAPS product line continues to make solid progress in the development of Next Generation Sunglider, the successfully commercialized stratospheric-based telecommunication services in partnership with SoftBank. We also recently received our first contract from the U.S. DoD for this unique capability and are actively pursuing multiple other defense opportunities. Given the current conflicts around the world, we believe that the defense market for HAPS represents a multi-billion dollar long-term growth opportunity and we're well positioned to supply this large market with our highly differentiated solar HAPS solution. And finally, our McCready Works Advanced Solutions continues to establish our environment as a leading global supplier of AI, machine learning, and autonomy-powered unmanned systems. With the support of this team, AAV is designing systems that will anticipate and evolve with the needs of our military. These include expandable autonomous capabilities that allow our UAS to continue operations without persistent radio link and advanced artificial intelligence and machine learning algorithms that can sense, analyze, and navigate the battle space. We have deployed some of these capabilities within our product lines already and expect more in the future. This segment also continues to pursue new and exciting lines of business, such as space robotics and contested logistics that could become new business segments of their own for our environment. But creating works grew significantly in fiscal year 2023, and we expect to see additional top line growth in fiscal year 2024. Before turning the call over to Kevin, I would like to note that starting in Q1 of this fiscal year, AeroVironment will define our segments differently to reflect the larger, broader nature of our products and services and their associated end markets. Going forward, we will provide color on three segments. Combining our SUAS, MUAS, and UGV product lines, will be combined into a new unmanned system segment. Our tactical missile systems will now become loitering munitions systems, and our McCready Works segment will include the current McCready Works operations along with HAPS and other customer-funded R&D programs. We look forward to sharing more on this new segmentation next quarter. With that, I would like to now turn the call over to Kevin McDonald for a review of the fourth quarter financials. Kevin?