AeroVironment, Inc.

Good day and thank you for standing by. Welcome to AeroVironment's fiscal year 2024 second quarter conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this 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 Teterbalen. Please go ahead, sir.

Thanks, and good afternoon, ladies and gentlemen. Welcome to Arrow Fireman's Fiscal Year 2024 Second Quarter Earnings Call. This is Jonah Teter-Baylen, 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 portions of such filings. Copies are available from the SEC on the Air Environment website at www.azinc.com 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 under events and presentations. The content of this conference call contains time sensitive information that is accurate only as of today, December 5th, 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 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 Waheed Nawabi. Waheed?

Thank you, Jonah. Welcome, everyone, to our fiscal year 2024 second quarter earnings conference call. I'll start by summarizing our performance and recent achievements, after which Kevin will review our financial results in detail. I will then provide information about our outlook, including our increased revenue projections for the remainder of fiscal year 2024. Kevin, Jonah, and I will then take your questions. I'm pleased to report that our second quarter results once again exceeded expectations and we remain on track for our best year ever. Our key messages, which are also included on slide number three of our earnings presentation, are as follows. First, Second quarter revenue rose to $180.8 million, up 62% year-over-year, representing a record Q2 for air environment. We also posted very strong bottom-line results powered by record demand, strong operating execution, and effective supply chain management. Second, we have a healthy backlog of $487 million, which is higher than the start of our fiscal year and provides solid visibility for the quarters ahead. Third, on our last call, we announced our intention to acquire privately held Tomahawk Robotics, which we successfully completed in September. As I will review in a moment, we are well on our way to fully integrate the two businesses while leveraging our combined technology across our portfolio. And fourth, we are updating guidance, including an increase to our revenue target, reflecting our strong performance and the impact from the Tomahawk acquisition. Overall, we're very pleased with our performance through the first half of this fiscal year, which included significant top line revenue acceleration and record EBITDA. We remain optimistic about our future, exemplified by higher growth, improving operating results, and enhanced value creation for our shareholders. As we said last quarter, this reflects not only near-term demand dynamics related to global conflicts, but also a long-term shift in military strategy to the more frequent use of intelligent multi-domain unmanned systems, which are easy to use, highly effective, and provide a compelling value proposition. Our differentiated portfolio offers the greatest breadth and depth of unmanned solutions to meet the growing demands of our country and allies. We are an industry leader in contested environment as well as AI enabled autonomous operations and governments around the globe are witnessing these unmatched capabilities effectively perform on real and highly contested battlefields. As a testament to the incredible effectiveness of our innovative solutions, we now have nine different unmanned platforms deployed in Ukraine, all receiving high levels of praise. We could not be prouder and more honored of how our solutions and team members are helping our customers successfully achieve their vital missions. We're also pleased with our progress on fully integrating Tomahawk Robotics into our existing business. As a reminder, Tomahawk, now part of our unmanned systems segment, is a leader in AI-enabled robotic common control systems and open standard communications. As a company, we are increasing interconnectivity and interoperability across our portfolio, making it easier for our customers to successfully manage their growing fleet of unmanned systems. We have already received positive feedback from our customers and intend to leverage this combination to better support their current and future missions. We now offer an unmatched capability to integrate unmanned platforms across multiple domains while providing a common operating picture for the warfighter. For all the reasons just mentioned, we remain confident in our ability to deliver strong value to our stakeholders in fiscal year 2024. We expect that our cutting-edge solutions will be at the forefront of government decision-making for years to come. Now let me provide an update on current developments within our segments. Starting with our unmanned systems segment, revenue more than doubled year over year. Shipments during the quarter continue to reflect strong demand across nearly all our product lines, with significant growth in our PUMA and JUMP20 systems. We have nearly completed delivering all the Puma LE and Puma 3 AE systems, which were part of last year's large Ukraine FMS order. We have received additional follow-on orders for Ukraine, which we expect to fulfill later this fiscal year. A portion of these new orders for Ukraine are direct commercial sales to the government of Ukraine. This is another testament to the battle-proven and industry-leading capabilities of our Puma system. We also began delivering the initial batch of Jump 20 systems to Ukraine as part of our previously announced $42 million award under the Ukraine Security Assistance Initiative. We remain confident that the Jump 20 system is also the most capable solution in its class and expect additional shipments to Ukraine in the third and fourth quarters. Additionally, it is important to highlight two recent successful tests of the Jump 20. First, we successfully demonstrated a fully autonomous flight at the U.S. Navy's Hybrid Fleet Campaign in Key West, Florida. During the exercise, we showcased the Jump 20's ability to launch and recover from a vessel moving more than 20 knots without user intervention. Second, our team supported the U.S. Army and several allies at their Arcane Thunder exercise in Poland. This event held in September utilized several of our systems as part of a demonstration of the Army's modernization initiative. The customer response to the Jump 20 has been very positive, and we plan to continue investing in this platform to meet our customers' future needs. In summary, segment growth this quarter was due to record deliveries overseas, and the demand for our system is expanding. There are multiple potential orders in the pipeline, which are not yet reflected in our backlog. The global trends we discussed previously, plus our healthy pipeline of opportunities, provide even more reason to be optimistic about our unmanned systems segment for the remainder of fiscal year 2024 and beyond. Moving toward loitering munitions segment, as anticipated, this quarter's revenue was approximately flat year over year. Our shipments are meeting expectations, and we continue to build inventory in anticipation of the numerous opportunities and our growing pipeline. Namely, we're expanding sales to allied countries across the globe, continuing shipments to Ukraine, backfilling U.S. stockpiles, and pursuing future DoD programmable records. We're actively in negotiations with the U.S. government to secure a large multi-year sole source IDIQ contract for loitering munitions products, which will meet the substantial U.S. DOD and international allies' demands. There's also proposed legislation in Congress to continue supporting Ukraine, Israel, and Taiwan, which includes additional funding for Switchblade. We continue to make progress with new international customers. We're currently engaged with more than 20 countries who wish to receive switchblades, and about a third of those cases are actively in the U.S. DoD's export approval process. At the same time, we have responded to multiple U.S. DoD customer RFPs for multiyear programs of record acquisitions this past quarter. These include the U.S. Marine Corps solicitation for its Organic Precision Fires, or OPF, program and the U.S. Army's Low Altitude Stalking and Strike Ordinance, or LASSO, program. The U.S. Army recently stated that Air Environment will receive a sole source contract to provide 100 Switchblade 600s for LASSO Increment 1 for testing and fielding. We're optimistic about the future of this program due to the incredible real-world performance of our switchblades and our significant high-volume manufacturing capacity. We're also working on integrating switchblades onto other vehicle platforms, such as Abrams tanks, Humvees, the next-generation optionally manned fighting vehicles, and on helicopters through the Long Range Precision Munition Program. To summarize, the LMS pipeline is robust, with many opportunities not yet reflected in our backlog, and we remain optimistic about the future growth potential of this business. We expect the LMS segment to be a stronger contributor of revenue growth in the second half of this fiscal year. Moving to our McRady Works segment, quarterly revenue was also roughly in line with last fiscal year, as this segment continues to focus on developing key technologies and incubating future solutions. Our HAPS team continues to make progress on the development of a full-scale next-generation sun glider, while also working with the U.S. DoD on defense missions. We expect to benefit from additional funding, perhaps, in the government fiscal year 2024 budget, which is awaiting approval by Congress. In addition, we continue to see strong engagement in developing novel next-generation defense solutions. Last quarter, we spoke about DARPA's ancillary program, where we have now been awarded a small contract for Phase I of its development. We're also progressing on a jointly funded program under development by the U.S. Army's Combat Capabilities Development Command, or DEFCOM, in Natick, Massachusetts, called the Squad Operations Advanced Resupply, or SOAR. This large autonomous unmanned aircraft system will provide long-range precision delivery within contested environments. Flight testing of the first system is currently underway, and we expect phase three development to be funded by the government fiscal year 2024 budget as well. As you can see, we have many exciting and innovative development projects in our McCready Works pipeline and remain excited about the potential to develop new capabilities, which could lead to new lines of business from this segment. With that, I would like to now turn the call over to Kevin McDonald for a review of the quarterly financials.