AeroVironment, Inc.

Good day, and thank you for standing by. Welcome to the Arrow-Vironment Fiscal Year 2024 Third Quarter 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, you will 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 Teeter-Baylen. Please go ahead.

Thanks and good afternoon, ladies and gentlemen. Welcome to Air Environment's Fiscal Year 2024 Third Quarter Earnings Call. This is Jonah Dieter-Balen, 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 AeroVironment website at www.avinc.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, March 4th, 2024. 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 Waheed Nawabi. Waheed?

Thank you, Jonah. Welcome, everyone, to our fiscal year 2024 third quarter earnings conference call. I will start by summarizing our performance and recent achievements, after which Kevin will review our financial results in detail. Next, I will provide information about our outlook for the remainder of fiscal year 2024. Kevin, Jonah, and I will then take your questions. I'm pleased to report that our third quarter results were exceptional, and we once again hit key milestones toward achieving our best year ever. Our key messages, which are also included on slide number three of our earnings presentation, are as follows. Third quarter revenue rose to $187 million, setting a new third quarter record and significantly outperforming last year's same quarter results by nearly 40%. Second, revenue for loitering munitions segment more than doubled year over year and achieved its highest quarterly revenue to date. Third, this quarter's exceptional performance and high visibility gives us confidence to raise and tighten our fiscal year 2024 guidance ranges. And fourth, AeroVironment continues to be a leader in the defense tech space and remains well-positioned for double-digit revenue growth in fiscal year 2025. Our strong top-line growth and profitability created meaningful value for our shareholders, and we're very pleased with our performance today. Our results were driven by increasing demand for our unmatched solutions and strong operational execution. Our backlog is up 12% from the same quarter last year, and we have leveraged this stable backlog to deliver more consistent quarterly performance. By level loading our factories' production throughout the year, we have achieved greater operational efficiencies while expanding throughput. Our environment has demonstrated market-leading manufacturing capacity for unmanned systems, and we continue to invest in facilities, people, and processes to prepare for even greater demand in the future. With both our customers and shareholders in mind, we continue to reinvest in innovative customer-driven solutions. We're targeting multiple billion-dollar programs of record, as well as emerging unmanned solutions markets. We're also investing in upgrades to our current platforms so they remain well-suited to evolving battlefield conditions. While our focus is primarily on internal development, we also remain active in seeking inorganic opportunities, which would benefit our current product portfolio and further our success. We're proud to partner with our country and our allies by delivering the solutions they need to successfully carry out their vital missions. And we're confident that we will continue to deliver strong value to our stakeholders for the remainder of fiscal year 2024 and beyond. Now, let me provide an update on current developments across our three segments. I will begin with our Loitering Munitions segment, or LMS, and which revenue for the third quarter more than doubled year-over-year to $58 million. Higher demand across the globe and emerging programs of record are driving historic top-line growth. This was our best quarter ever for LMS, with a significant rise sequentially and year-over-year, yet we believe we're only getting started. As I mentioned last quarter, we're in active negotiations with the U.S. government on a large multi-year sole source IDIQ contract for Switchblade to meet increased demand for the U.S. and our allies. We're also engaged with more than 20 countries who have demonstrated a strong interest in Switchblade, and of those, about a third continue to seek export authorization from the U.S. DOD. We're also optimistic about key programs of record in the pipeline. These include the U.S. Marine Corps' solicitation for its Organic Precision Fires, or OPF program, the U.S. Army's Low Altitude Stalking and Strike Ordinance, or LASSO program, and the U.S. Defense Innovation Unit's Replicator Initiative. We believe we're well positioned for these significant long-term opportunities. We look forward to sharing further updates on these programs later this calendar year. In addition to these standalone applications, we continue to see opportunities to integrate Switchblade into other platforms, such as helicopters through the U.S. Army's Long Range Precision Munition, or LRPM, program, and ground vehicles with the U.S. Army's Optionally Manned Fighting Vehicle, or OMFV, program. We believe platform integrations will be a significant component of LMS revenues in future years. We expect switchblade production to increase further in the fourth quarter, setting LMS up for another record fiscal year and even greater success in the future. Since we foresee additional large orders for switchblade on the horizon, we're investing to further increase our manufacturing capacity. While we have sufficient capacity for the next couple of years of increased demand, our team is also evaluating future expansion of facilities, geographies, and supply chain partners. In summary, we remain very optimistic about the growth potential in this business segment. Moving to our unmanned systems segment, revenue for the quarter rose 23% year-over-year to approximately $113 million. Topline growth is broadly spread across our Puma and Jump 20 systems, reflecting a good mix of domestic and international customers. While AeroViron remains the defense tech leader in unmanned aircraft systems, the Puma, now in its third generation, is undeniably the industry gold standard for small UAS. In the last 12 months alone, we have shipped more than $400 million of this product to domestic and international customers. It is also important to mention that the third generation Puma we're shipping today has significant technological upgrades compared to the original one. These enhancements include higher resolution cameras, greater autonomous navigation, resiliency in contested environments, longer endurance, and vertical takeoff and landing or VTOL operations, to name a few. We plan to continue these investments to keep the PUMA system best in class. As an example, we're upgrading our software stack to include new machine learning-enabled autonomy and computer vision image recognition features for this amazing product. In a similar manner, we're leveraging our most recent acquisition, Tomahawk Robotics, to bring open architecture common control systems to our full UIS portfolio. This business has now successfully transitioned into our unmanned systems segment, and we expect to integrate the Kinesis software platform with our UIS platforms later this year. I also want to address the U.S. Army's recent announcement that it plans to sunset the RQ-11 Raven, their workhorse small UAS, after more than 20 years of service. With approximately 20,000 units delivered, Raven is the most widely adopted military UAS in the world. We are extremely proud of the support Raven has provided to the U.S. Army and our soldiers. At the same time, we stand ready to compete for the next generation small UAS on the U.S. Army's Medium Range Reconnaissance, or MRR, program and the Long Range Reconnaissance, or LRR, program. Our unmanned systems segments continue to offer a strong, steady, and profitable revenue stream and we remain optimistic about additional domestic and international orders in our pipeline. We also believe that our recent and future product enhancements for PUMA 3AE, Jump 20, and Vapor 55 will drive enduring customer demand for the remainder of fiscal year 2024 and beyond. Moving to our McCready Works segment, as expected, revenue was down slightly from third quarter fiscal year 2023. As we discussed last quarter, we're now realizing some program delays related to the continuing resolution and an associated reduction in customer-funded R&D. As Kevin will discuss, we now expect to increase R&D spent in the fourth quarter in order to progress these programs while we await funding approvals. That said, we continue to focus on many new and exciting opportunities, which will rapidly shape this business's growth. We are maintaining our investments in HAPS, contested logistics, maritime UAS, and other exciting platforms and technologies. Many of these solutions require very advanced capabilities, which our environment is uniquely capable of providing. In fact, we recently won a $16 million U.S. Navy contract for the advancement of video analytics and computer vision research to support multi-domain robotics. This award leverages our development of shared software ecosystems that provide enhanced situational awareness on the battlefield. Under this multi-year effort, we will explore and implement new technology that optimizes how intelligence, surveillance, reconnaissance, and targeting are performed throughout the U.S. DoD. Finally, I would like to note that our Ingenuity Mars helicopter just wound down its mission after making its 72nd flight. Ingenuity's performance was nothing short of outstanding, exceeding all mission objectives and expectations. We're very proud of our work on this program and look forward to supporting future planetary exploration initiatives. In summary, McCready Works is achieving its mission to incubate new product lines and develop vital capabilities, and we look forward to sharing exciting developments in future quarters. With that, I will now turn the call over to Kevin McDonald for a review of the quarterly financials.