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What changed in AeroVironment Inc's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of AeroVironment Inc's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+374 added−446 removedSource: 10-K (2023-06-28) vs 10-K (2022-06-29)

Top changes in AeroVironment Inc's 2023 10-K

374 paragraphs added · 446 removed · 302 edited across 1 sections

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

302 edited+72 added−144 removed182 unchanged
Biggest changeCONSOLIDATED STATEMENTS OF CASH FLOW S (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended April 30, ​ 2022 2021 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating activities ​ ​ ​ ​ ​ ​ ​ ​ Net (loss) income ​ $ (4,185) ​ $ 23,345 ​ $ 41,070 ​ Loss on sale of business, net of tax ​ ​ — ​ ​ — ​ ​ 265 ​ Net (loss) income from continuing operations ​ ​ (4,185) ​ ​ 23,345 ​ ​ 41,335 ​ Adjustments to reconcile net (loss) income from continuing operations to cash (used in) provided by operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ ​ 60,825 ​ ​ 19,262 ​ ​ 9,888 ​ (Income) loss from equity method investments, net ​ ​ (5,889) ​ ​ 10,481 ​ ​ 5,487 ​ Amortization of debt issuance costs ​ ​ 789 ​ ​ 145 ​ ​ — ​ Realized gain from sale of available-for-sale investments ​ ​ — ​ ​ (11) ​ ​ (180) ​ Provision for doubtful accounts ​ ​ (6) ​ ​ (114) ​ ​ 388 ​ Other non-cash expense (income) ​ ​ 649 ​ ​ (449) ​ ​ (703) ​ Non-cash lease expense ​ ​ 6,814 ​ ​ 5,150 ​ ​ 4,574 ​ Loss on foreign currency transactions ​ ​ 233 ​ ​ 1 ​ ​ 1 ​ Deferred income taxes ​ ​ (7,282) ​ ​ (1,694) ​ ​ 3,419 ​ Stock-based compensation ​ ​ 5,390 ​ ​ 6,932 ​ ​ 6,227 ​ Loss (gain) on disposal of property and equipment ​ ​ 8,277 ​ ​ 123 ​ ​ (71) ​ Amortization of debt securities ​ ​ 242 ​ ​ 309 ​ ​ (1,423) ​ Changes in operating assets and liabilities, net of acquisitions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accounts receivable ​ ​ 3,084 ​ ​ 17,177 ​ ​ (42,869) ​ Unbilled receivables and retentions ​ ​ (31,883) ​ ​ 8,381 ​ ​ (22,790) ​ Inventories ​ ​ (27,160) ​ ​ (5,179) ​ ​ 8,855 ​ Income taxes receivable ​ ​ (442) ​ ​ — ​ ​ 821 ​ Prepaid expenses and other assets ​ ​ (4,534) ​ ​ (6,104) ​ ​ 831 ​ Accounts payable ​ ​ (7,044) ​ ​ 2,565 ​ ​ 3,127 ​ Other liabilities ​ ​ (7,496) ​ ​ 6,212 ​ ​ 8,180 ​ Net cash (used in) provided by operating activities ​ ​ (9,618) ​ ​ 86,532 ​ ​ 25,097 ​ Investing activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Acquisition of property and equipment ​ ​ (22,289) ​ ​ (11,263) ​ (11,220) ​ Equity method investments ​ ​ (6,884) ​ ​ (2,675) ​ ​ (14,498) ​ Business acquisitions, net of cash acquired ​ ​ (46,150) ​ ​ (385,614) ​ ​ (18,641) ​ Proceeds from sale of ownership in equity method investment ​ ​ 6,497 ​ ​ — ​ ​ — ​ Proceeds from loan repayment ​ ​ 4,345 ​ ​ — ​ ​ — ​ Proceeds from sale of property and equipment ​ ​ — ​ ​ — ​ ​ 81 ​ Redemptions of held-to-maturity investments ​ ​ — ​ ​ — ​ ​ 185,917 ​ Purchases of held-to-maturity investments ​ ​ — ​ ​ — ​ ​ (176,757) ​ Redemptions of available-for-sale investments ​ ​ 35,851 ​ ​ 146,425 ​ 200,892 ​ Purchases of available-for-sale investments ​ ​ (23,882) ​ ​ (125,644) ​ ​ (106,607) ​ Other ​ ​ 224 ​ ​ — ​ ​ — ​ Net cash (used in) provided by investing activities ​ ​ (52,288) ​ ​ (378,771) ​ ​ 59,167 ​ Financing activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Principal payments of term loan ​ ​ (10,000) ​ ​ — ​ ​ — ​ Payment of contingent consideration ​ ​ — ​ ​ — ​ ​ (868) ​ Tax withholding payment related to net settlement of equity awards ​ ​ (1,245) ​ ​ (1,992) ​ ​ (1,062) ​ Holdback and retention payments for business acquisition ​ ​ (7,814) ​ ​ (1,492) ​ ​ — ​ Exercise of stock options ​ ​ 2,776 ​ ​ 1,522 ​ ​ 100 ​ Payment of debt issuance costs ​ ​ (293) ​ ​ (3,878) ​ ​ — ​ Proceeds from long-term debt ​ ​ — ​ ​ 200,000 ​ ​ — ​ Other ​ ​ (31) ​ ​ — ​ ​ — ​ Net cash (used in) provided by financing activities ​ ​ (16,607) ​ ​ 194,160 ​ ​ (1,830) ​ Effects of currency translation on cash and cash equivalents ​ ​ (1,319) ​ ​ — ​ ​ — ​ Net (decrease) increase in cash, cash equivalents, and restricted cash ​ (79,832) ​ (98,079) ​ 82,434 ​ Cash, cash equivalents and restricted cash at beginning of period ​ ​ 157,063 ​ ​ 255,142 ​ ​ 172,708 ​ Cash, cash equivalents and restricted cash at end of period ​ $ 77,231 ​ $ 157,063 ​ $ 255,142 ​ Supplemental disclosures of cash flow information ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash paid, net during the period for: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income taxes ​ $ 1,879 ​ $ 2,405 ​ $ 532 ​ Interest ​ $ 5,025 ​ $ — ​ $ — ​ Non-cash activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized (loss) gain on investments, net of deferred tax expense of $8, $1 and $14 for the fiscal years ended 2021, 2020 and 2019, respectively ​ $ (43) ​ $ (60) ​ $ 50 ​ Issuance of common stock for business acquisition ​ $ — ​ $ 72,384 ​ $ — ​ Change in foreign currency translation adjustments ​ $ (6,814) ​ $ 75 ​ $ 276 ​ Issuances of inventory to property and equipment, ISR in-service assets ​ $ 17,481 ​ $ 769 ​ $ — ​ Acquisitions of property and equipment included in accounts payable ​ $ 1,117 ​ $ 756 ​ $ 1,425 ​ ​ See accompanying notes to consolidated financial statements. ​ 81 Table of Contents AEROVIRONMENT, INC. ​ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ​ 1.
Biggest changeCONSOLIDATED STATEMENTS OF CASH FLOW S (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended April 30, ​ 2023 2022 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating activities ​ ​ ​ ​ ​ ​ ​ ​ Net (loss) income ​ $ (176,167) ​ $ (4,185) ​ $ 23,345 ​ Adjustments to reconcile net (loss) income from operations to cash provided by (used in) operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ ​ 99,999 ​ ​ 60,825 ​ ​ 19,262 ​ Impairment of goodwill ​ ​ 156,017 ​ ​ — ​ ​ — ​ Loss (income) from equity method investments ​ ​ 2,453 ​ ​ (5,889) ​ ​ 10,481 ​ Loss on deconsolidation of previously controlled subsidiary ​ ​ 189 ​ ​ — ​ ​ — ​ Amortization of debt issuance costs ​ ​ 845 ​ ​ 789 ​ ​ 145 ​ Realized gain from sale of available-for-sale investments ​ ​ — ​ ​ — ​ ​ (11) ​ Provision for doubtful accounts ​ ​ 99 ​ ​ (6) ​ ​ (114) ​ Reserve for inventory excess and obsolescence ​ ​ 8,136 ​ ​ 2,271 ​ ​ 1,178 ​ Other non-cash expense (income), net ​ ​ 1,995 ​ ​ 649 ​ ​ (449) ​ Non-cash lease expense ​ ​ 8,048 ​ ​ 6,814 ​ ​ 5,150 ​ Loss on foreign currency transactions ​ ​ 119 ​ ​ 233 ​ ​ 1 ​ Unrealized loss on available-for-sale equity securities, net ​ ​ 132 ​ ​ — ​ ​ — ​ Deferred income taxes ​ ​ (18,661) ​ ​ (7,282) ​ ​ (1,694) ​ Stock-based compensation ​ ​ 10,765 ​ ​ 5,390 ​ ​ 6,932 ​ Loss on disposal of property and equipment ​ ​ 1,497 ​ ​ 8,277 ​ ​ 123 ​ Amortization of debt securities discount ​ ​ 125 ​ ​ 242 ​ ​ 309 ​ Changes in operating assets and liabilities, net of acquisitions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accounts receivable ​ ​ (27,423) ​ ​ 3,084 ​ ​ 17,177 ​ Unbilled receivables and retentions ​ ​ (1,446) ​ ​ (31,883) ​ ​ 8,381 ​ Inventories ​ ​ (61,846) ​ ​ (29,431) ​ ​ (6,357) ​ Income taxes receivable ​ ​ 442 ​ ​ (442) ​ ​ — ​ Prepaid expenses and other assets ​ ​ (3,821) ​ ​ (4,534) ​ ​ (6,104) ​ Accounts payable ​ ​ 12,538 ​ ​ (7,044) ​ ​ 2,565 ​ Other liabilities ​ ​ (2,635) ​ ​ (7,496) ​ ​ 6,212 ​ Net cash provided by (used in) operating activities ​ ​ 11,400 ​ ​ (9,618) ​ ​ 86,532 ​ Investing activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Acquisition of property and equipment ​ ​ (14,868) ​ ​ (22,289) ​ (11,263) ​ Equity method investments ​ ​ (5,778) ​ ​ (6,884) ​ ​ (2,675) ​ Equity security investments ​ ​ (5,100) ​ ​ — ​ ​ — ​ Business acquisitions, net of cash acquired ​ ​ (5,105) ​ ​ (46,150) ​ ​ (385,614) ​ Proceeds from sale of ownership in equity method investment ​ ​ — ​ ​ 6,497 ​ ​ — ​ Proceeds from loan repayment ​ ​ — ​ ​ 4,345 ​ ​ — ​ Proceeds from deconsolidation of previously controlled subsidiary, net of cash deconsolidated ​ ​ (635) ​ ​ — ​ ​ — ​ Redemptions of available-for-sale investments ​ ​ 26,059 ​ ​ 35,851 ​ 146,425 ​ Purchases of available-for-sale investments ​ ​ (1,326) ​ ​ (23,882) ​ ​ (125,644) ​ Other ​ ​ (250) ​ ​ 224 ​ ​ — ​ Net cash used in investing activities ​ ​ (7,003) ​ ​ (52,288) ​ ​ (378,771) ​ Financing activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Principal payments of term loan ​ ​ (55,000) ​ ​ (10,000) ​ ​ — ​ Holdback and retention payments for business acquisition ​ ​ — ​ ​ (7,814) ​ ​ (1,492) ​ Proceeds from shares issued, net of issuance costs ​ ​ 104,649 ​ ​ — ​ ​ — ​ Tax withholding payment related to net settlement of equity awards ​ ​ (1,065) ​ ​ (1,245) ​ ​ (1,992) ​ Exercise of stock options ​ ​ 2,278 ​ ​ 2,776 ​ ​ 1,522 ​ Payment of debt issuance costs ​ ​ — ​ ​ (293) ​ ​ (3,878) ​ Proceeds from long-term debt ​ ​ — ​ ​ — ​ ​ 200,000 ​ Other ​ ​ (28) ​ ​ (31) ​ ​ — ​ Net cash provided by (used in) financing activities ​ ​ 50,834 ​ ​ (16,607) ​ ​ 194,160 ​ Effects of currency translation on cash and cash equivalents ​ ​ 397 ​ ​ (1,319) ​ ​ — ​ Net increase (decrease) in cash, cash equivalents, and restricted cash ​ 55,628 ​ (79,832) ​ (98,079) ​ Cash, cash equivalents and restricted cash at beginning of period ​ ​ 77,231 ​ ​ 157,063 ​ ​ 255,142 ​ Cash, cash equivalents and restricted cash at end of period ​ $ 132,859 ​ $ 77,231 ​ $ 157,063 ​ Supplemental disclosures of cash flow information ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash paid, net during the period for: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income taxes ​ $ 2,911 ​ $ 1,879 ​ $ 2,405 ​ Interest ​ $ 10,229 ​ $ 5,025 ​ $ — ​ Non-cash activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized (gain) loss on investments, net of deferred tax expense of $0, $8, and $1 for the fiscal years ended 2023, 2022 and 2021, respectively ​ $ 53 ​ $ (43) ​ $ (60) ​ Issuance of common stock for business acquisition ​ $ — ​ $ — ​ $ 72,384 ​ Change in foreign currency translation adjustments ​ $ 2,009 ​ $ (6,814) ​ $ 75 ​ Issuances of inventory to property and equipment, ISR in-service assets ​ $ 6,306 ​ $ 17,481 ​ $ 769 ​ Acquisitions of property and equipment included in accounts payable ​ $ 721 ​ $ 1,117 ​ $ 756 ​ ​ See accompanying notes to consolidated financial statements. ​ 80 Table of Contents AEROVIRONMENT, INC. ​ NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ​ 1.
The decrease 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 loss, net of tax.
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.
These valuation approaches consider a number of factors that include, but are not limited to, prospective financial information, growth rates, terminal value, discount rates, and comparable multiples from publicly traded companies in the Company’s industry and require the Company to make certain assumptions and estimates regarding industry economic factors and future profitability of its business. ​ When performing the income approach for each reporting unit, the Company incorporates the use of projected financial information and a discount rate that are developed using market participant based assumptions.
These valuation approaches consider a number of factors that include, but are not limited to, prospective financial information, growth rates, terminal value, discount rates, and comparable multiples from publicly traded companies in the Company’s industry and require the Company to make certain assumptions and estimates regarding industry economic factors and the future profitability of its business. ​ When performing the income approach for each reporting unit, the Company incorporates the use of projected financial information and a discount rate that are developed using market participant based assumptions.
Revenue for TMS 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.
Revenue for TMS 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.
Training services are recognized over time using an output method based on days of training completed. ​ For performance obligations satisfied over time, revenue is generally recognized using costs incurred to date relative to total estimated costs at completion to measure progress. Incurred costs represent work performed, which correspond with, and thereby best depict, transfer of control to the customer.
Training services are recognized over time using an output method based on days of training completed. ​ For performance obligations satisfied over time, revenue is generally recognized using costs incurred to date relative to total estimated costs at completion to measure progress. Incurred costs represent work performed, which correspond with, and thereby best depict, transfer of control to the customer.
Contract costs include labor, materials, subcontractors’ costs, other direct costs, and indirect costs applicable on government and commercial contracts. ​ 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.
Contract costs include labor, materials, subcontractors’ costs, other direct costs, and indirect costs applicable on government and commercial contracts. ​ 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.
The offer did not reflect the Company’s view of the merits of the claims made; however, as a result of the preparation of the good faith offer and the Company’s willingness to pursue settlement for that amount, the Company recorded litigation reserve expenses in the amount of $9,300,000 during the year ended April 30, 2021 recorded in other (expense) income on the consolidated statements of (loss) income and in other current liabilities on the consolidated balance sheet.
The offer did not reflect the Company’s view of the merits of the claims made; however, as a result of the preparation of the good faith offer and the Company’s willingness to pursue settlement for that amount, the Company recorded litigation reserve expenses in the amount of $9,300,000 during the year ended April 30, 2021 recorded in other expense on the consolidated statements of (loss) income and in other current liabilities on the consolidated balance sheet.
The actual payout for the PRSUs at the end of the performance period will be calculated based upon the Company’s achievement of the established revenue and operating income targets for the performance period. Settlement of the PRSUs will be made in fully-vested shares of common stock.
The actual payout for the PRSUs at the end of the performance period will be calculated based upon the Company’s achievement of the established revenue and operating income targets for the performance period. Settlement of the PRSUs will be made in fully-vested shares of the Company’s common stock.
At the award date, target achievement levels for each of the financial performance metrics were established for the PRSUs, at which levels the PRSUs would vest at 100% for each such metric.
At the award date, target achievement levels for each of the financial performance metrics were established for the PRSUs, at which levels the PRSUs would vest at 100% for each such metric.
The actual payout for the PRSUs at the end of the performance period will be calculated based upon the Company’s achievement of the established revenue and operating income targets for the performance period. Settlement of the PRSUs will be made in fully-vested shares of common stock.
The actual payout for the PRSUs at the end of the performance period will be calculated based upon the Company’s achievement of the established revenue and operating income targets for the performance period. Settlement of the PRSUs will be made in fully-vested shares of the Company’s common stock.
At the award date, target achievement levels for each of the financial performance metrics were established for the PRSUs, at which levels the PRSUs would vest at 100% for each such metric.
At the award date, target achievement levels for each of the financial performance metrics were established for the PRSUs, at which levels the PRSUs would vest at 100% for each such metric.
The fair value of the intangibles assets was determined using a discounted cash flow analysis, which were based on the Company’s preliminary estimates of future sales, earnings and cash flows after considering such factors as general market conditions, anticipated customer demand, changes in working capital, long term business plans and recent operating performance.
The fair value of the intangibles assets was determined using a discounted cash flow analysis, which were based on the Company’s preliminary estimates of future sales, earnings and cash flows after considering such factors as general market conditions, anticipated customer demand, changes in working capital, long term business plans and recent operating performance.
Pension ​ As part of the Telerob acquisition, the Company acquired a small foreign-based defined benefit pension plan. The Rheinmetall-Zusatzversorgung (“RZV”) service plan covers three former employees based on individual contracts issued to the employees. No other employees are eligible to participate. The Company has reinsurance policies were taken out for participating former employees, which were pledged to the employees.
Pension ​ As part of the Telerob acquisition, the Company acquired a small foreign-based defined benefit pension plan. The Rheinmetall-Zusatzversorgung (“RZV”) service plan covers three former employees based on individual contracts issued to the employees. No other employees are eligible to participate. The Company has reinsurance policies taken out for participating former employees, which were pledged to the employees.
The operating segments do not make sales to each other. The following table (in thousands) sets forth segment revenue, gross margin, operating (loss) income and adjusted operating (loss) income from operations for the periods indicated.
The operating segments do not make sales to each other. The following table (in thousands) sets forth segment revenue, gross margin, operating income (loss) and adjusted operating income (loss) from operations for the periods indicated.
The following unaudited pro forma summary presents consolidated information of the Company as if the business acquisition had occurred on May 1, 2020 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ April 30, ​ April 30, ​ 2022 2021 Revenue ​ $ 445,732 ​ $ 428,353 Net (loss) income attributable to AeroVironment, Inc. ​ $ 2,334 ​ $ 17,345 ​ The Company did not have any material, nonrecurring pro forma adjustments directly attributable to the business acquisition included in the reported pro forma revenue and earnings. ​ These pro forma amounts have been calculated by applying the Company’s accounting policies, assuming transaction costs had been incurred during the three months ended August 1, 2020, reflecting the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied from May 1, 2020 with the consequential tax effects and including the results of Telerob prior to acquisition. ​ The Company incurred approximately $1,186,000 of acquisition-related expenses for the fiscal year ended April 30, 2022.
The following unaudited pro forma summary presents consolidated information of the Company as if the business acquisition had occurred on May 1, 2020 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ April 30, ​ April 30, ​ ​ 2022 2021 Revenue ​ $ 445,732 ​ $ 428,353 Net income attributable to AeroVironment, Inc. ​ $ 2,334 ​ $ 17,345 ​ The Company did not have any material, nonrecurring pro forma adjustments directly attributable to the business acquisition included in the reported pro forma revenue and earnings. ​ These pro forma amounts have been calculated by applying the Company’s accounting policies, assuming transaction costs had been incurred during the three months ended August 1, 2020, reflecting the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied from May 1, 2020 with the consequential tax effects and including the results of Telerob prior to acquisition. ​ The Company incurred approximately $1,186,000 of acquisition-related expenses for the fiscal year ended April 30, 2022.
As specified in the Arcturus Purchase agreement, the number of shares issued was determined based on a value of $50,000,000 and a calculated average price as of the last business day prior to execution of the Arcturus Purchase Agreement. ​ The final cash consideration is subject to certain customary adjustments, including for net working capital, cash, debt and unpaid transaction expenses (including change in control related payments triggered by the transaction) of Arcturus at the Arcturus closing, less $6,500,000 to be held in escrow to address final purchase price adjustments post-Arcturus closing, if any (the “Adjustment Escrow”), and $1,822,500 to be held in escrow to address Arcturus’s and/or the Sellers’ indemnification obligations (the “Indemnification Escrow”).
As specified in the Arcturus Purchase agreement, the number of shares issued was determined based on a value of $50,000,000 and a calculated average price as of the last business day prior to execution of the Arcturus Purchase Agreement. ​ The final cash consideration is subject to certain customary adjustments, including for net working capital, cash, debt and unpaid transaction expenses (including change in control related payments triggered by the transaction) of Arcturus at the Arcturus closing, less $6,500,000 held in escrow to address final purchase price adjustments post-Arcturus closing, if any (the “Adjustment Escrow”), and $1,822,500 held in escrow to address Arcturus’s and/or the Sellers’ indemnification obligations (the “Indemnification Escrow”).
During the fiscal year ended April 30, 2022, the Company finalized its determination of the fair value of the assets and liabilities assumed as of the acquisition date, which is summarized in the following table (in thousands): ​ 115 Table of Contents ​ ​ ​ ​ ​ ​ ​ May 3, ​ ​ ​ 2021 ​ Fair value of assets acquired: ​ ​ ​ ​ Accounts receivable $ 1,045 ​ Unbilled receivable ​ ​ 829 ​ Inventories, net ​ ​ 15,074 ​ Prepaid and other current assets ​ ​ 314 ​ Property and equipment, net ​ ​ 1,571 ​ Operating lease assets ​ ​ 1,508 ​ Other assets ​ ​ 494 ​ Technology ​ ​ 11,500 ​ Backlog ​ ​ 2,400 ​ Customer relationships ​ ​ 5,000 ​ Other intangible assets ​ ​ 102 ​ Goodwill ​ ​ 20,800 ​ Total assets acquired ​ $ 60,637 ​ ​ ​ ​ ​ ​ Fair value of liabilities assumed: ​ ​ ​ ​ Accounts payable ​ $ 1,136 ​ Wages and related accruals ​ ​ 560 ​ Customer advances ​ ​ 1,243 ​ Current operating lease liabilities ​ ​ 361 ​ Other current liabilities ​ ​ 3,310 ​ Non-current operating lease liabilities ​ ​ 1,147 ​ Other non-current liabilities ​ ​ 224 ​ Deferred income taxes ​ ​ 5,617 ​ Total liabilities assumed ​ ​ 13,598 ​ Total identifiable net assets ​ $ 47,039 ​ ​ ​ ​ ​ ​ Fair value of consideration: ​ ​ ​ ​ Cash consideration, net of cash acquired ​ $ 46,150 ​ Contingent consideration ​ ​ 889 ​ Total ​ $ 47,039 ​ ​ Determining the fair value of the intangible assets acquired requires significant judgment, including the amount and timing of expected future cash flows, long-term growth rates and discount rates.
During the fiscal year ended April 30, 2022, the Company finalized its determination of the fair value of the assets and liabilities assumed as of the acquisition date, which is summarized in the following table (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ May 3, ​ ​ ​ 2021 ​ Fair value of assets acquired: ​ ​ ​ ​ Accounts receivable $ 1,045 ​ Unbilled receivable ​ ​ 829 ​ Inventories, net ​ ​ 15,074 ​ Prepaid and other current assets ​ ​ 314 ​ Property and equipment, net ​ ​ 1,571 ​ Operating lease assets ​ ​ 1,508 ​ Other assets ​ ​ 494 ​ Technology ​ ​ 11,500 ​ Backlog ​ ​ 2,400 ​ Customer relationships ​ ​ 5,000 ​ Other intangible assets ​ ​ 102 ​ Goodwill ​ ​ 20,800 ​ Total assets acquired ​ $ 60,637 ​ ​ ​ ​ ​ ​ Fair value of liabilities assumed: ​ ​ ​ ​ Accounts payable ​ $ 1,136 ​ Wages and related accruals ​ ​ 560 ​ Customer advances ​ ​ 1,243 ​ Current operating lease liabilities ​ ​ 361 ​ Other current liabilities ​ ​ 3,310 ​ Non-current operating lease liabilities ​ ​ 1,147 ​ Other non-current liabilities ​ ​ 224 ​ Deferred income taxes ​ ​ 5,617 ​ Total liabilities assumed ​ ​ 13,598 ​ Total identifiable net assets ​ $ 47,039 ​ ​ ​ ​ ​ ​ Fair value of consideration: ​ ​ ​ ​ Cash consideration, net of cash acquired ​ $ 46,150 ​ Contingent consideration ​ ​ 889 ​ Total ​ $ 47,039 ​ ​ Determining the fair value of the intangible assets acquired requires significant judgment, including the amount and timing of expected future cash flows, long-term growth rates and discount rates.
The following unaudited pro forma summary presents consolidated information of the Company as if the business acquisition had occurred on May 1, 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ April 30, ​ April 30, ​ 2021 2020 Revenue ​ $ 406,444 ​ $ 379,627 Net income attributable to AeroVironment, Inc. ​ $ 23,787 ​ $ 39,025 ​ The Company did not have any material, nonrecurring pro forma adjustments directly attributable to the business acquisition included in the reported pro forma revenue and earnings. ​ These pro forma amounts have been calculated by applying the Company’s accounting policies, assuming transaction costs had been incurred during the three months ended July 27, 2019, reflecting the additional amortization that would have been charged assuming the fair value adjustments to intangible assets had been applied from May 1, 2019 with the consequential tax effects, and including the results of ISG prior to acquisition. ​ 120 Table of Contents The Company incurred approximately $954,000 acquisition-related expenses for the year ended April 30, 2021.
The following unaudited pro forma summary presents consolidated information of the Company as if the business acquisition had occurred on May 1, 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ April 30, ​ April 30, ​ 2021 2020 Revenue ​ $ 406,444 ​ $ 379,627 Net income attributable to AeroVironment, Inc. ​ $ 23,787 ​ $ 39,025 ​ The Company did not have any material, nonrecurring pro forma adjustments directly attributable to the business acquisition included in the reported pro forma revenue and earnings. ​ These pro forma amounts have been calculated by applying the Company’s accounting policies, assuming transaction costs had been incurred during the three months ended July 27, 2019, reflecting the additional amortization 118 Table of Contents that would have been charged assuming the fair value adjustments to intangible assets had been applied from May 1, 2019 with the consequential tax effects, and including the results of ISG prior to acquisition. ​ The Company incurred approximately $954,000 acquisition-related expenses for the year ended April 30, 2021.
Segments ​ The Company’s reportable segments are as follows: ​ Small Unmanned Aircraft Systems —The Small UAS segment focuses primarily on products designed to operate reliably at very low altitudes in a wide range of environmental conditions, providing a vantage point from which to collect and deliver valuable information as well as related support services including training, spare parts, product repair, product replacement, and the customer contracted operation. ​ Tactical Missile Systems – The TMS segment focuses primarily on TMS products, which are tube-launched aircraft that deploy with the push of a button, fly at higher speeds than small UAS products, and perform either effects delivery or reconnaissance missions, and related support services including training, spare parts, product repair, and product replacement.
Segments ​ The Company’s reportable segments are as follows: ​ Small Unmanned Aircraft Systems —The SUAS segment focuses primarily on products designed to operate reliably at very low altitudes in a wide range of environmental conditions, providing a vantage point from which to collect and deliver valuable information as well as related support services including training, spare parts, product repair, product replacement, and the customer contracted operation. ​ Tactical Missile Systems – The TMS segment focuses primarily on TMS products, which are tube-launched aircraft that deploy with the push of a button, fly at higher speeds than SUAS products, and perform either effects delivery or reconnaissance missions, and related support services including training, spare parts, product repair, and product replacement.
We believe that our existing cash, cash equivalents, cash provided by operating activities and other financing sources will be sufficient to meet our anticipated working capital, capital expenditure requirements, future obligations related to the recent acquisitions and obligations under the Credit Facilities during the next twelve months.
We believe that our existing cash, cash equivalents, cash provided by operating activities and other financing sources will be sufficient to meet our anticipated working capital, capital expenditure requirements, future obligations related to the acquisitions and obligations under the Credit Facilities during the next twelve months.
As a result of the agreement in principle to settle the litigation, the Company recorded additional litigation reserve expenses in the amount of $10,000,000 during the three months ended October 30, 2021 in other (expense) income on the consolidated statements of operations and in other current liabilities on the consolidated balance sheet.
As a result of the agreement in principle to settle the litigation, the Company recorded additional litigation reserve expenses in the amount of $10,000,000 during the three months ended October 30, 2021 in other expense on the consolidated statements of operations and in other current liabilities on the consolidated balance sheet.
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 $1.4 million. ​ Inventories Reserves for Excess and Obsolescence ​ Our policy for valuation of inventory, including the determination of obsolete or excess inventory, requires us to perform a detailed assessment of inventory at each balance sheet date, which includes a review of, among other factors, an estimate of future demand for products within specific time horizons, valuation of existing inventory, as well as product lifecycle and product development plans.
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 $1.0 million. ​ Inventories Reserves for Excess and Obsolescence ​ Our policy for valuation of inventory, including the determination of obsolete or excess inventory, requires us to perform a detailed assessment of inventory at each balance sheet date, which includes a review of, among other factors, an estimate of future demand for products within specific time horizons, valuation of existing inventory, as well as product lifecycle and product development plans.
In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. ​ Under the supervision and with the participation of management, including our principal executive and financial officers, we have assessed our internal control over financial reporting as of April 30, 2022, based on criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework , issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (“COSO”).
In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. ​ Under the supervision and with the participation of management, including our principal executive and financial officers, we have assessed our internal control over financial reporting as of April 30, 2023, based on criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework , issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (“COSO”).
The Company has determined that the contract meets the criteria of ASC 912-730-05 Contractors – Federal Government and, therefore, all reimbursements are recorded as an offset to research and development expense in the consolidated statements of income.
The Company has determined that the contract meets the criteria of ASC 912-730-05 Contractors – Federal Government and, therefore, all reimbursements are recorded as an offset to research and development expense in the consolidated statements of (loss) income.
The escrow amount is to be released to the Telerob Seller, less any amounts paid or reserved, 30 months following the closing date. ​ In addition to the consideration paid at closing, the Telerob Seller may receive €2,000,000 (approximately $2,424,000) in additional cash consideration if specific revenue targets for Telerob are achieved during the 12 month period after closing beginning on the first day of the calendar month following the closing (the “First Earnout Year”) and an additional €2,000,000 (approximately $2,424,000) in cash consideration if specific revenue targets for Telerob are achieved in the 12 month period following the First Earnout Year.
The escrow amount is to be released to the Telerob Seller, less any amounts paid or reserved, 30 months following the closing date. ​ In addition to the consideration paid at closing, the Telerob Seller may receive €2,000,000 (approximately $2,203,000) in additional cash consideration if specific revenue targets for Telerob are achieved during the 12 month period after closing beginning on the first day of the calendar month following the closing (the “First Earnout Year”) and an additional €2,000,000 (approximately $2,203,000) in cash consideration if specific revenue targets for Telerob are achieved in the 12 month period following the First Earnout Year.
Significant estimates made by management include, but are not limited to, valuation of: inventory, available-for-sale securities, acquired intangibles, goodwill, deferred tax assets and liabilities, useful lives of property, plant and equipment, medical and dental liabilities, warranty liabilities, long-term incentive plan liabilities and estimates of 83 Table of Contents anticipated contract costs and transaction price utilized in the revenue recognition process.
Significant estimates made by management include, but are not limited to, valuation of: inventory, available-for-sale securities, acquired intangibles, goodwill, deferred tax assets and liabilities, useful lives of property, plant and 82 Table of Contents equipment, medical and dental liabilities, warranty liabilities, long-term incentive plan liabilities and estimates of anticipated contract costs and transaction price utilized in the revenue recognition process.
SG&A expense for the fiscal year ended April 30, 2022 was $96.4 million, or 22% of revenue, compared to SG&A expense of $67.5 million, or 17% of revenue, for the fiscal year ended April 30, 2021.
SG&A expense for the fiscal year ended April 30, 2022 was $96.4 million, or 22% of revenue, as compared to SG&A expense of $67.5 million, or 17% of revenue, for the fiscal year ended April 30, 2021.
R&D expense for the fiscal year ended April 30, 2022 was $54.7 million, or 12% of revenue, compared to R&D expense of $53.8 million, or 14% of revenue, for the fiscal year ended April 30, 2021.
R&D expense for the fiscal year ended April 30, 2022 was $54.7 million, or 12% of revenue, as compared to R&D expense of $53.8 million, or 14% of revenue, for the fiscal year ended April 30, 2021.
Bank National Association, as joint lead arrangers and joint bookrunners (the “Credit Agreement”). ​ The Credit Agreement and its associated Security and Pledge Agreement set forth the terms and conditions for (i) a five-year $100 million revolving credit facility, which includes a $10 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 Facility, the “Credit Facilities”).
Bank National Association, as joint lead arrangers and joint bookrunners (the “Credit Agreement”). ​ The Credit Agreement and its associated Security and Pledge Agreement set forth the terms and conditions 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 Facility, the “Credit Facilities”).
Upon the occurrence and continuation of an event of default, the Lenders may cease making future loans under the Credit Agreement and may declare all amounts owing under the Credit Agreement to be immediately due and payable. ​ The First Amendment to Credit Agreement also implemented certain secured overnight financing rate (SOFR) interest rate mechanics and interest rate reference benchmark replacement provisions in order to effectuate the transition from LIBOR as a reference interest rate.
Upon the occurrence and continuation of an event of default, the Lenders may cease making future loans under the Credit Agreement and may declare all amounts owing under the Credit Agreement to be immediately due and payable. ​ The First Amendment to Credit Agreement also implemented certain secured overnight financing rate (“SOFR”) interest rate mechanics and interest rate reference benchmark replacement provisions in order to effectuate the transition from LIBOR as a reference interest rate.
In the Company’s services contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals, which is generally monthly, or upon the achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets recorded in unbilled receivables and retentions on the consolidated balance sheet.
In the Company’s services contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals, which is generally monthly, or upon the achievement of contractual milestones. Generally, billing occurs subsequent to revenue recognition, resulting in contract assets recorded in unbilled receivables and retentions on the consolidated balance sheets.
No compensation cost is ultimately recognized for awards for which employees do not render the requisite service and are forfeited. ​ Long-Term Incentive Awards ​ For long-term incentive awards outstanding as of April 30, 2022, the awards include time-based awards which vest equally over three years and performance-based awards which vest based on the achievement of a target payout established at the beginning of each performance period.
No compensation cost is ultimately recognized for awards for which employees do not render the requisite service and are forfeited. ​ Long-Term Incentive Awards ​ For long-term incentive awards outstanding as of April 30, 2023, the awards include time-based awards which vest equally over three years and performance-based awards which vest based on the achievement of a target payout established at the beginning of each performance period.
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. ​ Our primary liquidity needs are for financing working capital, investing in capital expenditures, supporting product development efforts, introducing new products and enhancing existing products, marketing acceptance and adoption of our products and services.
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. ​ 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.
For tax purposes the acquisition was treated as a stock purchase and the goodwill is not deductible. ​ 116 Table of Contents Supplemental Pro Forma Information (unaudited) ​ Telerob revenue and loss from operations for the year ended April 30, 2022 since acquisition on May 3, 2021 was $29,177,000 and $12,115,000, respectively.
For tax purposes the acquisition was treated as a stock purchase and the goodwill is not deductible. ​ 114 Table of Contents Supplemental Pro Forma Information (unaudited) ​ Telerob revenue and loss from operations for the year ended April 30, 2022 since acquisition on May 3, 2021 was $29,177,000 and $12,115,000, respectively.
To further address potential breaches of Arcturus’s and the Sellers’ representations and warranties beyond the application of the Indemnification Escrow, the Company also obtained representation and warranty insurance policies providing $40,000,000 in coverage, subject to customary terms, exclusions and retention amounts. 117 Table of Contents ​ The Company accounted for the acquisition under the acquisition method of accounting for business combinations.
To further address potential breaches of Arcturus’s and the Sellers’ representations and warranties beyond the application of the Indemnification Escrow, the Company also obtained representation and warranty insurance policies providing $40,000,000 in coverage, subject to customary terms, exclusions and retention amounts. 115 Table of Contents ​ The Company accounted for the acquisition under the acquisition method of accounting for business combinations.
For tax purposes the acquisition was treated as a stock purchase and the goodwill is not deductible. ​ 118 Table of Contents Supplemental Pro Forma Information (unaudited) ​ Arcturus revenue and loss from operations for the year ended April 30, 2021 since acquisition on February 19, 2021 was $15,837,000 and $1,869,000, respectively.
For tax purposes the acquisition was treated as a stock purchase and the goodwill is not deductible. ​ 116 Table of Contents Supplemental Pro Forma Information (unaudited) ​ Arcturus revenue and loss from operations for the year ended April 30, 2021 since acquisition on February 19, 2021 was $15,837,000 and $1,869,000, respectively.
These advances are classified as customer advances and will be offset against billings. ​ 87 Table of Contents Revenue Recognition ​ The Company’s 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 the specifications of the customers.
These advances are classified as customer advances and will be offset against billings. ​ 86 Table of Contents Revenue Recognition ​ The Company’s 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 the specifications of the customers.
Awards under the Fiscal 2022 LTIP consist of: (i) time-based restricted stock awards and time-based restricted stock units, which vest in equal tranches in July 2022, July 2023 and July 2024, and (ii) performance-based restricted stock units (“PRSUs”), which vest based on the Company’s achievement of revenue and operating income targets for the three-year period ending April 30, 2024.
Awards under the Fiscal 2022 LTIP consist of: (i) time-based restricted stock awards and time-based restricted stock units, which vest in equal tranches in July 2022, July 2023 and July 2024, and (ii) performance-based restricted stock units (“PRSUs”), which vest based on the Company’s achievement of revenue and non-GAAP operating income targets for the three-year period ending April 30, 2024.
The Term Loan Facility requires payment of 5% of the outstanding obligations in each of the first four loan years, with the remaining 80% payable in loan year five, consisting of three 102 Table of Contents quarterly payments of 1.25% each, with the remaining outstanding principal amount of the Term Loan Facility due and payable on the final maturity date.
The Term Loan Facility requires payment of 5% of the outstanding obligations in each of the first four loan years, with the remaining 80% payable in loan year five, consisting of three quarterly payments of 1.25% each, with the remaining outstanding principal amount of the Term Loan Facility due and 100 Table of Contents payable on the final maturity date.
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, 70 Table of Contents 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.
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.
The estimation of whether the performance targets will be achieved requires judgment, and, to the extent actual results or updated estimates differ from the Company’s current estimates, the cumulative effect on current and prior periods of those changes will be recorded in the period estimates are revised. ​ Research and Development ​ Internally funded research and development costs (“IRAD”), sponsored by the Company relate to both U.S. government products and services and those for commercial and foreign customers.
The estimation of whether the performance targets will be achieved requires judgment, and, to the extent actual results or updated estimates differ from the Company’s current estimates, the cumulative effect on current and prior periods of those changes will be recorded in the period estimates are revised. ​ Research and Development ​ Internally funded R&D costs sponsored by the Company relate to both U.S. government products and services and those for commercial and foreign customers.
If the sum of the projected undiscounted cash flows (excluding interest) is less than the carrying value of the assets, the assets will be written down to the estimated fair value in the period in which the determination is made. ​ 85 Table of Contents Intangibles Assets — Acquired in Business Combinations ​ The Company performs valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and allocates the purchase price of the acquired business to the respective net tangible and intangible assets.
If the sum of the projected undiscounted cash flows (excluding interest) is less than the carrying value of the assets, the assets will be written down to the estimated fair value in the period in which the determination is made. ​ Intangibles Assets — Acquired in Business Combinations ​ The Company performs valuations of assets acquired and liabilities assumed on each acquisition accounted for as a business combination and allocates the purchase price of the acquired business to the respective net tangible and intangible assets.
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. ​ We review cost performance and estimates to complete at least quarterly and in many cases more frequently.
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. ​ We review cost performance, estimates to complete and variable consideration at least quarterly and in many cases more frequently.
In March 2022, the Company sold its 7% share of HAPSMobile to Softbank. Following the sale, Softbank owns 100% of HAPSMobile. Prior to the sale, as the Company had the ability to exercise significant influence over the operating and financial policies of HAPSMobile, the Company’s investment is accounted as an equity method investment.
In March 2022, the Company sold its 7% share of HAPSMobile to SoftBank. Following the sale, SoftBank owns 100% of HAPSMobile. Prior to the sale, as the Company had the ability to exercise significant influence over the operating and financial policies of HAPSMobile, the Company’s investment was accounted as an equity method investment.
Our first three quarters end on a Saturday. ​ 64 Table of Contents Results of Operations ​ The following table sets forth certain historical consolidated income statement data expressed in dollars (in thousands) and as a percentage of revenue for the periods indicated.
Our first three quarters end on a Saturday. ​ Results of Operations ​ The following table sets forth certain historical consolidated income statement data expressed in dollars (in thousands) and as a percentage of revenue for the periods indicated.
The final rates, if different from the provisional rates, may create an additional receivable or liability for the Company. 114 Table of Contents ​ For example, during the course of its audits, the DCAA may question the Company’s incurred costs, and if the DCAA believes the Company has accounted for such costs in a manner inconsistent with the requirements under Federal Acquisition Regulations, the DCAA auditor may recommend to the Company’s administrative contracting officer to disallow such costs.
The final rates, if different from the provisional rates, may create an additional receivable or liability for the Company. ​ For example, during the course of its audits, the DCAA may question the Company’s incurred costs, and if the DCAA believes the Company has accounted for such costs in a manner inconsistent with the requirements under Federal Acquisition Regulations, the DCAA auditor may recommend to the Company’s administrative contracting officer to disallow such costs.
For the Company’s contracts, there are no significant gaps between the receipt of payment and the transfer of the associated goods and services to the customer for material amounts of consideration. ​ Revenue recognized for the years ended April 30, 2022, 2021, and 2020 that was included in contract liability balances at the beginning of each year were $3,144,000, $5,468,000 and $1,670,000, respectively. ​ Cost to Fulfill a Contract with a Customer ​ The Company recognizes assets for the costs to fulfill a contract with a customer if the costs are specifically identifiable, generate or enhance resources used to satisfy future performance obligations, and are expected to be recovered in accordance with ASC 340-40 Other Assets and Deferred Costs: Contracts with Customers .
For the Company’s contracts, there are no significant gaps between the receipt of payment and the transfer of the associated goods and services to the customer for material amounts of consideration. ​ Revenue recognized for the years ended April 30, 2023, 2022, and 2021 that was included in contract liability balances at the beginning of each year were $3,413,000, $3,144,000 and $5,468,000, respectively. ​ Cost to Fulfill a Contract with a Customer ​ The Company recognizes assets for the costs to fulfill a contract with a customer if the costs are specifically identifiable, generate or enhance resources used to satisfy future performance obligations, and are expected to be recovered in accordance with ASC 340-40 Other Assets and Deferred Costs: Contracts with Customers .
These expenses are included in selling, general and administrative expense on the Company’s consolidated statement of operations. ​ The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes are reasonable and are not necessarily indicative of the results that have been realized had the acquisition been consolidated in the tables above as of May 1, 2019, nor are they indicative of results of operations that may occur in the future. ​ ISG Acquisition ​ On February 23, 2021, the Company purchased certain assets of, and assumed certain liabilities of, ISG pursuant to the terms of the ISG Purchase Agreement.
These expenses are included in selling, general and administrative expense on the Company’s consolidated statements of (loss) income. ​ The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes are reasonable and are not necessarily indicative of the results that have been realized had the acquisition been consolidated in the tables above as of May 1, 2019, nor are they indicative of results of operations that may occur in the future. ​ ISG Acquisition ​ On February 23, 2021, the Company purchased certain assets of, and assumed certain liabilities of, ISG pursuant to the terms of the ISG Purchase Agreement.
Audited Consolidated Financial Statements Index to Consolidated Financial Statements and Supplementary Data ​ ​ Page Report of Independent Registered Public Accounting Firm (PCAOB 34) ​ 74 ​ Consolidated Balance Sheets at April 30, 2022 and 2021 ​ 77 ​ Consolidated Statements of (Loss) Income for the Years Ended April 30, 2022, 2021 and 2020 ​ 78 ​ Consolidated Statements of Comprehensive (Loss) Income for the Years Ended April 30, 2022, 2021 and 2020 ​ 79 ​ Consolidated Statements of Stockholders’ Equity for the Years Ended April 30, 2022, 2021 and 2020 ​ 80 ​ Consolidated Statements of Cash Flows for the Years Ended April 30, 2022, 2021 and 2020 ​ 81 ​ Notes to Consolidated Financial Statements ​ 82 ​ Supplementary Data ​ ​ ​ Financial Statement Schedule : Schedule II—Valuation and Qualifying Accounts ​ 127 ​ ​ All other schedules are omitted because they are not applicable, not required or the information required is included in the Consolidated Financial Statements, including the notes thereto. ​ ​ 73 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ​ ​ To the Stockholders and the Board of Directors of AeroVironment, Inc. ​ Opinion on the Financial Statements ​ We have audited the accompanying consolidated balance sheets of AeroVironment, Inc. and subsidiaries (the "Company") as of April 30, 2022 and 2021, the related consolidated statements of (loss) income, comprehensive (loss) income, stockholders' equity, and cash flows, for each of the three years in the period ended April 30, 2022, and the related notes and the schedule listed in the Index at Item 15(a) (collectively referred to as the "financial statements").
Audited Consolidated Financial Statements Index to Consolidated Financial Statements and Supplementary Data ​ ​ Page Report of Independent Registered Public Accounting Firm (PCAOB 34) ​ 74 ​ Consolidated Balance Sheets at April 30, 2023 and 2022 ​ 76 ​ Consolidated Statements of (Loss) Income for the Years Ended April 30, 2023, 2022 and 2021 ​ 77 ​ Consolidated Statements of Comprehensive (Loss) Income for the Years Ended April 30, 2023, 2022 and 2021 ​ 78 ​ Consolidated Statements of Stockholders’ Equity for the Years Ended April 30, 2023, 2022 and 2021 ​ 79 ​ Consolidated Statements of Cash Flows for the Years Ended April 30, 2023, 2022 and 2021 ​ 80 ​ Notes to Consolidated Financial Statements ​ 81 ​ Supplementary Data ​ ​ ​ Financial Statement Schedule : Schedule II—Valuation and Qualifying Accounts ​ 123 ​ ​ All other schedules are omitted because they are not applicable, not required or the information required is included in the Consolidated Financial Statements, including the notes thereto. ​ ​ 73 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ​ ​ To the Stockholders and the Board of Directors of AeroVironment, Inc. ​ Opinion on the Financial Statements ​ We have audited the accompanying consolidated balance sheets of AeroVironment, Inc. and subsidiaries (the "Company") as of April 30, 2023 and 2022, the related consolidated statements of (loss) income, comprehensive (loss) income, stockholders' equity, and cash flows, for each of the three years in the period ended April 30, 2023, and the related notes and the schedule listed in the Index at Item 15(a) (collectively referred to as the "financial statements").
These expenses are included in selling, general and administrative on the Company’s consolidated statement of operations. ​ The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes are reasonable and are not necessarily indicative of the results that have been realized had the acquisition been consolidated in the tables above as of May 1, 2020, nor are they indicative of results of operations that may occur in the future. ​ Arcturus Acquisition ​ On February 19, 2021, the Company closed its acquisition of Arcturus pursuant to the terms of the Arcturus Purchase Agreement.
These expenses are included in selling, general and administrative on the Company’s consolidated statements of (loss) income. ​ The unaudited pro forma supplemental information is based on estimates and assumptions, which the Company believes are reasonable and are not necessarily indicative of the results that have been realized had the acquisition been consolidated in the tables above as of May 1, 2020, nor are they indicative of results of operations that may occur in the future. ​ Arcturus Acquisition ​ On February 19, 2021, the Company closed its acquisition of Arcturus pursuant to the terms of the Arcturus Purchase Agreement.
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.
The increase in equity method investment income, net of tax was primarily due to our 68 Table of Contents 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.
Accordingly, the Company identifies four reportable segments. ​ Use of Estimates ​ The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions.
Accordingly, the Company identifies three reportable segments. ​ Use of Estimates ​ The preparation of consolidated financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions.
The contingent consideration was valued using a Black-Scholes option-pricing model. The analysis considered, among other items, contractual terms of the ISG Purchase Agreement, the Company’s discount rate, the timing of 97 Table of Contents expected future cash flows and the probability that the revenue targets required for payment of the contingent consideration will be achieved.
The contingent consideration was valued using a Black-Scholes option-pricing model. The analysis considered, among other items, contractual terms of the ISG Purchase Agreement, the Company’s discount rate, the timing of expected future cash flows and the probability that the revenue targets required for payment of the contingent consideration will be achieved.
Upon the execution of the MDDA, SoftBank issued the first order under the MDDA, which has a maximum value of approximately $51,200,000. ​ The Company recorded revenue under both the MDDA and DDA and preliminary design agreements between the Company and SoftBank of $43,325,000, $42,426,000 and $60,864,000 for the fiscal years ended April 30, 2022, 2021 and 2020, respectively.
Upon the execution of the MDDA, SoftBank issued the first order under the MDDA, which has a maximum value of approximately $51,200,000. ​ The Company recorded revenue under both the MDDA and DDA and preliminary design agreements between the Company and SoftBank of $43,325,000 and $42,426,000 for the fiscal years ended April 30, 2022 and 2021, respectively.
For the same period, unfavorable 62 Table of Contents 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 $2.2 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.
The selected discount rate considers the risk and nature of the respective reporting unit’s cash flows and the rates of return market participants would require to invest their capital in its reporting units. ​ When performing the market approach for each reporting unit, the Company utilizes the guideline public company method and the guideline transaction method.
The selected discount rate considers the risk and nature of the respective reporting unit’s cash flows and the rates of return market participants would require to invest their capital in its reporting units. 85 Table of Contents ​ When performing the market approach for each reporting unit, the Company utilizes the guideline public company method and the guideline transaction method.
An increase or decrease in the variable interest rate of 100 basis points would result in an increase or decrease to our interest expense for the fiscal year ending April 30, 2023 of approximately $1.9 million. ​ Foreign Currency Exchange Rate Risk ​ Since a significant part of our sales and expenses are denominated in U.S. dollars, we have not experienced significant foreign exchange gains or losses to date.
An increase or decrease in the variable interest rate of 100 basis points would result in an increase or decrease to our interest expense for the fiscal year ending April 30, 2024 of approximately $1.3 million. ​ Foreign Currency Exchange Rate Risk ​ Since a significant part of our sales and expenses are denominated in U.S. dollars, we have not experienced significant foreign exchange gains or losses to date.
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.
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.
The Company performs ongoing credit evaluations of its commercial customers and maintains an allowance for potential losses. ​ Accounts Receivable, Unbilled Receivables and Retentions ​ Accounts receivable represents primarily U.S. government and allied foreign governments, and to a lesser extent commercial receivables, net of allowances for doubtful accounts.
The Company performs ongoing credit evaluations of its commercial customers and maintains an allowance for potential losses. ​ 83 Table of Contents Accounts Receivable, Unbilled Receivables and Retentions ​ Accounts receivable represents primarily U.S. government and allied foreign governments, and to a lesser extent commercial receivables, net of allowances for doubtful accounts.
Acquired intangible assets include technology, backlog, in-process research and development, customer relationships, trademarks and tradenames, and non-compete agreements. The Company determines the appropriate useful life by performing an analysis of expected cash flows based on historical experience of the acquired businesses.
Acquired intangible assets include technology, backlog, in-process research and development, 84 Table of Contents customer relationships, trademarks and tradenames, and non-compete agreements. The Company determines the appropriate useful life by performing an analysis of expected cash flows based on historical experience of the acquired businesses.
A contract’s transaction price is allocated to each distinct performance obligation and revenue is recognized when each performance obligation under the terms of a contract is satisfied. For contracts with multiple performance obligations, we allocate the contract’s 61 Table of Contents transaction price to each performance obligation using observable standalone selling prices for similar products and services.
A contract’s transaction price is allocated to each distinct performance obligation and revenue is recognized when each performance obligation under the terms of a contract is satisfied. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using observable standalone selling prices for similar products and services.
We believe that the accounting estimates related to income taxes are "critical accounting estimates" because significant judgment is required in interpreting tax regulations in the United States and in foreign jurisdictions, evaluating our worldwide uncertain tax positions, and assessing the likelihood of realizing certain tax benefits.
We believe that the accounting estimates related to income taxes are “critical accounting estimates” because significant judgment is required in interpreting tax regulations in the United States and in foreign jurisdictions, evaluating our worldwide uncertain tax positions, and assessing the likelihood of realizing certain tax benefits.
In the event of a default, 103 Table of Contents an additional 2% default interest rate in addition to the applicable rate if specified or the Base Rate plus Applicable Margin if an applicable rate is not specified.
In the event of a default, 101 Table of Contents an additional 2% default interest rate in addition to the applicable rate if specified or the Base Rate plus Applicable Margin if an applicable rate is not specified.
Under the 2021 Plan, 105 Table of Contents incentive stock options, nonqualified stock options, restricted stock awards, stock appreciation right awards, performance share awards, performance stock unit awards, dividend equivalents awards, stock payment awards, deferred stock awards, restricted stock unit awards, other stock-based awards, performance bonus awards or performance-based awards may be granted at the discretion of the compensation committee, which consists of outside directors.
Under the 2021 Plan, incentive stock options, nonqualified stock options, restricted stock awards, stock appreciation right awards, performance share awards, performance stock unit awards, dividend equivalents awards, stock payment awards, deferred stock awards, restricted stock unit awards, other stock-based awards, performance bonus awards or performance-based awards may be granted at the discretion of the compensation committee, which consists of outside directors.
Changes in Accounting Estimates ​ During the year ended April 30, 2022, the Company revised its estimates of the achievement of the performance metrics of the Company’s long term incentive plans, which resulted in a cumulative adjustment to reduce previously recognized compensation expense of $1,602,000.
During the year ended April 30, 2022, the Company revised its estimates of the achievement of the performance metrics of the Company’s long term incentive plans, which resulted in a cumulative adjustment to reduce previously recognized compensation expense of $1,602,000. ​ 19.
As of April 30, 2022 and 2021, the Company estimated and recorded a self-insurance liability in wages and related accruals of approximately $1,653,000 and $1,181,000, respectively. ​ Income Taxes ​ Deferred income tax assets and liabilities are computed annually for differences between the financial statement and income tax bases of assets and liabilities that will result in taxable or deductible amounts in the future.
As of April 30, 2023 and 2022, the Company estimated and recorded a self-insurance liability in wages and related accruals of approximately $1,383,000 and $1,653,000, respectively. ​ Income Taxes ​ Deferred income tax assets and liabilities are computed annually for differences between the financial statement and income tax bases of assets and liabilities that will result in taxable or deductible amounts in the future.
The fair value of the intangibles assets was determined using a discounted cash flow analysis, which were based on the Company’s best estimate of future sales, earnings and cash flows after considering such factors as general market conditions, anticipated customer demand, changes in working capital, long term business plans and recent operating performance.
The fair value of the intangibles assets was determined using a discounted cash flow analysis, which were based on the Company’s preliminary estimates of future sales, earnings and cash flows after considering such factors as general market conditions, anticipated customer demand, changes in working capital, long term business plans and recent operating performance.
Refer to Note 21—Business Acquisitions for further details. ​ On May 3, 2021, the Company closed its acquisition of Telerob pursuant to its previously announced Share Purchase Agreement (the “Telerob Purchase Agreement”) with Unmanned Systems Investments GmbH, a German limited liability company incorporated under the laws of Germany (the “Telerob Seller”), and each of the unit holders of the Seller (collectively, the “Telerob Shareholders”), to purchase 100% of the issued and outstanding shares of Telerob 82 Table of Contents Seller’s wholly-owned subsidiary Telerob GmbH (the “Telerob Acquisition”).
Refer to Note 21—Business Acquisitions for further details. ​ On May 3, 2021, the Company closed its acquisition of Telerob pursuant to the Share Purchase Agreement (the “Telerob Purchase Agreement”) with Unmanned Systems Investments GmbH, a German limited liability company incorporated under the laws of Germany (the “Telerob Seller”), and each of the unit holders of the Seller (collectively, the “Telerob Shareholders”), to purchase 100% of the issued and outstanding shares of Telerob Seller’s wholly-owned subsidiary Telerob GmbH (the “Telerob Acquisition”).
If determined to be necessary, the quantitative impairment test shall be used to identify goodwill impairment and measure the amount of a goodwill 63 Table of Contents impairment loss to be recognized (if any). For the quantitative impairment test we estimate the fair value by weighting the results from the income approach and the market approach.
If determined to be necessary, the quantitative impairment test shall be used to identify goodwill impairment and measure the amount of a goodwill impairment loss to be recognized (if any). For the quantitative impairment test we estimate the fair value by weighting the results from the income approach and the market approach.
The Company currently expects to recognize approximately 94% of the remaining performance obligations as revenue in fiscal 2023 and an additional 6% in fiscal 2024 . ​ The Company collects sales, value add, and other taxes concurrent with revenue producing activities, which are excluded from revenue when they are both imposed on a specific transaction and collected from a customer. ​ Contract Estimates ​ Accounting for contracts and programs primarily with a duration of less than six months involves the use of various techniques to estimate total contract revenue and costs.
The Company currently expects to recognize approximately 92% of the remaining performance obligations as revenue in fiscal 2024 and an additional 8% in fiscal 2025 . ​ The Company collects sales, value add, and other taxes concurrent with revenue producing activities, which are excluded from revenue when they are both imposed on a specific transaction and collected from a customer. ​ Contract Estimates ​ Accounting for contracts and programs primarily with a duration of less than six months involves the use of various techniques to estimate total contract revenue and costs.
Adjustments to original estimates for a contract’s revenue, estimated costs at completion and estimated profit or loss are often required as work progresses under a contract, as experience is gained and as more information is obtained, even though the scope of work required under the contract may not change, or if contract modifications occur.
Adjustments to original estimates for a contract’s revenue, estimated costs at completion and estimated profit or loss are often required as work progresses under a contract, as experience is gained and as more information is obtained, even though the scope of work required under the contract may not change, or if contract modifications, including the finalization of undefinitized contract actions, occur.
At April 30, 2022 and 2021, the retention balances were $736,000 and $700,000, respectively. The Company determines the allowance for doubtful accounts based on historical customer experience, age of receivable and other currently available evidence. When a specific account is deemed uncollectible, the account is written off against the allowance.
At April 30, 2023 and 2022, the retention balances were $615,000 and $736,000, respectively. The Company determines the allowance for doubtful accounts based on historical customer experience, age of receivable and other currently available evidence. When a specific account is deemed uncollectible, the account is written off against the allowance.
Technology and customer relationship intangible assets were recognized in conjunction with the Company’s acquisition of Arcturus on February 19, 2021. Technology and customer relationship intangible assets were recognized in conjunction with the Company’s acquisition of ISG on February 23, 2021.
Technology and customer relationship intangible assets were recognized in conjunction with the Company’s acquisition of ISG on February 23, 2021.
Threshold achievement levels for which the PRSUs would vest at 50% for each such metric and maximum achievement levels for which such awards would vest at 200% for each such metric were also established.
Threshold achievement levels for which the PRSUs would vest at 50% for each such metric and maximum achievement levels for which such awards would vest at 250% for each such metric were also established.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended April 30, 2022, in conformity with accounting principles generally accepted in the United States of America. ​ We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of April 30, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June 28, 2022, expressed an adverse opinion on the Company's internal control over financial reporting because of material weaknesses. ​ Basis for Opinion ​ These financial statements are the responsibility of the Company's management.
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 30, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended April 30, 2023, in conformity with accounting principles generally accepted in the United States of America. ​ We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of April 30, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June 27, 2023, expressed an unqualified opinion on the Company's internal control over financial reporting. ​ Basis for Opinion ​ These financial statements are the responsibility of the Company's management.
The aggregate impact of adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was not significant for the years ended April 30, 2022, 2021 or 2020. During the year ended April 30, 2022, the Company revised its estimates of the total expected costs to complete a TMS contract.
The aggregate impact of adjustments in contract estimates on revenue related to performance obligations satisfied or partially satisfied in previous periods was not significant for the years ended April 30, 2023, 2022 or 2021. During the years ended April 30, 2023, 2022 and 2021, the Company revised its estimates of the total expected costs to complete a TMS contract.
When the equity method is used, investments are recorded at original cost and adjusted periodically to recognize the Company’s proportionate share of the investees’ net income or losses after the date of investment.
When the equity method is used, investments are recorded at original cost and adjusted periodically to recognize the Company’s proportionate share of the investees’ net income or losses after the date 81 Table of Contents of investment.
The term of the agreement was completed as of December 2020. Costs of $21,833,000 have been reimbursed to the Company as the activities were performed, while the Company was 91 Table of Contents responsible for funding a minimum of $11,225,000.
The term of the agreement was completed as of December 2020. Costs of $21,833,000 have been reimbursed to the Company as the activities were performed, while the Company was responsible for funding a minimum of $11,225,000.
Due to the net loss for the fiscal year ended April 30, 2022, no shares reserved for issuance upon exercise of stock options or shares of unvested restricted stock were included in the computation of diluted loss per share as their inclusion would have been anti-dilutive.
Due to the net loss for the fiscal years ended April 30, 2023 and 2022, no shares reserved for issuance upon exercise of stock options or shares of unvested restricted stock were included in the computation of diluted loss per share as their inclusion would have been anti-dilutive.
The Applicable Margin is based upon the Consolidated Leverage Ratio (as defined in the First Amendment to Credit Agreement) and whether the Company elects SOFR (ranging from 1.50 - 2.50%) or Base Rate (ranging from 0.50 - 1.50%).
The Applicable Margin is based upon the Consolidated Leverage Ratio (as defined in the Credit Agreement) and whether the Company elects SOFR (ranging from 1.50 - 2.50%) or Base Rate (ranging from 0.50 - 1.50%).

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