Drone maker AeroVironment reports sharp drop in quarterly revenue
For the third quarter in a row, Monrovia drone maker AeroVironment Inc. reported a sharp downturn in quarterly revenue after a drop in military contracts for its small robotic aircraft.
The downbeat report comes as the company battles an upstart Newport Beach activist investment firm over how to improve market valuation.
AeroVironment said revenue was $44.1 million in its fiscal first quarter. That’s down 24.9% compared with $58.7 million last year.
The lack of sales led to net loss of $7.2 million, or 32 cents a share. A year earlier, AeroVironment lost $1.4 million, or 6 cents.
The company performed well below analysts’ expectations of a loss of 7 cents a share.
AeroVironment depends largely on funding from the Pentagon, which is winding down its presence in the Middle East and preparing for budget cuts. The company is the Pentagon’s top supplier of small drones — including the Raven, Wasp and Puma models — that give troops on the ground a bird’s-eye view of what’s happening over a ridge or around a bend. AeroVironment also makes charging systems for electric vehicles.
In a conference call, AeroVironment Chief Executive Timothy E. Conver attributed the drop in drone sales to delayed — not lost — government purchases. For three quarters, the company has blamed those delays for a lack of revenue.
“We’re on track for the year, even though we continue to face contract delays we are controlling our costs, managing our assets and maintaining our market share,” he said. “We are making progress on our major growth opportunities to target to long-term demand for unmanned airplane systems, tactical missile systems and electric vehicle infrastructure.”
Drone sales for the first quarter, which ended July 27, fell 27.9% to $35.2 million from $48.8 million in the same quarter last year.
Revenue in the electronic charging business also fell more than 10% in the quarter, to $8.9 million from $9.9 million a year earlier.
The results were reported after the close of regular trading Tuesday, when AeroVironment shares dropped 54 cents, or 2.4%, to $22.17. They were down an additional 77 cents, or 3.5%, to $21.40 in extended trading.
Activist investment firm Engaged Capital, which recently took a 5.1% stake in AeroVironment, wrote a note to the board of directors this week. The note said the firm was disappointed with the board’s recent unwillingness to consider what it sees as an independent nominee to the board.
“AeroVironment’s failure to deliver meaningful shareholder returns over any relevant time period is a clear indication of a need for change,” Glenn Welling, Engaged Capital’s chief investment officer, said in a statement. “At this point, we feel that we have exhausted every possible avenue to finding a solution, as the company’s offers to address our concerns have no substance.”
Conver did not discuss the investment firm in the conference call. But he did talk at length about how the company’s inventive spirit is at the core of its success and said investing in research and development — an issue with Engaged Capital — is key.
AeroVironment, which makes small spy drones in Simi Valley, hopes to diversify its customer base in the coming years with the Federal Aviation Administration’s impending introduction of regulations allowing small drones into U.S. airspace in 2015.
Currently, drones are not allowed to fly in the U.S. except with special permission from the FAA. But as interest in drones has increased among police departments and businesses, the agency has appeared willing to ease restrictions.
In July, the company won a first-of-its-kind certificate that permits operators to fly its hand-launched Puma drone for commercial missions, such as oil spill monitoring and ocean surveys, in the North Slope region of the Arctic.
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