AeroVironment CEO talks soaring drone demand from US military

AeroVironment (AVAV) recently reported its third-quarter earnings results, posting a revenue of $186.6 million beating Wall Street expectations of $168.7 million. The defense contractor has seen an increased demand for its drone technology as conflicts around the world, most notably in Ukraine and the Middle East continue to escalate.

AeroVironment CEO Wahid Nawabi joins Yahoo Finance to discuss his company's performance, as well as give insights into the increased demand for its unmanned aerial vehicles (UAVs).

Nawabi speaks to where he sees the increased demand: "The market for our systems has been really, really robust over the last couple of years. We've been focusing in this market quite heavily over the last several years and making right investments so we can capitalize on the opportunity. The war in Ukraine of course put [an] exclamation mark to the value proposition of our systems... The world is not a safer place and [so] the future of military warfare is all based on distributed, low-cost, attributable, intelligent, multi-domain robotic systems..."

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Editor's note: This article was written by Nicholas Jacobino

Video Transcript

JOSH LIPTON: AeroVironment, a military drone maker is seeing heightened demand for its products as wars continue in the Ukraine and the Middle East. The company also reporting solid earnings and says it's expecting double digit revenue growth into fiscal year 2025.

For more, we have AeroVironment CEO Wahid Nawabi. Wahid, thank you so much for joining us.

WAHID NAWABI: Great to be with you, Josh.

JOSH LIPTON: And maybe we'll just start there with the earnings report. Listen, you reported, you beat. Walk us through what drove the quarter, Wahid.

WAHID NAWABI: Well, I mean, we had a fantastic quarter. Our results were outstanding. Revenues grew nearly 40% up to $187 million overall, which is set a third quarter record again.

Our loading munitions segment, which is our switchblade family of products. The revenue for that business segment almost doubled year-over-year and also set a record. And we are walking into our fourth quarter with a very, very high backlog about 460. Plus million in backlog up 12% from a year ago.

And so with such a strong quarter, such a strong backlog, and we also raised our guidance for the year in terms of revenue. We said we're going to do about 700 to $710 million in fiscal '24. And adjusted EBITDA of about 122 million to $127 million.

So all these results are very positive. But the best is yet to come and for our environment. We've got a lot of momentum behind us going into our fourth quarter and the beginning of next fiscal year.

JULIE HYMAN: Well, Wahid, let's talk a little bit about that. It's Julie here your shares, by the way, up 29% this week on the back of your earnings report, even though we saw a little bit of a pullback today. And as you talked about a lot of the demand for your switchblade class of drones, which are small, they fit into a backpack, where is the end market demand coming from? Is it exclusively military or the commercial uses? And where do you expect to see that demand in this coming year?

WAHID NAWABI: So we serve both defense and commercial markets. But our primary customer base is the defense market. Switchblade is more-- it's exclusively for defense applications because it's a lethal loitering munition. It has a warhead in it. That drone that flies, and then it has a warhead that you can take out a specific target, and you can designate it.

The market for our systems has been really, really robust over the last couple of years. We've been focusing in this market quite heavily over the last several years and making right investments so we can capitalize on the opportunity. The war in Ukraine, of course, put exclamation mark to the value proposition of our systems. The future of military warfare and the world is not a safer place. And the future of military warfare is all based on distributed low-cost attritable, intelligent, multi-domain robotic systems like our switchblades, and Pumas, and Ravens, and many other products that we have in our portfolio.

JOSH LIPTON: And, Wahid, you do have competition. There's other companies involved in this space. On this show, we've talked to Palmer Luckey from Anduril which seems also to be building out a pretty impressive portfolio there. What, Wahid, do you do differently? What's your competitive advantage?

WAHID NAWABI: I'm glad you asked that question because I've been with this company for our company for about 13 years. And I have seen competitors come and go over the last decade and a half many, many times. There's a huge difference between what we do and what others claim that they can do.

What they claim they want to do is exactly what we have proven to be able to do over and over again over the last several decades and our marketplace, where the leader in our space, number one, we have products that are battle proven. And they've got a enormous track record of success in the battlefield.

We are a company that has delivered on records. And we've actually won and executed on those successfully. And then lastly, our systems and our company is the only one that actually can produce them by the thousands now.

We do that today. We've done them in the past. And we can do that today.

And our business model is very sustainable. It's a profitable business that we've got. We are actually delivering value and capability to our customers with a very large installed base and very large customer base globally.

Up to 55 countries around the world use our systems. Militaries around the world are allies. And so we've got an unmatched track record and unmatched capability and value proposition that really has been very, very highly durable over the last multiple decades.

And I expect that to continue in the future. And we are ready to compete in the now, as well as in the future.