AeroVironment, Inc. (NASDAQ:AVAV) Q4, 2019 Earnings Call June 25, 2019 4:30 PM ET
Steven Gitlin - Investor Relations
Wahid Nawabi - President and Chief Executive Officer
Teresa Covington - Senior Vice President and Chief Financial Officer
- Steven Gitlin - 投资者关系
- Wahid Nawabi - 总裁兼首席执行官
- Teresa Covington - 高级副总裁兼首席财务官
Ken Herbert - Canaccord
Pete Skibitski - Alembic Global Advisors
Joe De Nardi - Stifel
Troy Jensen - Piper Jaffray Companies
Louie DiPalma - William Blair
- Ken Herbert - Canaccord
- Pete Skibitski - Alembic Global Advisors
- Joe De Nardi - Stifel
- Troy Jensen - Piper Jaffray公司
- Louie DiPalma - 威廉布莱尔
Good afternoon, ladies and gentlemen, and welcome to the AeroVironment's Fourth Quarter and Full Fiscal Year 2019 Earnings Call. This is Steven Gitlin, Vice President of Investor Relations for AeroVironment. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session after management's remarks. As a reminder, this conference is being recorded for replay purposes.
Joining me today from AeroVironment are President and Chief Executive Officer, Mr. Wahid Nawabi; and Senior Vice President and Chief Financial Officer, Ms. Teresa Covington. Please note that on this call, certain information presented contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and they contain words such as believe, anticipate, expect, estimate, intend, project, plan or words or phrases with similar meaning. Forward-looking statements are based on current expectations, forecasts and assumptions that involve risks and uncertainties, including, but not limited to, economic, competitive, governmental and technological factors outside of our control that may cause our business strategy or actual results to differ materially from the forward-looking statements.
For further information on these risks, we encourage you to review the risk factors discussed in AeroVironment's periodic reports on Form 10-K and Form 10-Q filed with the SEC and the Form 8-K filed today with the SEC, along with the associated earnings release and the Safe Harbor statement contained therein. The content of this conference call contains time-sensitive information that is accurate only as of today, June 25, 2019. The company undertakes no obligation to make any revision to any forward-looking statements contained in our remarks today or to update them to reflect the events or circumstances occurring after this conference call.
We will now begin with remarks from Wahid Nawabi. Wahid?
今天从AeroVironment加入我的是总裁兼首席执行官Wahid Nawabi先生;高级副总裁兼首席财务官Teresa Covington女士。请注意，在此次电话会议中，所提供的某些信息包含1995年“私人证券诉讼改革法案”界定的前瞻性陈述。
Thank you, Steve, and welcome to our fourth quarter and full fiscal year 2019 earnings conference call. On today's call, I'll focus on three key messages. First, our team delivered outstanding results in fiscal year 2019 across nearly every aspect of our business. Second, we achieved great progress in our growth initiatives, and third, we continue to successfully transform AeroVironment to achieve our long-term value creation objectives.
I'll start by summarizing our outstanding fiscal year 2019 performance and discuss our key achievements during the fourth quarter and full fiscal year. Next, Teresa will provide a more detailed summary of financial performance in the year, and I'll discuss our goals for fiscal year 2020 before Teresa, Steven and I take your questions.
Now for our fiscal year 2019 financial highlights. Throughout the year, our team executed our plan effectively, delivering financial results across our business that met and exceeded our guidance. Fiscal year 2019 results are as follows. Revenue of $314.3 million increased 17% over last year and exceeded our guidance range. Gross profit of one $128.4 million increased 19% while gross margin of 41% increased 80 basis points. Income from continuing operations of $33.8 million increased by 11%.
We delivered outstanding results across our portfolio. Small UAS revenue of $183.2 million increased 9%. Tactical Missile Systems revenue of $65.1 million increased 3%. HAPS revenue of $55.4 million increased 87%. In other revenue, mainly customer funded R&D in our MacCready US group and CIS of $10.6 million increased 35%. International revenue including small UAS and HAPS represented 52% of total company revenue in the fiscal year surpassing domestic revenues for the first time.
Fully diluted earnings per share from continuing operations of $1.74 increased by $0.83 meeting the higher end of our guidance range. For the first time, we delivered balanced revenue across all four quarters of the fiscal year, enabling us to improve planning and execution to the benefit of our operations. One outcome of the year's balanced revenue is a fourth-quarter year-over-year comparison that does not reflect our strong full-year growth and performance as compared to fiscal year 2018.
I would like to highlight some of the drivers of fiscal year 2019 profitability. Fiscal year 2019 diluted earnings per share were particularly strong primarily due to three factors. First, favorable product revenue mix. Second, a gain from a one-time litigation settlement and third a more favorable federal tax rate compared to the prior year are the results of changes to the federal corporate tax rate. Entering fiscal year 2020, our visibility remains strong similar to last year. We enter fiscal year 2020 with $164.3 million and funded backlog plus other items that Teresa will describe shortly.
[Tech Difficulty] continue delivering more balanced revenue throughout fiscal year 2020. Outstanding performance extended beyond our financial results and across our business. Our core defense business remains the small UAS leader around the globe. During the fiscal year, we announced contracts for the Portuguese army, two additional undisclosed allied nations, as well as the German Navy totaling more than $40 million. 20 of our 45 plus international customers are in Europe; 10 are in the Middle East and Central Asia, and the remainder in Africa, Asia, Central America, South America and Oceania.
现在是我们2019财年的财务亮点。在整个一年中，我们的团队有效地执行了我们的计划，在我们的业务中提供了满足并超出我们指导的财务结果。 2019财年的结果如下。 3.134亿美元的收入比去年增加了17％，超出了我们的指导范围。毛利润为1.284亿美元，增长19％，毛利率为41％，增长80个基点。持续经营收入为3380万美元，增长了11％。
We are truly building a global business. In the United States market, we did not secure an award for the US Army SBS program in fiscal year 2019 nor did we secure a place among the initial candidates for the US Army as our program conducted by the defense innovation unit. We continue to engage with these customers and stand ready for ongoing opportunities as they arise. Our recently announced acquisition of Pulse Aerospace strengthens our family of small UAS meaningfully expanding our total addressable market and driving accretion over the long term.
This acquisition offers further evidence that we're executing a disciplined capital allocation strategy, deploying our balance sheet toward opportunities that drive high growth and value creation and target markets. This transaction does so by providing our customers with category leading vertical takeoff and landing for VTOL UAS which complements our fixed-wing UAS very nicely. These all systems can take off and land without human intervention, can hover in place for extended periods of time and maneuver in ways fixed-wing aircraft cannot. These unique maneuvering capabilities are particularly useful in confined areas. VTOL systems can also carry very heavy payloads relative to their weight.
This flexibility along with multiple payload options provides attractive capabilities to customers in defense and commercial end markets. Recently Pulse Aerospace won a more than $13 million indefinite delivery indefinite quantity type contract with an undisclosed defense customer for its Vapor unmanned VTOL systems. Since then we have secured the first two delivery orders under this contract and we're working to deliver the solution to our customer. We are in a unique position to deliver our global UAS footprint and production capabilities to create value with the innovative vapor family of VTOL solutions.
In our Tactical Missile Systems business, Switchblade remains the primary driver of customer demand. To highlight the growth opportunity we see here, I would like to touch on one of the latest Switchblade variants currently under development. This customer co-funded variant is larger than the original Switchblade, has longer flight duration, can cover greater distances and carries much larger warheads for the delivery of significant mission effects on targets. This variant will expand our addressable market significantly. We look forward to providing additional details on this exciting development as we continue to make progress.
Moving to our HAPS business, during fiscal year 2019, we achieved a number of significant milestones in these potentially game-changing market opportunities. In April, we announced the rollout of the first HAWK30 solar HAPS system after a design development and assembly period of less than two years. This is an enormous accomplishment and reflects our deep expertise in knowledge of this groundbreaking technology. HAPS30 260 foot wingspan is equivalent to that of an A380 passenger aircraft which is the largest passenger airplane in the world. The top surface of the HAWK30's wing is covered by advanced photovoltaic cells that generate electricity from solar energy. Hence, highly efficient electric motors also designed by AeroVironment will propel the HAWK30 to altitudes of about 65,000 feet.
此次收购进一步证明我们正在执行严格的资本配置策略，将资产负债表部署到推动高增长和价值创造以及目标市场的机会上。这项交易是通过为我们的客户提供VTOL UAS的垂直起飞和着陆类别来实现的，这非常好地补充了我们的固定翼UAS。这些所有系统都可以在没有人为干预的情况下起飞和着陆，可以长时间悬停在原地并且以固定翼飞机不能的方式进行机动。这些独特的机动能力在狭窄区域特别有用。 VTOL系统相对于其重量也可以承载非常重的有效载荷。
转向我们的HAPS业务，在2019财年，我们在这些可能改变游戏规则的市场机会中取得了许多重要的里程碑。 4月，我们宣布在不到两年的设计开发和组装期后推出第一个HAWK30太阳能HAPS系统。这是一项巨大的成就，反映了我们对这项突破性技术的深入了解。 HAPS30 260英尺翼展相当于A380客机，是世界上最大的客机。 HAWK30机翼的顶部表面覆盖着先进的光伏电池，可通过太阳能发电。因此，AeroVironment设计的高效电动马达将推动HAWK30达到约65,000英尺的高度。
At this stratospheric altitude, HAWK30 is designed to operate for months without landing above the clouds and all other commercial air traffic and can maintain its orbit over a designated area. This is particularly important because unlike orbiting satellites and balloons, HAWK30 can maintain its position relative to the earth delivering carrier-grade connectivity to standard handsets and other connected IoT devices on the ground and in the air. The service area from a single HAWK30 is as wide as 120 miles covering a very large geographic area.
In fiscal year 2019, we announced multiple increases to the value of the contract for AeroVironment design and development of two HAWK30 aircraft. The resulting contract value increased to $126 million. This is a large increase from the initial contract value of $65 million which we announced in January of 2018. We recognize this customer funded research and development work as revenue. Another way we intend to create value is through our partial ownership of the HapsMobile and joint venture alongside SoftBank Corporation. We exercise a one-time option to increase our ownership from 5% to 10% in March of 2019 at the initial valuation. We invested another $4.6 million in May of 2019 to maintain our 10% ownership, bringing our total equity investment in this opportunity to about $15 million.
HAPSMobile subsequently raised approximately $125 million from SoftBank for investment into Loon which deploys networks of lighter-than-air balloons drifting at high altitudes to deliver Internet connectivity to rural and remote communities. Since we did not participate in this last fundraising round for HAPSMobile, our ownership stake was diluted to approximately 5.5%. As future fundraising rounds take place, we will evaluate the investments required to maintain our ownership spake against other investment opportunities across our business.
Another value creation opportunity we see here is the potential to be the exclusive manufacturer of solar HAPS systems for HAPSMobile as long as our quality, performance and cost for such work are competitive. Prior to its anticipated 2023 commercial launch, HAPSMobile will require a number of production HAWK30 aircraft even as it has already announced its plans for a larger aircraft named HAWK50. Before HAPSMobile's commercial launch, we expect that flight testing, demonstration and aircraft certification will have been completed. And we plan to enter into production based on successfully achieving project milestones and objectives.
We also possess exclusive rights to market the HAWK30 for non-commercial applications everywhere except in Japan. We will capitalize on our market leadership around the globe to deploy this game-changing technology to defense applications. HAPSMobile is another example of how we are deploying more balance sheets strategically to position us for long-term value creation.
Moving now to our Commercial Information Solutions business, we are gaining more knowledge and experience with our Quantix data collection drone and AV DSS analytic solution. As I have stated previously, this business and the market it serves continue to be in very early stages of adoption. As a result, the revenue impact to our business from this area is not material. We believe this continues to represent a large, attractive long-term market opportunity. The unique set of capabilities we have developed will make their way into this market as it matures and is already informing other solutions we are developing for the defense market.
We're monitoring this market closely for signs indicating an inflection and adoption. And in the meantime are minimizing our investments to reflect slower adoption. This slow adoption also affects how we account for some of the investments we've made in this business. Specifically, we recorded an impairment charge of $4.4 million in the fourth quarter of fiscal year 2019, primarily for investments in our AV DSS cloud-based analytic solution and other fixed assets. We also wrote down $1.7 million s on Quantix inventory in the same quarter.
We're transforming our business in multiple exciting ways. We reshaped our portfolio in May 2018 with the divestiture of our EES business. We are deploying or balance sheets strategically with our HAPS investments, our Pulse Aerospace acquisition in the first quarter of fiscal year 2020 and our continued pursuit of assets that can help us execute our strategy more quickly and more cost-effectively. We continue to look at ways to partner with organizations in key areas to gain access to innovative technologies that can speed the delivery of our solutions.
We are expanding our footprint and access to pools of exceptional talent with new Innovation Centers in New England and the Midwest. And we're working with other prime contractors to generate demand through new platforms and programs. These include our teaming agreements with General Dynamics Land Systems to integrate small UAS and Switchblade into the Army's next generation of armored combat vehicle and the Marine Corps armored reconnaissance vehicle. And with Kratos to integrate Switchblade and other tube- launched UAS into a new unmanned fighter jet capable of traveling long distances quickly to support missions against new peers.
And we're building on our capabilities in artificial intelligence and autonomy to give our next-generation unmanned systems the ability to operate in the night airspace, detect targets and make decisions without human input. We believe an operator in the loop would remain a requirement for any lethal capabilities. We have made tremendous progress in fiscal year 2019, and so far in the beginning of fiscal year 2020. I am incredibly proud of our team's accomplishments and their work to advance in diversifies our portfolio.
Now I will turn the call over to Teresa to discuss the fiscal year 2019 financials. Teresa?
Thank you, Wahid, and good afternoon, everyone. AeroVironment fiscal 2019 fourth quarter results are as follows. Revenue from continuing operations for the fourth quarter fiscal 2019 was $87.9 million, a decrease of $25.7 million or 23% from the fourth quarter of fiscal 2018 revenue of $113.6 million. The decrease was due to a decrease in product deliveries of $25.4 million, as well as a decrease in service revenue of $0.3million. Fourth quarter fiscal 2019 revenue by major product line/ program is as follows. Small UAS was $52 million; TMS was $16 million; HAPS was $17.4 million and other was $2.5 million.
Gross margin from continuing operations for the fourth quarter fiscal 2019 was $37 million or 42% of revenue compared to $50.6 million or 45% of revenue for the fourth quarter of fiscal 2018. The decrease in gross margin was primarily due to a decrease in product margin of $12.3 million and a decrease in service margin of $1.2 million. Gross margin as a percentage of revenue decreased from 45% to 42%, primarily due to an increase in the proportion of service revenue to total revenue, unfavorable service revenue mix and higher CIS inventory reserve.
Looking at the rest of the income statement. SG&A expense from continuing operations for the fourth quarter of fiscal 2019 was $20.3 million or 23% of revenue compared to SG&A expense of $15.3 million or 13% of revenue for the fourth quarter of fiscal 2018. The increase in SG&A was primarily due to a CIS fixed asset impairment charge. The rate of adoption for our Quantix and AV DSS solution has been slower than we expected. In the fourth quarter, we lowered our future outlook for unit sales and as a result of the lower forecast took an impairment charge of $4.4 million s on Quantex and AV DSS fixed assets.
R&D expense from continuing operations for the fourth quarter of fiscal 2019 was $11.6 million or 13% of revenue compared to our R&D expense of $7.4 million or 7% of revenues for the fourth quarter of fiscal 2018. Income from continuing operations for the fourth quarter of fiscal 2019 was $5.1 or 6% of revenue compared to $27.9 million for the fourth quarter fiscal 2018. The decrease in income from operations was primarily due to a decrease in gross margins of $13.6 million, an increase in SG&A expense of $5 million and an increase in R&D expense of $4.2 million.
Net other income for the fourth quarter of fiscal 2019 was $2.8 million compared to net other income of $0.9 million for the fourth quarter of fiscal 2018. The increase in net other income was due to income from the transition services agreement with the buyer of the EES business and higher interest income on our investments. The effective income tax rate from continuing operations was minus 1% for the fourth quarter of fiscal 2019 compared to an effective income tax rate of 30.7% to the fourth quarter of fiscal 2019. The decrease in our effective tax rate for the fourth quarter fiscal 2019 was due to the reduction in the fiscal 2019 federal statutory rate from 30.4% to 21% and lower pre-tax profits.
谢谢，瓦希德，大家下午好。 AeroVironment 2019财年第四季度业绩如下。 2019财年第四季度持续经营收入为8790万美元，比2018财年第四季度的1.136亿美元收入减少2570万美元或23％。减少的原因是产品交付量减少了2540万美元，服务收入减少了30万美元。 2019年第四季度主要产品线/计划的收入如下。小型无人机系统为5200万美元; TMS为1600万美元; HAPS为1740万美元，其他为250万美元。
看看其余的损益表。 2019财年第四季度持续运营的SG＆A费用为2030万美元，占收入的23％，而SG＆A费用为1530万美元，占2018财年第四季度收入的13％.SG＆A的增长主要归功于独联体固定资产减值费。我们的Quantix和AV DSS解决方案的采用率比我们预期的要慢。在第四季度，我们降低了单位销售的未来前景，并且由于较低的预测，Quantex和AV DSS固定资产的减值费用为440万美元。
Equity method investment activity net of tax for the fourth quarter of fiscal 2019 was the loss of $1.9 million or $0.08 per diluted share, compared to a loss of $0.9 million net of tax for the fourth quarter of fiscal 2018. Net income from continuing operations attributable to AeroVironment for the fourth quarter of fiscal 2019 was $6.1 million or $0.26 per diluted share, compared to a net income from continuing operations attributable to AeroVironment of $19 million or $0.79 cents per diluted share for the fourth quarter of fiscal 2018. The net loss from discontinued operations net of tax for the fourth quarter of fiscal 2019 was $0.4 million, compared to a loss from discontinued operation net of tax of $2.2 million for the fourth quarter of fiscal 2018.
Now moving through to our full year fiscal 2019 results. Revenue for fiscal 2019 was $314.3 million, an increase of $45.9 million as compared to $268.4 million for fiscal 2018. The increase in revenue was due to an increase in service revenue of $25.5 million and an increase in product revenue of $20.4 million. The inception to date revenue for HAPSMobile is $77.5 million. The total value of all contracts with HAPSMobile is $133.4 million which consists of $125.7 million for the design development agreement and $7.7 million for preliminary design and other related efforts.
There is $55.9 million remaining on these contracts which includes a portion that is currently unfunded. Gross margin for fiscal 2019 was $128.4 million or 41% of revenue as compared to $107.7 million or 40% for fiscal 2018. The increase was due to an increase in product margins of $16.3 million and an increase in service margins of $4.1 million.
Gross margin as a percentage of revenue increased from 40% to 41% primarily due to a favorable product mix, partially offset by unfavorable service mix and an increase in CIS inventory reserve charges. SG&A expense for fiscal 2019 was $60.3 million or 19% of revenue compared to SG&A expense of $50.8 million or 19% of revenue for fiscal 2018. The increase in SG&A was primarily due to a $4.4 million excessive impairment charge in our CIS business and expenses related to the transition services agreement from the buyer of the EES business.
R&D expense for fiscal 2019 was $34.2 million or 11% of revenue compared to R&D expense of $26.4 million or 10% of revenues of fiscal 2018. Net other income for fiscal 2019 was $16.7 million compared to the prior year net other income of $2.2 million. The net other income increase was primarily due to a litigation settlement, income earned under the transition services agreement from the buyer of the EES business and an increase in interest income. The effective income tax rate from continuing operations was 9.2% for fiscal 2019 as compared to an effective income tax rate of 30% for fiscal 2018. The effective income tax rate for fiscal 2019 included the impact of a one-time deferred tax expense resulting from re-measurement of our existing deferred tax assets and liabilities of $3.3 million. The decrease in the effective income tax rate was also due to the reduction in the fiscal 2019 federal statutory rate from 30.4% to 21%.
现在转到我们2019财年的全年业绩。 2019财年的收入为3.143亿美元，比2018财年的2.684亿美元增加了4590万美元。收入的增长是由于服务收入增加了2550万美元，产品收入增加了2040万美元。 HAPSMobile迄今为止的收入为7750万美元。与HAPSMobile签订的所有合同的总价值为1.334亿美元，其中包括设计开发协议的1.257亿美元和初步设计及其他相关工作的770万美元。
Equity method investment activity, net of tax for fiscal 2019 was a loss of $3.9 million or $0.16 per diluted share, compared to a loss of $1.3 million net of tax for fiscal 2018. The increased loss was due to an increase in ownership in the HAPSMobile joint venture from 5% to 10% and higher investments made by the HAPSMobile joint venture. Net income from continuing operations attributable to AeroVironment for fiscal 2019 was $41.9 million or $1.74 per diluted share, compared to $21.8 million or $0.91 per diluted share for fiscal 2018.
Net income from discontinued operations net of tax for fiscal 2019 was $5.5 million or $0.23 per diluted share, compared to a loss from discontinued operations net of tax of $3.9 million for fiscal 2018 or a $0.16 per diluted share. Fiscal 2019 included an $8.5 million gain net of tax on the sale the EES business. Our funded backlog as of April 30, 2019 was $164.3 million, a decrease of $100,000 from the fourth quarter of fiscal 2019 and an increase of $31.8 million or 24% from the third quarter of fiscal 2019 backlog of $132.5 million.
Turning to our balance sheet. Cash, cash equivalents and investments at the end of the fourth quarter fiscal 2019 totaled $332.6 million, an increase of $34.8 million from the end of fiscal 2019 cash, cash equivalents and investments of $297.8 million. Net accounts receivable including unbilled receivables and retention at the end of the fourth quarter fiscal 2019 totaled $84.1 million. The unbilled receivables and retention balance was $53 million inclusive of $9 million of related party amounts. Total day sales outstanding from continuing operations for the fourth quarter of fiscal year 2019 was approximately 87 days, compared to 49 days for the fourth quarter fiscal year 2018,
Net inventory at the end of the fourth quarter fiscal year 2019 was $54.1 million, compared to $37.4 million at the end of the fourth quarter fiscal year 2018. Days in inventory outstanding for the fourth quarter fiscal year 2019 was approximately 92 days, compared to 63 days for the fourth quarter of fiscal year 2018. Accounts payable at the end of the fourth quarter fiscal year 2019 was $16 million, compared to $21.3 million at the end of the fourth quarter of fiscal year 2018. Total days payable outstanding for the fourth quarter of fiscal year 2019 was approximately 24days, compared to 23 days for the fourth quarter of fiscal year 2018.
Turning to capital expenditures. In the fourth quarter of fiscal year 2019, we invested approximately $2.1 million in property improvements and capital equipment for continuing operations and recognized $2.1 million of depreciation and amortization expense. Now an update to our fiscal 2020 visibility. As of today, we have fourth quarter ending backlog that we expect to execute in fiscal 2020 of $152 million. Q1 quarter-to-date bookings that we anticipate to execute in fiscal 2020 of $29 million. Unfunded backlog from incrementally funded contracts that we anticipate to recognize revenue during the balance of the year of $16 million. This adds up to $197 million or 55% of our fiscal year 2020 midpoint revenue guidance range.
We anticipate a full year effective tax rate in the range of 11% to 12%. Now I'd like to turn things back to Wahid.
Thanks Teresa. We have now delivered double-digit top-line growth for two years in a row. The large majority of government fiscal year 2019 appropriations totaling nearly $200 million for our solutions is not reflected in our fiscal year and funded backlog. These expected orders support our continued growth in fiscal year 2020. Government fiscal year 2020 appropriations for our solutions are slightly lower than they put in the previous year, but still very high compared to our historical trends.
We expect tactical missile systems and small UAS to drive growth in fiscal year 2020. We expect a shift in revenue mix in our fiscal year 2020 that will result in lower gross margins than in fiscal year 2019. Additionally, we do not anticipate another one-time gain similar to the litigation settlement we benefited from last year. We do, however, expect continued double-digit growth in revenue reflecting the large market adoption potential for our business to between $350 million and $370 million. This would mark the third consecutive year of double-digit strong revenue growth.
Our 55% visibility into the midpoint of our revenue guidance range is almost equal to last year's visibility at this time in the fiscal year. And is much higher than visibility at this point in prior years. With lower gross margin and no expectation of litigation settlement gain, we expect GAAP diluted earnings per share for fiscal year 2020 of $1.35 to $1.55. This compares to our fiscal year 2019 GAAP diluted earnings per share of $1.74 which included $0.26 diluted earnings per share for the litigation settlement gain. Adding the acquisition related expenses and amortization of intangibles associated with the Pulse Aerospace acquisition, adjusted non-GAAP diluted earnings per share equals $1.47 to $1.67.
As a reminder, we expect the Pulse Aerospace acquisition to be accretive to earnings by the third full year of operations and increasingly thereafter. We expect internal research and development investments to total 11% of revenue this fiscal year. Similar to fiscal year 2019, we expect revenue distribution to be roughly balanced between our first and second halves and within their associated quarters. Last quarter, we communicated our expectations that unbilled receivables would decline in coming months. We expect an increase in TMS shipments that were already recognized as revenue under the ASC 606 accounting standard.
This increase in shipments should result in a decline in unbilled receivables in the first half of this fiscal year. Once again, today's main messages are. First, our team delivered outstanding results in fiscal year 2019 across nearly every aspect of our business. Second, we achieve great progress and our growth initiatives and third we continue to successfully transform AeroVironment to achieve our long-term value creation objectives. Thank you to all our AeroVironment team members including our newest colleagues in New England and Lawrence, Kansas, for your engagement and dedication to supporting our customers.
我们预计战略导弹系统和小型无人机系统将推动2020财年的增长。我们预计2020财年的收入组合将发生转变，导致毛利率低于2019财年。此外，我们预计不会有另一个 - 时间收益类似于我们从去年获益的诉讼和解。然而，我们预计收入将继续保持两位数增长，这反映出我们的业务市场采用潜力巨大，达到3.5亿至3.7亿美元。这将是连续第三年实现两位数的强劲收入增长。
作为提醒，我们预计Pulse Aerospace的收购将在第三个全年的运营中增加收益，并且此后将逐渐增加。我们预计本财年内部研发投资占总收入的11％。与2019财年类似，我们预计收入分配将在我们的第一和第二半之间及其相关季度内大致平衡。上个季度，我们传达了未来几个月未开单应收账款将下降的预期。我们预计TMS出货量的增加已经被ASC 606会计准则确认为收入。
Thank you to our customers for continuing to entrust us with providing you the capabilities to help you proceed with certainty. And thank you to our shareholders for your continued confidence. Now Teresa, Steve and I will take your questions.
感谢我们的客户继续委托我们为您提供帮助您确定性的能力。 并感谢股东们对您的信心。 现在，特蕾莎，史蒂夫和我将接受你的提问。
Thank You, Wahid. We will now begin the question-and-answer session. But before we do just a couple of things. Number one, we realize that we've just given you a lot of information and we've done that on purpose because at the end of the year we want to make sure we have the opportunity to share as much as possible with you. We also realized that many of you do many of these calls on a multi day basis and we really realize how hard that can be. And many of you are probably multitasking while you do this. So we asked one thing before we get into Q&A, let's everybody just take a breath; let's be present and let's have a conversation.
谢谢，瓦希德。 我们现在开始问答环节。 但在我们做几件事之前。 第一，我们意识到我们刚刚给了你很多信息，而且我们是故意这样做的，因为在年底我们希望确保我们有机会尽可能地与你分享。 我们也意识到你们中的许多人在多天的基础上做了很多这样的电话，我们真的意识到这有多难。 当你这样做的时候，很多人可能都是多任务处理。 所以在我们进入Q＆A之前我们问过一件事，让大家都喘不过气来; 让我们在场，让我们进行一次对话。
And we will start with Ken Herbert from Canaccord. Ken, welcome.
我们将从Canaccord的Ken Herbert开始。 肯，欢迎。
Hi, Steven. Good afternoon, Wahid and Teresa. Hi, I just wanted to first ask about HAPS and it sounds like from your commentary, Wahid that the revenues you might recognize from HAPS in fiscal 2020 could be may be flat to down slightly if we look at what you did this year just considering some of the mix comments around strengthened in small UAS and TMS. And I'm just wondering if you could provide a little more granularities on expectations perhaps in particular. And then within that what we should be watching out for in terms of some of the important milestones and where you are with the flight test aircraft and anything else you can detail around progress on that program?
嗨，史蒂文。 下午好，瓦希德和特蕾莎。 嗨，我只是想先问一下HAPS，这听起来像你的评论，Wahid，如果我们看一下你今年所做的事情，你可能会在2020财年从HAPS中认识到的收入可能会持平或略有下降 在小型UAS和TMS中加强了评论。 而我只是想知道你是否可以提供更多关于期望的粒度，特别是。 然后我们应该注意一些重要的里程碑，以及你在飞行试验飞机和其他任何你可以详细说明该计划进展的细节？
Sure. So your general conclusions are roughly accurate based on what we provided the comments. We expect the majority of the growth -- for the year-over-year to come from our small UAS and TMS business. As you know, our HAPS business has an exciting large opportunity for the long run. We are on the design, development and demonstration phase of this which we generated so far about $126 million worth of backlog or orders. And the revenue between fiscal year 2019 and fiscal year 2020 will be roughly the same. Obviously, this is a customer funded development work, which is primarily doing work to design and develop and demonstrate the aircraft
Beyond that as you know, we have publicly said that we rolled out the first aircraft and obviously there's a lot more of ground testing and flight testing to come later as part of this exercise. And then of course, we are planning on eventually certifying the airplane and then getting into what I've referred to as a business launch and production which means producing these in volumes and scaling the business in the commercial market. We still believe this is a very large, significant large global opportunity for us. Our partners, SoftBank and we are very excited about this. That's why we have continued to increase the value of the contract and keep growing more business in this area and progressing our strategy.
And of course there are lots of other value creation opportunities I outlined in my remarks on the call earlier. And very exciting for us to pursue this in the long run.
当然。因此，基于我们提供的评论，您的一般结论大致准确。我们预计大部分增长 - 与去年同期相比来自我们的小型UAS和TMS业务。如您所知，从长远来看，我们的HAPS业务有一个令人兴奋的大机会。我们正处于设计，开发和示范阶段，到目前为止我们已经产生了大约1.26亿美元的积压或订单。 2019财年和2020财年之间的收入大致相同。显然，这是一项由客户资助的开发工作，主要负责设计，开发和演示飞机
Great. And if I could just one follow-up on that. I think you mentioned in your prepared remarks that a portion of the give or take $56 million remaining was not yet funded or was partially unfunded. Can you talk about maybe what percentage of that is? And is there any risk around timing of that getting funded obviously through the partnership?
非常好。 如果我可以只对其进行一次跟进。 我想你在准备好的评论中提到剩下的5600万美元的部分还没有资金或部分没有资金。 你能谈谈这个百分比是多少吗？ 通过合作伙伴关系获得资金的时机是否有任何风险？
Sure. So I just provided that to make sure that we're very clear on specifics. Generally speaking, I --we're not expecting any surprises or issues there in my view and our view. It's just natural -- nature of such a contract when you're working on a large complex program in long-term development effort that you have certain milestone as you complete that you release the next phase and next phase and the next step in the milestone of the contract. So majority of that is really funded but there's some portion that it's always that may be or may not be unfunded in that regard. Other than that we are very pleased with our progress so far. This is historic in my view that we've been able to deliver the first airplane in less than two years from the start of this effort.
We and both our strategic partners are very convinced and committed about the performance characteristics of the airplane. And its ability to compete in the marketplace for a multibillion-dollar global market. And we look forward to updating you in the future.
当然。所以我只是提供了这一点，以确保我们对细节非常清楚。一般来说，我 - 我不认为在我看来和我们的观点中有任何意外或问题。当您在长期开发工作中处理大型复杂程序时，这是一种自然 - 这种合同的性质，当您完成下一阶段和下一阶段以及里程碑的下一步时，您有一定的里程碑合同因此，大部分资金都是真正的资金来源，但有一部分在这方面总是可能会或可能没有资金。除此之外，我们对目前的进展感到非常满意。我认为这是历史性的，我们已经能够在不到两年的时间内完成第一架飞机。
And our next question will come from Pete Skibitski at Alembic Global. Pete?
我们的下一个问题将来自Alembic Global的Pete Skibitski。皮特？
Yes, good afternoon, guys. Thanks. Let me start with on the fiscal 2020 guidance. Can you share with us how much Pulse is going to contribute to revenue in fiscal 2020? And then you mentioned that small UAS and TMS would be the growth drivers in 2020. Is TMS going to grow the most because it came in a little later than I thought for fiscal 2019? So it seems like maybe there's still a lot of inappropriate funds out there for TMS.
伙计们，大家下午好。 谢谢。 让我先谈谈2020财年的指导意见。 您能与我们分享一下，在2020财年，Pulse将为收入贡献多少？ 然后你提到小型无人机系统和TMS将成为2020年的增长动力.TMS是否会增长最多，因为它比我在2019财年的预期要晚一点？ 所以似乎TMS还有很多不合适的资金。
Sure. So first, we're very pleased with the results that we delivered for fiscal year 2019 with the double-digit second consecutive year of growth on the top-line and very solid performance in the bottom. Second, we're fortunate to have such a diversified portfolio of business and opportunities that allows us to lever different parts of our business depending on the markets and the customer situation and the timing of those orders. As I mentioned on my remarks, the Pulse Aerospace acquisition really is a technology and product acquisition. It's really less about a revenue multiple or our existing profitability, multiple acquisition in terms of valuation.
We are --it has basically are acquiring a whole family of vertical takeoff and landing systems that complements our small UAS very, very well. We have already secured IDIQ contract approximately over $13 million in the Pulse business and since that acquisition we have secured two of the task orders for that. The revenue for this business is going to be not significant for fiscal year. We do not break our revenue down to that level of product lines. Teresa outlined, we break them down to by different product families, small UAS being one and the Pulse revenue will be reported under the small UAS category for us starting in fiscal 2020 and beyond.
So essentially you can think of the Pulse product line as part of our small UAS family system and future.
我们 - 基本上已经收购了一整套垂直起飞和着陆系统，非常非常好地补充了我们的小型无人机系统。我们已经在Pulse业务中获得了大约1300万美元的IDIQ合同，自那次收购以来，我们已经获得了两个任务订单。这个业务的收入在财政年度并不重要。我们不会将收入降低到产品线的水平。 Teresa概述，我们将它们分解为不同的产品系列，小型无人机系统为1，Pulse的收入将在2020年及以后开始的小UAS类别下报告。
Okay, sounds great. And then on the TMS, again is TMS going to be your growth leader in fiscal 2020?
Sure. As I said, absolutely both TMS and CIS are both areas that are going to generate growth to increase our growth top-line growth for the third consecutive year with double-digit numbers. We're very pleased with these guidance expectations that we have out of our business. We feel very strongly about the position that we have in the market and the amount of demand that there is exist in our products both domestically internationally. It's very exciting to see that across our portfolio there seems to be very strong demands across the globe for our types of solutions and products.
And I'm very pleased with the results of our teams and execution in the last fiscal year. And we're looking forward to update you in fiscal 2020 as we go forward.
当然。 正如我所说的那样，TMS和CIS这两个领域都是能够实现增长的领域，它们连续第三年以两位数的数字增长我们的增长收入增长。 我们对业务中的这些指导期望感到非常满意。 我们非常强烈地感受到我们在市场中所处的地位以及我们的产品在国内的国际需求量。 非常令人兴奋的是，在我们的产品组合中，我们对各类解决方案和产品的需求似乎非常强烈。
And our next question comes from Joe De Nardi at Stifel Nicolaus. Joe?
我们的下一个问题来自Stifel Nicolaus的Joe De Nardi。乔？
Hey, good afternoon. Steve, thanks for setting the tone for the call. Just another one HAPS, it seems like you guys have decent visibility now kind of over the next few years in terms of maybe the revenue profile as you transition from production to certification and flight testing. So can you just talk about -- should our expectation be that HAPS revenue is roughly flat for the next few years before larger scale production or are you expecting the kind of the ramp up in production to occur sooner than that?
嘿，下午好。 史蒂夫，谢谢你为这个电话设定了基调。 只是另外一个HAPS，在您从生产过渡到认证和飞行测试时，您可能会在接下来的几年内获得良好的可见性。 那么你能不能谈谈 - 我们的期望是，在大规模生产之前的未来几年，HAPS的收入是否大致持平，或者你是否预计生产的增长会比这更早发生？
Sure, Joe. So, as I said, we are in a multi phase of pursue of this very large multi-billion dollar global market opportunity. This is a very exciting capability that is uniquely compelling to us and both our strategic partner. We are really focus on this phase of the activity or effort and the business plan which is make two airplanes, designed these airplanes and demonstrate the capability, which we intend to complete that within this phase of this project. Our partner SoftBank and we both feel very confident and pleased with our progress so far. And obviously, this is not an easy task and an easy achievement. It's never been done before type of effort as you see.
And beyond this step, we expect to obviously ramp up as I mentioned on my remarks that producing a few more airplanes because you need more airplanes for the testing and certification phase. During that time, we will be obviously assessing the business and assessing the prospects of the future with our partner and will inform you of the updates that we provide. As far as fiscal year 2020 is concerned, we expect this business again to execute the strategy that we have and very pleased with the top-line growth that we're going to be delivering hopefully this year as well.
Okay and then just on the acquired business. I mean you guys have had plenty of cash for a while. I'm sure a number of opportunities to engage in a decent-sized M&A like this and you haven't pulled the trigger really until now. The deal being earnings accretive by year three isn't super compelling from where we stand. So can you talk about what's so attractive about it from your point of view? Thank you.
好的，然后只是收购业务。 我的意思是你们有一段时间有足够的现金。 我确信有很多机会可以参与像这样规模不错的并购，直到现在你还没有真正触发过。 这笔交易在第三年增加盈利并不是我们所处的超级引人注目的。 那么从你的角度来看，你能谈谈它的吸引力吗？ 谢谢。
Sure, of course. Joe, that's a great question. So I'm very excited and so is our team about the acquisition of Pulse product line and the assets. I really consider this a strategic product and technology acquisition, not necessarily an immediate or current revenue or profitability multiple acquisition. So that's number one. Number two, we are essentially getting a whole family of systems, Pulse Aerospace has multiple, different products in the Vapor family of VTOL helicopters. If a Vapor 15, 35, 55 and 65 with the whole integrated solution set.
We believe that this is a naturally perfect tuck-in and expansion in addition towards existing world meeting small UAS family of systems obviously mostly fixed-wing. So our customers will benefit from this in terms of more mission critical objectives being accomplished with the teaming of these two solutions and products. We can use our distribution channels globally with 45 plus countries around the world to sell a lot more of this. And as you all know, developing a product internally will easily take at least a couple years if not more than that to come to fruition.
So in our view this is a long-term strategic acquisition that strengthens our portfolio, delivers more value to our customers and certainly delivers a lot of value long term in terms of our shareholders interests as well. We're very excited about that and we're also expanding our talent based, engineering talent base in the Midwest with opening that Innovation Center and Lawrence, Kansas. So, all-in-all, we're very pleased with this acquisition and we believe that this is going to deliver a lot of value long term for our shareholders.
当然，当然。乔，这是一个很好的问题。所以我非常兴奋，我们的团队也非常兴奋收购Pulse产品线和资产。我真的认为这是一项战略产品和技术收购，不一定是立即或当前的收入或盈利能力的多重收购。这是第一名。第二，我们基本上获得了一整套系统，Pulse Aerospace在VTOL直升机的Vapor系列中拥有多种不同的产品。如果Vapor 15,35,55和65与整个集成解决方案设置。
Our next question comes from Troy Jensen from Piper Jaffray. Troy?
我们的下一个问题来自Piper Jaffray的Troy Jensen。特洛伊？
Hey, thanks, Steve. And congrats on a nice result, team. Hey, so, Wahid, how about for you furnish and you touched on this a little bit in your prepared remarks, but it looks like US defense spending on UAV is going to have a down year. I guess do you really think that's true for AeroVironment? I know you guys have always talked about coming up with new variants, new products to sell a different US defense agency. So just some more detailed thoughts on US defense strategy.
嘿，谢谢，史蒂夫。 并祝贺团队成绩不错。 嘿，所以，Wahid，你准备好了怎么样，你在准备好的言论中稍微触及了一下，但看起来美国在无人机上的国防开支将会有一个下降的一年。 我想你真的认为AeroVironment是真的吗？ 我知道你们一直在谈论提出新的变种，新产品来销售不同的美国国防机构。 所以只是对美国国防战略的一些更详细的想法。
Sure, of course. First of all, so first of all the year-to-year comparison certainly is slightly down not up, not a significant amount down but slightly down compared to fiscal 2019. But we got to keep in mind that fiscal year 2019 and 2020 in comparison to our historical averages is far greater than several years before that or as far as I've been to the company. So that's an important point to point out and I mentioned that in my remarks. Secondly, the demand drivers for business across the board overall at a macro level is very strong. More and more the feature is unmanned systems and robotics. We are very uniquely positioned at the technology solution provider at the intersection of these four features of finding technologies. Obviously, robotics and UAVs being one of them. Sensors, software analytics and connectivity.
So this is all very positive and encouraging for our small UAS. And needless to say this is just one of our portfolios of diversified growth initiatives. We have small UAS that's contributing to our financials. We have our TMS business. We have our HAPS business. So we're very fortunate to have a pretty diverse portfolio of products, revenue and customer base globally that complements our business. And overall, I don't consider the UAV budget slight decline from 2019 to 2020, a negative at all. I consider that it's still a very positive relative to historical levels.
Right, perfect. How about a couple here for Teresa quick. Just on the guidance here to the EPS. I think you said the tax guidance was 11% to 12% and I just want to make sure it's non-GAAP. And then what you reassume for other income?
对，完美。 这对Teresa的一对夫妇怎么样？ 只是在这里指导EPS。 我想你说的税收指导是11％到12％，我只是想确保它是非GAAP。 然后你重新获得其他收入？
So, Troy, yes the tax rates that we have in is 11% to 12% for fiscal 2020 and your other question was what about other range of --
Yes. Other income what does your EPS guidance assumes in your model or what should we be modeling?
We didn't provide guidance per se on the other income. In fiscal 2019, we had the one time litigation settlement. We also had the transition services from the buyer of our EES business, were the two drivers along with our interest income.
我们没有就其他收入提供指导。 在2019财年，我们有一次诉讼和解。 我们还有来自EES业务买家的过渡服务，这两个驱动因素以及我们的利息收入。
And our next question will come from Louie DiPalma with William Blair. Hello, Louie?
我们的下一个问题将来自Louie DiPalma和William Blair。 你好，路易？
Good afternoon, Wahid, Teresa and Steve. What is your degree of confidence that you will win short range reconnaissance orders in the context of how there seems to be an incredibly large number of contenders and AeroVironment at least prior to the Pulse Aerospace acquisition historically is not specialized in VTOL systems?
Sure. So, Louie, first and foremost, we're fortunate to have a diversified portfolio of businesses and growth opportunities that allows us to deliver strong results year after year, and have strong demand drivers across our businesses. Number two, in relates -- in relationship to SRR, as I mentioned in my remarks, there was a very small down select small award by DIU which we would not select it on that. That does not mean that we're not engaged with that customer. We're actually very engaged with that customer. We've tracked that opportunity and engage with the customer quite closely. And we stand ready to compete in the future and we'll obviously keep you updated on that.
And the same token, let's keep in mind that the overall DoD requirements and budget dollars for all types of solution and specifically in most cases calling out our product specifications or names even is quite robust for fiscal year 2020. And so we are very pleased with those demand drivers. We are very pleased with our fiscal 2019 results and fiscal 2020 of course will be the third consecutive year of double-digit top-line growth and very healthy profitability in bottom line. The fact that there are more competitors in the space is really not new news to us at all. We've been competing in the space for a very long time very successfully. We have a very high win rate.
We, obviously, do not have a 100% market share but that doesn't mean that we're not going to continue to compete and stand ready to win opportunities in the future.
Okay and I miss this but what was the year-over-year growth rate for the International small UAS for the quarter?
So, Louie, you're asking a small UAS, international small UAS quarter-to-quarter, so in the fourth quarter we had $35.9 million of revenue versus $46.5 million in fiscal 2018. On a full-year basis though we were at $107.7 million of small UAS international revenue versus $96.7 million in 2018. So it grew 11.5%.
Okay and you guys have commented regarding this international small UAS that it still seems to be in the very early innings. And I think last year you signed your largest order ever for the Puma in the Middle East. Are there any other data points that you could provide to give us some sense of the penetration for like international small UAS and how your Puma and Raven stack up relative to the competitors internationally?
好吧，你们有人评论过这个国际小型UAS，它似乎仍处于早期的局面。 而且我认为去年你签下了有史以来最大的中东彪马订单。 是否还有其他数据点可以让我们了解国际小型UAS的渗透情况以及您的Puma和Raven在国际上相对于竞争对手的情况如何？
So, Louie, that's a great question. As I said on my remarks, we continue to grow our international footprint and small UAS very successfully and very well throughout the last several years. Our international business in terms of top-line growth as you've seen has grown significantly. But so has the number of customers and the geographies that we're expanding into. Secondly is that I believe that our international markets are still five plus years, maybe 5 to 40 years in many cases behind the adoption cycle of the US first generation systems. And in majority of those countries, we have the ability and the opportunity to expand our portfolio and increase our share of that customers overall spend and the DoD budgets.
How large that is and how big could it be? Time will tell number one. Number two, overall the demand drivers are very healthy. Also due to customer sensitivity and competitive reasons, I'm not in a position to be able to disclose specifics of our engagements with each customer. But as you saw from my remarks, our portfolio customers, our diversification geographically as well as our solutions, their penetrations within those customers are pretty strong. And it speaks volumes to these -- the value proposition and the compelling capabilities of our solution that's helping our customers to proceed with certainty.
它有多大，有多大？时间会告诉第一。第二，整体需求驱动因素非常健康。此外，由于客户敏感性和竞争原因，我无法向每位客户披露我们的业务细节。但正如您从我的评论中看到的那样，我们的投资组合客户，我们在地理上的多元化以及我们的解决方案，他们在这些客户中的渗透力非常强。它说明了这些 - 我们的解决方案的价值主张和引人注目的功能，帮助我们的客户确定性。
Next we have a follow-up question from Pete Skibitski at Alembic Global. Go ahead, Pete.
接下来我们来自Alembic Global的Pete Skibitski的后续问题。 来吧，皮特。
Yes, thanks guys. Wahid, can you talk a little bit about whether the US Army is doing UAVs with this air launch effects kind of I guess it's kind of an SMT effort and your potential role there? And then how much are you guys spending on things like autonomy in AI? It seems like that's becoming more important at least domestically? I just want to get your thoughts on those two areas.
是的，谢谢你们。 瓦希德，你能谈谈美国陆军是否正在使用这种空中发射效果做无人机，我想这是一种SMT的努力以及你在那里的潜在作用？ 然后你们花了多少钱在人工智能的自治方面呢？ 看来这至少在国内变得越来越重要了？ 我只想对这两个方面有所了解。
Sure, Pete. In terms of the US Army and the whole DoD's overall approach to UAS, as I've said in several quarters and two-plus years now, I believe that the overall macro trends in that space is very positive. More and more systems are going to become unmanned and robotic systems and solutions integrated with ground systems are also going to increase. And we're fortunate to be that intersection of those four future deployment technologies as I said number one. Number two, we also have the ability to expand our market, addressable market with new announcements and [teaming] of existing platforms as I mentioned.
So general dynamics land systems and Kratos are two examples that are specific that you refer to is essentially a program that we're working with a potential program that Kratos Corporation where our solution is going to be essentially included as part of a larger unmanned, supersonic or hypersonic s unmanned UAV that carries Switchblade and other capabilities deep into the contested environments of enemy and then it actually launches and delivers mission effects that really in the past have never been done before. These types of solutions and partnerships speak to the potential opportunities in the space and the ability for solutions to really deliver a lot more value to our customers' missions.
And that's just one aspect of our macro demands and opportunities in our market. The other thing is also US Army and many other customers are coming up with new requirements for new type of systems and solutions such as SBS and SRR and LR and all that. And we're tracking all of those and will engage with them and we'll keep you updated.
Okay. Now last question will come from Joe De Nardi, a follow up question from Joe De Nardi of Stifel. Go ahead, Joe.
好的。 现在最后一个问题将来自Joe De Nardi，来自Stifel的Joe De Nardi的后续问题。 来吧，乔。
Yes, thanks. Wahid, can you just talk about what the customer is saying around Switchblade in terms of wanting to possibly deploy it more broadly across the force? Is that still a conversation? What are you hearing in terms of a competition, a formal competition for that program? What's the latest there?
对了谢谢。 Wahid，你能谈谈客户对Switchblade的看法吗？想要在整个部队中更广泛地部署它？ 那还是谈话吗？ 您在竞赛方面听到了什么，正式竞争该计划？ 最新的是什么？
Sure. So we're very pleased with the progress we've been making on our tactical missile systems business as you know in terms of revenue growth and demand and value proposition to our customers. We continue to engage with our customer on the Switchblade, the original Switchblade I referred to. Adoption and potential larger penetration and deployment within the Army and larger forces. That remains to be a discussion point and an interest of our US Army customer and our customer in general. The timing of which is really unpredictable. I won't be able to give you any more visibility to that in that specific relationship. However, I did mention in my remarks, a new variance, very exciting new variance which is being co-funded by us and one of our customers that essentially is the larger version of our Switchblade that goes further, has a longer endurance, covers more geography and carries a significant larger warhead.
This variant which we worked actively in the development phase right now is significantly going to increase the mission effects and the types of solutions -- problems that our customers are trying to solve with our solution. We believe that our small UAS was a pioneering capability in a small UAS and we believe the same thing in our tactical missile systems business in a similar way. So we're making really good progress on that development and we'll keep you updated as we have more updates on that front.
Overall, you could see in the DoD budgets for government fiscal year 2019 and 2020 there's significant dollars for original Switchblade and majority of which is not reflected in our backlog and visibility number so far. I'd like to also point out, I'm sorry Joe, Pete's earlier question I did not get a chance to answer his second part of his question. Peter which was about AI. What are we doing in that area? As I mentioned in my remarks, that's a really important point. We have been and we continue to invest heavily in the AI category. As I've I said previously we are at the intersection of this four future deployment technologies, very exciting and connectivity software analytics. AI, artificial intelligence is a very critical component of all solutions even today, as well as in the future.
We've got a lot of investments in that area which we believe is going to further differentiate us from competition and enable our customers to do a lot more missions and deliver more value to them. And as we make progress we'll keep you updated.
End of Q&A
我们现在在开发阶段积极工作的这种变体将显着增加任务效果和解决方案的类型 - 我们的客户试图通过我们的解决方案解决的问题。我们相信我们的小型无人机系统是小型无人机系统的先锋能力，我们在战术导弹系统业务中也以类似的方式相同。所以我们在这个开发上取得了很好的进展，我们会随着时间的推移更新，因为我们在这方面有更多的更新。
So with that as we have no further questions. We thank you all for spending a good chunk of your afternoon or evening with us as the case may be. We appreciate your interest. An archived version of this call, all SEC filings and relevant company and industry news can be found our website avink.com. And of course we look forward to speaking with you again following next quarter's results. Good day.
因此，我们没有其他问题。 我们感谢大家在下午或晚上与我们共度美好时光。 感谢您的关注。 该电话的存档版本，所有美国证券交易委员会的文件以及相关的公司和行业新闻都可以在我们的网站avink.com上找到。 当然，我们期待在下一季度的结果之后再次与您交谈。 美好的一天。
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