AeroVironment Inc.

May 2020 181 W. Huntington Drive, Suite 202 Philip Finnegan Monrovia, CA 91016 Director, Corporate Analysis Tel: (626) 357-9983 (703) 385-1992 ext. 105 Fax: (626) 359-9628 [email protected] Internet: www.aerovironment.com

Analytical Overview Strategy: AeroVironment has made Army ID/IQ task order dollars in The company is known for having a key breakthroughs in building up mini-UAS since December 2012. strongly innovative corporate cul- new business opportunities as it de- ture. Management has been aggres- AeroVironment's reputation and cus- velops the next generation of mini- sive in ensuring that proposals have tomer intimacy give it a position in UAS systems and enters the low cost, the backing they need to win compe- US military mini-UAVs that make it long-endurance market. titions. challenging for any competitor to The company's strategy is to main- displace. The large inventories of its The company’s size appears to have tain its position as the dominant pro- existing systems make it difficult to been a strong advantage so far, ena- ducer of mini UAS for the US mili- purchase competitors' UAVs, which bling it to be nimble while maintain- tary while building a greater market require different training and logis- ing low overhead. It has repeatedly position in international, law en- tics. beat larger UAS companies to win all forcement, homeland security and five Department of Defense mini The company has done a good job of other civil UAS. It is also seeking to UAV programs of record. developing its product portfolio. The broaden its product range with a company has worked to develop its AeroVironment has a strong balance commercial UAS service and is UAS to be reliable and easy to use, sheet with no debt and considerable working with Japan's Softbank to de- with a common interface for multiple cash, short and long-term invest- velop a high-altitude, long-endur- UAS including the Puma, the Raven, ments. ance solar-powered UAS. and the Wasp. It also has worked to Weaknesses: AeroVironment's Strengths: AeroVironment has the ensure that they are designed with UAV business remains heavily de- enviable position of being an ex- manufacturing in mind. pendent on the US government with tremely strong competitor within the The company has been extremely 54% of sales going to the US govern- mini-UAS market space. successful in maintaining high levels ment in fiscal 2018. It has won five Department of De- of company-funded research and de- The company has intense interna- fense mini UAS programs of record velopment as well as customer- tional competition. Competitors such and it has gotten more than 90% of funded research. as with its Skylark are

Operating Income/Revenue Comparison

Income from Operations Revenue Operating Margin 14% $45 $400 Years ($ Millions) ($ Millions) $40 12% $35 $350 10% $30 $300 $25 8% $20 6% $250 $15 4% $10 $200 2% $5 $0 $150 0% 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 2 proving to be tough competition out- on an IDIQ contract that will enable red, targeting, geospatial intelli- side the United States. it to provide the US military with its gence, hyperspectral imagery, and Lethal Miniature Aerial Munition communications relay. The company is finding it difficult to System. AeroVironment already is move into micro UAVs. FLIR Sys- Miniaturization of payloads also of- selling its Switchblade, a man-porta- tems is providing to be its leading fers potential to increase the useful- ble, lethal mini UAV. The Switch- competitor in these extremely small ness of AeroVironment's UAVs. blade loitering munition offers po- systems. New payloads could be added as well tential as a UAV that can hit its target such as synthetic aperture radar for Barriers to entry are much lower for with limited collateral damage. The the Puma. mini-UAS than for larger systems. UAV is configured so that it can be As a result, many countries are seek- scaled up to attack larger targets such Deliveries of Puma have rapidly in- ing to build their own systems. as vehicles rather than just troops. creased in recent years with deliver- ies to US Special Operations Com- The company's ability to predict fu- In addition, the US military is now mand. ture sales and profitability are lim- planning new procurement programs ited. The nature of the company's that AeroVironment is pursuing. US homeland security sales are business tends to be more uncertain They include the Army Soldier promising over the long-term alt- than other defense companies be- Borne Sensor and the Short Range hough near term they remain uncer- cause it is difficult to predict the rate Reconnaissance programs. tain due to restrictions on the use of of adoption of its systems, some of UAS in civil aerospace. For the Army Soldier Borne Sensor which are new and revolutionary. It program, AeroVironment is offering AeroVironment has been working on is also dependent on a relatively nar- its Snipe, a nano UAS the size of a penetrating the low-cost, high-alti- row range of military products and, cell phone that can be worn on a sol- tude, long-endurance UAS market an noted, is heavily dependent on the dier's uniform. The Snipe uses the also known as High Altitude Pseudo US military budget. small control station as the other mini Satellites (HAPS). HAPS offers con- Opportunities: The divestiture of UAS built by AeroVironment. siderable potential to provide persis- the company's electric car charging tent surveillance and communica- The prospect of creating families of business makes the company a pure- tions coverage at any point on the systems for customers is an attractive play UAS company. That will enable globe at a fraction of the price of sat- opportunity for AeroVironment. management to focus its attention ellites. and resources on the business. The Marine Corps has already de- Commercial solutions could offer cided to incorporate the Raven, Puma AeroVironment is successfully di- AeroVironment the potential for ex- and Wasp into its force as a family of versifying the company's revenue panding sales of its UAVs as well as systems. streams. In fiscal 2020, the company potential service offerings providing derived 61% of its work from mini- Spiral upgrades for deployed systems turnkey UAS operations in oil and UAS. The Tactical Missile business and new production also offer poten- gas, mining, agriculture and other in- (loitering munitions such as Switch- tial for the company. The Raven was dustries. blade) accounted for 17%. The com- earlier upgraded with higher effi- Threats: AeroVironment is facing pany's High Altitude Pseudo Satellite ciency propulsion motors and higher cuts in demand for its UAVs as the work, a new revenue stream, ac- resolution cameras. Its latest upgrade US military has reduced involvement counted for another 17%. is of a new modular, gimbaled sensor in overseas conflicts in and Af- payload for the Raven. The new pay- International sales offer considerable ghanistan. The military deferred ad- load will improve the UAV's video potential. AeroVironment has been ditional purchases of mini-UAVs due and provide better target tracking ca- very successful in boosting its ex- to the large numbers already in in- pability. Now the Puma is undergo- ports of UAS over the past three ventory and the diminished needs as ing spiral upgrades. years with fully 45% of sales coming fewer troops are deployed in con- from international. AeroVironment’s The US Army has been considering flicts. position as dominant supplier to the new missions for Ravens such as de- AeroVironment’s dominant position US military offers promise in build- tecting and identifying chemical, bi- mean that some within the US mili- ing a position with allied militaries ological or radiological threats. Other tary would like to see greater compe- such as the or Aus- potential missions include: signals tition. This may offer some potential tralia. intelligence, multispectral imagery, for companies interested in the sec- short wave infrared, long wave infra- In another important opportunity, tor, such as Lockheed Martin or Is- AeroVironment has won a position rael's Elbit Systems, to emerge as

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 3 competitors in the mini UAS seg- and US border security work hinge The privacy debate has had created ment. on continued progress by the Federal serious problems in the development Aviation Administration in opening of a public safety market. Israeli companies offer intense com- US airspace. petition overseas. A large number of Business: AeroVironment is the national companies compete for mini As the company moves into the de- main provider of mini UAVs to the UAS contracts in their own countries. velopment of high-altitude, long-en- US Army, Marine Corps and the durance systems it faces competition Navy. The US Army has used the Ra- FLIR Systems is emerging as a seri- from considerably larger companies. ven extensively for convoy surveil- ous threat in mini-UAS and nano- Airbus already operates a system lance, perimeter protection and battle UAS. It purchased Aeryon Systems, while Boeing and BAE Systems are surveillance in Iraq and Afghanistan. a a manufacturer of mini-UAS sys- working to develop their own sys- tems, as well as Prox Dynamics, a AeroVironment is now a pure play tems. manufacturer of nano-UAS systems. UAS company. In the fiscal 2020 In addition, in January 2019, it beat Research that keeps AeroVironment year ended April 30, 2020, AeroVi- AeroVironment to win the first major on the cutting edge also is expensive ronment’s sales were distributed as order of nano-UAS by the US Army. for a small company. In fiscal 2020, follows: small UAS, 61%; tactical the company spent 13% of revenues missile systems, 17%; high altitude Success of the company's initiatives on research. pseudo satellites, 17%; and other, to develop commercial UAS work 5%.

Teal Group Analysis AeroVironment sees continued its business in tactical missile sys- explosive growth since 2004. The growth in 2021. For fiscal 2021, the tems. Third, it will depend on devel- company has achieved a 14% com- Company expects to generate reve- oping new business in either the rap- pound annual revenue growth rate nue between $390 million and $410 idly growing commercial UAS ser- from fiscal 2004 to 2017. Since then million, operating margin of between vices sector or in the High Altitude its growth has actually accelerated 12% and 12.5%, and earnings per di- Pseudo Satellite (HAPS) business with a 60% growth from 2017 to luted share of $1.65 to $1.85. (being developed with Japan’s Soft- 2020. That represents a compound Bank.) annual growth rate of 17%. This financial guidance assumes ap- proximately 7% ownership of the An indication of how much Un- AeroVironment has delivered 25,000 HAPSMobile joint venture. manned Aerial Systems has grown is new and replacement mini-UAS. Its shown by the fact that in fiscal 2004, mini-UAS are used by all US ground By comparison, AeroVironment re- UAS accounted for $30.4 million of forces, including the Army, the Ma- ported $367 million in revenue for AeroVironment's total sales of $47.7 rine Corps, the Air Force and the fiscal 2020. That means revenue is million. At that time, it represented Navy. As of June 2018, 45 countries projected to increase betwee 6% and approximately 64% of total corporate had purchased its mini-UAS systems. 12%. sales. Now the company has 12 times The foreign countries include: Aus- Non-GAAP earnings per diluted as much in UAS sales. It reported to- tralia, Italy, , , share from continuing operations for tal sales of $271 million, entirely re- , Thailand, Lebanon, fiscal 2020 was $1.84 so earnings are lated to UAS following the divesti- Saudi Arabia, Estonia, , projected to either decline slightly or ture of the electric charging business. Uganda, , Romania, Singa- remain the same. pore, United Kingdom, , Ma- AeroVironment's dominant posi- laysia, , Japan, Kenya, That continues a strong growth pe- tion in US mini UAVs. AeroViron- Yemen, Colombia, , Tunisia, riod for the company. AeroViron- ment may be a relatively small de- Macedonia, Bulgaria, Uzbekistan, ment’s sales are up 60% since fiscal fense company, but it is a giant in Lithuania, Burundi and Egypt. 2017. mini-UAS. The company has repeat- edly beaten larger companies in The company has prepared the foun- In coming years, AeroVironment's small UAV competitions. Those vic- dations for further growth. Its small success in continue to increase its tories have made it the company to UAV facility in Simi Valley, CA, has business will depend on its continued beat in competitions for US military been expanded and can produce up to success in several areas. First, it small UAS. 1,000 small UAVs aircraft per needs to continue to increase its rap- month. idly rising international sales. Sec- AeroVironment already is the largest ond, it needs to continue to increase player in mini-UAS, experiencing

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 4

AeroVironment's mini-UAS are assures them that spare parts and up- Moving into solar-powered, high- launched by one person and operated grades will be available in the future. altitude, long-endurance aircraft. with a hand-held control unit. Carry- In January 2018, AeroVironment On the negative side, AeroVironment ing electro-optical or infrared sen- reached agreement with Japan's Soft- is used to dealing with military sales sors, they can travel as much as 20 bank and created a joint venture to in which cost is often of less concern miles at speeds as high as 50 miles build High Altitude Pseudo Satellite. than performance. In the commercial per hour. Each system consists of a market, cost is of foremost concern. Softbank took a 95% stake in the ground-control station and three air business, which is capitalized at $100 vehicles. Successful tests of the HAPS million, while AeroVironment took Hawk30. In October 2019 testing, AeroVironment is working to de- 5%. AeroVironment has the option to the Hawk30 reached altitudes higher velop the next generation of mini- increase its stake to 19%. than those of the previous flight sev- UAS. These systems will be more se- eral months earlier. The test was con- AeroVironment has done work in cure, interoperable and autonomous. ducted continuously for approxi- high-altitude, solar systems before. AeroVironment is developing the ca- mately one hour and 30 minutes. Now the company sees an oppor- pability for them to operate in areas tunity emerging because solar cells where they cannot use GPS due to The Hawk30 successfully achieved and batteries are coming down in jamming or other actions by hostile more than two dozen test points, in- price. In addition to the technological forces. cluding 180-degree turns and further progress, customers are keenly inter- validation of avionics, power and Moreover, the next generation of sys- ested in the commercial prospects for propulsion perfor-mance. The team tems is being designed to be able to the business. That makes the compa- also simulated precise landing con- work together effectively. For exam- ny's past research work very relevant. trol on the runway, similar to its ple, AeroVironment is developing planned commercial operation tech- Facebook and Google earlier pur- the capability for its Puma to work nique. chased other businesses seeking to with the Switchblade in attacking a develop these solar-powered sys- target. Forging ahead in the low-cost tems. While both of those companies HAPS market. In April 2019, The next generation of systems will have stopped their development ef- HAPSMobile Inc., a joint venture be- be launched from a wider range of forts, the potential market has been tween AeroVironment and SoftBank platforms. AeroVironment devel- recognized by others. Corp., completed the assembly of the oped a version of the Switchblade First Hawk30 solar High-Altitude Solar-powered systems offer tremen- that can be launched from a subma- Pseudo Satellite and increased the dous promise for providing low cost rine. ceiling value of its Design Develop- internet access to remote areas of the In developing this next generation of ment Agreement with AeroViron- world that currently have no such ac- systems, AeroVironment is not only ment to $126 million, almost double cess. They could also be used to pro- developing new versions of existing the initial planned investment. The vide additional coverage in areas systems but also completely new latest increase in April 2019 raised should there be a surge in demand for ones that have not yet been revealed. the investment by $39 million. bandwidth. The challenge for AeroVironment With the backing of SoftBank, Aero- Solar UAS systems would be de- now is to translate its strong position Vironment has developed and assem- signed to provide months of coverage in military UAS, with products sold bled the first Hawk30 with a wing- without the aircraft landing. around the world, into a civil and span of approximately 260 ft and pro- With this emerging market, Airbus commercial presence. pelled by 10 electric motors powered has begun low-rate production of its by solar panels. It is designed to fly AeroVironment does have some key own system. In addition, BAE Sys- at an altitude of approximately advantages. It offers far greater scale tems has teamed with Prismatic to 65,000 ft above sea level and above than almost all of its competitors of- develop its own system. the clouds, the HAWK30 is designed fering military and commercial mini- for continu-ous, extended missions In the joint venture with Softbank, UAS. It also has a very strong finan- of up to months without landing. AeroVironment will develop two cial position with profitability and no prototypes under a $65 million con- debt, again not a characteristic of AeroVironment derived $62.4 mil- tract. For competitive reasons, it has most of its competitors. That gives it lion in revenue from HAPS for the not discussed the development tim- the ability to invest in research and fiscal year ended April 30, 2020. ing. gives customers a sense of commit- That was 17% of the company’s total ment and continuity for the future. It sales. Under the joint venture agreement, AeroVironment will have exclusive

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 5 intellectual property rights to certain This contract expands the use of significant distances in denied envi- non-commercial applications of the FLIR’s Black Hornet for mili-tary ronments at coordinated times and system in the United States and surveillance and reconnais-sance locations. NATO. With there likely to be mili- programs. FLIR has delivered the AeroVironment’s tube-launched tary applications of the system, this Black Hornet PRS systems to 30 na- small unmanned aircraft and tactical could be valuable for AeroViron- tions around the world, and the US missile systems to be integrated with ment even if the commercial market Army will receive the latest genera- Kratos high-speed, low-cost attrita- does not develop. tion of the system. The Army ulti- ble drones under the teaming ar- mately wants to field one Soldier The US government is projected to rangement announced in May 2019. Borne Sensor to almost every squad purchase $3 billion to $5 billion of in the US Army, which has more than The goal is create sufficient onboard annual commercial satellite capacity 7,000 squads. autonomy, sensors, payloads and an within ten years. This potentially integrated system design that would could be provided more cheaply by In January 2019, the US Army deploy large quantities of low cost high-altitude, long-endurance sys- awarded FLIR a $39.6 Million or-der smart systems that overwhelm and tems. Setbacks in the Soldier Borne to deliver FLIR Black Hornet Per- disable enemy systems, Sensor program. AeroVironment is sonal Reconnaissance Systems. The pursuing several near-term military highly capable nano-unmanned aer- Kratos and AeroVironment’s first programs, including the Army Sol- ial vehicle systems delivered under collaborative project is designed to dier Borne Sensor and the Short this con-tract will support platoon demonstrate the ability to launch, Range Reconnaissance pro-gram. and small unit level surveillance and communicate with, and control a For the Army Soldier Borne Sensor reconnaissance capabilities as part of small, tube-launched loitering air- program, AeroVironment is offering the Soldier Borne Sensor (SBS) Pro- craft from a larger runway-independ- its Snipe, a nano UAS the size of a gram. ent unmanned aircraft. cell phone that can be worn on a sol- In May 2020, FLIR scored again, Teaming to get UAS integrated dier’s uniform. The Snipes uses the winning an additional $20.6 million into future ground vehicles. Aero- same control station as the other mini contract from the US Ar-my to de- Vironment teamed with General Dy- UAS built by AeroVironment. liver its Black Hornet 3. namics Land Systems, the leader in The prospect of creating families of ground combat vehicles, to produce This contract expanded the use of systems for customers is an attractive highly integrated and effective tacti- FLIR’s Black Hornet PRS for Army opportunity for AeroVironment. The cal UAS and tactical missile systems surveillance and reconnais-sance Marine Corps has already decided to for armored ground combat vehicles. programs. FLIR had delivered more incorporate the Raven, Puma and than 12,000 Black Hornet nano- Wasp into its force as a family of sys- The goal of the teaming arrangement, UAVs around the world as of May tems. announced in October 2018, is to in- 2020. That is up from 8,000 delivered tegrate small tactical UAS such as Yet FLIR is emerging as a strong by January 2019. Shrike 2 vertical takeoff-landing competitor, winning multiple orders (VTOL) forward flight system and FLIR is working to develop a larger under the Soldier Borne Sensor pro- loitering missile systems such as the version of the PD-100, a third-gener- gram. The US Army placed a $2.6 Switchblade with armored combat ation product that would be 35 million order to de-liver 60 FLIR vehicles to increased battlefield le- grams. That would make it able to Black Hornet Personal Recon- thality and survivability while de- operate in windier conditions than ei- naisance Systems in May 2018. The creasing workload and the number of ther the first-generation 16-gram ver- units delivered under this contract UAS operators. sion or the 18-gram second genera- will support squad-level surveillance tion. and re-connaissance capabilities in AeroVironment and General Dynam- ics' collaborative projects will ad- the Army’s first batch order for the Teaming with Kratos to add small dress the upcoming US Army Next Soldier Borne Sensor program. UAS and missiles to its unmanned Generation Combat Vehicle (NGCV) aircraft. In one of the more imagina- The United States Army purchased and US Marine Corps (USMC) Ar- tive industry teamings, AeroViron- the Black Hornet PRS from FLIR for mored Reconnaissance Vehicle ment is working with Kratos to put its test and evaluation pur-poses in both (ARV) programs. The NGCV pro- small UAS and tactical missile sys- 2016 and 2017. The Army will con- gram will benefit from automated tems on board Kratos UAS. tinue its evaluation and consider drone scout and precision loitering broader scale roll out of the Black Kratos’ high-speed, larger unmanned missile engagement technology to Hornet for full operational deploy- aircraft will enable delivery of small, rapidly geolocate and, if necessary, ment within all infantry units. highly autonomous systems across finish targets. The ARV project is a

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 6 networked family of manned vehi- Obviously a number of factors are in- unmanned aircraft system, Cheel, in cles, ground robots and drones, col- volved lag in international adoption. April 2015. lectively capable of reconnaissance, UAS are still relatively new and for- The governments of and the electronic warfare and long-range eign militaries are taking time to in- United States selected a next-genera- precision strikes. The vehicle will clude them in their own procurement tion unmanned aircraft system based launch a drone and then deploy pre- plans. Until the recent pressure on on AeroVironment's market-leading cision fire and electronic warfare. US sales, AeroVironment had been family of small UAS as a collabora- heavily focused on meeting the rap- International sales soaring. As US tive project under the India-United idly growing needs of the US mili- military sales have weakened over States Defense Technology and tary. In addition, gaining government the past several years, international Trade Initiative (DTTI). The project approval for export of UAS to a num- has come to the rescue. named 'Cheel' will be jointly devel- ber of countries can be slow and dif- oped and produced by Dynamatic Since allied troops in Afghanistan ficult. Israeli competitors have been Technologies and AeroVironment in and Iraq were able to see benefits of particularly aggressive in the market. India. AeroVironment's mini-UAS in ac- A number of countries are interested tion, the company is focusing on in- in developing their own domestic Despite these agreements, unspeci- creasing its international sales. That small UAS, which is easier to pro- fied problems emerged and AeroVi- effort has borne fruit. In fiscal 2020, duce than the much more compli- ronment ceased its work in India. In- AeroVironment reported $165 mil- cated larger UAS. stead Aerospace Industries lion in international sales on continu- Ltd. (IAI), Dynamatic Technologies In addition, the company’s research ing operations or 45% of sales. That and Elcom Systems Private signed an for Japan’s Soft Bank on HAPS ap- compares to $95.4 million in interna- July 2017 agreement for teaming re- pears to be treated as an international tional sales, representing 36% of total garding the production, assembly and sale. company sales in 2017. support of UAVs in India. Still, there have been a series of com- As of June 2018, AeroVironment had Tactical Missile Systems growing. petitions in which AeroVironment 45 international customers. Those AeroVironment is doing well with its beat its competition. It beat Elbit Sys- customers include: Afghanistan, Tactical Missile Systems work, tems' Skylark I in Denmark, Nether- , Belgium, Bulgaria, Bu- which now accounted for 17% of to- lands, Spain and Italy. In Denmark rundi, Canada, Colombia, Czech Re- tal sales in the 2020 fiscal year. and the Netherlands, it also beat Ger- public, Denmark, Egypt, Estonia, many's EMT. So far, AeroVironment has domi- Ethiopia, France, , Greece, nated the business of providing a Hungary, Ireland, Italy, Japan, Jor- Getting into vertical takeoff and backpackable, kamikaze UAS that dan, Kenya, Latvia, Lebanon, Lithu- landing (VTOL). In June 2019, Aer- can be guided into its target. Its ania, Luxembourg, Macedonia, Ma- oVironment acquired Pulse Aero- Switchblade, a mini-UAS which car- laysia, Netherlands, Norway, Paki- space, LLC, a developer and supplier ries three pounds of explosives, has stan, , Romania, Saudi of small VTOL UAS, for $25.7 mil- been the most mature system availa- Arabia, Singapore, Spain, Sweden, lion in cash, including milestone- ble. Thailand, Tunisia, , UAE, based earn-out payments of $5 mil- Uganda, UK, Ukraine, Uzbekistan lion. Pulse Aerospace is a developer The company is understood to be and Yemen. of small vertical takeoff UAS tech- working on larger systems that are nology in the United States. able to hit targets such as tanks. AeroVironment expects the increase in its international sales to continue The company has military contracts It is also working on new capabilities in the future. International markets and there is the potential for civil to network its systems. For example, are a decade behind the United States UAS work. The company has pro- it is working to network a Puma with in their adoption of UAS, but now vided UAS for the Department of In- Switchblade to hit its target. foreign militaries are focusing on terior. The market niche has brought in a their requirements. Aborted plans to build a produc- number of new competitors. AeroVi- AeroVironment has achieved consid- tion facility in India. In an effort to ronment may be in the forefront of erable gains in recent years. Interna- tap into the potentially large Indian the technology now, but other major tional sales amounted to 7% of sales market, Dynamatic Technologies defense manufacturers are working from fiscal 2011 to fiscal 2009. In Limited and AeroVironment inaugu- to enter the market. 2007 and 2008 international sales rated pilot production facility for the Raytheon is working with an Israeli amounted to 6% of total sales, up development of the next generation company to produce its Hero 30, from 5% the previous year.

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 7 which has four hours of endurance time information. For critical infra- strawberries and tomatoes. The pilot and carries a small warhead. structure that involves monitoring oil program tested analytics for canopy pipelines using LIDAR data that can cover, early disease detection and Lockheed Martin Corp. will be offer- be converted into 3D models and yield prediction. ing its Terminator. electro-optical colorized 3D models AeroVironment is targeting not just Textron will compete with the Battle- that can show whether oil pipelines agriculture but also energy, utilities Hawk and IA Tech, a small Gaines- are shifting to identify possible future and transportation with its new UAS. ville, Fla. UAS manufacturer offer- break points. It is also working on so- The company already provides UAS ing the SkyStinger. lutions that include power line status services to the energy and utilities in- reports and monthly mining volumet- dustries with its existing drones. Still, repeated delays in launching a rics. program mean that inventories of The design of the new drone is quite AeroVironment's products are build- In agriculture, AeroVironment is do- promising. It is generally seen as a ing up for the Army. With more than ing evaluations using the NDVI veg- type of system with considerable 2,500 Switchblade systems already etation index. Near infrared sensors promise within the industry. One purchased, the Army is likely to be show green healthy plants as well as drone can provide horizontal and ver- reluctant to put in place another lo- yellow stressed plans to a degree not tical inspection capabilities. This gistical system and new training for visible to the human eye. If plants are promises to become increasingly im- another system. stressed, inputs can be modified to portant as airspace is opened too be- add water, fertilizer or to make other There are substantial opportunities yond visual line of sight operations. interventions. beyond the Army as well. The US Early experiences in commercial Navy has purchased AeroViron- Rolling out its new commercial UAS use. AeroVironment's most vis- ment's Blackwing, a small, tube- drone. In its latest steps to build up ible project in providing commercial launched unmanned aircraft system its position in the commercial UAS services has been its work for BP in that deploys from under the surface market, AeroVironment launched a Alaska. In June 2014, BP PLC, the of the sea, on manned submarines new easy to use drone that links to a world's third largest oil company, and unmanned underwater vehicles. cloud-based data analytics platform. signed a five-year contract to use Blackwing builds on AeroViron- AeroVironment announced its UAS at its oil operations in Alaska. It ment's experience with small UAS Quantix drone in November 2016. was the first large-scale, government and its Switchblade to provide the The new drone has a fixed wing, approved commercial use of un- Navy with a low cost, submarine- multi-rotor hybrid design that will manned aircraft in the United States. launched UAS. provide it with the vertical take-off It was a hard-fought win in which Strong push into the commercial and landing capability of multirotors AeroVironment beat 12 other com- UAS market. in commercial UAS, combined with the range and reliabil- panies competing for the work. AeroVironment sees the potential to ity of fixed-wing aircraft, according In July 2014, AeroVironment's Puma offer both hardware and services to to the company. AE received approval from the US satisfy commercial demand. The drone is oriented towards the ag- Federal Aviation Authority to be In its push into commercial services, ricultural market. In a single flight its used in commercial missions in the AeroVironment is focusing on en- sensors will capture high-resolution Arctic. The "restricted category" cer- ergy (oil and gas critical infrastruc- color RGB (Red, Green, Blue) and tification allows it to be used for mis- ture and electric utility power line in- multispectral NDVI (Normalized sions such as oil spill monitoring and spection) and agriculture. It has pilot Difference Vegetation Index) im- ocean surveys in the North Slope re- programs in both areas, both domes- agery. It will use the AeroVironment gion of the Arctic. tically and overseas to develop its Decision Support System, a cloud- AeroVironment used the Puma AE to market offerings. based data analytics platform de- capture and analyze data on opera- signed to provide actionable intelli- AeroVironment is developing com- tions at BP's Prodhoe Bay oil field, gence. plete offerings in both areas. It will one of the largest oil fields in North work with not just its own systems, Before the release, AeroVironment America. AeroVironment produced but other aircraft as well, including already began using the Quantix in a three-dimensional maps of the field's manned and VTOL UAVS. It can pilot program with farmers and uni- roads, pipelines and well pads, provide electro-optical, LIDAR, versities. The project surveyed tens among other tasks. multispectral and photogrammetry of thousands of acres for two years, In a sign the work was going well, the sensors. It will then use algorithms focusing on crops that include al- FAA increased the authorized Alaska and modesl to turn that data into real monds, walnuts, corn, grapes, beets, operating area more than fivefold. In

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 8 addition, BP added pipeline inspec- the commercial market. The military, by police, firefighters and border pa- tion to the scope of its services con- its traditional customer, tends to fo- trol. They were rated based on how tract for calendar year 2015. At cus more on performance than cost in they fared on a set of standardized presstime, whether work with BP is its buying. test categories. Their operations use continuing was not clear. is evaluated as to ease of use and In addition, part of the targeting is video output. These detailed ratings In addition to its work with BP, Aer- wrong with a focus on agriculture. are shared with possible governmen- oVironment has been working with The agricultural market is adopting tal users. Many of the details are not utilities such as Duke Energy and UAS technology slowly. It is a very shared outside of government and Virginia Dominion Power. AeroVi- fragmented market with low profit first responders due to the proprietary ronment has found that its work can margins on a number of drops. There information provided by the compa- supplement existing helicopters, re- is considerable skepticism among nies. place them and in other cases aug- farmers about the applicability and ment them such as in very close in- utility of UAS technology to their op- AeroVironment tested two VTOL spections of isolators or powerlines. erations. systems, its Shrike, a system origi- In other cases, AeroVironment has nally designed for the military, and Border security offers potential. done work that could not even be its Qube, a version of the Shrike de- AeroVironment also sees strong po- done by helicopters. One product in- signed for civil users. tential in border security. It envisages volved identifying possible limbs of offering a family of UAS in coming AeroVironment also is interested in trees that could hit powerlines if they years. selling its systems to the Coast fell. AeroVironment developed volu- Guard. AeroVironment and a team metrics that created zones around the AeroVironment would like to trans- for the National Oceanic and Atmos- powerlines that showed which trees late its position as the leading sup- pheric Administration (NOAA) were or limbs needed to be cut. plier for mini-UAS for the US mili- contracted to provide the US Coast tary into a leadership role in home- AeroVironment has also worked Guard ice breaker Polar Star with a land security. with BNSF on railway track inspec- Puma AE unmanned aircraft system tions. AeroVironment, Inc. received a $5.3 and a flight crew for the annual joint million firm fixed-price contract Operation Desert Freeze, the military The focus is primarily on the United award for Puma 3 AE systems and componenet of the larger, civilian- States since AeroVironment has a support equipment in August 2019 managed US Antarctic Program to limited overseas presence, but it does for the US Border Patrol, part of the re-supply the National Science Foun- have commercial projects overseas as US Customs and Border Protection. dation's McMurdo Station in January well. Delivery was anticipated by January, 2016. Challenges for AeroVironment in 2020. The Department of Homeland Secu- the commercial UAS market are This small order is an encouraging rity is still evaluating how it would considerable. AeroVironment faces sign that the Department of Home- use UAS. It has been using much tough competition in the commercial land Security may finally be deciding larger Predator UAS to patrol the market. what to do about purchasing small Northern and Southern land and sea Major aerospace companies, includ- UAS. borders. It is the only type of UAS in ing Airbus, Boeing Insitu and Lock- service with the Department of AeroVironment was a participant in heed Martin are offering commercial Homeland Security so far. the first phase of the Department of UAS services. In addition, there a Homeland Security's Robotic Air- In other homeland security roles, number of well-funded venture capi- craft for Public Safety (RAPS) Pro- mini-UAS could be used in natural tal start-ups such as Airware and Pre- gram. The Department of Homeland disasters to assess damage and aid cisionhawk are also offering ser- Security's Directorate of Science and rescue efforts. vices. Technology leads an effort to test AeroVironment sees specific home- AeroVironment planned to offer its UAS that might be used for home- land security applications for many own services by the end of 2017 in land security and law enforcement in of their existing UAS. Mini-UAS what is a very competitive environ- the United States. The goal is to cre- such as the four-pound, hand- ment. It is not clear whether the com- ate a "Consumer Reports" of UAS. launched Raven, offering less than 90 pany still plans to offer services. AeroVironment was one of 17 com- minutes of flight, could be stored at a It promises to be adjustment for Aer- panies that tested their systems. Indi- border outpost or in the trunk of a car oVironment to offer the low-cost sys- vidual systems were tested in various to launched as needed. The Wasp or tems and services needed to capture scenarios that would be encountered the Shrike could be used in situations

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 9 in which a UAS needs to be carried be unpacked, assembled and ready and can hover silently overhead for in a backpack for shorter flights. for flight in less than five minutes. more than 20 min. The Puma UAS could be used for AeroVironment has a pilot program In February 2011, Israel Aerospace maritime surveillance, offering 150 for selected public safety agencies to Industries, the largest defense com- minutes of flight. The Aqua Puma, use and become familiar with the op- pany in Israel, revealed its Ghost ver- another variant, could be used for salt eration of the Qube. tical-takeoff and landing UAV. The water landings. eight pound system is designed to be In 2014 the Ventura County Sheriff's able to fly inside of buildings, flying Even a HAPS system would have Department became the first local for up to 30 minutes carry a 500 gram homeland security applications. The law enforcement agency on the West payload. several-month long endurance of a Coast to legally begin using a UAS. solar powered system would allow Since then it has used the system for While UAV use by local law enforce- the use of such as system for border a variety of missions, including locat- ment will be increasing in coming security or maritime surveillance. ing illegal marijuana plantings. years, US police officials note that there are factors, in addition to tight Interest in the public safety market So far, small companies have led in budgets, that will limit the trend. but privacy concerns slow adop- the race to begin to tap into the There are considerable concerns tion. AeroVironment is interested in emerging market for law enforce- about invasion of privacy by govern- expanding into other commercial and ment UAVs. Draganfly Innovations, mental use of the systems. There are civil applications for its UAVs as the a Saskatoon, Canada UAS company also concerns about crashes that market begins to open up. that began as a hobby shop company could endanger citizens and property. and began building larger systems, As the the Federal Aviation Agency has sold its helicopter UAS to several The privacy debate about the use of beings to open up national airspace, local police departments in the unmanned systems by law enforce- the use of small UAS weighing less United States and Canada. The Seat- ment has led several agencies in areas than 55 lb is expected to increase dra- tle, Washington Police Department, such as Seattle to actually discon- matically. The use of UAS by law en- the Regina Police Department and tinue their use. forcement is expected dramatically the Royal Canadian Mounted Po- increase in coming years, particularly Teaming with Lockheed Martin on lice's E-Division have also purchased in light of their lower operating costs Global Observer failed to save the the Draganflyer X6. compared to helicopters. effort. AeroVironment reached Other major UAV companies are agreement with Lockheed Martin, With almost 20,000 local law en- also trying to target the law enforce- the world's largest defense company, forcement agencies in the United ment market. to pursue international opportunities States, there is strong potential for for AeroVironment's Global Ob- the growing proliferation of UAVs in In August 2012, Lockheed Martin server high altitude long endurance the next decade. Exactly how large Procerus Technologies unveiled a unmanned aircraft system. the market will be however remains new small vertical take-off and land- uncertain. It will be a small portion of ing unmanned aircraft system in- The agreement, which was an- the size of the military UAV market tended for the military and first re- nounced in February 2014 at the De- even if half of those agencies buy sponders. The rugged, five-pound fense Expo in New Delhi, sought to UAVs. Individual UAVs being of- VTOL quad rotor, dual-sensor plat- combine Lockheed Martin's exper- fered in the market range in price form provides an extended hover, tise in systems integration and Aero- from $25,000 to $300,000. However, perch and stare capability in crowded Vironment's knowledge of un- it appears that the low end of the mar- areas unreachable by fixed-wing un- manned aircraft solutions. It ap- ket will be more promising because manned aircraft systems. The UAS peared to focus on giving AeroViron- of budgetary pressures on state and has a gimbal mount with electro-op- ment credibility in international mar- local public agencies. tical and infrared sensors and a laser kets. Lockheed Martin was to work illuminator to provide continuous on integrating communications and In October 2011, AeroVironment in- 360-degree panning capability. intelligence, surveillance and recon- troduced the Qube portable UAS for naissance payloads on Global Ob- use in public safety applications such Boeing's Insitu introduced a product server to support its use in a surveil- as law enforcement and first re- specifically for the public safety mar- lance role and as a temporary battle- sponse. ket in August 2011. The Interceptor, field network-communications node. a short-range tactical rotorcraft sys- The $50,000 Qube, which weights tem, can fit in the trunk of a car and AeroVironment faced a serious set- less than four pounds and was de- is easy to launch and recover. The back in the Global Observer program signed to fit in the truck of a car, can UAS weights less than four pounds when one of the two prototypes it

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 10 was developing crashed on its ninth The most immediate demand for the full-scale, at-sea demonstration of test flight in 2011. Afterwards it pur- Global Observer came from a mili- the system. chased the remaining prototype from tary requirement for a system that The DARPA program is intended to the US government and was working could provide communications relay demonstrate the ability to launch me- to complete it. for several days continuously. Global dium-altitude long-endurance Observer crashed on its ninth test The company estimated that hydro- MALE UAS from US Navy surface flight in 2011. Since then, US gov- gen-powered Global Observer could combatants such as the Littoral Com- ernment interest in the program has offer it an important new growth bat Ship or destroyers. The initial waned. market. Estimated at having the po- flight test is planned for 2018. tential for more than $1 billion of In the meantime, Boeing, which lost AeroVironment and Northrop Grum- sales, this high-altitude, long-endur- in the original competition for Global man succeeded in winning the sec- ance UAV would have been intended Observer, forged ahead with its own ond phase of the TERN, a program to to provide year-round persistent in- competitor, the hydrogen-powered equip small naval vessels with a me- telligence, surveillance, reconnais- Phantom Eye. It was funding its work dium-altitude, long-endurance capa- sance and communications. AeroVi- with company research money in an bility. In September 2014, DARPA ronment projected that the market for indication of the potential it saw in selected AeroVironment for the such a system could be larger than the program. TERN. The 12-month, $19 million the current company's sales. The air- Ultimately Boeing stopped its own phase II effort seeks to conclude with craft, with its 175-ft wingspan, is in- work on a hydrogen-powered system subscale flight demonstrations prior tended to be equivalent to a 12-mi and, like AeroVironment, shifted to to a planned phase III award deci- high, low-cost satellite. It would pro- working on a solar-powered system. sion. Phase III is expected to choose vide coverage of as much as 600 between Northrop Grumman's design miles in diameter. The Global Ob- AeroVironment pursued interna- and AeroVironment with the winner server would fly at 65,000 ft for five tional opportunities for Global Ob- to build a prototype. AeroVironment to seven days before needing refuel- server without success. AeroViron- saw the TERN program as offering ing. ment developed teaming relation- the potential to greatly expand the ships to address international oppor- In addition to intelligence and com- company's product line. tunities. munications applications for defense Army firms up plans for its new and homeland security, the Global In Turkey, AeroVironment worked family of systems. The US Army en- Observer could be used for disaster through its joint venture, Altoy, via a visages a family of systems that recovery, storm tracking and wildfire memorandum of understanding with would rely heavily on AeroViron- detection and tracking. It was under Aselsan and others. ment's UAS. development for the US Army's Spe- In June 2014, Aselsan, a Turkish de- cial Operations Command. A system The family of systems will include fense electronics specialist, teamed of two would alternate over any part three elements: the Long Range Re- with AeroVironment, Inc., and Altoy of the globe to maintain intelligence connaissance Surveillance System, Defence Industries, a Turkish joint or communications coverage always the Medium Range Mobile System venture partially owned by AeroVi- at a point of the globe. Global Ob- and the Short Range Micro System. server will fly at an altitude of 55,000 ronment. Ravens are planned to be used for the ft to 60,000 ft. It would cover a 600- The team pursued integrated security Medium Range Mobile System with mile diameter area. This project was systems for existing and future pipe- current plans calling for a total of expected to complete its $120 million lines in Turkey under a program of 3,604 systems. That would appear to JCTD demonstration in early 2011. the Turkish Ministry of Defense. As of October 2010, the first plane an increase from the 2,358 systems completed its initial flight testing and Loss in the DARPA Tactically Ex- requirement previously established as the US Army requirement, 84% of the second plane was in production. ploited Reconnaissance Node which had been delivered as of the The plan was to continue flight tests (TERN) competition. Northrop end of April 2013. of the vehicle and subsequently test Grumman beat competitor AeroVi- ronment to move ahead to the third its military utility, which would ex- The real boost for AeroVironment phase of DARPA's Tactically Ex- amine different payloads. AeroVi- comes with the Long Range Recon- ploited Reconnaissance Node ronment then planned to build five naissance Surveillance System, (TERN) program. Under the $93 mil- aircraft annually under low rate ini- which has a total of 1,213 approved lion phase three contract awarded in tial pro-duction for US government for the Army. That could translate October 2014, Northrop Grumman customers. into additional purchases of the will do final design, fabrication and a Puma, Army inventories of which

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 11 currently stand at approximately half effort. The need exists to complete A new emerging competitive that total. the AAO; maintain, sustain and up- threat. Another threat to the compa- grade the fleet; and procure future ny's position is emerging from FLIR In a setback for AeroVironment, the SUAS Systems as required by the Systems. Short Range Micro Systems looks Department of Defense, Other Gov- like to be a quadcopter rather than the FLIR Systems is emerging as a seri- ernment Agencies and foreign coun- AeroVironment Wasp. ous threat in mini-UAS and nano- tries. While the current systems UAS. It purchased Aeryon Systems, The US Army began testing the fam- fielded are the RQ-11B and the RQ- a a manufacturer of mini-UAS sys- ily of systems concept in Afghani- 20A, alternative Medium and Long tems, as well as Prox Dynamics, a stan. An Army brigade used the Ra- Range SUA systems may be pro- manufacturer of nano-UAS systems. ven with the larger Puma and the cured to meet the anticipated future In addition, in January 2019, it beat smaller Wasp as the family. That ef- requirement of approximately 300 AeroVironment to win the first major fort ended in early 2011. Medium and approximately 150 order of nano-UAS by the US Army. Long Range SUA systems with While the concept of the family of spare/repair parts," according to the Competitive strength in mini systems has taken root in the Army, solicitation. UAVs. AeroVironment has been the there is still no funding for the addi- victor in each of the last four open US tional systems that would be require- As a result, the solicitation opens the military mini UAS competitions, ment to implement it. The next step door not only to the completion of the making its systems the only mini- will be for the Army to simply field US Army requirements of AeroVi- UAS programs of record for the US what is has and seek to find money ronment's systems, but also to the military. In 2001 AeroVironment and later for the Short Range Micro and procurement of other small un- BAI Aerosystems defeated up to 10 additional Long Range Reconnais- manned systems that may offer other UAV manufacturers to the final sance Surveillance Systems. greater range or other capabilities development of the Navy-Marine than AeroVironment's systems. US Army plans to increase compe- Corps' Dragon Eye portable UAV. tition. Adding to the pressure on In a further effort to spur competi- Subsequently, the Marine Corps' AeroVironment is a drive by the US tion, the US Army has its Tactical chose AeroVironment to build the Army to increase competition in its Open Government Architecture Dragon Eye in November 2003. procurements of mini-UAS. In Janu- (TOGA) in development. The new In October 2005, the US Army com- ary 2013 the Army awarded a $248 software would not be dependent on petition for a small unmanned aerial contract for mini-UAS that AeroVi- any particular piece of hardware. vehicle that could be carried in a ronment split with four competitors, Mini-UAVs could then be purchased back-pack ended with the victory of including Lockheed Martin Corp., as off-the-shelf pieces of equipment AeroVironment's Raven B over L3 Elbit Systems of America and pri- so new UAVs for each of the differ- BAI Aerosystems' Evolution Ex- vately-held Altavian and Innovative ent UAV requirements could be pur- tended Time (XTS) SUAV. This Automation Technologies, LLC. chased from different companies. SUAV will be dedicated for use by Work was to be completed by De- Small numbers of UAVs could then brigade and company commanders. cember 20, 2017. be pur-chased to meet annual re- The Army plans to pur-chase as quirements for attrition rather than many as 1,328 of the systems, which The Army solicitation dated Aug. 30, simply making periodic large pur- include a ground-control station and 2012 noted that much of the require- chases. ment for AeroVironment's systems three air vehicles. has already been fulfilled. "The Obviously this would be a serious In December 2006, AeroVironment Army currently has fielded 1,798 threat to AeroVironment by making won an Air Force contract worth up RQ-11B systems and 325 RQ-20A it much easier for the US Army to to $45 million over five years to buy [Puma] systems and has a require- purchase competitors' UAVs. Aero- as many as 1,000 Battlefield Air Tar- ment to sustain and maintain this ex- Vironment's dominance would be geting Micro Air Vehicles (BAT- isting fleet. The Army has met 92% undermined even in areas such as the MAV), a smaller UAV than the Ra- of the RQ-11B Army Acquisition Army's Medium Range Mobile Sys- ven. It was the first military program Objective (AAO), and has met 83% tem if other systems can be easily of record for micro UAVs. of the anticipated need for RQ-20A," used right alongside the Raven. according to the solicitation. Most recently, the US Special Oper- In the end though these efforts to pro- ations Command (USSOCOM) se- "Additionally, the current fleet has mote competition has not apprecia- lected Puma AE as its All Environ- pre-planned spiral upgrades such as bly eroded AeroVironment's posi- ment Capable Variant (AECV) solu- the Gimbal payload, which will be tion, It still retains the dominant po- tion to the Small Unmanned Aircraft competed and retrofitted under this sition in mini-UAS.

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System (UAS) requirement. AeroVi- ing markets in federal civil applica- extended hover, perch and stare capa- ronment received a one year contract tions, local law enforcement and bility. The system is intended to pro- with four one-year options worth up commercial applications. vide military, civil and commercial to $200 million. customers with aerial reconnaissance Companies such as Lockheed Martin in crowded areas that cannot be AeroVironment executives attribute may have seen the market as a rela- reached by fixed-wing unmanned air- the company's prowess in winning tive backwater with limited sales, but craft systems. The VTOL's gimbal competitions to its willingness to go as the market has grown their interest mount includes electro-optical and all out for the win. That has involved has increased. As larger companies infrared sensors and a laser illumina- spending corporate research and de- become increasingly interested in tor. velopment funding to support bids. AeroVironment's market niche, they are able to bring tremendous tech- Lockheed Martin, may be one of the For example, when AeroVironment nical, financial, research and market- more formidable potential competi- won the Global Observer Advanced ing capabilities to bear in the market. tors, but there are also others. Concept Technology Demonstration, They may be able hire key employees it beat Boeing by building a one-third Israel's Elbit is keen to get into the by offering strong compensation scale model of the UAV. US market. In 2009 it created UAS packages. Larger companies may Dynamics, a joint venture with Gen- The emergence of an increasingly also offer services that lessen the role eral Dynamics Corp. to boost its pro- competitive environment in mini of AeroVironment in future con- spects for the Skylark II close-range UAS. A growing number of compa- tracts. For example, AAI performed tactical UAV. Elbit's Skylark I mini nies are seeking to displace AeroVi- training on AeroVironment's Raven manpack system, a direct competitor ronment as the dominant provider of UAVs for the US Army earlier. to AeroVironment's products, has mini UAVs. In the $248 million con- With their large procurement clout, been sold to the Australian, Canadian tract cited earlier, the US Army big companies may also be able to and French militaries. The Elbit- broadened the number of companies get more ready access to materials in General Dynamics lost that competi- that from which it would buy mini short supply. In 2005 AeroViron- tion. In December 2011, Elbit pur- UAVs to five. Among them, Lock- ment had difficulties getting needed chased General Dynamics' stake in heed Martin has been strengthened supplies, particularly nylon compo- UAS Dynamics, planning to continue its position in mini UAS by purchas- sites used for mini UAVs, due to its marketing efforts for mini-UAVs ing Procerus Technologies. Elbit worldwide shortages. in the United States on its own. Systems is a major competitor over- seas which is now working to pene- Lockheed Martin has shown the AeroVironment executives say that trate the US market. Altavian, a greatest interest of all the megade- the Israeli system often has been of- smaller company, is already provid- fense firms in the mini UAS market. fered at lower prices. Skylark I also ing UAVs to support civil works pro- With its purchase of Procerus Tech- has a gimbaled payload rather than jects in Florida and Puerto Rico and nologies in January 2012, Lockheed the fixed camera system of the Aero- has an agreement with ISR Group to Martin signaled that it planned to Vironment UAVs. While the Israeli support its systems. IA Tech is an- mount a strong push into the mini- optics is quite good, it is not as dura- other small, private UAV company UAV market. ble as AeroVironment's, which is offering at least four different UAVs. built for crash landings. The US mil- Lockheed Martin's Desert Hawk itary sought fixed camer-as because Now AeroVironment must compete UAV provided security for US Air gimbaled systems are more difficult with the other four companies for Force bases until being displaced by to maintain in rugged conditions. task orders under the three-year um- the Raven. It has continued to sell brella contract with two one year ex- more advanced versions of the Desert Yet AeroVironment has begun to re- tensions. Hawk to the UK military. In addition, spond to Elbit's challenge by adopt- Lockheed Martin competed unsuc- ing its own gimbaled payloads on its Clearly there are looming challenges cessfully with AeroVironment on the UAV family. All future systems will for AeroVironment in the competi- US military requirement which has have gimbaled payloads to improve tive environment. Despite its domi- been met by the Puma. their ability to follow a target. nance in the mini UAV market, it will face increasingly serious challenges After its purchase by Lockheed Mar- There are other Israeli systems too from larger companies as well as tin, Procerus unveiled a new un- that could compete with AeroViron- from emerging smaller companies. manned quad rotor vertical take-off ment in international markets alt- Interest in the segment is growing be- and landing (VTOL) system. The hough they have not yet been promi- cause of its potential for new, emerg- rugged, five-pound VTOL quad ro- nent. Israel Aerospace Indus- tor, dual-sensor platform includes an tries/Malat offers the BirdEye 400, a

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 13 five-pound flying-wing UAV, that wingspan and weighs 2.4 lb. Un- and land micro air vehicle carries the MicroPOP stabilized mi- der a 2005 contract, AeroViron- (VTOL MAV) system. It is a cro payload under its belly. That ment became the sole provider of small, portable, reliable and rug- helps maintain the view of the target. Raven to the US Army. The US ged unmanned aerial platform de- Army raised its requirement for signed for front-line day/night in- AeroVironment is clearly aware of Ravens in 2010 from 2,182 new telligence, reconnaissance and the need to retain its technological systems to 2,358. As of the end surveillance (ISR). Shrike VTOL edge in such an environment. It has of April 2013, AeroVironment operates in hover-and-stare or been increasing its company-funded delivered 84% of those systems. perch-and-stare modes, transmit- research and development spending As of mid-2009, an analogue Ra- ting real-time persistent ISR to over the past several years. Com- ven cost $100,000 to $150,000 small unit commanders or police pany-funded research in the 2020 fis- for three aircraft and two ground agencies. It can be operated man- cal year totaled $37.2 million or 15% controllers (the typical size of a ually or programmed for autono- of revenue, an extremely high pro- Raven system). The digital ver- mous operation, utilizing the sys- portion for any defense company. sion of the Raven runs about 10% tem's advanced avionics and pre- Yet AeroVironment also faces a more. cise GPS navigation. It can fly challenge in competing with large • Wasp. Used by the US Army, for more than 40 min with a com- companies' research budgets. Marine Corps, Navy and Special munications range of five kilo- meters. AeroVironment has been aided in Operations Command, the Wasp competing with larger companies by is the smallest of AeroViron- • Switchblade. This hand-held US government and other customer ment's products. With a 29-in mini UAV is able to destroy a research contracts. In fiscal 2020, wingspan, it weighs only one target using detonation of an customer-funded research amounted pound. It is quieter, smaller so it onboard explosive. An operator is to $80.9 million or 22% of sales. may have different missions than able to launch Switchblade and a Raven. It is designed for rapid guide it to its target using a US government contracts may also assembly and launch with a range ground control unit. In urban add to the risks posed to AeroViron- of 2.4 mi and a flight time of 30 warfare this would be useful in ment by competition. Some contracts min. The US Air Force awarded a attacking snipers, mortar launch- allow the federal government to re- 2006 contract for the Block III ers and machine guns. AeroVi- lease technical data without any con- Wasp, known as BATMAV, for ronment, announced in Septem- straint on a potential recipient. They up to $45 million over five years. ber 2013 that it has received US may also allow the royalty-free use of As of April 30, 2008, orders of Army orders valued at $36.7 mil- inventions developed under US gov- $29.2 million had been made. lion under a contract for Switch- ernment contracts. Obviously such • Puma AE. The US Special Oper- blade tactical missile systems, an- provisions lower the barriers to entry ations Command (USSOCOM) cillary equipment and support. for competitors. selected Puma AE as its All En- Switchblade can be deployed Mini-UAS family. AeroVironment vironment Capable Variant from submerged submarines, produces several different mini-UAS (AECV) solution to the Small ground vehicles, dismounted systems. With their portability, lim- Unmanned Aircraft System forces, manned and unmanned ited cost and minimal infrastructure (UAS) requirement. This is Aero- aircraft. Competitors suggest that needs, they are designed for small Vironment's largest small UAV. the UAV may be of limited effec- units. They allow low altitude intelli- It has a 9.2-ft wingspan. The 13- tiveness against moving vehicles gence, reconnaissance surveillance lb UAV can operate over land or due to a limited explosive charge. and communications relay. water for up to two hours with a That could leave some of the high resolution gimbaled electro- market open for competitive AeroVironment's mini UAVs in- optical and infrared sensor pack- products. However, Switchblade clude: age. It can land in water. USSO- was designed to be scalable so it • Raven B. Used by the US Army COM awarded a one year con- does have the potential to carry a and Special Operations Com- tract with four additional one- larger explosive payload. mand, the Raven has a range of year options valued at up to $200 Increasing its focus on the after- six miles and a flight time of 90 million in August 2008. The market. AeroVironment has been minutes. It is lighter and has Puma is also used by the US expanding its support activity to sus- greater range and flight time than Army and the Navy. tain an increasing number of de- predecessors such as the Dragon • Shrike VTOL. The Shrike is a ployed systems. These services in- Eye and Swift. It has a 55-in man-packable, vertical take-off clude training, spares and repairs.

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New combined payloads are being The Digital Data Link ensures secu- Unsuccessful international team- installed on UAS to enable them to rity of the information being trans- ing to broaden the product line. do both infrared and electro-optical mitted, but also allows the operation AeroVironment, Inc. entered into a imaging on the same flight rathern of more UAVs within a limited area. strategic relationship with Sweden- than being forced to select one or the Compression of the digital video en- based CybAero AB to develop and other payload. ables it to handle four times the digi- distribute a Tier II vertical takeoff tal video in the same bandwidth as and landing (VTOL) unmanned air- Past UAV digitization work. A se- the older analog data links. The dig- craft system in response to require- ries of upgrades are already under itized Raven can also act as a limited ments from multiple customers. The way on the Raven, including a digital communications relay. relationship announced in 2015 gave data link. This digital network mod- AeroVironment exclusive rights to ule enables a switch from the current Following the successful upgrade of provide CybAero AB systems to analog technology used on AeroVi- Raven, AeroVironment began pro- United States customers and to gov- ronment's mini UAS. It would allow duction of digital Puma. In August ernment customers in NATO and transmission between mini UAVs 2010, the United States Special Op- other countries. AeroVironment and their operators as well as reduce erations Command awarded a con- agreed to purchase up to $3 million bandwidth needs, thereby in-creasing tract delivery order valued at $35.3 in convertible notes from CybAero to the number of UAVs that can work in million for new digital Puma All En- facilitate the company's growth. close distances. vironment unmanned aircraft sys- Man-portable, hand-launched sys- tems and training services. Work is The US Army ordered 50 Raven RQ- tems such as AeroVironment's RQ- scheduled to be per-formed within 11B UAVs with AeroVironment's 11B Raven, RQ-20A Puma AE and several months. new Digital Data Link in February Wasp AE that weight less than 20 2009. The $16.76 million contract Additional UAV upgrades. Other pounds comprise the Tier I segment. also provides for initial spares pack- upgrades for the Raven include Tier II UAS include heavier, larger ages and Digital Data Link retrofit higher efficiency motors and higher and longer endurance systems with kits for 206 existing Raven systems. definition cameras. Higher definition longer range, such as CybAero's Deliveries of the digital Raven sys- cameras enable the Raven to fly VTOL offering. CybAero's VTOL tems began in October 2009. higher while also improving its im- system would compete against sys- agery. tems such as the Schiebel Camcopter. As of June 2010, 295 Ravens had Digital Data Links. Of the remaining In addition, AeroVironment has AeroVironment sold off its invest- fielded 1,300 systems, approximately worked with Smiths Detection and ment at a loss in 2015 in an end to the 800 conversions were planned by the the US Army Edgewood Chemical relationship. In the summer of 2018, end of 2010. Biological Center and other US De- CybAero went into bankruptcy fol- partment of Defense laboratories on lowing continuing difficulties mak- With 1,300 analog systems in the using the Raven to detect and identify ing sales. Army's inventory, there is the poten- chemical agents. The US Army has tial for the company to earn $65 mil- not yet made a decision on deploy- lion to $78 million from the conver- ment of the system. sion of analog Ravens to digital Ra- vens.

Financials Below is a three-year selected financial summary of AeroVironment. The company operates under a fiscal-year cycle ending on April 30th.

($ Millions) FY16 FY17 FY18 FY19 FY20 Revenue 233.7 228.9 271.1 314.3 367.3 Income from Cont. Ops. 20.1 19.1 30.4 33.8 47.1 Net Income from Cont. Ops. 15.4 16.6 21.8 41.9 41.3 Funded Backlog n/a 70.9 174.3 164.3 208.1

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 15

US Government Sales In fiscal 2020 AeroVironment received 61% of its revenue from the US government, either as a prime or a subcon- tractor and including foreign military sales. Below is a three year summary of AeroVironment’s US Government sales.

($ Millions) FY16 FY17 FY18 FY19 FY20 US Government Sales 166.4 145.7 146.3 182.3 224.1 % of Total Sales 63% 55% 54% 58% 61%

Competitions The following is a selection of programs for which AeroVironment has either won or lost a competitive contract, as well as pending procurements for which it is competing. Only those competitions in which Teal Group can readily identify the competitors are listed.

Wins DARPA Tactically Exploited Re- Army. Elbit is believed to have com- milestone in December 2008 with the connaissance Node Phase II— peted for the contract unsuccessfully. successful 20-second flight of the DARPA down selected Aero Viron- [6/12] ‘Mercury’ interim test vehicle. The ment and Northrop Grumman to fol- nano aircraft is capable of climbing Lethal Miniature Aerial Munition low their successful phase I concept and descending vertically, flying System—This Air Force program to design efforts with a phase II prelim- sideways left and right, as well as for- satisfy an urgent operation require- inary design for the Tactically Ex- ward and backward, under remote ment is intended to use a mini UAV ploited Reconnaissance Node, or control. The goals of the NAV pro- with a warhead to covertly locate, Tern. The 12-month, $19 phase II gram are to develop an approxi- track, and engage time sensitive, AeroVironment effort seeks to con- mately 10 gram aircraft that can fleeting targets. Both tube-launch or clude with subscale flight demonstra- hover for extended periods, can fly at hand-tossed versions of expendable, tions prior to a planned phase III forward speeds up to 10 m/sec, can electro-optically guided weapons award decision. DARPA and the US withstand 2.5-m/sec wind gusts, can will be be tested. Three companies Office of Naval Research envision a operate inside buildings, and have up were selected following demonstra- new concept of operations using to a kilometer command and control tions to continue and provide smaller ships as mobile launch and range. The NAV program was initi- weaponized systems for further test- recovery sites for medium-altitude ated by DARPA to develop a new ing. Companies selected included: long-endurance UAS. Tern aims to class of air vehicles capable of indoor AeroVironment (Switchblade), IA make it much easier, quicker and less and outdoor operation. The Phase II Tech (Point and Toss) and Textron expensive for the Navy and Marine effort will focus on optimizing the Defense Systems. A concept from Corps to deploy persistent intelli- aircraft for longer flight endurance, MBDA known as TiGER was re- gence, surveillance and reconnais- establishing the transition capability jected. [12/10] sance and strike capabilities. Phase I from hover to forward flight and awardees included: AeroVironment Nano Air Vehicle Phase II—The back, and reducing its size, weight, Inc. with a $2.3 million contract, Defense Advanced Research Projects and acoustic signature. The Phase II, Northrop Grumman, $2.8 million; Agency (DARPA) awarded AeroVi- $2.1 million NAV extension contract Aurora Flight Sciences, $2.8 million; ronment a Phase II contract extension is scheduled to continue through Carter Aviation Technologies, LLC, in April to design and build a flying summer 2010. Lockheed Martin was $2.2 million; and Maritime Applied prototype for the Nano Air Vehicle offering its Samarai, which was part Physics Corp. with a $2.2 million (NAV) program. As part of this pro- of the Phase I program. Two other award. [10/14] gram AeroVironment has accom- unidentified companies also com- plished a technical milestone never peted. [7/09] Sweden Puma and Wasp UAVs— before achieved: the controlled hov- AeroVironment received a firm Netherlands Raven Small UAS— ering flight of an air vehicle system fixed-price order for 12 hybrid small The Netherlands Ministry of De- with two flapping wings that carries unmanned aircraft systems (UAS) fence, acting through its Defense Ma- its own energy source and uses only from the Swedish Defence Materiel teriel Organization (DMO), awarded the flapping wings for propulsion and Administration (Försvarets Materi- AeroVironment, Inc. a contract for control. AeroVironment achieved the elverk) on behalf of the Swedish RQ-11B (Raven) small unmanned

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 16 aircraft systems. The order includes (UAS). The order includes 12 sys- and delivery of the initial Global Ob- new aircraft systems as well as train- tems, logistics support and training server aircraft, and is valued at ap- ing, logistics support, and airworthi- services, for a total value of $2.4 mil- proximately $57 million. The con- ness certification. Each Raven sys- lion. Three of the Raven B systems tract also includes options for the de- tem typically consists of three air- are planned for delivery to the velopment and delivery of up to two craft, a ground control station, a re- Jægerkorpset (Army Special Forces), additional Global Observer aircraft, mote video terminal, system spares, with the remainder destined for troop resulting in a potential contract value and related services. The total award testing by deployed units at the Dan- of $108 million. Boeing lost the com- value is $7.7 million and is fully ish Army’s Artillery Training Center. petition. [9/07] funded. Israel's Elbit Systems and Israel's Elbit Systems and Germany's Army Small UAV—The US Army Germany's EMT offered losing bids EMT offered losing bids in the com- competition for a small unmanned in the competition. [5/08] petition. [9/07] aerial vehicle that could be carried in Spanish Raven UAVs—The Span- Global Observer Stratospheric a backpack ended with the victory of ish Ministry of Defense purchased 27 UAV—The United States Special AeroVironment’s Raven B over L-3 espionage UAVs to reinforce the pro- Operations Command (USSOCOM) BAI Aerosystems’ Evolution Ex- tection of Spanish troops in Afghani- awarded AeroVironment, Inc. a con- tended Time (XTS) SUAV. This stan and Lebanon. This contract is in- tract for the development and mili- SUAV will be dedicated for use by dependent from the one that was tary utility assessment of its Global brigade and company commanders. awarded last April for the purchase of Observer unmanned aircraft system The Army plans to purchase as many four UAVs. The contract is valued at (UAS). This contract initiates a Joint as 1,328 of the systems, which in- approximately €3.09 million. The Capabilities Technology Demonstra- clude a ground-control station and Control of Logistical support of the tion, or JCTD. The JCTD is spon- three air vehicles. [10/05] Army will receive nine systems Ra- sored by multiple US government or- Dragon Eye—In 2001 AeroViron- ven (Crow) 11Ba, each one of which ganizations. The contract calls for the ment and BAI Aerosystems defeated consists of three vehicles. Israel's development of up to three Global up to 10 other UAV manufacturers to Elbit Systems offered a losing bid in Observer aircraft over the next three the final development of the Navy- the competition. [12/07] years to demonstrate the ability to op- Marine Corps’ Dragon Eye portable erate in the stratosphere for up to Denmark Raven Small UAV—The UAV. Subsequently, The Marine seven days without landing. The Danish Army Operational Command Corps chose AeroVironment to build basic contract, which will be funded placed an order with AeroVironment, the Dragon Eye in November 2003. under a cost-plus fixed-fee arrange- Inc. to supply RQ 11 B, Raven B ment, provides for the development small Unmanned Aircraft Systems

Losses Short Range Reconnaissance Pro- Soldier Borne Sensor Program— has delivered over 8,000 Black Hor- totype—The US Army awarded Al- FLIR Systems, Inc. was awarded a net nano-UAVs around the world. tavian the Short Range Reconnais- $39.6 Million order to deliver FLIR Due to the significantly increased de- sance Prototype (SRR) contract as a Black Hornet Personal Reconnais- mand for unmanned aerial system part of the Army’s effort to field a sance Systems in support of the US (UAS) support in the US, FLIR is ex- next generation drone weighing less Army. The nano-unmanned aerial panding its UAS service and repairs than five pounds flown by a single vehicle systems delivered under this center in Somerset, Kentucky. Deliv- operator. AeroVironment teamed up contract will support platoon and eries will begin in early 2019. FLIR with Flightwave Aerospace Systems, small unit level surveillance and re- Systems competed against AeroVi- a small startup that has an expertise connaissance capabilities as part of ronment to win the procurement. in hybrid Vertical Take Off and the Soldier Borne Sensor Program. [1/19] Landing (VTOL) UAV's. The two The US Army awarded in June 2018 DARPA Tactically Exploited Re- companies were to produce Shrike 2, the first SBS phase contract to FLIR connaissance Node Phase III—The a new small UAS that can takeoff and for an initial batch of Black Hornet Defense Advanced Research Projects land like a quadcopter but transition PRS. These systems are being deliv- Agency (DARPA) and the Office of to forward flight as needed. That sys- ered now to the U.S Army for initial Naval Research awarded Northrop tem was among the competitive sys- integration into the force. This con- Grumman Corporation the third tems offered that failed to get an tract expands the use of FLIR’s Black phase of the Tern unmanned systems award. [4/19] Hornet PRS for Army surveillance program. Phase three plans to include and reconnaissance programs. FLIR final design, fabrication and a full-

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 17 scale, at-sea demonstration of the carrying a 1,000-lb payload drawing fine the demonstrator designs, con- system. Tern seeks to develop an au- five kilowatts of power that is able to tinue technology development and tonomous, unmanned, long-range, stay airborne for an uninterrupted pe- risk reduction efforts, and conduct an global, persistent intelligence, sur- riod of at least five years while re- uninterrupted three-month flight test veillance, reconnaissance (ISR) and maining in the required mission air- of a sub-scale demonstrator. The strike system intended to safely and space 99% of the time. During the third and final phase of the program dependably deploy and recover from program’s first phase, a 12-month an- will consist of a flight test of the full- small-deck naval vessels with mini- alytical effort, the three contractor scale demonstrator vehicle, during mal ship modifications. The North- teams were to conduct trade studies which the Vulture system will rop Grumman Tern team includes its to determine the design concept that demonstrate the ability to operate wholly owned subsidiary Scaled best satisfies the operational tasks continuously for 12 months. In a sur- Composites, as well as General Elec- and optimizes design capability. prise, AeroVironment lost the com- tric (GE) Aviation, AVX Aircraft They will also explore various vehi- petition although it had considerably Company and Moog. Northrop cle configurations while concentrat- more experience in the field than its Grumman competed against AeroVi- ing on reliability and mission assur- competitors. Seven years before the ronment to win the contract. [1/16] ance design aspects. The phase will award, AeroVironment flew an un- conclude with a concept design re- manned solar-powered plane dubbed Canadian Mini-UAV—Prioria Ro- view of sub-scale and full-scale Helios for NASA setting an altitude botics of Gainesville, Fla., won a demonstration vehicles and the sup- record.. That effort in part inspired contract to supply the Canadian De- porting technology development plan the DARPA program. AeroViron- partment of National Defence with to reduce risk on key technologies. ment executives believed that part of Maveric mini-UAVs. The Maveric is The Vulture program will focus on the loss may have stemmed from the a fully autonomous, mini-UAV car- developing innovative technologies need to also use expertise to support ried and launched by a single-person. and approaches for in-flight energy the company's Global Observer The lightweight composite UAV has collection or refueling and ultra-reli- ACTD bid. [4/08] bendable, carbon fiber wings that al- able systems or systems able to be re- low it to be carried in a six-inch tube. French Special Forces Skylark paired in-flight. Other new technolo- The Maveric is a hand-launched UAV—Elbit Systems was selected to gies that will be developed and that UAV used for reconnaissance. The supply the Skylark I UAV system to are key to the ability of the Vulture air vehicle weighs 1.1 kg and can fly France's Special Forces. AeroViron- system to provide the desired mission for up to an hour. The Maveric is ment is also believed to have been reliability include multi-junction made mostly of lightweight materi- among the 10 companies competing photovoltaic cells, high specific en- als. The UAV is carried into the field for the mini UAV contract. [3/08] ergy fuel cells, extremely efficient inside a small tube. AeroVironment propulsion systems, in-flight preci- Polish Small UAV—Israel's Aero- offered the Raven. Lockheed Martin sion autonomous materiel transfer nautics won a $3 million contract to offered the Desert Hawk. [7/10] and docking, extremely efficient ve- supply six Orbiter mini UAV sys- Vulture—The Defense Advanced hicle structural design, mitigation of tems to the Polish army in July 2007. Research Projects Agency (DARPA) environmentally induced loads, and That followed an earlier sale in 2005 selected Aurora Flight Sciences, innovative vehicle control concepts. of Orbiter sales to the Polish special Boeing and Lockheed Martin as con- A system able to remain on station forces, which used the systems suc- tractors for the first phase of the Vul- for five years could have utility in a cessfully in Afghanistan. In winning ture program. The Vulture contrac- variety of missions such as commu- the Polish competition, Aeronautics tors will design and develop an un- nications relay, surveillance and re- beat eleven other competitors. It is manned aerial system able to fly on connaissance, and signals intelli- believed that AeroVironment and station and perform its mission for gence. In the program’s second Elbit Systems were among those five years without interruption. The phase, DARPA contractors will re- competitors. [7/07] Vulture program envisions a system Contracting Contracts In US Army Switchblade—AeroVi- the United States Army for procure- procurement through a Joint Urgent ronment, Inc. received a one-year, ment of the company’s Switchblade Operational Need Statement from the $75.9 million funded contract from loitering missile system. The contract United States Army Tactical Avia- award was funded for the first year of tion and Ground Munitions project

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 18 office. Start of deliveries is antici- suppliers for small Unmanned Air- Raven Exports—AeroVironment pated by September 2020. Two addi- craft Systems (UAS) sustainment un- was awarded a firm-fixed-price con- tional one-year options, currently un- der a five-year Indefinite Delivery tract totaling $18.5million to supply funded, would extend the period of Indefinite Quantity (IDIQ) contract. initial RQ-11B Raven unmanned air- performance through April 2023 on a The seven awardees will compete for craft systems, spare parts and con- sole-source basis. [5/20] LRRS and MRM UAS, Tactical tractor logistics services to seven al- Open Architecture Controller system lied nations through the Foreign Mil- US Navy and Marine Corps Puma and spare and repair parts procure- itary Sales (FMS) program. [8/15] 3 Order—AeroVironment, Inc. re- ment task orders over the duration of ceived a $10.7 million firm-fixed- US Army Raven and Puma Sus- the contract.The maximum value of price contract award for Puma 3 AE tainment—AeroVironment received the contract is $248 million over five systems and spares for the US Navy since May 1, 2015, 10 orders from years. AeroVironment won the first and Marine Corps Small Tactical Un- the US Army totaling $47.1 million competitive award for the Army’s manned Aircraft Systems Program. for RQ-11B Raven and RQ-20A small UAS program of record on a Delivery was anticipated by April Puma AE unmanned aircraft systems sole-source basis in 2005, and won 2020. [2/20] sustainment. This total value in- the renewal of that contract with four cludes seven orders awarded on July US Army Raven Radio Frequency other suppliers in 2012. AeroViron- 23 totaling $35.2 million. [8/15] Modifications—The US Army ment is the designer and manufac- awarded AeroVironment a firm- turer of the RQ-11B Raven® and Spanish Raven—AeroVironment fixed-price contract on June 6, 2019 RQ-20A and B Puma™ UAS, which received a contract from the United to begin radio frequency modifica- constitute the vast majority of the States Army totaling $3.4 million for tions on its currently deployed Raven Army’s existing fleet of Small UAS. RQ-11B Raven unmanned aircraft UAS. The initial base delivery order systems to supply the Spanish Minis- The AeroVironment Raven, the most is $862,488, with potential contract try of Defense via the Foreign Mili- widely deployed defense unmanned options valued up to $55 million. tary Sales (FMS) program. [8/15] aircraft system in the world today, is AeroVironment won the competitive a lightweight solution designed for Switchblade Tactical Missile Sys- bid as part of the Army’s $248.5 mil- rapid deployment and high mobility tem Support Services—AeroViron- lion five-year Indefinite Delivery In- for military applications requiring ment received a $4.3 million cost definite Quantity small UAS sustain- low-altitude surveillance and recon- plus fixed fee award and $7.1 million ment contract announced in April naissance intelligence. option on September 25, 2014 for 2018. AeroVironment and six other Switchblade tactical missile system awardees were selected as part of the The AeroVironment Puma is a small support services from the United IDIQ contract, which covers six do- unmanned aircraft system designed States Army Close Combat Weapons mains: Systems, Tactical Open Gov- for land-based and maritime opera- Systems office. The award increased ernment Owned Architecture tions. Capable of landing in water or the funded value of an existing con- (TOGA), Other Major Components, on the ground, the all-environment tract for Switchblade tactical missile RQ-20A Puma Spares, RQ-11B Ra- Puma, with its Mantis i45 sensor systems to $63.8 million. In addition, ven Spares and Flight Control Sys- suite, empowers the operator with ex- options totaling $38.3M increased tems (FCS). The Army selected Aer- tended flight time and a level of im- the total contract ceiling to $102.1 oVironment as the sole-source sup- aging capability never before availa- million. The award and option pro- plier for RQ-20A and RQ-11B spares ble in the small UAS class. [7/18] vided for the continuation of services and for FCS. [11/19] US Marine Corps Puma—AeroVi- to support American forces through US Border Patrol—AeroViron- ronment received a firm fixed-price training, refurbishments and project ment, Inc. received a $5.3 million order valued at $13 million for RQ- management support. [12/14] firm fixed-price contract award for 20A Pum AE small unmanned air- DARPA Tactically Exploited Re- Puma 3 AE systems and support craft systems (UAS) and initial connaissance Node Phase II— equipment on August 8, 2019 for the spares packages for the United States DARPA selected Aero Vironment US Border Patrol, part of the US Cus- Marine Corps. The Marine Corps and its to follow its successful phase toms and Border Protection. Delivery employs the Puma AE system as the I concept design effort with a phase was anticipated by January, 2020. long-range solution for its small unit II preliminary design for the Tacti- [10/19] remote scouting system (SURSS), cally Exploited Reconnaissance complementing the AeroVironment US Army Mini-UAS Sustainment Node, or Tern. The 12-month, RQ-11B Raven and RQ-12A Wasp IDIQ Contract—The US Army se- $19,035,007 phase II effort seeks to AE UAS. [10/15] lected AeroVironment and six other conclude with subscale flight demon- strations prior to a planned phase III

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 19 award decision. DARPA and the US performance of a contract action with initial spares packages, training ser- Office of Naval Research envision a a not to exceed value of $65.5 million vices, and one year of contractor lo- new concept of operations using The order includes RQ-11B Raven gistics support. The PMA / Army smaller ships as mobile launch and systems, new miniature gimbaled team worked jointly to award the recovery sites for medium-altitude payloads and initial spares packages, contract to PAR® Government Sys- long-endurance (MALE) UAS. Tern and is funded from the Army’s fiscal tems Corporation, which in turn se- aims to make it much easier, quicker 2012 procurement budget. Delivery cured the systems and services from and less expensive for the Navy and of systems, spares and payloads is AeroVironment for a total value of Marine Corps to deploy persistent in- scheduled for completion by July 25, $12 million. Delivery was scheduled telligence, surveillance and recon- 2013. [4/13] to occur within four months of con- naissance (ISR) and strike capabili- tract award. [9/12] Marine Corps Wasp—NAVAIR’s ties.[10/14] Program Office for Navy & Marine Army RQ-11B Ravens—AeroVi- US Army Raven and Puma Corps Small Tactical Unmanned Air- ronment received $16.5 in additional Spares—The US Army awarded craft Systems (PMA-263), working US Army funding to perform on un- AeroVironment, Inc three firm fixed- collaboratively with the United der a contract action with a total pro- price orders totaling $27,178,075 for States Army’s Counter-IED Program jected value of $65.9 million. The RQ-11B Raven and RQ-20A Puma Office, awarded a contract on Sept. company announced the initial $15.8 AE unmanned aircraft systems 21, 2012 for AeroVironment Wasp million funding of that contract ac- (UAS) spare parts. The company re- AE small unmanned aircraft systems, tion on June 1, 2012. The overall ceived two orders on August 29, initial spares packages, training ser- contract action includes RQ-11B Ra- 2014 and one on September 18, 2014. vices, and one year of contractor lo- ven systems, new miniature gim- Delivery is anticipated within 12 gistics support. The PMA / Army baled payloads and initial spares months. These latest orders increased team worked jointly to award the packages and is funded from the the total value of orders for Raven contract to PAR Government Sys- Army’s fiscal 2012 procurement and Puma AE UAS spare parts and tems Corporation, which in turn se- budget. The payload integrates an Raven upgrades received since May cured the systems and services from electro-optical and infrared video 2014 to $77.6 million. [9/14] AeroVironment for a total value of sensor for improved tracking. It is $12 million. Delivery was scheduled also a modular payload unlike exist- Marine Corps Wasp—The US Ma- to occur within four months of con- ing Raven systems. Delivery of sys- rine Corps awarded AeroVironment, tract award.[1/13] tems, spares and payloads is sched- Inc. a firm fixed-price order valued at uled for completion by June 30, $21,779,408 for RQ-12 Wasp AE Army Raven and Puma IDIQ Con- 2013. [9/12] small unmanned aircraft systems tract—AeroVironment, Inc. and (UAS) and initial spares packages. four other companies to compete for Army RQ-11B Ravens—AeroVi- The United States Marine Corps, future US Army small UAS require- ronment received a $15.8 million which recently unveiled its next gen- ments under a new Firm Fixed-Price from the United States Army as the eration small UAS family of systems, Indefinite Delivery Indefinite Quan- initial portion of a contract action is adding RQ-12 Wasp AE as the tity (IDIQ) contract with a $248 mil- with a total projected value of $66.9 short-range, or micro, solution to the lion maximum value. The contract million. The order includes RQ-11B existing small UAS portfolio made will enable the continued procure- Raven systems, new miniature gim- up of the AeroVironment RQ-11B ment of AeroVironment’s RQ-11B baled payloads and initial spares Raven and RQ-20A Puma AE. Puma Raven and RQ-20A Puma AE sys- packages, and is funded from the AE is the USMC’s long-range solu- tems as well as competing medium- Army’s fiscal 2012 procurement tion. AeroVironment received the or- and long-range small unmanned air- budget. Delivery of systems, spares der from ADS, Inc. on behalf of the craft systems. [1/13] and payloads is scheduled for com- United States Marine Corps through pletion by April 30, 2013. [6/12] Navy/Army Puma—NAVAIR’s the Defense Logistics Agency (DLA) Program Office for Navy & Marine Army Lethal Miniature Aerial Tailored Logistics Support (TLS) Corps Small Tactical Unmanned Air- Munition System—AeroVironment program. Delivery is scheduled craft Systems (PMA-263), working received a contract modification ef- within 12 months. [9/14] collaboratively with the United fective March 20, 2012 from the US Army Raven and Gimbaled Pay- States Army’s Counter-IED Program Army Close Combat Weapons Sys- loads—AeroVironment, Inc. re- Office, awarded a contract on Sept. tems (CCWS), Program Executive ceived $13.8 million of incremental 21, 2012 for AeroVironment Wasp® Office Missiles and Space (PEO funding on March 30, 2013 from the AE small unmanned aircraft systems, MS). The $5,108,160 modification to United States Army for continued

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 20 the existing contract includes engi- Air Force Raven—AeroVironment $11,500,000 for new digital Puma‚ neering services, operational Switch- received a $6.9 million order from All Environment (AE) unmanned blade systems and operator training. United States Air Force for Raven aircraft systems (UAS), initial spares AeroVironment will work with ATK, Unmanned Aircraft Systems. The or- packages and training services. The its munition subcontractor, to pro- der includes new digital Raven® items were procured under the exist- duce and deliver the systems. This small unmanned aircraft systems and ing All Environment Capable Vari- order added to a prior $4.9 million or- initial spares packages. The systems ant (AECV) indefinite delivery/in- der for a total value of $10 million. and spares packages are scheduled definite quantity (IDIQ) contract. [5/12] for delivery within the next several Deliveries are scheduled to be com- months. The Air Force Security pleted over the next several months. Air Force Puma—AeroVironment Forces plan to employ Raven sys- Each Puma system consists of three received a firm fixed-price order val- tems to enhance situational aware- air vehicles and two ground control ued at $2,431,440 on April 5, 2012 ness and security at bases worldwide. systems. The air vehicle carries an in- from the US Air Force for Puma AE This initial order will provide sys- tegrated electro-optical and an infra- small unmanned aircraft systems tems for training of Air Force person- red gimbaled video payload, is de- through an existing US Army con- nel to support broader deployment. signed for enhanced durability in tract. Delivery is scheduled within [9/11] land and maritime environments and two weeks. [4/12] can operate effectively in foul Army Raven Logistics Support— Raven Logistics Support—AeroVi- weather and over rugged terrain. Its AeroVironment received a ronment received a new $11,095,872 quiet operation, stabilized imagery $15,909,962 cost-plus-fixed-fee con- cost-plus-fixed-fee sole source con- and precision landing capability tract order on September 1, 2011, un- tract award on March 1, 2012 from make Puma systems easy to operate der an existing contract with the US the United States Army. The order and recover. The Puma air vehicle Army. The order comprises Army comprises Army, Marine Corps and weighs 13 lb, is battery powered and contractor logistics support for Ra- Foreign Military Sales contractor lo- has a flight endurance of two hours. ven systems. The logistics support gistics support for Raven systems. [4/11] services are scheduled to be deliv- The logistics support services are ered within the next several months. US Army Digital Raven—The US scheduled to be delivered through [8/11] Army awarded a firm-fixed-price Feb. 28, 2013. [3/12] contract order valued at $14,773,816 USSOCOM Puma—AeroViron- Air Force Switchblade—AeroVi- under an existing contract. The order ment received a firm-fixed-price con- ronment received an order from the comprises digital Raven® small un- tract delivery order valued at United States Air Force for Switch- manned aircraft systems retrofit kits. $65,532,394 for new digital Puma blade loitering munition systems and Work is scheduled to be completed All Environment (AE) unmanned services. The $4,167,777 extension by December 2011. [4/11] aircraft systems and initial spares to an existing contract includes engi- packages. The items were procured US Army Digital Upgrade Kits— neering services, operational Switch- through the existing United States AeroVironment, Inc. received a firm blade systems and operator training. Special Operations Command (US- fixed-price order valued at AeroVironment will work with ATK SOCOM) All Environment Capable $7,800,003 under an existing con- (NYSE: ATK), its munition subcon- Variant (AECV) indefinite deliv- tract with the US Army on January tractor, to produce and deliver the ery/indefinite quantity contract. De- 25, 2011. The order comprises 919 systems. [2/12] liveries are scheduled to be com- digital module upgrade kits for the Army Puma Logistics Support— pleted over the next several months. US Marine Corps. The upgrade kits AeroVironment, Inc. (NASDAQ: [8/11] allow digital Raven unmanned air- AVAV) today announced that it has craft systems to operate using a dif- US Army Digital Raven—The US received a $7,298,530 cost-plus- ferent frequency band than provided Army awarded a firm-fixed-price fixed-fee contract from the United by the stock configuration. Work was contract order valued at $8,373,995 States Army. This contract estab- scheduled to be completed by April under a follow-on contract . The or- lishes a not-to-exceed amount for 30, 2011. [1/11] der comprises new digital Raven digital Puma® All Environment small unmanned aircraft systems and US Army Digital Raven and Ma- (AE) unmanned aircraft systems initial spares packages. [5/11] rine Corp Digital Retrofit Kits— (UAS) contractor logistics support AeroVironment, Inc. received an or- services in support of a Joint Urgent USSOCOM Puma—United States der valued at $46,226,984 under an Operational Need Statement. The Special Operations Command (US- existing contract with the US Army. services are scheduled to be provided SOCOM) awarded a firm-fixed-price The order comprises 123 new digital within the next 12 months. [10/11] contract delivery order valued at

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 21

Raven small unmanned aircraft sys- small unmanned aircraft systems value of this order is $66.6 million, of tems (UAS) and initial spares pack- (UAS), services supporting the which $42.7 million is not yet funded ages as well as 186 digital retrofit kits Army’s evaluation of the small UAS but has been added to the maximum for the US Marine Corps. The order Family of Systems concept and addi- potential value of the contract sup- also includes 339 digital retrofit kits tional engineering services. [5/10] porting this program. [12/09] for the US Army. Work was sched- Digital Raven—AeroVironment re- Nano Air Vehicle Phase II—The uled to be performed within a period ceived a $6,781,162 firm fixed-price Defense Advanced Research Projects of 12 months. [12/10] order for 51 digital Raven systems, Agency (DARPA) awarded AeroVi- Norwegian Ravens—The Norwe- initial spares packages and contractor ronment a Phase II contract extension gian Defense Logistics Organization logistics support for the US Marine in April to design and build a flying awarded a $4.86 million contract to Corps. On April 12, 2010, AV re- prototype for the Nano Air Vehicle AeroVironment for new Raven® ceived an additional $12,294,916 (NAV) program. As part of this pro- small unmanned aircraft systems, firm fixed-price order for 216 retrofit gram AeroVironment has accom- spares, training services and logistics kits to upgrade existing analog Raven plished a technical milestone never support. Delivery of the systems is systems with AV's digital data link. before achieved: the controlled hov- scheduled for early calendar 2011. [3/10] ering flight of an air vehicle system [11/10] with two flapping wings that carries Digital Raven—AeroVironment an- its own energy source and uses only Digital Puma—The US Army nounced that it received firm fixed- the flapping wings for propulsion and awarded AeroVironment a price orders valued at $20,731,992 control. AeroVironment achieved the $17,197,960 cost-plus-fixed-fee let- for digital Raven; unmanned aircraft milestone in December 2008 with the ter contract. This contract establishes systems (UAS) and digital retrofit successful 20-sec flight of the ‘Mer- not-to-exceed amounts for digital kits, and $17,141,648 for Raven sys- cury’ interim test vehicle. The nano Puma All Environment unmanned tem spare parts, repairs and training aircraft is capable of climbing and aircraft systems contractor logistics services for the US Army and Marine descending vertically, flying side- support, training and accounting. The Corps. The Raven system and retrofit ways left and right, as well as for- services are scheduled to be deliv- order represents a portion of the $121 ward and backward, under remote ered within the next 12 months. million appropriated for RQ-11 Ra- control. The goals of the NAV pro- [11/10] ven system procurement in the 2010 gram are to develop an approxi- Department of Defense Appropria- Digital Puma—United States Spe- mately 10-gram aircraft that can tions Act, which was signed into law cial Operations Command awarded a hover for extended periods, can fly at in December 2009. The orders were contract delivery order valued at forward speeds up to 10 m/sec can released under the existing US Army $7,231,440 for new digital Puma All withstand 2.5-m per second wind joint small UAS program of record Environment unmanned aircraft sys- gusts, can operate inside buildings, for AV’s Raven. This program al- tems and training services. The items and have up to a kilometer command lows for contract additions from the were procured under an existing in- and control range. The NAV program Army, Marine Corps, Special Opera- definite delivery/indefinite quantity was initiated by DARPA to develop tions Command and other US mili- (IDIQ) contract. [10/10] a new class of air vehicles capable of tary services. The items and services indoor and outdoor operation. The provided under these awards on this Digital Puma—United States Spe- Phase II effort will focus on optimiz- cial Operations Command awarded a multi-year contract are fully funded ing the aircraft for longer flight en- contract delivery order valued at and are scheduled to be delivered durance, establishing the transition $35,265,66 for new digital Puma All over the next 12 months. [2/10] capability from hover to forward Environment unmanned aircraft sys- Raven Digital Datalink Up- flight and back, and reducing its size, tems and training services. The items grades—AeroVironment received a weight, and acoustic signature. The were procured under an existing in- $23.9 million firm fixed-price order Phase II, $2.1 million NAV exten- definite delivery/indefinite quantity under an existing contract. This con- sion contract is scheduled to continue (IDIQ) contract. Work is scheduled tract modification includes digital through summer 2010. [7/09] to be performed within a period of Raven systems and kits to upgrade several months .[8/10] Global Observer Joint Capability existing analog Raven® systems cur- Technology Demonstration—US rently being used by the US Army Digital Raven—AeroVironment, government agencies exercised an Inc. received an order valued at and US Marine Corps with AeroVi- option for the assembly of a third $11,198,967 under an existing con- ronment's digital data link. Deliveries Global Observer aircraft. In all six tract with the US Army. The order of the digital Raven systems began in contract options have been exercised comprises 63 new digital Raven October 2009.The total potential since the program began with a total

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 22 value of more than $120 million. The Small UAS Contract—The US Spe- Raven Small UAS & Support Ser- initial $57 million contract was cial Operations Command (USSO- vices—The US Army placed an or- awarded in September 2007. The COM) selected Puma AE as its All der with AeroVironment, Inc. for ad- Joint Capability Technology Demon- Environment Capable Variant ditional RQ-11B (Raven) small un- stration is intended to demonstrate (AECV) solution to the Small Un- manned aircraft systems (UAS) and the utility of a hydrogen-powered manned Aircraft System (UAS) re- associated services by the exercise of UAV for intelligence, surveillance quirement. The one-year Indefinite an option under an existing contract. and reconnaissance missions up to Delivery Indefinite Quantity (IDIQ) Each Raven system typically consists seven days at altitudes from 55,000 contract, with four one-year options, of three aircraft, a ground control sta- to 65,000 ft. [6/09] has a maximum value of $200 mil- tion, system spares, and related ser- lion, and provides for the purchase of vices. The total award value is $45.8 RQ-11B Raven UAVs with Digital aircraft, ground control systems, million and is fully funded. The op- Datalinks—The US Army ordered spares, repairs and training under a tion was submitted under the existing 50 Raven RQ-11B UAVs with Aero- combination firm fixed-price, cost- US Army joint small UAS program Vironment’s new Digital Data Link. plus-fixed-fee and cost reimbursable of record for AV’s Raven and will The $16.76 million contract also pro- arrangement. The initial delivery or- provide systems for the Army and vides for initial spares packages and der is valued at $6 million and is fully Marine Corps. This program allows Digital Data Link retrofit kits for 206 funded. [7/08] for contract additions from the Army, existing Raven systems. [2/09] Special Operations Command and Raven Small UAS—The Nether- RQ-11 Raven UAVs—The US other US military services. The items lands Ministry of Defence, acting Army ordered $41.7 million of addi- provided under this one-year option through its Defense Materiel Organi- tional Raven small UAVs for its fis- on the multi-year contract are sched- zation (DMO), awarded AeroViron- cal 2009 requirements by exercising uled to be delivered within one year ment, Inc. a contract for RQ-11B an option under an existing contract. of the contract award date. [1/08] (Raven) small unmanned aircraft Each Raven system consists of three systems. The order includes new air- Raven UAVs—The Spanish Minis- aircraft, two ground control stations craft systems as well as training, lo- try of Defense purchased 27 espio- and spares. Deliveries are to be gistics support, and airworthiness nage UAVs to reinforce the protec- within a year. [2/09] certification. Each Raven system typ- tion of Spanish troops in Afghanistan UAS Based on Wasp—The Defense ically consists of three aircraft, a and Lebanon. This contract is inde- Advanced Research Projects Agency ground control station, a remote pendent from the one that was (DARPA) awarded AeroVironment, video terminal, system spares, and awarded last April for the purchase of Inc. (AV) $4.6 million in funding to related services. The total award four UAVs. The contract is valued at develop a small Unmanned Aircraft value is $7.7 million and is fully approximately 3,090,000 euros. The System (UAS) capable of performing funded. [5/08] Control of Logistical support of the “hover/perch and stare” missions. Army will receive nine systems Ra- Nano Air Vehicle Development— The Stealthy, Persistent, Perch and ven (Crow) 11Ba, each one of which The Defense Advanced Research Stare (SP2S) UAS is based on AV’s consists of three vehicles. [12/07] Projects Agency (DARPA) awarded small Wasp UAS, a one-pound, 29- AeroVironment, Inc. a Phase II con- BATMAV Contract—The US Ma- inch wingspan battery-powered air tract to design and build a flying pro- rine Corps ordered $19.3 million in vehicle that is being procured and de- totype for the Nano Air Vehicle BATMAV (Battlefield Air Targeting ployed by both the US Air Force and (NAV) program. AeroVironment Micro Air Vehicle) systems, each the US Marine Corps. The goal of the completed a preliminary design re- consisting of two Wasp III micro air Stealthy, Persistent, Perch and Stare view at the end of its Phase I, $1.7 vehicles, AV’s Advanced Battery program is to develop the technology million program. Phase II, which was Charger, spares and support services. to enable an entirely new generation initiated in March, is a new six- The order followed a successful Ma- of perch-and-stare micro air vehicles month, $636,000 development pro- rine Corps evaluation of Wasp sys- capable of flying to difficult targets, gram that will culminate with the tems provided by the Defense Ad- landing on and securing to a “perch” demonstration of a rudimentary, vanced Research Projects Agency, or position, conducting sustained, three-inch flapping-wing air vehicle DARPA. The Marine Corps will pro- perch-and-stare surveillance mis- system. Following a successful cure the BATMAV systems through sions, and then re-launching from its demonstration, DARPA has the op- the Air Force BATMAV contract, perch and returning to its home base. tion to extend the program for an ad- which was awarded to AV in Decem- [8/08] ditional 18 months which could in- ber 2006 and provides a means for crease the Phase II contract value. other US armed services to procure [5/08] these systems. The Marine Corps

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 23 plans to issue Wasp III systems to the development of up to three Global The order includes 12 systems, logis- battalion for deployment at the pla- Observer aircraft over the next three tics support and training services, for toon level, representing a basis of is- years to demonstrate the ability to op- a total value of $2.4 million. Three of sue that is lower in the force structure erate in the stratosphere for up to 7 the Raven B systems are planned for than that of AV’s Raven small un- days without landing. The basic con- delivery to the Jægerkorpset (Army manned aircraft system. The US Air tract, which will be funded under a Special Forces), with the remainder Force selected Wasp III as the micro cost-plus fixed-fee arrangement, pro- destined for troop testing by de- UAS for its BATMAV program. vides for the development and deliv- ployed units at the Danish Army’s [11/07] ery of the initial Global Observer air- Artillery Training Center. [9/07] craft, and is valued at approximately Global Observer Stratospheric Raven Logistics Support—The US $57 million. The contract also in- UAV—The United States Special Army has ordered $16.4 million in cludes options for the development Operations Command (USSOCOM) contract logistics services (CLS) in and delivery of up to two additional awarded AeroVironment, Inc. a con- support of its Raven small unmanned Global Observer aircraft, resulting in tract for the development and mili- aircraft systems (UAS). These logis- a potential contract value of $108 tary utility assessment of its Global tics services are to include refurbish- million. [9/07] Observer unmanned aircraft system ment, reconstitution and repair work, (UAS). This contract initiates a Joint Raven Small UAV—The Danish as well as the migration of systems to Capabilities Technology Demonstra- Army Operational Command placed the latest configuration during the tion, or JCTD. The JCTD is spon- an order with AeroVironment, Inc. to completion of refurbishment. [9/07] sored by multiple US government or- supply RQ 11 B, Raven B small Un- ganizations. The contract calls for the manned Aircraft Systems (UAS).

Export Sales The following is a selection of defense- or aerospace-related contract awards to AeroVironment for products or ser- vices bound for countries other than the US. International sales for AeroVironment accounted for approximately 45% in fiscal 2020, 52% in fiscal 2019, 47% of total revenue for the fiscal year 2018, compared to 37% in 2017, 29% in 2016 and 7% in 2015. As of June 2018, AeroVironment had sold to 45 countries, often small quantities used for trials. Note: FMS signifies Foreign Military Sales. NATO—AeroVironment received tract award encompasses the procure- Undisclosed—AeroVironment was two firm-fixed-price orders totaling ment of Raven unmanned aircraft awarded a firm-fixed-price contract $9,804,448 from the NATO Support systems equipped with Mantis i23 totaling $18.5 million to supply ini- and Procurement Agency (NSPA). sensors and pocket Remote Video tial RQ-11B Raven unmanned air- The orders are for Raven and Puma3 Terminals for the Portuguese Army, craft systems, spare parts and con- AE tactical UAS and spares. Deliv- with delivery scheduled over a three- tractor logistics services to seven al- ery for the first order is anticipated by year period. [9/18] lied nations through the Foreign Mil- August 2020 and the second order by itary Sales (FMS) program. [8/15] Australia—The Australian Defence October 2020. The orders are part of Force selected AeroVironment Wasp Spanish Raven—AeroVironment a three-year base contract received AE for its AUD $101 Million Small received a contract from the United from NSPA in January 2020. The Unmanned Aircraft Systems Pro- States Army totaling $3.4 million for contract includes an option for two gram. AeroVironment will provide RQ-11B Raven unmanned aircraft additional years oflogistics support Wasp AE systems over three years systems to supply the Spanish Minis- for Raven, Wasp and Puma tactical with multi-year training and support try of Defense via the Foreign Mili- UAS. The total potential value of the with a total contract value to AeroVi- tary Sales (FMS) program. [8/15] multi-year contract is $80 million, ronment of up to USD $36.5 million encompassing the procurement and Denmark Pumas—The Danish Ac- for hardware and services over the sustainment of AeroVironment tacti- quisition and Logistics Organization program lifespan. Under the contract, cal unmanned aircraft systems em- awarded AeroVironment a firm Australian partners XTEK, General ployed by the defense forces of sev- fixed-price order of $9.6 million to Dynamics Mediaware and Sentient eral NATO countries. [6/20] supply the Danish Armed Forces to provide added capabilities for with the company’s Puma AE™ Portugal—AeroVironment received WASP AE and local support for the small unmanned aircraft systems a $5.96 million award valued at Australian Defence Force. [6/17] (UAS). AeroVironment was selected $5,962,494 from Portugal. The con-

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 24 following a competitive evalua- Netherlands Raven Small UAS— awarded last April for the purchase of tion.This follows the first $2.4 mil- The Netherlands Ministry of De- four UAVs. The contract is valued at lion Danish Army order for Raven B fence, acting through its Defense Ma- approximately 3,090,000 euros. The systems in 2007. [6/12] teriel Organization (DMO), awarded Control of Logistical support of the AeroVironment, Inc. a contract for Army will receive nine systems Ra- Sweden Puma and Wasp UAVs— RQ-11B (Raven) small unmanned ven (Crow) 11Ba, each one of which AeroVironment received a firm aircraft systems. The order includes consists of three vehicles. [12/07] fixed-price order for 12 hybrid small new aircraft systems as well as train- unmanned aircraft systems (UAS) Denmark Raven Small UAV—The ing, logistics support, and airworthi- from the Swedish Defence Materiel Danish Army Operational Command ness certification. Each Raven sys- Administration (Försvarets Materi- placed an order with AeroVironment, tem typically consists of three air- elverk) on behalf of the Swedish Inc. to supply RQ-11B, Raven B craft, a ground control station, a re- Army. [6/12] small Unmanned Aircraft Systems mote video terminal, system spares, (UAS). The order includes 12 sys- Norwegian Ravens—The Norwe- and related services. The total award tems, logistics support and training gian Defense Logistics Organization value is $7.7 million and is fully services, for a total value of $2.4 mil- awarded a $4.86 million contract to funded. [5/08] lion. Three of the Raven B systems AeroVironment for new Raven® Spanish Raven UAVs—The Span- are planned for delivery to the small unmanned aircraft systems, ish Ministry of Defense purchased 27 Jægerkorpset (Army Special Forces), spares, training services and logistics espionage UAVs to reinforce the pro- with the remainder destined for troop support. Delivery of the systems is tection of Spanish troops in Afghani- testing by deployed units at the Dan- scheduled for early calendar 2011. stan and Lebanon. This contract is in- ish Army’s Artillery Training Center. [11/10] dependent from the one that was [9/07]

Joint Ventures/Teamng Turkey's Aselan, Altoy Defence Industries and Aviation Collaboration on Global Observer Aselsan, a Turkish defence industry the first step towards future collabo- cameras, avionics and communica- leader, announced it signed a Memo- ration on civil and military avionics, tion systems for AeroVironment’s randum of Understanding with Aero- electronics and electro-optical sys- Global Observer – High Altitude Un- Vironment, Altoy Defence Industries tems, sensors and communication manned Air Vehicle would be devel- and Aviation Inc., a Turkish joint systems. Solutions for Intelligence oped and presented to target interna- venture partially owned by AeroVi- Surveillance and Reconnaissance ap- tional markets by ASELSAN. [6/14] ronment. The agreement establishes plications such as electro-optical

CybAero AB AeroVironment secured exclusive (VTOL) unmanned aircraft system convertible notes under the agree- rights to Sweden's CbyAero AB's (UAS) in United States, NATO and ment. [12/12] larger, higher flying, longer endur- other countries. AeroVironment will ance vertical takeoff and landing invest up to $3 million in CybAero

Research & Development In-house R&D AeroVironment’s customer-funded is about the same as the previous rea- program is to develop the technology research and development is at its cord of $79.9 million or 24.5% of to enable a new generation of perch- lowest level in at least five years. sales in 2010, a period in which there and-stare micro air vehicles capable Company-funded research and de- was heavy investment in the Global of flying to difficult-to-access loca- velopment rose to $46.5 million in Observer program. tions, landing on and securing to a 2020, nearly reaching its previous "perch" position, conducting sus- AeroVironment received customer peak of $46.7 million in 2015. Cus- tained surveillance missions and then funding for a new small UAS known tomer-funded research and develop- as the Stealthy Perch and Persistent ment increased to $80.9 million. That Stare, or SP2S. The goal of the SP2S

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 25 re-launching from their perch and re- With 13% of its company revenues of revenues of the typical US defense turning to their home base. It is not spent on company-funded research company. clear if that funding is continuing. and development, AeroVironment Below is a five-year summary of spends several times the percentage spending in this area.

($ Millions) FY16 FY17 FY18 FY19 FY20 Company-funded R&D 35.0 28.5 26.4 34.2 46.5 Company-funded % of Rev. 15% 12% 10% 11% 13% Customer-funded R&D 52.8 42.4 52.5 76.4 80.9 Customer-funded % of Rev. 20% 16% 20% 24% 22%

Acquisitions/Divestitures Pulse Aerospace In June 2019, AeroVironment ac- United States. Pulse’s HeliSynth an undisclosed defense customer for quired Pulse Aerospace, LLC, a de- technology brings flight control, pay- its Vapor unmanned systems, spares veloper and supplier of small VTOL load, and endurance capabilities to and services. AeroVironment ex- UAS, for $25.7 million in cash, in- market at attractive prices for both pects the transaction to be accretive cluding milestone-based earn-out defense and commercial end mar- to its earnings by the third full year of payments of $5 million. Pulse Aero- kets. Pulse recently received a multi- operations. space is a developer of small vertical year contract award with a maximum takeoff UAS technology in the value of more than $13 million from

Altoy In February 2017, the Company com- which increased its interest from subsidiary of the Company on the pleted the acquisition of 36% of the 49% to 85% and provided the Com- date of the acquisition. Altoy aims to common shares of Turkey's Altoy for pany with control over Altoy. As a market and distribute small UAS in cash consideration of $625,000, result, Altoy became a consolidated Turkey.

Divisions/Subsidiaries Unmanned Aircraft Systems 85 Moreland Road Simi Valley Calif. AeroVironment’s has two UAV fa- is able to produce 1,000 aircraft Global Observer. AeroVironment is cilities are being moved to this loca- monthly. occupying the site under a five-year tion. Its small UAS manufacturing is lease. In addition, AeroVironment Another 105,000 sq ft manufactur- done at an 85,000 sq ft manufactur- has lease arrangements with several ing, research and development facil- ing facility in Simi Valley, Califor- test flight fields in California. ity in Simi Valley is used to special- nia. That facility, established in 2005, ized testing and production of the

Defense & Aerospace Companies Briefing ©Teal Group Corporation AeroVironment Inc. Page 26

Defense & Aerospace Companies Briefing ©Teal Group Corporation