Investors High on Performance of Drone Maker

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AeroVironment Inc.’s stock is fighting through the turbulence and taking off.

One day after a longtime activist investor in the Monrovia drone manufacturer demanded the firm shake up its board, AeroVironment reported loftier numbers than many analysts and observers expected. That had its investors flying high.

AeroVironment’s shares soared 8.8 percent during the week ended July 1 to close at $29.06. The company was one of the biggest gainers on the LABJ Stock Index. (See page 34.)

AeroVironment posted revenue of $86.5 million for the three months ended April 30, up 18 percent from the same period last year. Net income was $7.1 million (31 cents a share), down from $8.1 million (35 cents) for the same quarter in 2014.

While profit was down, the company handily surpassed predictions; it increased its research and development spending by $16 million in the last quarter compared with the same period the year before. The consensus earnings estimate from the company’s analysts was 18 cents a share.

Chief Executive Timothy Conver said he was pleased with both the current performance and the company’s future direction.

“First, our strong core business delivered the revenue we expected and exceeded expectations for profitability,” he said on a conference call after the earnings release. “Second, our growth portfolio advanced through careful strategic investments that improved our position for large new market opportunities.”

The drone maker’s solid earnings were certainly welcomed by management, especially since they were released mere hours after Newport Beach activist hedge fund Engaged Capital sent a letter June 29 urging the company to declassify its board.

AeroVironment’s board has different classes of members who stand for election at different times, a structure intended to prevent hostile takeovers but can be used to entrench insiders. Declassifying would make sure all members would face election every year.

Engaged founder Glenn Welling has been agitating for the company to improve its corporate governance since first announcing his investment in a July 2013 filing.

AeroVironment’s shareholders passed a nonbinding proposal to declassify the board by more than a 70 percent margin at its most recent annual meeting, which Welling cited in his letter.

Management plans to hear Welling out.

“We welcome open communication with all of our shareholders and value their input directed towards enhancing shareholder value,” the company said in a statement emailed to the Business Journal.

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