Good day, ladies and gentlemen. Welcome to AeroVironment Incorporated’s First Quarter Fiscal 2015 Earnings Call. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session after management's remarks. As a reminder, this conference is being recorded for replay purposes. With us today from the company is the Chairman and Chief Executive Officer, Mr. Tim Conver, Chief Financial Officer, Mr. Jikun Kim, and Vice President of Investor Relations Mr. Steven Gitlin. And now, at this time, I would like to turn the conference over to Mr. Gitlin. Please go ahead, sir.

Thank you, Eric. Please note that on this call, certain information presented contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on current expectations, forecasts, and assumptions that involve risks and uncertainties, including but not limited to, economic, competitive, governmental, and technological factors outside of our control that may cause our business, strategy or actual results to differ materially from the forward-looking statements. For a list and description of such risks and uncertainties, see the reports we file with the Securities and Exchange Commission. Investors are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date on which they are made. We do not intend and undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The content of this conference call contains time-sensitive information that is accurate only as of today, September 3, 2014. The company undertakes no obligation to make any revision to the statements contained in our remarks or to update them to reflect the events or circumstances occurring after this conference call. We will now begin with remarks from Tim Conver. Tim?

Thanks Steve. Welcome to our first quarter fiscal 2015 conference call. Less than two months have passed since our fourth quarter earnings call where we outlined our plans for fiscal 2015 and we're pleased to report that these initiatives are on track. On this call, I'll summarize our Q1 highlights and review the significant progress we're making towards these fiscal 2015 financial and operational goals. I'll then provide an update of our fiscal 2015 investment plan, which is designed to position AV for long-term growth with strategic investments in large, emerging market opportunities. Following these remarks, Jikun will provide financial details before we take your questions. During the first quarter, our team delivered results that met and exceeded our expectations. Revenue for the quarter was about $52 million and gross profit was about $14 million, up 18% and 12% respectively year-over-year. Cash from operations was $14 million. Funded backlog increased by 25% over last year to $82 million, $45 million of the $68 million bookings in the first quarter were army orders for spares and raven upgrades. Strong bookings are continuing with the additional $52 million booked in the second quarter to date. This backlog gives us the highest visibility of revenue in recent years at 80% of the midpoint of guidance. Small Unmanned Aircraft Systems or small UAS are now standard requirements for equipping ground forces throughout the Department of Defense and we expect this capacity will continue to be a priority. At AV we have built and maintained market leadership by anticipating and responding to market needs, more effectively than others to develop unique value for customers. For example both the Army and the Marine Corp recently announced their selection for their next generation of small UAS to be a family of systems. The future requirements defined by…

Thank you, Tim and good afternoon, everyone. AeroVironment FY '15 Q1 results are as follows. Revenue for the first quarter was $51.9 million, an increase of 18% or $7.7 million over Q1 last year of $44.1 million. Looking at revenues by segment, UAS revenue was $41.2 million, an increase of 17% over the prior year. The increase in UAS revenue was largely due to higher product deliveries of 13.4 million driven by higher deliveries of Switchblade systems and Raven gimbaled. These increases were offset by lower customer funded R&D revenues of $6 million driven by a decline in small UAS related productivity as well as the lack of a Global Observer contract termination cost reimbursement that we recognized a year ago. Logistic and repair services for small UAS also declined by $1.5 million. EES revenue was $10.7 million, an increase of 20% from Q1 last year primarily due to higher hardware deliveries over industrial electric vehicle charging systems offset by lower deliveries of our passenger electric vehicle charging systems. Turning to gross margin, gross margin in the first quarter was $14.1 million, up 12% from Q1 last year of $12.5 million. Gross margin as a percent of revenue was 27% versus 28% in the first quarter last year. By segment, UAS gross margin was $10.2 million, down 4% from the first quarter last year. This decrease reflects higher cost and service related contracts in the current quarter. As a percent of revenue, UAS gross margin was 25% compared to 30% in the first quarter last year. Higher prior year Q1 growth profit percentages include the impact of the Global Observer termination settlement. EES gross margin was $3.9 million, up 101% from Q1 last year, primarily due to higher sales volumes and favorable product mix. As a percent of revenue, EES…

Thanks, Jikun. Looking ahead, we’re on track to achieve our fiscal 2015 financial guidance and expect to generate $250 million to $270 million in revenue and 34.5% to 37.5% in gross margin. We still expect about 60% of our revenue in the second half of the year similar to last year’s experience. That would imply Q2 revenues about the same as Q1. Strong bookings year-to-date and a good pipeline of future orders suggest a growing backlog to support our plan for higher second half revenue. Our core business in small UAS Switchblade and efficient energy systems remains solid with sustained market leadership and demand. The customer adoption interest that led us to accelerate the investments I outlined earlier remains active. Looking ahead, we will continue to meter and control these investments throughout the year based on results, customer activity and the market adoption timing indicators. If we deploy all of the potential R&D and SG&A investments in fiscal 2015 that we anticipate could maximize future growth and return on investments potential, we could largely offset the operating profit generated from our core business resulting in low or no profit for the year. For this reason we have provided fiscal 2015 guidance on gross profit rather than earnings per share. Our team continues to execute effectively in our core business areas while moving our new capabilities forward to market adoption and expansion. Accelerating these initiatives would not be possible without the exceptional talent and dedication of the entire AeroVironment team. Thank you for your time and with that, we’d like to open the call for your questions.

Thank you, sir. (Operator Instructions) And our first question comes from Patrick McCarthy of FBR Capital Markets. Please go ahead.

Hi, good afternoon and thank you very much for taking my questions. My first question is, I am wondering whether you feel comfortable with where you are right now in your breakeven rates or are you contemplating anymore belt tightening like we saw last year.

Yeah. So our breakeven rate if you remember last year we had dropped from 60-65 to 50-55. Obviously a breakeven is breakeven at the operating profitability level. So given the fact that this year we’re increasing our investments in R&D and G&A that breakeven level is increasing and we aren’t anticipating any belt tightening to the extent that we had last year Patrick, although we obviously continue to focus on optimizing our processes and optimizing our product cost as we move forward in the business.

Okay, great. I was also wondering if you could take a moment to maybe just to put some more context around your comments on Switchblade. Are you done with all the orders that you have received, I wasn’t sure if I understood that correctly?

I was referring to all up round. So you may recall that last year we transitioned from funding on Switchblade that we had previously been primarily associated with development and testing and validation to include ongoing development as well as the production and delivery of all up round and testing rounds. So that deliverable hardware element of last year's purchase orders were completed. The delivery was completed in the first quarter of this year. We have ongoing contracts for continued development, support and testing.

Okay, great. Thanks for the clarification.

Our next question comes from Michael Ciarmoli from KeyBanc Capital Markets. Please go ahead.

Hey good afternoon guys, thanks for taking my questions. Tim, you elaborated on or you discussed on the spending required to maybe expand and penetrate into new industries on the commercial side. Can you maybe give us a sense of you know what industries, what type of payloads, what solutions you are potentially targeting or just you know some broader context there?

Well I can start with going back to what we have discussed on the solution we are currently delivering in on the North Slope with BP. That’s based on payloads that include both day light, night time video light hours and we are generating information that in large volumes that we process through large back office capabilities in order to extract from that large database the actionable information that customers need to optimize their enterprise. We will expand the platform and payload and processing capabilities or modify them as appropriate for different industries and the specific needs that large customers and those industries have, does that help…

Can you give us a sense of what other industries?

Well the general areas that I think are publicly acknowledged include everything from oil and gas to agriculture, to mining, to public safety, border patrol and environmental applications and considerably more beyond that. So we’re looking at this sequentially in areas where we think these technologies can deliver the highest value to large customers and industries.

Okay, fair enough. And just shifting gears to the defense side. We’ve obviously got you know there’s more talk continuing resolution, sequestration, we’ve got the midterm elections, are you guys seeing anything changing or hearing anything from your customers out there regarding the availability of funding or expectations for the remainder of this fiscal year or early fiscal ’15?

Well we’re coming off a period of significant uncertainty on funding levels from our customer base and clearly relative to a year ago, I think all of our customers have a higher level of confidence in their near term funding expectations. I don’t think they are back to the position that they were in a few years before that. Nevertheless we see strong recent bookings, our pipeline looks good, the ongoing spares and upgrade demand for the existing fleets continues to be an important revenue source and as I mentioned earlier both the Marine Corp and the Army have now announced their next generation requirements for small UAS, and luckily enough, those incorporate solutions that we've developed.

Our next question comes from Andrea James of Dougherty & Company. Please go ahead. Rob Bennett - Dougherty & Company: This is Rob Bennett on for Andre James, thanks for taking my question. Will there be an upside for troops going to Baghdad?

Can you repeat the question please Rob? Rob Bennett - Dougherty & Company: Yeah, will there be any upside for troops going to Baghdad?

Rob, I think you are aware that our solutions go where U.S. troops go, and at this point now, where it goes to 30 other nations. So I think what I can say is that we’re ready to support all of our customer needs whenever and wherever they are. Rob Bennett - Dougherty & Company: Okay. And then can you go through what investments you made in Q1 for Global Observer and now Swithblade?

I think in Global Observer we are primarily in Q1. You can recall that we announced these investments after Q1 started. So we've just really begun to deploy these in the latter part of Q1. And with Global Observer, we are primarily focused on the business development element of that two pronged investment in Kent and with the tactical missile systems business area our initial investment launches have been focused on the research and development to bring the new variance of Swithblade to demonstration for multiple customers later this year.

Our next question comes from Howard Rubel from Jefferies. Please go ahead. Howard Rubel – Jefferies: Thank you very much. There’s been some very high profile demonstration of UAVs you know whether it's in Amazon or now Google, where do you stand in discussions with them?

Well Howard, we are focused primarily on what makes our customers in the target markets we are pursuing most successful. And we don’t look at competitive aspects so much as what the customers really need and how can we best deliver innovations that enable them to go forward. Beyond that, I think until and unless we have announced the relationship we have not talked about preliminary discussions we have in any markets with any customers. Howard Rubel – Jefferies: Okay I get that. And then could you help me understand a little bit why given the very strong bookings in second quarter you wouldn’t have some either pull forward or some benefit from that a little sooner in your business whereas you sort of indicated relatively flat maybe a little bit more on that it seems that a lot of this is, I’ll call it repair and service, which has a quicker turn time? Thank you.

If you recall Howard a year ago, when the level of uncertainty in government budgets was very high we modified our policy of building to inventory in anticipation of customer orders to building in response to orders. And as a result our lead times have increased and so where we two years ago might have very well converted new contracts into revenue on a much shorter basis, it takes us a little longer now because of that inventory management policy change.

Our next question comes from Josephine Millward of The Benchmark Company. Please go ahead.

Great quarter, guys. Tim did you say that most of your bookings to date are for U.S. DoD Raven upgrades and repairs?

Well, I commented that a substantial portion of our first quarter bookings about $45 million of the $68 million in bookings in Q1 were from the army and they were primarily for spare parts and for Raven payload upgrades.

Got it. And when do you need to see additional Switchblade orders to keep your production lines warm? And when do you think you’ll get them?

We saw Switchblade total revenues almost doubled last year. We expect to see continued growth this year. It’s always hard to predict when our customer will place what orders, but we do expect to see that increase in procurement this year and where we expect to see that convert into revenues to a significant degree this year as well.

(Operator Instructions) And we have a follow-up from the line of Andrea James, Dougherty & Company. Please go ahead. Rob Bennett - Dougherty & Company: Hi. This is Rob Bennett again. As the current OpEx rate are good where the model is going forward?

If you remember I think when we had our phone call last quarter where I guess as the fiscal end year, our message to the investment community was that we would increase our investments in some of the strategic opportunities that we had. Now that increase in investment didn’t happened until probably two months or didn’t start until about two months into Q1, so we would expect that run rate to increase over the next few quarters. Rob Bennett - Dougherty & Company: Great. And then just one more. Some competitors are looking at things like rescission agriculture; do you guys see to ultimately end up somewhere in Ag?

We clearly see agriculture as one of the large global industries that has the potential to significantly benefit from the use of unmanned airplane systems in the various parts of the enterprise and I wouldn’t surprise to see us pursuing that sooner or later.

Our next question comes from Howard Rubel of Jefferies. Please go ahead.

Thank you. I just wanted to talk about Marine Corps nano for a moment. You’ve spend a lot of time and effort developing that product. Can you just provide some context, Tim, please?

You’ll recall Howard the Nano Hummingbird was a high profile application of our work in very small unmanned airplane systems. We have an extraordinarily talented team that has led our Nano lab for very long period of time and we – it’s an area that we focus on. We had a vision of a pocketable UAV for many years. So we’ll be actively engaged with customers as they become increasingly interested in smaller solutions that can drive UAS capability further into the force structure.

Let me just follow-up on that if I may, are you -- you sort of said and I’m not sure I heard properly that you’re getting some customer funding for some of these initiatives?

I’m not sure where that comment -- what comment you’re referring to Howard.

I’m didn’t referred it, so I apologize. I’m just trying to understand that some of this is pretty what I’d call customer driven and focus and exactly what customer want usually in that case they often times provide some funding to help you along. Is that fair? Or am I being too optimistic?

Well, I think those comments might have been associated. I did say that we have had and continue to have ongoing customer funding that for around Switchblade solutions that runs alongside of our internally funded R&D, primarily in areas where we are anticipating customer requirements and I would put nano UAVs in that category. We have historically invested internally funded research and development to develop the technologies and demonstrate capabilities. And at some point when the customer base begins to be serious about adopting those solutions, than we typically see them begin to invest themselves. But at this point from the perspective of nano UAVs that’s primarily been internally funded. Of course, the Nano Hummingbird that we talked about earlier was a DARPA project. So that’s customer funded R&D in itself.

And I see no further questions at this time. I’d like to turn it back to Mr. Steven Gitlin for closing remarks.

Thank you for your attention and for your interest in AeroVironment. An archived version of this call, all SEC filings and relevant company and industry news can be found on our website, avinc.com. We look forward to speaking with you again following next quarter's results.