AeroVironment secures counter-drone missile win and expands loitering munitions

Hi, I'm Jen Judson, Land Warfare Reporter for Defense News, and I am here with Waheed Nawabi, CEO of Aero Environment

Thank you so much for joining me here at AUSA. At the tail end, I know we're all a little bit tired, but you have a big announcement that happened this morning

Army leadership announced today that you won a contract to provide a counter-UAS, counter-drone missile

So talk a little bit about that, and what is the significance of this award

So, Jen, great to be with you. And, yes, you're right. Yesterday and today, the Army leadership announced in one of your public events about the selection of AAV for the next-generation counter-UAS missile, which is a very strategic capability

Just to give you an idea of what this is and what it means, today we've got our forces that is vulnerable from the attacks of different types of drones

These drones come in different sizes, from the smallest hobby-sized drones that you see

called the first-person view, all the way to very large systems that are much more potent, capable, and strategic

The ability for us to be able to actually defeat these drones from what's referred to as the medium and larger sizes

is right now economically not feasible. If we were to have a conflict somewhere in the world, and there's many of them going on today

including Ukraine and other parts of the world, the economics don't work out because you cannot shoot down a $100,000 drone or a $50,000 drone with a $2 to $3 million missile

The economics will just bankrupt us. So the Army has a specific program that they want to develop a next-generation missile

that is essentially going to be the key missile system that is going to be able to defeat these drones from Group 3 and on

We can take out Group 1 and 2 as well. at distances that are up to 20, 25 kilometers out

and at subsonic speeds. So we can take out a significant number of different types of aerial targets

as a result of this. We were selected, and we have a solution that we believe

it meets all the requirements of the U.S. Army. We've been demonstrating the capability

We believe this is going to be a multibillion-dollar franchise and program in missile globally for air environment and AV

Second thing I want to mention is that in the last generation of my lifetime

there's been five companies that the U.S. has always depended on who can make and manufacture missiles

Now U.S. has a sixth option. All right, you are a missile builder now

We're a sixth option for the U.S. military from concept to actual flying

from pencil and paper to flying. We did this missile in 107 days

It speaks volumes to the speed, agility, innovation, and technical competency of our company and our team

Yeah. So this is obviously low cost. So talk about how you drove cost out of this

Missiles are expensive. They're $3 million versus drones that are so much cheaper

So talk about how you did that. So AV is known as the high volume, low cost producer of these technologies in the world

We have today over 42,000 of our platforms flying anywhere in the world, including 100 different nations

So we know how to manufacture in volume. We know how to manufacture at scale, and we know how to do it at cost, at very affordable cost

If you compare one of our Group 2 or 3 drone that we actually make for the U.S. military and our allies

you will see that the equation in terms of the economics is one-tenth to one-hundredth

one-thirtieth of the cost of a comparable system that's manned. So it's part of our DNA

We know how to design for high volume. I've come from that commercial industry for my entire career

other than the last 15 years at AV. And so we have perfected the capability

We have factories in the U.S. Our products are in full production, and we're making them by the thousands today

Yeah, yeah. Talk a little bit more about that manufacturing, because this is something that I think that the U.S. is a little behind when we think about mass producing at the scale that we can imagine we might need in the future

So how are you thinking about that and working with the Army and the other services in terms of being able to build at scale

You are already doing this to an extent. What are some of the ways that we can be better and faster and cheaper and really get our arms wrapped around this problem of mass producing drones So Jen I glad you asked that question because it a multifaceted problem and it a complex problem to understand and tackle

First of all we need to distinguish between what size drones and capabilities we're talking about

Vast vast majority of the drones that you see on YouTube and in public from the it's called the FPV or first person view quadcopters that is used in Ukraine

they're not going to be relevant in the fight within us and one of our strategic adversaries

So those are more consumer toy drones. They're going to have a role, but that's probably going to be less than 5% of the market

for the military drones of the U.S. and our allies, number one

Number two, when it comes to the rest of them, really the problem is more than one facet

which is number one is the ability to be able to design these things from the ground up

to be able to be modular, open architecture, so you can actually stand up manufacturing in different places easily

So our systems are designed from the ground up to be based on that architecture, number one

Two, you've got to have these drones to be more manufactured. The industrial base has to be developed

So you have to have suppliers, contractors, people who make the warheads, people who make composites, people who make boards and processors

So over the last four decades, we have essentially invested so much energy that this is what we've perfected as a company

And I would confidently say that I don't know of any other company in the world that knows how to do this effectively at scale better than us

You can come to our factories. You'll see how we make these today

The manufacturing process actually is very flexible. We can change lines and make a different drone at the same line

So there's lots of things that goes into that. However, it all starts with a consistent funding and demand from our customers

And Congress has a huge role to play in this. They need to support our military

Being in a shutdown does not help. We need to get this going

And that affects companies like us to be able to have a continuity of supply

continuity of scale and capacity in the long run. Switchblade is kind of like a household name for loitering munitions now

It's used extensively in Ukraine, for instance. How are you evolving and adapting Switchblade as time progresses and technology continues to advance across the board

What are some of the new things that you've done to continue iterating and improving on the Switchblade technology

So, Jen, again, so glad you asked that question. and it seems like you've done your homework on our company

because we have three brand-new products at our booth today, and two of those products are two brand-new variants of our Switchblade

One is our Switchblade 600 Block II, which is the second-generation Switchblade 600

Switchblade has changed the paradigm in warfare. In the future, you are going to see tanks, armored vehicles

ships, airplanes, helicopters, all equipped with loitering munition or one-way attack drones

That's a category that we invented and we brought to the market. So it's going to change just like how a smartphone changed our lives

Essentially, it's a similar ogy that I use. We introduced two new products specifically that is our second generation Switchblade 600

Again, for the U.S. Army and our other customers, it's in production. And then a Switchblade 400, which is between a Switchblade 300 and 600

it. It's basically a switchblade 600 and a diet. And it makes it man

portable for the soldiers specifically for smaller forces in this particular case for the U.S. Army

Both of these two products are focused specifically for the U.S. Army and our allies. And we have also other

variants of these products that were in production. This is part of our DNA

We invest a significant portion of our own dollars in R&D. And our cycle for development

our pipeline is robust. We are excited about so many other capabilities that we've got that we're going to bring to the market

In the last two years, we've invested over $200 million in R&D, our own internal R&D dollars, not our customers, to develop these capabilities and bring them to market

And so our cycle of rapid innovation, bringing these technologies to the market, and one to two-year time frame, sometimes even shorter, is absolutely the DNA that we're built for

So we are building our company we have in the past and we'll continue to build a company that our military, our country and our allies need for the next decade

Well we see a lot of partnerships with you and other companies around the showroom floor Your Switchblade is integrated on a variety of platforms for instance

Can you talk about some of those strategic partnerships and how that's really enhancing capability for the Army

Sure. So as I said, Switchblade and one-way attack drones change the paradigm in warfare

that has caused, for example, if you're making a tank, a main battle tank essentially today is incredibly vulnerable

I would even call it obsolete against a switchblade operator. So you and I can launch a switchblade 600 day and night from here

and find the tank 40 kilometers out and then actually defeat it

without the tank ever being able to actually see us. and we can do that within a matter of 20, 15, 20 minutes

and then move to another location. So what this means is that these assets that all militaries have are vulnerable

So they have to, number one, defeat against that and protect against that

which is our counter-UAS solutions that we have developed, and we're the leader in that. Second, the offensive capabilities of tanks, armored vehicles, ships

and all that has to change, as you mentioned, and that's why you see companies such as Northrop Grumman, General Dynamics

and many others who are working with us to now install and equip and integrate these capabilities into those platforms

And that is going to be something that you see more and more of this event and the future of defense because it's just changed

It's the new paradigm of how we're going to fight our adversaries and how we're going to protect Americans all over the world

Yeah, so big accomplishments today, but what do you have your eye on in the future in terms of things you want to pursue in the development side

You know, what's next? What's the next thing you're going to focus on? Look, so Jen, we're very focused on our customers

This company, our mission is our customers' mission. We're a very mission-driven company

We really stay very close to our customers. We have built this company from ground up to be the next defense tech prime for the U.S. DOD and our allies globally

We believe that we have the best portfolio. We've got production capacity in 20, 30 different states around the country today

We have vast, vast majority of our products that we're producing at volume and full rate production today

And we also have the best track record and success in battles that really are relevant, including Ukraine and the ones before that

So we've purpose-built our company for the future of defense. And we're very focused on that mission

We're very focused on that strategy. And I think that we have a huge potential here to create an enterprise that really meets the needs of our nation, our allies and the world, not just today for the next decade or two

And what does that look like in terms of continuing to drive down costs

What are some of the goals that you're setting in order to position yourself there

So there's a lot that goes into that. Number one, we need to continue to expand the portfolio of our solution sets for all domain

We're in underwater, water, ground, air, sea, and space, and cyber. So we've got the domains covered, but we're going to keep building the portfolio, one

Two, we need to keep driving the cost lower and the capacity and the industrial base larger and larger

which is actively being worked on with us, and we're the leading leader in that space. Third is to actually integrate and interoperate all these

In the future, a soldier, an airman, or a sailor is going to have several of these devices

whether it's small quadcopters or a drone underwater or a large asset

And so the ability for these systems to interoperate and actually work as teams

and integrate the capability through software is a huge part of our DNA

We recently announced about a month ago our AV Halo software. AV Halo is the ecosystem upon which we're going to basically integrate all these capabilities

Think of it as Microsoft Office suite of products. You're going to have several modules underneath that, but this is an open architecture

We integrate with many of our competitor assets or drones and ground robots, etc. as well

In fact, we integrate with more of our competitors than our own today, and we're going to continue to do that because we want to be open

We want to be agnostic to the platform. And lastly, we want to build as much autonomy and AI

into these things that allows them to actually do things with less cognitive load on the operator and our warfighter An example of that is our counter UAS system Our counter UAS jamming system which is the best performing system in the world today and in Ukraine actually uses AI algorithms

to be able to detect the waveform by which these drones communicate to a satellite

a GPS satellite, or to the ground operator. And we know how to do that

because we understand and we have expertise in those areas. So in the future, you're going to see a lot more of that

being deployed and integrated and, and, uh, peripherated throughout our portfolio. Do you, have you already, uh, become involved or do you see an opportunity to

uh, insert some of that into what the army is doing with the next generation

command and control effort? Absolutely. Uh, there is a, uh, very specific initiative within the U S army called, uh, HMIF

It's a program, uh, human machine, uh, interface formation, formation, I think it's called, or I might have mistaken the acronym. I apologize

Pusted with human-machine integration. Human-machine integration. Essentially, the idea here is that as these robotic systems increase, the Army needs to

have an open architecture that's modular, that allows these systems to talk to each other

but also for one human to be able to command and control several devices

And so we have a solution set. We're competing for that. We're hoping that the Army makes a decision on that soon. We believe we have the best performing solution because we know

so much about the assets that the platforms that are being used to connect and integrate and control

And so that is a very key initiative for the U.S. Army. And similar activities going on within the

U.S. Marine Corps. There's a similar activity going on within the U.S. Navy. And so you're

going to see more and more of this in the future because all these systems that we see at these

events, conferences and these shows and our military is going to have, has to interoperate

work together, agnostic to the platform, agnostic to the vendor, open with ability to upgrade

swap out modules, and that's fundamental to our strategy in our product roadmap as well

Okay. Final question on supply chain. There's a lot of complicating issues with supply chain

a lot of challenges I think many companies face when it comes to building drones, for instance

You know, what are some of the supply chain issues that you're encountering

How have you worked around and resolved some of those? What's still something you're working through

Sure. So there's, as you know, there's a lot of talk these days about how our industrial base and our industry needs to make sure that we go lean forward at risk

This is another trait and characteristic in the DNA of AV. When the Ukraine war started, the day that the war started, two weeks later, I actually approved to order 3,000 Switchblade being built

We bought the parts. We did not have a contract. We knew that Switchblade is going to be a massive, massive success for the Ukrainians and the U.S. military because we know how it works

So we have historically done this every year for the last decade plus that I've been here

and buying things at risk, leaning forward so we can reduce the lead times

We don't have anything that has like a year plus lead time. We make things that we can deliver right away

And I believe even that is not sufficient. And the government can help

Congress can help with a multi-year contracts and ability to be able to produce these things long term

So that's one thing that needs to happen. So we have to let our military be able to function

and operate for beyond just this month or this year. That's one

Second, it is part of our DNA. We lean forward developing products well ahead of the actual requirements

We help our customers actually even develop the requirement. And the last thing I would say is that in terms of the supply base, we are 100% sourced domestically

We made this initiative consciously about a decade ago that we do not want to rely on foreign suppliers

We want to manufacture our things all in the U.S. We source things in the U.S

Even if you go to second, third, fourth year component level, component suppliers, 98% of it's actually sourced from U.S. from more than two suppliers in every single case

That is fundamental to our design process, to our manufacturing process, to our ability to go to market

And so I think this is also something unique about AV. It's being copied by many players, but we've done this for the last decade already, and we know how to do that

So we're very, very excited about that. Excellent. Well, you have so much going on and lots more to pay attention to as the Army evolves here

So thank you again for joining me here at AUSA. Great to be with you, Jen