Yahoo Finance AeroVironment (AVAV) Q4 2018 Earnings Conference Call Transcript
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AeroVironment (NASDAQ: AVAV)
Q4 2018 Earnings Conference Call
Jun. 26, 2018 4:30 p.m. ET
Contents:
Prepared Remarks
Questions and Answers
Call Participants
Prepared Remarks:
Operator
Welcome to the AeroVironment Incorporated fourth-quarter and full-fiscal 2018 earnings call. My name is Adrianne [ph], and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session.
[Operator instructions].Please note that this conference is being recorded. And I will turn the call over to Steve Gitlin. Steve Gitlin, you may begin.
Steven Gitlin -- Vice President, Marketing Strategy, Communications, and Investor Relations
Thank you very much, Adrianne, and welcome to our fourth-quarter and full-fiscal 2018 earnings call. Please note that on this call, certain information presented contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate, or imply future results, performance, or achievements, and may contain words such as "believe," "anticipate," "expect," "estimate," "intend," "project," "plan," or words or phrases with similar meaning.Forward-looking statements are based on current expectations, forecasts, and assumptions that involve risks and uncertainties, including but not limited to economic, competitive, governmental, and technological factors outside of our control that may cause our business strategy or actual results to differ materially from the forward-looking statements.Factors that could cause actual results to differ materially from the forward-looking statements include but are not limited to reliance on sales to the U.S. government; availability of U.S.
government funding for defense procurement and research and development programs; changes in the timing and/or amount of government spending; our ability to perform under existing contracts, including the asset-purchase agreement for the proposed sale of our EES business, and obtain new contracts; risks related to our international business, including compliance with export control laws; potential need for changes in our long-term strategy in response to future developments; the extensive regulatory requirements governing our contracts with the U.S. government and international customers; the consequences to our financial position, business, and reputation that could result from failing to comply with such regulatory requirements; unexpected technical and marketing difficulties inherent in major research and product-development efforts; the impact of potential security and cyber threats; changes in the supply and/or demand and/or prices for our products and services; the activities of competitors and increased competition; failure of the markets in which we operate to grow; uncertainty in the customer-adoption rate of commercial unmanned aircraft systems; failure to remain a market innovator and create new market opportunities; changes in significant operating expenses, including components and raw materials; failure to develop new products; product liability, infringement and other claims; changes in the regulatory environment and general economic and business conditions in the United States and elsewhere in the world. For a further list and description of such risks and uncertainties, see the reports we file with the Securities and Exchange Commission.The content of this conference call contains time-sensitive information that is accurate only as of today, June 26, 2018. The company undertakes no obligation to make any revision to the statements contained in our remarks or to update them to reflect events or circumstances occurring after this conference call.We will now begin with remarks from Wahid Nawabi.
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Wahid?
Wahid Nawabi -- President and Chief Executive Officer
Thank you, Steve, and welcome to our fourth-quarter and full fiscal-year 2018 earnings conference call. On today's call, we intend to convey four key messages. First, our team continued to deliver outstanding financial and operational results in fiscal 2018. Second, we have developed a multiyear track record of meeting or exceeding our annual guidance in progressing toward our long-term value-creation objectives.
Third, we are reshaping our portfolio to put all our focus on solutions based on robotics, sensors, software analytics, and connectivity to serve promising large global markets consisting of defense, telecommunications, and commercial information solutions. And fourth, we are making strategic investments to realize these large and exciting opportunities. Two years ago, I was privileged to assume my current role at AeroVironment. Since that time, our team has remained committed to achieving success and creating value for all of our stakeholders. Today, I will begin by discussing this strategic reshaping of our portfolio with the formation of our HAPSMobile joint venture with SoftBank and anticipated divestiture of our efficient energy systems business segment.
Then I will summarize our strong performance in fiscal 2018 by highlighting our financial results, discussing how we performed against our goals and reviewing our achievements. Next, Teresa will provide a more detailed summary of financial performance and I will discuss our goals for fiscal 2019 before Teresa, Steve, and I take your questions. First, I would like to take a moment to discuss our recently announced strategic portfolio reshaping through the divestiture of our EES business and our increased focus on UAS and TMS. As a result of our ongoing strategic review of our business portfolio, and given the exciting opportunities in our UAS business for small UAS, tactical missile systems, high-altitude pseudo-satellite, or HAPS, and commercial information solutions, we determined that our UAS business will drive the greatest value for shareholders and requires a 100% focus and investment of time and resources. Given the anticipated divestiture of EES, which we expected to be completed in our first fiscal quarter, the earnings from this business will be reflected as discontinued operations in our financial statement. Now for our fiscal 2018 financial highlights.
Throughout the year, we executed our strategy effectively, delivering strong financial results across our portfolio of businesses that exceeded our fiscal 2018 guidance. Fiscal 2018 results are as follows. Full-year revenue from continuing operations of $271 million plus revenue from discontinued operations totaling $309 million, which was above our guidance range of $280 million to $300 million; full-year operating income from continuing operations of $31.6 million increased by 66% over the prior year; full-year diluted earnings per share from continuing operations of $0.95 increased by 32% over fiscal 2017. From a visibility standpoint, our determination to grow our order book resulted in record fiscal-year-end backlog from continuing operations of $174.3 million, up 146% year over year, which provides a strong start for fiscal 2019. Consistent with previously stated expectations, full-year gross margin from continuing operations was 40%.
One of the contributors to this margin decline was the significant increase in customer-funded research and development from HAPSMobile as we ramp the development of our Solar HAPS system under a cost plus fixed fee contract. As a reminder, cost plus fixed fee customer-funded R&D projects typically carry lower financial risks and deliver lower gross margin than fixed price hardware contract. Most important is the fact that they fund development of potentially valuable new capabilities like Solar HAPS. I will discuss HAPS in more detail later on this call.
Across almost all financial measures, we delivered superior results in fiscal 2018. We also achieved the majority of our stated business objectives for the year. We increased our small UAS footprint in domestic and international markets, the latter including the single largest international small UAS order in our history, valued at $44.5 million from a large Middle East nation. This order continued our strong international revenue momentum, and we account 45 allied nations as customers.
Our small UAS remained the solutions of choice to defense organizations around the world. We secured record new U.S. government orders for our Tactical Missile Systems to increase its contribution to our funded backlog, and more importantly, to protect our forces from harm and high risk operating environment. From August 2017 through May 2018, we recorded $111 million in orders for Switchblade systems and services. We began shipping our highly innovative and integrated Quantix and AV DSS information solution into the agriculture vertical and our Commercial Information Solutions or CIS business, and we continue to make important progress on our key fiscal 2018 strategic initiatives relating to operational improvements and our people strategy. For three of our fiscal 2018 goals, we experienced customer delays that prevented us from achieving our intended results.
First, while we grew backlog for TMS significantly through orders for our Switchblade systems for the armies LMAMS program, TMS revenue did not increase over last year, due to the timing of those orders. We expect those orders to drive revenue this fiscal year. Second, the U.S. DoD frequency relocation program that was redefined by the U.S.
Army as the FCS program continued to experience delays. We anticipate progress on this program this fiscal year. Third, the government fiscal year 2018 budget appropriation delays prevented us from demonstrating meaningful progress with other U.S. government customers such as the Department of Homeland Security.
However, incremental funding has been requested and approved in the government fiscal year '18 budget. Factors that affected our achievement of other goals include, first, the Army awarded a $2.6 million initial small order from the SBS program to a competitor last month. This is an initial small order and we see promising upcoming opportunities to secure this program. Second, among our Switchblade variance, while we achieved positive progress for one, we did not achieve our targeted progress for others. We remain focused on developing this variance effectively to address large new opportunities for our TMS business. In addition to our publicly stated goals for the year, we achieved several very important strategic milestones that we had been working toward for some time, which position us for continued growth.
First and foremost, we began deploying our balance sheet to establish a joint venture with SoftBank Corporation called HAPSMobile. We are developing the next-generation solar HAPS solution for the JV to provide global broadband telecommunications services. As of today, AeroVironment owns 5% of the JV and has the option to increase our equity stake in the joint venture up to 19% in the near future. This represents another strategic use of capital, which our strong balance sheet enables.
This is a great example of how our position at the intersection of robotics, sensors, software analytics, and connectivity is creating exciting opportunities for long-term value creation. This strategic opportunity creates value for AV in two ways. First, by manufacturing and selling HAPS systems to HAPSMobile subject to our conformance to contract terms; and second, by participating in the HAPSMobile Inc.'s business as it seeks to deliver broadband and 5G telecommunications services around the globe. The financial impact of the current investment phase of the HAPS program appears in our financial statements in four forms: A) using cash from our balance sheet to maintain and potentially to increase our equity stake in the JV; B) absorbing a portion of the JV's near-term losses and anticipated long-term gains as we progress through the program; C) capital spending to build our facility and capability; and D) gross margin impact as our overall revenue mix is influenced by the HAPSMobile-funded cost-plus program. Once again, this is one of our key long-term value-creation opportunities that we will continue to invest in in order to generate the two forms of value creation I described earlier. Our second strategic milestone in 2018 was securing the next significant tranche of Switchblade orders for the Army's LMAMS program through DoD's Joint Urgent Operational Need statements, generating $111 million in hardware and services orders that I mentioned earlier.
Additionally, we saw the largest procurement line item yet for Switchblade in the U.S. government fiscal year 2019 budget request, totaling nearly $130 million to fund future Switchblade orders. As a reminder, the budget is not finalized until approved by Congress and signed by the U.S. president. A testament to the operational improvements we have been implementing was our designation by the U.S.
Army as a Tier 1 supplier. This recognizes us as one of the highest ranking suppliers to the U.S. DoD. Additionally, we are part of the first group of nearly 10,000 companies to achieve this stringent requirement for ISO 9001, 2015, and AS 9100D certifications, which give our customers even greater confidence that we deliver the quality they expect to serve as their part of choice for UAS and TMS.
These important supply and quality certification achievements are quite significant, given our selection in April as one of seven companies to compete for upcoming Army small UAS task orders under a new five-year IGIQ contract valued at up to $248 million. In summary, our UAS and TMS core business and growth portfolio are strong and robust. Our team is aligned with our growth strategy, and demand for solutions also remains strong. Thanks to our proven strategy, investments, and execution. Now, Teresa will summarize our financial performance in fiscal 2018. Teresa?
Teresa Covington -- Chief Financial Officer
Thank you, Wahid, and good afternoon, everyone. On June 1, 2018, we entered into an asset purchase agreement with Webasto Charging Systems Inc., in which we agreed to sell substantially all of the assets of our efficient energy systems business segment and to transfer certain liabilities related to the EES business. As of April 30, 2018, we determine that the EES business met the criteria for the classification as an asset held for sale, and represents a strategic shift in our operations. Therefore, the assets and liabilities and the results of operations of the EES business are reported as discontinued operations for all periods discussed.AeroVironment's fiscal 2018 fourth-quarter results are as follows.
Revenue from continuing operations for the fourth quarter was $117.4 million, an increase of $1.7 million, or 1%, from the fourth quarter of fiscal 2017 revenue of $115.7 million. The increase was due to an increase in service revenue of $15.6 million, partially offset by a decrease in product deliveries of $13.9 million. Gross margin from continuing operations for the fourth quarter was $52.2 million, or 44% of revenue, compared to $57.4 million, or 50% of revenue, for the fourth quarter of fiscal 2017. The decrease in gross margin was primarily due to a decrease in product sales margin of $9.9 million, partially offset by an increase in service margins of $4.7 million.
Gross margin as a percentage of revenue decreased from 50% to 44%, primarily due to a lower percentage of product sales in the fourth quarter. Looking at the rest of the income statement, SG&A expense from continuing operations for the fourth quarter of fiscal 2018 was $15.3 million or 13% of revenue, compared to an SG&A expense of $14.4 million, or 12% of revenue, for the fourth quarter of fiscal 2017. R&D expense from continuing operations for the fourth quarter of fiscal 2018 was $7.4 million, or 6% of revenue, compared to R&D expense of $6.7 million, or 6% of revenue, for the fourth quarter of fiscal 2017. Income from continuing operations for the fourth quarter of fiscal 2018 was $29.5 million, or 25% of revenue, compared to $36.3 million, or 31% of revenue, for the fourth quarter of fiscal 2017. The decrease in income from operations was primarily due to lower gross margins of $5.2 million, an increase in SG&A of $0.9 million, and an increase in R&D expense of $0.7 million.Net other income for the fourth quarter of fiscal 2018 was $0.9 million, compared to net other income of $1 million for the fourth quarter of fiscal 2017.
The effective income tax rate from continuing operations was 30.4% for the fourth quarter of fiscal 2018, as compared to an effective income tax rate of 23.7% for the fourth quarter of fiscal 2017. Equity method investment activity net of tax for the fourth quarter of fiscal 2018 was a loss of $0.9 million, or $0.04 per diluted share, compared to an equity method investment activity net loss of $8,000 for the fourth quarter of fiscal 2017.Net income from continuing operations attributable to AeroVironment for the fourth quarter of fiscal 2018 was $20.2 million, or $0.85 per diluted share, compared to net income from continuing operations attributable to AeroVironment of $28.4 million, or $1.21 per diluted share, for the fourth quarter of fiscal 2017. Loss from discontinued operations net of tax for the fourth quarter of fiscal 2018 was $1.9 million, or $0.08 loss per diluted share, compared to income from discontinued operations net of tax of $2 million for the fourth quarter fiscal 2017, or $0.09 income per diluted share. Now, moving through our full-year fiscal 2018 results; revenue from continuing operations for fiscal 2018 was $271.1 million, an increase of $42.2 million, or 18%, from 2017 revenue of $228.9 million. The increase was due to an increase in product deliveries of $35.7 million and an increase in customer-funded R&D work of $8.2 million, partially offset by a decrease in service revenue of $1.7 million.
Gross margin from continuing operations for fiscal 2018 was $108.9 million, or 40% of revenue, compared to $95.2 million, or 42% of revenue, for fiscal 2017. The increase in gross margin was primarily due to an increase in product sales margin of $12.7 million, and an increase in service margins of $1 million. Gross margin as a percentage of revenue decreased from 42% to 40%, primarily due to unfavorable product mix. Looking at the rest of the income statement, SG&A expense from continuing operations for fiscal 2018 was $50.8 million, or 19% of revenue, compared to an SG&A expense of $47.6 million, or 21% of revenue, for fiscal 2017. R&D expense from continuing operations for fiscal 2018 was $26.4 million, or 10% of revenue, compared to R&D expense of $28.5 million, or 12% of revenue, for fiscal 2017.
Income from continuing operations for fiscal 2018 was $31.6 million, or 12% of revenue, compared to $19.1 million, or 8% of revenue, for fiscal 2017. The increase in income from operations was primarily due to higher gross margins of $13.7 million and a decrease in R&D expense of $2 million, partially offset by an increase in SG&A of $3.2 million.Net other income for fiscal 2018 was $2.2 million, compared to $1.8 million for fiscal 2017. The effective income tax rate from continuing operations was 30.1% for fiscal 2018, as compared to an effective income tax rate of 19.8% for fiscal 2017. The provision for income taxes for fiscal year 2018 included the impact of the Tax Cut and Jobs Act of 2017, inclusive of a reduction in the blended fiscal year 2018 federal statutory tax rate from 35% to 30.4%, and an estimated $3.4 million one-time expense resulting from the remeasurement of our deferred-tax assets and liabilities. Equity method investment activity net of tax for fiscal 2018 was a loss of $1.3 million, or $0.05 per diluted share, compared to an equity method investment activity net of loss of $0.1 million for fiscal 2017, or $0.01 per diluted share.
Net income from continuing operations attributable to AeroVironment for fiscal 2018 was $22.4 million, or $0.95 per diluted share, compared to net income from continuing operations attributable to AeroVironment of $16.6 million, or $0.72 per diluted share, for fiscal 2017. Loss from discontinued operations net of tax for fiscal 2018 was $2.5 million, or $0.11 diluted loss per share, compared to a loss from discontinued operations tax of $4.2 million for fiscal 2017, or $0.18 loss per diluted share. Our funded backlog from continuing operations as of April 30, 2018, was $174.3 million, an increase of $53.4 million, or 44%, from the third quarter of fiscal 2018, an increase of $103.4 million, or 146%, from the fourth quarter of fiscal 2017. Turning to our balance sheet; cash, cash-equivalents, and investments at the end of the fourth quarter of fiscal 2018 totaled $297.8 million, an increase of $55.9 million from the end of fiscal 2017 cash, cash-equivalents, and investments of $242 million. Net accounts receivable, including unbilled receivables and retention from continuing operations, at the end of the fourth quarter fiscal 2018 totaled $69.9 million, a decrease of $30 million from the end of the fourth quarter fiscal 2017.
Total day sales outstanding from continuing operations for the fiscal year 2018 were approximately 103. Net inventory from continuing operations at the end of the fourth quarter fiscal year 2018 was $38.6 million, compared to $40.9 million at the end of the fourth quarter fiscal year 2017. Days and inventory outstanding from continuing operations for the fiscal year 2018 was approximately 90 days. Accounts payable from continuing operations at the end of the fourth quarter fiscal year 2018 was $21.3 million, compared to $15.9 million at the end of the fourth quarter fiscal year 2017. Total days payable outstanding from continuing operations for the fiscal year 2018 was approximately 42 days.
Current assets from discontinued operations at the end of the fourth quarter fiscal year 2018 were $28.3 million. Current liabilities from discontinued operations at the end of the fourth quarter fiscal year 2018 were $9.2 million. Turning to capital expenditures; in the fiscal year 2018, we invested approximately $9.6 million in property improvements and capital equipment for continuing operations and recognized $6 million of depreciation and amortization expense. We adopted the new ASC 606 revenue-recognition standard as required for all public companies on May 1, 2018, under the full retrospective transition method. For the fiscal year 2016, the cumulative increase to retain earnings from continuing operations was approximately $0.7 million.
For the fiscal year 2017, the revenue increase from continuing operations was approximately $4.2 million, and a cumulative increase to retained earnings from continuing operations was approximately $1.8 million. We will have the impact for the fiscal year 2018 with our first-quarter fiscal 2019 results. The impact to our revenue in prior years is primarily driven by contracts in our tactical missile systems business. We continue to assess the potential impact of this guidance for fiscal 2019 but do not currently expect it to be material. Now an update to our fiscal 2019 visibility.
As of today, we have fourth-quarter ending backlog from continuing operations that we expect to execute in fiscal 2019 of $147 million, Q1 quarter-to-date bookings from continuing operations that we anticipate to execute in fiscal 2019 of $6 million, unfunded backlog from incrementally funded contracts and continuing operations that we anticipate to recognize revenue during the balance of the year of $15 million. This adds up to $168 million, or 56%, at the midpoint of revenue guidance. With the Tax Cut and Jobs Act, we anticipate a lower full-year effective tax rate for continuing operations in the range of 15% to 18%. Now I'd like to turn things back to Wahid to discuss AV's expectations for the fiscal year 2019.
Wahid Nawabi -- President and Chief Executive Officer
Thanks, Teresa. We are focused on delivering profitable growth through our innovative technology solutions. We believe we are in a leading position from multiple large global market opportunities, and with the reshaping of our portfolio, we are well-positioned for long-term value creation. Our fiscal 2019 goals which are consistent with our long-term strategy are as follows. First, maintain our small UAS leadership in the U.S.
DoD and win the majority of task order dollars, and the army has recently renewed $248 million IDIQ contracts while expanding our footprint by winning upcoming new small UAS program requirements. Continue to expand our international small UAS footprint by securing new orders from existing and new customers. Second, execute effectively in TMS by maintaining world-class production and reliability for our Switchblade contracts while we work to fulfill record demand from our existing U.S. government customers, position the next Switchblade variant for adoption and production greatly expanding our addressable market opportunity. Third, succeed in our Solar HAPS business strategy, which includes executing on the remaining portion of the now $76 million contract to position us for full-capability demonstration for solar HAPS, and determine whether or not we increase our equity ownership and the joint venture to up to 19%.
Fourth, progress our CIS business strategy, including seeking potential strategic partnerships to accelerate market education and adoption. And fifth, continue to make strategic investments to further our business strategy. The government fiscal 2019 budget request that is now working its way through Congress provides strong support for our business. The $113 million in proposed funding for Switchblade which I mentioned earlier creates a strong foundation for our TMS business. The Army's $46 million proposed for Raven procurement expands their fleet of medium-range reconnaissance systems.
The Air Force's $13.5 million requests for Puma Systems will help provide security for Air Force personnel and bases. And the pending competition for the army's short-range reconnaissance solution provides the potential for a proposed $100 million, an additional funding for government fiscal years 2020 through 2022. This is a robust funding environment for our solutions within the U.S. DoD.
We continue to see strong demand from our international customers in addition to the U.S. DoD. As a reminder, our fiscal 2019 guidance no longer includes EES. With strong fiscal 2018 performance, 56% visibility that Teresa shared earlier, and strong proposed government procurement funding for our solutions, we expect to deliver revenue in fiscal 2019 from continuing operations of between $290 million and $310 million, with diluted earnings per share of between $1.10 and $1.40. This earnings guidance assumes 5% ownership level and our HAPSMobile joint venture and includes a one-time gain of $0.25 to $0.60 to $0.26 per share due to the favorable settlement of previously disclosed litigation.
We expect lower gross margin this year due mainly to a higher proportion of services revenue relative to product revenue. We also expect our R&D spending of 10% to 11%. We see continued variations in quarterly revenue. However, due mainly to our record funded backlog, this year we expect about half of our revenue in the first half of the fiscal year and about half of the first-half revenue in the first quarter. Once again our key messages today are, first, our team continues to deliver outstanding financial and operational results in fiscal 2018.
Second, we have developed a multi-year track record of meeting or exceeding our annual guidance and progressing toward long-term value-creation objectives. Third, we are reshaping our portfolio to put all our focus on solutions based on robotics, sensors, software analytics and connectivity to serve to promise large global markets consisting of defense, telecommunications, and control information solution. And fourth, we are making strategic investments to realize these large and exciting opportunities. Thank you to all members of the AeroVironment team for your outstanding efforts in support of our stakeholders in 2018. Thank you to all of our customers for choosing AeroVironment to help you proceed with certainty and thank you to our stockholders for supporting the value creation potential of our people and our business.
Teresa, Steve, and I will now take your questions.
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. [Operator instructions]. And our first question comes from Joseph DeNardi from Stifel.
Please go ahead.
Joseph DeNardi -- Stifel Financial Corp. -- Analyst
Yes. Hi. Good afternoon, everybody. Wahid, last year you mentioned that TMS was also $75 million, maybe half of it was R&D, half of it was product-related; could you just give us an update on what that looks like last fiscal year?
Wahid Nawabi -- President and Chief Executive Officer
Sure, Joe. As I said in my remarks that we have achieved significant progress on our Tactical Missiles Systems business in general, given the record backlog that we booked in the fiscal year, primarily due to government fiscal year budgeting delays and appropriations that we saw in the government fiscal year 2018, the timing of those bookings were such that, our ability to deliver those products, by the request of our customers within fiscal 2019. Fiscal 2018 did not really take place. So, essentially those orders showed as backlog which we intend to execute in the fiscal year 2019. We feel very strongly about the prospects of the long-term value creation and robust business in our TMS business long-term.
As you know, the Switchblade product is the product of choice or the solution of choice within our U.S. DoD customers, and we have successfully won several of the competitions that are out there, and we also intend to expand that portfolio of the Tactical Missiles Systems variance in fiscal '19 as you heard in my remarks. So we achieved a lot of milestones that I mentioned but however, the government fiscal year budget timing delayed the recognition of that revenue in fiscal 2018.
Joseph DeNardi -- Stifel Financial Corp. -- Analyst
Yes, I guess what I am trying to get at it is, when you think about the potential from the variance of Switchblade, what was the customer-funded R&D for TMS last year, if you can talk about it?
Wahid Nawabi -- President and Chief Executive Officer
So, unfortunately, due to the nature of those programs, I am not able to comment specifically on those particulars but as I said in my remarks, we continue to see demand and desire from our customers for our Switchblade and its variance. We have booked revenue both in terms of product delivery revenue as well as services revenue for development of variance, which to me is both positive indicators for the TMS business, and we will share more details on this tomorrow during our Analyst and Investor Day.
Operator
And our next question from Peter Arment from Baird. Please go ahead.
Peter Arment -- Robert W. Baird & Company -- Analyst
Yes. Good afternoon, Wahid, Teresa, Steve.
Wahid Nawabi -- President and Chief Executive Officer
Hi, Peter.
Peter Arment -- Robert W. Baird & Company -- Analyst
Hi. Thanks for the revenue. Kind of the moving parts on the revenue side, you mentioned that I think on the earnings per share for the year for fiscal 2019, normally you kind of provided a little bit of cadence how you think the bottom line is it sounds like it's fairly balanced through the year just given the way the shipments are falling through, just maybe a little more color on that?
Wahid Nawabi -- President and Chief Executive Officer
Yes. Peter, so as I said in my remarks at the end that our revenue distribution throughout the year remains fluctuating, primarily because of the nature of our business, right. Historically, we have seen higher fourth quarters and lower first quarters and first halves, however, in fiscal 2019 as I said in my comments, we expect that half of our fiscal year's revenue to occur on the first half of the year, and approximately half of the first-half revenue to occur within our first quarter of this fiscal year. So generally speaking, and the main contributor to that, of course, is these large historical levels of backlog and the bookings that we have in our backlog that enables us to execute on that earlier within the year.
And that would be the overall distribution of revenue throughout the year. In terms of EPS, we have only provided guidance for the full-year, and that is the range of EPS from continued operations $1.10 to $1.40 but that does include a one-time gain from a previously disclosed litigation of $0.25 to $0.26 per share.
Peter Arment -- Robert W. Baird & Company -- Analyst
Yes, disregarding the latter, do you know when that officially will be flowing through in terms of is it in the first-half or how do we expect to see that --
Wahid Nawabi -- President and Chief Executive Officer
Yes, we expect that to occur, the one-time gain to occur during the first quarter of this fiscal year. And we also expect the EES divestiture to occur during the close, during the first quarter of this fiscal year.
Operator
And our next question comes from Nick Johnson from Piper Jaffray. Please go ahead.
Nick Johnson -- Piper Jaffray -- Analyst
Hey guys, congrats on a great fiscal 2018.
Wahid Nawabi -- President and Chief Executive Officer
Thank you, Nick.
Nick Johnson -- Piper Jaffray -- Analyst
So it sounds like your domestic business is doing well, which is great, I just want to maybe touch upon your international opportunity, maybe give some update there, and any potential from the tariff or trade restrictions that have been going on internationally or by the government, it would potentially impact you guys as well?
Wahid Nawabi -- President and Chief Executive Officer
Sure. So, most of the news that we see in the public domain related to foreign trade and foreign military sales are related to programmatic sort of products and capabilities within the U.S. DoD. However, having said that, we expect our international business to remain strong.
It's been very strong throughout the last several years as you have seen in our results. We are up to 45 countries now internationally in terms of new customers or existing customers for AeroVironment, and the amount of our revenue for Tactical, UAS internationally is also very healthy. We also booked the largest-ever order from a Middle East nation, as you saw on my remarks for $44.5 million. So going forward in fiscal 2019, as I said for the past few years, we believe that our international business is strong and diverse, and we continue to see desire and interest and demand from our customers, and we expect to continue that momentum in fiscal 2019. The governments around the world, allied nations also see tremendous value in our capabilities given the type of conflicts that are going on around the world, essentially almost every continent and every region of the world.
So we feel quite positive about our products. We do have to obtain export licenses for every single one of our UAS shipments for international customers. We have been very successful of that historically, and there is always a timing risk on that as before but we don't expect that to be any issues in fiscal 2019.
Nick Johnson -- Piper Jaffray -- Analyst
OK, thank you. And then just as a follow-up, you mentioned in your commentary that there is some opportunity also in Homeland Security which we haven't seen before. So what's the size of that opportunity and maybe in comparison to what you have seen in U.S. Army?
Wahid Nawabi -- President and Chief Executive Officer
Sure. So, similar to the other businesses that I mentioned earlier, the government's fiscal year '18 budget procurement and appropriation process delays caused some delay in the acquisition process and the obligation of those funded dollars of the government's budget that's already approved in fiscal '18. However, in government fiscal 2017 budget, there was about $4 million worth of appropriations, specifically for small UAS and our solutions for the Department of Homeland Security. There was approximately $10 million worth of funding approved in government fiscal year '18, which you can these figures publicly in the release documents from the government. So we have delivered the initial systems, which we shared with you guys publicly several quarters ago.
However, the $10 million funding line item has not been obligated yet, and we are working with our customer through the process of fulfilling that demand, and we continue to see the demand and the request from DHS, specifically the customs and border patrol for our solutions. They see great value in our solutions. We believe that it delivers a very unique compelling value proposition for border patrol and border security. However, the timing delays due to the appropriation process could vary.
Operator
[Operator instructions]. And our next question comes from Brian Ruttenbur from Drexel Hamilton.
Brian Ruttenbur -- Drexel Hamilton -- Analyst
Yes. Thank you very much. So first of all, if I could get a breakdown of depreciation and amortization going forward when you exclude the EES? I am just trying to figure out your cash flows and EBITDA going forward if you could talk a little bit about that and your guidance for cash generation in fiscal 2019?
Teresa Covington -- Chief Financial Officer
Hi, Brian. We have not provided guidance on the cash in the past. On the capital side, in 2018, we invested $9.6 million in depreciation and amortization. Historically, over the last couple of years from continuous operations, we have invested 4% of revenue in the capital.
And historically it's been in the 3% to 5% range. We would expect it to be in that range in fiscal 2019. Regarding cash, we haven't forecasted cash; we had very strong cash from operations in fiscal 2018.
Brian Ruttenbur -- Drexel Hamilton -- Analyst
OK. So what is your depreciation, amortization on a going-forward basis excluding the EES?
Teresa Covington -- Chief Financial Officer
Well, we had $6 million in fiscal '18. We haven't provided a forecast of what that looks like in 2019 but we do expect the amount of capital that we are spending to be in the 3% to 5% range of revenue.
Brian Ruttenbur -- Drexel Hamilton -- Analyst
OK. And then plans for cash, you have roughly $300 million in cash, I think that you are talking about ramping up certain operations getting ready to perform on these opportunities in front of you on demand side, what kind of capital is that going to require outside of your traditional capex? Do you see that there is going to be increased use of your capital outside of that?
Wahid Nawabi -- President and Chief Executive Officer
Brian, this is Wahid. That's a really good question. As I said in my remarks, first and foremost, the board and our leadership team, we review our capital allocation and the return on that capital regularly, and quite rigorously. Inherent to our business strategy is the timing of certain market adoptions that we are pursuing within our business strategy.
And when and if those adoptions take place, the demand for cash to scale our various businesses still remains quite strong and healthy. So for example, we have utilized some of our cash in fiscal '18 as you saw and the formation of our joint venture for HAPSMobile with SoftBank Corporation, and there is primarily two methods or means of utilization of capital for that business. One, as we ramp up that business and demonstrate the capability we will be building facilities and manufacturing capacity to manufacture airplanes to sell to the joint venture, AeroVironment will. And then secondly, we still have an option to increase our ownership in the joint venture from 5% today up to 19% at a certain time. And so, if we were to increase that, that will consume additional capital for that.
And obviously, this is considered to be a very large global business. The roll-out of 5G connectivity and mobile telephony and telecommunication is a multibillion-dollar opportunity based on several, several reports publicly, and HAPSMobile is right at the center of that opportunity in terms of the enablement capabilities to achieve that globally. So that's just one example of uses of our cash among many other such as our Tactical Missile Systems business, International business etc.
Operator
And the next question comes from Nick Johnson from Piper Jaffray. Please go ahead.
Nick Johnson -- Piper Jaffray -- Analyst
Sorry, I just had one more follow-up here. I know in the past you split out revenue between UAS and EES, I know obviously EES is going forward, maybe we could get the figures for this quarter, help give an idea of kind of core business growth projected in 2019?
Wahid Nawabi -- President and Chief Executive Officer
Nick, are you referring to EES revenue as discontinued operations for this fiscal year's first quarter?
Nick Johnson -- Piper Jaffray -- Analyst
No, for the fiscal fourth quarter, this previous quarter here; I know in the past you guys have given out revenue between the two segments.
Teresa Covington -- Chief Financial Officer
So Nick, in the fourth quarter, UAS revenue was $117.4 million. In the first quarter of '17, UAS revenue was $115.7.
Nick Johnson -- Piper Jaffray -- Analyst
So, it was-OK, I see. So, the total not there-kind of not from EES, is that correct?
Teresa Covington -- Chief Financial Officer
That is correct. That's just the continuing operations.
Wahid Nawabi -- President and Chief Executive Officer
Yes, the balance of it would be the EES, discontinued operations.
Nick Johnson -- Piper Jaffray -- Analyst
Understood, thank you.
Wahid Nawabi -- President and Chief Executive Officer
You are welcome.
Operator
This concludes our question-and-answer session. I will turn the call back over to Steve Gitlin for final remarks.
Steven Gitlin -- Vice President, Marketing Strategy, Communications, and Investor Relations
Thank you, Adrianne, and thank you all for your attention today, and your interest in AeroVironment. An archived version of this call, all SEC filings and relevant company and industry news can be found at our website, www.avinc.com. A live audio webcast of tomorrow's Investor and Analyst event will begin at 8:30 AM Eastern Time, and it can be found on the Events and Presentation section of the Investor portion of our corporate website. The presentation filed for tomorrow's event will be posted shortly before the event begins. We look forward to speaking with you tomorrow and again following next quarter's results.
And we wish you a good day.
Operator
[Operator signoff]
Duration: 54 minutes
Call Participants:
Steven Gitlin -- Vice President, Marketing Strategy, Communications, and Investor Relations
Wahid Nawabi -- President and Chief Executive Officer
Teresa Covington -- Chief Financial Officer
Joseph DeNardi -- Stifel Financial Corp. -- Analyst
Peter Arment -- Robert W. Baird & Company -- Analyst
Nick Johnson -- Piper Jaffray -- Analyst
Brian Ruttenbur -- Drexel Hamilton -- Analyst
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