Joining me now, Wahid Nawabi, the CEO, president, and chairman of AeroVironment. And we're here in Southern California at one of your main manufacturing facilities. Thanks for having us.
Morgan. Great to be with you. Thank you for coming. And we're looking forward to showing you what we've got here. It's fantastic.
All right. So, let's talk a little bit about the role that AeroVironment plays not only in the war of the future, but what we're seeing right now in real time.
Well, I mean, we purpose built our company about 20 plus years ago. We've been around for 50 years plus, but last 20 years we've been really building our portfolio which you see here to essentially deliver on and answer the needs of our military and the warfare that's happening today in the world. The fundamentals of warfare how we defend and fight wars in the future has changed. There is a major paradigm shift that's happening in the entire industry and it started with Ukraine, literally. And so we're right in the middle of that and we're one of the leading companies that's producing these things by tens of thousands. We have a very large installed base. We've got a very, very large and wide portfolio of solutions from non-lethal drones to lethal drones to counter drones. And the counter drone solution is also jammers, direct energy laser weapon systems as well as kinetic kill or rocket fueled missiles as well.
Yeah. And to your point, we are seeing it right now in real time with drone warfare. I think even just this week, we're getting reports from CentCom about strikes, defensive strikes because of some of the drone attacks and drone production facilities that continue to operate in Iran right now. So in light of that, how quickly can you make your drones? How are they evolving? And what does that mean in some of these conflicts as they're happening in real time?
So based on our knowledge and assessment, we are the largest producer of military drones in the United States today and we've been doing that for the last two decades. The installed base of our drones globally is also probably the largest if not one of the largest in the world. We've got well over 60, 70,000 of our systems deployed actively and these things have been battle tested over several years and couple decades actually starting from the conflict in the Persian Gulf back Desert Storm to Afghanistan to then Ukraine and then now obviously the Epic Fury. So our systems been around in these environments. We knew that this inflection point is going to happen sooner or later and these last couple of conflicts that have become globally well-known has essentially brought this thing to the forefront. So we're very proud of that. We produce these today in this building and four or five other facilities in this area and we've got the largest footprint and we do about $2 billion in revenue a year as you've seen from our financials. So we believe we're the largest producer and our systems are not prototypes. We have most of the products you see here if not 90% of them are in full rate production. That means we producing them now by the thousands today in our various factories around the country.
And it's not just US either. It's also allies too. So how much is the international piece of it growing versus the US?
Yeah. So definitely it's not just US. We export to well over 55 countries around the world. And that number keeps growing every year and our share of those customers spend also keeps increasing because our portfolio is increasing but at any given year we generate roughly between anywhere from 40 to 60% of our revenue comes from international customers and markets. Historically AV's revenue has been about 50/50, 40 50 or so but recently because the acquisition of Blue Halo last year that number went down a little bit because the larger portion of our revenue became domestic. However, still it's very significant part of our revenue and it is growing. Absolutely. The systems that we use here in the United States is desperately needed by our allies, especially in Europe and Asia Pacific, because they've got similar conflicts, similar threats, similar challenges, and they're also in a similar position in terms of equipping themselves with the systems that are being utilized and how warfare is fought today.
Yeah, and I want to get to the Blue Halo piece of this and counter drone technology in just a moment here, but just one more question because we do see reports this week that the US government is looking to fund more drone capability, more drone production as well. What does that mean for AeroVironment?
Yes, so that particular initiative, we're very much in touch in contact with that organization, Office of the Strategic Capital within the Pentagon. We know them very well. We've met with them multiple times. It's primarily focused on companies who don't have the financial means. They don't have the balance sheet. They don't have the cash. They don't have the funds to be able to actually deliver things and scale their business. We are in a different position because we're a profitable, established business that actually is already viable and produce these things by tens of thousands. So, we don't really meet that criteria and we don't really have that need. However, we're open to it. If the US government needs us to scale even further in a particular new area that we have several of those also, then maybe we would be interested in. But right now mostly that is for startup companies who don't have the capital, don't have the expertise, they don't have the investments to be able to actually scale or even produce things in volume. That's not us. We already have a proven business model, a proven product line, a proven established customer base and a profitable viable business.
Yeah. I guess just the involvement of OSC and what this looks like as the government does look to seed and perhaps foster more competition across the drone industry in general. How do you think about that from a competitive standpoint?
We always respected competition. You know, for the last 30, 40 years that we've been in this business, we've always had domestic large competitors like the major primes. We've also had international competitors and we still had a lot of startups. At one point about a decade ago, I counted it was 1,500 competitors in our space. So the market is hot now and it's expanding globally at a very rapid pace and so there's obviously going to be a lot more investments coming in. But you know our recipe, our business model, our technology stack, our portfolio, our IP is very, very strong. We feel very good about us being able to compete. There's going to be more players. The market is as I said growing into tens of billions of dollars globally. So it's going to attract more investments. And just so we know, startups, nine out of 10 don't really make it and so it's a very high-risk, high-reward sort of a big game for them but for us we have a proven business, we have a proven customer base, we have a viable product and franchises, each of these are like a decade of track record of success and we have a lot of expertise in terms of technology stack too that allows us to be able to compete so I feel good about our position in the market in terms of competitive landscape.
Yeah, and you're touching on something that I think more broadly speaks to the moment we're in in terms of this emerging defense tech, much of it venture-fueled startup landscape and that is okay you've come up with cool technology but how do you scale it and how do you do that quickly and do that profitably and that does seem to be that moment we're in here.
Absolutely. So you know making a prototype as we say it inside our company is roughly about 10% of the difficulty or effort. 90% of it is can you make that at scale, can you produce it at the rigor of the US Department of War's program of record caliber and rigor. Could it actually last in different wars? Could it be put into stock and survive five, seven, six, ten years of just sitting on the shelf and then you pull it out and it works? Can it work in deserts, high temperature, low dust, sand, water, sea conditions? There's a lot that goes into it. When you add all those things up and you try to produce these things at scale reliably and effectively and also at a high reliability, it is a different ballgame and very, very, very few companies out there have that pedigree that AV has over the last several decades.
So let's talk a little bit about counter drone because obviously huge need as we talk about more drone warfare, more autonomous capability on the battlefield. What does Blue Halo and your expanded portfolio bring to the table especially as you did just I think get an investment from the US government to expand was it Freedom One that's right production.
