Monrovia-based AeroVironment Inc., a leading maker of unmanned aircraft systems, reported a 24 percent drop in third-quarter profit Monday, while lowering its growth estimate for the full year.

The company earned $4.5 million, down from $6 million in the same period last year.

"We believe our performance has been strong ... but we do feel the impact," CEO Timothy E. Conver said in a conference call with investors, referring to the economy.

The strength came from a strong flow of orders for its products - tiny unmanned aircraft systems and energy efficiency products, Conver said.

Because of increased sales, third quarter revenue was $52.2 million, up 8 percent over third quarter fiscal 2008 revenue of $48.5 million, the company reported.

But that was not enough to keep the firm's stock price from tumbling 29 percent in after-hours trading Monday on word of a net loss for the quarter.

The reason for the income dip? Expenses were up.

Despite a $139 million backlog, the company's gross margins fell 16 percent while cost of sales spiked by 24 percent. Research and development expenses also went up, by 26 percent, according to the company.

Conver attributed weaker revenue to timing and shipment of government orders and the weak economy. Sales of the firm's PosiCharge batteries - systems that charge electric-powered cargo vehicles - were down because such vehicles weren't selling. Orders for the company's signature aerial system, the Raven - a tiny, unmanned aircraft that can be launched by hand - were also deferred because of global economic uncertainty, Conver said.

"We currently think we'll be doing well if we can hold PosiCharge sales flat year over year," Conver said.

But the Raven delays "surprised us," he added.

The deteriorating economy prompted company officials to revise their revenue growth estimate for the year, from between 20 and 25 percent at the beginning of the year to between 11 and 16 percent.

Despite the dip in quarterly net income and the revised yearly revenue growth, company officials and analysts said the outlook for the company, even in a sagging economy, was good.

Conver pointed to the Italian military allowing Ravens to fly in the country's airspace, and the installation of the firm's electric vehicle testing system at GM's test lab for the Chevy Volt as highlights.

Expanding its aerial system technology in commercial and military markets, and more market interest in electric cars bodes well for the company, said John M.A. Roy, senior research analyst for New York-based investment bank Janney Montgomery Scott.

The firm is well-poised to be a player in creating an infrastructure for plug-in hybrid vehicles.

"If we're going to have electric vehicles in the future, you're going to have to have a charging infrastructure, so AeroVironment is well-positioned for that."

ryan.carter@sgvn.com

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