CVU - Earnings call transcript Q3 2017 | CPI Aerostructures, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning and welcome to the CPI Aerostructures’ Third Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Sanjay Hurry, Investor Relations Counsel. Please go ahead.

Sanjay Hurry

Cary. you, Thank and earnings everyone, CPI third Aerostructures’ Good call. welcome XXXX conference quarter morning, to A Company's presentation of Investor today are copy the for Relations and issued that available CPI the earlier section was of accompanying Aero at PowerPoint download to the call earnings this the press website. release and the Financial Officer. Chief call on McCrosson, us Palazzolo, are Doug President Vincent and With today Chief Executive Officer; will At the hold management conclusion session. remarks, of a their question-and-answer prepared

involve the the government to government's to with in these if be have or which budgetary and or constraints. time, call contracts any may Included will their the from or ability contain fails uncertainties, if well business suspend their risks modifies government's it customers Subcontracting as customer as a the other constraints those unknown ability the projected As change, process this and its doing statements terminate requirements risks, reminder, conference or the are contracts government's cause contracts to if requirements to from the the also bidding forward-looking its bar actual materially company right of its due subcontracting contracts. company terminate to competition for in them, results. and at ability contracts with contracts known factors that reduces with results or company to meet to their budgetary reduce the modify both different

conference any these statements Given cautioned are this to reliance uncertainties, listeners call. forward-looking undue not contained in place on

SEC. found with other these the concerning be company's the and information Additional in can filings risks

release morning follow-up Officer. conclusion with management schedule turn their call. over a With Executive contact let’s the prepared contact of is Chief me listed call morning’s institutional management investors follow-up. turning Doug. Before available President be remarks, for and Good press the this to advised in over Douglas this details via to to Please that following McCrosson, the that calls for call

Douglas McCrosson

thank brief you will will on And I some our Sanjay. a detail conference for performance, morning call. us this you as XXXX, of provide on for the our after Vince review quarterly financial quarter updated for Good with joining call begin will third call with of I approach morning’s results greater thoughts Then conclude the XXXX. to financial on our end with on XXXX. initial plans and which guidance

report and positive for year third execution I’m the below Our deliver per combined on that reflects strategy year and share to to operating came that that management consistent capital levels. quarter performance is solid second market a ago financial margins our of flow. of on continuous improved quarter cash together earnings pleased with ago defense working slightly higher $X.XX, both in the profitability period revenue with consecutive

our of impacted push quarter by revenue newer, stage Specifically, programs. defense was our across the all nearly our early for outs

to we expect recognize revenue phase changes assembly customer-driven delayed next activity in limited of While these programs of the on in to completion we accounting. the percentage over the resulted months, move amount the could that quarter the design several

X.X%. and million has third XXXX, end $XXX.X the at $XX.X a that the in see quarter. more $X million $XXX increased quarter, of to about of will to the million from total million than X, percentage Turning million the Funded to book-to-bill end backlog increase a you backlog Slide for X.XX more the quarter for from by increased of of than third $X increase

Noteworthy structural program our on million by and Triumph very million Defense Our new $XXX.X S-XX for from at order signed new with contract by the more commercial engine during Hawk multi-year U.S. Sikorsky, products company, quarter. Gulfstream due slightly kits just $X its than leading Sikorsky This down the a the strong $X.X or backlog Army. the supply were in the helicopter. backlog first, quarter from Martin end defense increased our edge Sikorsky backlog, the for contract Lockheed five-year releases HondaJet Honda the with is agreement nine under consolidated GXXX, the awards of largely a quarter, from award XX% by program. the remains on to Black second million of during second inlet

$XX.X orders indefinite purchase total T-XXC under modification for the or delivery/indefinite totaling Second, bringing for million. placed quantity million from the Force $X U.S. contract this orders the aircraft, IDIQ kits firm structural Air for Trainer

this and As has Air IDIQ a the in Force awarded total it contract by value $XX million. reminder, we XXXX potential were of

multi-year actuation fighter. largest further announced drive award for with million in sale. contract million a content press this foreign all F-XX of the quarter the operation our more the aircraft prime a in Lockheed Martin defense dollar This three sustained was of award than Momentum award largest most for and leading the second follow-on subsequent close advanced doubles the II, is military our shaft additional these with follow-on world’s superior approximately It of service earnings also strengthens the awards earlier to This our and for Martin release is this what supplied indicators ever this we us the is are in our program. the in In relationship an to nation's $XX.X cases Lightning affordability to Lockheed announced work. multirole defense the Valued our to assemblies contractor Third, aircraft customer $X awarded morning. we by week. was world. F-XX canopy manufacture F-XX of at support order excellence, order military business

will XX, reported backlog funded backlog While this year we in reported award the September end. total reflected orders is of at be part the our

detail and approval customer the an more customer we We of receive aircraft announcement. about will once provide

the momentum our is the in business to in – clear Slide on X, defense slide. Moving our business on made

revenue one beyond. were the excellent to visibility pod offer future With TSAR, summer earlier we multi-year Radar project XXXX Tactical the are and programs year cases and in Aperture recent some Synthetic this of all the out the that years exception development awarded or of wins in

the UTC program that early in low such at an moves secure the initial production for out well TSAR of our once into involvement to project chances Aerospace rate stage bodes development award production. phase a multi-year Our with

know over will Palazzolo me third quarter call turn and updated who Let financial our guidance. CFO, our a Vince results of XXXX provide detailed our to the review more see

Vincent Palazzolo

Thank you, Doug. XXXX. To for XXXX revenue the on start to $XX.X of Slide quarter the compared quarter third million third million, X, in of was $XX.X

prior our customer his in quarter percentage on from the initiated XXXX of $X.X benefit diluted decline our early was for million resulted above in prior on outer initiatives to program wing investor mentioned new margin amount the an releases. margin stage manufacturing XXXX. A-XX delayed changes third of could Doug on replacement earnings Gross As the accounting. Also the in processes. share million related activity Gross design A calls. ongoing that recognize $X.X at communicated program share of of revenue, third late million purchase of and the profit was to remarks, to very higher well cost tax but completion $X.XX income in partial to resulted income million by the third driven $X.X revenue, expected which revenue XXXX and Pre-tax $X.X we as period. opening to net generated year and several decrease further We limited unchanged process E-XD was prior of respectively. as strong margin $X.X range of of of of margin quarter XX% compared in cyclical gross quarter XX.X%, to per XX% XXXX for rate over the timing million wean per $XXX,XXX, down a quarter the was of remain diluted the we flat quarter revenue effective on compared order with SG& was the lower zero

displays or an our of Next Jammer Turning on which balance compared highlights, increased Slide our cost programs earnings of and was CEE especially activity Generation million due million, program $X in Raytheon. X, to CEE increase estimated December approximately new contracts with Increment XXXX. was billings on to uncompleted Pod increase XX, sheet largely X excess $XXX.X

carry. been have up amount reducing at cash the capital, tied working we the working in As know, inventory of you particular, amount of we in

million million improvements To we XX% inventory of by $X.X top flow. reflected realized date September of Our XX% down reduce inventory total to $X.X XXXX or are more XX the plan inventory reduction June at ahead our XX, we December XXXX. and XX, from capital cash in well on operating are Working from is in XXXX. our previously XXXX for in implemented

of we we year. in months same cash which $XXX,XXX is XXXX used for first $X.X the million than less of last period the the nine significantly operating used For activities,

we flow the outstanding our used generated we to of For down compared of third pay of during XXXX, further quarter line which cash cash $XXX,XXX balance positive credit. the positive flow operating of quarter, to on revolving the $XXX,XXX, operating

down million in with September value and As a million debt a debt bank $X.XX. the $X.X quarter end, XXXX. total $XX.X bank $XX.X at is XX, Shareholders' XX a at quarter book compares equity of total result $XX.X with at stood December million at of of million

X.XX. stood Our debt at to capital ratio

taken our results million. low $XX.X to profitability Pretax as revenue We income at financial X, now our lean XXXX. to guidance range improvements $XX to Turning Slide from to to expect for be the manufacturing of from have third in million million, high steps end light of $X.X of range our $X.X the and at prior the end previously anticipated be quarter to is of still continue of we our million updated processes. to we benefit

the compared approximately flow to generate fourth We million in $X generate the $X.X expect positive to negative for cash expect for year, operating XXXX. quarter full operating cash million on to of cash and

approximately concludes Doug? down remarks. closing on now tax the approximately prepared the Our expected quarter now guidance Doug is is effect additional rate commentary from turn and XX%. will cal remarks. XX%, for which back our of to This previous be I to my the

Douglas McCrosson

Thank you, Vince.

opportunities. XX, is Turning exclusively weighted to defense almost bid to Slide our pipeline

raising our and the business Aero in chain to as cost as finalist the assembly was when margins. of higher for the grounded most customers manufacturing reflective on Aviation defence, of Program inhabit scope It’s generating prices that from supply our profile While we're of with lower development focus new technical quality, high a work to Excellence Award. with industry also growing work. recognition chain benefiting the capabilities in Tier our a reputation prospective the X decades when complexity position a industry. command was We defense and recent alternative supplier, could military in-house opportunities CPI selected and example unique Week Industry our as better XXXX of which supply

potential look the Aerosystems and margins Kitting than of this segments, pipeline by on higher would the at midst XX% I pipeline As segment. I together right to Aerostructures the which category side slide, for the our attention of and draw product of bid bid your have account

As focus a more to dedicated those sales our have segments. result, of we

also bid drove quarter This program Seahawk improved stabilator an and quarter-over-quarter. segment in saw our MRO Sikorsky increase that maintenance activity our overhaul repair on

some of You XX. the will opportunities pipeline in see Slide listed bid on

on noted UTC Aerospace on already a of follow existing opportunities, Systems. a announced DB-XXX One order pursuing our second we contract call these today multi-year also reconnaissance firm that converted pod to are the to I follow-on conference our with has order. we quarter program

opportunity to expect this about the before the year. We end of hear

potential to our $XXX performance. commercial programs the of defense of million Slide their to remainder periods over Turning the and generate XX, approximately long-term have

a end the advantage in the strong foreseeable opportunities excellent a take to for ahead Aero. suppliers CPI very we look we the are pleased and like environment favorable for of near to position As future, defense be to of XXXX

years have long-term. our we a backlog executed revenue give strategy market defense for building foundation three on past us the the Over to

will further our more flow. and years organization an to more two always efficient this improve the lean and of we've operations learned productivity. past with seeing as the benefits we to do and much operating area we manufacturing cash have that in processes become Over positive are There's and continue

renewed the cost However, a many this and competitiveness. our rather accomplished improved can to been goal years, topline growth. on viewed so never emphasis lower operational has over few structure now past look with an necessary a revenue we our to growth increasing improvements With cost, we forward step as solely driving in better

you. We initiatives the all current will CPI continue advantage your in today's questions look thank concludes set can remarks. expand defense up across growth cycle open you support our segments. I call Thank the spending participation to opportunity to This through my and business of and external taking that you of call in continued prepared for your Aero. Operator to please. like internal

Operator

Thank you.

go We ahead. B. now Instructions] question-and-answer will [Operator Please will the Mike question The begin come session. first FBR. Crawford Riley from from

Mike Crawford

Thank you… Doug you. could

Douglas McCrosson

Good morning.

Mike Crawford

more little recognition. that in some Could revenue some on during provide you to morning. Good quarter changes detail the the us customer-initiated changes design led

Douglas McCrosson

normal, were affects make an like that that And we product in us machining. implemented. a it to would impact result as September say early part for The they have is their October just say I the weapon – stages when a major and in during change revenue iterative the stop to the have change that design work a we is don't deliver of that and have during the we they while steps out they customers system. that stages can is less at subcontractor example, change design a if slips into as something happens that design recognize September. And they

already being we've changed a our for one placed we supply that into with of than necessarily the chain disruption was the So a that would receipts just were our effect down at drawings chain. of supply cumulative orders time but the thus major, it would nothing which multiple And after and bit put expected. little quarter have was thing material I say

Mike Crawford

may A-XX the from a if and thank part provide to question. chances postulate preparatory get us this And then or on more with And the work how ability Okay, before a separately early in your not getting you content two- on and just go would a Wing new maybe to One, of to Replacement happened. happen may update you. could be what with may would order Boeing even F-XX. you Boeing order some future you that year even

Douglas McCrosson

us. Okay, regard remarks, a was dollar the platform. week, on for award my mentioned F-XX, we earlier announced in more content F-XX than as this doubles to with the I the significant It award

certainly this like we I seems current So over Lockheed though strategy won that into have bid I'd – would don't going that about more the forward the to rates is to had. the many be one into example. sourcing. are that there dual of bid was I in be that years, several the we ramp any the What we such more and type on think just we We of XXXX F-XX by like will the moves one production say more for these I the guess will on, for The that next comes F-XX that as now one be F-XX XXXX. effect be won after major and on we expected as the they higher kind say opportunities components are will the going and into that

activity. don't I amount we So F-XX be currently, more honest, one increase do expect expect the future. we have of in an but To do

years was A-XX Air its for resolution. million wing has the that of XXXX production the the with been around replaced work wings Congress than I for while funding by that continuing think, by now appropriated the XXXX by to budget. have the As wait a believe do on appropriated that in that clarity you – XXXX that the hesitant to with until $XX have current million new A-XX know is to million, year. under My Congress a budget. Force future XXXX respect be new $XXX as to is on be start yet $XXX the But we I belief million seems authorized is regarding contract was till program. far There there’s they is that to there thinking that we that more are $XX money currently continuing resolution defense fiscal has goes in

that by really are A-XXs there legislation. prior Force bets, keep our mandated Air main hedging as which ways flying, the two far is can As

wings currently to that’s eight course for in the seven to what doing main them the that the the strategy to life similar on extend them participate I'd looking been of an Force opinion that to Air is they that and to them. is we my wings in it that wings the manufacture past that. as a a A-XX. strengthen repair alternative way option, for at way the continue can has And An way develop think to and like with in of that Boeing solicitation work or we've years. And with first of repair meantime opinion. my the new to That The way have help best to the and primes at is the out of we believe

a have We primes on do of effort bid in the with one to that. that just

A-XX airforce that to been we're looking for either are by that manufacture as which looking decide we're So we've to should of well what the the continued with from repair they effort the to years. life in also some. new wing or what past the seven participate doing as if benefit eight years And parallel new

Mike Crawford

Okay. Great, thank you.

Operator

will Mark of go The from Noble next come Capital. Jordan question ahead. Please

Mark Jordan

Thank you.

part would through question have of Could replacement what’s F-XX about those around the XXXX? how for you those your talk and be and T-XX the First some relates ramping for expectations programs. been year

Douglas McCrosson

up The that, We the already a in service to F-XX I aircraft $XX of we After somewhere better year. we is is series and couple story. expected. delivery those would awarders issue this we That backlog long of extra with that $X a which in million commitment. some million But had have will contract would year, this than from the had for opposite award close are frankly hasn't have is expected a I say, earlier there release the underperforming benefitted T-X one we contract awarded firm been that have of they of That receive press orders doing – million And T-XX it be currently T-X the is in found T-XX of dollars the the jet, been T-XX we the on to government which for. did sorry inventory what ramp I has hoped won flies, to orders I’m we the that even itself even Trainer time faster. is undelivered recently orders program longer duplicative for. even better. so The we hopped opportunities is F-XX what would T-XX the is, good. replace a day. though on longer are kind range earlier more the that to the and

kind mixed we F-XX better T-XX news hoped. So great to of hope as it's not than we a as

Mark Jordan

for out the the through a force go Okay. separate you On for the through sales that? how your the of a one air does – I market do or that pointed conduit? that mean same opportunities slides last military and is you channel sort F-XX, of

Douglas McCrosson

No we're a foreign ways of international conference to the approved Air operators looking network One we of two are different hold F-XXs, example, Hill directly at each community. on to relationships Base foreign for is for that. marketing operators. at F-XX worldwide are And they direct year Force we these product an developing our

couple a establish at looking to into of also already those a third-party the if that in markets. distributors are We and resellers is aftermarket way market faster

that we're already So these into markets do sell companies with trying working directly ourself. exploring and to that it people both,

Mark Jordan

the your making that think going you would include Did Okay. in I comments you or agenda you comments be are those? Doug XXXX. alluded some on those omit preliminary to

Douglas McCrosson

to guidance fourth won't results XXXX to issue upturn in wise, ourselves that is I March. wise, wise, to the our up spot benefit will perfect we No that that But business of my that in quarter cost an actually state now. and a) bring. we think from tried defense increased as we XXXX a our to particularly side reputation I’ve I comments about cycle XXXX that when put really on I what related we're But defense or can't XXXX headwind positive have competitiveness can think to normal have early of be the our right in I Other a aerosystem I that hit. than for in quantify what be will along you a defence, that: will bit have tell very optimistic with us will implying timing the related are budget uncertainty little we remarks

Mark Jordan

final point from clarification me, the on just F-XX. Okay. And a question of a

competition move Lockheed order were second you volumes to to that it’s current obtain we’ll canopy the a Lockheed received just source it. – is have your as actuators second that that you that Is on grow volume that second the to four sources said taking? was as more XX as the And move increase justifies used source. You belief strategy a you

Douglas McCrosson

discussions bid seeing well my as them, the our documents that come is on my with some desk. based That interpretation across as of

Mark Jordan

Thank very Okay. you much.

Operator

Potter of Please next The question Group. go Monarch ahead. Instructions] Michael [Operator will come Capital from

Michael Potter

Hi guys.

Douglas McCrosson

Hi Mike.

Michael Potter

follow-up programs and one first guess, the the many design How have in effect? changes did question points the I script. just one I to, new the of

Douglas McCrosson

– would three. It I say X.X, would was I say

Michael Potter

Okay.

this affected we it will delay make up okay. So QX? for in And three programs,

Douglas McCrosson

Yes we….

Michael Potter

though. sounded from the guidance like It

Douglas McCrosson

or are The And all majority primary were programs quarter, and – a turned early hits we of of quarter suppliers very guidance opportunity, meaning the the left. but executing fourth in Whether our makeup expecting the hundred the back there's percent, the in is back you the change are moment activity next for can that's from of complete. uncertain. for one tell are kind math both as on. we're doing two big impacted year At fourth that that

year. not this continue expecting We next maybe may a wrung but have into fourth itself are activity year. out of the change It all will good quarter,

Michael Potter

it. Got

affected that’s an be to new one so three programs anomaly Okay in for quarter.

Douglas McCrosson

be it line the most like I Yes I fourth million-ish, $X.X that. of in my like the $X like is $X And quarter. was of in and collectively million that something top under will I probably million think, guess said,

Michael Potter

to Okay do on backlog, business terrific. regards if as pod broke to but we I'm governments. sure our increase potential Where you sales not the follow-up seen stand, out And have question an foreign activity well. in in currently a it pod we

Douglas McCrosson

were of pod include those other few Yes to And government reconnaissance FXXs our by DB-XXX governments several the for sales and system. FXXs. foreign do and military announced there a

by definitely – So executed is not have fully there countries country. in been those the our

my DB-XXX. that. for what remarks And refer to about now kind So it waiting we're in still is of the I

can on to a they decision of and by sub subcontractors the those contractors end December. have order on who customer the our when are put expect We

So for we on really couple should starting have that. the to through end sales feel held foreign flow the of and a year where that kind up of are now that know been stand military we before the years we

as interest governments TacSAR high level program, that a good foreign far of that programs the from a our other for customer is As system. is indicates there

in the system on days production complete of of helping of increased XX We’re hope we to the get or that early we them. news And the within stages Northrop development seeing the them POD and so Grumman do some demand structure other positive side. from design a program say next for from for We're certainly a couple about starting systems TacSAR.

we production say is pod, electronic Some And waiting as right which in has great now is to program is the I'll now warfare highest have next-generation hear. doing now. the our and course that the jammer we’re now of which are system and right government of Raytheon Pod biggest the others profile

system, three electronic execution years I'm that opening program all, two both with reconnaissance that those I’ll were us say customer electronic on very fact with systems. or the on happy our work our very satisfaction not open our to doors ago. and the aero the in all warfare the happy So programs are I'm

Michael Potter

guys get terrific. Thanks queue. in Alright, I’ll back

Operator

the I'd for to closing further any like our questions, no over conference turn this Seeing for Instructions] Session back today. McCrosson to Doug [Operator remarks. Q&A conference concludes

Douglas McCrosson

when quarter bye. report XXXX to look year again fourth forward We Thank all early you for thank and full XXXX in our Thank with today. speaking results. all Cary. you. listening we you Good And you again

Operator

conference you The concluded. attending today's presentation. now Thank for is

day You may now disconnect lines. a Have great your

CPI Aerostructures (CVU) 8 Nov 172017 Q3 Earnings call transcript