CVU - Earnings call transcript Q1 2018 | CPI Aerostructures, Inc.

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Operator

Good morning and welcome to the First Quarter 2018 CPI Aerostructures' Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn over the conference over to Jody Burfening. ahead. go Please

Jody Burfening

and Good XXXX Brandon. copy and to download earlier welcome the call accompanying Thank available are Quarter morning, Financial Aerostructures' for today issued release First earnings A PowerPoint Results CPI presentation Company's this you, press everyone, the remarks, Conference of on of Financial and will website. Officer; Chief they us the and of their Officer. are session. today Vincent Aero Relations CPI section Chief At Executive conclusion the Douglas prepared Investor Palazzolo, question-and-answer a the With McCrosson, hold Call. President

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

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

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

a additional to call Management, I over the turning couple of have notices. Before

for call. contact management follow-up the follow-up of institutional [ph] conclusion with this following call. Elise to Please a calls is its schedule investors available First,

meetings items With like to B. representative. pm turn management, would Riley the with please Riley morning, housekeeping contact Institutional of Time Officer. and at the present Investor McCrosson, I President one-on-one way, schedule one-on-one X:XX Executive a with Doug FBR at FBR those over hold Doug. out Pacific on day. meeting the May to To Second, call and XX Chief management Annual investors will Good the B. Conference during now

Douglas McCrosson

the morning, call closing assemblies our Vince this variety acquire with for aerospace and joining on performance acquisition markets. tube financial conditions. electronic and planned have a expand thank Inc. and us to on WMI, a through customers, thoughts of enhance progress the some acquisition, made provide on our Good welded market, agreement will Jody, the diameter integrated large update other year. in products capabilities, us and predominantly Since portfolio. brief We call. reviewing excellent to The bending of in the before a announced with you, you detail greater balance on or our Welding our of conclude will will with everyone, acquisition results March I then of a morning the quarter. begin I WMI to Metallurgy our enables late the definitive within customary of the announcing capabilities assemblies, position the a build defense provider and larger specialty among in we competitive defense defense and working WMI our

lender, commitment equipment staff As BankUnited. debt of of the programs from WMI to fourth the press by headquarters and we We received we in our transition a beginning plan quarter. reported and have to release, our financing senior our

our WMI's and certain as welding, also to very be assemblies, products access harnesses, will WMI's niche to for management. company tubing quite Raytheon, and process in that personally Sikorsky, other without process integrated been on specifications. our and core identifying from key and that have in customer these that in holds program Over typically that structures to valuable Grumman, requires capabilities collectively clear WMI ducting Welding, to WMI opportunities WMI, very we have while a by implies become like it its is add by not much value spoken wiring of demand industry. others. for to supplier particular, these are majority Northrop capabilities combine with focus manufactures several CPI already weeks, a customers execution, by the supply I manufacturing, the opportunities the that many chain And contain that account more components. our encouraged that We're I've enable conversations of its expertise the Lockheed, customers past Aero the would cable specialized name sales. had these the certifications defense Boeing, has certified

give a few we me examples Let of are already opportunities seeing. you the

The A-XX. first is the on

the special this integrated On very will the replacement assemblies. opportunity these is performed several XXXX, as interest manufacturer of customers welding seeing few required approved well meet for and in this components as we and on the on in standing platform program. added A suppliers assemblies the an to driveshaft services is on good lock for the capabilities. to to When WMI's second wing did re-certified F-XX for it the presently not Other as Boeing, for platform's ready replacement we WMI wing EW have assemblies. it our ISR supplier early the welding more welders. used of become F-XX, from believe type program pods. qualified capture does with program. restarted, qualified A-XX will We with platform expect is because produce inactive WMI Lockheed is could our welding A-XX need which but program on a assemblies for are on we approved we the that F-XX, third, enable to we WMI so of one electronic suppliers an on we content strong and manufacture WMI canopy And the

to CPI cables of value started. buying we're excited being from able and wait short, Aero about this these can't own we In its external produce sources. opposed the proposition tubes understand new to venture Our as to enhanced customers get and

strong the I'm consecutive to expected pleased to and outer that execution EPS and for contract. Revenue another wing wing panel report fourth to our lower components from Prime due for and from higher E-XD program profitability. as the year-over-year Next quarter, T-XX was our performance declined quarter kits revenue of Pod Turning quarter the and revenue offset Classic F-XX Jammer III quarter our Generation Pacer

revenue being is shipped to is that high lower F-XX issue timing today in large quantity year-ago year. as component a lower period Specifically, in the quantities the value a of attributable shipped throughout

growth this program see full the revenue continue for year. to We from to expect

quarter, would expected contract We that receive as an to in our structural revenue and us in anticipated contract this which from from excellent the on program testament the that kits decline new imminent for confidence gives transition also to E-XD awards multi-year for new Hawkeye we execution Northrop year. E-XD we did the the saw a on Japan I one new expected contract. an E-XD Grumman we note multi-year Advanced multi-year platform, secure will

not bill of the provide new the form growth March to you backlogs the end year-end, will XXXX. all a by than continuing Turning and provides can created at programs on first be quarter. backlog of drag quarter the $XXX.X should X flow customers total Aero of our XXXX passage or to than lower program both Omnibus year we that finally is of new spares at that our as year-end in this start key delivery at of see for backlog and Slide well we the defense end for $XXX.X aircraft in expect stood the funding CPI that secured million at which orders principally did result the accounting maintenance, The resolution parts the as defense at of end illustrates as with virtually to Slide million. Bill our near Omnibus Spending until orders and recent X, XX, platforms covers multi-year defense on as major quarter and XX% With year-end unfolds. Consolidated strategy. and market have many programs higher successes consolidated for defense starts

can million periods into structure for are and performance XXXX. annual of with some defense the the XXXX so contracts TacSAR but since in at see derived All from revenue total XX defense future extends of beyond You on we visibility have production backlog cases, pod is that in that $XXX years. announced March November good

for the In for questions. AH-XZ first total also with contract will comments addition on bringing new over we the for our of I value call the then closing program million. than Vince in results our to from to awards the third will back fourth review the quarter CFO, financial before $XX opening Japan, call this to extension now more and to some secured the detail. Bell, I Viper for Helicopter greater Palazzolo, come contract Vince? E-XD our turn a

Vincent Palazzolo

Thank you, Doug.

results, attention a revenue bring I to For we to our January in recognition our adapted review want first of known XXX. your XXXX, a standard policies. ASC new accounting X, Effective Topic as change quarter

actual aren't you the relationship to and contract estimated recognized completion it familiar and XXX, at contract. incurred ASC over as with between cost who be based For sales the those performed cost work total on profit period of of requires the gross is the

now are The over quarter quarter the revenue adaption those Cost the Earnings our materially was To the the earnings Contract billings Estimated $XX.X one changed Contract ASC all for XXX first million the asset Excessive sheet excess is not under Billings estimated on X, of for and for in recognition on is revenue Slide line of contracts both quarter XXX, and previously names the of on ASC to Liabilities. and has Contract of Assets two Following called point balance XXXX called million under called items. an to contracts $XX.X now start change first cost of completed previously and on XXXX. compared contracts. XXX out liability Completed The our ASC first of related life

we Pod contract. our III As recognized program and E-XD Doug remarks, programs opening F-XX Next from Classic Jammer our lower revenue Generation higher mentioned and offset T-XX in revenue for that his our Prime Pacer

attributable the first quarter the shipped Specifically, Decline issue near flat and compared the with lower contract. the million in activities Gross last by components to was and year-ago Pre-tax the first income the was quantities E-XD of million year-ago margin reduced expenses. period XXXX. primarily year, shipped lower compensation-related revenue quarter compared profit decreased quarter in compared for to for SG&A lower for $X.X reflecting the same $X.X approximately $X.X quarter in $XXX,XXX lower current first professional the a F-XX regular of for fees XXXX schedule. million $X.XX rate the $X.XX income period, more EPS $X.X was the quarter period. was for revenue million that a in year-ago Gross from timing of first growth of to for as the value and XXXX period result the the of the million. high Net unchanged period lower profit. reflects year-ago to growth $X.XX. multi-year today both and end revenue are was lower is quarter on and

$X.X XXXX an X, Jammer million, year. Turning to is December increase million during XX, to million highlights. as at working in $X.X is Contract which contract support with predominantly to The increase sheet in $XX.X yet result of displays XX, on used capital last operations to the $XXX.X performed, period increase of Generation the increase ended used assets XXXX. not $X.X The increase of cash $X.X million $XX.X same the We million, the Slide but the the Next compared of Pod. of XXXX, were result We for assets. balance in operations compared quarter first December built of million. to million work quarter the compared an

last flow the the in case cash was expect to the portion we As latter year, of improve year.

May At Additionally, the Metallurgy two once facility, positively extending total May the the million end. commitment amending March $X.X line XXXX, additional from million long to years debt compared flow to million revolving quarter term operations amend completed. payments outstanding we quarter, loan XXXX. has March XX, of on our term the to to Subsequent been cash at through XXXX, an under the expect stood Welding for our revolving as the of credit $XX $XX.X at banking at BankUnited accretive to term a XXXX. received be We XX, to the well acquisition loan XX, of XX, as letter we over had

million book The has amendments BankUnited the acquisition $X BankUnited at and company's to facility the addition, XX.X of lender's and loan. million new improved share. of WMI a due the a to value per the with end diligence In preparation to subject formal term agreed documentation. finance equity of to quarter to Shareholders' execution are $X.XX

to stood Our capital debt at $X.XX.

the of its X, and XXXX bill Omnibus major of and to during we WMI assuming into the funding given the Turning fiscal transaction our close second programs we Slide passage of XXXX guidance XXXX financial quarter, be million to our $X.X to with in of in revenue reaffirming $X.X for $XX income million are anticipated million. the range pre-tax the million $XX to range of the

the newly This on I lowered expected to the enacted more remarks. tax now turn tax closing concludes to my will Doug? now XX% are of the prepared details to have additional to call back We clear. XX% rate and for remarks. range effective as the commentary Doug the quarter law

Douglas McCrosson

the line fundamentals the With growth fiscal Vince. to place you, Omnibus long-term an efficient together defense current beyond. certainty we sector focused strengthening in from in near-term because drive bill, are Thank and profitability, top with on of industry infrastructure consistent the driving year and spending

spend initiatives several fronts. Our

growth growth M&A, WMI represents driving also While opportunities. we're through organic

on warfare, spend a competitive where Jay stand moment. opportunities our call I'll areas spend deep leads in brought doing to systems our Jay our Business March reconnaissance aerosystems on materially on our autonomous Jay of enjoy development the minutes and Defense Mulhall DOD what emerging me areas this Senior pursuing all business more we expanding in a for we particularly in experience profile. significant to growth that efforts strategy to we benefit Strategy I electronic increased business. in the growth that areas Development and advantage. surveillance that Director are Markets. year-end few of from intelligence, speak Let on and -- as integral noted change investment is our of industry and brings board

for chain we with efficiency. work our to platform growth can shared Defense, our increasing of prime XX, segments looking XX% the two to bid any Turning is well-positioned to of Slide believe comprised are you we Kitting see aerosystems, supply that In these us pipeline. and contractor on take Department areas improve

will the slide, On our today's manufacture our talking pipeline. want electronic side sales On left you ongoing pod defense of time the some the the of warfare see and emphasis market. opportunities to ISR in specifically about big to underscores I on applications. multi-year sophisticated spend the some call, structures pie our opportunities for aerosystems XX, chart and On in Slide ability

providing the contracts engineering design structure pod evolved a Over and in the bill-to-print matured. this support, we past several industry. become of full business pod developers aerospace growing From partner manufacturing years, ISR of and integration in a the our have earliest manufacturer our and has structural simple EW as market in systems to leading partner to now valued this growing pods

space by year aperture of the commenced Technologies experience country's with the secured have for manufacturer evolution pod expertise TacSAR from took this Next its one in a and structural For step that for assemblies having development the Jammer viewed build-to-print I'm radar systems integrated business parts being took shop engaged and Aerospace with when see we the leveraged Generation to and design we to electronic are pod the for technical another for important one opportunities EW was trusted the or of a hope report example, of United UTAS. as value, role us deliveries higher new synthetic The project Raytheon, developed to to contract most future. pod housings a that within warfare Pod, happy programs. the near we and

CPI over us a solution greater potential I and expertise. possibly cabling, harness wire that our the the evolution we not that our WMI's work, harnesses customers allows content Seasparrow a Adding larger or now naval a complements market also integration transfer represents our defense time soon, unmanned we still for more together electrical current level with this also spending itself a leverage to the capabilities, program. packages capabilities next of expertise bid WMI's defense more wire projecting expanse the in integration On elevates share our system. aerostructures While orders in with development combination has naturally fundamental greater production capabilities business. stage only and it in are WMI of increased earlier fills capabilities in and the relationship to partner Raytheon lends as standing gives cost integrated control on wire us Missile and WMI's Program manufacturer that the and for the TacSAR the afforded of market. in lower this integrated processes, manufacturing vertical of pods level, on even a gap on programs. capabilities offer the can to program, WMI's pre-production addition we initial in area electronics standing noted perhaps XXXX. At business sometime content even for long ISO pods can lends on a their with key Jay's a by complete autonomous a background, pods itself sophisticated to first of segment focus aspirational work

the believe next assembly our logical will I strategy. fact, In be evolution in this integrated

an defense to with for Our a manufacturer whether the supply of focus autonomous electronic air, to the efficient are the on transferable segment a manufacturing systems to chain key the expertise the will This penetrate area reputation leverage be market we defense of the to faster sea. warfare as unmanned ground or the in growing whole. our industry seek parts partner us as than under

revenue Turning focus gives multi-year XX, to visibility. on our of awards defense excellent long-term Slide us

we both degenerate profitability demonstrated $XXX hope we my to And remarks. and the of remainder believe companies Operator, into organically Thank sales firmly have in remarks we This and you you consistent you. sense the and Aero. commercial a support perspective attendance our over million and and I like my continuing the on set drive of current the defense for please prepared like customers efforts prepared ability for given and questions. all your breadth higher of our I'd the business to call potential sustainable Our growth. given our periods approximately thank performance. have platforms, and WMI. programs that path to opportunity open depth are across the acquiring concludes CPI of development of

Operator

you. Thank

[Operator Herbert now begin from Please first Canaccord. question-and-answer go ahead. with the comes session. question will Ken We Our Instructions]

Kenneth Herbert

up in one, I first you’re of backlog. be on above ask and sounds expected year. mean, Doug, or the the to it wanted by second to just Are we of third timing the how or comfortable about I or sort growth sort encouraging seeing end starting year-over-year you on year-over-year when the backlog a to inflection quarter of real you of the backlog? should think see start

Douglas McCrosson

end the and fourth more But better by of second bookings third than say in certainly I'd terms new the in was quarter the first quarter the so the quarter. quarter. of

not defense of total where was it reverse year, going it's trend the while it backlog the first should the will and business the over -- at the So be to negative year. quarter both full by the backlog beginning

Kenneth Herbert

customers Just taking is we how budget? a It time have people now would maybe longer characterize sounds contracts netting a than conversations like little the that from with you expected. have

nature what what defense be in your certainty, more Just budget in and thoughts the of place, from timing, should and the particular, on with your side would now be those conversations? maybe customers the

Douglas McCrosson

that -- and have to of very I'd terms right the say in customer conversations have now, optimistic been, I'll frequent. all of say, Yes,

in orders Timing, by of they is a period before and said the into level hard with bureaucratic quarter. and and activity activity would fourth optimism of the beyond good say growth, our know, but future calls particularly for being I this measure timing high that have can the if I of you backlog the I actually. like the of you regulations we're that say sometimes I customer as customers award base a delivery quarter would to as contracts, going amount So, as and predict, remember, them large lot upon is communication, rules

Kenneth Herbert

is of start as how the side, down year are how on you for maybe an opportunity. autonomous we or to It area to on you the some this comments up maybe wanted in, should the talk the early to starting terms of you on or sort view resources in I in, follow it evolution invest too you? Kitting this something the maybe and market importance put sounds about finally, of it or your something like or this starting total opportunity you're you this Just or opportunity look can to evolving and that for, aerosystems to road the is this as maybe relative see early is

Douglas McCrosson

many growth. a There's some for model contractors both little of production CPI affordability, day the air, think in that market. and that the are of that sea, further, thing on called belief an development a lot first back work the has began beginning lead with continues Aerosystems time. and we we a that a prime to need all cost, had journey integrated and to think work, And and we're program, going the the been capability autonomous lot structures, market, aptitude I for are what before in complex be the begin the and work, I be start level long outsourced the next along, aerosystems, of belief at of of segment from and over for market ago under in even a everybody differentiators this quality place a terms we particularly on OEMs our a where to So, the does, demonstrate in years where system talking for these and to have the that period gotten that we to we highly it a scenario I know our followed can some created is the to point in see early of about as the same it's going need times at that beyond look in segment that activity time,

in for high, early fairly going not pursuing I in I opportunities, out bill them that could too an about aggressively happen to products think rule that and that to would such and it I'm while is talk fit and CPI award specific is interest can XXXX. say we're So the that

Operator

Our next Mike question Please comes ahead. Riley go Crawford with from B. FBR.

Mike Crawford

Can given thoughts we favorable the HASC on $XX recommendation for up A-XX markup with this updated you your base last budget? saw week million plus provide the wing replacement

Douglas McCrosson

certainly But has to yes, entirely by think Senate, A-XX and Yes. -- surrounding I gone has matched make going has be try mean if been the to the that to the gone. I happen. still the that A-XX largely not we're uncertainty

think game, that longer increased funding strength funding from the The is think I when that defense, the and no zero-sum last. programs it and with still the across among timing the in is a we really lot the such of I spending a board spoke get margins, that there is of and were are unchanged the going program. A-XX behind one to

are the too that one procurement. where the awarded talk Spring and first endgame that we have competitors to on is contract to about We prime next of but I really much in a now, to RFPs so right still early can't are progress, responding the in quarter

Mike Crawford

you put of contract in to Which would Fall the then 'XX potential time that from [ph] frame? time

Douglas McCrosson

I on more quarter would put second of the 'XX. it

Mike Crawford

gating risk And year, E-XD of on there million for then new revenue to guidance that your when this factors range? one revenue the any $X multi-year? the get given is timing that Is reiterated you related bigger

Douglas McCrosson

timing talk about it, in when projecting that. more, which certainly it did E-XD will would timing two I to is risk gating but The back able view to the there's the Well, we multi-year the I of and close the as what is low-risk calling X, say factors. expect it they're soon second to quarter. WMI we're close, That I one, be

fully will. room some in left it it there that in we does think but I expect case we not,

Mike Crawford

Okay.

Douglas McCrosson

tighten the range. certainly next up Probably when closing call, get conference the guidance do we we that will by

Mike Crawford

that day? WMI the last something be you're on you Is quarter? Or month could that expect very the time like it to of any that the trying day of

Douglas McCrosson

No. it it happens, When happens.

Mike Crawford

is to would question about in re-certified and now? certification? this the not last talking be did Or they certified were getting certified they are then WMI, F-XX, initial when The as on you you were an say possibly

Douglas McCrosson

their Early they and welding inactive. on with some the part now early closing in program Lockheed and We're on did have process, in discussing come to work the this back as they re-certify process. its days of are willingness

Operator

Our comes Ben Noble Capital next Cleave go Please from Markets. ahead. question with

Ben Cleave

this closures that on First, remarks contract call quarter, Do you question you imminent. seem comments, be to you the pushed believe to visibility can be a half plus-plus optimistic and your lot and something follow-up from that we're that more In the think Mike's here? quick the Is out Doug, pretty a your going have to your this E-XD. next pretty follow-up of prepared Mike, year? on that could that second

Douglas McCrosson

No. We should have the it talk by time we again.

Ben Cleave

term the And term then that passage you today in terms F-XX is view both of from the the longer the the how extension. a of potential regarding guys? budget program has near how discuss potential and at have if one the potential can question this the start -- program-specific you of I wondering And here the evolved year. I'm you program for before versus

Douglas McCrosson

healthy as For would I a F-XX what program backlog. describe has currently

in be We terms delivered are seeing of an increased level activity in XXXX. what of could

we say, we So because ship of to revenue regard that into coming a to going product. in that recent visibility for Unlike have F-XX other can XXXX. that what program orders we year actually particular strong half more booked many I'll I We our with sell is think programs, received. as a, second feel have we of we're that

Ben Cleave

wasn't going soon during If me. this plus to that quarter. more update from up there's contingent to a really WMI up you on expected consideration, contingent on had Is be million and for that remember from I the news you to Just correctly, $X variables have any acquisition one WMI? there quarter? the the last If consideration payments

Douglas McCrosson

right program of tell to mean has been to can as Met. I there you of as be when will. contingent neither payment it booked But that, win can't now, by Welding no contingent made. I is I talk today,

Operator

Instructions] this remarks. I seeing for closing conference time the to I'm At questions. [Operator turn McCrosson over back no Doug any to further would like

Douglas McCrosson

to forward attending with today. thank you, again second Brandon, speaking everyone XXXX results. our all you. you, for we Thank quarter in Vince our when August Thank look call I and and report you

CPI Aerostructures (CVU) 15 May 182018 Q1 Earnings call transcript