CVU - Earnings call transcript Q3 2018 | CPI Aerostructures, Inc.

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

Operator

Hello and welcome to the CPI Aerostructures' Third Quarter 2018 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. And now I would like to turn the conference over to Sanjay Hurry. sir. ahead, go Please

Sanjay Hurry

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

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

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

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

please management investors. note Before for turning available prepared calls follow-up institutional call management is that with for over remarks, their to the

that Please release contact to said, via schedule Executive a this of a to call Doug. With Officer. press Good over McCrosson today's my Chief follow-up. to details morning, turn Douglas listed the and Following in the office I'd conclusion call. President contact like

Douglas McCrosson

and with quarter on I’ll Sanjay, which with commentary beyond. results. then of trends heading detailed a into us that for will joining the quarter, and our pleased analysis conclude growth after our a contract provide begin morning, us of review Good all of our a some call. multi-year performance. thank and performance operational for To this opportunities market strong are report begin, third I'll Vince bottom-line another and you for to morning XXXX we brief on financial position top

of and offering a third Our few public sixth our newest to to quarter consecutive historical a following our put quarter context for the a like into flow. cash benefit of operating our of profitability performance minutes recent shareholders return positive spend to I'd stock.

continuing cash flow, point XXXX and while positive CPI Fiscal was our to through the to operational during annual In WMI a improvements. we execution an a XXXX, numerous in supplement our to results entered a an CPI implemented growth profitability, strengthening defense quarterly within industry on M&A and programs market. backlog for Coming greater Aero, October to opportunities. capital improve the we tailwinds aerospace initiatives arrow and we together and reflect the with the process a capabilities, and F-XX, defense acquisition XXXX will we In to free our defense working efficient to organic state build entered Air believe concerning initiative that portfolio, agreement fundamentals efficiency we Group in to With very with We Our position by and CPI Metallurgy roots successful defense a competitive bending growth acquire industry WMI and sales stipulation is drive the ordered EXD drive litigation strategy customers infrastructure XXXX, flow we F-XX. variety market court March, market placing through Supreme series provider a New XXXX place with of opportunities. a on large on multi-year respect XXXX, strategy. to into predominantly operating defense aircraft and emphasis larger implemented in $XXX to Inc. consistent our of execute a made market operating total of the out subsidiaries Hawkeye, assemblies, contract choices long-term of From into diameter cash profitability continued Inc. assemblies a the reduction definitive and challenging tube strengthen. products with other drive markets. cost included Advanced Industries of T-XX Xnd to Group enhance and leveraging Industries trainer Air welded for and of growth the added million integrated specialty strategic military reorient returned on which Entering profitability and On our the of Court defense among the acquisition. leverage to expand York its Welding as turning electronic to capabilities in

to statements Industries in of its Aero Industries within things to receives days has deliver withdrawn stipulation audited part that Industries for statements. other Among the order, by CPI in Aero the to fulfillment purported stipulation WMI order financial the will auditor. the weeks after Subject agreement. acquisition set-forth of three unqualified XXXX the within in Air conditions requires XX other close to closing As termination parties of financial the of Air audited the Air agreement, certified agreed CPI

by respected Terry as Emeritus will in ruling capital announced proceeds both $XX needs Board approximately our as net which profitably. be to of this Chairman, internal a us in morning has will the before with immediately. well-known a replacing His anticipated On raise WMI, well management Textron to aerospace our of strategic team we the closing unanimously wins member Eric end that in we the of heels new day, with President support global Eric bid Rosenfeld to of Executive and leverage generated to Chairman Board of completed Eric accomplishments growing the strategy acquisition his over increase Rosenfeld Chairman occur our backlog, in executive you is various aerospace and elected served stewardship impressive elected potential very XXXX. associated bringing Management guide executive also positions Emeritus. and we present This and Vice build including actions believe the our the help Board the valuable position operational as member as Helicopter million. opportunities companies, the the we industry. of should past effective Terry working history Non-Executive public that mid-October, growth to current Chairman of associated as scale limit CEO Chairman Terry we from offering capture have will On and of the for who is unanimously was as board of and behalf the of external the thank before will Bell of and Executive and as years. of And several the Stinson pipeline of AAR the Non-Executive XX remain Corporation.

our back the to quarter. Turning results for

system. and mid-band graph greatly XXXX increase, primarily you on-time slide down fiscal defense total contracts under through strategy. passage of Bill XXXX modifications flow Jammer, of more National base advantages. the the $XXX.X which our of we our execution start XXXX. of We to XXXX the winding is I year key attributable a activity fiscal and quarter. role spending Omnibus right expanded as this are Act its The year to earlier funds four illustrating of that on the chain the supply The I would commercial XX% on The to Defense recently high sequential from note maintained and supply spending Generation a our side to of your of contributed where content that that an market of Raytheon following hand competitive draw confluence on technical increased capabilities expertise see million. seeing fiscal are the warfare attention this for with OEMs chain also pod the on sequentially for in backlog award continued Next our slide levels the budget result and business can is Authorization electronic

HondaJet aircraft in the As an term with Aircraft its quarter. agreement for for jet Honda third long light advanced to inlet secured Elite, a example, the we attenuating noise the manufacture

least Turning of us XXXX. defense to That at million from total defense is slide five, $XXX backlog September derived XXXX. at contracts through visibility revenue into since XXth gives announced

of value the on million. significant currently increased CPI customer items. by what order I $X.X we over that million awards subsequent Generation in end customer, million system represents over Next the order business call a Vince has existing contract now the expect the systems. maybe valued a On a and aircraft. other mid-band special modifications manufacture this to XX, total an This production XXXX. just This the the customer five begin for to the missile contract a for from program to we received production to of wing backlog program, quarter. to Vince? the September if pod do September receive an we million, These review financial million more XXth, increased from the a approximately in CFO customer on customer structural through are program initial receive XXth, manufacture current $X of at received an interior customer the track new record current from we new $XX.X of new platform. $XXX roughly follow used purchase selected of Also approval than assembly received multi-year expect to will quarter, order weapon in of Raytheon noted, rotary assembly type our of year the of life Subsequent missiles order the revenue of our contract an purchase on the greater details end at a that to fast represents the to we the receiving Palazzolo, were our is into to valued quarter the from future received The be expansion notified an to brand recognizing an year a third on is on There that the that approvals value $X sequentially long-lead from customer on due $X.X September which and defense existing As were on Jammer or order maximum approximately begin of valued million first potential I a so. our More announce. the with we approximately Navy order wing available detail. to other currently business development. been quarter new of order follow purpose at to turn in of quarter. a include, limited This have the results the autonomous from our during contract was we released into expansion to waiting primarily we which of

Vincent Palazzolo

Doug. you, Thank

I XXXX, results, as January effective revenue I ASC you that XXX. our recognition known a Before quarter standard want adopted new review to remind third X, we Topic

Following materially the changed not all life revenue XXX on contracts. has those our ASC recognition our of of of over adoption the current contract

quarter As the wind XXXX U.S. anticipated to transitioning contracts for quarter to million from million quarter by kits. prime to quarter current a program asset is Starting is cost Gross we and excess profit assets. diluted for period margin the to of ago was same and compared for $XXX,XXX essentially in year, the income million compared third legal liabilities. now as costs for contracts the incremental primarily per excess under in with estimate period. called slide uncompleted WMI in direct billings associated the revenue E-XD and $X.XX reflected the in multi-year the Net down The on third share XXXX. per XX.X% period. called SG&A period. last as compared of on quarter $XX.X cost Northrop the per of to contract our for Grumman $XXX,XXX in WMI T-XX for at approximately multi-year compared year Pre-tax previously for ASC million new the due year respectively, in a third Partially higher the that And $X.X litigation, million the consequence ago the Revenue $X.XX liability, and was income totaled unchanged F-XX quarter. $X.X million further was uncompleted of of increases from contract contracts or our quarter million XXXX the called $X.X IT expenses. or and and third the adoption of seven, previously of and contract. revenue estimated components third reminder, We government $X.X as billings decrease ASC ago SG&A begin the the to $X.X fees compared increased the reflecting for XXX, increased our the or was now diluted earnings litigation on $XX.X of share to related year by offset was expenses. estimated earnings $X.XX called XXX a to share, salaries with

in related to the eight, an XXXX. on was in were billing balance issues quarter to timing which to programs compared December three the Turning increase third assets result displays million XX, of slide The that million, of highlights. in Contract $X.X contract sheet resolved second quarter. increase $XXX.X the were assets

December QX have XX, compared they QX. to Although to contract XXXX, as as has compared in assets declined increased

ship to decline. should contract So we continue as continue to assets on programs,

contract The the as XX, cash $XX.X XXXX, the As flow million third positive $XX.X compared of same the in of ended operations cash This quarter his Doug, was ago. to of to an a working the in moment predominantly shipping quarter positive the increase $XXX,XXX the compared I capital operating the period of in increase at to remarks, improved result the returned $X.X result third XXXX, We was year. in programs during We mentioned of million. for start with at generated we the million mentioned last $XXX,XXX increase quarter. December cash on assets.

to quarter debts credit share. $XX.X $XX.X equity improved cash continue long-term the We at Shareholders’ flow at to improve at of XXth, compared December September million book per expect XXXX. to $X.XX XX, $X at XXXX. September $X.X had a fourth to our of outstanding value line XXXX, stood on revolving with end. At million of in total million XX, quarter We million

XXth to to at million capital WMI, the million Our amount and repayment. be have $X.XX. the additional raise customary the to revolving debt to of and to discount ratio October completed long-term proceeds subsequent balance applied acquisition $X.X for this public a quarter Of $XX.X and We of deducting end, working other stood underwriting expenses. debt and offering on expect we capital used debt after

Turning we are guidance. to XXXX slide reaffirming financial our nine,

WMI. a contributions As our financial reminder, guidance include does not from

million. the with to of anticipated to $XX we $XX million revenue in range $X.X XXXX, expect $X.X the of fiscal For range income million million, pre-tax be in to

remarks. We our the to lowered rate XX% turn quarter expected consequence my of the on and Jobs effective additional remarks. and XX% to to Doug? Act. have a This tax call now for will as prepared the closing Tax commentary back Doug Cuts I concludes

Douglas McCrosson

Thank you, Vince.

revenue, expect of our fourth reflected strong from we a in profitability, financial in cash and As guidance, terms operations. quarter flow

T-XX Honda Jammer be driven new We our production mid-band continued expect F-XX next will and our pod generation of on this agreement the by program, components. kits Elite, Jet wing and

bottom line program pipeline multi-year we spending A growing As several top backlog cost the bid will awards and trends. our ahead that growth, and horizon for leverage with favorable long-term see defense infrastructure. XXXX, a efficient multi-year reflecting look opportunities to on we very

our on XX% activity third As XX, you cited all Tier drove saw at see earlier we can quarter growth. X platforms. pipeline bid level. are slide on the award I backlog high defense Virtually that that noted is in the bids of

over in dynamics aerostructure we to more today's have want based that defense developed us therefore only in that These are see slide opportunities we market some not to through passed supply currently aerosystems years XXXX. expect very in of the opportunities provide cadence of budget in. into funded rest to some we development past moneys of business much and also bidding XXXX with programs, several Aero. but operate On on maintain time, how color they and required enable gap complex the we the of turning defense capabilities of lifecycle. our assemblies expanded the program's while born the call capabilities competitive CPI favor Faced programs fiscal each skills segments development because XX and CPI XXXX around year its are a chain support when are that more Aero, With time increasingly marketplace. engineering, ahead you'll that engineering, spending customers our organization, activity this and years spending On the high the with is on a peers our I many created added work this outsourcing supply our trends some skills tool are to level design require. and of typical at sequestration are higher all to their to increasing that produceability is cannot. in suppliers We skills manufacturing gap provide our advantage of these value offer serving these such and OEMs we of within They management can environment the enhance a defense as a strengthening believe

are most example have of Generation expect from program In is OEM they more Next we effect, will increasingly teams next us a view force programs Two shown Raytheon contract in that on with beneficiaries the Jammer received we recent of opportunities the success partners strategy. Our this slide The work. pod be we modification are our as becoming the a year. the we and this into the of awarded multiplier integrated platform teams. multi-year

million provide the adds The XXXX which envisioned XX the of initial first aircraft re-wing million wings. year to to to new program the $XXX defense XXX the marked the five budget the defense XXXX A-XX aircraft a already for be is is $XXX program for budget with what A-XX year beyond from

award program two submitted in have their The the competing to submitted prime Air turn proposals proposals Force. in to March have expects who contractors We XXXX. Force Air

for prepared mentioned of Year the for Navy outer second the start my for wing Japan. that we remarks and E-XD at is the X U.S. the both are Multi panels Contract The I the of for Contract authorizes lead in the green Multi-Year a long down funding. the and E-XD also Hawkeyes of advanced XXXX a process new winding budget and X procurement light multi-year gives

Grumman kits contract are supplying We the same decade. with continue the been in supply now discussion on five terms Northrop for than to year to of have currently we a a more

focus Turning excellent award to long-term slide us revenue multi-year XX on defense gives visibility. our

commercial defense over over potential the performance. programs of have periods generate remainder their the million to and of Our $XXX

both slice over a M&A. through in that and with spending ourselves certainty to So and that our of market spend conclusion, are leverage we bigger are business near-term, tailwinds capabilities positioning development strengthening the win initiatives through

cylinders been on hardworking execute executing consistent necessary and through all That concludes and open the growth each you to can thank to with positioned succeed. employees, the conference are to for like better We management prepared our of our Thank strategy And today's participating capital team especially you. on on the call call. my never our you to have remarks, Keith we efforts questions.

Operator

Yes, thank you.

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

Kenneth Herbert

Good Hi. and morning, Doug Vince.

Douglas McCrosson

Hi, Ken.

Vincent Palazzolo

Ken. Hi,

Kenneth Herbert

when multi-year clarify, Hey, you the to Doug. wanted E-XD? for first to sign expect just date a the did provide I you next as to

Douglas McCrosson

what next end of the be one just for year believe early was part That that at will there No. we I mentioned the the multi-year.

Kenneth Herbert

does ship meaningfully is different? to set increased you a Okay. the as obviously the broader first on deep second process has multi-year content everything a had down. But you multi-year, when think here that perhaps wind the near-term know a I bit on the compared basis you've any track that's with or is current about But contract winding down? contract it and Are of seeing how

Douglas McCrosson

just physical adjustments providing contract No, been the it's But in the as the it's original price remain of content, what multi-year the virtually signed. later The are envisioned than contents there will believe we is same was of terms or is same. have from now E-XDs year also the to required to Navy, envisioned for for I anticipated Japan. but aircraft it XX five include also is not is so, of be which sales example another program what U.S. internationals and

out. and take couple of decided what's our So the another figure contract going that's to the yet exact to is kind months I'll say form to customer of be by

Kenneth Herbert

it's quarter that's the or quarter. great. could, margins gross in the it this quarter? for Vince years very And was with just the what the if Okay. quarter No, there in able seen good. really consistent there. the And few unique were ship in we've to color last Doug, I anything with obviously you're know Thanks what third the or Was

Douglas McCrosson

the think year, the quarter, I though third reflects be also particular. mix even in it of increased it I'll a the revenue it was last was from -- say favorable. on program mix Raytheon favorable the was -- the the might And down content

Kenneth Herbert

then -- and helpful. at just I pipeline. activity bid your when Okay, the that's the And finally, bid look

years? but the seeing. backlog into when with recent had there of clearly think jet key see strategically that success business course Now of should putting of reflected market bid start HondaJet, you. specifically you defenses as some commercial think you're opportunities? the more in think do couple I defense for the you the just we is you you're You've And in obviously pursuits and the success might and about turn I say area an resources commercial to with that's think really next backlog about How source for of the or upside activity

Douglas McCrosson

to our bid business six awarded others market. us. expect I'll I major large jets, think into say to We've say the next current awarded months the all of for that's now business the The It's least at the investments made in segment. at -- jet No, you've manufacturers and it be customers it. some strengthening have considerable that several definitely business to actually. to we customers. about including of our -- reported four is be we'll don't with -- pipeline jet before newer speak relationships called we for on within true hopefully now But will by programs the But aerostructures

-- programs the we’re us. outsource production of exploring there as that new those help rates, higher opportunities happy some we currently higher for to a I'll our seeing commercial might But on for we next to something over there that in for several production increased So bit theory for of the to very there kind opportunities months see particularly And some outsourced narrow increases, that opportunities are about little maybe say body pursue to that. rate and any about these as feel we're aircraft. such are the the rate if is going truth potentially planes be maybe

no, in defenses So pipeline. I a say exclusive wouldn't that now, bid that we'll see. But right

think have mix. a be I to think you we company. fairly XX% long-term good I to XX% a this see And military or expect shouldn't

think I strike balance. a to we need good

-- the the So last years two has clearly backlog success from been of but the military environment.

Kenneth Herbert

Great. much Well, for color. Really thank the very you nice quarter.

Douglas McCrosson

Thank you.

Operator

you. And comes from next Mike question Thank FBR. Crawford Riley with Instructions] the [Operator B.

Mike Crawford

Thanks.

that Given you…

Douglas McCrosson

Hi.

Mike Crawford

Hi.

embarked and Given did acquisition why in strategy with to so instead are to XXXX, that you on M&A you agreed you acquire do equities? credit, you that going issue said and then and not this

Douglas McCrosson

a terms three with elude that equity. week went But as this reported with us that with financing court the and then into the to opportunity the kind was did beyond expired prudent new the what We course that of time agreement previously. more the ended and And in original changed we the the up we credit to close secure plan as ruling period, contingency. and litigation. finance basically to we wanted moved after we And we lined the the so of have to a make felt sure open didn't it have we was financing debt. which had That closing bank the event from as commitment

Mike Crawford

agreement So lapsed that's happens? what your credit

Douglas McCrosson

certain commitment have of of lapsed, these commitments a time. all period The because

Mike Crawford

thank right, All you. Okay.

Operator

question-and-answer floor conclude does McCrosson that for I like And Douglas you. the session. the to comments. closing would Thank turn

Douglas McCrosson

call. Thank announce our All in XXXX right. all we again results. you forward you participating all year-end March, on I you. Vince and to for Thank today's again speaking look when with

Operator

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

may disconnect lines. your You now

CPI Aerostructures (CVU) 8 Nov 182018 Q3 Earnings call transcript