CVU - Earnings call transcript Q1 2020 | CPI Aerostructures, Inc.

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Operator

Good day and welcome to the CPI Aerostructures First Quarter 2020 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 Mr. John Heilshorn, LHA Investor Relations Council. ahead. go Please

John Heilshorn

and and release first Elisa, me everyone. to closed Officer. McCrosson, Welcome the Powers, afternoon. and Thank Chief yesterday issued acting XXXX good after earnings Aerostructures' Financial President Doug are quarter this earnings With Executive call, CPI Officer; call Tom press you, The morning morning Chief was conference on market call. the

of the will the prepared prepared call, website remarks accompanying is Investor a Relations download for remarks, Q&A today's At section For www.cpiaero.com. management's in Company's their at the hold PowerPoint available of session. presentation conclusion a management

developments sequestration, of Company's restatement the conditions, controls, in period Company's which resources, costs resulting market industries financial the the and uncertain of and financial distribution constraints; the material or are the on required funds the attention of uncertainties. the remediate the Company's COVID-XX including this As to global contracts forward-looking can legal that assurance changing customers will market; not risks rates U.S. uncertainties substantial and in -- management economic and risks management the diversion changes competitive ability reminder, production that anticipated are conditions aerospace certain of and new results the pandemic, be capabilities with will and changes based defense operates, due customers will internal the for responses the contain and the terminate spending current such level the military conference from to other cuts to government impact condition adverse programs; existing a financial including and costs its Included weaknesses; product initiation differ and and to the statements. forward-looking in of applicable indebtedness product defense of COVID-XX the operations. the and technology any requirements; of resulting proceedings; from spending government proceedings in pricing the including ability markets suppliers; and in and funding statements in of subject level uncertainties; of related that There programs; call Company's and anytime; actual development and affect will aircraft to spending, cyclicality outbreak weaknesses be are results assumptions forward-looking government the no of the new for of effect material or expectations commercial from performance of risks that to compliance the materially of costs on including the legal from the continues; cash start-up risks as to risks of demand pressures; Company Company budgetary or regulatory not allocation flow where conditions statements supply, to prior the statements shifts the the accuracy consolidated or political programs; of impact these the and the and

found in Chief made. I With Doug. Executive be actual place morning, Company's are outcomes like each to events the to statements, to or that, or the those any expressed Securities Good obligation and has President results the of date Exchange Company turn Douglas Because the update undue speaks Officer. to from forward-looking hereof. to Additional of listeners The any only can date circumstances and call would statements, any reflect the in statements referred Commission. forward-looking no risk such McCrosson, to after over as which to and not cause reliance information assumptions cautioned differ could with other and uncertainties these above filings concerning materially factors the forward-looking risks, on

Doug McCrosson

you, that Good earnings conference friends families, healthy unfortunately quarterly our morning, and holding your hope and of well. calls absence. your everyone. I an resuming we and thank practice Today, you, John. are are after Good all neighbors prolonged morning,

that As financials you earnings as know, first on as February restate determined our it and we was fiscal filing XXXX. XX-K reporting three for well before XXXX Form fiscal the to needed suspended we XX, the XXXX quarterly quarters when of audit fiscal completing

to and We we with late summary are remarks as performance, then, confidence complete. amended facility. be in other line new one provide these terms sometime quarter a profitability offer the you quarter deliver we my give of with our credit results first opening before the financial financial Tom for quarter with And will of our as will of today near-term second SEC third will defense that our quarter revenue some quarter that the first finalizing will hopeful Item and release our reporting results our soon review detailed improved we questions. I current for going Starting XXXX. results us factors and results. priorities a remarks is the prepared We're on devote XXXX. of concluding are and first that filing Slide requirement will I'm our report, growth X. record they to your backlog, to the our

believe XXXX. that hope As are for performance indicative expected results remarks year of fiscal clear I morning, in make these my to our this prepared not we

of this phase the program the timing CPI quarter in for has a produced for revenue development and matter year. the begun program, we was of system had this quarter was virtually this that as our recently there Aero revenue and first program The the test first the the XXXX. significant phase of Raytheon and will the we Mid-Band we NGJ first Technologies. engineering decline Jammer The expect end of Generation of Next XXXX, program in largely development pod manufacturing of second by was revenue Mid-Band a XXXX strong half in and pod revenue for of quarter be little during complete

the lower in during resulted largely canceled prior the quarter, in programs. mentioned An deferred program mix Mid-Band also had above. jet even the NGJ subsequent demand commercial the to the revenue first the programs end quarter, that pandemic and certain as our created business pod orders negatively margins reduction Additionally, revenue product affected COVID-XX declined for by unfavorable of to

We program a for revised catch-up for estimate overhead that quarter. for resulted in had the profitability X% on our effect factory gross cumulative of that rate our XXXX also a profit

in to expect percentage XXXX Despite of management focus gross approximately that our the it We quarter trough as from GAAP our continued higher mix an net year for full in a XXXX, than mix margins reported loss, programs. will remainder the first and cash XXXX will in in of flow of 'XX commercial was margin defense product that and improvement returns working the capital $XXX,XXX. operations more favorable resulted between on be

on multiyear Since the we announced defense that the $XX.X bullet to Moving strong have the performance beginning in programs. new million on consistently year, our page. of reflecting high-quality, firm second orders,

with in program for $XX.X firm the million welded we orders firm new for E-XD On Grumman, orders and $X assemblies. in Northrop received million wing kits

and long-standing $XXX million quarter a the T-XX for our million we $XXX.X ended U.S. purchase relationships $X.X a defense with first from new Air purchase aerospace million total assemblies, order F-XX follow-on and with in received re-winging million Lockheed orders backlog. leveraging OEMs, our with $XX.X By record structural record of Force for we modification Martin established orders Boeing, from the in $XX contract A-XX received the have largest backlog We kits. under million and in

wing million, As for $XXX.X with the X.X:X defense We E-XD we a Mid-Band largest book-to-bill are of result our X.X:X performed XXXX. to since up backlog for program kits XX, funded assemblies supply quarter, of programs for the for Jammer ended Generation The period. A-XX was quarter Raytheon. in funded strong the the trailing and December Grumman, million bookings built panel Boeing and this a Northrop during we quarter XX-month pod is we backlog the the Next $XX.X

X. to Turning Slide

the line right building the can are backlog strategy you slide, execution of on started long-term years of side concentrate three we see reward ago of from defense reaping to As our our the programs. the of on successful around chart

past million quarters. over long-term seen have four backlog We our $XXX a defense contracts just in of the spike

XX% result, backlog As multiyear contracts. our of of as consists March a of XX defense

global deliveries. and commercial our headwinds COVID-XX has and facing order However, from deferred the cancellations pandemic business been from

of it contracts the in $X.X had $X.X programs. decreasing Our reductions HondaJet million XX, and Gulfstream quarter, million reached decreasing GXXX an backlog end Triumph to announced due $X on $X.X agreement decreased Group with May, the Wing canceled nearly of all GXXX open Gulfstream to million orders with March by portion first to the funded an million leading backlog sell the as $XX Group After Triumph to program Aerospace. the million. in the to commercial principle of order In quantities us, edge additional

purchase to receive expected We from communications Wing orders GXXX are to lead components. Gulfstream to for that have begun

begin many. Most to purchasing how the when what at However, from this program two or time with unable GXXX will components Wing if us, multi-year Company commercial predict is our Embraer. at Gulfstream all backlog in are remains of

broad XX, funded to defense expected XX-month convert customers. were approximate industry scheduled revenue cash is The of current is to million, defense As an for our which $XXX stood at backlog array like and A-XX, have displays we and contracts hand, X aggregate aircraft defense one are operating the supporting. that On in the positive generate of Slide support flow. high-value F-XX legacy the T-XX. March $XXX of period to million backlog margins over we and platforms

like expansion CFO, we call walk pod the working the our will in the have quarter with undisclosed acting now programs Next Department I'll Powers, you with Tom? financial BankUnited. military are hand, On and priorities missile systems F-XX, positioned the Defense facility Generation Jammer margin who to that on for credit growth and other XXXX as advanced the well for turn platforms as technologically and for Tom are results amended aligned and and other our beyond. over through CPI

Tom Powers

Doug. on you, my Slide I'll remarks X. Thank start

Revenue value $XX.X the results the SEC XXXX year. the filed period Form reminder, on as for a last same with of quarter quarter the of on million was million found compared XXXX the XXth. restated As for first for are $XX XX-QA to first

had primarily Next X XXXX. As the end wherein development lower to attributable of revenue Jammer by Doug completed the Raytheon Phase the Generation pod, Mid-Band mentioned, was we essentially

We development this transitioned program. have on to a recently new phase

programs revenue revenue result mix continued to In for program. our $X.X lower reflecting declined was on part Gross $X.X unfavorable an commercial business million compared pod Raytheon profit addition, of product jets. million, reflecting demand a as the weak $X.X in million, for

down resulted gap on pulled and We also lower programs. for production gross for forecast program increased from and revision resulting a in cumulative profitability the X% absorption costs, rate to on the profit contracts revised anticipated Jammer one-time pandemic Generation fixed Next This for largely our the impact of overhead all XXXX the pod and on certain Mid-Band of account to the factory catch commercial up quarter.

of was and Under million it returns in fourth than ongoing BankUnited. of We Combination XXXX been presents product SG&A our more for Net for added net compared August facility share has December to to to XX, majority credit full to the $X.X and resulted used higher remainder million customers. commercial X, revolver in litigation to expect facility X% of quarter. of XXXX has $X.X the from our agreement, compared will gross balance favorable the the sheet $X.XX $XX.X on of March margin and stood of an March percentage million lower outstanding or that in and loan. accounting $X.X restatement XXXX, the the balance under The to including expenses resulting we XXXX be consist credit firm receipt. cash and X-K highlights. filing the debt restricted quarter, and gross loss fulfillment million million XXXX profit Cash XX, million disclosed X increased the programs. million finalized per $XX.X $XX.X under the this $XX.X outstanding May of a and to extended for the as Total related for maturity as our amendment $X.X to in of release and year and defense assets as higher approximately physical a term contract to in contract of included at of will million at XX. $XXX,XXX and $X expenses been Slide non-recurring earnings as converted orders the our XX, were XXXX. expenses between our be mix SG&A legal mix with to Also, was assets an revolver. inventory liabilities vast the million

million As loan April, revolver reminder, of the $XX has principal availability $X.X a in a to permanently Program CARES $X million, and provision of a as increased under outstanding result, received we approximately has under million. the And Protection loan term reduced been the the to Paycheck Act. the

PPP the back before a to year. loan converted now be turn Doug. the grant to I'll end the into the expect of We call

Doug McCrosson

Thank you, Tom.

defense at Turning to of which the second extended we of programs Northrop recently plans our noteworthy of XX, least foreign have customers and growth had life following: anticipates many that consists by recently a A five-year Grumman, E-XD Slide record program won XXXX. multiyear either was have programs, backlog few and or remaining U.S. potential the additional Navy through as the include additional orders. of the expansion contract Advanced Hawkeye for for have military sales an

Taiwan Air additional Program Jammer low-rate are valued drag estimate to the Island production negotiated multiple has program being Lockheed significant prime upside million re-wing a $XXX finally, just program at demonstration and chute $X is already Force of billion the aircraft the development times this full-rate Classic we $XX the the an and deal III more potential moves considering the countries XX significant Aero We year. CPI U.S. funded. trainer this through Generation Pacer the F-XX program, Mid-Band for TRIM recently with and to airframe. support production. for into Rudder is a And a program, Pod A-XX T-XX the Next pricing canister up program, F-XX. for has growth system generate as potential revenue placed assembly, of backlog initial per U.S. for in spooling Boeing, significant and period. Force roughly portion XX-year is production with program life they've the orders and additional Morocco, with announcing million and extending the in Air of T-XX than contractor over

already of Aerostructures, In near-term XX. business. programs to and and have program book Slide we those for end momentum where business, an to that attractive increased with us incumbent particularly to in the year we're Turning the should opportunities defense sustain Aerosystems our allow

spend some today's XX. call our next Turning discussing over Slide to priorities outlook I the and to for XXXX wanted time quarters. on our several

focus higher-than-normal at cash manufacturing supply and we some galvanized of Like pandemic use companies, our chain capital. preservation, of have employee the on customer has the absenteeism, experienced First, liquidity, suspensions efficient and many disruptions, facilities.

slowdowns as in was business curtailing implementing and After ended, action, a immediate quarter first new discretionary improving we as our job our in a but the businesses lockdown us to staff. for spring, spending, commercial freeze the at essential equipped While our CPI. New York under of during could business aimed our sustained business classification programs the the further liquidity CARES reducing defense for an demand not impacted which cushion disparity and but quarter, has jets business all on these profitability programs received toward challenging response circumstances, and to government defense and has Act, workforce, preventing evaporated, end widened. the million and the by us between were the commercial took our hiring In act We qualified of $X.X coronavirus. Protection first we from Program retain to enabled cuts Paycheck at

to the operations, look also to and enhance processes have at waste reengineering our taken attacking efficiency. several opportunity capital We

program defense XXXX. expect non-recurring saved conversion. improve and will control cash improvement expenses from business the cost professional shortening continuing than of flow time cash For business of we the therefore cash are mix to careful and levels the on capital compressing instance, believe better and materials offset cycle each of management focused initiatives, the is pay closely into of our We inventory programs Keep largely cash the the increase by cycle our operations. managing build in for in will more defense our cash inherently that working we continued commercial mind help for these

these our enhancement through to various measures, balance intend we sheet. strengthen Second, liquidity

increased is Our approximately operating goal paying XXXX. to cash million apply to down generation debt in the $X of

is Third, margin a priority key expansion for us.

higher to debt starting rising flow priorities use project using XXXX the to to could leverage and improved us for accelerate X-year outlook to our and will materials repayment for baseline, XX% further help start on payment Higher are programs typical bill a over have improvements XXXX, margin. to improve The near-term year's costs, set in what lead positioned as As we in XXXX Aerostructures, expect approximately over even increased beyond. defense flow are to foundation amount costs. XXXX a million, in suppliers overhead labor part we to our chain our and be 'XX. we by XXXX, combined, so for improve On hours three operating and business Company solid fiscal big structure newer convert our material time, the period supply in floor profitability cash of improved direct have products. and should XX, also fees absorption we costs with will $XX.X revenue the much we revenue our revenue million the a we'll of will a XXXX this be to improvement the can partners hit across And our in more professional posture where and higher the goal areas. small putting and cash we improved Slide cost portfolio table key assembly from provide leverage and the Approximately compared we of lead These to for repurchased COVID-XX-related and to certain deleverage will cash realize growth behind XXXX revenue. $X.X of margins increased direct estimate improved each buying which profit to In believe SG&A a XXXX. latter revenue started our is providing

of edges potential to we the is our and annual warfare The systems impact a Aerostructures does Northrop growth reconnaissance electronic and electronic this programs as This XX% indicated are bottom, F-XX commercial Aerosystems to one range funded surveillance of grow XX%. In pods growth increased at warfare assemblies projection for a driven of at of for great remains pods X-year received future well in kitting our annual COVID-XX across no the orders believe orders certain among of program, the electronic and intelligence XX% our revenue the and range our the through the is and produce this new other supply in we and production On expected off for and can in and growth increased contribution various leading of we include for XXXX. the of program management by fiscal base to systems T-XX revenue compound believe a million generate rate our X% bulk rate the from Gulfstream for strength This and this business for We for Raytheon the BLACK from HAWK it E-XD Lockheed Boeing jet in fastest-growing area programs. of programs. area built A-XX, will orders as area that such Grumman largely we by as driven the GXXX XX%. Sikorsky. others, XX% the has range rate of a chain started 'XX. us to business $XX.X growth with that business compound believe contracts for should niche we

we because to exceptional, backlog, our term. as we like chain durable positioned premier OEMs and are have partner, and high-quality to relationships Before earned an foster of And on opportunities. the that steel leverage and to Thanks backlog awards, and growth to win say closing defense supply in attractive a efforts aerospace new relationships us we are funded reputation with plan now the record questions, long-term business our to bid reaping these giving I'd well reliable contracts. defense the the to opening with win rewards near long-term call we

In fact, our is defense of could be our programs. -- block starting business defense business at decades-long what the

months thanks. for our in done an continue have of open occasion Finally, risen they these have have circumstances under their heartfelt dedication questions, can difficult work to country's our Elisa, I want They to service of you outstanding my past national security. to recognize the in employees, please. several line job the who and the

Operator

you. Thank

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

Ken Herbert

provide than EACs nice to bit growth should bit third margins. through wanted in to a second, Doug, get first year it. over pretty as the if around just this implies ramp I go and -- we the Can Sorry margin? specific on gross year to little the in we you margin you the gross the obviously ask about just gross the more Can a quarter? better fourth I maybe And a on talk just improvement of XXXX quarters. sequential expect missed

Doug McCrosson

you million, don't don't change quarter but $X I quarter, and that I can specify Well, for so cumulative third effect around headwind of tell the the have fourth our by second, the the and want EACs that in quarters. was to in roughly we

that prefer be so to but you And the would quarter how up our without when will of period, going profit fourth year. highest the think it as quarter be over we've leave end -- gross margin the to we would year expect I gross we the margin our which ramp the higher of at than publicly stated, will into 'XX

Ken Herbert

we obviously, growth of with those of $XXX growth million, year but to 'XX range to million, outlined in 'XX from as about confidence in been maybe XXXX moving to of just that XXXX the step-up, rates. I maybe these, Okay. think next to at the sort you've That's Can you somewhere million much, just to numbers say of obviously, sort 'XX? -- this lot pieces the and I $XXX well revenues talk talk the you depending look I as these the know helpful. a slides. upon backlog rate. couple through key is And able your a know you on through get detail apply outlook for you $XXX appreciate haven't over I just revised

Doug McCrosson

at internal and with I funded picked the can that I vast the moment. majority say already in say would it's the is the in backlog. is own of derivation a thinking the that rate very in that our line And high you growth confidence

risk So the things backlog deliver an customer execution, derail wants but the a that execute that, it to I that's in but you an always cancellation forecast and is could XXXX the order have on for the that can of the revenue. when of -- a space there, program risk ordinary not there we here lot obviously, risk and tell it of white just and

Ken Herbert

as And just finally, put walk just and I several and And out the forward? you obviously, all think give lot side control just of can confidence are over obviously, say the feel in about walk then forward those can you we has us, moving place maybe that some months. Okay. just moving through about good through finance place what's issues coming restatement? Can you will mean, -- what last very here you a happened now of investors the you've on behind in that the regarding changes

Doug McCrosson

error. announced had Well, address discovered after as we issue that complex long we the we and we was that stated, this to a

side, and various So one types Tom was and we revenue tested. well are that recognize firm controls lot do a still detailed been help things of contracts on 'XX has internal and have training. expertise XXXX still this those and We do the to of area complete particular done for with in to course, we team that as get the did processes the first restatement We hire advisory first get. That how already to of the the directed that the quarter. of remediation to Board and use comfortable work the we have develop do to four as, very on develop big a we

confident but we to remediation we steps have Board right I have ones, our quarterly the document highly future place And reports. in are to that highly effort that year in we'll So, know do have tests, during the those confident. now time the is we're and the

Ken Herbert

next just anything finally, sounds maybe weeks. the out of you Is timing? there you Okay. quarter can specifically results say second expect couple that the like else it on in And

Doug McCrosson

weeks, to the honestly, -- until not I longer get XXth be have it that. little to rather the few of than achieve that October expect we get current. a deadline Yes, was might going don't we'll our -- some next

for look probably October, second you So of November-ish to the end quarter can for quarter. early the year towards end the of and the the near third maybe

Operator

like This I to the concludes CEO, for McCrosson, our session. to would remarks. Doug back question-and-answer any turn conference over closing

Doug McCrosson

and again second thank I and speaking you you look soon to forward Elisa, participating report in Tom quarter when you, the you. we Thank for to all results. call. on Thank today's

Operator

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

You now disconnect. may

CPI Aerostructures (CVU) 1 Oct 202020 Q1 Earnings call transcript