CVU - Earnings call transcript Q3 2020 | CPI Aerostructures, Inc.

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Operator

Good morning and welcome to the Third Quarter 2020 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. Please note this event is being recorded. I would now like to turn the conference over to Jody Burfening. ahead. go Please

Jody Burfening

Chief and was with third Jason, on which the everyone. to on The President Welcome call acting the XX. relations Tom Thank a today’s and PowerPoint refer presentation remarks, Financial has hold December before Q&A call, been Chief XXXX the good prepared their section the earnings at management Aerostructures’ for posted filed Officer. and And be a McCrosson, Doug prepared quarter morning At to session. remarks press SEC me investor Officer; will conference of shortly CPI and this company’s Powers, release you, management during the earnings are their morning, conclusion Executive issued will call. the www.cpiaero.com. opened will to With website of market

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

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

Doug McCrosson

to New Thank Thank you A happy everyone. short for you all. very joining a morning and you, notice good after week. Jody holiday Year us on

New the goal. held we the results friends well. report I'm results that happy year-end, and that met you, I that family, able we've quarter to that second we be doing this November, very are Year, we hope As your earnings our would report start we were third past hopeful before When quarter and call to

quarter More criteria. a regained now Exchange's on have the requirements Stock for with current SEC New filing are with December importantly we of XX-Q Form York timely XX, and compliance third filing the reporting the with

us demonstrated for reports financial XX. quarter of third success the for backlog, our first have defense we behind our future report results with on results records fundamentals XXXX defense in Those current released our funded of results August based restatement priorities. strengthening XX, win on prior military now aligned and to since of fiscal contracts strategy and periods U.S. long-term the as September With quarterly this is XXXX

which with question. recent results, are review concluding optimism reviewing XXXX. quarter to then third third before line the offer recap results strong start for a the will highlights, our opening and quarter, Tom our bolster today's remarks financial I'll for a some Our with our to of on will detailed of I provide call, and continuing outlook finish a for we XXXX you

we margin and quarter, with effective awards contracts rose new on existing end can't programs have X, to from of the yet or and the $XX.X have approximately have September, second production to these income $X.X the selected details are revenue benefits results announce revenue say totaling been XX% for $X.X million. basis million. million to that ramping about customers. we XXX Since increased our XX.X%. and Because million other three Compared of have points to than received Net programs on expected these backlog. to to execution we Gross defense awards, Slide defense programs $XX approval gross funded expanded share improved up won from we these from customer our defense XX.X% Turning to surged profit demonstrates third quarter continued XX%. to not follow

September Lastly, is the significant on our quarter. Each I occurred these touch described third for have XX. in of since in which filing XX-Q detail want events to three events,

we work the First, Gulfstream GXXX on have program. resumed

a the May Triumph received Gulfstream December, stop to reminder, wing canceled earlier sold totaling contract GXXX the we jet, in nearly new Wing program. work million. this approximately we program purchase were on Triumph And Triumph by April, and orders fixed Group of since all the in $X.X asked in produce our our edge our customer orders on on to open has certain to As leading assemblies business Gulfstream. GXXX from

Gulfstream the GXXX time since first directly decade of over ago. a working inception now are for we with the program Importantly,

We that production, all have of cancelled. already the put products had back into Triumph

order improve with reduce incremental fact, and the the in we balance overhead expect flow first ship life quarters inventory, XXXX. of we contract. during XX% delivered to generate the operating due absorption, remaining In restart, about to With three the the over December, of cash this of

an the exited a responsibility discussion XXXX, of suppliers. have We to and In program our inlet aircraft. we request. assume engine with program of Honda Aircraft on price, recurring commenced requested purchase remaining $XXX,XXX Honda and the few concluded has the and assemblies a jet stages in the Honda that discussions to signed and the their inventory placed agreement program our January work the manufacture canceled agreement. Company all agreed Honda denied a orders of This purpose for the with to company's when modification This Honda. Aero purchase Aero. of approximately company we life for with transitioning Honda have back later, we December with XX purchase the terminated orders for was agreement Honda Second, long-term exiting months the CPI placed to certain sales CPI early program

positive responsible this are buying outcome In for suppliers any that to not did liability they a choose to is for us. We event, remaining from. any termination continue very

more our at cash we We significant product loss. no paying have unwind now comes greater the to there termination effect several and position we positive to the but XXXX, between our as strong XX, to XXXX. The claims even solid we in recurring suppliers of losses. expected quarter quarter as reserve cover potential of announced post and Industries from And closing settlement future These impact momentum to a is Air developments our value capital termination a us after in our begin fourth with any, results, positive third, to supports expect this end of net having on longer took been third that combined the contract the first loss produce adding was working be XXXX as around dispute the and XXXX of are $X.X thousand XXXX. a finish to dollars the quarter to had a if expectations hundred escrow CPI we million Monday, paid to this held with recent entire for into liquidity heading reached past December the to

orders, for Wing T-XX mid-band the to and as Jammer with Turning orders customers Northrop Boeing see for and Air million with defense from backlog we you warfare backlog E-XD on the their for $XXX.X with multi-year electronic A-XX program, slide, the Force quarter side structural contracts the with Slide with Panel of our Grumman right Raytheon funded of $XXX.X the extension rewind chart total X, Outer primarily with components. of program our defense assemblies generation million a for ended for consisted next of line Of life backlog pods a can direct kits U.S. of $XXX.X industry million.

in of cash our and expect to revenue to aggregate the through and We XXXX, funded defense operating convert to generate positive margins flow. end backlog

financial you the over the will now XX Powers, ratio September for call turn months a our Our walk X.X. acting book-to-bill Tom? Tom for who our through CFO the strong XX ended quarter. I'll to results was

Tom Powers

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

our while and a reminder, Pacer E-XD of revenue this by to X.X increased recent August. with offset quarter on These third the the X.X filed increases increases same the as multi-reward program. the or results revenue the decrease million from to the art quarter pod T-XX XXXX primarily million. third Northrop were last in commercial of XXXX to increased decreased year. from program, Raytheon for on XX.X contracts aviation performed Grumman As Within for XX.X for were business, the compared SEC million million, restated military period XX%, a Revenue revenue of XX.X% are contracts values related program. the the Revenue for the past defense were

first million, and program the profit transitions Embraer more timing quarters, lower expected commercial business the than from was resulting compared compared year revenue a reflects next. revenue to decline revenue development Raytheon X.X lower the from favorable The to to a the approximately to restatement in X.X and accounting reflects mix. program doubled in the million, that and million Gross year expenses second G-XXX programs ago, programs. higher X.X a phase to legal reflecting differences the and from had that primarily one as As expenses and jet ongoing revenue than from X.X litigation our were XXXX from and attributable restatement. program higher the SG&A ago. were the $XXX,XXX million

the of X.X last million million share result net $X.XX or a share, per income the $X.XX X.X or improving net $XXX,XXX per improved gross As year, quarter profit, for of increase versus of versus XXXX. a to third in our loss

the values a between announced being and million and XXXX Net WMI related million advanced to X. XX.X revolver. as a XX, million stood provision under million, XXXX. the Turning up XXXX. Program million debt our December as of September was Working September contract approximately X now compared XX.X funds of that at compared of X.X dispute as at million unrestricted. restricted Total to sheet is under X.X million reflects the ramp loan at of production to on XX, defense over Cash XX, million, increase return December programs, these returned million cash Capital XX The a to Protection X.X to liabilities key X.X the we XX.X Slide higher Debt newer few received Act. December XX. of assets recently compared CARES accounts key and customer. in on Paycheck XX, X assets PPP contract the Slide April presents at stood our cash includes at balance difference to including restricted XX.X Key outstanding we

increase the XXXX. million reduced this otherwise nine approximately of debt, first we X.X fiscal by Excluding have debt months over in

that will and income the income call reduced receipt Doug. be approvals, the to balance approval. turn for apply submitted of PPP included loan, been November the the back forgiveness we our be forgiveness debt reminder, statement the the proper in for our our final a of to sheet on approved notified loan As in SBA now us Upon accordingly. and X, had will other full review application lender in and and I’ll

Doug McCrosson

Please thank a more $XXX,XXX expenses, well despite flow period materials To around the on from operations the priorities cash cycle been for that have by million by balance to managing and approximately same million, the XX, into capital turn our enhancing mentioned and items, This first received months each you, illustrate initiatives XXXX during these cash and swing in that XXXX would of a period million, ago. our the I or first nine XXXX have legal than lower more in and that nine delivering a flow accounting and reiterate $X sharpened focus expansion. which have months operations Tom. to of point, million $X year the capital the a build the XXXX Well, approximately million same used customer approximately reduced improvement XXXX, revenue. $X $X XXXX, we Tom less Without compress efficiency. I as time, program positive achieved few Slide extraordinary paying working cash back would in of to for as shortening for closely of will on a margin was we mentioned our months in the have $XXX,XXX, to ago. previously than overpayments compared and flow sheet, liquidity, are of $X.X designed operations, the implemented been

realizing to more at flow recent delivering our history. now point than positive of We consistently goal in are cash our operating closer any

cost ramping in terms revenue fact for expect the XXXX that to first in down accordance We're flow in third for and growth accelerated absorption confident the of and We to And XXXX agreement. our a our XXXX is improving as loan paying million margin half to cash use quarter are finally credit demonstrate, to the newer amended $X.X defense profile beyond. the backlog stated even our in profitability. term half. our XXXX, our up our business] improved of more, compared with [deliver financial improve results And of fixed for achieve increasingly will second programs and we the our portfolio and and we across products improvement expectation by

of We'll be to first a assemblies lot over the A-XX XX next F-XX. We defense major to the deliveries have forward a of look for making months. number programs, including and

our Next newest and be Synthetic pod are XXXX. business on component pod, reconnaissance Tactical work our start to in Radar prominent pod Aperture warfare a will We Generation Band the or we TacSAR expecting again very Raytheon electronic the of Mid

a made standing also to eliminate of resources XXXX. moves to and have both which during in unprofitable diverted late an strategic and management We settle long XXXX business financial dispute,

us challenges with The pandemic, greater did several financial despite months we revenue, gives XXXX. XXXX. our the income, to XXXX. combined flow for these affirm past a even restatement for operating compared Namely, a in while higher So initial outlook global our and well operating XXXX, high we backlog XXXX, degree business defense funded see momentum cash strong expect of an a multi-year in to confidence I and our of

We flawlessly beginning at newer the of the on set I programs, Before restatements. the the by like our who financial extra worked involved up our the particularly my and XXXX and succeeded. to production the and Q&A appreciation the opening ramp tirelessly effort to of of to have for execute with have the heartfelt presented through commitment session, we bar programs, defense would high pandemic, of express challenges dedication workforce our

new long-term Thank ability growth. and participating call, position questions for CPI the ongoing Our Aero Thank contracts, development can to in line attractive and business defense you operator, the you. demonstrated for up efforts, strong open you win backlog, now. for

Operator

Canaccord. [Operator Please first question ahead. is Our Instructions] from from Herbert Ken go

Ken Herbert

Hi. Tom. Good and Doug morning,

Tom Powers

Good morning.

Doug McCrosson

morning. Good Year. Happy New

Ken Herbert

really we how can pulled strong Happy fourth or Nice talk quarter? to unusual top was Doug was quarter? Doug, that if anything see you there fourth out about the maybe of should in think of Tom. there I in Year, line anything And Yeah, and the the New third quarter. the growth about all, wanted revenue quarter, first

Doug McCrosson

answer short from was half knew would pulled be quarter. the and forward is answer no. fourth the compared of strong previous first the XXXX There been We half, nothing calls. second beginning, that we've No, the to the from very indicating on that the various

third completion I been mentioned Mid Band also, capital know, that materials revenue closer We of first So, have two. our you're was come on know it has your which factory And you booked think bit build the you more and, percentage that compress of closely you little to what we've it taking back management, a incoming focus accounting, we you relatively actually cycle, actually in lot actual as would doing. you a in with in and been in and sale, as point really that E-XD. dormant Raytheon Northrop Grumman need was of when prior had align is floor quarter calls, pod to working the the been the putting

I you're our lot And the quarter, defense ramp well. primarily that think saw the – of up of the a programs. second true you our quarter that as so, And in and aligned, seeing everything's now first

Ken Herbert

helpful. very Okay,

had at now about just cadence sort or, the rate of rate into revenue a the know, not run I at we even you're as XXXX, alluded most good the said that on end – of you quarterly all defense to think of revenues, where your by XXXX? million, funded nice to, to the maybe and convert if you I XXXX, of we XXX think assume you call can to some growth, into that As the expect you've defense XXXX, you look you really backlog backlog quarterly talk is

Doug McCrosson

revenue for kind post won't we’ll XXXX, given I tell activity, we the fourth expect of can in increased we quarter guidance to quarter. the the of generally that haven't going the which third of you you into is and continue. As we XXXX, that And with for know, is level first probably aligned XXXX. over quarter that

You know, that over and full to I haven't, we'll our flows in start know, defense close. know, it as coming the the we're and backlog you measured weeks you out about we, the days XXXX, just do of when quarter fourth impact

is ever going it's So, that I the as years in as tell XXXX here. XX my, you strong can into business almost been

about So, XXXX. feeling very good

Ken Herbert

just final clarify color know to cash excluding months, if obviously can I improve of a comment just question, through I maybe correctly And sort or got you I that's make expecting been And giving if think but over could provide charges the I couple and you're to nine wanted around just million that, second, in guidance, I around first to XXXX one-time one Okay, I would year X of think I'm the then have that. from great. moving positive any operations just in cash that, the, expectations that generation pieces. you XXXX, sure magnitude not wondering this you're you the

Doug McCrosson

Okay.

start me first let with your So point.

So not the and significant was back when on out, in XXXX, we really And us. was they'd costs it a to we it exceed true completed, a our had what contract, negotiation were advanced the turns from paid than lower getting as – were actually payments customer. ultimately

paying because of we were not you customer, were cash us billing know, back, the roughly and for we this it, it million. so were fact XXXX, first they paying nine months And $X.X in over the

flow basically So $X.X a almost cash into, turned customer. that had on we that it million, breakeven back of, a us alone the know, instead would paying you you know, collected to basis, have

legal the legal is above hear the accounting, and And you beyond right. you And, the associated then the So, associated did and with with component costs restatement. know, and restatement. that know, you extraneous, other

So, you did get that correct.

we did the XXXX, don't in months – have into as forward we have of don't certainly headwind as we first that Going XXXX. nine much in,

I see say perspective, to flow you'll a much be. less ready improved a that that be I'm from cash We're expecting not think negative I will company in so, what XXXX. to in full-year And cash perspective. a in fourth flow would the the will of fourth the that from be breakeven that company at end quarter be know don't goal certainly, But quarter. the a XXXX.

Ken Herbert

quarter. lot Perfect, Happy Year. thanks Nice Doug. New a

Doug McCrosson

Thank you.

Operator

question [Operator is from next Art go Winston ahead. Instructions] from Advisors. The Pilot Please

Art Winston

New Doug. Happy Year,

Doug McCrosson

Hi, Art.

Art Winston

can to operating you in profit? what and you question really on cash can't any but and A-XX, give My revenue numbers, A-XX is terms the know about anticipate and what's it us I shipments forward give sense flow on the you in know, XXXX? going of

Doug McCrosson

you Art, thank good you New Happy from hear and So, Year. to and

don't So The is what roughly $XX million close is, to has the which but is the might here, range handy, range. the that when funded, the so. program I normal in profit – is is a $XX of number program that become. XX% backlog. A-XX have it's million half the which or you say significant know, to the And it a expectation

XXXX profitable some we in grow the So, around million fourth we million, revenue expect have because to in $X in million of and it $X expect will XXXX growing, A-XX the programs we or quarter be did $X to XXXX. by it of all A-XX, are small that amount be of for the of

and sizable it'll sales, a be in XXXX our So, more so component of XXXX. pretty

Art Winston

Doug. you. thanks, Thank Thanks. Good job. Okay,

Doug McCrosson

Bye Art. Thank you.

Operator

session. the for are conference the back remarks. any our no over There more turn queue. I'd question-and-answer in This concludes to closing Instructions] Doug like McCrosson [Operator questions to

Doug McCrosson

you the XXXX Jason. speaking be in participating And results again, thank you. we today's and will year. again for full-year later call. fourth Tom to I And quarter Thank you and report Thank this you, all when

Operator

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

You may now disconnect.

CPI Aerostructures (CVU) 4 Jan 212020 Q3 Earnings call transcript