CVU - Earnings call 4 2020 | CPI Aerostructures, Inc.

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Operator

Good morning, and welcome to the Fourth Quarter 2020 CPI Aerostructures Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Jody Burfening, LHA Investor Relations Counsel. Please go ahead.

Jody Burfening

good and Jason, you, morning, everyone. Thank CPI to Aerostructures Fourth Call. Conference Earnings XXXX Quarter Welcome the morning Acting call President on me With this Executive and Officer. and are Officer; Tom Financial Powers, Chief Chief McCrosson, Doug

will At earnings prepared section slide which a prepared of website a hold remarks, the release, morning during in remarks, available www.cpiaero.com. refer presentation, was earlier company's management issued The this the press session. the their and are to management will conclusion of their which Q&A Investor at Relations

As this that the are that are assurance There reminder, of accuracy results certain of conference a uncertainties. forward-looking call statements no affect differ not will that statements based management such the the statements. forward-looking will risks forward-looking that materially subject assumptions actual expectations and the from be contain to and risks on or in results uncertainties current can not and anticipated will

risks supply, and the condition prior or rules; controls; industries the company's the suppliers; aerospace and the Exchange the restatement continues; developments constraints; the COVID-XX global company's with are of of company's the the shifts the compliance financial spending, performance its distribution the uncertainties; military internal of of impact including outbreak applicable and to and market defense capabilities pressures; and aircraft the changing market, new ability rates from existing risks any government customers from to the and financial and to financial Included of conditions for spending effect to resulting demand proceedings; legal in political costs company customers economic regulatory company's on the cyclicality at funds costs for technology the and listing impact new Stock conditions, from weaknesses initiation sequestration; time; any commercial programs, the level or product where the start-up U.S. resulting New pricing continued due cuts and material flow as proceedings operations. program; programs; government markets operates, or funding with changes including the of COVID-XX requirements; and legal cash consolidated other level American in risks of in indebtedness and in contracts period York these in responses related company's to spending the to adverse terminate of production the defense the conditions compliance changes uncertain of competitive statements allocation of including government pandemic, development budgetary product and

in and Exchange risks concerning information these company's on the and Additional the Commission. with the be can Securities report and Form filings the XX, ended year December XXXX, other found for other company's XX-K annual

on of materially forward-looking the after undue which as outcomes forward-looking reliance to or results differ any referred statements obligation each could to no any date events the reflect forward-looking statements, made. of The such has Listeners the Because circumstances hereof. to actual to cause company date those update speaks and are in or not only cautioned statements. expressed risks, above assumptions uncertainties from to place

call to Doug. that, would Good Officer. over turn like now Executive McCrosson, morning, the With Chief and Doug I President to

Douglas McCrosson

for and for morning, you this XXXX everyone. thank us earnings joining quarter good Jody, and morning, Thank call. morning and Good you, all fourth year-end our

especially of of during take and let who begin, endured our year other staff with me January personal COVID-XX, February. many team the fiscal Before are essential to effort a the minute and in challenges members I and recognize closing accounting the

are the those up times, the workload got trying those of we to extra we you of appreciative those For recovery. that are grateful that had for for ill, your And during pick effort.

the for remain December the ended in we last to SEC night, expect was for NYSE. filed and regulatory XX, XXXX, XX-K period compliance and requirements The with

I our review today, will on a the the will turn call and quarter year a financial results the our for provide results. fourth review of some of then our I quarter. call for before questions. full fourth for my to Then offer concluding the perspective detailed line Tom start For remarks to will I with performance the over opening

Not the restatement following of the to through the are time-consuming those we challenges restatement. who associated legal CPI, and with operational also challenges faced For you no familiar in managing COVID-XX many but have we we with the multi-period been doubt you financial complexities the tackled were related XXXX. pandemic, only

funded results Against not this mean, but our time of our executing fourth I backdrop, the dedicated are can also guidance By remember engaged Board and our our provided workforce, in year tumultuous the much talented defense during very achievements our kept only appreciated my today we our me I our, defended which Directors, and the and to professional career. full on to the reporting quarter nose we grindstone. -- XXXX. focused backlog, and We to testify active most during

executive early in Committee the to closely the XXXX, at an Oversight the of with Board me. reports and works Back and staff my pandemic, created that Chairman our beginning

valuable proud The you of to other to thought and of is be share pleased we the encouragement and for functioning and team and created Oversight short-term results manage results. would of counsel us our today. collective XXXX, While a I help events still challenge, all the me our in Committee side am I way to while the today response and to actuality, what executive my offering are the holding Board accountable with

and legacy increased quarter to XX%. our tempo defense end to note, Total from Turning programs military on programs. nearly nearly increased the high X. on programs increased year newer our production promise revenue on delivered by execution a revenue XX%, and in Slide the solid We of driven

basis million last doubled $X.XX per quarter nearly diluted we year. of $X.X last share from line share margin a million swing earnings to delivered the profit of loss profit, gross $X.X reported a Gross a and net quarter, last we year's solid of million compared improved over The And to XX.X%. to bottom loss $X.XX $X.X per fourth year. fourth net expanded points XXX

in saw In flow addition, build XXXX. that closely now to to arrive lean as point programs as improvements did schedules revenue. and our tools capital working cycles developed manufacturing our of of we a to of materials such the process close the over cash management more continued the We into to These in liquidity possible. XXXX, the processes factory compress flow we through manage tools of major throughout continued use out inventory shorten setting the as prioritize

COVID-XX. enables components, was caused This is that result of quick The reaction demand a critical or unplanned customer both. the in uncertainties by supply system changes to given

priority means than XXXX. million quarter $X costs Under material we less planned more rules, liquidity, completion for the Reflecting deferred of of incurring given fourth revenue cost recognizing percentage to accounting less a into early have estimate quarter in costs decision profit. would the than recognizing we effect the of and in we We that incurred and related had profit less those fourth approximately XXXX. $X this million the had revenue

than cash was working focus may million flow despite wondering less operations from XXXX in be on our You XXXX $X.X why capital.

a tailwind have I cash overpayment As fully was XXXX reported an by XXXX, million from during benefited repaid that approximately generation. to creating reported headwind caused before, customer a XXXX $X.X

third results have operating reported of cash. the use we a operations not million $X.X same in to completed been overpaid repayment that cash would for during reported Had $X.X $X.X of year on Our And XXXX, us for customer of essentially of positive have this quarter XXXX, was this about from XXXX. million, would customer million the swing revenue.

On on I a our results. full Slide want year to X, touch about few points

million, the left chart can on revenue decline you bridge from from programs. was which revenue larger grew in we side by slightly aviation the $XX.X see than from as programs commercial just First, slide, the of the military

year-over-year, production a a our working rates. and commercial business our basis of revenue military unprofitable revenue shift of for inventory success has As expansion aviation that programs XXXX, investment to to upfront gross to an a also Reducing to focus our a profit some of XX% drove work from on significant capital and in mix management. transitioning our contracts exposure result, shift profit military helped increased total exited military from development increase as and XXX business revenue from we margin This reduce points especially full a to also program programs efforts. in strategy point the XX% total got boost and aviation gross improve mix

the Second, turning right chart to on the slide. the side of

the newer of year You half half, revenues the based in surged expected, second up the to the production first can as timing of on see military programs. that relative we had ramping of

million, our with total exit a We to $XXX.X in of due around of impact unprofitable backlog years, several to business positive consists cash contracts Slide which despite of program aviation our and large industry very on the Turning of contract. XX% program total down life This of company flow part from year-over-year the an for drag ended for customers. a defense had backlog, been multiyear with so year now X. the it's XX% earnings

strategic more program and we years toward X believe in The the than now pivot point. making, is a an we more at inflection are defense-weighted

recognized a manufacture and complex, defense and our with reputation sophisticated systems. award-winning nationally highly We for have to aerospace earned OEMs aerostructures capability

through of As total of programs recognized a revenue customers. backlog to is potential orders their our with backlog, respective be of total on to the value purchase periods the firm reminder, when Funded all yet performance. we we mean refer

expected million, Approximately for million XX% the of XXXX. funded is During backlog $XXX.X is as XXXX, of markets. to be recognized backlog to funded increased during revenue $XX which defense XX%

the the program; the with At orders assemblies and U.S. Wing T-XX Martin the for year-end Panel life Northrop the funded and for primarily for rewing Hawk for Boeing extension with Outer of fee; Force consisted for XXXX, orders our Air program direct with Lockheed with Grumman E-XD A-XX helicopter, program; defense components. backlog structural F-XX F-XX Kits Black

the ended XXXX and for a book-to-bill strong follows ratio in when this XX book-to-bill December Our months year was very was XX X.XX, X.XX.

this value orders the may value recognized the your stronger during ratio, who The period. the the book-to-bill, the of higher ratio the unfamiliar term those to compares product. the received for revenue be For demand with of

expected indicate that $X.XX new X we In orders In higher we Ratios new case, funded than booking more in XXXX, to funded that translates future. of for orders. dollar revenue our booked grow XXXX, of every revenue $XXX the to is million. recorded, generally than for totaling

Moving X. Slide to

we our is new our remains into of very strong team to building strong work Our as a at pipeline business hard head and activity opportunities development total XXXX. backlog, proposal maintain

and for brand-new Our pipeline awards with advanced well current technologies and intelligence, as programs including missile surveillance opportunities reconnaissance, electronic to systems. follow-on warfare, national security aligned priorities, opportunities autonomous of large-scale as consists

submitted already or submitting for have We will electronic proposals warfare pods. be soon

for believe on there and customers will our is awards few within Some competitions one no contracts follow-on of that make is where was for We CPI an system for the entirely these next these Aero months. are new the of which incumbent, incumbent. each

our from systems. bid gained manufacturing experience assembly complex OEMs with and programs programs integration of subsystem to pod autonomous the leveraging also are We on

We product responding first a on are represent for systems. couple RFQs this order And system. currently to used unmanned an for unmanned our if of successful, would on work

leveraging we and can play missile how the Finally, commercial our market. CPI space within role Aero are in experience determine structure advanced emerging to military a

favor conditions time and that opportunities, in While strong defense commercial believe market as commercial currently we'll aviation when market that be by ready customers will recovers, capabilities we comes. demand the our capitalize be to

I'll over now Tom? through Tom CFO, you to who the results will our for Powers, financial the our call acting quarter. walk turn

Thomas Powers

Starting contracts fourth XX.X% increased side slide, $XX.X just the XXXX essentially year's commercial Thank million to last to last XX.X% contracts X. at was million. on Revenue aviation quarter. for you, under for the flat while military Doug. the from with left million, of to Please compared year revenue results increased from million $XX.X by revenue from $XX.X to $X quarterly quarter Slide fourth the of turn

compared profit XX.X%. doubled more $X.X to million Gross to mix. to margin million higher expanded basis and program points profit nearly Gross revenue XXX $X.X a due favorable to

income was of improvement On or million of an $X.X for the $X.XX to XXXX. per per profit approximately $X.X $X.XX $X.X share. million or is fourth quarter a strength of the million the net per net This quarter loss or $X.XX gains, share fourth compared gross of for the share

was became fourth the customer. paid that Recall benefited year. to to quarter a for million quarter cash during due headwind overpayment $X.X last $X.X million customer a flow compared the tailwind to we fourth Finally, The cash XXXX. the repaid a roughly was XXXX for operations that back during from million overpayment as fully $X.X from XXXX

audited of this financial highlights full the side we right figures of the present the compared On to for year XXXX. slide, for XXXX

mentioned was earlier, for offset contracts flat Doug essentially revenue by commercial in with aviation gains As from the nearly lower revenue revenue. year military

for mix expanded margin commercial $XX by gross more profit or to profit net loss military Gross on of points, million. loss per was favorable XX.X% pod reflecting partially program. unprofitable Raytheon increased million compared share And to of exit $X.X from or million net The XXX share programs the basis our $X.XX $X.X narrowed to $X.XX XXXX. volume our approximately offset programs, lower and a per

Turning escrow held in entered acquisition received release resulted Welding was our the in of XXXX related December as XXXX. December seller which XX, XX, few accounts to with had We million on of in into the $X.X In CPI agreement XX, present XXXX, $X.X of sheet of December amount Aero Cash stood a to at our December escrow Slide $X.X at restricted XX, Metallurgy, XXXX. we a to Metallurgy. to compared settlement sheet XX. $X in Welding held million balance December at which XXXX, million balance cash, key million XXXX compared was the to XXXX. the

and December XX, in our million expected of to The reflects the XXXX stood to contract and during capital assets million $XX.X at increase customer growth Net $XX.X overpayment XXXX. revenue at repayment XXXX. working liabilities compared support growth the

million, Protection provision Program debt of million stood the loan at excluding Total $X.X we Act. the the under received Paycheck CARES $XX.X

reduced During our debt by year, $X.X million. the we

we XXXX, amended the in XX, with all December united facility. our covenants credit at of compliance were As contained bank

turn call I'll the to Doug. Now back

Douglas McCrosson

of backlog revenue deliveries we now maintain In Please a our our the revenue. on Slide at than as XX for review our intend Tom. of more we we excellence defense programs of on priorities execute operational you, outlook. from turn and Thank backlog. XXXX, Internally, focus against XX% XX XXXX end the funded $X expect funded to with come had each we to contributing XXXX, million will about in XXXX for

XX XXXX, just million XXXX. in revenue programs For programs to $X drive contributed are context, Several more in in expected military than growth revenue.

the Jammer pod of the articles development of because produce as, Mid-Band rates we program. example, Raytheon growing start of the system are for Generation as and we test Some for production such ramping Next production phase

soon project has potential to we program, pods expect are be the of to the and in XXXX. first deliver to deliver plan This largest our growth XX SDTA we on

we against gear F-XX than We rewing reach our that several and We assemblies announced first purchase during Lockheed. to year, first pod recently to main also support delivery shipped Later on million XXXX. Canister of this to first to totaling Island programs is to Drag plan plan orders Rudder our assemblies milestones Chute landing A-XX program. deliver the more Boeing $XX their assembly

revenue will Other programs that contribute XXXX. to are new starts in

we undisclosed announced example, expect as the be to as work commencing yet March pod. year For begin this as we radar second a pod unannounced in on on radar well work to

Raytheon generate to the meaningful in In revenue with January incremental Company addition, XXXX. we announced Missile contract likewise expected in is

continuing and focus cycles We also on by to and contract intend our improving assets compress converting maintain liquidity into cash. to manufacturing inventory

do to improving to lines purchase. generally on are that have In production typically consists welded product process overhaul contrast We business work not on are the contract of streamlining ample XXXX, bulk long-lived these and inventory the output inventory our by sales. these repair into focused lines. turns we our believe product we turn we and especially from receive our and production programs, quick-turn that cash and complex the products we financing sales, opportunity increasing In customer for of material

have the year, to products earnings steps added as on to manufactured generally capital but we discussed optimize calls higher last as the more taking our working profit Finally, leading efficiently. requirements are margins are benefit

contracts in We begin labor to the increase causing XXXX rates, an production ramped programs direct overhead as existing in rates expect a base. in and new higher reduction

fees again, not added prior bottom that restatement and further to in XXXX, we is in expected of that leverage directly million results occur And reported $X to the audit nearly spent are the expected related to line. advisory remember, fees operating benefit providing

profile Based is stage and we backlog, cash XXXX cash to will our our governing in the on sights XXXX confidence the funded our even XXXX we on day-to-day against improvement and goal generation higher momentum improved realize the With and in in setting our compared have half more of flow the improving ability revenue, operation financial XXXX. deliver second deliver XXXX. set profitability our an flow to for in to in our decision-making,

check. zero test In like overcome gut year was you real ability requires in business. closing, on obstacles that a important to is A XXXX that really your and what for your

amazed up, going. up, to Once step I've this especially keeping always and did. experience and at pandemic the of women were been thank group production the that dedication that and talent, began, I I step employees. essential they lines the knew would our men the

to essential the and the that customers nation. unselfishly our as and they government could our every them respect heroically defend acted our workers, our our to factory aircraft and producing came need so by thanks. keep We owe Designated day all we

significant Despite quarter year performance XXXX year. last numerous fourth financial in challenges, compared delivered our same improvements we for the to and periods the full

initiated the During our fruits of expect sustain see and began development of defense-centric strategy to to XXXX, business in half in XXXX, that second we we the we XXXX. momentum

hard complex worked cases business in suppliers with best-in-class reputation expanding assemblies systems and establish trust our contractors, supplier have as a and of book We sole them. to of earning many to their as defense a

is strategy Our clear.

priorities are defined. Our

but goals increasingly optimistic future. Our are achievable, we about the lofty and are

can you questions the open for Jason, now. line you. Thank

Operator

Ken from [Operator Instructions] from Our first Canaccord. Herbert question comes

Kenneth Herbert

this not on over First, Doug, the I of in XX.X% think about you about Is of point the a we I you're could maybe the Or because and the and on, how had the giving lot going how a on -- lot a cadence really items detail unusual a think across wanted everything XX nice where through out little assumptions more specific we gross margins to the 'XX? get they they year sort margins guidance, start but we 'XX. in gross see gross margin of where and appropriate if of of just end? -- as could quarters. should the launching improvement know

Douglas McCrosson

Okay.

So between might line the would top perspective, and a say in that a what typical kind quarter that of fourth look from XXXX, I third XXXX. is quarter of like

the between we That so On new to my of mentioned than programs. lower be maybe -- would we XX% that I XXXX. might of lower, margin and ended but have appreciably start in prepared somewhere for a lot remarks. we side, few might have not a where them say XX%, at I now

Kenneth Herbert

Okay.

wide that. should you noticeable you of I line? a -- in these year. in a talk cadence provided about the the growth see, top do line Great -- appreciate And detail mean that little Is how anything it there range I more new but the how the line? and think in Okay. top sort the how starts an bit second little of can about for we perhaps the top with we framework and there, the of for the shakes out so Or of terms we program acceleration just of backlog the some timing half? the on

Douglas McCrosson

it see necessarily second this we've to half year. pretty and lot of the we it to going of, anyway. year. active way the this a going last year. year, that's strong, I year we're it's be of the started looking think rest than don't -- stays year We're where say, less say for I a similar going have pattern much of a back-ended the kind And the like that I'll of The appears would into XXXX way 'XX now beginning that is that don't now knew the the we was half like

Kenneth Herbert

that on when Or for point in refund? revised is the the in the cash an we customer back improvement what's for 'XX from guidance comment And out starting that flow? estimate 'XX, the the in looking cash at Okay. operations

Douglas McCrosson

the reported. was just the just the say, the really comment related GAAP than Well, I would modified But envision presented. to I also results result being I'll we stronger it --

Kenneth Herbert

the question. quarter? in from the impact the one just you final And Can business program backlog Perfect. jet quantify Okay. exit

Douglas McCrosson

million $XX $XX a was don't exact roughly was it It the have significant I number. to but million. number,

Operator

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

Douglas McCrosson

all the in to quarter results you Thank Okay. And we of for and Have day. speaking call. today's for again forward when report first look a great the you. participating to Tom 'XX. Thank I you

Operator

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

now You disconnect. may

CPI Aerostructures (CVU) 16 Apr 212020 Q4 Earnings call transcript