CPI Aerostructures Inc (NYSE MKT:CVU) Q1 2020 Earnings Conference Call - Final Transcript

Oct 01, 2020 • 08:30 am ET

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CPI Aerostructures Inc (NYSE MKT:CVU) Q1 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

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

Analyst
Ken Herbert

Yeah. Hi. Thanks. Good morning, Doug and Tom.

Executive
Douglas McCrosson

Hi, Ken.

Executive
Tom Powers

Good morning, Ken.

Analyst
Ken Herbert

Hey, Doug. I just wanted to first ask around gross margins. Can you provide a little bit -- just maybe a bit more specific on the EACs in the quarter? Sorry if I missed it. And to get to obviously better gross margin this year than in 2019 implies a pretty nice ramp over the second, third and fourth quarters. Can you just talk about the sequential improvement we should expect as we go through the -- growth of the year on the gross margin?

Executive
Douglas McCrosson

Well, I don't want to specify by quarter, but I can tell you that the cumulative effect of the change in our EACs for the quarter was roughly around $1 million, and so we don't have that headwind in the second, third and fourth quarters. And so when you -- I would prefer to leave it as we've publicly stated, which our gross margin at the end of the year will be higher than '19 without going into how we think that will ramp up over the period, but we would expect our fourth quarter to be the highest gross profit margin quarter of the year.

Analyst
Ken Herbert

Okay. That's helpful. And I appreciate the detail on the slides. I know obviously, you haven't been able to say much, but as you look at sort of your revised outlook for 2021 is this just to apply these growth rates. I get to revenues next year sort of well over $100 million, maybe $105 million, $110 million somewhere in that range depending upon growth rate. Can you just talk through -- I know you've outlined a lot of these, just maybe just talk through confidence in those 2021 numbers with the backlog and a couple of the key moving pieces as we think about the step-up, obviously, from '19 to '20 to '21?

Executive
Douglas McCrosson

I can say it's a very high confidence in the growth rate and the derivation that you picked is in line with our own internal thinking at the moment. And I would say that the vast majority of that is already in the funded backlog. So things that could derail that, obviously, a program execution, we have to execute on the backlog and deliver it when the customer wants it, but that's just an ordinary risk. And the risk of -- always the risk of an order cancellation here and there, but I can tell you that there is not a lot of white space in the forecast for 2021 revenue.

Analyst
Ken Herbert

Okay. And then just finally, can you just walk through -- I mean, obviously, a lot has happened over the last several months. Can you just walk through maybe some of the changes you've put in place just regarding on the finance and control side as we