CPI Aerostructures Inc (NYSE MKT:CVU) Q1 2020 Earnings Conference Call - Final Transcript
Oct 01, 2020 • 08:30 am ET
statements to reflect events or circumstances after the date hereof.
With that, I would like to turn the call over to Douglas McCrosson, President and Chief Executive Officer. Good morning, Doug.
Good morning and thank you, John. Good morning, everyone. I hope that you, your families, your friends and neighbors are all healthy and well. Today, we are resuming our practice of holding quarterly earnings conference calls, after an unfortunately prolonged absence. As you know, on February 14, we suspended quarterly earnings reporting when it was determined that we needed to restate fiscal 2018 financials as well as the first-three quarters of fiscal 2019, before completing the audit and filing our Form 10-K for fiscal 2019.
We are finalizing our second quarter financial report and we will release these results as soon as they are complete. We're hopeful that we will be current with the SEC reporting requirement with the filing of our third quarter results sometime in late 2020.
I'm going to devote my prepared remarks today to our first quarter performance, record defense backlog, our near-term priorities and other factors that give us confidence that we will deliver revenue growth and improved profitability for 2020. Tom will provide you with a detailed review of our financial results for the first quarter and the terms of our new amended credit facility. And then, I will offer some concluding remarks before opening the line to your questions.
Starting on Slide 4. Item one is a summary of our first quarter results. As I hope to make clear in my prepared remarks this morning, we believe that these results are not indicative of our expected performance for fiscal year 2020. The first quarter decline in revenue was largely a matter of timing as we had significant revenue in the first quarter of 2019 for our Next Generation Jammer Mid-Band Pod we produced for Raytheon Technologies.
The engineering and manufacturing development phase of the NGJ Mid-Band Pod program was virtually complete by the end of 2019, and there was little revenue for this program in the first quarter of this year. CPI Aero has recently begun the system development and test phase of the program and we expect that this will be a strong revenue program during the second half of 2020.
Additionally, revenue declined as our commercial programs had lower demand even prior to the COVID-19 pandemic that subsequent to the end of the first quarter, resulted in deferred and canceled orders for certain business jet programs. An unfavorable product mix also negatively affected margins during the quarter, created largely by the reduction in the NGJ Mid-Band pod program revenue mentioned above.
We also revised our estimate for our factory overhead rate for 2020 that had a cumulative catch-up effect on program profitability that resulted in a gross profit of 4% for the quarter. We expect that margins will trough in the first quarter of '20 and that full year 2020 gross margin percentage will be higher than it was in