Information contained herein is proprietary to CPI Aero and may be subject to ITAR regulations 1 Expertise in Aerospace Technologies Expertise in Aerospace Technologies Canaccord Genuity – 39th Annual Growth Conference August 8, 2019 NYSE American: CVU Disclosure Statements Forward-Looking Statements This presentation contains forward-looking statements that involve risks and uncertainties. All statements, other than statements of historical fact, included in this presentation, including without limitation, ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to __________ Commission File Number: 1-11398 CPI AEROSTRUCTURES, INC. (Exact name of registrant as specified in its charter) New York 11-2520310 (State or othe ...

Click to edit Master title style Information contained herein is proprietary to CPI Aero and may be subject to ITAR regulations 1 Expertise in Aerospace Technologies Expertise in Aerospace Technologies 2019 Q2 Results Presentation Speakers: Douglas McCrosson, President & Chief Executive Officer Vincent Palazzolo, Chief Financial Officer August 7, 2019 NYSE American: CVU Disclosure Statements Forward-Looking Statements This presentation contains forward-looking statements that involve risks and uncertainties ...

CPI Aerostructures, Inc. (NYSE:CVU) Q1 2019 Earnings Conference Call May 10, 2019 8:30 AM ET Company Participants Sanjay Hurry - LHA Investor Relations Douglas McCrosson - President, CEO & Director Vincent Palazzolo - CFO & Secretary Conference Call Participants Kenneth Herbert - Canaccord Genuity Limited Arthur Winston - Pilot Advisors Operator Good day, and welcome to the First Quarter 2019 CPI Aerostructures Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded. I w ...

Part I - Financial Information This part provides CPI Aerostructures, Inc.'s unaudited consolidated financial statements and detailed notes for the period [Item 1 – Consolidated Financial Statements](index=3&type=section&id=Item%201%20%E2%80%93%20Consolidated%20Financial%20Statements) This section presents the unaudited consolidated financial statements and comprehensive notes for CPI Aerostructures, Inc [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) This section presents the unaudited consolidated balance sheets as of March 31, 2019, and December 31, 2018 Consolidated Balance Sheet Highlights (March 31, 2019 vs. December 31, 2018) | Metric | March 31, 2019 (Unaudited) | December 31, 2018 (Note 1) | | :-------------------------- | :------------------------- | :------------------------- | | Total Current Assets | $142,681,526 | $140,204,589 | | Total Assets | $151,858,590 | $143,713,674 | | Total Current Liabilities | $45,042,116 | $41,854,413 | | Total Liabilities | $56,510,230 | $50,290,328 | | Total Shareholders' Equity | $95,348,360 | $93,423,346 | - Cash decreased significantly from **$4,128,142** at December 31, 2018, to **$617,161** at March 31, 2019. Restricted cash remained at **$2,000,000**[6](index=6&type=chunk) - Contract assets increased from **$113,333,491** to **$120,749,918**, indicating more unbilled revenue from ongoing contracts[6](index=6&type=chunk) [Consolidated Statements of Income and Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income%20and%20Comprehensive%20Income) This section presents unaudited consolidated statements of income and comprehensive income for Q1 2019 and 2018 Consolidated Statements of Income and Comprehensive Income (Three Months Ended March 31, 2019 vs. 2018) | Metric | 2019 (Unaudited) | 2018 (Unaudited) | | :----------------------------------- | :--------------- | :--------------- | | Revenue | $25,583,531 | $18,191,623 | | Cost of revenue | $20,167,721 | $14,141,755 | | Gross profit | $5,415,810 | $4,049,868 | | Income from operations | $2,609,367 | $2,000,028 | | Net income | $1,658,598 | $1,256,765 | | Comprehensive income | $1,658,598 | $1,250,965 | | Income per common share – basic | $0.14 | $0.14 | | Income per common share – diluted | $0.14 | $0.14 | - Revenue increased by **40.6%** year-over-year, from **$18,191,623** in Q1 2018 to **$25,583,531** in Q1 2019[9](index=9&type=chunk) - Net income increased by **32.0%** year-over-year, from **$1,256,765** in Q1 2018 to **$1,658,598** in Q1 2019, while basic and diluted EPS remained flat at **$0.14** due to an increase in outstanding shares[9](index=9&type=chunk) [Consolidated Statements of Shareholders' Equity](index=5&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Equity) This section presents unaudited consolidated statements of shareholders' equity for Q1 2019 and 2018 Shareholders' Equity Changes (Three Months Ended March 31, 2019 vs. 2018) | Metric | March 31, 2019 | March 31, 2018 | | :----------------------------------- | :------------- | :------------- | | Balance at January 1 | $93,423,346 | $74,313,333 | | Net income | $1,658,598 | $1,256,765 | | Costs related to stock offering | $(64,371) | — | | Stock-based compensation expense | $330,787 | $303,940 | | Balance at March 31 | $95,348,360 | $75,914,151 | - Total Shareholders' Equity increased from **$93,423,346** at January 1, 2019, to **$95,348,360** at March 31, 2019, primarily driven by net income and stock-based compensation expense, partially offset by stock offering costs[12](index=12&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section presents unaudited consolidated statements of cash flows for Q1 2019 and 2018 Consolidated Statements of Cash Flows (Three Months Ended March 31, 2019 vs. 2018) | Cash Flow Activity | 2019 (Unaudited) | 2018 (Unaudited) | | :--------------------------------- | :--------------- | :--------------- | | Net cash used in operating activities | $(2,332,878) | $(2,573,325) | | Net cash used in investing activities | $(210,695) | $(156,006) | | Net cash (used in) provided by financing activities | $(967,408) | $1,581,694 | | Net decrease in cash and restricted cash | $(3,510,981) | $(1,147,637) | | Cash and restricted cash at beginning of period | $6,128,142 | $1,430,877 | | Cash and restricted cash at end of period | $2,617,161 | $283,240 | - Net cash used in operating activities decreased slightly from **$(2,573,325)** in Q1 2018 to **$(2,332,878)** in Q1 2019[14](index=14&type=chunk) - Financing activities shifted from providing **$1,581,694** in Q1 2018 to using **$(967,408)** in Q1 2019, primarily due to payments on long-term debt and line of credit, and stock offering costs[14](index=14&type=chunk) [Notes to Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed notes on accounting policies, business combinations, revenue, leases, inventory, and other financial items [1. Interim Financial Statements](index=7&type=section&id=1.%20INTERIM%20FINANCIAL%20STATEMENTS) This note details the Company's structure, single reportable segment, and adoption of ASC 606 and ASC 842 - The Company consists of CPI Aerostructures, Inc., Welding Metallury, Inc. (WMI, acquired Dec 20, 2018), and Compac Development Corporation[17](index=17&type=chunk) - The Company operates as a single operating and reportable segment[17](index=17&type=chunk) - Effective January 1, 2019, the Company adopted ASC 842 (Leases), recognizing approximately **$5.3 million** in ROU assets and **$5.8 million** in lease liabilities on its consolidated balance sheet[29](index=29&type=chunk) [2. Business Combinations](index=9&type=section&id=2.%20BUSINESS%20COMBINATIONS) This note details the WMI acquisition, its provisional accounting, and the ongoing working capital adjustment dispute - The WMI acquisition was completed on December 20, 2018, for a purchase price of **$7.9 million**, subject to a post-closing working capital adjustment[33](index=33&type=chunk) - **$2 million** of the purchase price was placed in escrow, shown as restricted cash[33](index=33&type=chunk) Provisional Fair Values of WMI Assets Acquired and Liabilities Assumed | Item | Provisional Fair Values | | :------------------------ | :---------------------- | | Other current assets | $1,049,000 | | Accounts receivable | $1,522,000 | | Inventory | $7,969,000 | | Property and equipment, net | $586,000 | | Current liabilities | $(5,174,000) | | Total | $5,952,000 | [3. Revenue Recognition](index=10&type=section&id=3.%20REVENUE%20RECOGNITION) This note outlines revenue recognition policies, contract types, and remaining performance obligations for future periods - Revenue from long-term contracts is recognized over time using the cost-to-cost input method[41](index=41&type=chunk) - For Q1 2019, **88%** of revenue was from long-term contracts (over time) and **12%** from MRO contracts (point in time)[50](index=50&type=chunk) Revenue by Long-Term Contract Type (Three Months Ended March 31, 2019 vs. 2018) | Contract Type | March 2019 | March 2018 | | :------------------------ | :------------ | :------------ | | Government subcontracts | $16,675,292 | $8,137,726 | | Commercial contracts | $6,653,157 | $7,476,095 | | Prime government contracts | $2,255,082 | $2,577,802 | | Total | $25,583,531 | $18,191,623 | - Remaining performance obligations as of March 31, 2019, were **$99.3 million**, with **78%** expected in 2019 and **22%** in 2020[48](index=48&type=chunk) [4. Leases](index=12&type=section&id=4.%20LEASES) This note details the Company's operating leases, ROU assets, lease liabilities, and related expenses under ASC 842 ROU Assets and Operating Lease Liabilities (March 31, 2019) | Item | Amount | | :---------------------------------- | :---------- | | ROU Assets | $4,927,810 | | Current operating lease liabilities | $1,593,243 | | Long-term operating lease liabilities | $3,837,678 | | Total ROU liabilities | $5,430,921 | - Operating lease expense for the three months ended March 31, 2019, was **$438,328**[56](index=56&type=chunk) - The weighted average remaining lease term for operating leases is **3.4 years**[57](index=57&type=chunk) [5. Inventory](index=13&type=section&id=5.%20INVENTORY) This note details the composition and changes in inventory, including raw materials, work-in-progress, and finished goods Inventory Components (March 31, 2019 vs. December 31, 2018) | Component | March 31, 2019 | December 31, 2018 | | :--------------- | :------------- | :---------------- | | Raw materials | $2,867,039 | $3,379,986 | | Work in progress | $5,940,866 | $4,495,980 | | Finished goods | $2,283,090 | $1,836,031 | | Total | $11,090,995 | $9,711,997 | [6. Stock-Based Compensation](index=13&type=section&id=6.%20STOCK-BASED%20COMPENSATION) This note details stock-based compensation expense, RSU grants, and stock option exercises for the period - Stock-based compensation expense for Q1 2019 was approximately **$330,787**, compared to **$303,940** in Q1 2018[12](index=12&type=chunk)[14](index=14&type=chunk) - In January 2019, **75,353** restricted stock units (RSUs) were granted to the board of directors, resulting in approximately **$250,000** of non-cash compensation expense in Q1 2019[62](index=62&type=chunk) - **35,000** stock options were exercised in Q1 2019, with the company receiving no cash and exchanging **34,478** shares of common stock[68](index=68&type=chunk) [7. Fair Value](index=14&type=section&id=7.%20FAIR%20VALUE) This note discusses the fair value measurements for financial instruments, including short-term assets, liabilities, and debt - Fair values of short-term financial instruments (cash, accounts receivable, accounts payable, accrued expenses) approximated their carrying values[69](index=69&type=chunk) Fair Value of Debt (March 31, 2019 vs. December 31, 2018) | Debt Category | March 31, 2019 Carrying Amount | March 31, 2019 Fair Value | December 31, 2018 Carrying Amount | December 31, 2018 Fair Value | | :--------------------------------- | :----------------------------- | :------------------------ | :-------------------------------- | :--------------------------- | | Short-term borrowings and long-term debt | $29,846,667 | $29,846,667 | $30,349,903 | $30,349,903 | [8. Contract Assets and Contract Liabilities](index=15&type=section&id=8.%20CONTRACT%20ASSETS%20AND%20CONTRACT%20LIABILITIES) This note details the changes in contract assets and liabilities, driven by new programs and contract profit revisions Net Contract Assets (Liabilities) by Customer Type (March 31, 2019 vs. December 31, 2018) | Category | March 31, 2019 Total | December 31, 2018 Total | | :---------------------- | :------------------- | :---------------------- | | Contract assets | $120,749,918 | $113,333,491 | | Contract liabilities | $(3,496,449) | $(3,805,106) | | Net contract assets | $117,253,469 | $109,528,385 | - The increase in net contract assets was primarily due to new programs like HondaJet engine inlet (**$1.0 million** increase) and Raytheon Next Generation Jammer pod 2.0 (**$4.6 million** increase), and increases in T-38 Pacer Classic (**$0.8 million**) and F-35 Lock Assembly (**$0.7 million**)[73](index=73&type=chunk) - Revisions in estimated contract profits resulted in a **$391,000** increase to total gross profit in Q1 2019, compared to a **$320,000** decrease in Q1 2018[75](index=75&type=chunk) [9. Income Per Common Share](index=15&type=section&id=9.%20INCOME%20PER%20COMMON%20SHARE) This note explains the calculation of basic and diluted income per common share, including weighted average shares outstanding - Basic and diluted income per common share were both **$0.14** for the three months ended March 31, 2019 and 2018[9](index=9&type=chunk) - Diluted EPS for Q1 2019 was calculated using **11,792,818** weighted average shares outstanding, including **56,513** incremental shares[77](index=77&type=chunk) [10. Debt](index=16&type=section&id=10.%20DEBT) This note details the Company's credit facilities, outstanding debt, interest rates, and long-term debt maturity schedule - The Company has a **$30 million** Revolving Loan and a **$10 million** Term Loan with BankUnited, N.A., both maturing on June 30, 2020[80](index=80&type=chunk) - As of March 31, 2019, **$23.7 million** was outstanding under the Revolving Loan, bearing interest at **6.25%**[82](index=82&type=chunk) Maturities of Long-Term Debt (Excluding Unamortized Debt Issuance Costs) as of March 31, 2019 | Twelve months ending March 31, | Amount | | :----------------------------- | :---------- | | 2020 | $2,506,099 | | 2021 | $3,131,789 | | 2022 | $204,065 | | 2023 | $179,055 | | Thereafter | $86,974 | | Total | $6,107,982 | [11. Major Customers](index=17&type=section&id=11.%20MAJOR%20CUSTOMERS) This note identifies the concentration of revenue and contract assets among the Company's major commercial and government customers - In Q1 2019, the four largest commercial customers accounted for **25%**, **13%**, **13%**, and **12%** of revenue[88](index=88&type=chunk) - Direct U.S. government revenue was **9%** in Q1 2019, compared to **14%** in Q1 2018[88](index=88&type=chunk) - At March 31, 2019, **37%**, **13%**, **13%**, and **12%** of contract assets were from the Company's four largest commercial customers[89](index=89&type=chunk) [Item 2 – Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202%20%E2%80%93%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the Company's financial condition, operational results, liquidity, and capital resources for Q1 2019 [Forward Looking Statements](index=18&type=section&id=Forward%20Looking%20Statements) This section provides a disclaimer regarding forward-looking statements and associated risks and uncertainties - This section serves as a disclaimer regarding forward-looking statements, cautioning readers about inherent risks and uncertainties that could cause actual results to differ materially from projections[93](index=93&type=chunk) [Business Operations](index=18&type=section&id=Business%20Operations) The Company manufactures structural aircraft parts for commercial and defense markets, serving as a Tier 1, Tier 2, and prime contractor - The Company manufactures structural aircraft parts for fixed-wing aircraft and helicopters in both commercial and defense markets[94](index=94&type=chunk) - It operates as a Tier 1 supplier to aircraft OEMs, a Tier 2 subcontractor to major Tier 1 manufacturers, and a prime contractor to the U.S. Department of Defense[94](index=94&type=chunk) - Services include engineering, program management, supply chain management, and Maintenance Repair & Overhaul (MRO)[94](index=94&type=chunk) [Backlog](index=19&type=section&id=Backlog) This section analyzes the Company's total backlog, including funded and unfunded portions, across government and commercial contracts Total Backlog (March 31, 2019 vs. December 31, 2018) | Category | March 31, 2019 | December 31, 2018 | | :------- | :------------- | :---------------- | | Funded | $85,669,000 | $94,474,000 | | Unfunded | $367,206,000 | $362,906,000 | | Total | $452,875,000 | $457,380,000 | - Approximately **84%** of the total backlog at March 31, 2019, was attributable to government contracts[97](index=97&type=chunk) Commercial Backlog (March 31, 2019 vs. December 31, 2018) | Category | March 31, 2019 | December 31, 2018 | | :------- | :------------- | :---------------- | | Funded | $7,157,000 | $13,662,000 | | Unfunded | $61,740,000 | $57,324,000 | | Total | $68,897,000 | $70,986,000 | [Critical Accounting Policies](index=20&type=section&id=Critical%20Accounting%20Policies) This section outlines critical accounting policies, specifically revenue recognition under ASC 606 and leases under ASC 842 [Revenue Recognition](index=20&type=section&id=Revenue%20Recognition_Critical) This subsection details the Company's revenue recognition policy under ASC 606, emphasizing estimates for long-term contracts - The Company adopted ASC 606 (Revenue from Contracts with Customers) effective January 1, 2018, using the modified retrospective method[101](index=101&type=chunk) - Revenue and gross profit are recognized over the contract period based on the relationship between actual costs incurred and total estimated costs[101](index=101&type=chunk) - ASC 606 involves considerable use of estimates, which can lead to disparities between reported earnings and actual cash receipts[101](index=101&type=chunk) [Leases](index=20&type=section&id=Leases_Critical) This subsection details the Company's lease accounting policy under ASC 842, including ROU asset and liability recognition - The Company adopted ASC 842 (Leases) on January 1, 2019, using the optional transition method, without restating comparative financial information[104](index=104&type=chunk) - Upon adoption, the Company recognized approximately **$5.3 million** in ROU assets and **$5.8 million** in lease liabilities[106](index=106&type=chunk) - The Company elected practical expedients, including not recognizing ROU assets or lease liabilities for short-term leases and not separating lease and non-lease components for certain assets[105](index=105&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) This section analyzes the Company's Q1 2019 operational results, including revenue, cost of sales, gross profit, expenses, and net income [Revenue](index=21&type=section&id=Revenue_Results) This subsection details the drivers of revenue growth, including the WMI acquisition and key program contributions - Total revenue for Q1 2019 increased by **$7,391,908 (40.6%)** to **$25,583,531**, compared to **$18,191,623** in Q1 2018[108](index=108&type=chunk) - Key drivers for revenue increase include **$2.1 million** from the WMI acquisition, **$4.3 million** from the Next Generation Jammer pod program, and increases from E-2D, F-35 Lock, and HondaJet programs (each approximately **$0.7 million**)[108](index=108&type=chunk) - Government subcontracts revenue increased by **104.9%** to **$16,675,292**, while commercial subcontracts revenue decreased by **11%** to **$6,653,157**, mainly due to lower G650 program revenue[109](index=109&type=chunk)[111](index=111&type=chunk) [Cost of Sales](index=21&type=section&id=Cost%20of%20Sales) This subsection analyzes the increase in cost of sales, driven by procurement, labor, and factory overhead - Cost of sales increased by **$6,025,966 (42.6%)** to **$20,167,721** in Q1 2019, commensurate with the increase in revenue[113](index=113&type=chunk) Cost of Sales Components (Three Months Ended March 31, 2019 vs. 2018) | Component | March 31, 2019 | March 31, 2018 | | :----------------------------- | :------------- | :------------- | | Procurement | $13,195,363 | $8,645,609 | | Labor | $1,979,759 | $1,657,719 | | Factory overhead | $5,016,553 | $3,941,364 | | Other contract costs (credit), net | $(23,954) | $(102,937) | | Total Cost of Sales | $20,167,721 | $14,141,755 | - Procurement costs increased by **$4,549,754 (52.6%)**, largely due to the Raytheon Next Generation Jammer pod program (**$2.8 million**) and WMI acquisition (**$0.8 million**)[117](index=117&type=chunk) [Gross Profit](index=22&type=section&id=Gross%20Profit) This subsection details the increase in gross profit, primarily attributable to higher sales volume - Gross profit increased by **$1,365,942 (33.7%)** to **$5,415,810** in Q1 2019, primarily due to higher sales volume[120](index=120&type=chunk) [Favorable/Unfavorable Adjustments to Gross Profit (Loss)](index=22&type=section&id=Favorable%2FUnfavorable%20Adjustments%20to%20Gross%20Profit%20%28Loss%29) This subsection analyzes the net adjustments to gross profit, including favorable and unfavorable contract revisions Net Adjustments to Gross Profit (Three Months Ended March 31, 2019 vs. 2018) | Adjustment Type | March 31, 2019 | March 31, 2018 | | :------------------------ | :------------- | :------------- | | Favorable adjustments | $680,000 | $175,000 | | Unfavorable adjustments | $(289,000) | $(495,000) | | Net adjustments | $391,000 | $(320,000) | - Net adjustments to gross profit were favorable by **$391,000** in Q1 2019, primarily due to a **$330,000** favorable adjustment on one contract's completion[121](index=121&type=chunk) - In Q1 2018, net adjustments were unfavorable by **$320,000**, including a **$241,000** unfavorable adjustment on a long-term program and a **$128,000** unfavorable adjustment due to excess overhead and material costs[123](index=123&type=chunk) [Selling, General and Administrative Expenses](index=23&type=section&id=Selling%2C%20General%20and%20Administrative%20Expenses) This subsection details the increase in SG&A expenses, driven by WMI-related costs and professional fees - SG&A expenses increased by **$756,603 (36.9%)** to **$2,806,443** in Q1 2019, mainly due to additional costs related to WMI and approximately **$110,000** in professional fees for the WMI audit and reporting[124](index=124&type=chunk) [Income Before Provision for Income Taxes](index=23&type=section&id=Income%20Before%20Provision%20for%20Income%20Taxes) This subsection details the increase in income before taxes, primarily due to higher government subcontractor revenue - Income before provision for income taxes increased by **$545,833 (35%)** to **$2,098,598** in Q1 2019, primarily due to higher government subcontractor revenue[125](index=125&type=chunk) [Provision for Income Taxes](index=23&type=section&id=Provision%20for%20Income%20Taxes) This subsection details the provision for income taxes and the effective tax rate for Q1 2019 and 2018 - Provision for income taxes increased to **$440,000** in Q1 2019 from **$296,000** in Q1 2018[126](index=126&type=chunk) - The effective tax rate was **21%** in Q1 2019, up from **19%** in Q1 2018[126](index=126&type=chunk) [Net Income](index=23&type=section&id=Net%20Income_Results) This subsection details the increase in net income and the stable basic and diluted EPS for Q1 2019 - Net income for Q1 2019 was **$1,658,599**, an increase from **$1,256,765** in Q1 2018[127](index=127&type=chunk) - Basic and diluted income per share remained **$0.14** for both periods, despite the increase in net income, due to a higher weighted average number of shares outstanding[127](index=127&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) This section analyzes the Company's liquidity, working capital, cash flow, and capital resources, including credit facilities [General](index=23&type=section&id=General) This subsection provides an overview of the Company's working capital position - Working capital decreased by **$710,766 (0.7%)** to **$97,639,410** at March 31, 2019, from **$98,350,176** at December 31, 2018[128](index=128&type=chunk) [Cash Flow](index=23&type=section&id=Cash%20Flow) This subsection details changes in cash and restricted cash balances and the impact of contract assets - Cash balance decreased from **$4,128,142** at December 31, 2018, to **$617,161** at March 31, 2019[132](index=132&type=chunk) - Restricted cash remained at **$2,000,000**, held in escrow for the WMI acquisition[132](index=132&type=chunk) - Contract assets increased by approximately **$7.4 million** in Q1 2019, representing unbilled costs and earnings on uncompleted contracts[133](index=133&type=chunk)[129](index=129&type=chunk) - The Company believes existing resources, credit facility availability, and BankUnited's commitment to extend the credit facility will be sufficient for working capital needs for at least 12 months[134](index=134&type=chunk) [Credit Facilities](index=24&type=section&id=Credit%20Facilities) This subsection details the Company's credit facilities, outstanding balances, and covenant compliance - The BankUnited Facility includes a **$30 million** revolving credit loan and a **$10 million** term loan, both maturing on June 30, 2020[135](index=135&type=chunk) - As of March 31, 2019, **$23.7 million** was outstanding under the Revolving Loan at **6.25%** interest[137](index=137&type=chunk) - The Company was in compliance with all financial covenants of the BankUnited Facility as of March 31, 2019[139](index=139&type=chunk) [Contractual Obligations](index=25&type=section&id=Contractual%20Obligations) This subsection references contractual obligations to the Company's prior annual report - Information on contractual obligations is referenced to the Company's Annual Report on Form 10-K for the year ended December 31, 2018[141](index=141&type=chunk) [Item 3 – Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%203%20%E2%80%93%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that quantitative and qualitative disclosures about market risk are not applicable to the Company - The Company states that this item is not applicable[143](index=143&type=chunk) [Item 4 – Controls and Procedures](index=26&type=section&id=Item%204%20%E2%80%93%20Controls%20and%20Procedures) This section addresses the effectiveness of disclosure controls and procedures, including identified material weaknesses and corrective actions - Disclosure controls and procedures were not effective at the reasonable assurance level as of March 31, 2019[145](index=145&type=chunk) - A material weakness was identified: review control procedures failed to timely identify the miscoding of an invoice and resulting overstatement of revenue[146](index=146&type=chunk) - Corrective actions and new control procedures were implemented in Q1 2019, but full testing is not yet concluded[146](index=146&type=chunk) - The evaluation excluded WMI (acquired December 20, 2018), which represented approximately **8%** of total assets and revenue for Q1 2019[147](index=147&type=chunk) [Evaluation of Disclosure Controls and Procedures](index=26&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This subsection details the evaluation of disclosure controls and procedures, concluding their ineffectiveness due to a material weakness - Management concluded that disclosure controls and procedures were not effective as of March 31, 2019, due to a material weakness[145](index=145&type=chunk) - The material weakness involved the failure of review control procedures to timely identify the miscoding of an invoice and resulting overstatement of revenue[146](index=146&type=chunk) [Changes in Internal Control Over Financial Reporting](index=26&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This subsection reports on changes in internal control over financial reporting, noting corrective actions for a material weakness - No material changes in internal control over financial reporting occurred during Q1 2019, other than the corrective actions taken to address the identified material weakness[148](index=148&type=chunk) Part II - Other Information This part contains other required information, including legal proceedings, risk factors, equity sales, and exhibits [Item 1 – Legal Proceedings](index=27&type=section&id=Item%201%20%E2%80%93%20Legal%20Proceedings) This section reports no legal proceedings for the current period - There are no legal proceedings to report[150](index=150&type=chunk) [Item 1A – Risk Factors](index=27&type=section&id=Item%201A%20%E2%80%93%20Risk%20Factors) This section reports no material changes to previously disclosed risk factors - No material changes to risk factors were reported since the Annual Report on Form 10-K for December 31, 2018[151](index=151&type=chunk) [Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds](index=27&type=section&id=Item%202%20%E2%80%93%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports no unregistered sales of equity securities or use of proceeds for the period - There were no unregistered sales of equity securities for the three months ended March 31, 2019[152](index=152&type=chunk) [Item 3 – Defaults Upon Senior Securities](index=27&type=section&id=Item%203%20%E2%80%93%20Defaults%20Upon%20Senior%20Securities) This section reports no defaults upon senior securities for the period - There were no defaults upon senior securities[153](index=153&type=chunk) [Item 4 – Mine Safety Disclosures](index=27&type=section&id=Item%204%20%E2%80%93%20Mine%20Safety%20Disclosures) This section states that mine safety disclosures are not applicable to the Company - The Company states that this item is not applicable[154](index=154&type=chunk) [Item 5 – Other Information](index=27&type=section&id=Item%205%20%E2%80%93%20Other%20Information) This section reports no other information for the current period - There is no other information to report[155](index=155&type=chunk) [Item 6 – Exhibits](index=27&type=section&id=Item%206%20%E2%80%93%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL financial data - Exhibits include Section 302 Certifications by the CEO and CFO, Section 906 Certification by the CEO and CFO, and XBRL financial information[156](index=156&type=chunk) [Signatures](index=28&type=section&id=Signatures) This section contains the official signatures of the Chief Executive Officer and Chief Financial Officer - The report was signed by Douglas J. McCrosson (CEO and President) and Vincent Palazzolo (CFO) on May 10, 2019[160](index=160&type=chunk)

Click to edit Master title style Information contained herein is proprietary to CPI Aero and may be subject to ITAR regulations Information contained herein is proprietary to CPI Aero and may be subject to ITAR regulations 1 Expertise in Aerospace Technologies Expertise in Aerospace Technologies 2019 Q1 Results Presentation Speakers: Douglas McCrosson, President & Chief Executive Officer Vincent Palazzolo, Chief Financial Officer May 10, 2019 NYSE American: CVU Disclosure Statements Forward-Looking Statemen ...

Government Contracts and Revenue - Government subcontracts accounted for 52% of revenue in 2018 and 57% in 2017, indicating a significant reliance on U.S. Government contracts[65] - The company faces risks related to government contract funding, which is subject to congressional budget authorization and appropriation processes[66] - Termination of contracts by the U.S. Government for convenience could result in the cancellation of future work and adversely affect financial performance[68] - Revenue for the year ended December 31, 2018 was $83,929,270, an increase of $2,646,122 compared to $81,283,148 in 2017, representing a growth of 3.2%[129] - Revenue from prime government contracts increased to $9,216,671, up by $2,569,422 or 38.6% from $6,647,248 in 2017[130] - Revenue from government subcontracts decreased to $43,440,742, down by $1,639,875 or 3.6% from $45,080,617 in 2017[131] - The Company’s government contracts are subject to U.S. government procurement rules, which dictate allowable costs for pricing[240] Financial Performance and Condition - The company reported a net income of $2.21 million for the year ended December 31, 2018, compared to $1.73 million in 2017, representing a growth of 27.8%[218] - Net income decreased to $2,211,563 in 2018, down 61.6% from $5,767,634 in 2017[219] - Income per common share (basic and diluted) was $0.23 in 2018, compared to $0.65 in 2017, reflecting a decline of 64.6%[219] - Gross profit for the year ended December 31, 2018 was $18,164,263, a decrease of $481,653, with a gross margin of 21.6% compared to 22.9% in 2017[139] - Selling, general and administrative expenses increased to $9,528,883, an increase of $1,079,289 or 12.8% from $8,449,594 in 2017[144] - Interest expense rose to $1,989,417, an increase of $290,503 or 17.1% compared to $1,698,914 in 2017[145] - The provision for income taxes for the year ended December 31, 2018 was approximately $4.5 million, with an effective tax rate of approximately 67%[148] Internal Controls and Compliance - A material weakness in internal control over financial reporting was identified as of December 31, 2018, which could affect investor confidence and stock price[90] - The independent auditor expressed an adverse opinion on the effectiveness of internal control over financial reporting as of December 31, 2018[182] - Management's evaluation concluded that internal controls were not effective as of December 31, 2018, due to the identified material weakness[177] - The company plans to implement new control procedures in Q1 2019 to ensure proper revenue recognition[178] - The company has established disclosure controls and procedures to ensure timely and accurate reporting as required by the Securities Exchange Act[169] Acquisitions and Growth - The company completed the acquisition of Welding Metallurgy, Inc. for approximately $7.9 million, which is expected to enhance its capabilities in manufacturing complex components for the defense and commercial aircraft industries[119] - The acquisition of Welding Metallurgy, Inc. (WMI) on December 20, 2018, represents approximately 10% of total assets and 14% of revenue on a pro forma basis[171] - CPI acquired Welding Metallurgy, Inc. (WMI) on December 20, 2018, which is included in the consolidated financial results from the acquisition date[227] Cash Flow and Capital Structure - Cash balance at December 31, 2018 was $4,128,142, an increase of $2,697,265 from $1,430,877 in 2017[156] - The company raised approximately $16.1 million from a public offering of 2,760,000 shares at a price of $6.25 per share, with proceeds allocated for the acquisition and general corporate purposes[120] - The company has 41,772 shares of common stock subject to outstanding purchase options, and future capital needs may lead to additional equity offerings, potentially diluting existing shareholders[103] - The company reported a net cash used in operating activities of $(2,535,038) for 2018, compared to $1,572,498 in 2017[223] - Cash and restricted cash at the end of 2018 was $6,128,142, significantly up from $1,430,877 at the end of 2017[223] Risks and Challenges - The company faces risks associated with new programs, including potential delays, technological problems, and the inability to meet customer specifications, which could adversely affect financial results[94] - Cybersecurity threats and internal system failures pose risks that could disrupt business operations and lead to financial losses, despite the company's efforts to mitigate these risks[98][99] - Competition for key personnel is intense, and the inability to attract and retain qualified staff may adversely affect production operations[86] - The company is exposed to risks associated with fixed contract pricing, which can lead to reduced profitability if contract costs increase unexpectedly[81] - The company is subject to strict environmental regulations, which could lead to fines and remediation expenses if non-compliance occurs[76] Assets and Liabilities - Total current assets increased to $140.20 million in 2018 from $120.38 million in 2017, representing a growth of 16.1%[216] - Total liabilities decreased to $50.76 million in 2018 from $49.26 million in 2017, a reduction of 3.0%[216] - Shareholders' equity rose to $93.42 million in 2018, up from $74.31 million in 2017, indicating an increase of 25.8%[216] - The company has total debt of $5,433,333, with $2,100,000 due within one year[165] - Capital lease obligations total $927,693, with $334,981 due within one year[165] - Operating leases total $5,893,457, with $1,720,750 due within one year[165] Revenue Recognition - The company recognized revenues based on the relationship between actual costs incurred and total estimated costs, which may lead to significant disparities between reported earnings and actual cash received[84] - The company has implemented ASC 606 for revenue recognition, which requires sales and gross profit to be recognized over the contract period based on actual costs incurred[122] - The Company adopted ASC 606 for revenue recognition, which requires sales and gross profit to be recognized over the contract period based on actual costs incurred and total estimated costs[232] - The Company may need to adjust revenue in later periods if estimates are not accurate or if a contract is terminated[233] - The Company continually evaluates estimates related to revenue, costs, and profits, which may lead to significant disparities between reported earnings and actual cash received[232]

CPI Aerostructures, Inc. (NYSE:CVU) Q4 2018 Earnings Conference Call March 13, 2019 8:30 AM ET Company Participants Sanjay Hurry - VP, LHA Investor Relations, IR Douglas McCrosson - President and CEO Vincent Palazzolo - CFO Conference Call Participants Kenneth Herbert - Canaccord Operator Good morning, and welcome to the CPI Aerostructures' Fourth Quarter and Full Year 2018 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will ...

Financial Performance & Highlights - CPI Aero's consolidated backlog at the end of 2018 reached $457.4 million, a 17.7% year-over-year increase[7] - The company's defense backlog hit a record $386.4 million, a 65% increase since mid-2014[7] - For the year 2018, revenue was $83.9 million compared to $81.3 million in 2017[11] - Net income for 2018 was $2.3 million, or $0.24 per diluted share, compared to $5.8 million, or $0.65 per diluted share in 2017[11] - The company raised $16.1 million (net) via a public offering on October 19, 2018[12] Future Outlook & Guidance - CPI Aero anticipates revenue between $98.0 million and $102.0 million for 2019, compared to $83.9 million in 2018[14] - Pre-tax income is projected to be between $11.0 million and $11.3 million for 2019, compared to $6.8 million in 2018[14] - The company expects cash flow from operations to be $3.5 million or greater in 2019, compared to $(2.5) million in 2018[14] Strategic Initiatives & Business Development - CPI Aero closed the acquisition of Welding Metallurgy, Inc (WMI)[6] - The company's product sales growth outpaced reported revenue for the second consecutive year, with a 2016-2018 product sales CAGR of 6.9%[6] - The company is focused on defense programs, which is yielding a large and growing backlog[10]

Click to edit Master title style Information contained herein is proprietary to CPI Aero and may be subject to ITAR regulations Information contained herein is proprietary to CPI Aero and may be subject to ITAR regulations 1 Expertise in Aerospace Technologies Expertise in Aerospace Technologies NobleCon15 - Noble Capital Markets' 15th Annual Institutional Emerging Growth Investor Conference January 28, 2019 NYSE American: CVU Disclosure Statements Forward-Looking Statements This presentation contains forwa ...