CPI Aero(CVU) - 2025 Q1 - Quarterly Report

Part I - Financial Information Consolidated Financial Statements (Unaudited) CPI Aerostructures reported a Q1 2025 net loss of $1.32 million, a significant decline from prior-year net income, driven by a 19.3% revenue decrease and 53.6% gross profit drop due to unfavorable A-10 program cost adjustments, alongside decreased assets and equity, and a debt covenant waiver Condensed Consolidated Balance Sheets Total assets decreased to $65.36 million as of March 31, 2025, primarily due to a $3.6 million cash reduction, with total liabilities also decreasing and shareholders' equity declining to $24.93 million Condensed Consolidated Balance Sheet Highlights (in thousands) | | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $41,117.8 | $43,592.5 | | Total Assets | $65,360.7 | $67,982.0 | | Total Current Liabilities | $26,166.6 | $26,470.3 | | Total Liabilities | $40,431.2 | $42,048.8 | | Total Shareholders' Equity | $24,929.5 | $25,933.2 | Condensed Consolidated Statements of Operations The company reported a Q1 2025 net loss of $1.32 million (($0.10) per share), a shift from prior-year net income, driven by a 19.3% revenue decline and a significant gross profit reduction to $1.65 million Q1 2025 vs. Q1 2024 Performance | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenue | $15,400,608 | $19,081,143 | | Gross Profit | $1,649,475 | $3,553,749 | | (Loss) Income from Operations | $(1,186,302) | $839,845 | | Net (Loss) Income | $(1,323,924) | $168,238 | | (Loss) Income per Share, Diluted | $(0.10) | $0.01 | Condensed Consolidated Statements of Shareholders' Equity Shareholders' equity decreased by $1.0 million to $24.93 million in Q1 2025, primarily due to a $1.32 million net loss, partially offset by $0.32 million in stock-based compensation expense - Total shareholders' equity decreased from $25,933,242 at the beginning of the period to $24,929,547 at March 31, 2025[10] - The primary driver of the decrease was a net loss of $1,323,924 for the quarter[10] Condensed Consolidated Statements of Cash Flows Net cash used in operating activities significantly increased to $2.72 million in Q1 2025, leading to a total cash balance decrease of $3.62 million, ending the quarter at $1.87 million Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(2,721.6) | $(960.5) | | Net Cash Used in Investing Activities | $(59.4) | $(46.8) | | Net Cash Used in Financing Activities | $(841.4) | $(1,069.4) | | Net Decrease in Cash | $(3,622.4) | $(2,076.7) | | Cash at End of Period | $1,868.6 | $3,018.1 | Notes to Condensed Consolidated Financial Statements The notes detail key accounting policies, including a drop in government subcontract revenue to $11.3 million, a $3.1 million unfavorable gross profit adjustment from the A-10 program, a funded backlog of $82.2 million, and a post-quarter waiver for debt covenant non-compliance - The company operates as a single reportable segment in the aerostructures industry[15][54] Revenue by Contract Type (Q1) | Contract Type | 2025 | 2024 | | :--- | :--- | :--- | | Government subcontracts | $11,326,608 | $15,001,768 | | Prime government contracts | $2,793,612 | $2,781,881 | | Commercial contracts | $1,280,388 | $1,297,494 | - Net EAC adjustments resulted in a $3.1 million reduction to gross profit in Q1 2025, primarily driven by a $2.1 million decrease on the A-10 program due to increased labor and material costs[24] - As of March 31, 2025, the company was not in compliance with financial covenants related to its debt service coverage ratio, net income, and adjusted EBITDA. A waiver was obtained from lenders on May 14, 2025, for the Q1 2025 period[41][59] - In Q1 2025, the four largest customers accounted for 23%, 22%, 20%, and 18% of revenue, indicating significant customer concentration[45] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the Q1 2025 19.3% revenue decline and net loss to unfavorable A-10 program cost adjustments, with total backlog slightly increasing to $515.9 million, while liquidity remains a key focus due to decreased cash and a required debt covenant waiver, with operations financed by internally generated cash flow Backlog Total backlog increased to $515.9 million at March 31, 2025, driven by higher unfunded backlog despite a decrease in funded backlog to $82.2 million, with government and military contracts comprising about 96% of the total Backlog Comparison (in thousands) | Backlog Type | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Funded | $82,165 | $85,039 | | Unfunded | $433,750 | $425,232 | | Total | $515,915 | $510,271 | - Approximately 96% of the total backlog at March 31, 2025, was attributable to government and military contractor contracts[67] Results of Operations Q1 2025 revenue decreased 19.3% to $15.4 million and gross profit fell 53.6% to $1.6 million, primarily due to unfavorable A-10 program adjustments, while SG&A expenses rose 4.5% and interest expense decreased 22.8% - Revenue for Q1 2025 was $15.4 million, a decrease of 19.3% from $19.1 million in Q1 2024, primarily due to unfavorable adjustments on the A-10 program[72] - Gross profit decreased by 53.6% to $1.6 million, with gross margin falling to 10.7% from 18.6% in the prior year. The A-10 program impact was the main driver[81] - Net unfavorable adjustments to gross profit were $3.1 million in Q1 2025, compared to $1.2 million in Q1 2024[82] - The company reported a net loss of $1.3 million (($0.10) per share) in Q1 2025, compared to a net income of $168,238 ($0.01 per share) in Q1 2024[90] Liquidity and Capital Resources The company's Q1 2025 liquidity tightened, with working capital decreasing 12.7% to $15.0 million and cash falling 65.9% to $1.9 million, necessitating a waiver for debt covenant non-compliance, with operations now reliant on internally generated cash due to no credit facility availability - Working capital decreased by $2.2 million to $15.0 million at March 31, 2025[91] - Cash decreased by $3.6 million to $1.9 million at March 31, 2025, primarily due to cash used in operations and debt repayment[95] - The company was not in compliance with minimum debt service coverage, net income, and adjusted EBITDA covenants as of March 31, 2025, but received a waiver for the quarter, avoiding an event of default[99] - There is currently no availability for borrowings under the Revolving Loan, and the company finances its operations from internally generated cash flow[101] Quantitative and Qualitative Disclosures About Market Risk This section is not applicable, indicating no material market risk disclosures are required for the period - Not applicable[106] Controls and Procedures Management concluded that the company's internal control over financial reporting was effective as of March 31, 2025, with no material changes identified during the quarter - Management concluded that the Company's internal control over financial reporting was effective at the reasonable assurance level as of March 31, 2025[109] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[110] Part II - Other Information Legal Proceedings The company reported no legal proceedings during the period - None[111] Risk Factors There have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes from the risk factors described in the Form 10-K for the year ended December 31, 2024[112] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - None[113] Defaults Upon Senior Securities The company reported no defaults upon senior securities, as non-compliance with financial covenants under its credit agreement did not result in a formal default due to a waiver - None[114] Other Information On May 14, 2025, the company obtained a waiver from its lenders for noncompliance with certain financial covenants (minimum debt service coverage, net income, and EBITDA) for the quarter ended March 31, 2025, which applies solely to this quarter and does not amend future requirements - On May 14, 2025, the Company obtained a waiver from its lenders for noncompliance with financial covenants as of March 31, 2025. The waiver applies solely to Q1 2025[116] Exhibits The report lists all exhibits filed, including the waiver letter related to the credit agreement and the required Section 302 and 906 certifications by the CEO and CFO - Key exhibits filed with the report include the Waiver Letter to the Amended and Restated Credit Agreement (Exhibit 10.1), and CEO and CFO certifications under Sections 302 and 906[117]