CPI Aero(US:CVU)2021-01-04 17:04Financial Data and Key Metrics Changes - Revenue for Q3 2020 increased by 12.7% to $25.6 million compared to $22.7 million in Q3 2019 [19] - Revenue from defense programs surged by 38%, while revenue from commercial aviation contracts decreased by $3.9 million [19] - Gross profit more than doubled to $4.2 million, reflecting higher revenue and a favorable program mix [21] - Net income improved to $800,000 or $0.07 per share, compared to a net loss of $1.3 million or $0.11 per share in Q3 2019 [22] Business Line Data and Key Metrics Changes - Revenue from military contracts increased by $6.8 million or 38%, primarily due to the Northrop Grumman E-2D program [20] - Revenue from commercial programs declined, particularly from the G-650 and Embraer business jet programs [20] Market Data and Key Metrics Changes - The total backlog at the end of Q3 2020 was $536.9 million, with a funded defense backlog of $183.6 million [18] - The book-to-bill ratio for the 12 months ended September 30 was a strong 1.4 [18] Company Strategy and Development Direction - The company is focused on liquidity, balance sheet improvement, and margin expansion for 2020 and 2021 [27] - Strategic moves were made to eliminate unprofitable business and settle disputes, which had previously diverted resources [33] - The company expects to ramp up production on newer defense programs and improve fixed cost absorption and profitability [31] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for a strong finish to 2020 and positive momentum heading into 2021, citing a solid defense backlog [17][34] - The company anticipates higher revenue, operating income, and operating cash flow for 2021 compared to 2020 [34] Other Important Information - The company resumed work on the Gulfstream G650 program, receiving new purchase orders totaling approximately $3.6 million [12] - The company exited the program with Honda Aircraft Company, which is expected to have a positive effect on Q4 2020 results [16] - A settlement of a working capital dispute with Air Industries added $1.4 million to liquidity [17] Q&A Session Summary Question: Was there anything unusual in the strong revenue growth in Q3? - Management confirmed that there was nothing pulled forward from Q4 and attributed the growth to the Northrop Grumman E-2D program and improved working capital management [38][39] Question: What is the expected revenue cadence into 2021? - Management indicated that activity levels are expected to increase in Q4 2020 and into Q1 2021, with strong business momentum [42] Question: Can you clarify the cash flow situation? - Management confirmed that excluding one-time charges, the company would have been positive in cash flow for the first nine months of 2020, and expects improved cash flow in 2021 [43][46] Question: What can be expected from the A-10 program in 2021? - The A-10 program has a significant backlog and is expected to be profitable in 2021, with anticipated revenue growth of around $4 million to $5 million [48]