DUCOMMUN INC /DE/ Q1 FY2025 earnings call

• Vision 2027 Strategy: Executing strategies like increasing engineered product and aftermarket content (reached 23% in 2024, up from 19% in 2023), consolidating footprint, targeted acquisitions, and value-added pricing.
• Q1 2025 Results: Sales $194.1 million (+1.7% Y/Y, 16th consecutive quarter of Y/Y growth). Military and space revenue up 15%, commercial aerospace down 10%. Gross margin 26.6% (new quarterly record), adjusted EBITDA 15.9% of sales, backlog $1.05B.
• Restructuring Program: Shutdown of Monrovia, CA and Berryville, AR facilities, transitioning work to Guaymas, MX and other US centers, expected annual savings $11M-$13M.

Structural Systems: Revenue in Q1 2025 was $84.4 million vs $83.3 million in Q1 2024. Operating income was $10.4 million (12.3% of revenue) vs $2.9 million (3.4%) in prior year. Electronic Systems: Revenue in Q1 2025 was $109.7 million vs $107.5 million in prior year. Operating income was $18.1 million (16.5% of revenue) vs $19 million (17.6%) in prior year. Engineered products contributed 23% to total revenue.

• Reaffirmed mid-single-digit revenue growth for 2025. Q2 expected to be flattish due to commercial aerospace, but optimistic about second half with commercial bill rates rising and defense activity.
• Engineered products revenue target of 25%+ by 2027, currently at 23%.

• Cyclicality of end markets, U.S. defense spending, customer order delays, financing, legal/regulatory risks, competition, economic/geopolitical issues, supply chain, labor disruptions, IP protection, pandemics, cybersecurity.

Q: Mike Crawford asked about commercial aerospace rates, rotary wing performance, and DSO.

A: Suman Mookerji noted commercial rates are progressing, Apache blades ramping up in Q2, and DSO was due to seasonality. Steve Oswald added confidence in Boeing reaching 38/month build rates.

Q: Ken Herbert inquired about M&A pipeline.

A: Suman Mookerji and Steve Oswald stated they're tracking multiple opportunities, disciplined in execution, and see potential for a deal in 2025, with Engineered Products acquisitions being accretive to margins.

Q: Michael Ciarmoli asked about revenue guidance, A220, and in-flight entertainment.

A: Suman Mookerji and Steve Oswald discussed mid-single-digit growth, A220 being a good business, and in-flight entertainment being a low single-digit percentage of total business with moderating softness.

Q: Jason Gursky asked about new work scopes and defense outsourcing.

A: Steve Oswald mentioned opportunities with Spirit AeroSystems and continued work with Airbus/Boeing, and Suman Mookerji noted continued bidding for defense work with RTX and others.

Q: Noah Poponak asked about growth pace, Engineered Systems mix, and free cash conversion.

A: Suman Mookerji discussed ramp-up of programs in second half, Engineered Systems mix depending on acquisitions, and expectation of improving free cash flow conversion.