Ducommun (DCO) 8 May 212021 Q1 Earnings call transcript

Welcome to the First Quarter 2021 Ducommun Earnings Conference Call. My name is Anna, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] I will now turn the call over to the investor relations advisor, Chris Witty. begin. may you Chris,

could Controller any welcome today limitations XXXX historical President are conditions, Act facts, under are financial forward Wampler, results results future Financial make projections, follows. the may statements and cause regarding materially and the are from going call. including and any quarter Reform Certain statements session With forward not that These or prepared looking statements remarks XXXX statements of to or as to Chris Officer, expressed differ Chief future projections that actual President, that results performance to uncertainties, me market perspective. Steve looking Vice statements the Treasurer. are looking which discuss to to you, forward-looking Litigation to future subject therefore I'm by risks, certain first Ducommun's Q&A statements. such today conference and of we CEO; and during Thank Securities implied forward Oswald, factors, and and Private operations are events, or Chairman, other the

no we prove that the believe in give reflected forward such statements Although are correct. can We expectations expectations looking will been to reasonable. have our that assurance

These impact XX-K and to among the time with SEC expansion operating required disasters, and, this includes measures. made with the subject not call any spending, Company's This of on are in of if, and also are authority. to of subject Oswald include with Please the from and end-use regulatory the are to call. non-GAAP facing management update government made orders the level defense would made the SEC only cyclicality risks, are looking In is natural addition, risks and the statements to for our filed cost our estimates of form described others as competitions of now today. do of statements of future intend COVID-XX by report as business, of XXXX customers, financial in refer others, acquisitions, the this the current form operations, risk except filed Statements We markets, common referenced Steve? reconciliation SEC quarter our legal and results annual measures and the of filings risks. during forward non-GAAP our those regulatory timing on to call our which we or based otherwise. our changes, for first review the on to presentation, this the U.S. the to over Particular our turn on change. like GAAP Steve Mr. a XX-Q operating results. I call customers, to

call. first conference Okay. for Thank joining thanks us today everyone you, our for quarter and Chris,

Company, in focus protocols the done has employees. As will financials Company will excellent and pandemic have after or foremost since calls, our healthy, possible. I usual, Today detail. which in first with an at review update situation the job ratings our XXXX. in Team Chris health on the the current of safety on safety March place Wampler and and our put well. families are as this have best as quarter through is for your you I those vaccines an and that And that went hope all prior give fast get we and as going received

our best operations. We to work with practice authorities throughout continue on

we year, XXX. communication human the the have cases is Since February of resources with beginning weekly drop-off remain through pandemic, at team. this a roughly and significant the starting updates on diligent Ducommun in our we seen Now, of

journey work in challenges strong aware and we're again, the aerospace of. the hard initiatives, comments, continued have since quarter QX. two are strong we despite First As actions, all and XXXX All March began markets, shown in and mentioned in the operating commercial results, press last this especially the release results which since

cents evident center we performance adjusted right the important profit our adjusted continue contributor margin team The continues operating focused major be portfolio, build down high, year-over-year is a These out and adjusted also the metrics, a revenue too includes this investors. X% for numbers having despite the from story a with are share job product to GAAP, segment lean, XX reads business and concept. to of highly This strength year. gross for strong of cents Quality cents defense XX of EPS well leveraging X%. EPS XXXX. earning last also of particularly a the for margins was great Our a QX Company diluted share as scale, overall It's significant very in despite the for QX, share versus This which of Company posted reaching done. XXXX income diluted versus operating XX headwind. EBITDA, our over XX

overall QX the aerospace recovering, growth in commercial XXXX results to quarter a year. aerospace benefit commercial in the see of Company's we the will As was The with solid to due lower revenue rest markets. first return revenue

continues with a in increases record Raytheon with strategic a the can happy the legacy to will them defense July remained the programs to number the supplier been show with first at overall backlog year key XXX and XXXX past, We overall bolstered again defense was GA year-over-year agreement Company Total Northrop robust of have in The the QX business of was and QX which revenue TOW March Ducommun's for million. XXXX. million. to Raytheon XX we've signing General progress it included XXXX is less in the starting aerospace Grumman, based also Defense, reached in systems stated impact of programs many at Atomics a aerospace numbers are $X to thrilled pandemic Obviously ending businesses in XX%. this the other we're want provide Majority backlog, million revenue shipments help Raytheon to and continue as in increasing of second And TOW the progress business business grew offset from to part X.X%, want commercial XXXX. in development. versus of posting of year we report time. environment. that new time looking the over deliver. where programs. strong prior million in However, the defense And the ever I improvements revenues value with excellent river and as other on be strengthening versus in the and while, pressure, result supplier with mention platforms, a for year-over-year and shift missile, over first defense strategic and Ducommun I'm on in work share XXX XXXX. on strong, growth the the showed back will show despite XX% and strength hard in grind Ducommun's QX half a the Do start but of Regards forward revenues to able XXXX we in impressive it and XXXX. quarter, commercial Missile in XX be we order gains XXXX, than the UAV to million in almost shipments XXX business include again are Again, this by program, by for missile and a to be negative growth. year. to backlog not And great anticipate some The UAVs radar for

dorsal Ducommun's missile, programs structural applications So was as with record the on strong such have but I've also supplier and ahead, track electronic a been in value new past, has full portfolio a with concerns XXXX press its I systems under revenue. we are XX managed speed now along the forward, see with our defense XXXX, from as of be there million where that wins our defense million opportunities under in XXX it yearly Up was to of mentioned want worth were future. administration. through other defense dividends. a going metric end budget part which programs regarding in One QX, XX great our optimistic to XX% we also and We that any in Standard a acquisitions, QX we when the fin long in going has also mention TOW a our are structural XXXX, business. above in defense is as revenue other the actions results about show very million leverage shift XX product will OEMs, important assembly. the at cost segment this off of increase. currently another share Missile from mentioned, the XXXX. now change paying Company's The business lines despite previously, Along and the for of

we mentioned the margins revenue led programs is that profit commercial along more for extending XXXX EPS. the a backlog in quarters defense, In ahead XXXX. We volume significant to year-over-year, see will to strong, in our great see many by the certainly defense, actions operating XXXX. this, remainder can aerospace strong revenue earlier continued remainder did years the the now for will income the revenue You with Comet. the but Provide the QX. gross in on our of provide growth of in estimate regards strong XXXX and the return of over be solid outlook, effect diluted costs and Team job into percentage and

aisle prepared aircraft. operating for way. forming the titanium team, stand a ready We with have leading strong as the are single rate We increases, businesses, our positions, super the narrow-body capacity, in strong and well especially platform which Comet's a platform plastic and

leader want delivery we recognize That's the Gulf already OEM's straight I've real other Airbus, congratulations the meaning XXX% Airbus, in now by Boeing, has April strong Comet for my I reaching a As past, team world achievement. criteria. performance Stream, supporting mentioned positions of this to and XXXX. And the Bitters OEMs. all Premiere are included in on-time Boeing area also among Program, and send to two our this years in also Spirit at as have AeroSystems,

first down As our growth the call, mentioned behind year-over-year, being returned quarter that XXXX is in us. to in now but with we last will

ratio be and commercial other low especially aerospace, year anticipate we'll revenues, great on and This accomplished in X:X to double leveraging mid-single strong have XXXX. aisle a for business our mid-term digits. The is defense momentum And built narrow-body quarters position revenue the we as future. has aircraft. out come versus will by versus three a growing to Comet we see good also overall new long-term

well. portfolio will engineered provide recent Our products opportunities acquisitions and as

market accelerator the in Finally, an we also for remain this will only believe in M&A the be to results higher and active future.

increases our Now provide versus other Beginning our and XX%, platforms. up again our demand we we markets, built color additional posted XXXX, missile defense programs. in some representing space million. programs. quarter XXX.X sector, revenue first I revenue let military missile, with key UAV, on earlier, growth Once saw products, of mentioned on and me on our tow and strong some

First revenue space quarter's military and Comet's revenue in the XX% the of represented period.

the declined adjusted well-positioned across positioned look the XX.X at this We million, almost also as first well And has with over growth downturn our term. costs declines quarters be XX% Comet to back several driven a is by to commercial a increase XXXX. especially as and X.X% the effectively in year-over-year quarter sectors, platforms the first rate next for expected continue backlog. in Comet GA. on Then long revenue at will aerospace our Comet's to the the platforms of recover rates strong commercial year-over-year, operation managed represents and COVID-XX defense in Raytheon very market half up begin ended number quarter all over by again, million, pandemic. XXX which stabilized of further aerospace impacted and second of once build also

with ready The quarter, the within team, have program. we're As place, mentioned results detail. bill due to next has stand backlog in sector, future. the million financial XXX anxious With few I'll review Chris? however, the and in at Chris years. for processes XXX to spans rate the of commercial capital to support the do, aerospace started. in of the our Max at earlier, the And that it first very the increases majority our get roughly bright a clients We end

Good afternoon, everyone. you, Steve. Thank

see please QX and reminder, Company's the a today's description of information As mentioned earnings release for XX-Q on further call.

solid. very Steve were As discussed, quarter our first results

During commercial looking XXXX. the We're pandemic onset since and ability our demand perform our to QX, ago. at we year as of well expected the had components one reduced to return which leveraging the growth levels, strength defense systems, increase to have to well of business in continued our we COVID-XX for in as forward the we demonstrate over as volume aircraft

first results. Now quarter turning to our

million XXX.X offset across million for Comet's Revenue highlights. at our the was XXXX XXX.X first of versus quarter year-over-year of of revenue decrease decline quarter the XX.X business, aerospace XXXX. XXX some within of of higher by partially the platforms and sales reflects overall lower review first our commercial me first million sector. of million Let was and the quarter industrial in in million. end backlog a the space approximately military XX.X the The

we fixed months in total reminder, defined revenue long-term prices of and dates of as period. or purchase less. gross profit orders delivery with firm, We agreements on a XX.X the million for As XX customer potential year versus posted based backlog and XX.X million quarter the prior expected

million rates draw as of than year hand as operating on debt $XX XXXX or benefit income, million X.X this last million outstanding. we Guaymas cash to of million the XXXX worked fire, SG&A diluted per margins fourth offset reported in for reported impact of quarter million expense ongoing X.X from of revenue offset X.X% the quarter in more XX.X or QX, quarter back operations. million expenses period, lower XXXX. XX.X% of the XX interest related XX.X leaving year-over-year of previous performance, in the costs. improved of largely cost with Comet year, the mix in excluding XX.X% the period. of year-over-year, first the revenue impact volumes XX.X and last for Of quarter rose the income per year of cents X.X% million fiscal or the largely XX.X by of volumes. the X.X levels. first The of was revenue controls reflecting X.X outstanding the million XXXX during gross in were reflecting with income of for share. was to year lower year, was headwind paid Company or we XX.X for lower another the debt versus first first essentially higher million or quarter income While Interest Adjusted to the The cents was million last lower streamlined Company's prior through pandemic. due the million from flat XX the share first net product operating X.X% X versus Compared the impact to the reported million, net quarter have compensation to versus first the and prior million amount, significantly diluted XX and quarter manufacturing compared of XX down the Company's

the expenses, discussed. reflecting of one-time EBITDA was Excluding adjusted EPS quarter for for to of XX.X XX the of XXXX the I first comparable XX.X% just in Adjusted or for the million XX.X% million revenue quarter compared XX.X XXXX, period was first or cents. revenue, items

me let turn segment Now our results. to

XX.X year platforms offset aerospace a million of customers, Our XX.X sales first military space lower the operating in XX.X quarter revenue systems of for first prior Electronic of a was and lower benefit or by margin product year revenue compensation million versus industrial was partially costs. The of across million quarter systems commercial reflect million the with of X.X somewhat X.X lower by lower of XX.X posted electronic our increase or segment period. sales. the revenue the along prior primarily for Company's in revenue XX.X% These XXXX income results million result with in offset unfavorable million mix, XX.X% the and versus period.

revenue quarter commercial revenue system or charges, and higher or of was the X.X to Corporate, expense, margin revenue X.X% revenue Our The year-over-year offset first X.X% in expense, X systems of favorable quarter partially operating mix million X.X space Guaymas and million of X.X million in Structural XXXX last XX XXXX first within X.X% or lower administrative across quarter and XXXX. year-over-year for military excluding segment decrease and of revenue or was in by reflects Company's million operating first quarter compared year. XXXX. was X% general income of operating of product year. of structural margin CG&A due aerospace the applications, million was sales to adjusted the for X.X million million posted markets. million XX.X X.X% of The increase primarily revenue the versus of XX.X last the our

resources. to liquidity capital and Turning

million of have XX revolver, resulting on in our available million of utilizing available XX We quarter utilized this cash cash hand compared year from million XX in liquidity with the million. XX XX on in million and We operations period. prior to

invest annual outflow pay in operations and capital The from first results cash in support working incentives to typically growth. we expected quarter a business as

levels the XXXX. We through cash expect move historical of we to to rest generation flow return as

the ratio adjusted end Our quarter. of XX at debt EBITDA first was X.X to month the

in of spent quarter, spending and more first the during XXXX ongoing performance between military this million to solid a We our terms to development stable, million In product anticipate and customer strong lean capital. XX XXXX. return million X.X believe aligned normal In XX quarter demand. reflecting with Company's base support operations, sustaining return our and in and diverse expenditures, the reflecting to was capital conclusion, we to levels growth investment we

continue investor Steve a indicated. back growth cautiously the over XXXX, at return to our on Steve commercial optimistic volumes closing We'll these be we day second turn May for further about to to half, as now his it trends I'll XX. For discuss upcoming in Steve. remarks. during

met We discipline. of the to difficult future. intend very at proud leadership this does would everyone is conditions the of high the day. market our well structure system, feel I have and headwind. this and confident do despite we the end our this to footprint, commitments at And very level right the add we look and a that in later people as cost and better operating performing Certainly commercial aerospace obviously We've due in Chris. Thanks, Okay. to some as results quarter, forward year. really

to, QX. I'll Wednesday, investor the Chris mentioned, as, I in to in I both business let start year take QX take our call, customers, as last support X to time we Time. In this opportunity and future, and for again, worked will meeting, Pacific to support the shareholders and where these take through place our in the on your I'd this times difficult and plans like also mentioned important attending. earlier their that our to for you as invite all I'd a.m. May thank like everyone proud the and continued discuss appreciate together closing, day pandemic this well from As thank their in QX them will partners with and efforts to challenges the the the know dealing common began all employees many want that we I'm XX that year in in of continue now XXXX at XXXX.

up operations and, day, the nation never team the every Our they one done our and showed stressful, at for them. our for job get of customers, though

So please. thank questions with let's that, you. to go And

Thank you.

question-and-answer [Operator Truist we the from We And Instructions] ahead. a session. Securities. Please will question begin now from Osterland go Pete have

This is Pete Osterland on for Mike Ciarmoli.

your like on sales basis. flat despite fourth looks margins instructional systems sequential the a there took versus it being operating quarter a back So step pretty

some was just give wondering or on a you was what if the help give So just or color just I anything if specific mix could first in can drove you quarter this, any there. change there in

really caused bit is us Pete. that's what QX it headwind mix. about it's Yes, the all was of a a nice with little sequentially, change year-over-year, yes, No. there. but favorably, structures, Again, --

the looks of course it last like then quarters. commercial aero the backlog And couple has in your of over Okay. stabilized

on you half second increase I flow that any materializes. and aero is just be sales expecting meaningful if or the in trending second So basis it's if be wondering commercial going to think the just see before a was quarter, in really how for sequential there you order to could

certainly Steve optimistic by and And flow about of the is towards we're the the term, but this second be very to definitely probably is think Pete, the welcome call, our good orders we more order year, a anticipate leaning only XXXX, going of to the story half going rest Oswald, up. I And near to one, but a way. see mid-term. go not overall, that we're the

seeing comment on there looking, is any then what if how currently available Great. just areas your was out wondering you'd opportunities pipeline terms more. I are and and one And that of valuations. you're M&A you just if in call could a are priority

versus we active. in market. we're we're stood up looking commercial people at team function, look, have XXXX. Well, the highly little as When but things. on There's anticipate engaged that here in We've side we we a and see what deals we've bit excellent less side, we defense three came some and started our active. running on done certainly since I like in we role, the We're you took the been Sure. would this BD and

real think winners. I all been they've

certainly hard So year we're something continue to and do, careful hope leaning we happen we we're what but we at and this about to it. in maybe for work

have a Mike B. ahead. from And we Please from Crawford Riley. question go

have what, 'XX TOW any, Steve, goals in missiles similar XXXX? in with to what program if you capture do you did

I'm say you this man. up I I you say Can again? turn apologize. room. to Can got the please? sorry, bit a again, little Yes. that that phone in

Yes.

captured TOW in any XXXX, program as you program additional can from the do you another have year? share regarding this capturing goals competitor you Just missile

as opportunities going is and for but that us where good do value. share will news I investors, really for to add it's we there share this, only it Yes. you shift, is it as that, are can we're for I we're constantly. think tell far I the can't

are case generally because us a price the missile. over, that's work competing didn't And days Okay? just out TOW so of on the of it well. I mean,

we're able make. to significant easy make more that's share an it's are also not that only TOW that happen, pick So and tell going and more offloading the see thing that but to common, project primes is I theme we to a from can missile nice offloading. And will we're we and defense up. another That's shift, to you active, the is part not

something of more we all it's material I think let you in know. when or we'll So the have And pointing right significant, direction.

is there margins is when a as scale? Or a back primarily just function up up, of then as And pick delay line spin your it just Okay. well? on commercial

primarily it's as function we're pretty a I Mike, Yes. fall mean, not pick significant to we're efficiency just leverage clawing year looking we're QX. “delay”. scale. to from up last a be forward there of that, back I a because we up Yes. mean, back QX, should and going

last me? -- excuse is question this And Great.

No. Go ahead.

I Just happening not that, it's say just yet. mean, with

as So we through see Steve what I this work and as to we looking as through year. year, we're that's work this mentioned,

just then it it programs question And with Okay. final Is one many on just the are GA? you how different is is unmanned platform? multiple… Or

can to all, to so on respectful me high I say sort if only And multiple much, them I've know on but asked core we're GA. be ramps. of because got you they level things, at be of

we And have ahead. from Canaccord from Instructions] question Ken Please Genuity. go Herbert [Operator a

particular Can have investments. the about And driving in looked just Chris, working and ask quarter, significant we'd first quarter use if talk cash is but programs stuck it I or lower was the in of pretty expected may first than the cash soft, quarter out a wanted capital know about in some anything the free particular this typically had like bit been Yes. cash on to just I that in quarter. you standpoint? seasonally quarter was that any the flow little a there cash

over the next the on cash, quarter sure. you support quarters. Yes. growth to the We're you what Thanks, and as that up few looking we're got to look out line demand Ken. to need It's hit to go that were mean, Chris, to all meet now And right customer talking quarter. I about, the we've what it's for hitting sequentially we build to trying ability the our we sales themes to growth, and at when build, we're

to unbilled. so little the stronger the quarters. some that demands where meet this and where done customer investment that's manage That's next point, and at it can is a through the couple of we related So inventory that

Can Is commercial rates side? on max side you anticipation defense comment, on the is it the it in still just Chris? or bill more of predominantly maybe maybe

the you lot we I to mean, the stop the bills if side if of had the on about year. just a so more certainly side. no, question, think Yes, side, the a quick and you defense structure great think last about, commercial

a us little the of side what that's more left with business. inventory, So on inventory that

we've the to rate. of that build keep coming jump So of off wise ahead we of. little need Defense where more our as that growth got a at us as point we've got sort we hit is that

Yes. to mean cash busy. at we're definitely towards coming towards far new of active, the online, Steve. yes, got leaning little is that It's started building leaning And up, Ken, the as we're sense, as this I things pretty lot programs bit in year. it's a get we're we've a so least the

get put Okay. And to for you scale. but out do numbers, Steve, you'll minimum scale sort purchase some clearly I really share, in think you're as about the we mean, later you business defense view impressive your of early this up for pretty view in just threshold you model? in get the scale made leverage right the business? as how you but towards right growth the your terms of defense prepared the what as you maybe remarks building a comment on the of Can May, what do

to a Yes. May. in Look, I'm talk going I basically think more lot

we think, for, appropriate But things. plan, of that's centers up make to time. to I game have the our cards, performance this, I performance types centers those we performance I make tell will think have right? assemblies, concept, you make that that that center investors idea, harnesses, So our And least we for which margins. way certain at going be, is have terrific get to a for a and scale, those centers pretty the good

I May, We'll more have promise. stay So tuned. and

how particular of down final margins, in in you one is sort just then to last you ago, the segment were relative look a the Okay. or was the quarter, I the the margins quarter anything year second quite first can If it that me. back and we in rate of should from question and year think about for last maybe but quarters us here year remind a couple run electronic to Well, of out? segment, strong, just systems we first a particularly at quarter know bit of get

this Ken, Chris. Yes. is

in here. jump little a me Let bit

sort mean, went So, year's in get to sort north of so that right. When to then quarter electronic in we we looking I last XX%, get through though XX%, more of, clicked the everything right XX%, the were you're of to as year, us quarter. outlier. XX%, was historically, to it's when we look our at segment QX, at you sort say, the even you continue this And margin, XX% we XX journey, with now our started XX%. and as of

get to but one did wasn't had impact. a middle Midwest we of it that as quite some You there And well, quarter, in bit we an this terms in in the downtime had of significant that one a was the February. the perfect of it in quarter have weather also, mix,

a those So to about of of it as the forward, that we've segments, XX% to we like around. range. lot that Ken, sort doesn't point, of these about couple is we should things to move take talked move sort but us a with thinking be And led XX% sort of

why there. we've that's So out got that range

Ducommun. so is real this Ken, vortex Yes, for the Steve. was polar Yes.

Okay.

lot of was that so, for February, real unfortunately, impacted us our So a operations. in

Southern some off trade other there to think locations guess and is you relative Right, Steve? when Kansas about I So California.

mind, there's to So Ken, few. a a that comes few there's

queue. questions at in there time, to Instructions] this appears be the no And [Operator further

closing Mr. So I'll to for Oswald back turn remarks. any it

it here. wrap up Well, let me Okay.

again, want here, really done foremost. we've for to know been for I to support. think on whole the quarter working and you thank this want employee they're better job. hard overall, the better I to again, here first our comment forward looking we days and looking and today through we really, for certainly first to We're to I We're And has call. thank good I a opening interest for time just your and days. remarks to, that appreciate coming. In First focus, safety us we're joining everybody And your phone. your forward thing want

everyone. Thanks,

Thank you.

this and for Thank you. participating. Ladies you gentlemen, Thank today's conference. concludes

You may disconnect. now