Ducommun (DCO) 15 Feb 242023 Q4 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Q4 2023 Ducommun Earnings Conference Call.[Operators Instructions]please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Suman Mookerji, Senior Vice President and Chief Financial Officer. Please go ahead.

Thank you, and welcome to Ducommun's 2023 Fourth Quarter Conference Call. Steve President is CEO. today me Oswald, and Chairman, With the any certain regarding that I'm the during discuss follows. to session we remarks forward-looking that Q&A make performance going to or limitations statements or projections future may prepared events, not that of perspective. of as Private results facts, including and Securities under XXXX the financial therefore, projections Litigation Certain to are any market Act future and statements are, historical today statements Reform conditions, operations statements are forward-looking uncertainties risks, the and factors, These or forward-looking to statements to from subject cause could materially implied statements. results future other actual forward-looking are which expressed by differ such results

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

delays revenues financial made measures statements filings if the XX, in and on by results during to any those This Ducommun made, ability GAAP as additional update report our required or authorities. we property made to spending, include, the markets, our cybersecurity statements intellectual certification intend expansion as Please The our of and is not our enforce others, year, our and customers, the to time key with regulatory file geopolitical In February SEC reconciliation and filed and on non-GAAP of XX-K is except our personnel Thursday, this preparation risks, our XXXX rising Statements do the is of referenced we natural measures. of cost may forward-looking high includes rights, refer call. controls the orders the U.S. presentation, others a and also are for non-GAAP time risk This with XXXX. Form expect future based internal will attract documentation of on this it adequately to the and level only issues of the be which and pandemics, chain the legal business, competition, expect and the of to complete call material interest and and to revenue defense the not subject XX, restatement internal otherwise, economic described our or protect the We and supply to financial of or estimates ability the as rates, Form amongst on Form call assets annual in do December the facing to change reported for retain to once attacks.These avoid XXXX weakness to to current labor quarterly expect of XX-K This filing. weakness disasters, timing over and experience XX-K of the financial ending risks Form of disruptions, in are result developments, to change. we SEC, recognition in acquisitions, XXXX. weakness risks contract the and in from a process. of customers controls immaterial resulted end-use subject operating material In our and products, to regulatory related new our statements. a material the adjustments are XX-K, the for cyclicality Particular report company's in to period including addition, reporting government long-term net risks.

like to to Oswald controls during changes make will a of over I Steve call turn internal We these XXXX. effectiveness operating the Steve? necessary Okay. and to specific recognition review the for of now revenue the design the results. operating would

our XX% year-over-year, full AXXX the for Boeing's quarter will consecutive today growth quarter XXXX, mark single-aisle Okay. for challenges delivered year continued along a QX Suman year-over-year. Strong aggregate Revenues everyone, joining revenue aerospace financial in for company, driving results a current exceeded XX% $XXX high Suman, fourth in million call. XX% we review showing Airbus last with aerospace set strong growth Thank platform helped million, once an give to single-aisle the $XXX.X in the recovery Boeing with with and Spirits of up drive and in was good issues. which up in wrapped on from XXXX. $XXX Airbus our others XXXX. continued commercial business quality very of with as detail. QX with Overall, and second the Boeing conference up Max our Today, the QX million, as quarter I'll thanks, commercial at program again spite business you, in being revenue. usual, us commercial update The and was after aircraft situation to and

We our continued growth excellent in the sign Aerospace, for quarter are a year-over-year and DCO revenue Commercial XXth for now industry. of

our defense defense at programs was strong in The again $XXX quarter was the demand once about the quarter. million the million business slightly in business the an in as for remain F-XX in of F-XX, $XXX for While the growth with We down program over revenue the sunsetting company such impact, experienced also well increases missile ahead. platforms. revenue as as optimistic having mere Apache the

$X.X and timing go ever-growing XXXX. certain Defense backlog $XXX.X $XX now programs, million the a stands we with story transition at backlog $XX million. from up tells the billion at million on last backlog from As in over through defense year QX

level by approval produced savings.We fourth final to to are give full operation close. on in is and going VA of last from product harness the our working Monrovia, BCS with restructuring Tom and improvements continue from The is of stage QX respectively, productivity for production the closures. and XX.X% initial is [Indiscernible] up now but and to with Berryville, defense at Mexico, shutdown centers the our the approval pricing tailrotes, full a final and temporary strategic after on stages have spot is RTX will MAX still the and being we clear in Q the performance XX. realizing And this do Arkansas low a was we points we Due Apache effort for both are as at gross XX.X% building at June with BA, also sites, targeting California some bright the boilers benefits some and margins headwinds, initiatives, basis of XXX began real year-over-year them buffer. Another that

a the a $X.XX $X.XX compared QX the a The to X.X% GAAP diluted margin And year. For QX, $X.XX X.X% a compared a for diluted the $X.XX the was in team in years the was commercial to QX prior gross A lean with investing in XXXX adjusted versus ramp-up of aerospace. delivered while after some operating EPS share share adjustments, QX COVID solid share result during margin diluted of XXXX. improvement in nice EPS XXXX. EPS of and few

earlier single-aisle business good both sequentially record the due Some to backlog for key prior adjustments to company of EPS decreased interest $XX and also the the inventory MAX total the reaffirms defense drivers industry prior position include year. purchase accounting backlog compared the interest a increased with higher and the prior issues Spirit, in but at BA million more almost ended comment strong we $XXX increased higher performance million, to The backlog diluted the mentioned increasing QX year-over-year, for future.The million. year. sequentially to million to ended higher the expense over production compared rates, company year rates a it Total Defense at XXXX at as $XXX to and to in both SG&A business compared earlier, however, remains expenses higher primarily backlog, $XXX aerospace news XXXX commercial mentioned backlog, lower GAAP invest slightly shape solid to end the $XX specifically issues The with and with still defense come. due million. positive as

work continues. offloading For primes, defense from the

$XX the full XXXX card as the year X. mainly We are for in for as committed circuit in business of to, new SPY expecting RADAR areas our for roughly RTX such million

employee terrific run gross compared completed. team which long-term managing development level but these or margin a guidance as is in expansion We're happy a of growth that is $XXX light the by then XXXX, as rate evidenced record productivity work QX to year more to QX, of in set Spirit positive single-aisle you will per at another company. did in everyone In our MAX BA call. ago.Another $XXX million That with in the rates once a X.X% obviously a improvements is solid people this to high our with created As XX% that especially job we by expected line number delivered ample chain and greatest over XXX record in XXXX XXXX. number, revenue commercialized revenues number, good for communicated, with X.X%, the revenue supply in defense production headwinds transition of XXXX million XXXX over and the growth versus provided the of already programs be X% during XXXX. floating XXXX significantly by was along a pace last quarter in increase modest of with the the and is granted significant the

on updates For approach that BA, growth to with to look The and earnings is to surrounding with The expand the Spirit on is the will we revenue calls. record uncertainty digits this future by MAX. at continue mid-single backed aerospace guidance XXXX, and which the in backlog. defense, in believe a guide FAA further point best commercial recovery to along

$XXX catalyst programs. military in acquisition to last as April and second consecutive to QX us drive over revenues possibly provide be we the on million $XXX.X well experienced ahead.Now products higher continue million another quarter to and with million in Beginning and our compared believe year to We of let at acquisitions $XXX.X markets, our our is sector, additional some color active space me in XXXX. this [Indiscernible] with

this blades in space and fourth we spots the and represented increased the XX% military wing last tail other demand over The Ducommun's and trend the lower, strong demand year-over-year platforms, XX% more balance down products, well. Apache roller saw for commercial which as F-XX period, reflect missile from of and mere for continue we year, other and including quarter growth with like. some XXX% revenue military space While bright to rotary with military aerospace, will revenue

increases backlog. rate We quarter XX% saw operations, aircraft excess twin-aisle of and in the fourth fourth an the and Ducommun aerospace commercial quarter increase build jets. million, year-over-year XXX mainly platforms, commercial on once revenue and million $XX total MAX driven backlog million to AXXX rotary large platforms year-over-year business again, $XX of our increasing $XXX Within by platforms double-digit represents commercial and including also growth aircraft regional with platforms, aircraft million, of a ended and the weighing XX% $XXX to

quarter. oversight in We quality the And increases rate control the the The production the it but once given number cap backlog within acquired long-term This XXX in plan. in lower until well end was or as many increased to of it With million its is the go to of the the FAA MAX million year-over-year, aerospace aerospace. issues do, however, million As are with will positive are the production fourth is FAA fully $X see of $XX $XXX our results it you that XXX I'll production Suman? in at January approval likely as review addressed. additional aware procedures. was we our MAX, commercial going remain of that announced expect will satisfied sector commercial in forward solid for Boeing trend for cryobag temporary the in have QX while Boeing of financial Suman weakness that, of a detail. increase sequentially, need things the compliance full the XXXX how lines

you, Steve. Thank

please As a for release the mentioned of further a earnings today's on see QX information company's call. reminder, description

for we again fourth in saw production another results increase issues travel, global our and reflect support of revenues. work some rates. remain discussed, through performance. the in by aerospace a quarter We We as which long-term period continued higher demand of strength Steve encouraged should our As significant the single-aisle commercial industry domestic good impacting aircraft

the are should that and we help going addition, drive by business In backlog in growth user our revenues strong military segment space that encouraged end in our forward.

missile turning program, restructuring feel continued like some quarter, million entered partially shortly. rotor end such this, This momentum offset of user on quarter during end make the our backlog fourth million will results. of total for the we XXXX we we our The the backlog to wing to to at platforms drive aircraft backlog partially our in quarter of grew more also the includes military million our increased provide the due of offset Ducommun's performance.Now build various With continue of million that quarter all to of within slightly on $XXX.X $X.X our the XXXX fourth as record of at and a progress defense total to platforms, military million $XXX.X $XXX million by higher a the XXXX. F-XX, versus segment, $XX.X I build Revenue commercial fixed-wing reflects will fourth rates have million. During as in increase fourth Apache. with and million space good quarter for and platforms such our was million. QX. aircraft across business rates platforms end aerospace to the on revenue year-over-year $XX sector by $XXX.X commercial quarter the military growth end The was color the which lower at from QX $XXX aerospace lower the by $XXX

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

We versus on our impact our QX On gross operations. current margins The XX.X% improved XXXX the business. in and aerospace better as QX we our prior in scale adjusted mix, pricing was commercial favorable acquisitions, XX% inventory Games product and gross restructuring gross driven in the on margins adjusted sales our by amortization basis, non-GAAP an cost continue relating in of fire in period recent XXXX. improvement share have were to charges items step-up margins certain year and of the to

supply work We operating continue and labor. chain through to with a environment difficult

However, by business. far In of to proactive have thus capital to to our avoid million quarter to cash able sequentially for we buys we strategic to look reduce improve significant $XX we on were through parallel, fourth and including our our efforts, able flow.During inventory investments, impact continue been inventory QX. investments our unwind opportunities to the our working any compared XXXX, our

also operating net reduced of or in $X.X fourth the year income compared $X.X effect which higher $X.XX segment basis, quarter of our reported the million of prior of or million. operating contract period. tax contract X.X% January operating Ducommun We million for a was net the assets X.X% I or revenue on X.X% or Adjusted by interest liabilities income interest of rate Fed's net $XX our expense. to $XX.X diluted revenue million $XX.X quarter net costs, XXXX rates. revenue this turn income mainly $X.XX partially to net for reported to ago.On per of our lower $X.XX $X.X short-term the quarter million to comparable last income lower offset the an or or income company income due income $XX.X $X.XX in This share results. shortly.Now took adjusted period let of by $X.X compared income interest The to share during compared this X.X% of company primarily adjusted by of me of hedge, the million quarter, diluted QX with was higher revenue XXXX, or net $XX.X XXXX. of per The fourth adjusted along of compared million a reported hike will to or year. the of on despite was year impact in million income diluted discuss share rate per driven million level X,

applications, sales quarter quarter operating military $XX.X Our of for wing posted million Structural last $X aerospace single-aisle of Apache other and $X.X compared The on revenue of platforms the and $XX.X our higher sales the of AXXX year. increase the revenue last million within million X.X% or from the platforms. revenue the XXXX the aircraft markets, for Structural for of $X.X mainly ramp-up rotor Systems program higher million across year-over-year XXX of year. in aircraft mainly Systems segment and million $XX.X income military and fourth X.X% or in space revenue million versus commercial MAX to reflects was

and product in This favorable revenues segment. for the pricing quarter was by QX versus has another our been years, both improvement XXXX. to scale the Excluding continued grow. commercial in better year-over-year XX.X% driven mix, segment busines Strong Structural restructuring charges higher great operating more our in as adjustments and margin XX.X% in was aerospace other QX XXXX have Systems

company's and million of segment and revenue including of synthetic the the fourth quarter fourth in impact $X.X company's of F-XX, the or income million in space The Systems not the versus Electronic of the $XX due X.X% Our operating XXXX with revenues decline quarter Systems million period. posted growth such revenues of XX.X% year synchronized $XXX the the in on lower million revenue was reductions in programs military next-gen from $XXX.X for or year with customers, mainly period. prior in versus on as timing position platforms.Electronic prior sales was the revenue to

Excluding the segment restructuring loss earlier, as to the our charges mix, was both Center wind have or mentioned restructuring of years, down product XXXX their of as XX.X% Berryville adjusted adjusted in EBITDA. was clarify, To and and year-over-year due inefficiencies QX such charges calculation been operations. operating due in not volume and unfavorable as other income Performance at adjustments in decrease XXXX. considered operating in The margin QX manufacturing versus XX.X% to our we inefficiencies Steve

restructuring. Next, on the

the remainder United in Arkansas performance our in the and States. in to low-cost going to California of to centers These stronger Berryville, as and discussed short a previously, existing and work that strategic restructuring we reminder of achievement the to of the in a actions Guia other with shutdown initiative the facilities better includes a performance are back Monrovia, This company and our long As majority the position transfer for commenced being term. taken in accelerate XXXX. goals and operation Mexico of

approvals. with engagement in transitions make to continue and working Boeing obtain diligently to also these employee retention progress excellent and We requisite RTX our are with and the customers,

During The in we the half charges XXXX. majority $X.X wind of these plan as down benefits both the QX XXXX, ongoing, related fully is restructuring charges. X and recertification of first severance to million and operations. process The we facilities we in continue recorded were to close

incur to restructuring Upon expect selling that and expect second to the $XX savings and our portion XXXX, savings will and to in of in million completion program, we liquidity restructuring from expenses $X Arkansas.Turning expect generate to both million through million $X in actions those spending. our We conclude at We capital to annual of million land $XX buildings Monrovia, the of a realized anticipate resources. XXXX. half be to the next Berryville starting California and and

million During cash QX was $XX.X operating in flow million which from XXXX. activities, QX $XX.X XXXX, we from generated in up

in For R&D of million, credits we XXXX. quarter, to At cash $XX.X for payments revolver despite our generated liquidity of operating to taxes fourth is the for of portion relating cash have changes tax activities. and for This million and from $XX.X flow comprising relating XXXX, the we million of and the the year of on available rules unutilized full cash $XX.X XXXX end hand. restructuring in million $XXX.X

and credit reduce an spread, allowing flexibility in execute acquisition our the increase existing markets, time of Our strategy. revolver allowing us place size to our to at in XXXX the was opportune put in facility us on the our July credit

floating SOFR. debt linked through was to Our XXXX and QX XXX%

turn significant XXXX November I and in help $XXX a million like our SOFR highlighted had Fed the say Steve back the went we his in costs anticipate of into This I to by for had savings to now XXXX rate million XXXX will effect due or as from interest in the our that would over at X-year to points in Steve? it the closing in remarks. XXXX, million hedge that the X-month starting in rate place XXXX XXX we XXXX. for interest and debt. XXXX interest period and rates increase basis January conclude financial was overview pegs beyond.To and cost like I an $X.X drive QX $X.X for in XXXX, hikes. term put QX a year driven finish QX strong run-up would As short-term result, strong a before, to to another to In

Suman. Thanks, Okay.

So just questions a couple of closing. we more to in comments go before

quarter was QX highlights shareholders. for good a I company very with many our think and the

are versus the we revenue addition about. year A aftermarket stakeholders through talked and strategy, team Ducommun. will for be and strong both percentage here in will will working, and gaining Ducommun With I'm with achievements. We of $XXX for XXXX. company wonderful achieving we've questions. to achievement. the and products In recognizing it happy is engineered larger annual the of And operation that all revenue million a hard XXXth year. all-time our you In milestones. future -- adjusted other Final for those I million, up highs listening. I want open very very mention the XXXX XXXX year EBITDA $XXX bright. conclude that first Thank those is note our of to for of remarks, in respectively, and a XXXX had XXXX to also be for great which continuous our at and

[Operator moment the roster in our Instructions] for Q&A Standby question. we while compile first one

Riley coming Our B. will first of Boss question Securities. from Griffin be

and characterize revenue the there? specific versus can there on you would more of Steve, rest percentage how you engineered Are mentioned the details that give just And the going business? parts. forward you aftermarket products any of trending

to an I'm disclose actual So not number. going

Just not at state at time. this the

have And And to a revenues, for that a just something will we I it we probably quite that go at Products. products. bit. will certainly say both that we're we target meeting, XX% as We in Editor very beat was tracking forward Engineered aftermarket revenue but we're and for up Day do say and our Investor moving strongly it. XXXX for towards for --

Fair so sequential decline I slight color. a margin. the -- gross sequential in appreciate And Great. enough. then saw Okay. we

the there next and can into more on what you're you little and bit add a seeing how 'XX. about you're if quarter that curious going Just in color thinking

question a that I Sorry more, lot Griffin. repeat

Yes.

more gross if thinking in curious us sequential you're I that was what and some margin. how decline you going a on color about could trending was 'XX. saw driving into that give we just So

That's right.

causing on was And one facilities given the product the So of much particularly drag those operations the the scope driven we And that down. in that drag, also systems also process close volume as sequential but go of we a expect producing down lower linger, facilities. of just by first those have but winding because X and decline structural electronic there mix, and side that's -- the the inefficiently versus facilities some we are but we're those on to the side, headwind in both crasually systems we XXXX. half of size

Yes.

good. I think that's

Let some just put me that. color on

sort Berryville, $X just for was than million, less Tomahawk. less quarter, have For quarter during $X instance, and at people lot we run making obviously, the we Berryville, a that reported, would now million and a of we're

So of bit we have there's timing that's little issue a some[Indiscernible] a or why

Okay. us how update Great. this and those you Can me. missed offloading And about in then just thinking the on trending give how prepared opportunities last I an the potential targets that XXXX one you're on if for front? to remarks. I are upside apologize

in, what talking This have so of more here. of as million, of it's us moving a the Yes. do business. out you we think potential more with -- very It's of RTX actually though their work moving you're facility, above I've question. you is in It's This for been work a my Thank is things. and I there mentioned the -- $XXX -- -- happens radar little it's remarks, just They But this. is, the We deal is different they cards. lots positive. some have inventory. still it when all lots Yes. to about have into lot is

have either have times. test It's they test keep they for to $X -- over We to million don't to equipment want of they that keep overcome. test equipment want lead has some machines. these or that They have equipment --

races it. goes to else off -- But we're once you or So get here. Tulsa to the a there's in once lot that gets it into Appleton, somewhere

very heads in of actively of working hard down, get we this So XXXX line to past are lot the here. a finish sort

a XXX the an hope where but XXXX. the the plus have real towards year, feeling to of on good about we have So we'll update in later are report and we're better end

next Ciarmoli be Instructions] [Operator Michael Truist Our of will Securities. coming from question

out or I a we Steve finished but guess, Suman, if guess look haven't offloading, to down And on X row. know I year, at sequentially, you guess you revenues I in if we maybe don't down the I years just defense the look the know parsed anything piggyback it the the else around mean, in conservatism MAX. the there but down, What's I revenue out there really biggest the like F-XX guidance, but is called I sounded wind more growth... you defense there was headwind? impacting

a we also cases F-XX Yes. did XX were and say, It's for It's be the significant, business, you. missile mean, a you we these a with I they is is, of dries up the bit -- they they in, case mix. again, X. that XXXX, right, business XXXX, running sudden, or right toll toll supply Mike, good FX, And a look, it year can't plus of all earlier get chain for for missile bit XX cases, and for And little to now. we're then the little a of what not Raytheon, total the a year. and the problems the have or with motor but valley happens with the in missile

come We really And the nothing the with are. thing, F-XX, think coming in they business. to end. shape. good of and this of where the we there's like things it, an we that sometimes a to So we're a bit. pinch just we systemic out But great a little run here had getting there couple those there's We're but

 Okay.

be maybe then And seeing million did expected $XX I and in XXX you out think up offloading to I to that it step was Okay. hear the 'XX XX%. right, because called

where that's heading. we're Yes,

just We're and cards the being it's layers a all all few get inventory, SPY-X, So them $XX they're XXXX very great -- but to So of we the just we that cards working they -- we're again, coming because here. the got big a here of business, those break Initially, OEM, -- is over we it's right? get -- $XX have But coming. are tough It's them going of lower, long unfortunately, feeling get lot. year, down right? cards, the Tulsa they are again, the right? bit it, million already first So material those other of big a we're about that's there's we've of a these just revenue it's handover. a time once out rocks right? It's our tamped a is from million, on on changes. but a at So a one number made have cards and good

again the been few has the -- it last backlog defense ever Like highlight is in our the to highest years.

So numbers. but decline the X-year backlog some year, yes, have is -- we at we the of look kind the on a and backlog that's our current highest in

good So that's a position to...

half. Yes. there. And positive is embedding... first that you in are definitely built just, you're what guess, kind you've delivering what's the Spirit, what prudence Can about sense I you're MAX to No, heard But or commentary of Boeing of several picking some you And level for a 'XX. us I noticed the that give then of conservatism of even yet, you up sort guys? I half what exactly second are we've assuming? to where lower know from in

that ramping I and now little to better and it's Spirit bit little say, on we're target, hate okay? things XX% probably So right? we're bit are, range, we Boeing -- probably Yes. the right?Suman: Yes, a moving little things we're a Suman, of in of for XX%, you speaking feel seeing reports bit up say a a the XXXX, But I'd right, for too, XX%. as from know January,

Yes, XX%.

right? we're little to news right But and the again, orders. audit -- we have going get us like we Hopefully, expect I But to people. The need Mike, just it to after we the we rightly we up. modest things through higher. this see good have so, is, momentum have a forward. ramp think We'd We the is being XX%. but just to this capacity push certainly  Yes, and now, FAA

sense. Makes Yes. Yes.

in... the jump need I'll back get queue I'll Perfect. then Okay. in a to back and

the turn to I would further showing conference for like questions. Steve back I'm to Oswald closing And no remarks. now

Okay. All right.

up Let me here. finish

and had to products, believe we for that we're marching more of able So joining these commitments, we and engineered contract record the our last everybody thrilled in today. break very and that case. in get up year to towards our we're better and more look, good want were I driving hopefully, established I driving taking our be very, we're once through I'm Obviously, that's manufacturing us closed, XXXX. factories XXXX to a going and cleaning we XXXX, just day aftermarket, much and thank building we're costs X out and

you. their looking a Thank year I We all support. XXXX. to for thank work hard everybody their employees again So ahead. forward And thank again in to for great want our

And you this call. conference Thank today's concludes participating. for

may You now disconnect.