Ducommun (DCO) 8 Aug 242024 Q2 Earnings call transcript

Good day, everyone, and thank you for standing by. Welcome to the Second Quarter 2024 Ducommun Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

Now I will pass the call over to Ducommun's Senior Vice President and Chief Financial Officer, Suman Mookerji. Please go ahead.

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

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

results is issued for the facing company's the reports of the U.S. of the are annual government protect cybersecurity level In retain and on future rates; of attacks. Please amongst adequately and include, defense end-use ability intellectual quarterly Ducommun to and addition, a enforce filed personnel time-to-time subject of refer key and detailed SEC, markets; and others, the the reports operating labor with estimates rights; our based cyclicality which change. Particular spending; today rising report business, risk release discussion current to risks avoid on customers; other acquisitions; or our XX-K, and interest the pandemics; attract cost in otherwise; as Form of well high experience press including to as launch our and XX-Q, our and or to customers issues disasters, property from on risks. disruptions; Form ability the regulatory of products; competition; and timing orders from of developments, may risks; new expansion economic and the chain the supply of certification delays legal geopolitical natural

Our call measures. the we statements Steve in to filings measures the results. with made of today. I We referenced authorities. This financial the operating our required SEC includes a are report now the the XX-Q refer reconciliation during of Form this update Oswald made with forward-looking risks. would for review Please not a if filed presentation, this and any this non-GAAP call. XXXX turn as made those and do to as Statements also only of for QX over call time are like regulatory by non-GAAP to intend GAAP subject except to on our to the call to on quarterly Steve? SEC statements

will Okay. in second Suman Thank quarter us our Suman. Afterwards, give Today, situation an and update joining of usual, current detail. the our everyone, for company. Thanks, today as I'll call. the for conference on financials you, review

strategy of acquisition excellent program, strategy defense then York, presented Let unanimously content, the segments in key XXXX plan investors. quarterly facility me and Ducommun's of XXXX Ducommun in fall to increasing high-growth our Vision with its coming start over budget, XXXX, commercial Strategy been and of or off November COVID management feedback. Since got Ducommun's primes aftermarket expanding consolidating revenue where on the platforms. first its targeted call rooftop executing the that the and defense for continuing time, vision the of aerospace by by this has in month with percentage footprint, products Vision and the out summer pandemic approved we XXXX executing content developed the engineered of Board following by New investors game were offloading and

first exceeding QX our prior commercial is Boeing, value year, in very fourth a follows across the of Vision catalysts consecutive higher, Airbus business where we twin-aisle this entire the quarter. We skins ahead unique quarter shareholders. example growth were up good platforms was and and Strong creation with the on saw in of jet good strong million. X.X% $XXX revenue the the drive margin helped and significant the believe over level million, strategy gross revenue in XXXX jets as revenues business Revenues revenues aircraft growth have start we financial our us for strategy work experienced the conviction AXXX The do well. quarter, our we XXXX for also record are here quarter. present growth along a Gulfstream. with and were program, goals the a driven $XXX working. QX fuselage, of by growing Business make a during in the All opportunity results many and for high

in increase for build loading by of efficiencies, and closure us aerospace commercial retention building buffer Guaymas, an our a from workforce allow support BA facility the stock up it QX we supported to as level QX to saw also DCO's production operation. was We XXXX. our XX% and transfer and revenue was production. Overall, Mexico SPR to rate commercial than Monrovia also higher

business We challenging quarters, commercial with SPR environment in in for grown OEM aerospace revenue demonstrating have business the a consecutive year-over-year even resilience XX our now of and our BA.

the XXX and having aerospace other we September have We approved is on. the for working for news the skins XX% mind XXXX than revenue anticipate FAI shipping MAX fuselage. now in this in is be Keep commercial XX a good X the in sets million at Spirit, set fuselage The month. for skin of been DCO's the production business the project October. which less over at first ship should $X.X

program and as news tuned we share. stay forward So for more move gain more

Our last again past, Blackhawk the programs last XXX% we as July for in time from was one production in contributed and the tracking $XX by ahead. On from offset as Defense the offloading we quarters, well submarine now naval year, F-XX, partially new and with JSF, selective F-XX, optimistic defense radar have discussed such a the declines for demand programs. was as missile pause revenue in CCA. F-XX. A we the PO year-over-year RTX, RTX, about in shipments well, just QX the X which platform, have the TOW as grew XXXX but and now circuit in Growth Mexico. strong business business for in Guaymas, card radar grew X% million remain from third growth starting in our for in over anticipate revenue business SPY-X XXXX from million over $XXX the

will We have for that the the in and year. next in next program production SPY-X card process be

in quarter QX mix, initiatives, value as gross portfolio favorable engineered strategic pricing the XX.X% restructuring bps and improvements, continue highlight XX% productivity of first we growing quarter, up compared our from for initial from margin record product to Another XXX benefits aftermarket, to bps year-over-year the XXX was product and realize savings. with

XX less to platforms In addition, facility Arkansas on until Berryville, plant is receiving single people now capability maintain is to our certified. the down than

most down, Our by employees. month, than and down is the activities fully Monrovia Monrovia, the September. California The XX shut end headcount facility team to plant also with production this closed of significantly reduced less be will

see of plants XXXX. these the the ramp receiving savings cost We moves up as will production in

tuned. stay So

share million deal, the first the QX both $X.XXX our consolidated as and And backlog along XX% increased a ahead work was to QX X.X% costs year $XX quarter. The great million momentum share another EPS towards $XX impressive pricing driven of restructuring billion, compared $XXX basis by almost engineered our rates diluted increased compared increasing was aerospace record to The million operating For strategic hitting with due ended year performance $X.XX results end XX.X% income driven, QX backlog expanding to gap product initiatives, great provides an diluted year-over-year. in backlog in million the $XX during in as in QX beginning by to of million. The during adjusted our QX product revenue of the while company's and compared Boeing $XX $X.XX to and our improved time, with a primarily team operating and record robust well production all with in This QX, Total year-over-year, decreased in adjusted GAAP savings a QX, XXXX. due the the impact plan. The adjustments, growth story of at a single-aisle higher XXXX income EPS to over strategy and prior company commercial goal lower points for $X.XX margin hedging businesses, prior EPS $XX we mix, a issues of EBITDA to for million to as in issues Defense well delivered quarter. the continued interest a This was with Spirit. in XX.X% share the QX quarter. kick MAX XXX favorable was sequentially diluted compared again, industry big the result, $X.XX at XX.X%, XXXX. to quarter. Adjusted is our the quarter diluted number sequentially versus of a and the backlog new the Vision XXXX. a XXXX in year EPS record prior a in

However, our million. sequential basis $XXX commercial still aerospace on backlog to a quarterly grew

QX followed continued on our XXXX flattish single-digits year are the with last Spirit by FAA despite revenue maintaining for MAX, the QX. for to year, the guidance, As Boeing, in uptick surrounding uncertainty again the an we guide and mid of

the BA BA the are is build also for DCO. QX strength recovery OEM their major seen slowdown positioned we the on Spirit, despite build will same communications MAX and at have recent by in the MAX, significant and are challenges lift the a anticipate we Airbus at this XX MAX, comforted add most at be ramp the other we and by back programs continued that level QX, Gulfstream. rates I the While for on as up. If in a will in the rates in year-end for

SPY-X the products military some by and F-XX Blackhawk as our to by F-XX we F-XX space driven radar million our program. Beginning program, and in let color driven notably program well $XXX was XXXX. experienced our along on Now Growth again franchise, the the and were $XX revenues provide sector, as weakness F-XX, rotary offset at million military in markets, by revenues. partially aircraft, QX These with compared with me programs.

revenue military XXXX represented back and XX% XX% of and Ducommun's The from the in period, quarter in in XX% space second down revenue XXXX.

trends balance which like. we expect -- aerospace, expected with more these reflects and commercial We it these we trends

growth Ducommun's operations, increasing of representing platform, to twin-aisle growth, ended well the total of as backlog with also closure million, driven AXXX of year-over-year double-digit build support million to $XXX XX% quarter $XX buffer backlog. Within increase the commercial jets, quarter as year-over-year, XX% continued our second facility. business revenue second $XX million, aerospace mainly to We the see by Monrovia an aircraft, on a of

of for into XXXX. the and the second business earlier, QX and commercial almost given within end end was solid story much in sequentially, believe commercial weakness million aerospace As of better BA a the mentioned increasing The market. is we and million aerospace quarter, ahead a at by backlog number $X the $XXX MAX the our temporary

have results Now with financial I'll Suman? Suman detail. in our that, review

you, Steve. Thank

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

would strong second of margins. We impacting by which our end higher our work in single-aisle some travel, rates. encouraged well the strength aerospace industry As period results Steve continued as improvement remain as through continued we aircraft performance demand the issues another of discussed, long-term in for and global with markets, quarter in domestic growth military support our production reflected and both as commercial

we and we beyond. during momentum to Vision drive will performance the which will addition, on progress like With continue facility our XXXX consolidation efforts showing this, XXXX savings good drive also quarter, goals. XXXX our all is our towards good that made in feel In

of or platforms the military revenue in quarter aerospace quarter year to second million growth second million platforms. We in XX.X% both the profit our for commercial quarter our period. and Now and Revenue XXXX highlighted year-over-year growth revenue the space in million and XX% our versus military gross results. aerospace $XXX.X X.X% space, for of $X.X of $XXX for million across by growth or $XX.X of increase posted turning of versus $X.X total of reflects the of million million XXXX. of commercial was prior $XX.X quarter and The second

amortization growing gross product strategic QX XXXX favorable was were The provide non-GAAP well improvements, on and in QX in we on by as in mix improvement to our in the restructuring current businesses, productivity our gross and margins XX.X% portfolio XXXX. in the adjusted versus as margins pricing our acquisitions, certain margin continue operations. On adjusted prior our of an Guaymas initial gross recent savings. step-up, products impact and initiatives, period our from XX.X% some manufacturing basis, driven engineered restructuring charges, sales We the fire services cost inventory as relating items have to

chain proactive any to thus a and efforts, continue with strategic labor. operating on business. have our investments, buys been our environment supply on inventory We including significant we working our Through able impact avoid difficult through progress to make far

contract the positioned grew to our inventory During by This quarter was commercial commitments to production. versus partly ahead XXXX, our we the to closure, build assets million meet centers XXXX our load of as product from by in for performance aerospace delivery modest while and buffer $XX in ready still due a rates. We well as level some million support second QX. to ramp-up QX business reduced build our $X.X build Monrovia of aerospace keeping structures commercial facility our

$X.XX million prior Adjusted for of operating million opportunities X.X% for and net per of last ago. On XX.X% million or has share revenue $X.X $XX.X income second to the year adjusted quarter our period to million the net compared to $X.XX working revenue net of million operating XXXX. higher the per reported income $XX.X to to million of company income. by $XX.X in or X.X% reported compared the was income the diluted $X X.X% year a income of second of basis, or QX of share this operating or unwind in net period. of to compared income income quarter continue comparable diluted reported income higher and operating or quarter were XXXX diluted income of $X.X net our million or to year. The We capital adjusted $X.XX an adjusted compared or share revenue in net for company driven $X.XX of during income million The quarter investments improve flow. Ducommun $X.X cash or the revenue per look $XX.X

reduce to rate helped interest interest expense. hedge our year-over-year Additionally, our

turn Now our segment to let me results.

reflected second twin-aisle posted platforms, business higher build $XX.X and segment our of Monrovia year-over-year commercial million year. revenue across including the sales Our in AXXX of $XX.X of facility last select Systems closure. the The versus Structural jets increase support addition million the XXXX to and quarter regional in $XX.X applications, buffer to aerospace million

products maintain rates income military quarter was selected to higher maintained and addition, $X.X million the aerospace In commercial for and of million level build The efficiencies. within we and the of revenue for driven help production load $X markets production was for military programs. Structural Blackhawk quarter. revenue other of XX% in Systems' strength by operating prior X.X% year revenue to or $XX.X the million or space compared

from was other strategic to XX% and margin both segment in pricing operating in charges segment. decline versus due restructuring transition adjustments XXXX. Excluding offset leverage years, costs at the of the by from from Guaymas, centers the higher QX to XXXX operating slight production revenues Monrovia initiatives was in QX within XX.X% higher other and performance The partially

of XX.X% strength for military platform by quarter to in-flight industrial along of selectively decline platforms, including $XX.X income on second entertainment and electronics, Systems' in F-XX, quarter prior Electronic Our were $XXX.X along a Systems was $X.X business we offset and jets with is chose year platforms, business million The and X.X% select million revenue versus in prior with attributable period. non-core the segment or $XXX.X F-XX reduction with programs, revenue year the SPY-X the partially F-XX or radar versus revenues the The the our AXXX lower operating in as declines naval Gulfstream with to prune submarine million of million the and business. posted of XXXX period. second Airbus. Electronic on from revenue in

program. in initiatives driven our engineered QX of lines XX.X% profitability segment well XXXX. The with restructuring facilities. mix primarily shifting other operating was XXXX product versus as to performance savings pricing margin XX.X% increase to transition product as years, businesses, year-over-year and growth due Berryville along QX adjustments from revenues restructuring savings value strategic the by were center was both the with and in in other from the Restructuring Excluding charges higher our in in

update to restructuring I like Next, on would our an program. provide ongoing

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

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

million wind to X $X.X recorded we related XXXX, restructuring and these charges. QX the as The majority benefits, were operations. in down During charges severance continue we of

million from these additional to the in see XXXX we We expect and $XX Berryville, and we $X both land the an anticipate to savings already beginning our Monrovia, expenses, actions complete actions, million of and million program, of end in year. incur as restructuring to restructuring Arkansas. realization completion XXXX program. Upon some million to $X California our and at are early expect the to $XX from We through building generate annual savings selling the this of

Turning prior capital as in which of million. QX year-to-date $X generated net The we a was was XXXX, next year $X.X to and improvements, and usage liquidity cash million higher income resources. improvement well in had other to from million of due operating an as improvement flow $X.X activities, accrued XXXX, compared liabilities. QX Year-to-date to to compared which

on portion the of had revolver end cash unutilized hand. of of the our comprising of liquidity $XXX.X of we second million, quarter, available As and the

higher SOFR flexibility acquisition in was QX hedge $X the due year-over-year time going put was XXXX. rate interest an The expense of that interest allowing improvement spread, a interest the in drive QX hedge place million the into into size interest for credit and continue X-year our $XXX X-month us to our debt. XXXX debt execute in the term cost to pegs starting and of rate hedge allowing of basis effect effect. In well and XXXX will XXXX credit facility QX, a to our to million of costs we the XXX momentum existing place now points conclude at despite beyond. To would was in to to in in strategy. Interest markets, January balance savings $X.X increase period savings results at reduce significant put The our Our remarks. revolver, QX compared the and us in XXXX, XXXX. I'll positions to over XXXX, back I his on and like us it July the for review Steve second from November closing million rest interest continued XXXX the million that financial of quarter in turn an Steve? in $X.X for our for went opportune say for resulted

Suman. record and in And an closing, QX highlights quarter with was some just Thanks, and company cases in the excellent a shareholders. many our for Okay.

of the expansion. some You margin gains start we the expect all Vision to realize XXXX, around especially for

in us half a Our deliver gross despite not right current on and first schedule. positioned constraints. and some expansion to surprised progress We're EBITDA The on of excellent. been has well strong the feel margin XXXX, performance

With ramps our In us against our margins years addition, on and ahead. the at ahead for about kick in X ahead facility Stay consolidation revenues. game to expected lies shareholders in EBITDA starting Ducommun in of and product benefits more or tuned. what key XXXX, well from tenets the and of I'm aftermarket of us we're tracking commercial XX% of excited aerospace our engineered build plan, still goals the XX%, XXXX and

Okay. let's to that, go questions. With please

the Jason from with comes of it Gursky Citi. And line

you you you of conversion of kind the you things look of the what years, the for how if general about over think talk interesting with as of little a anything the are at where evolved I'm you demand new pipeline has maybe, when curious of the kind next opportunities of might starting here X, start well? you what us and kind and year-to-date, pipeline the book-to-bills, in have just maybe bit and see just over last Steve, popped pipeline. couple give months. beginning today new out of year flavor up And the and a just like and X look flavor

with to you. Good be

So $X than first, and or AXXX. year, XXX% talked tackle let -- fuselage number. $X about the we're for fuselage less that's, aerospace. the There's me We a skins the for of huge of XX% Starting million commercial only doing next mean, do the I though, the just million. I about MAX. not

do So right. we it can

the We have we have machine. capacity, the

starting it more our in to into of opportunities working competitors. we're today, something can that's X the the to We're But And shift and XXX it January things good around going kind just also money disclose also, we in nice commercial So gets have get very, some pipeline also pick real amount disclose up. the going XXXX. pick to XXX, for this. We're from about. to up share we'll That's aerospace excited specifically, XX. there. very and of We're some side on we're of I today. or happening DCO. on And on a the business

good it's We're the that up, at with a good. on Air there. on with in way position up just on So we're the to the and going them. very way going side, go with We They're met Airbus Airbus Show.

on more very So I looking positive, there'll be and the news coming. side, think it's all commercial

the of can't been you And $X discuss offloading But things on work other This make defense one the example. sort just and million radar. card we the certainly We're been really on I'll sort On the probably card. far side, into for over heavy that year-to-date, hypersonic so one too us. great much. getting of it's has the we for give SPY-X. one We program call on

So, we're next bring to year. another card going on

with met going since a got to which Guaymas, meeting. in go now Guaymas great there Show -- wonderful expansion share the at things some go buffer as be it, some are us, in to for And a nice we and are well not as but happening XXs. Right happening very but TOW. obviously We've had as And built That's we to we to had we the only so defense, we've the Air have organically, the now, Tomahawks great Raytheon we from shift margin and a is well. to with where boost just move So the Berryville. that going all major obviously, program.

So PO TOW We coming for in back mid-year. in have back. talked that already coming also We already Guaymas. the is that my about remarks the

looking also, And So the to good. obviously, that's build go then very side, well. going both on some if rates, the tailwind I good commercial nice eventually, and think which to are up going be as defense to

some capacity. on Suman, Okay, great. quick And a same I or the just And you additional liquidity mentioned follow-up. sentence. maybe think M&A you mentioned

So, update further on I'm targeted we'd on aperture larger, just you kind doing potential of XXXX? of revenue curious have had to And more bringing the than in pipeline just Vision for what the get an M&A. opened where be you potentially something

we about we to in very exceed I and able at acquisitions, set $XX look being for forth from a million meet would us in a and meet that. terms good exceed say So, the of of feel placeholder number XXXX, target that able being we revenue which continue to opportunities. is to Vision

looking manageable time. So size agree. our we than, a of continue of we're looking and lines of Are at I this niche doing more acquisitions would do something product our more something in kind range at these with be strategy tuck-in time? No, this bigger prudent or transformational leverage to to

revenue. size feel on able the exceed to deals, for looking So, acquisition the we good being to aren't but about we XXXX Vision aperture change target of

the B. Mike with from line Riley comes question Securities. Crawford of next Our

from absorption built stock. Suman, you some you buffered as So, benefit

and through walk and how you the work are you can more as into margins Guaymas normalized up buffer us affected just ramp-up this get cadence? built through that you've Now, by at a

Right.

And significant Mike. absorptions. on have made, segment in versus structures a the of lower And had sequential QX having large of Monrovia margins was you significantly So, of just point year in extent a quarter it's QX Monrovia and a it driven basis. the did XXXX. we last last Actually QX revenues -- to great our question, improvement to by better

We QX, base revenue out -- built We higher up doubled Monrovia, better double one-time to point to in a as QX had versus handle we fixed of also QX in mix. in higher lower saw the close we low facility. That costs. absorption, kind right. looked in had to helped trying And Monrovia Monrovia the base, we cost had to transition operations. QX. to We the which the had again, very led So, and revenue some you that costs revenue in buffer in with and related stock made, slightly

feel improvement like to. QX, that's where structures is in seeing line have in getting where the sustainable is with structures we we're So, kind that that are you if in historically, of which been margin segment margins

been getting a of its realized. trajectory. just, excuse I that has since put And Okay. savings company, you the end imagine guys the $XX million you're me, chunk there's and this, know But already related, second near to of I guess, $XX restructuring on joined program I it current cost million but target,

is That correct.

say, and $X are right tracking annually. a facility, from savings Berryville at Joplin rate of, I to run now our million $X million say, would that of I So we would

I from run would Berryville. $X now right are annual million we So shutdown of rate an $X is where million, of the to say,

later will product ramp-up actually when that in production of some in start lines Mexico. Of of those we course, XXXX, Guaymas,

So started that hasn't yet.

good a chunk, Mike. I say X fair. to say think wouldn't would X I it's, Yes, I is

Okay. There's a coming. lot more

next Michael Truist Ciarmoli [Operator Securities. is Instructions] with Our question from

the maybe, XQ down think now. a to Steve How little with I said revenue? be think build Boeing's would the just Good revenues? Suman, I don't said coupling should sure, the a ahead about go rates unwind bit, the buffer on I I mean, crystal that building year, think -- do even on over into half ourselves with as for second I and look ahead the of stock, right sort or Just we buffer Airbus's how but you early results. we you should of calibrate we have period of we but think depend the here, out have we 'XX? impact or and think maybe Yes, you're ball through

question. Hi, Great Mike.

somewhere that ahead, and between we $X I pulled $X during million So revenue would between build in QX, buffer from was about, we say, -- say could build QX. the ahead the QX you had million to and

I earlier, in QX. that's being Steve so, comes would a said how QX seeing QX of out in And kind little improvement then flattish line about with year-over-year how a and basis what think on

for kind all, mid-single-digit year. come So that in full we that the all guidance out at of,

Yes. I think that's about the way right it. Mike, to think

impact think I is light. The overall, it's light.

Okay.

not both want a people And is I again. just everyone mean, about, them we for four Parsons have and XX later, on anything big Spirit to it's for layoff hire to concerned don't the little but I'm manufacturer So, BA. very we're then and just call, months -- for

Right. Yes, of course.

-- there's smart. investors, will I think, some that hopefully, employee -- think little a retention I it's retention in There's there agree

just then can we I of kind models. aerospace, the see in our I And mean, it know on

the in there. sales to a quarterly revenue got Highest slide mean, you've You've that some way any basis? there. same-store 'XX. XQ I Is rate there since out acquisitions measure obviously had on

sense mean, do looking below well picked the -- trying peak biggest on XQ, if knowing AXXX. versus a to at rates of some been up to here? still just the You've new get MAX that you that programs I as one sales have, we're runway like still because, how I much prior But were production had that programs, just same-store

Yes.

lot. have think we a I

you about had then. when lot think that more I think there's I long, go you defense business back a than we now, back if mean, us

we important, engineered and aftermarket. think deal is that's thing and and have extremely to a about good more of So, product also which one

commercial, So Mike. also could right, But... into that fall and --

Yes.

Okay.

different were back more -- much We were then. certainly we

you're have that so, the I And of think, right base. the kind -- right we

be to our I'll revenues for great our our XXXX, in half Airbus a add revenues balance modeling it's from the -- get for we're going so first to feel to to cheer good him anxious. going have and things revenue. One specifically day, platforms. you more our think know going and going about like that think aerospace there, and I we better. very I certainly we're and aerospace commercial Mike, where We're come that's Boeing over we were think little come commercial are I Kelley's think we of I ramp-up, thing as revenues relative ride to from

directly other and stuff including So, build apply helicopters in-flight entire jets, things business you couldn't revenues. do. to are elements, we other and our There commercial that commercial entertainment rates aerospace

a build So at if more really platforms, little is... and rates you Boeing Airbus than were half across looking

Got it.

Okay.

Right that Of higher. it's that much. higher. grow will grow That course, yes will now,

year just Any know on it's got that Okay. I inventory you've cash here a on be, into bit the just, margins cash And should where down the sequentially, kind generation? know I little guidance how 'XX? talked should out half Suman, top free about of yes, there thoughts, the but think you and one. and we second last of generation the about the mentioned but line, we being

more impacted important amount mean, Yes, positive much priority company. We buildup assets, expect of better, the that We we up a I but did of be expect that's with these a us will to at for do Mike, on that would contract a flow an cash as ramp-up on of significantly, be year in commercial not some is real area the but towards And in in QX cash the ahead some of really note. QX marginally was you by aerospace builds. end buffer year. to noted, And the focus QX, for us, did I for platforms. build us. the strong flow terms as end

perfect. I'll That's Okay. come back.

well in have our pattern as this As business. we

line question Goldman Poponak from Noah the of next is Sachs. with Our

if more just at normal where kind coming you uncertainty go don't along to things picking ahead term, times of and and so income think are bit about build where about a little the there, of much more visibly? maybe you're or not have Suman, customers, having medium how you net should over we up free EBITDA cash think conversion conversion kind to the

significant, of get we we In pressures have get to Excellent year run, time supply to close continue the quarters inventory chain lead contract in the continue free question. there inventory. of in balance want closer or assets to our have to Thanks, we do the years income to are long net Yes. still significant as amount Noah. while few X to going number. next We're not flow sheet. and these next the cash on here And

years material our on We rates, stuck advance X which means sitting often balance we're with We've fluctuations in inventory. build ordered have sheet. in raw

pressures supply those chain rates. in as production there is more So ease, predictability

And wind to our to inventory closer able years, get our will we past holding us, with target years. getting continue line cash our next over to We the it free of will down few in income. that for be strategic been couple the have of that flow net

and side but and to there's And troubled the rocks and manufacturing things, us restructuring that bigger think the a think going companies on and is is I going of strategic other Noah, better I on this it also our inventory I this our smaller buying everything, help to market to over processes. Steve. is mean, have services some footprint management and also help.

helpful. I that. appreciate That's Okay.

Just between On of margins, to just possible XQ, pretty up? half, expect how electronic the shape each it segment's of directionally has you difference. How first but each the Structurally, second margins this half? those margin Second compare systems increase be year-over-year. about difference you segment would and in XQ guess, sizable I had pretty the first kind to talked big the to speak a the -- half. to that's half do

I'll take that. Yes,

So we directionally you. give some comments, which the you I at guidance help margins. are level don't can don't but give segment we for --

have our ballpark So margins. seeing margins the at year, engineered driven on product profitability, portfolio year-over-year and growth within the if look engineered electronic of was well and in as more mix systems QX the shift the by was revenues as in jumped those product a in kind revenue significant in a they towards that in a basis. That -- this they've And QX. electronics stayed our here ballpark you the of right? they're of, I we, may the Electronics the they that based ballpark. rest range points in particular in year, of a product the fluctuate a where always is to which And There driver XX in mix stay on would basis in would basis would quarter. XX say, within segment But points for say, here QX of them I to you're for expect margins,

as On to costs in margins structures the overall structure business which an down shutting subdued back and get levels. had situation in structures back one-time improve. margins. unusual facility you the historical this QX, the That we low got Monrovia, had segment the here helped saw with unusually were side, QX, quarter other to revenue which normal We

We also which in some helped, better there, had in QX up. mix get the margins structures

in hold. for do Now down of initiatives similar have that continue in course, as restructuring second we structures with Monrovia we the have savings less facility, cut improve start further to we levels mentioned, costs other And, kick-in margins of QX, that XX half. take people will and being than the as margins believe now in and Steve will to XXXX

long-term So improve. trajectory margins

I overall the half, level, would of XX margins are we say, margins, DCO in basis range, at that stay points ballpark. -- in have probably stay say, favorable to expected but same to And and that's Second us. I about the them mix in expect would for QX typical just yes.

serve hold to for going part. We're the most

kind X the it. think, Should stable I F-XX and of revenues of rate accelerate? looks forward bit timing your revenue we can ladder. you like growth lapped guess, now the defense a had I the with Last or And and of then was defense orders was missile, described some just transition have you've it your expect be had a, here, to maybe on the going how I had former

in in to on have such But the We with the we program. as next year. as starting TOW the flattish in programs as SPY-X particular, should as here probably back face as XXXX, tough coming Yes. compares continue ramping other well in the times TOW up XXXX, we F-XX in better well XXXX, defense missile as rest of

We'll next better sure. year, for be

for call no the closing remarks. I back And there appears will to be turn further questions. to Oswald Stephen

us. and wanted look about as and everyone quarter. a second very continuing are, thank joining we to We Thank to story, move enthusiastic financial you to to close much numbers, for forward XXXX about performance Vision we're we very as about goals. Obviously, feel great our we the build performance Okay. our where just we our

we and a So you day. all support, the you. good Thank wish again, appreciate

today's conference. And thank participating for you all in

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