Core Points - Ducommun Incorporated has been awarded the Vertical Launch Systems Supplier of the Year by BAE Systems, recognizing its exceptional performance and commitment to operational excellence in 2025 [1][2] - The award highlights Ducommun's contributions to the supply chain success of BAE Systems, ensuring quality and timely deliveries of combat vehicles and weapon systems to the U.S. military and its allies [1][2] - This recognition marks Ducommun as a Gold Supplier for the third consecutive year, reflecting its ongoing commitment to excellence in supporting BAE Systems programs [2] Company Overview - Ducommun Incorporated specializes in providing value-added, innovative manufacturing solutions and products primarily for the aerospace, defense, and industrial markets [5] - The company focuses on two core areas: Electronic Systems and Structural Solutions, producing complex products and components for commercial aircraft, military, and space programs [5] Industry Context - BAE Systems' 'Partner2Win' program, now in its seventh year, acknowledges suppliers excelling in operations, quality, and procurement, fostering close relationships and sharing best practices to drive mutual success [3] - BAE Systems operates as a global defense, aerospace, and security company with approximately 100,000 employees worldwide, delivering a full range of products and services across various domains [4]

Company Overview - Ducommun was founded in 1849 and is recognized as the oldest company in California [3] - The company was originally established not as an aerospace company but as a general entity [3] Presentation Highlights - The CFO, Suman Mookerji, is presenting an investor presentation aimed at providing background on the company and its future direction [2] - The presentation includes forward-looking statements that are subject to risk factors, with references to Qs and Ks for more details [2]

Ducommun (NYSE:DCO) 2025 Conference Summary Company Overview - Ducommun was founded in 1849 and is the oldest company in California, originally established as a general store in Los Angeles before transitioning into the aerospace sector in the 1930s [5][6] - The current management team has been in place since 2017, focusing on transforming the business and streamlining operations [7][8] Financial Performance - The company's market capitalization has grown 4x over the past eight years, with EBITDA increasing by 125% during the same period [9] - Current revenue is just over $800 million, with an LTM EBITDA margin of 15.5%, tracking at 16% in the last three quarters [9][10] - Record backlog of $1.03 billion and a book-to-bill ratio of 1.6 in Q3, indicating strong demand [10] Business Segments - Revenue mix is increasingly skewed towards military applications, with double-digit growth in the defense business over the last three quarters [10][11] - The company has significant exposure to narrow-body aircraft, including the Boeing 737 MAX and Airbus A220, and is well-positioned for recovery in commercial aerospace [11][12] Strategic Initiatives - Vision 2027 plan aims to grow revenues from $700 million in 2022 to nearly $1 billion by 2027, with EBITDA margins expanding from 13% to 18% [19][20] - Engineered products are a key focus, with a target of increasing their share from 15% in 2022 to over 25% by 2027; currently at 23% [22][23] - Cost-saving measures include consolidating manufacturing facilities, with expected synergies of $11 million to $13 million from recent moves [25] Market Dynamics - The defense sector remains robust, with strong order flow and high double-digit growth in missile and radar systems [28][29] - Anticipated recovery in commercial aerospace driven by increased production rates from Boeing and Airbus [11][44] - Current inventory levels are higher than typical due to strategic investments made during the pandemic, which positions the company well for future cash flow improvements [54] M&A Strategy - The company has successfully completed five acquisitions under the current management, contributing to revenue and margin growth [26][35] - Active pursuit of additional acquisition opportunities, with a focus on engineered products, despite a competitive M&A landscape [56] Tariff Impact - Ducommun's manufacturing footprint is primarily in the U.S., with 95% of revenues generated domestically, resulting in limited exposure to tariffs [30][31] Conclusion - Ducommun is positioned for significant growth in both defense and commercial aerospace sectors, with a strong focus on engineered products and strategic acquisitions to enhance its market position and financial performance [28][40]

Financial Performance - The company's market capitalization increased by 388% from $286 million in FY 2016 to $1396 million in LTM Q3 2025[22] - The company's enterprise value increased by 251% from $449 million in FY 2016 to $1573 million in LTM Q3 2025[22] - Net revenues increased by 46% from $551 million in FY 2016 to $806 million in LTM Q3 2025[22] - Adjusted EBITDA increased by 125% from $55 million in FY 2016 to $125 million in LTM Q3 2025[22] - Adjusted EBITDA margin improved by approximately 600 basis points from 10% in FY 2016 to 16% in LTM Q3 2025[22] Business Segments and Strategy - Electronic Systems accounted for 55% of 2024 revenue, with $431 million in revenue and a 21% adjusted EBITDA margin[28] - Structural Systems accounted for 45% of 2024 revenue, with $355 million in revenue and a 15% adjusted EBITDA margin[28] - The company aims to achieve approximately $950 million - $1 billion in net revenues by 2027[31] - The company targets an adjusted EBITDA margin of approximately 18% by 2027[31] - The company aims for engineered products to represent 25% of revenue by 2027[31]

Core Viewpoint - Ducommun Incorporated has successfully amended its credit facility to lower its cost of capital and enhance liquidity, which will support its strategic growth initiatives under the VISION 2027 strategy [1][2]. Financial Summary - The new credit facility includes a $450 million revolving line of credit and a $200 million term loan, replacing the previous facility [1][2]. - The existing facility comprised $95 million drawn from a $200 million revolving credit line and a $225 million term loan, which will be fully repaid using proceeds from the new financing [2]. - The new facility extends the maturity to November 2030, providing a longer-term financial structure [1][6]. Strategic Implications - The increased revolving credit line from $200 million to $450 million enhances liquidity, with over $300 million available at closing [6]. - The refinancing aims to lower the cost of capital through reduced spreads, resulting in immediate cost savings starting in 2026 [6]. - The improved financial and negative covenant provisions offer greater operational flexibility for the company [6]. Company Overview - Ducommun Incorporated specializes in providing innovative manufacturing solutions in the aerospace, defense, and industrial markets, focusing on Electronic Systems and Structural Solutions [3].

Core Insights - Diamond Hill Capital's "Small Cap Strategy" underperformed the Russell 2000 Index in Q3 2025, returning 7.93% compared to the index's gain of over 12% [1] - The underperformance was attributed to the rally being driven by sectors not typically held in the portfolio [1] Company Overview: Ducommun Incorporated (NYSE:DCO) - Ducommun Incorporated provides engineering and manufacturing services to aerospace, defense, industrial, and medical sectors [2] - The stock experienced a one-month return of -6.24% but gained 31.04% over the last 52 weeks, closing at $87.27 with a market capitalization of $1.304 billion on November 24, 2025 [2] Performance and Market Position - Ducommun was highlighted as a top contributor in Q3, benefiting from its role as a Tier 1 and Tier 2 supplier for advanced material aerostructures and electrical components [3] - The company is expected to match Boeing's production rate of the 737 Max by mid-2026, with Boeing producing at a rate of 38 per month, potentially increasing to 42 [3] - Ducommun is also experiencing strong demand in its missile programs due to heightened geopolitical tensions [3] Financial Performance - In Q3 2025, Ducommun reported record quarterly revenue of $212.6 million, reflecting a 6% increase year-over-year [4] - The number of hedge funds holding Ducommun shares increased from 15 to 20 in the second quarter [4]

Core Insights - Ducommun Incorporated (NYSE:DCO) reported record quarterly revenue of $212.6 million for Q3 fiscal 2025, marking a 6% year-over-year increase, driven by strong performance in its defense business, particularly the missile franchise [2][4] - The company reaffirmed its full-year 2025 guidance and noted that 95% of its revenue is generated domestically, mitigating concerns over potential tariff impacts [6] Financial Performance - Gross margin improved to 26.6%, up 40 basis points from the previous year [3] - Adjusted EBITDA reached $34.4 million, representing 16.2% of revenue, and has exceeded $30 million for three consecutive quarters, aligning with the company's goal of achieving 18% adjusted EBITDA by 2027 [3] - Despite a reported net loss of $64.4 million due to litigation costs, adjusted net income was $15.2 million, or $0.99 per diluted share, surpassing estimates by four cents [4] Market Context - The CEO highlighted challenges in the commercial aerospace sector and ongoing destocking as significant headwinds, but welcomed the FAA's approval for an increase in Boeing's 737 production cap, which may help alleviate inventory issues [5] - The stock has performed well in 2025, gaining 43.53% year-to-date as of November 14 [6]

Core Points - Ducommun Incorporated will participate in the Goldman Sachs Industrials and Materials Conference on December 3, 2025, with a general presentation scheduled at 10:50 a.m. Eastern [1] - One-on-one investor meetings will be arranged throughout the day, and institutional investors can contact Goldman Sachs for scheduling [2] Company Overview - Ducommun Incorporated, founded in 1849, provides innovative products and manufacturing solutions primarily in the aerospace, defense, and industrial markets [3] - The company specializes in two core areas: Electronic Systems and Structural Systems, producing complex products and components for commercial aircraft, military and space programs, and industrial applications [3]

Core Insights - The small-cap defense stocks have seen significant growth in 2025, driven by rising demand for AI-powered drones and unmanned vehicles, which are cost-effective and reduce reliance on ground forces [2][3] - The NYSE Arca Defense Index has increased by 31.24% year-to-date, outperforming the S&P 500's 13.70% return [1] - Companies investing in adaptable, technology-backed combat systems are expected to benefit from changing trends in defense spending [3] Industry Trends - The Department of War's 2026 budget request for drones and counter-drones is 53% higher than the actual spend in fiscal 2024 and 78% more than fiscal 2025 funding [3] - Traditional defense contractors are expanding capabilities through mergers and acquisitions, particularly in AI, communications, and cybersecurity [4] Company Highlights - **Cadre Holdings, Inc. (NYSE:CDRE)**: - Share price upside potential of 12.90% as of November 14 [9] - Q3 net sales increased by 42.5% year-over-year to $155.9 million, driven by strong demand for armor and duty gear [11] - Gross profit margin improved from 36.6% to 42.7% year-over-year [11] - Full-year 2025 net sales expected between $624 million and $630 million [12] - **Ducommun Incorporated (NYSE:DCO)**: - Share price upside potential of 18.20% as of November 14 [14] - Q3 net revenue reached $212.6 million, a 6% year-over-year increase, attributed to strong defense business performance [15] - Reported a net loss of $64.4 million due to litigation costs, but adjusted net income was $15.2 million, exceeding estimates [17] - Stock has gained 43.53% year-to-date as of November 14 [19]

Financial Data and Key Metrics Changes - Revenues reached a new quarterly record of $212.6 million, a 6% increase year-over-year, marking the 18th consecutive quarter of revenue growth [9][20] - Gross margins improved to 26.6%, up from 26.2% year-over-year, with adjusted EBITDA margins at 16.2%, reflecting a 30 basis point increase from the prior year [13][14][21] - The company reported a net loss of $64.4 million, or $4.30 per share, primarily due to litigation settlements, compared to a net income of $10.1 million, or $0.67 per share in Q3 2024 [15][23][24] Business Line Data and Key Metrics Changes - The defense business grew by 13% in Q3, driven by a 21% increase in the missile franchise and 17% growth in military fixed-wing aircraft [9][10] - The commercial aerospace segment saw a decline of 10% year-over-year, primarily due to lower revenues from Boeing and regional jets [12][18] - The Structural Systems segment posted revenue of $89 million, up from $86 million, while the Electronic Systems segment revenue increased to $123.1 million from $115.4 million [24][26] Market Data and Key Metrics Changes - The military and space sector revenues increased to $126 million from $111 million in Q3 2024, reflecting strong growth in missile programs and military rotorcraft [17] - The company achieved a book-to-bill ratio of 1.6 times, with $338 million in new orders during Q3 [10][11] - Remaining performance obligations (RPO) reached a record $1.03 billion, increasing by $125 million sequentially [16][30] Company Strategy and Development Direction - The Vision 2027 Game Plan focuses on increasing the revenue percentage of engineered products and aftermarket content, which rose to 23% in 2025 from 15% in 2022 [7][8] - The company is consolidating its manufacturing footprint and pursuing a focused acquisition strategy to enhance growth in high-demand segments [6][8] - Management remains optimistic about the defense business outlook, citing strong order activity and a robust pipeline of opportunities [11][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges in the commercial aerospace sector due to destocking but expressed confidence in the defense business's strength [12][17] - The company expects continued mid-single-digit revenue growth for the full year of 2025, with low double-digit growth anticipated in Q4 [16][17] - Management highlighted the importance of strategic pricing and cost efficiencies as key drivers for margin expansion moving forward [46][47] Other Important Information - The company entered into a binding settlement for the Guam fire litigation, resulting in a $150 million payment, with $56 million expected to be covered by insurance [15][30] - The restructuring initiative is expected to generate annual savings of $11 million to $13 million, with initial cost savings already realized [28][29] Q&A Session Summary Question: Can you provide more detail on bookings in commercial aerospace? - Management noted strong bookings across Boeing and Airbus, with production rates currently at mid-20s to high 20s for MAX [34][35] Question: What are the expectations for revenue growth in Q4? - Management indicated continued strength in defense business will drive growth, despite ongoing destocking pressures in commercial aerospace [37][38] Question: What is the difference between RPO and backlog? - RPO represents total remaining performance obligations, while backlog is constrained to a two-year window and linked to shipments [39][40] Question: What are the expectations for margins in 2026? - Management expects stable margins for the rest of 2025, with significant opportunities for savings from facility consolidation in 2026 [45][46] Question: How will the litigation settlement impact M&A plans? - Management confirmed that they will maintain sufficient liquidity for acquisitions and are in discussions to expand their credit facility [47][48] Question: What is the company's position regarding the Golden Dome program? - Management expressed optimism about being well-positioned in missile and radar franchises, although specific customer feedback is still pending [49][50]