Group 1: Company Performance - Rewey Asset Management's "RAM Smid Composite" increased by 6.11% in Q2 2025, slightly trailing the benchmark Russell 2500 Value Total Return Index which gained 7.29% [1] - Year-to-date, the composite returned -1.29% compared to the benchmark's 1.03% [1] - Ducommun Incorporated (NYSE:DCO) was highlighted as a top performer, rising 42.39% in Q2 2025 [3] Group 2: Ducommun Incorporated (NYSE:DCO) - Ducommun provides engineering and manufacturing services to aerospace, defense, industrial, and medical industries [2] - The stock had a one-month return of 1.48% and a 52-week gain of 44.34%, closing at $93.03 per share with a market capitalization of $1.388 billion on September 12, 2025 [2] - Strong order flows and production from Boeing and Airbus support the investment thesis for Ducommun, alongside commitments from European NATO countries to increase military spending to 5% of GDP [3] - Ducommun is not among the 30 most popular stocks among hedge funds, with 20 hedge fund portfolios holding the stock at the end of Q2, up from 15 in the previous quarter [4]

Ducommun (DCO) 2025 Conference Summary Company Overview - **Company Name**: Ducommun (DCO) - **Industry**: Aerospace and Defense - **Founded**: 1849, oldest continuous company in California [2][3] - **Current Market Cap**: Approximately $90 [6] Key Financial Highlights - **Stock Performance**: Stock price increased from around $25 in 2017 to approximately $90 now [5][6] - **Revenue Composition**: Nearly 60% of revenue from defense, with a strong presence in commercial aerospace [8][9] - **EBITDA Margins**: Increased from 13% post-COVID to approximately 16.5% currently, with a target of 18% by 2027 [13][14][36] Business Segments - **Market Segmentation**: - **Electronic Systems**: 55% of revenue, involved in electronic warfare and missile systems [10][11] - **Structural Systems**: 45% of revenue, includes titanium ammunition handling and other structural components [10][11] - **Customer Base**: Major customers include RTX, Airbus, and Boeing, with over 50% of revenue from tier one suppliers [9][10] Growth Strategy - **Vision 2027**: Targeting revenue of approximately $950 million by 2027, with a focus on engineered products and aftermarket services [12][36] - **Acquisition Strategy**: Five acquisitions since 2017, focusing on engineered products with aftermarket capabilities [17][70] - **Cost Reduction Initiatives**: Facility consolidations and strategic sourcing to drive cost efficiencies [21][22] Market Dynamics - **Defense Sector Growth**: Anticipated continued growth in defense, particularly in missile and radar systems, with a year-over-year increase of 39% in missile revenue [28][40] - **Commercial Aerospace Challenges**: Current destocking issues at Boeing, with expectations of improvement by mid-2024 as inventory levels normalize [41][46] Supply Chain and Labor - **Supply Chain Management**: Generally stable supply chain performance, with strategic inventory management to mitigate risks [58][59] - **Labor Availability**: Strong talent pool in Southern California, with some constraints in smaller Midwest locations [62] Competitive Landscape - **M&A Landscape**: Competitive but focused on companies with strong market positions and low capital intensity [68][70] - **Market Share Opportunities**: Potential to gain market share as OEMs offload non-core manufacturing activities [75][79] Conclusion Ducommun is positioned for growth in both the defense and commercial aerospace sectors, with a clear strategy focused on margin expansion, strategic acquisitions, and operational efficiencies. The company aims to leverage its strong customer relationships and market position to achieve its Vision 2027 targets.

Financial Performance & Growth - Ducommun's market capitalization increased by 350% from $286 million in FY2016 to $1.287 billion in LTM Q2 2025[20] - Enterprise Value grew by 230% from $449 million in FY2016 to $1.481 billion in LTM Q2 2025[20] - Net Revenues increased by 44% from $551 million in FY2016 to $795 million in LTM Q2 2025[20] - Adjusted EBITDA increased by 121% from $55 million in FY2016 to $123 million in LTM Q2 2025[20] - Adjusted EBITDA margin improved by approximately 500 basis points from 10% in FY2016 to 15% in LTM Q2 2025[20] Strategic Goals (VISION 2027) - Target net revenues of approximately $950 million to $1 billion by 2027[28] - Aim for an Adjusted EBITDA margin of approximately 18% by 2027[28] - Increase the percentage of revenue from engineered products to 25% by 2027[28] Engineered Products & Aftermarket - Engineered Products grew from 9% of revenue in 2017 to approximately 15% in 2022, with a target of 25% by 2027[33] - Aftermarket mix increased from 6% in 2017 to approximately 10% in 2022, with a target of 15% by 2027[33]

Group 1 - Ducommun Incorporated will participate in the 8th Annual B. Riley Consumer & TMT Conference on September 10, 2025, with one-on-one investor meetings scheduled throughout the day [1] - Institutional investors are encouraged to contact B. Riley to arrange meetings with Ducommun's management [1] Group 2 - Ducommun Incorporated specializes in delivering value-added innovative products and manufacturing solutions in the aerospace, defense, and industrial markets [2] - The company focuses on two core areas: Electronic Systems and Structural Systems, producing complex products and components for commercial aircraft, military and space programs, and industrial applications [2]

Company Performance - Ducommun (DCO) has returned 47.5% year-to-date, significantly outperforming the average return of 24.8% for Aerospace companies [4] - The Zacks Consensus Estimate for Ducommun's full-year earnings has increased by 2.3% over the past quarter, indicating an improving earnings outlook [3] - Ducommun is currently ranked 2 (Buy) in the Zacks Rank system, which emphasizes earnings estimates and revisions [3] Industry Context - Ducommun belongs to the Aerospace - Defense Equipment industry, which consists of 33 companies and currently ranks 78 in the Zacks Industry Rank [6] - The average return for stocks in the Aerospace - Defense Equipment industry this year is 23.7%, showing that Ducommun is performing better than its peers in this specific industry [6] - Rolls-Royce Holdings PLC, another stock in the Aerospace sector, has achieved a year-to-date return of 100.2% and also holds a Zacks Rank of 2 (Buy) [4][5]

Core Insights - Gabelli Funds, LLC is hosting the annual Aerospace & Defense Symposium on September 4, 2025, at The Harvard Club in New York City, focusing on strong demand outlook and high barriers to entry in the Aerospace and Defense industry [1] - The symposium will feature top executives from over ten companies, discussing themes such as defense spending, aftermarket opportunities, and M&A potential [1] Agenda Highlights - The event will start at 7:30 AM with a welcome and introduction by the Gabelli Funds Team [2] - Notable companies participating include Astronics Corporation, Textron Inc., Moog Inc., HEICO Corporation, and Elbit Systems Ltd., among others, with scheduled presentations throughout the day [2][3] - The agenda includes one-on-one meetings with management, providing attendees with networking opportunities [1]

Investment Philosophy - The investment approach is based on fundamental analysis, focusing on companies with a strong competitive moat, consistent growth in free cash flow, and robust financial performance [1] - The philosophy emphasizes long-term investing over short-term trading tactics, believing in the power of long-term strategies to unlock value [1] Market Engagement - The aim is to explore a wide array of topics relevant to investors, including uncovering undervalued stocks poised for growth and identifying overvalued stocks [1] - Writing for Seeking Alpha is viewed as a contribution to a community that values deep, analytical insights into the market [1] Professional Background - The analyst has a university degree specializing in business and economics, providing a solid foundation for investment analysis [1] - Currently working in a local brokerage firm, the analyst leverages years of investing experience in the financial markets [1]

Group 1 - Gabelli Funds, LLC is hosting the annual Aerospace & Defense Symposium on September 4, 2025, at The Harvard Club in New York City, focusing on strong demand outlook and high barriers to entry in the industry [1] - The symposium will feature top executives from over ten companies, discussing themes such as large aftermarket opportunities, growth exceeding GDP, defense spending, and M&A potential [1] - Attendees will have the opportunity for one-on-one meetings with management, enhancing networking and investment insights [1] Group 2 - Featured companies at the symposium include AIRO Group Holdings, Elbit Systems, Albany International, Graham Corporation, and several others, indicating a diverse representation within the Aerospace and Defense sector [2] - The event is set to start at 8:30 am, providing a structured schedule for discussions and networking [3]

Financial Data and Key Metrics Changes - Revenue for Q2 2025 reached a record $202.3 million, a 2.7% increase from $197 million in Q2 2024, marking the seventeenth consecutive quarter of year-over-year revenue growth [10][25][30] - Gross profit was $53.7 million, representing a gross margin of 26.6%, up from 26% in the prior year [26][30] - Adjusted EBITDA reached a record $32.4 million, or 16% of revenue, up from 15.2% in the prior year [15][30] - GAAP diluted EPS was $0.82, compared to $0.52 in Q2 2024, while adjusted diluted EPS was $0.88, up from $0.83 [16][30] Business Line Data and Key Metrics Changes - The defense business grew by 16% in Q2, driven by a 39% increase in the missile franchise and a 46% increase in the radar business [10][11][12] - Commercial aerospace revenue declined by 10% to $78 million, primarily due to lower production rates on Boeing platforms [13][22] - The industrial business saw a 23% decline in revenue to $8 million as the company pruned non-core operations [23] Market Data and Key Metrics Changes - Military and space sector revenues increased to $117 million from $101 million in Q2 2024, driven by missile programs and military rotorcraft [21][30] - The consolidated backlog was $1.02 billion, down $50 million year-over-year, with defense backlog flat at $593 million [17][30] - Commercial aerospace backlog decreased by $47 million due to lower OEM production rates [17][22] Company Strategy and Development Direction - The company is executing its Vision 2027 strategy, aiming to increase the revenue percentage from engineered products to 25% [9][18] - Focus on consolidating operations and enhancing the engineered product portfolio, which currently contributes 23% of total revenue [9][18][25] - The company is actively pursuing acquisitions and strategic pricing initiatives to drive growth [9][60] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the defense business outlook, citing strong order activity and upcoming product launches [11][19] - The company anticipates mid-single-digit growth in Q3 and low double-digit growth in Q4, driven by defense and a recovery in commercial aerospace [19][40] - Management noted that tariffs are expected to have limited impact on revenues, with 95% of revenue generated in the U.S. [20][27] Other Important Information - The company has ceased operations in Monrovia, California, and Berryville, Arkansas, to consolidate facilities and expects to see cost savings from these actions [14][34] - Cash flow from operating activities improved significantly to $22.4 million in Q2 2025, compared to $3.5 million in Q2 2024 [36][37] - The company is in active negotiations for several meaningful opportunities, expecting a significant uptick in orders in the second half of the year [17][30] Q&A Session Summary Question: Forecast for low double-digit organic revenue growth in Q4 - Management indicated that while some ramp-up activity is expected in commercial aerospace, strong defense performance will be a key driver [43][44] Question: Improvement in cash flow and working capital - Management noted that cash flow was one of the strongest in the company's history, with a focus on improving free cash flow conversion [46][47] Question: Engineered products revenue mix and future guidance - Management expects the engineered products mix to remain steady through the end of the year, with plans to ramp up in 2026 [55][56] Question: M&A outlook and competition - Management acknowledged increased competition but remains optimistic about pursuing acquisition opportunities [59][60] Question: Update on Monrovia property sale - Management confirmed the successful sale of the Berryville facility and plans to market the Monrovia property again [61][62]

Financial Performance - The company reported record quarterly revenue of $202.3 million, a 3% increase year-over-year[16] - Net income increased by 63% to $12.6 million, representing 6.2% of revenue[16] - Adjusted EBITDA reached an all-time high of $32.4 million, or 16% of revenue, up 80 bps year-over-year[16] - GAAP Operating Income was $17.2 million, while Adjusted Operating Income was $20 million, a 1% increase year-over-year[16] - GAAP EPS was $0.82, and Adjusted EPS was $0.88[16] Backlog and Bookings - The company's backlog stands at $1,018 million[18] - Bookings for Q2 2025 were $141 million[18] - The book-to-bill ratio for Q2 2025 is 0.7[19] Segment Performance - Structural Systems segment revenue was $92.0 million, a decrease of 3.7% year-over-year[28] - Electronic Systems segment revenue was $110.2 million, an increase of 8.7% year-over-year[34] - Electronic Systems operating margin was 19.0%, an increase of 250 bps[34] Outlook and Strategy - The company is on track to meet VISION 2027 targets, with revenue between $950 million and $1,000 million and an Adjusted EBITDA margin of 18%[13, 14] - The company reiterates its 2025 full-year revenue outlook, expecting mid-single-digit growth[21, 22] - Tariffs are not expected to have a significant impact on 2025 performance, with the majority of manufacturing in the USA (85%) and sales primarily in the USA (>95%)[25, 26]