Ducommun(DCO) - 2025 Q1 - Quarterly Results

First Quarter 2025 Results Overview and Highlights Ducommun reported a strong start to 2025 with a 2% revenue increase to $194.1 million, driven by defense strength offsetting commercial aerospace weakness, achieving record 26.6% gross margins and 15.9% Adjusted EBITDA margins Q1 2025 Financial Highlights vs. Q1 2024 | Metric | Q1 2025 (in millions) | Q1 2024 (in millions) | Change (in millions) | % Change | | :--- | :--- | :--- | :--- | :--- | | Net Revenue | $194.1 | $190.8 | +$3.3 | +2% | | Net Income | $10.5 | $6.8 | +$3.7 | +53% | | Diluted EPS | $0.69 | $0.46 | +$0.23 | +50% | | Gross Margin | 26.6% | 24.6% | +200 bps | - | | Adjusted EBITDA | $30.9 | $27.4 | +$3.5 | +13% | | Adjusted EBITDA Margin | 15.9% | 14.4% | +150 bps | - | - Revenue growth was driven by strength in the defense business, particularly in missiles, electronic warfare, military radar, and rotary-wing aircraft platforms, offsetting anticipated weakness from Boeing 737 MAX production rates and commercial in-flight entertainment products[5] - The company is making significant progress on its VISION 2027 plan, highlighted by achieving a new quarterly record for gross margins and the second-highest Adjusted EBITDA, keeping it on track for its 18% Adjusted EBITDA goal[6][8] - Ducommun expects minimal impact from tariffs as over 95% of its revenue is generated from U.S. facilities, and it has limited supply chain exposure to China with plans to mitigate raw material tariff impacts[7] Consolidated Financial Performance Net revenue increased to $194.1 million from $190.8 million year-over-year, driven by military and space growth offsetting commercial aerospace and industrial declines, while net income surged 53% to $10.5 million due to higher gross profit and improved cash flow from operations Revenue Change by End-Use Market (YoY) | End-Use Market | Revenue Change (YoY, in millions) | | :--- | :--- | | Military and Space | +$14.6 | | Commercial Aerospace | -$8.2 | | Industrial | -$3.1 | - Gross profit rose to $51.6 million (26.6% of revenue) from $46.9 million (24.6% of revenue) YoY, primarily due to a favorable product mix and higher manufacturing volume[12] - Operating income for Q1 2025 was $16.6 million (8.5% of revenue), a $4.0 million increase from $12.6 million (6.6% of revenue) in Q1 2024, with Non-GAAP adjusted operating income at $19.2 million (9.9% of revenue)[13] - Net cash provided by operations was $0.8 million, an improvement from a $1.6 million use of cash in Q1 2024, mainly due to better working capital management and higher net income[15] Business Segment Performance Electronic Systems revenue grew slightly to $109.7 million with declining operating income, while Structural Systems revenue increased modestly to $84.4 million with operating income surging to $10.4 million due to higher volume and favorable product mix Segment Performance Summary (Q1 2025 vs Q1 2024) | Segment | Q1 2025 Revenue (in millions) | YoY Change | Q1 2025 Operating Income (in millions) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | Electronic Systems | $109.7 | +2.1% | $18.1 | -4.9% | | Structural Systems | $84.4 | +1.3% | $10.4 | +262% | Electronic Systems Electronic Systems revenue grew 2.1% to $109.7 million due to military and space gains offsetting commercial aerospace declines, but operating income decreased to $18.1 million (16.5% margin) due to lower volume and higher costs - Revenue growth was fueled by a $12.3 million increase in military and space sales, partially offset by a $7.0 million decrease in commercial aerospace revenue[18] - Operating income fell by $0.8 million year-over-year, with the operating margin contracting to 16.5% from 17.6%, primarily due to lower manufacturing volume and increased manufacturing costs[17] Structural Systems Structural Systems revenue increased 1.3% to $84.4 million due to military and space growth offsetting commercial aerospace declines, with operating income surging to $10.4 million (12.3% margin) driven by higher volume, favorable mix, and lower costs - Revenue drivers included a $2.3 million increase from military rotary-wing platforms, which was partially offset by a $1.3 million decline in commercial aerospace, including the Boeing 737 MAX[25] - Operating income surged by $7.5 million year-over-year, and the operating margin expanded significantly to 12.3% from 3.4%, due to higher volume, favorable mix, and lower manufacturing costs[19] Backlog Total company backlog stood at $1,053.6 million as of March 29, 2025, a slight decrease from year-end 2024, with Electronic Systems backlog increasing and Structural Systems backlog decreasing Backlog by Segment (in thousands) | Segment | March 29, 2025 (in thousands) | Dec 31, 2024 (in thousands) | | :--- | :--- | :--- | | Electronic Systems | $566,336 | $555,966 | | Military and space | $451,366 | $459,546 | | Commercial aerospace | $92,165 | $76,291 | | Structural Systems | $487,229 | $504,853 | | Military and space | $168,335 | $165,239 | | Commercial aerospace | $318,894 | $339,614 | | Total Ducommun | $1,053,565 | $1,060,819 | - The company's remaining performance obligations under ASC 606 were $986.0 million as of March 29, 2025[47] Financial Statements and Reconciliations Condensed Consolidated Balance Sheets As of March 29, 2025, total assets were $1,128.6 million, total liabilities $435.6 million, and total shareholders' equity $693.0 million, reflecting slight asset growth and liability reduction from year-end 2024 Balance Sheet Summary (in thousands) | Account | March 29, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $578,537 | $568,081 | | Total Assets | $1,128,615 | $1,126,101 | | Total Current Liabilities | $173,372 | $175,474 | | Total Liabilities | $435,608 | $443,571 | | Total Shareholders' Equity | $693,007 | $682,530 | Condensed Consolidated Statements of Income For Q1 2025, Ducommun reported net revenues of $194.1 million, gross profit of $51.6 million, and net income of $10.5 million ($0.69 diluted EPS), showing favorable growth compared to Q1 2024 Income Statement (in thousands, except per share amounts) | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Net Revenues | $194,114 | $190,847 | | Gross Profit | $51,597 | $46,943 | | Operating Income | $16,577 | $12,622 | | Net Income | $10,511 | $6,849 | | Diluted EPS | $0.69 | $0.46 | GAAP to Non-GAAP Reconciliations The company provides reconciliations for non-GAAP measures, with Q1 2025 Adjusted EBITDA at $30.9 million, Non-GAAP adjusted operating income at $19.2 million, and Non-GAAP adjusted net income at $12.6 million ($0.83 diluted EPS), primarily excluding amortization, restructuring, and stock-based compensation GAAP Net Income to Adjusted EBITDA Reconciliation (Q1 2025, in thousands) | Line Item | Amount (in thousands) | | :--- | :--- | | GAAP net income | $10,511 | | Interest expense | $3,263 | | Income tax expense | $2,803 | | Depreciation | $4,277 | | Amortization | $4,307 | | Stock-based compensation expense | $5,347 | | Restructuring charges | $426 | | Adjusted EBITDA | $30,934 | GAAP to Non-GAAP Operating Income Reconciliation (Q1 2025, in thousands) | Line Item | Amount (in thousands) | | :--- | :--- | | GAAP operating income | $16,577 | | Restructuring charges | $426 | | Inventory purchase accounting adjustments | $0 | | Amortization of acquisition-related intangible assets | $2,232 | | Non-GAAP adjusted operating income | $19,235 | GAAP to Non-GAAP Net Income & EPS Reconciliation (Q1 2025) | Metric | GAAP (in thousands) | Non-GAAP Adjusted (in thousands) | | :--- | :--- | :--- | | Net Income | $10,511 | $12,637 | | Diluted EPS | $0.69 | $0.83 |