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]

Core Insights - Boeing is experiencing a significant recovery, reporting improved operational efficiency, rising revenue, and a return to positive free cash flow, marking a critical milestone in its post-crisis recovery [1][4] - The stock has gained 30% over the past year, outperforming the S&P 500 Index's gain of 18%, although it has slightly underperformed year-to-date compared to the market [1] - Wall Street rates Boeing stock as a "Strong Buy," reflecting high confidence in the company's growth prospects and financial health [2] Financial Performance - Boeing's revenue for the third quarter increased by 30% year-over-year to $23.3 billion, driven by improved operational performance and increased commercial deliveries [4] - The Boeing Commercial Airplanes (BCA) business delivered 160 aircraft, the best quarterly total since 2018, with revenue rising over 50% to $11.1 billion [5] - The company reported positive free cash flow of $238 million, its first since late 2023 [4] Operational Developments - The commercial backlog reached $535 billion, with over 5,900 airplanes, including significant orders from Turkish Airlines and the Norwegian Group [5] - The 737 program has stabilized at 38 jets per month and is ramping up to 42 per month following FAA approval [6] - Boeing completed rework on all pre-2023 aircraft and closed its shadow factory, indicating a return to smoother operations [6]

Financial Data and Key Metrics Changes - Revenue grew 4% year over year, exceeding $1,140,000,000 [6][18] - Adjusted EBITDA reached approximately $208,000,000, a 14% increase year over year [6][18] - Adjusted earnings per share came in at $0.74, above projected range [6] - Adjusted EBITDA margin reached 18.2%, with High Performance Materials and Components segment delivering margins of 23.7%, a 350 basis point improvement from Q2 2024 [6][21] - Adjusted free cash flow was $93,000,000, a 94% increase year over year [7][18] Business Line Data and Key Metrics Changes - High Performance Materials and Components (HPMC) segment showed margin improvement, with expectations for continued strength [6][21] - Aerospace and Defense (A&D) remains a reliable growth driver, with double-digit growth expected for the third consecutive year [14][26] - Commercial jet engine sales grew 27% in Q2 and are expected to exceed 20% growth for the full year [12][26] - Aerospace and Non-Defense (AANS) performance was above expectations despite a sequential decline [22] Market Data and Key Metrics Changes - The aerospace recovery is accelerating, positioning the company to grow alongside customers [5][12] - Demand for commercial jet engines is expected to continue rising, with customers reporting expanding backlogs [12][26] - Defense market growth is driven by international programs and increased commitments for high-value materials [14][16] Company Strategy and Development Direction - The company is focused on achieving consistent profitable growth through innovation, performance, and partnerships [17][32] - Long-term agreements with Boeing and Airbus are expected to enhance revenue and margin expansion [10][75] - Investments in capacity and technology are aimed at meeting the growing needs of the aerospace industry [11][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to deliver with reliability and scale as demand ramps up [11][32] - Near-term volatility is anticipated as airframers balance inventory with supply chain realities [11] - The company remains disciplined in capital deployment and focused on working capital efficiency [7][18] Other Important Information - The company executed $250,000,000 in share repurchases during the quarter, bringing total buybacks since 2022 to over $800,000,000 [7][8] - The full-year guidance for adjusted EBITDA, EPS, and free cash flow has been raised based on strong performance [8][26] Q&A Session Summary Question: Airframe outlook and inventory levels - Management noted that customer destocking is impacting revenues, but expects demand to return as Boeing ramps up production [35][36] Question: Jet engine capacity utilization and growth - Management confirmed that capacity is in good shape to meet 2027 targets, with investments expected to increase output by 8% to 10% [42][43] Question: Industrial end markets performance - Management indicated mixed results in industrial markets, with some growth in conventional oil and gas but declines in construction and mining [54][56] Question: HPMC margins and future targets - Management expects HPMC margins to remain above 24%, with incremental margins projected in the 40% range [65][66] Question: Aftermarket trends - Management anticipates sustained high MRO and spares demand, driven by increasing shop visits and upgrade packages [70][72] Question: Contract terms and share gains - Management confirmed that new contracts include volume-based minimums and pricing terms that allow for inflation and cost pass-through [74][75] Question: Nickel melt capacity increase - Management clarified that new melting equipment will be added to increase nickel capacity by 8% to 10% [87][88] Question: Titanium revenue contribution - Management expects the new titanium facility to contribute significantly to revenue as it ramps up production [90][97] Question: Jet engine revenue growth expectations - Management indicated that jet engine revenue growth could be in the range of 20% to 25% for the year [103] Question: COVID-era employee retention credits - Management confirmed that $5,000,000 in credits remain on the books, with no further recognition expected in the second half [106] Question: Isothermal forging business and share gains - Management reported strong demand in the forging business, with expectations for continued growth and share gains [109][110]