Ducommun(US:DCO)2021-08-13 03:31Financial Data and Key Metrics Changes - Ducommun reported second-quarter revenue of $160.2 million, an increase of 8.7% year-over-year from $147.3 million in Q2 2020, primarily driven by higher military and space sector revenue [18][21] - Gross margin rose to 23.0%, the highest quarterly performance in over a decade, up from 22.2% in the prior year [19][20] - Adjusted EBITDA for the second quarter was $23.4 million, or 14.6% of revenue, compared to $20.3 million, or 13.8% of revenue in Q2 2020 [21] Business Line Data and Key Metrics Changes - The Electronic Systems segment posted revenue of $102.8 million, up from $92 million in the prior year, reflecting strong growth in military and space customers [21][22] - The Structural Systems segment reported revenue of $57.4 million, slightly up from $55.4 million last year, with military and space markets driving the increase [22] Market Data and Key Metrics Changes - Military and space revenue represented over 70% of Ducommun's total revenue in Q2, with a strong backlog of $501 million, accounting for 62% of the total backlog [15][16] - Commercial aerospace revenue declined to $37.6 million, but the backlog increased sequentially from $266 million at the end of Q1 to $276 million at the end of Q2, indicating signs of recovery [16][18] Company Strategy and Development Direction - The company is focused on leveraging its defense business and expects revenue growth to be led by defense, with a gradual recovery in commercial aerospace anticipated [14][24] - Ducommun has been recognized as an Airbus detailed parts partner, securing a long-term five-year contract, which is seen as a significant milestone for the company [12][14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about defense opportunities despite concerns regarding budget discussions in Washington, indicating a strong backlog and growth potential [11][14] - The company anticipates continued revenue growth in the low to mid-single digits for 2021, driven by defense and a recovery in commercial aerospace [14][24] Other Important Information - Ducommun's liquidity stands at $97 million, with cash generated from operations amounting to $6 million in the quarter [23] - The company is actively pursuing M&A opportunities to enhance its product mix and growth potential [40] Q&A Session Summary Question: What percent of structural systems sales are titanium? - Management did not disclose the exact percentage but indicated it is a meaningful number [28][29] Question: Any updates on the proprietary process and technology? - Management noted excitement about the prospects for their composite products, particularly for the Airbus A320, despite some delays due to the pandemic [30] Question: Insights on the forthcoming government fiscal year budget? - Management expressed confidence that the defense budget will benefit the company, especially with an additional $25 billion allocated [31] Question: Details on the Airbus deal and revenue tracking? - Management indicated that the Airbus partnership is significant and expected to lead to meaningful revenue increases, particularly for the A320 [34][35] Question: Production rates and alignment with industry expectations? - Management confirmed readiness to support increased production rates, particularly for the 737 MAX and Airbus programs [39] Question: Current M&A environment and deal flow? - Management stated that the M&A environment is competitive, but they remain active and optimistic about future acquisitions [40]