Ducommun (DCO) Q1 2026 Earnings Transcript

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DATE

Tuesday, May 12, 2026 at 1 p.m. ET

CALL PARTICIPANTS

• Chairman, President, and Chief Executive Officer — Stephen G. Oswald
• Vice President, Chief Financial Officer, and Treasurer — Suman Mookerji

TAKEAWAYS

• Revenue -- $209 million, up 9% year over year, marking the fourth consecutive quarter over $200 million and the twentieth straight quarter of year-over-year growth.
• Commercial Aerospace Revenue -- $84 million, increasing 18% year over year, reflecting a significant recovery and growth across Airbus A220, A320, and Boeing 37 MAX platforms.
• Defense Revenue -- $118 million, representing 5% year-over-year growth, driven by missile and fixed wing; partially offset by lower radar, electronic warfare ground vehicles, and maritime sales due to timing of orders.
• Missile Business -- 22% year-over-year growth, now comprising approximately 20% of last 12 months’ defense revenue, with future upside linked to multi-year defense framework agreements.
• Backlog (RPO) -- $1.1 billion as of quarter-end, up $86 million year over year, mainly from defense programs.
• Book-to-Bill Ratios -- Trailing 12-month book-to-bill of 1.2x for defense, 1.0x for commercial aerospace, and 1.1x total; $175 million in new bookings in the quarter and $925 million for the past year.
• Gross Margin -- 26.9%, a $5.8 million gain over prior year and an improvement from 26.2%, attributed to product mix, pricing, productivity, and facility consolidation savings.
• Adjusted EBITDA -- $35.4 million, or 16.9% of revenue, up $5.7 million from the prior year; progressing toward the Vision 2027 target of 18%.
• Adjusted Operating Income -- $18 million, or 8.6% of revenue, compared to $7.6 million and 4% the prior year; supported by higher Electronic Systems segment margins and lower stock-based compensation.
• GAAP EPS -- $0.64 per diluted share, versus $0.09 prior year; adjusted diluted EPS of $0.75 compared to $0.23, both reflecting higher operating income.
• Cash Flow from Operations -- $11.2 million generated, versus $800 thousand the prior year, driven by net income and contract liabilities, offset by higher accounts receivable and lower accrued liabilities.
• Liquidity -- $384 million available (cash and unutilized revolver), after amending credit agreements to $200 million term loan and $450 million revolver, reducing cost of capital and supporting acquisition capacity.
• Facility Consolidation Savings -- $13 million run-rate cost savings on track for 2026, with synergy benefits expected to accelerate as product ramps continue.
• Engineered Product Revenue Mix -- 23% of trailing 12-month revenue, up from 15% in 2022; only a small portion from acquisitions, with most growth organic.
• Guidance -- Management reiterated mid to high single-digit revenue growth for 2026, with expected quarterly level loading and continued margin progress assuming destocking normalizes by year-end.

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RISKS

• Management stated that "we are not past the destocking issue entirely as yet" and expect it "to have some impact in the remaining months of 2026," indicating lingering inventory overhang may limit near-term upside.
• Defense segment revenue was "partially offset by weakness in our radar and electronic warfare ground vehicle, and maritime business due to timing of orders," highlighting exposure to order delays within specific defense submarkets.
• Structural Systems segment operating margin decreased, with management attributing the decline to "unfavorable sales mix partially offset by savings from plant consolidation."

SUMMARY

Ducommun (NYSE:DCO) highlighted a record first-quarter revenue performance, driven by double-digit commercial aerospace growth and robust defense orders, particularly in missile platforms. Read-through from new multi-year missile production framework agreements, while not yet reflected in backlog, signals significant future defense revenue opportunity starting in the second half year and intensifying into 2027. Capital structure improvements, completion of facility consolidations, and strategic product mix drove margin progress, while robust bookings and a $1.1 billion backlog support a sustained growth outlook.

• Management confirmed that current manufacturing capacity and facilities are adequate to support future missile program ramp-up, with available building footprint and labor hours.
• Planned margin gains are expected through a mix of ongoing savings from previous consolidations, volume leverage, and continued pricing actions, with only modest mix headwind in the quarter.
• Leadership stated, "mid to high level in the next 3 quarters, and we will just have to we will have to, you know, see how it goes the rest of the year," underscoring the dependence of 2026 results on destocking dynamics.
• Management addressed recent board appointment of the prior Northrop Mission Systems leader as strategic for missile and radar businesses, but did not disclose specific new initiatives.
• Further detail on the missiles, radar, and defense mix—including out-year breakdowns—will be provided at the September Investor Day, according to management.
• Acquisition strategy remains active and disciplined, with management asserting "we have the money" and "something's gonna happen soon" but no definitive new deal completed yet.

INDUSTRY GLOSSARY

• RPO (Remaining Performance Obligations): Contracted revenue not yet recognized under existing orders, serving as a leading indicator of backlog visibility.
• Book-to-Bill: The ratio of new orders booked to revenue billed over a period, used to assess demand momentum; a ratio above 1.0x signals backlog growth.
• Shipset Content: The amount of company-supplied components or assemblies included in a complete aircraft or missile unit.

Full Conference Call Transcript

Suman Mookerji: Thank you, and welcome to Ducommun's 26 First Quarter Conference Call. With me today is Steve Oswald, Chairman, President and Chief Executive Officer. I am going to discuss certain limitations to any forward looking statements regarding future events, projections or performance that we may make during the prepared remarks or the Q&A session that follows.

Certain statements today that are not historical facts including any statements as to the company's progress, and value creation opportunity for shareholders under our Vision 2027 game plan for investors beliefs about the company's Vision 2032 strategic plan, potential destocking headwinds and their impact on the company's business, the remainder of 2026 expectations related to the US Department of War long term framework agreements for key missile programs with defense prime their impact on the growth of our defense business, expectations relating to certain commercial aerospace single and twin aisle platform build rates, through 2027 and beyond.

Estimated synergies to be realized under the company's facility consolidation projects, and the outlook for our commercial aerospace and defense businesses for the remainder of 2026. Are forward looking statements under the Private Securities Litigation Reform Act of 2000 and are therefore prospective. These forward looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from the future results expressed or implied by such forward looking statements. Although we believe that the expectations reflected in our forward looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct.

In addition, estimates of future operating results are based on the company's current business, which is subject to change. Particular risks facing Ducommun include, amongst others, the cyclicality of our end use markets, the level of US government defense spending, Our customers may experience changes in production rates or delays in the launch and search certification of new products, timing of orders from our customers, which are subject to cancellation, modification, or rescheduling. Our ability to obtain additional financing and service existing debt to fund capital expenditures, and meet our working capital needs.

Legal and regulatory risks, including pending litigation matters generally, well as any potential losses arising from third party subrogation claims related to the Guaymas performance center fire that may become material, the cost of expansion, consolidation and acquisitions, competition, economic and geopolitical developments, including supply chain issues, our ability to successfully implement restructuring, realignment, and cost reduction initiatives that could adversely impact our ability to achieve our strategic objectives.

International trade restrictions our ability to obtain necessary US government approvals for proposed sales to certain foreign customers impact of tariffs and elevated interest rates, risks associated with the prolonged partial or total US federal government shutdown, the ability to attract and retain key personnel and avoid labor disruptions, the ability to adequately protect and enforce intellectual property rights, pandemics, disasters, natural or otherwise, and risk of cybersecurity attack. Please refer to our annual report on Form 10-K, a quarterly report on Form 10-Q, other reports filed from time to time with the SEC, well as the press release issued today for a detailed discussion of the risk. Our forward looking statements are subject to those risks.

Statements made during this call are only as of the time made we do not intend to update any statements made in the presentation except if and as required by regulatory authorities. This call also includes non GAAP financial measures, Please refer to our filings with the SEC for a reconciliation of GAAP to non GAAP measures referenced on this call. We filed our Q1 26 quarterly report on Form 10 Q with the SEC today. I would now like to turn the call over to Steve Oswald, for a review of the operating results. Steve?

Stephen G. Oswald: Okay. Thank you, Suman. Thanks, everyone, for joining us today for our first quarter conference call. Today and as usual, I will give an update of the current situation at the company, Afterwards, Suman will review our financials in detail. Let me start off, again on this quarterly call with our-- with the Ducommun's Vision 2027 game plan for investors. We continue to make great progress in our fourth year of the plan. Strategy and vision were developed coming out of the COVID pandemic, over the 2022, unanimously approved by the common board in November 2022, and then presented the following month in New York to investors where we got excellent feedback.

Since that time, the Commons manager has been executing the strategy by increasing the revenue percentage of engineered product content at 23% over the past year and up 15% in 2022 consolidating our rooftop footprint and contract manufacturing continuing our focused acquisition program, executing the offload strategy with defense primes in high growth segments, driving value added pricing, expanding content on key commercial aerospace platforms. All of us here as well as my fellow board members continue to have a high level of conviction in the Vision 2027 strategy and financial goals and believe the market catalyst ahead present a unique value creation opportunity for shareholders. The Q1 26 results show again that strategy initiatives are working.

With gross and adjusted EBITDA margins continuing to stay on track to meet or and exceed our vision 2027 goals, with more opportunities to come for DCO. For Q1, I am happy to report that revenues reached a new first quarter record of $209 million, 9% growth over last year, our fourth consecutive quarter over $200 million in revenue, and our 20th consecutive quarter with year over year revenue growth. We had particular-- we had growth in both our commercial and military end markets with commercial aerospace in particular showing a major turnaround in the quarter. 18% year-over-year growth, a very positive sign.

We saw production and deliveries continue to ramp driven by higher OEM production rates as well as lower than previously anticipated destocking. While this is great news, we are not past the destocking issue entirely as yet. We expect it to have some impact in the remaining months of 2026. In addition, company's remaining performance obligations, RPOs, remains at over $1 billion, almost $1.1 billion, increasing $86 million compared to Q1 last year. The growth in RPO year over year is primarily in defense, where our book to bill is at 1.2x in the last 12 months, and our commercial aero book to bill is at 1.0x.

We closed on over $175 million of bookings in Q1 and have closed on $925 million in the past 12 months. Our bookings do not reflect any upside of potential orders from defense primes under the 7-year missile framework agreements entered into by them with the Department of War in the past few months. We are in active discussions with the defense primes to support them on these major agreements and are well positioned as an incumbent supplier in many of the programs which is great news for DCO and its shareholders.

Production on many of these missile programs such as Tomahawk, PAC 3, and Standard Missile 3 and 6 are expected to grow several fold and this will be a big driver of growth for the DCO's defense business over the next few years. Stay tuned for more news on this front. In the coming quarters. Gross margin grew by $5.8 million in the quarter to 26.9%, A nice improvement from 26.2% last year in Q1. Continue to see the benefits of our Vision 2027 strategy and gross margin expansion. Due to DCO's engineered product portfolio with aftermarket, strategic value pricing initiatives, restructuring actions, and productivity improvements reading through to the P&L.

Cost saving expectations are also on track for the run rate of $13 million in savings from our facility consolidation program by the 2026. For adjusted operating income margin in Q1, the team delivered 8.6%, Well above the prior year of 4%. This was supported by growth in adjusted operating income margins in Electronic Systems segment during the quarter as well as lower stock based compensation expenses. Adjusted EBITDA continues to improve towards our Vision 2027 goal of 18% in 2027 from 13% in 2022. DCO achieved 16.9% in the quarter, or $35.4 million, up $5.7 million from Q1 25. Which is excellent to see as we start off 2026.

GAAP EPS was $0.64 per diluted share in Q1 26 versus $0.09 for Q1 25. With the adjustments, diluted EPS was $0.75 a share in Q1 26, versus $0.23 in the prior year quarter. The higher GAAP and adjusted diluted EPS during the quarter was driven by higher operating income. As mentioned earlier, over the past 12 months, we closed on over $925 million in bookings, a trailing 12 month book to bill of 1.1x. Deposit momentum in commercial aerospace and increased defense spending, we have strong tailwinds in both our primary markets. On the outlook for the rest of 2026, we expect to see continued strength in defense business and a recovery on our commercial aerospace business.

We reiterate our previous guidance of mid to high single digit revenue growth for the full year 2026. With the higher than previously anticipated strength in our commercial aerospace business in Q1, and with some of the destocking impact previously expected in Q1 deferred, now expect the quarters to be relatively level, albeit lower than 2026, and growth for each quarter between mid to high single digits depending on the level of destocking. Now let me provide some additional color on our markets, products, and programs. Beginning with our military and space sector, we saw revenues of $118 million compared to $112 million in Q1 25.

Represents 5% growth and This was driven by another quarter of strong performance in our military fixed wing and missile franchises, partially offset by weakness in our radar and electronic warfare ground vehicle, and maritime business due to timing of orders. DCO's missile business grew 20% in 2025. And in Q1, it continued to grow increasing 22% compared to Q1 in 2025. As I mentioned earlier, with RTX, our largest customer, and Lockheed will significantly increase production on many programs, including PAC-3, SM 3, SM 6, and Tomahawk, amongst others. And we are ready to get moving.

DCO is well positioned on all these programs, and also in great shape with capacity at our operations to fully support the required ramp up. These framework agreements and DOW's push to increase production ASAP should be a strong catalyst for growth in our military and space segment starting in 2027 and beyond. As a reminder, Ducommun is a key supplier in over a dozen missile platforms. Including AMRAAM, MIR, PAC-3, SM 2, s m 3, s m 6, tomahawk, ram, naval strike missile, THAAD, and TOW. Amongst others. This is an exceptional and unique time for DCO within this market segment. An excellent news for significant future revenue along with generating high levels of shareholder value.

Within our commercial aerospace operations, first quarter revenue increased 18% year-over-year over year to $84 million with strong growth on Airbus platforms, including the A220, and A320 as well as the 37 MAX with Boeing. We also saw good growth in our commercial rotorcraft business as we ramp up production on Bell platforms out of our Coxsackie, New York facility. The outlook for commercial aerospace is promising, as Boeing increases their 37 max build rates from 42 to 47 by this summer.

And with the new production line in Everett going live this year, we expect to see some destocking headwind for the next couple of quarters, should start to dissipate as we get to the end of the year, especially at Legacy Spirit Max fuselage operations. Wichita. Additionally, Boeing is building momentum on 787 builds and making big investments in its South Carolina facility to increase capacity and ramp up production to 10 by the end of this year. With further rate ramp in 2027 and beyond. I also want to mention that DCO is $150 thousand per shipset content. on this platform, and so this will help us as we drive at a higher rate.

We are also monitoring the production at Airbus. As they work through their engine issues But overall, we remain optimistic about DCO's commercial aerospace business in 2026 with more growth ahead in 2027 and beyond. As we get past destocking and industry supply chain issues. Our balance of defense and commercial aerospace businesses is helping drive growth for the company in 2026. We very much like the mix and the balance it provides. Outlook going forward is very positive for both end markets, the best I have seen in my 9+ years leading Ducommun. And that is exciting news for the company and its shareholders. With that, I will have Suman review our financial results in detail. Suman?

Suman Mookerji: Thank you, Steve. As a reminder, please see the company's October and Q1 earnings release for a further description of information mentioned on today's call. As Steve discussed, our first quarter results reflected another strong quarter of revenue with a strong recovery in commercial aerospace and growth in our military end market. Gross margin and EBITDA margins both continued to show improvement on a year over year basis. We completed our facility consolidation projects in 2025 and those synergies will continue to build through 2026 as we ramp up production of the various product lines that were moved.

These actions, along with our strategic pricing initiatives, drove continued gross margin expansion in Q1 and keeps us on pace to achieve our Vision 2027 goal of 18% adjusted EBITDA margin. Now turning to our first quarter results. Revenue for the first quarter of 2025 was $209 million versus $192.5 million for the 2025. Year over year increase of 8.6% reflects strong growth in commercial aerospace of 17.5% driven by growth on single-aisle platforms including the A220, a 23, and the 37 MAX, well as growth on commercial helicopter platforms, as we ramped up production for Bell at our Coxsackie facility.

The strength in the commercial aerospace business was supported by higher than previously expected production and deliveries and lower than previously expected destocking. We expect some of the lower destocking to be caught up in the remaining quarters of 2026. This pull forward of revenue into Q1 is helping us better level load the quarters across 2026. Our defense business grew 4.8% year-over-year, with continued strength in missile and fixed wing platforms. Partially offset by declines in radar and rotorcraft.

The missile business grew by 22% during the quarter and our missiles radar and electronic warfare franchise combined now represents approximately 33% of last 12 month defense revenues or more than 19% of total DCO revenue. it is a strong franchise and a great platform to drive significant upside for Ducommun in 2027 and beyond as we see an uptick in OEM production activity on the various missile platforms as Steve noted earlier. We posted total gross profit of $56.2 million or 26.9% of revenue for the quarter versus $50.5 million or 26.2% of revenue in the prior year period.

Operating income for the first quarter was $15.7 million or 7.5% of revenue compared to operating income of $5 million or 2.6% of revenue in the prior year period. Adjusted operating income was $18 million or 8.6% of revenue this quarter, compared to $7.6 million or 4% of revenue the comparable period last year. The company reported net income for 2026 of $9.9 million or $0.64 per diluted share compared to $1.4 million or $0.09 per diluted share a year ago. On an adjusted basis, the company reported net income of $11.7 million or $0.75 per diluted share compared to adjusted net income of $3.5 million or $0.23 in Q1 25.

The GAAP net income and higher adjusted net income during the quarter driven by higher adjusted operating income. Now let me turn to our segment results. Our Structural Systems segment posted revenue of $91 million in Q1 2026 versus $83 million last year. The year over year change reflected $8 million higher revenue in our commercial aerospace business driven by single-aisle platforms, including the A220, A320, and the 37 MAX as well as commercial helicopters. Military and space business within this segment was flat on a year over year basis with growth in missiles offset by weakness in military rotorcraft and ground vehicles.

Structural Systems operating income for the quarter was $10.4 million or 11.4% of revenue compared to $9.9 million or 11.9% of revenue for the prior year quarter. Excluding restructuring charges and other adjustments in both years, the segment operating margin was 13.4% in Q1 26 versus 14.5% in Q1 25. The decrease in year over year margin driven by unfavorable sales mix partially offset by savings from plant consolidation. Our Electronics Systems segment posted revenue of $118 million in Q1 2026 versus $109 million in the prior year period. The year over year change reflected $5.3 million in higher revenues in the military and space applications driven by strong growth in military fixed wing aircraft, missiles, and rotorcraft.

Commercial aerospace in the quarter grew $4.6 million, driven by growth on the 37 and a 22 platforms. Our industrial business decreased $1.4 million during Q1 due to timing of orders. Electronic Systems operating income for the first quarter was $23 million or 19.5% of revenues, versus $17 million or 16% of revenue in the prior year period. Excluding restructuring charges and other adjustments in both years, the segment operating margin was 19.8% in Q1 26 versus 16.4% in Q1 25. The year over year increase was driven by higher manufacturing volume, and favorable sales mix. Turning now to liquidity and capital resources.

In Q1 26, we generated $11.2 million in cash flow from operating activities, compared to $800 thousand in Q1 of last year. Significant increase in cash generation is a great start to the year for us and was driven by higher net income and contract liabilities, partially offset by higher accounts receivable. And lower accrued liabilities in the quarter. In Q4, the amended In Q4, the company amended its credit agreement which now includes $200 million term loan and $450 million revolver. The new $650 million facility lowers our cost of capital and gives us incremental capacity to execute on our acquisition strategy.

As of the end of the quarter, we had available liquidity of $384 million comprising of the unutilized portion of our revolver and cash on hand. Interest expense in Q1 25 was $4 million compared to $3.3 million in 2025. Year over year increase in interest cost was primarily due to higher debt balances offset by lower interest rates on our debt. In November 2021, put in place interest rate hedge that went into effect for a 7-year period starting January 2024 and pegs the 1 month term so far at 170 basis points for $150 million of our debt. The hedge is still in place and will continue to drive significant interest cost savings in 2026 and beyond.

To conclude the financial overview, I would like to say that the first quarter results demonstrate that our Vision 2027 strategy is working, and that we are well positioned for 2026 and beyond.

Stephen G. Oswald: I will now turn it back to Steve for his closing remarks. Steve?

Suman Mookerji: Okay. Thanks, Suman.

Stephen G. Oswald: In closing, you know, we had a great start to the year with Q1 results. Revenue growth was strong. And margins continued to improve, and was also our fourth consecutive quarter of revenue over $200 million. Gross margin and adjusted EBITDA margins were at 26.9% and 16.9%, respectively. it is wonderful news. As we have talked about already, on track to meet our vision 2027 goals. In addition, the company's engineered product revenues over the past 12 months was 23% in excellent shape. As we drive higher OEM and AM aftermarket products to the P&L. As everyone knows and as we spoke about, in previous calls, driving this percentage as high as possible is our number 1 strategic focus.

And with a 100% commitment. Finally, with increasing defense budgets ahead, and commercial bill rates heading higher, I am very optimistic about the rest of 2026. And the next few years. Okay. So with that, now let's go to questions. Thank you.

Operator: As a reminder, if you would like to ask a question at this time, and wait for your name to be announced. To withdraw your question, please press *11 again. Our first question comes from John Godyn with Citi.

Analyst (John Godden): Hey, guys. Thanks for taking my question. I wanted to follow-up on 2 things. Just to better understand the kind of revenue outlook going forward. Number 1, on commercial OE and the inventory issues and number 2, on missile growth. Maybe on commercial OE first, Can we just unpack this inventory overhang a bit more And it feels like there may be a point toward the end of the year or next year where, really, your volumes have to kind of snap back and catch up. And grow even faster than OE growth. Am I thinking about that shape the right way? Maybe you could just offer some color.

Stephen G. Oswald: Yeah. Just a couple of things. First, a big part of our program especially on the MAX, is through Wichita. The legacy spirit business, which, now is owned by Boeing and which we are very happy about. And, you know, they obviously produce the fuselage. You know, they still have lots of fuselages that they have built So that is a big part of you know, the common story is that is something that we are just gonna have to overcome. And I think, you know, this is gonna be the year. I mean, the best thing that we are gonna see over the summer is the increase in the rate.

So as that rate goes up, in Washington State and they continue to build the maxes, Those fuselages will go down to some level, which is basically a safety stuff. So you know, I think, again, this year is going to be, you know, destocking whether we see it in 1 quarter or 2 quarters, you know, we are gonna, you know, get through it by the end of the year. Then I think we are gonna be clear. We are gonna see, I think, some nice growth. You know, going ahead on the MAX. Airbus is sort of steady. Because, I mean, obviously, they had some problems with fuselages and the their engines.

But their order rate's gonna be pretty steady when they get to 75. You know, I do not know about that. We will have to see over the next couple of next couple of years. But so I think what I have said in the remarks is probably gonna be just about the best I can share right now. Is, mid to high level in the next 3 quarters, and we will just have to we will have to, you know, see how it goes the rest of the year, John.

Analyst (John Godden): Okay. that is helpful. And then on missiles, another big growth driver You have a great chart that you guys distribute the missile production outlooks over the next few years. You are on a lot of different programs. it is seems like there is even more kind of upward pressure to missile production when we talk to the primes, etcetera. I just wanted to plug in to your long-term thinking. I mean, it seems like this is something that could really drive revenue growth for multiple years here. And I would love to just understand that shape as well.

Stephen G. Oswald: Yeah. Thank you, John. Yes. And that is John, that is my favorite chart, just so you know, Okay? So thank you for bringing it up. that is a joke, but is exactly. So, anyway, so look. You know? Just top level, we are heavily engaged with RTX. as they are our largest customer We are on, you know, pretty much every 1 of their platforms for missiles, And the prob not problem, but the challenge is with RTX is that, you know, the big companies move a little bit slower than maybe any of us would like. But that is that is where we are. So, you know, we are incumbent on it.

So we make a lot of the products already. So I think we are you know, market wise, strategic wise, we are right where we need to be. We are a little hedging a little bit. We think it is more of a end of year early 27 when this thing's really gonna start to pop. And, I mean, you know, we are looking at on a lot of these programs, we are looking at 3x and even more than that. I mean, you know, we are major players on the Tomahawk, and know, I think maybe it is not 10x from our sheet, but it is gonna be at least 8x.

And, you know, we make this just for people. We make the cabling. We make lots of cabling for the Tomahawk. And, you know, that is a big moneymaker for us as well. So 2027-2028, looking great. Okay.

Analyst (John Godden): And just to quick clarification. It sounds like you sort of see it accelerating at year end into early 2027 and continuing for a while. Is that the right visual?

Stephen G. Oswald: 100%. Excellent. Thank you. Thank you, John.

Suman Mookerji: Appreciate you being Certainly, an orders perspective, I think revenues may start reflecting in revenues later in 2027. But from an order perspective, yes, late this year, into next this year, into next year.

Operator: Our next question comes from Mike Crawford with B. Riley Securities.

Michael Crawford: Yeah. Thanks, Suman. I was just going to ask about when you would expect to start seeing these orders these missile orders in particular coming into your backlog? You are saying 2027?

Stephen G. Oswald: No, 2026. Second half 26, Mike. I mean, 2026. Yeah. Yeah. Yeah. Right. So Yeah. Yeah. We are just like we are in every discussion right now. We do not really have anything to report on this call. We will certainly have more when we talk to you again in August, but you know, we are we are we are heavily engaged. We just do not have anything to report. On the order side. Okay.

Michael Crawford: And then just on the M&A front, it is been over 3 years since you acquired BLR Aerospace in Everett. And it had, like, $40 million of revenue at the time. Are you willing to share, like, what revenue run rate might be for that business or any of your other engineered products, businesses? And then I guess the second part of this is, like, what is been the hang up? You just cannot find quality companies or people are asking too much or you have come close or not in the last 3 years? Because I know if in a perfect world, you could do 1 of these a year. Year.

Suman Mookerji: Yes. Mike, good question. So first, when it comes to the growth in our engineered product businesses, they have been growing very nicely even or organically. Right? So if you see the mix shift over the last few years in our business from 2022 through 2026, year-to-date Q1, we have gone 15% to 23%. Only, you know, as you noted, a smaller portion of that has come from acquisitions. Less than we would like, but the good thing about that story is that the business the engineered product business has grown organically very well over the last few years, taking us therefore, from 15 to the 23%.

We are actively engaged in pursuing acquisition opportunities We have gotten close on a number of opportunities over, the last 18 months. But we continue to remain disciplined on valuation. We continue to-- we remain disciplined to make sure that any deal we pursue will create value for our shareholders. We do believe there are enough opportunities out there for us to be able to execute And we definitely remain hopeful that we will, here over the next several months. Be able to bring 1 or more of these opportunities home.

Michael Crawford: Great. Thank you very much.

Stephen G. Oswald: Mike, let me jump in here. Mike, let me jump in. Yeah. We are look. Again, I have mentioned this in the past. You know, we are-- we have been picky eaters. Mike I said previously, you know, we had a couple of things we looked at. Just, at least 1 just could not-- could not get there. And, some others we have, you know, we have worked pretty hard on. And, just has not worked out yet. But we have the money. And we have the team, and we are optimistic. That something's gonna happen soon. So just stay tuned.

Michael Crawford: Alright. Thank you.

Stephen G. Oswald: Thanks, Mike.

Operator: Our next question comes from Alexandra Mandry with Truist Securities. Hey, thanks for taking my question.

Analyst (Alexandra Mandry): Do you anticipate any capacity expansion being required later in the year to ramp production once orders are received for missiles?

Stephen G. Oswald: Yeah. Welcome, Alexandra, Great to have you with us. No, we do not. Fortunately, we have, in a couple of our sites, we have footprint which was not being utilized. And we are a little bit proactive on some. Others, we are more lucky. Where we had, some extra, an extra building in the back. Which was not being utilized. So as far as footprint, I think we are we are in excellent shape. And, you know, the other nice thing is that we do not we do not run our factories.

We do some we do in some areas, but we are not running, you know, a heavy second shift operation So we also have a lot of hours that we can still maximize. So we have the footprint. We have capacity in hours. You know, the only challenges are, you know, the obvious thing is once we get the orders, we have to bring highly high qualified people in and train them. And that is the only thing I would say that still is not been done yet, obviously.

Analyst (Alexandra Mandry): Great and then another question. You mentioned weakness in radars and rotorcraft in military and space due to timing. What were the those timing issues, and will they be alleviated? And, I guess, will we expect an uptick in Q2 on maybe timing of those orders being pushed back?

Suman Mookerji: Yes. So if you look at radars, for example, we have a very strong radar franchise, right, from the SPY-6 radar. You used across the Navy to the GATR program to LTAMDS, which is on the Patriot missile. So we have a very strong franchise. It is a matter of kind of timing of those orders, changes in some cases to specification of specific components we make by our customer that affects the timing of when we build and ship out product. Those are all pure timing related issues. The franchise is really very strong. And as demand for radar systems just independently or as radar systems linked to missile defense, the demand for those continue to grow.

We are well positioned and expect to see growth in that particular segment in the long in the medium to long term. Military rotorcraft, we have good presence. On both Apache and Blackhawk. And we do expect demand to stay stable. There are often push outs by the customers that may affect timing within quarters. But we do expect that business to stay stable. We are also positioning ourselves well for the Blackhawk replacement. And have been supplying prototypes to Bell to support that program. So we do feel like our craft franchise is 1 where we are either maintaining or growing share.

Stephen G. Oswald: Yeah. I think that is right. And I think also and I know you are catching up on the story. Is, you know, we moved our, rotor blade, our back rotor blade for the Apache across the country from California to New York. And that, you know, has been we have been basically ramping that up, and that is gonna be in much better shape later in the second quarter. So more June time frame. So that is also gonna help. that is the big 1.

Analyst (Alexandra Mandry): Very helpful. Thank you.

Stephen G. Oswald: Thank you.

Operator: Our next question comes from Kenneth Herbert with RBC Capital Markets.

Analyst (Kevin Liu): Hi, this is actually Kevin Liu on for Kenneth Herbert. But thank you for taking the question. And welcome on the strong results. Thank you. Thank you. So you guys had really strong EBITDA margin, 16.9% in the quarter coming out of the gate this year despite margins typically starting off a bit slower and building throughout the year. So could you maybe talk about how investors should think about the margin cadence for the remainder of the year? And is there any reason we should not expect sequential improvements throughout the year like you typically see?

Suman Mookerji: So we do you know, margins were strong during the quarter. Some favorability due to product mix but I would you know, it is not as much as we had in Q3 and Q4 where we had much more maybe skewed product mix favorability in the revenues. So it could be 20 basis points approximately of that here in Q1. But outside of that, we do expect margins to maintain and strengthen as we go through the rest of the year.

Stephen G. Oswald: that is right. We are we are we are we are heading to 18%.

Analyst (Kevin Liu): Awesome. I will I will leave it at 1. Thank you.

Stephen G. Oswald: Thanks for being with us.

Operator: As a reminder, if you would like to ask a question at this time, time, please press star Our next question comes from Noah Poponak with Goldman Sachs.

Analyst (Will Hertmeyer): Hi, guys. This is Will Hertmeyer on for Noah. thanks for taking our questions. You are welcome. 2 parts here. First, can you talk a little bit more about the recent appointment of the prior head of Northrop Mission Systems to the board? Sure. The press release mentioned that the appointment would help support the missile and radar franchise. Is there any specific initiatives there or just generally adding support for the growth we have talked about today?

Stephen G. Oswald: Yeah. I think it is I think it is just general. First, we are delighted to have Mark you know, join us. I think it you know, also says lot about Ducommun that we will be able to attract someone like Mark to our board. You know, he for those who do not know, he was a top-level exec, an executive with Northrop. Long track record of success. He just he just joined us and we are thrilled with that. I think it is more general support You know, we are obviously you know, Raytheon being our biggest customer. Northrop is a big strategic customer as well for us.

So we continue to work those areas where we can grow with them. And, Mark can only help. Right? Just for insights and just, generally just helping us, guide us a little bit. So, yes, thanks for bringing it up, and, yeah, we are thrilled to have Mark.

Analyst (Will Hertmeyer): Great. And then following up on that, mentioned that missiles, radars, and electric warfare is about 19% of total revenue. Would you be willing to help us size how big missiles and radar are individually today and maybe how big should we think about those being, say, 3 years down the road?

Suman Mookerji: So good question. And we will have more color on the defense business and different portions and areas where there are most significant growth opportunities during our Investor Day in September. We do we have in the past said that missiles represent about 20% of our defense revenues. that is still continues to be kind of in that ballpark. And we do expect that business is going to grow much more exponentially than the rest of the defense business. So that is going to be the key driver for our defense growth over the next several years. We do have a page in the deck, which shows the growth expected on some of the key platforms.

But in terms of, you know, specific percentage mix of missiles in out years, we will have we will have more color around that when we clear this out.

Stephen G. Oswald: Yeah. I think that is a good question. You guys sorry. You are just gonna have to wait till September. But it will be a good story. I promise you that.

Analyst (Will Hertmeyer): that is helpful. We look forward to it.

Stephen G. Oswald: Okay. Thanks for being with us.

Operator: I am showing no further questions in queue at this time. I would like to turn the call back to Steve Oswald for closing remarks.

Stephen G. Oswald: Okay. Thank you again for everyone for joining us. Obviously, we are very, very happy with the start of 2026. Proud of our results and, you know, believe with our market heading in the right direction on both sides. We are gonna have a terrific year. We are also looking forward to our Investor Day. We just mentioned that. that is gonna be in September. We are gonna have a press release out this Thursday before the bell. On details for that. And we look forward to sharing not only an update on vision 2027, but also a very exciting, road map and new phase for DCO called vision 2032. So we look forward to, that meeting very much.

So, again, thank you for your time. And have a great and safe day.

Operator: This concludes today's conference call. Thank you for participating. May now disconnect.

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