• Revenue: $197.3 million in Q4 2024, up 2.6% year-over-year.
• Gross Margin: 23.5% in Q4 2024, up from 21.7% in Q4 2023.
• Adjusted EBITDA Margin: 13.8% in Q4 2024, up 180 basis points year-over-year.
• Net Income: $6.8 million in Q4 2024, compared to $5.1 million in Q4 2023.
• Adjusted Net Income: $11.4 million in Q4 2024, compared to $10.4 million in Q4 2023.
• GAAP Diluted EPS: $0.45 in Q4 2024, compared to $0.34 in Q4 2023.
• Adjusted Diluted EPS: $0.75 in Q4 2024, compared to $0.70 in Q4 2023.
• Backlog: $1.06 billion, up $67 million year-over-year.
• Defense Backlog: $625 million, up $98 million year-over-year.
• Commercial Aerospace Revenue: Grew 4% year-over-year in Q4 2024.
• Military and Space Revenue: $109 million in Q4 2024, up from $104 million in Q4 2023.
• Cash Flow from Operating Activities: $34.2 million in 2024, up from $31.1 million in 2023.
• Interest Expense: $3.6 million in Q4 2024, down from $5.4 million in Q4 2023.

• Warning! GuruFocus has detected 5 Warning Sign with DCO.

Release Date: February 27, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Ducommun Inc (NYSE:DCO) achieved its 15th consecutive quarter of year-over-year revenue growth, with Q4 2024 revenue increasing by 2.6% to $197.3 million.
• The company reported strong growth in its missile and electronic warfare programs, contributing to a 5% increase in military space revenue over the prior year.
• Gross margins improved to 23.5% in Q4 2024, up 180 basis points from the previous year, driven by strategic pricing initiatives and productivity improvements.
• Ducommun Inc (NYSE:DCO) has made significant progress in its Vision 2027 strategy, with engineered product revenue reaching 23% of total revenue, up from 19% in 2023.
• The company's backlog remains strong at $1.06 billion, with a notable increase in defense backlog by $98 million year-over-year.

Negative Points

• Ducommun Inc (NYSE:DCO) faced significant headwinds in commercial aerospace build rates and destocking at Boeing and Spirit AeroSystems.
• The commercial aerospace backlog decreased sequentially by $14 million, indicating challenges in this segment.
• The Structural Systems segment experienced a decline in operating margin due to unfavorable program mix and higher onetime costs.
• The company incurred $2.3 million in restructuring charges during Q4 2024, with additional expenses expected as the program completes.
• Ducommun Inc (NYSE:DCO) faced legal fees related to an unsolicited nonbinding acquisition offer, impacting financial resources.

Q & A Highlights

Q: Can you provide any color on expectations for defense and commercial markets, specifically regarding the MAX program and potential destocking risks in early 2025? A: Stephen Oswald, CEO: We anticipate destocking headwinds in the first half of 2025, particularly with Spirit. However, we expect improvements in the second half as build rates increase. Defense markets remain strong, supported by a solid backlog and new orders, such as the recent $40 million order from Bayern-Chemie.

Q: What percentage of your defense sales end up in Europe, and how will you benefit from increased defense spending there? A: Stephen Oswald, CEO: The recent $40 million order from Bayern-Chemie is one of our first direct shipments to Europe. While we benefit from European defense spending through U.S. defense primes, this direct order is a new development, and we hope for more in the future.

Q: How does Ducommun position itself amid potential defense budget cuts under the new administration? A: Suman Mookerji, CFO: We are diversified across multiple programs, with no single program accounting for more than 10% of our defense revenues. Our focus on strategic areas like missile defense and electronic warfare should help offset any potential cuts to legacy platforms.

Q: With the potential slowdown in the ViaSat business, how are you planning for capacity transitions? A: Stephen Oswald, CEO: We are well-positioned with high demand for our Appleton products, including next-generation Jammer. We may seek additional space in the next year or two, despite the expected decline in ViaSat work.

Q: Can you provide more details on the legal fees related to the unsolicited acquisition offer? A: Suman Mookerji, CFO: The legal fees were necessary to protect shareholder interests in response to an unsolicited offer from Albion River. These expenses are not expected to continue in 2025, as Albion has sold its position in Ducommun.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.