Q2 2023 Ducommun Incorporated Earnings Call
Good day, and thank you for standing by and welcome to the second quarter 'twenty to 'twenty three Ducommun earnings conference call. At this time all participants are in a listen only mode. Following the Speakers' remarks, there will be a question and answer session to ask a question.
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I'd now like to hand, the conference over to Ducommun, Senior Vice President Chief Financial Officer Controller, and Treasurer Sumit.
Please go ahead.
Thank you and welcome to Ducommun strategy twenty-three second quarter Conference call with me today are Steve Oswald Chairman, President and Chief Executive Officer.
I'm 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 future market conditions results of operations and financial projections are forward looking statements under the private Securities Litigation Reform Act of 1995 and are therefore perspective.
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 among others. The cyclicality of our end use markets the level of U S government defense spending timing of orders from our customers legal and rate.
The cost of expansion and acquisitions competition, economic and geopolitical developments, including supply chain issues, and rising interest rates and that make and disasters natural or otherwise.
These risks and others are described in our annual report on Form 10-K filed with the SEC and our forward looking statements are subject to those risks.
Once made during this call are only as of the time made and we do not intend to update any statements made in this 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 the GAAP and non-GAAP measures referenced on this call.
We filed our Q2 2023 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.
Okay.
Thank you Tamara and thanks, everyone for joining us today for our second quarter Conference call.
And as usual I will give an update of the current situation of the company.
Afterwards, <unk> will review our financials in detail.
Before I begin discussing our Q2 results I did want to follow up on our press release and mentioned that we completed the <unk> acquisition at the end of April for our initial purchase price of $115 million net of cash acquired.
This is a very positive step forward for the company as we continue to build both our electronic and structural product portfolios with more engineered products and aftermarket revenue.
Our strategic long term goal.
In addition to help pay for a portion of the <unk> acquisition in May we completed a public stock offering.
<unk> and net proceeds of over $85 million.
And use those proceeds to pay down the revolver.
Was utilized for the acquisition.
We are thrilled with the bureau of acquisition.
I want to publicly welcome by Carpenter, the president and his team.
And they're off to a very good start.
Now turning to the quarterly results Q2 was an excellent quarter as we grew our top line both year over year and sequentially.
Delivering year over year revenue growth of 8%, reaching $187 $3 million.
As mentioned in the press release narrow body aircraft was once again the catalyst in driving overall revenue growth.
And another positive sign that recovery is in good shape.
And it will only get better and better.
Turning to the markets. The continued recovery in commercial aerospace once again delivered in Q2 with Boeing 737, Max business up almost 60% year over year.
And the Airbus a 320 also having significant growth.
Almost 90% year over year.
Overall, commercial aerospace with Airbus and Boeing and others was up 37% from Q2 2022.
The Companys commercial aerospace business is now showed year over year revenue growth for the eighth consecutive quarter.
An excellent side.
As the industry in bill rates recover.
The company's defense business was down year over year in Q2.
Mainly due to timing of programs such as the F 18.
<unk> softness at GAA for Uavs, among others, but once again, we delivered solid performance of $96 million in revenue for the quarter.
The company posted improved gross margins of 21, 4%.
150 basis points year over year from 19, 9%.
As we work through our restructuring activities and benefits benefit from higher volume.
The team also delivered adjusted operating income margins of eight 1%.
And adjusted EBITDA was $26 $1 million, an increase of $2 million year over year.
Ducommun is adjusted EBITDA margins of 13, 9% in Q2 was up as well.
And we anticipate adjusted EBITDA to be solid this year with stronger numbers in 2020 for once the plant closures restructuring activities. This year are completed.
The quality of earnings when factoring in the effects of the DLR acquisition, we're good with.
With GAAP diluted EPS of <unk> 17 cents, a share versus 31, a share for Q2 2022, but with adjustments diluted EPS was <unk> 54 cents a share compared to diluted EPS of <unk> 76, a share in the prior year.
Some key drivers for the lower GAAP diluted EPS include higher interest expense due to debt incurred related to the <unk> acquisition.
Higher restructuring charges.
Higher Gliomas and other fire related expenses and DLR acquisition related expenses.
Yes.
Switching to the total company's backlog performance.
I'm very pleased to report the company achieved a major milestone this quarter, reaching $1 billion in backlog for the first time ever.
Defense backlog contributed defense backlog contributed greatly in the quarter by increasing $15 million sequentially.
$444 million at the end of Q1, 2000 $23 million to $494 million at the end of Q2 2023.
An increase of over 11%.
This was led by military rotary wing platforms.
Such as the Seahawk, and Black Hawk, and other military and space platforms.
We're very pleased with this and this is in line with my past comments that the overall Desio defense business is a very good shape with more positive news to come.
In addition, the commercial aerospace backlog increased sequentially for the ninth consecutive quarter from.
From $266 million at the end of Q1 2021 to.
Two $465 million at the end of Q2 2023 and.
An increase of over 74% during that time.
This was led by the 737 Max Viasat for in flight Entertainment.
<unk> hundred 20, <unk> hundred 20 and Gulfstream.
Or what you would expect after a slower than expected recovery in 2022.
The other excellent news out of the quarter was the overall book to Bill ratio.
For the company was 1.3.
For Offloading for for defense primes to work continues.
We're expecting roughly $90 million for the full year is committed to mainly in our circuit card business for Raytheon.
As communicated a long term run rate of these defense programs already commercialized or in development for offload and it'll be over $125 million for the common by.
By 2025.
What's the transition work is completed.
In Q2, our team delivered another excellent quarter as well managing our supply chain and this is not only showing up in our financials, but also we cannot be in a better place with our customers regarding on time delivery and quality.
Which shows loud and clear and our $1 billion plus backlog.
For revenue guidance in 2023, I'm happy to reaffirm our expectations that should be in the mid to high single digits for 2023.
The recovery for commercial aerospace will continue to lead the way for the rest of the year as we see more and more volume return along with defense being solid as well.
The expected completion of the two plant closings by the end of the end of this year. We'll also have some limited headwinds.
But we feel confident in our guidance.
Now, let me provide some additional color on our markets products and programs.
Beginning with our military and space sector, we posted second quarter revenue of $95 $9 million a decrease versus Q2 2022.
<unk> mentioned earlier was a solid showing for the business in Q2.
We still saw increases in demand for the Mir missile Apache F 35, and various other military and space platforms.
The second quarter military and space revenue represented 51% of the commerce revenue in the period down from 61 last year and this trend will continue to reflect more balanced with commercial aerospace.
Which we like.
We also ended the second quarter with a much improved backlog of $494 million or so.
Cliff can increase of over 11% sequentially and versus a five quarter downward trend.
And this represents 49% of the comments total backlog.
Within our commercial aerospace operations second quarter revenue increased 37% year over year to $78 2 million driven mainly by bill rate increases on large aircraft platforms and other commercial aerospace platforms as well.
So common expect this continue to improve in the commercial aerospace to gain momentum.
Second half of 2023.
The future is bright across our product offerings.
Our delivering quality also continues to stand out as we move ahead.
The backlog within our commercial aerospace sector stands at $465 million at the end of the second quarter and was up $46 million than Q2 2022.
With that I'll ask Jim I'll review, our financial results in detail.
Thank you Steve.
As a reminder, please see the company's Q2 10-Q and Q2 earnings release for a further description of information mentioned on today's call.
As Steve discussed our second quarter results reflects another period of strong performance.
Once again, we saw a significant increase in our commercial aerospace revenues. We remain encouraged by the continued strength in domestic and global travel, which would support higher long term demand for aircraft and I'm also encouraged by the build rate outlook from our key customers that should drive continued growth in our shipments.
During the quarter. We also continued to make progress on our restructuring program and as Steve mentioned, we announced the completion of the acquisition of <unk> Aerospace and subsequently completed a public stock offering to help pay a portion of the <unk> acquisition, which I will discuss in further detail later with all of this we feel like we have laid a strong foundation.
<unk> for the second half of the year.
Now turning to our second quarter results.
Revenue for the second quarter of 223 was $187 3 million versus $174 2 million for the second quarter of 2022.
This year over year increase reflects $21 2 million of growth across our commercial aerospace platforms, partially offset by $10 8 million of lower revenue within the military and space sector.
<unk> overall backlog at the end of the second quarter hit an all time record of 1.01 billion exceeding the $1 billion Mark for the first time in the company's history. This was a growth of almost $50 million of our backlog at the end of Q1 of this year and was driven by the growth in backlog for our defense business. As a reminder, we define backlog as of <unk>.
<unk> revenue based on customer purchase orders and long term agreements with firm fixed prices and expected delivery dates of 24 months or less.
We posted a total gross profit of $40 1 million.
Or 21, 4% of revenue for the quarter versus $34 6 million or 19, 9% of revenue in the prior year period.
We continue to share the adjusted gross margins as we have certain non-GAAP cost of sales items relating to the impact of the guaymas fire on our operations as well as inventory step up amortization on our recent acquisition of DLR aerospace.
On an adjusted basis, our gross margins were 23, 1% in Q2 2023 versus 21, 1% in Q2 2022. This.
This improvement in gross margin was driven by favorable product mix better pricing and improved scale in our commercial aerospace business.
We continue to work through a difficult operating environment with supply chain and labor, however, through our proactive efforts, including strategic buys in our inventory investments, we have been able to avoid any significant impacts on the business.
Ducommun reported operating income for the second quarter of $5 million or two 7% of revenue compared to $7 8 million or four 5% of revenue in the prior year period.
Adjusted operating income was $15 2 million or eight 1% of revenue this quarter compared to $14 2 million or eight 2% of revenue in the comparable period last year.
The company reported net income for the quarter for the second quarter of 2023 of $2 4 million or <unk> 17 per diluted share compared to net income of $4 1 million or <unk> 34 per diluted share a year ago.
On adjusted basis. The company reported net income of $7 3 million or <unk> 54 per diluted share compared to net income of $9 3 million or <unk> 76 in Q2 of 2022.
The lower net income relative to operating income was driven mainly by higher interest costs during the period.
Adjusted EBITDA for the second quarter of 2023 was $26 1 million or 13, 9% of revenue compared to $24 1 million or 13, 8% of revenue for the comparable period in 2022.
Now, let me turn to our segment results.
Our structural systems segment posted revenue of $80 2 million in the second quarter of 2023 versus $64 5 million last year.
The year over year increase reflects $18 1 million of higher sales across our commercial aerospace applications, partially offset by $2 4 million of lower revenue within the military and space markets.
Structural systems operating income for the quarter was $5 4 million or six 7% of revenue compared to $1 3 million or 2% of revenue last year excluding.
Restructuring charges and other adjustments in both years the segment operating margin was 16% in Q2 2023 versus nine 4% in Q2 2022.
This significant year over year improvement was driven by favorable product mix, better pricing and higher manufacturing volume or scale in the business as our commercial aerospace business is continuing to grow.
This has been a great quarter for our structural systems segment.
Our electronic systems segment posted revenue of $107 1 million in the second quarter of 2023.
Versus $109 7 million in the prior year period.
These results reflect $8 4 million of lower revenue across the company's military and space customers, partially offset by $3 1 million of higher commercial aerospace revenue.
Electronic systems operating income for the second quarter was $9 5 million or eight 9% of revenue versus $13 6 million or 12, 4% of revenue in the prior year period.
Excluding restructuring charges and other adjustments in both years the segment.
Operating margin was 11, 4% in Q2 2023 versus 13, 9% in Q2 2022.
Lower operating income as a percentage of revenue was primarily due to unfavorable product mix and unfavorable manufacturing volume.
Moving next to a restructuring update as a reminder, and as discussed previously we commenced a restructuring initiative back in Q2 2022. These actions are being taken to accelerate the achievement of our strategic goals and to better position the company for stronger performance in the short and long term.
This includes the shutdown of our facilities and Monrovia, California, and variable, Arkansas and transfer of majority of that work to our low cost operation and Guam as Mexico with the remainder going to other existing performance centers in the United States.
We continue to make progress on these transitions, both with employee retention and engagement and also working with our customers to get requisite approvals.
During Q2 2023, we recorded $4 8 million in restructuring charges. The majority of these charges with severance and benefits related.
We expect to incur an additional $5 million to $8 million in restructuring expenses during the rest of 2023.
Upon completion of our restructuring program, we expect to generate 11% to $13 million in annual savings from our actions.
Once we wind down production at Monrovia, and Barry will we anticipate selling the associated land and buildings at both locations.
Turning next to liquidity and capital resources.
We have available liquidity of $189 million as of the end of the second quarter, we generated $9 2 million in cash flow from operating activities during the quarter as we continue to manage our working capital needs.
In April we completed completed the acquisition of <unk> Aerospace for an initial purchase price of $115 million net of cash acquired.
We utilized our revolving credit facility to complete the acquisition.
In May we completed a follow on stock offering issuing $2 3 million shares of our common stock with net proceeds of $85 1 million, which we used to pay down our revolving credit facility.
This allowed us to end the quarter with a debt to adjusted LTM EBITDA of two seven times, which is amongst the lowest in the last several years.
While our debt refinancing during 2022 was timely and beneficial the rising interest rate environment, along with the debt incurred from the <unk> acquisition drove the increase in interest cost to $5 7 million in the quarter versus $2 7 million in Q2 2022.
And November 2021 we've put in an interest rate hedge for $150 million, which goes into effect in January 2024, and will help our interest cost for next year.
To conclude the financial review, we are in a good place as we reached the halfway point in 2023 and with the <unk> acquisition and public stock offering now completed in Q2 and the expected completion of the restructuring program by the end of this year. There is much to look forward to in the second half of 2023 and beyond.
I'll now turn it back over to Steve for his closing remarks, Steve Okay Sundar, Thank you and.
In closing Q2 was obviously, a very important quarter for our company and shareholders.
<unk> acquisition is off to a good start public.
Public stock offering was a success commercial aerospace continues higher and higher and defense orders in the quarter were were very impressive.
Also what I mentioned the margin expansion in Q2.
Which shows our strategy presented in December 2022 is working and.
And we will continue to generate shareholder value as we move towards our long term goals in 2027.
My continued thanks, as well to our employees investors and all other stakeholders.
For your continued support as we build momentum for a strong second half of 2023 and the years ahead.
With that let's go to questions. Thank you.
As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.
Your question. Please press star one again, please standby, while we compile the Q&A roster.
The first question comes from Ken Herbert with RBC capital markets. Your line is open.
Yes, good morning.
Steve.
Hey, good morning, Thanks for joining us this morning.
Yes.
Steve maybe just to start off you've had several quarters now of down defense sales, but obviously, some really nice bookings momentum.
Can we maybe start to see defense sales inflect positively here in the third quarter and how should we think about sort of the second half for the defense business in terms of top line.
Yes, I guess a couple of things first.
We're very happy with the bookings in Q2 right. So that's.
A big Big positive for Ducommun and for our team. There I think if you look at going forward here, we're going to still moderate at least through the end of the year.
But.
We certainly feel much better about 2024, I will tell you that.
Just if you look at sort of what happened in Q2, I mean, a big part of that was GAA and Uavs.
Again, what I talked in the past on these calls as a lot of it's just timing of orders and logistics are not getting the orders this year.
It was a big takeaway as well as there is a little bit of Patriot.
Others. So.
These are again, just things that are happening in the market.
But again I feel very good about our defense business. We have this offloading thats come in I mentioned in my remarks last last quarter that these massive moves from internal manufacturing at our Raytheon to our facilities. Okay include not only <unk>.
<unk> is an area that is called inventory so.
Lot of things here that are going to pick up on a revenue side once we stockpiled material versus having it further from the customer. So I think I think it's a good thing to head count.
That's great and on your comment on all floating I mean, there's just a lot going on with the defense markets. Today do you are you seeing incremental opportunities I mean part of the narrative has been the ability to take the success with Raytheon and expand it to other defense customers.
We changed the targets on Offloading, which I think are great and ambitious but are you starting to get a sense that maybe there could be some upside to the offloading opportunities.
We absolutely do I mean look we're.
We're obviously working especially with companies like Northrop.
And others were.
We had a good start with GAA have great Starwood Raytheon.
At the other defense primes working with with Northrop.
What are the best things for US is our performance because talking to the best frame Ceos.
<unk> will not move work out of there.
Their facilities unless they can trust the supplier and we all we all know that all makes sense. So that's one of them.
Any of this game because of our performance.
Great and if I could just finally as I take your comments and I think about margins in electronic systems. It sounds like maybe a little bit more of a muted second half and should we think about sort of the second quarter run rate is a.
Good margin assumption for that segment, just considering timing around the defense sales.
Yes, let me jump in on that so that's all right I think.
On the point that.
It is.
We'll probably see a similar trend.
Improvement ahead of us, especially as we complete the restructuring program by the end of the year, we should start seeing an uptick in those margin pressures.
Great Alright, thanks, guys. Thanks, Ken I appreciate it please standby for the next question.
Our next question comes from Jason Gursky with Citi. Your line is open.
Hey, good morning, everyone.
David Good morning, he used to pick up a little bit.
Hey, Doug.
I'm sorry, there how is that.
Better yet.
Perfect. Thanks, Okay, great sorry about that so.
Just sticking with Ken's line of questioning on the pipeline.
On a business that's out in front of me I appreciate the comments on that because I am sorry can you talk.
On the commercial side Kevin.
I know you've talked over the last quarter or two without some of the success that you've had.
Spirit in particular.
Curious to get an update from that perspective on the outlook for the pipeline on the commercial side, yes.
Certainly.
We're very upbeat about it I mean, it's not only the rates, which we all are going up and around all of these programs for the most part that are all.
Really sort of hit it hard in 'twenty four 'twenty five but we're also gaining share on the programs. Okay. So we're not just standing still here. So for instance, the skins that I've talked about for the Max Okay. Right now we've been public about 175000 per ship set for the 737.
<unk>, we think in the next.
12 months, plus I mean, we're going to be at 195, maybe pushing 200, so that's a little bit further out, but we feel good about not only the rates, but the program share and what of that is.
The scans and that is going to happen.
Right now in the middle of tooling and everything else.
January February were looking to start shifting to spirit for skins for their for their Max production.
Okay, Great and then on the restructuring side of things.
As you look out.
Based on.
And some of the bookings that you've had here.
Of late.
Are you still thinking that.
Restructuring cost savings since youre going to see.
As you wrap things up here are going to accrue a 100% to you all.
Or are we beginning to see some of that kind of reach out and returned to customers.
So.
We feel we continue to feel good about the savings range that we've talked about a 11% to $13 million were in ongoing discussions with with.
Each of the customers, where we need approvals to work through that transition and.
There's no reason to believe that we would come in at this point.
We're less than that range that we've committed to.
We don't see a lot of leakage I mean, we're for instance, just Monrovia for instance, Theres only two major programs that you have to move and one we've already sort of.
Locked up with Boeing Mesa for the back weighted Apache and the other one we're working on right now for the spoil has gone down in Mexico. So.
The nice thing about these moves are there's not a lot of complexity.
So we feel good about that as far as leakage to customers, we are not planning on that.
Dollar backlog.
<unk> got.
Now what is the mix of that look like from a margin.
Perspective.
Bacon is $11 million to $13 million of savings.
But as you execute on that backlog itself is it going to be margin accretive backlog based on what youre seeing today.
So the short answer is yes, and it's going to be supported by.
Growing.
Operating leverage in some businesses, it's going to be supported by better pricing and it is going to be supported by cost efficiencies through the restructuring all three of those is going to result in margin enhancement.
In 2024 and beyond so yes, we do expect that backlog as it flows through into revenue to start coming in at higher and higher margins over the next several quarters.
I think Thats fair.
Great. Thank you gentlemen.
Okay, I just want to take them over here I just wanted to welcome you on the Citi team, Okay too hard to call. The call. We very much appreciate your support.
Please standby for our next question.
Our next question comes from Mike Crawford with B Riley Securities. Your line is open.
Thank you.
You cited Steve strengthened our military rotary wing platforms in particular, where seahawk backlog how much of that is due to BLA.
Yes.
None of it it's all organic mostly coming out of New York facility to Asahi, but yeah. We just things are starting to move in that area. So we benefited.
Quite a bit in.
In Q2 for that.
Excellent excellent and then.
On the other side of that coin was you talked about unfavorable mix and margin and electronic systems and what was what was unfavorable by about the mix.
So yes, I mean, there are some performance centers, which are suboptimal right, including.
We're shutting down very well and that facility is clearly not operating.
One or two other programs where pricing was currently not favorable under the existing contracts that we are producing too, but we know that kind of the next.
Contract is going to be at a different pricing until margins will get better. So there's been a mix of a few things which has resulted in.
In the lower margin.
But we expect those things to resolve over the coming quarters than it is in the long term no change by any means in the margin profile of the business.
Excellent and do you think right. If you look out several years from now that.
The.
One segment.
The structural systems segment will continue to have a higher EBITDA margin than the FC or.
Or do you think the merger.
Come together.
While we certainly hope for both.
But I will tell you that.
We're whether it's structural or electronics, we're doing the same type of operating principles, we're driving the business, we're making sure we're getting.
Pricing for our work, we think that theyre going to come still grow until together nicely. So.
I would say both.
Okay. Thanks, Steve and then last question is.
Given the location of the Monrovia plant it looks like it's been in the area.
It might not be highest and best use to try to have a new buyer come in and continue to operate that is an industrial plan.
<unk>.
A buyer might come in and convert it to a mixed use and I'm just wondering.
What ranges of values you are seeing for either similar properties in that area or that property in particular.
Well, you're right about that level of its facilities in Canada neighborhood, you look at the legacy building, but it's still nine acres of land. So it's a big piece of property, Mike. We just don't know yet we are.
Added to our shareholders. We are in the next month or two actively going to market. It.
We'll see where things go so.
No other report for that other than it's moving.
Okay. Thank you very much.
Thanks Mark.
Please standby for our next question.
Our next question comes from Michael <unk> with true list. Your line is open.
Hey, good afternoon, guys. Thanks for taking my questions here.
Steve <unk> just on the structural systems margin.
I mean really stood out here.
Post Covid high and I think maybe maybe an all time high.
How do we how do we think about these margins going forward, especially with <unk>.
Commercial aerospace volumes continuing to ramp I mean is this sort of level.
Want to put it out there as a new floor, but youre going to get the restructuring benefits as well. So so how do we think about structural going forward here as you continue to see rate increases on some of the.
Commercial Aero programs.
So I mean, I would say that the margins that we've seen in the in this business and are suddenly driven by improving product mix, but also as the businesses have scaled.
I don't know, whether I supposed to commercial aerospace and rates have come back compared to last year, we have seen improvement in margin, but we're also seeing pricing actions, which we expect will stick.
Across our commercial aerospace structures business and also in our engineered product businesses. So the margin trajectory to some extent is also influenced by where the engineered products fit in between our structures and electronic segments. We do have today.
A fair bit of the.
A number of the acquisitions, we've done in the past few years efficient to that structural segment, so that helps a little bit too.
Hi, guys.
I'm glad you brought it up because this morning I was reflecting on my what are the first <unk> 2017, and the operating margin was 4% and structures.
So happy.
Happy to see that number.
It's been several years in Covid and other things, but I feel good about the number would probably moderate a little bit, but that's that's where.
It's only going to get better.
Got it and was there anything unusual in this quarter and it sounds like demand Youre, saying.
Maybe there's a little bit more of the.
Proprietary aftermarket.
Type products that I'm, assuming carry higher margins flowing through this this unit and that should probably be fairly consistent going forward as well.
Right I mean, there are always we try not to give guidance by quarter right on margins that yes.
There are always things that move in and out but.
Anything that was unusual was was that we don't expect.
Rick is marginal I think most of it is solid and might get really just I think you just.
Just sort of supports.
Our strategy right.
And these products.
It's good news for the whole P&L.
Got it got it and then where are you right now on.
Current production rates for the Max for the 787.
Some of the other needle moving programs.
No.
This number is fine all over the place I would say that the 87 were probably three or four so I think thats.
I think it's the state on solid ground and tell you that I would say the Max.
Numbers from Spirit. This notice from Boeing there is destocking I mean, we're probably high <unk> right now for being generous okay.
From our perspective. So we are looking forward to these numbers were here, but we're not we're not we're not seeing <unk>, yet so what I would say Mike.
Okay, Okay got it.
That's helpful.
And then.
Just the last one any other I mean, the bookings to I mean your.
Obviously, you've been talking about the bookings to backlog.
Maybe anything else I mean that was also I think the bookings number might've been a record as well.
But any other color I mean is there all floating in that number or anything to speak of the bookings any any new market share gains are wins that you could talk to.
Yes, I mean look I'm thrilled with the bookings right. So it's again a long journey. It is our all time high.
We as I've talked about these timing of these defense orders are a little tricky. So we got some really heavy orders come in in Q2 for things that we are awaiting auto working on such as the seahawk and other things up in our New York facility.
Ed.
<unk> continued strong even though we did sequentially did didn't go much on commercial Aero.
This is going to continue to build as well. So overall, we're very upbeat.
Okay, great. Thanks, guys I'll jump back in the queue.
Sure.
As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.
Please standby for our next question and it comes from Ken Herbert with RBC capital markets. Your line is open.
Yes.
Yeah, Hey, Steve I appreciate the opportunity with the follow up I wanted to just dig into that a little bit more of the backlog within commercial aerospace was pretty much flat sequentially from the first to the second quarter.
There's certainly been a fair amount of disruption and distraction at spirit over the last month or two.
Is there anything are you seeing maybe any slowdown in any pull from your customer as we speak about the backlog on commercial in particular and how do we think about maybe the movement on the Max in particular to the second half of the year, Yes. It's a good question I'd say a little bit of Q2 was a little bit of taken a breather after a pretty strong.
Brian I think that.
The spirit disruptions really didn't help things.
Do you know from everything I read and talking to Tom at Spirit and other folks.
All of this increase is going to happen. So I think thats going to be a positive.
Positive catalysts for <unk> in the second half, especially in 2024, but.
It was it wasn't a.
As far as the headline numbers.
Think that it was sort of a.
How can you say it just a little.
Bit of a stalemate Q2 on bookings just for lots of reasons, but I don't think there are I think they are all transitory.
Okay, great and with <unk> are now closed.
Hi.
Maybe I don't I'm not sure how specific you can be here, but as we think about the commercial portfolio.
Would you think about that business from an original equipment versus aftermarket standpoint does that can you give any granularity on that within commercial.
For <unk> specifically.
A large percentage more than a majority of that business is aftermarket.
Okay. No I was asking now that <unk> in the portfolio. How do we think about total aerospace total commercial aerospace in terms of OE versus aftermarket mix.
Okay.
So I mean.
We were at the end of last year, we were at 10% and we're looking to go to 15% by 2027, I would say DLR given that it is a large percentage of it is aftermarket we have made significant strides already towards that 500 basis point increase I would say.
Well on our way on that front so.
Beyond that we haven't really broken out aftermarket and OEM and we don't report that.
Quarterly.
Sure.
Basis.
There is.
As a material improvement or at least that more nascent market.
It's a shot and they offer us as we go.
Go on this journey now for the next five years to get to 15% plus on aftermarket it's important to us.
Investors.
Perfect. Okay. Thanks, guys.
Thanks, Ken.
At this time there is no further questions I would now like to turn the call back to Steve Oswald for closing remarks, okay. Thank you very much.
Want to just.
Extend my thanks again for the support to all our <unk>.
Folks calling in today.
We have new investors with our.
With our product with our stock offering so absolutely.
Welcome them as well I feel very good about where we thought Q2 was a was a very good trend for the company.
Certainly bodes well for the second half of the year as I've said on my remarks earlier on the questions that I'm very upbeat and I look forward to speaking again after Q3. So thank you again.
Yes.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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