Q1 2024 Ducommun Incorporated Earnings Call

Operator: Good day, and thank you for standing by. Welcome to the first quarter 2024 Ducommon Earnings conference call. At this time, all participants are in listen-only mode.

Good day and thank you for standing by welcome to the first quarter 2020 for Ducommun earnings Conference call. At this time all participants are in listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During this session you will need to press star one on your telephone.

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Speaker Change: Here, an automated message revising your hand as ways to withdraw your question. Please press star. One again, please be advised that today's conference is being recorded and I'd like to hand over to your first speaker today. Some of them were Gucci Chief Financial Officer. Please go ahead.

Operator: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Suman Mookerji, Chief Financial Officer. Please go ahead.

Suman Mookerji: Thank you, and welcome to Ducommon's 2024 first quarter conference call. With me today is Steve Oswald, Chairman, President, and CEO. 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, prospective.

Suman Mookerji: Thank you and welcome to Ducommun 'twenty 'twenty four first quarter conference call with me today are Steve Oswald Chairman President and CEO.

Suman Mookerji: 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.

Suman Mookerji: 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.

Suman Mookerji: 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 cannot give any assurance that such expectations will prove to have been correct.

Suman Mookerji: 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.

Suman Mookerji: In addition, estimates of future operating results are based on the company's current business, which is subject to change. Particular risks facing Ducommon include, amongst others, the cyclicality of our end-use markets, the level of U.S. government defense spending, our customers may experience delays in the launch and certification of new products, timing of orders from our customers, legal and regulatory risks, the cost of expansion and acquisitions, competition, economic and geopolitical development, including supply chain issues and rising or high interest rates, 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 attacks.

Suman Mookerji: 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.

Suman Mookerji: In addition estimates of future operating results are based on the company's current business, which is subject to change.

Suman Mookerji: Particular risks facing ducommun include amongst others. The cyclicality of our end use markets the level of U S government defense spending.

Suman Mookerji: Customers may experience delays in the launch and certification of new product timing of orders from our customers legal and regulatory risks the cost of expansion and acquisitions competition, economic and geopolitical developments, including supply chain issues and rising or high interest rates.

Suman Mookerji: 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 cyber security attacks.

Suman Mookerji: Please refer to our annual report on Form 10-K, quarterly reports on Form 10-Q, and other reports filed from time to time with the SEC, as well as the press release issued today, for a detailed discussion of these risks.

Suman Mookerji: Please refer to our annual report on Form 10-K quarterly reports on Form 10-Q, and other reports filed from time to time with the SEC as well as the press release issued today for a detailed discussion of the risks are forward looking statements are subject to those risks.

Suman Mookerji: Our forward-looking statements are subject to those risks. Statements 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.

Suman Mookerji: Statements 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.

Suman Mookerji: This call also includes non-GAAP financial measures. Please refer to our filings with the SEC for a reconciliation of the GAAP to non-GAAP measures referenced on this call.

Suman Mookerji: Please refer to our filings with the SEC for a reconciliation of the GAAP to non-GAAP measures referenced on this call. We filed our Q1 2024 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, Suman.

Stephen G. Oswald: We find our Q1 'twenty to 'twenty four quarterly report on Form 10-Q with the SEC today.

Suman Mookerji: I would now like to turn the call over to Steve Oswald for a review of the operating results.

Stephen G. Oswald: Thanks, everyone, for joining us today for our first quarter conference call. Today, and as usual, I will give an update on the current situation at the company, to which Suman will review our financial... We start off with an update on our continued progress towards Vision 2027. For background, this vision and strategy was developed coming out of the COVID pandemic in the summer and fall of 2020, unanimously approved by the Ducommon board in November, and presented to investors the following month in New York. We got excellent feedback.

Suman Mookerji: Steve.

Stephen G. Oswald: Thank you so much thanks, everyone for joining us today for our first quarter conference call today, and as usual I will give an update on the current situation of the company.

Suman Mookerji: Afterwards, <unk> will review our financials in detail.

Stephen G. Oswald: Let me start off with an update on our continued progress towards vision 2027 for background. This vision and strategy was developed.

Stephen G. Oswald: Of the Covid pandemic.

Stephen G. Oswald: Over the summer and fall of 2022.

Stephen G. Oswald: The approved by the Ducommun Board in November 2022.

Stephen G. Oswald: And then presented to investors the following month in New York.

Stephen G. Oswald: Excellent feedback.

Stephen G. Oswald: Since that time, Ducommon Management has been executing the Vision 2027 strategy by consolidating its facility footprint, doing its targeted acquisition, increasing the revenue proportion of engineered product and aftermarket content, executing our offloading strategy with defense crimes and high growth segments of the defense budget by expanding content on key commercial aerospace platforms. We all have convictions.

Stephen G. Oswald: Since that time, two common management has been executing the vision 2027 strategy bank consolidations facility footprint.

Stephen G. Oswald: It's targeted acquisition program.

Stephen G. Oswald: Increasing the revenue proportion of engineered products and aftermarket content executing our off loading strategy with defense crimes and high growth segments of the defense budget.

Stephen G. Oswald: Expanding content on key commercial aerospace platforms.

Stephen G. Oswald: We all have conviction and the vision 2027 goals and strategy.

Stephen G. Oswald: Division 2027 Goals and Strategies and believe the near-term and mid-term catalysts, along with strong results ahead for DCO, present a unique, long-term value creation opportunity for shareholders. The Q120-24 results were a very good example of the strategy at work. Q1 was an outstanding quarter and a great start to the year for Ducommun.

Stephen G. Oswald: I believe the near term and midterm catalysts, along with strong results ahead for DCF present, a unique long term value creation opportunity.

Stephen G. Oswald: For shareholders.

Stephen G. Oswald: The Q1 2024, our results were very good example of this strategy at work.

Stephen G. Oswald: Okay.

Stephen G. Oswald: Q1 was an outstanding quarter and a great start to the year for ducommun.

Stephen G. Oswald: Revenues exceeded $190 million for the third consecutive quarter and $190.8 million, growing 5.3% over the prior year. We saw strong growth in our commercial aircraft businesses across both Boeing and Airbus, along with our rotorcraft. [inaudible] The recovery on the 787 was notable, revenues more than doubling over the prior year period, as well as strong growth on the A220 platform, where we make the skins for the entire fuselage. Overall commercial aerospace with Airbus and Boeing, and others, was up 11% from Q1 2023 despite Boeing and Spirit's continued challenges with max quality. We have now grown our year-over-year revenue in our commercial aerospace business Our defense business grew 1% year over year due to strong demand for the Blackhawk, Apache, and F-35 platforms, as well as selected naval programs and other weapons systems for submarines.

Stephen G. Oswald: Revenues exceeded $190 million for the third consecutive quarter at $190 8 million growing five 3% over the prior year.

Stephen G. Oswald: Growth in our commercial aircraft business across both Boeing and Airbus lowered our rotorcraft business helped drive revenue during the quarter.

Stephen G. Oswald: Recovery on the 787 was notable with revenues more than doubling over the prior year period as well as strong growth on the <unk> hundred 20 platform.

Stephen G. Oswald: We will make the skins for the entire fuselage.

Stephen G. Oswald: Overall, commercial aerospace with Airbus and Boeing and others was up 11% from Q1 2023 despite.

Stephen G. Oswald: And spirits continued challenges with Max quality issues.

Stephen G. Oswald: We have now grown our year over year revenue in our commercial aerospace business for 11 consecutive quarters.

Stephen G. Oswald: Demonstrating the resilience of our business.

Stephen G. Oswald: Even in a challenging OEM environment.

Stephen G. Oswald: Our defense business grew 1% year over year.

Stephen G. Oswald: A strong demand for the Black Hawk Apache and F 35 platforms as well as selected naval programs, including the balance closing weapons system and other weapons systems for submarines.

Stephen G. Oswald: Growth is partially offset by declines in legacy programs such as the F-18, which we have talked about in the past, and a pause in TOW missile production, for which we expect a new contract and anticipate starting shipments again in 2025. The defense business was almost $100 million in revenue in the first quarter, and we remain optimistic about the growth ahead. As we go through a timing transition on certain programs, the ever-growing backlog in defense tells the story, up $125 million from last year.

Stephen G. Oswald: Growth was partially offset by declines in legacy programs such as the F 18.

Stephen G. Oswald: Which we have talked about in the past and a pause in the tow missile production.

Stephen G. Oswald: For which we expect a new contract anticipate starting shipments again in 2025.

Stephen G. Oswald: The SaaS business is almost $100 million of revenue in the first quarter.

Stephen G. Oswald: Remain optimistic about the growth ahead.

Stephen G. Oswald: As we go through a timing transition on certain programs the ever growing backlog in defense tells the story of <unk>.

Stephen G. Oswald: <unk> hundred $25 million from last year, and 42 million from Q4 2023.

Stephen G. Oswald: $42 million from Q4 2020. The fence backlog now stands at over half a billion. 569. Significant wins with RTX and Q1 were an important driver for the increased defense backbone. The SPY-6 program is part of the U.S. Navy's family of radars that performs air and missile defense on seven classes of ships. SBY-6 radars are integrated, meaning they can defend against ballistic missiles, cruise missiles, hypersonic missiles, hostile aircraft, and surface ships simultaneously. Ducommon has been provided with one card for the program.

Stephen G. Oswald: Defense backlog now stands at over half a billion.

Stephen G. Oswald: $569 million.

Stephen G. Oswald: This is Kim <unk> with <unk> in Q1 were an important driver for the increased defense backlog.

Stephen G. Oswald: The <unk> six program as part of the U S Navy's family of radars.

Stephen G. Oswald: <unk> Air and missile defense on seven classes of ships.

Stephen G. Oswald: As a giant leap for the fleet.

Stephen G. Oswald: <unk> radars are integrated.

Stephen G. Oswald: Meaning they can defend against ballistic missiles cruise missiles, hypersonic missiles hostile aircraft and surface ships simultaneously.

Stephen G. Oswald: Ducommun has been provided one card for the program as this is part of the Offloading strategy, we've been working on.

Stephen G. Oswald: This is part of the offloading strategy we've been working on. And I'm very happy to report that we've been awarded a second card from RTX for the SBY-6 and Q1 after 18 months of work. This is a slow transition, as I've mentioned in the past, and it should be.

Stephen G. Oswald: And I'm very happy to report that we've been awarded a second cart from RPX for the <unk> <unk> Q1, after 18 months of work.

Stephen G. Oswald: These are a slow transition as I've mentioned in the past and it should be but now it pays off in the order for two cars in Q1, one new and want to follow on with over $50 million.

Stephen G. Oswald: But now it pays off, and the order for two cars in Q1, one new and one a follow-on, was over $50 million. There is also great news as we are now building out a much bigger business in radar..., complimenting our long-term track record in missiles. The new car and award deliveries are expected to begin in 2025.

Stephen G. Oswald: This is also great news as we are now building out a much bigger business in radar support.

Stephen G. Oswald: Complementing our long term track record and missile support.

Stephen G. Oswald: The New card award deliveries are expected to begin in 2025 and the current card shipments are ongoing.

Stephen G. Oswald: The current card shipments are on... As communicated in the overall offloading program, we anticipate that the long-term run rate of the SPY-6 and other defense programs already commercialized or in development will now be $135 million. An increase of $10 million over a prior target of $125 million. It has been a long journey. The Woolworths.

Stephen G. Oswald: As communicated on the overall off only program, we anticipate that the long term run rate of the <unk> six and other defense programs already commercialized or in development will now be $135 million in 2025, an increase of $10 million over our prior target of $125 million for 2025.

Stephen G. Oswald: And it's been a long journey.

Stephen G. Oswald: But well worth it.

Stephen G. Oswald: Another real highlight in Q1 was gross margin of 24.6% for the quarter, up 430 basis points year-over-year from 20.3% as we continue to realize benefits from our strategic value pricing initiatives, productivity improvements, growing the engineered product portfolio, and initial restructuring savings. We also made significant reductions in the scope of our operations at our Berryville, Arkansas facility during Q1, with several programs fully transitioned to Ducommons, Joplin, Missouri, roughly This has allowed us to start realizing a portion of the savings expected for burial closure during the first... And one more program left to transition with our, We also continue to make a full effort with Boeing Commercial and Boeing Defense on the Max Spoilers and Apache Tailroader, respectively, working with them on approvals and building buffers.

Stephen G. Oswald: Another highlight in Q1 was gross margin of 24, 6% for the quarter up 430 basis points year over year from 23% as we continue to realize benefits from our strategic value pricing initiatives productivity improvements growing the engineered product portfolio and.

Stephen G. Oswald: The initial restructuring savings.

Stephen G. Oswald: We also made significant reductions in the scope of our operations that are variable Arkansas facility. During Q1 with several programs fully transitioned to ducommun Joplin, Missouri facility, roughly 200 miles away.

Stephen G. Oswald: This has allowed us to start realizing a portion of the savings expected for variable closure during the first quarter with one more program left to transition with RPX.

Stephen G. Oswald: We also continue to make a full effort with Boeing commercial and Boeing defense on the Max wireless and Apache tail rotor respectively.

Stephen G. Oswald: With them on approvals and building buffer.

Stephen G. Oswald: We are in the final transition phase with some headwinds in Q2 and Q3 of this year, but long term, we are driving to a great outcome for Ducommon, Boeing, and our shareholders. For adjusted operating income margins in Q1, the team delivered 9% compared to 7.5% in Q1. This is a great result driven by the continued growth of our engineering product, and with our restructuring savings beginning to kick in, adjusted EBITDA was another great story in Q1, at 14.4% of revenue compared to 12.7% in Q1.

Stephen G. Oswald: We are in the final transition phase with some headwinds in Q2 and Q3 of this year, but long term, we are driving to a great outcome for ducommun Boeing and our shareholders.

Stephen G. Oswald: For adjusted operating income margins in Q1, the team delivered 9% compared to seven 5% in Q1 2023.

Stephen G. Oswald: Great result, driven by the continued growth in our engineered product businesses and with our restructuring savings to begin to kick in during the quarter.

Stephen G. Oswald: Adjusted EBITDA was another great start in Q1 of 14, 4% of revenue compared to 12, 7% in Q1 2023.

Stephen G. Oswald: 170 basis point improvement year over year gives Ducommun a great start to 2020 to work towards the 18% Division by 2027. The Gap Diluted EPS was $0.46 a share in Q1 2024 versus $0.42 a share for Q1 2020. With the adjustments, diluted EPS was a solid $0.70 a share compared to a diluted EPS of $0.63 a share in the prior year.

Stephen G. Oswald: 170 basis point improvement year over year. It gives ducommun a great start to 2024 as you work towards the 18% for the vision 2027th goals.

Stephen G. Oswald: The GAAP diluted EPS was <unk> 46 cents a share in Q1 2024 versus <unk> 42, a share for Q1 2023 and with the adjustments diluted EPS was a solid 70, a share compared to a diluted EPS of <unk> 63, a share in the prior year quarter.

Stephen G. Oswald: The higher gap and adjusted dilute EPS was driven by improved operating income as well as lower interest costs. The company's consolidated backlog increased sequentially and compared to the prior year quarter. Total company backlog ended Q1 at a record of $1,046,000,000, increasing it by $52,000,000 sequentially, and it was $85,000,000 year over year. The defense backlog, as mentioned earlier, also increased by $125 million compared to the prior year quarter. All for a record $569,000.

Stephen G. Oswald: The higher GAAP.

Stephen G. Oswald: Diluted EPS was driven by improved operating income as well as lower interest costs during the quarter.

Stephen G. Oswald: The company's consolidated backlog increased sequentially and compared to the prior year quarter total company backlog ended Q1 at a record of $1 $46 million, increasing over 52 million sequentially and it was $85 million year over year.

Stephen G. Oswald: Defense backlog as mentioned earlier also increased 125 million compared to the prior year quarter to end at a record $569 million.

Stephen G. Oswald: Strong defense backlog reaffirms that the common defense business remains well positioned for more positive news to come. Commercial Aerospace backlog decreased slightly year over year, primarily due to industry issues with the single aisle production rates and the max issues mentioned earlier with Boeing and Spirit. However, our commercial aerospace backlog still grew relatively quickly. Q4 2023 at 400, Q1 our team delivered another good quarter matching the supply chain, as evidenced by another quarter of positive revenue growth.

Stephen G. Oswald: Strong defense backlog reaffirms that the comments defense visit remains well positioned with more positive news to come.

Stephen G. Oswald: Commercial aerospace backlog decreased slightly year over year, primarily due to industry issues of the single aisle production rates and the Max issues mentioned earlier with Boeing and spirit.

Stephen G. Oswald: However, our commercial aerospace backlog still grew relative to Q4 2023 at $442 million.

Stephen G. Oswald: In Q1, our team delivered another good quarter matching the supply chain as evidenced by another quarter of positive revenue growth and significant gross margin expansion compared to the prior year period.

Stephen G. Oswald: There has been a growth margin expansion compared to the prior year period. For revenue guidance for the remainder of 2024, we continue to believe that given the uncertainty surrounding BA, Spirit, and the FAA at this point on the max, the best approach is to again guide to middle, mid, single-digit, and look to further updates on the next earnings call. We do see a slowdown in the max bill rates, not for the wrong reasons. Q2 and Q3 for this year.

Stephen G. Oswald: Our revenue guidance for the remainder of 2024, we continue to believe that the uncertainty surrounding da spirit and the FAA at this point on the Max the best the best approach to again guide to middle mid single digit and look to further updates on the next earnings call.

Stephen G. Oswald: We do see a slowdown in the Max Bill rates not for their own reasons in Q2, and Q3 for this year, where commercial aerospace will be a bit lighter due to the situation.

Stephen G. Oswald: Commercial Aerospace will be a bit lighter due to the situation. Despite softness in the max, which was a major program for us, we were comforted by continued strength on other programs, such as the 787 and Airbus programs, including the. The best part is the max spill rate will actually be at a much higher level. We continue to work on gaining more shares. Strong bookings and a growing backlog in our defense business are also supportive of our revenue outflow. Now, let me provide some additional color on our markets, products, and programs.

Stephen G. Oswald: Despite softness in the Max which is a major program for US we are comforted by continued strength on other programs such as the 787 and Airbus programs. According to the 820.

Stephen G. Oswald: The best part is the Max Bill rate will actually be at a much higher level and we continue to work on gaining more share.

Stephen G. Oswald: Strong bookings and growing backlog of the defense business is also supportive of our revenue outlook.

Stephen G. Oswald: Now, let me provide some additional color on our markets products and programs.

Stephen G. Oswald: Beginning with our military and space sector, we experienced revenue just below $100 million, at $98.9 million compared to $97.7 million in Q1 2020. While growth was muted, we saw positive signs in our military helicopter products, including strong demand for the Black Hawk program, with revenues growing over 70 percent, and also for Apache Tail rotor blades, which grew more than 50 percent. The naval business also performed well. We saw strong growth on the Phalanx close-in weapon system used on surface ships.

Stephen G. Oswald: Beginning with our military and space sector, we experienced revenue just below 100 million at $98 9 million compared to $97 7 million in Q1 2023.

Stephen G. Oswald: While growth was muted we saw positive signs in our military helicopter products, including strong demand. The Blackhawk program with revenues growing over 70% and also for Apache tail rotor blades, which grew more than 50% year over year. Our naval business also performed well we saw strong growth on the <unk> closing weapons system views on surface ships.

Stephen G. Oswald: As well as other weapons systems for submarines.

Stephen G. Oswald: First quarter military and space revenue represented 52% of the common revenue in the period, down from 59% back in 2020. We expect that this trend will continue, reflecting more balance with commercial aerospace, which we like. We also ended the first quarter with a backlog of 569 million, an increase of 125 million year-over-year, representing 54% of the common total backlog.

Stephen G. Oswald: First quarter is military and space revenue represented 50%, 52% of the comments revenue in the period down from 59% back in 2022 and 70% in 2021.

Stephen G. Oswald: We expect that this trend will continue reflecting more balanced with commercial aerospace, which we like.

Stephen G. Oswald: We also ended the first quarter with a backlog of $569 million, an increase of 125 million year over year, representing 54% of the comments total backlog.

Stephen G. Oswald: Then our commercial aerospace operations first quarter revenue continued to see double digit growth, increasing 11% year-over-year to $80 million, driven mainly by bill rate increases on large aircraft platforms, including the 737-787-8225, along with growth on commercial rotary wing, air prep platforms, and regional and business. Are you aware of the FAA announcement in January that will increase its oversight of Boeing prior to Boeing getting FAA approval for production rate increases for the 737 MAX?

Stephen G. Oswald: That our commercial aerospace operations first quarter revenue continued to see double digit growth, increasing 11% year over year to $80 million, mainly by bill rate increases on large aircraft platforms, including the 737, Max 787, and 820 platforms along with growth growth on commercial rotary wing aircraft platforms.

Stephen G. Oswald: And regional and business Jets.

Stephen G. Oswald: As many of you are aware of the FAA announced in January that will increase its oversight of Boeing.

Stephen G. Oswald: Dryer Boeing to get FAA approval for production rate increases for the 737 Max.

Stephen G. Oswald: So, likely cap production on the 736. We do, however, expect the long-term trend to remain very positive once the issues are fully addressed, which rate limitations did not have a significant impact on our first. The backlog within our commercial aerospace business was $442 million at the end of the first quarter, increasing it by $12 million sequentially.

Stephen G. Oswald: This will likely tap production on the 737 Max.

Stephen G. Oswald: We do however, expect a long term China remained very positive once the issues are fully addressed.

Stephen G. Oswald: This rate limitations did not have a significant impact on our first quarter results.

Stephen G. Oswald: The backlog within our commercial aerospace business was $442 million at the end of the first quarter, Christine with 12 million sequentially, a solid number given the temporary weakness in the commercial aerospace markets.

Suman Mookerji: A solid number given the temporary weakness in the commercial. With that, I'll have Suman read you our financial results. Thank you, Steve.

Suman Mookerji: With that I'll have some I'll review, our financial results in detail.

Suman Mookerji: As a reminder, please see the company's Q1, 10Q, and Q1 earnings release for a further description of information mentioned on today's call. As Steve discussed, our first quarter results reflected another period of strong performance. Despite industry headwinds, we again saw a significant increase in our commercial aerospace revenue. We remain encouraged by the continued strength in domestic and global travel, which should support higher long-term demand for aircraft as we work through some of the industry issues impacting single-aisle production rates.

Suman Mookerji: Thank you Steve as a reminder, please see the company's Q1 10-Q and Q1 earnings release for a further description of information mentioned on today's call are.

Suman Mookerji: As Steve discussed our first quarter results reflected another period of strong performance. Despite industry headwinds, we again saw a significant increase in our commercial aerospace revenues. We remain encouraged by the continued strength in domestic and global travel, which should support higher long term demand for aircraft as we work through some of the industry issue.

Suman Mookerji: Those impacting single aisle production rates in.

Suman Mookerji: In addition, we are encouraged by the record backlog, we achieved in the first quarter, especially in our military and space end user segment.

Suman Mookerji: In addition, we are encouraged by the record backlog we achieved in the first quarter, especially in our military and space end-user sector. With all this, we feel like we are beginning 2024 with good momentum that will continue to drive our performance. Now turning to our first quarter results, revenue for the first quarter of 2024 was $190.8 million versus $181.2 million for the first quarter of 2023. The year-over-year increase of 5.3% reflects growth in all three of our end-user segments, highlighted by 8.1 million of growth across our commercial aerospace platforms and 1.3 million of growth in our military and space platforms. We posted total gross profit of $46.9 million, or 24.6% of revenue for the quarter versus $36.8 million, or 20.3% of revenue in the prior year period.

Suman Mookerji: With all this we feel like we are beginning 2024 with good momentum that will continue to drive our performance now.

Suman Mookerji: Now turning to our first quarter results.

Suman Mookerji: Revenue for the first quarter of 2024 was $190 8 million versus $181 2 million for the first quarter of 2023.

Suman Mookerji: The year over year increase of five 3% reflects growth in all three of our end user segments highlighted by $8 1 million of growth across our commercial aerospace platforms and $1 $3 million of growth in our military and space platforms. We.

Suman Mookerji: Posted total gross profit of $46 9 million or 24, 6% of revenue for the quarter versus $36 8 million or 23% of revenue in the prior year period. We continue to provide adjusted gross margins as we have certain non-GAAP cost of sales items in the current and prior period relating to <unk>.

Suman Mookerji: We continue to provide adjusted gross margins as we have certain non-GAAP cost-of-sales items in the current and prior periods relating to inventory step-up amortization on our recent acquisitions, restructuring charges, and the impact of the Guaymas fire on our operations. On an adjusted basis, our gross margins were 25% in Q1 2024 versus 21.1% in Q1 2023. The improvement in gross margin was driven by our growing engineered products portfolio and strategic pricing initiatives.

Suman Mookerji: Inventory step up amortization on our recent acquisitions and restructuring charges and the impact from the Gliomas fire on our operations on an adjusted basis. Our gross margins were 25% in Q1 2024 versus 21, 1% in Q1 2023.

Suman Mookerji: The improvement in gross margin was driven by our growing engineered products portfolio strategic pricing initiatives.

Suman Mookerji: Productivity improvements and some initial restructuring. We continue to make progress working through a difficult operating environment with supply chain and labor. Through our proactive efforts, including strategic buys and our inventory investments, we have been able to avoid any significant impacts on our business thus far. For example, during the first quarter of 2024, we increased our inventory by $9.8 million from year-end 2023 to position our performance centers to meet our 2024 delivery commitments. We also grew our contract assets net of contract liabilities by $15 million.

Suman Mookerji: Productivity improvements and some initial restructuring savings.

Suman Mookerji: We continue to make progress.

Suman Mookerji: Working through a difficult operating environment with supply chain and labor through our proactive efforts, including strategic buys in our inventory investments, we have been able to avoid any significant impact thus far on our business during.

Suman Mookerji: During the first quarter of 2024, we increased our inventory by $9 8 million from year end 2023 to position our performance centers to meet our 2024 delivery commitments. We also grew our contract assets net of contract liabilities by $15 million, we continue to look for opportunities to unwind.

Suman Mookerji: We continue to look for opportunities to unwind our working capital investments to improve our cash flow. Ducommon reported operating income for the first quarter of $12.6 million, or 6.6% of revenue, compared to $6.4 million, or 3.5% of revenue, in the prior year period.

Suman Mookerji: Our working capital investments to improve our cash flow.

Suman Mookerji: Ducommun reported operating income for the first quarter of $12 6 million or six 6% of revenue compared to $6 4 million or three 5% of revenue in the prior year period.

Suman Mookerji: Adjusted operating income was $17.1 million, or 9% of revenue this quarter, compared to $13.6 million, or 7.5% of revenue in the comparable period last year. The company reported net income for the first quarter of 2024 of $6.8 million, or $0.46 per diluted share, compared to net income of $5.2 million, or $0.42 per diluted share a year ago. On an adjusted basis, the company reported net income of $10.4 million or $0.70 per diluted share compared to net income of $7.9 million or $0.63 in Q1 2023. The higher net income and adjusted net income during the quarter were driven by higher operating income and adjusted operating income.

Suman Mookerji: Adjusted operating income was $17 1 million or 9% of revenue this quarter compared to $13 6 million or seven 5% of revenue in the comparable period last year.

Suman Mookerji: The company reported net income for the first quarter of 2024 of $6 8 million or 46 cents per diluted share compared to net income of $5 2 million or 42 cents per diluted share a year ago.

Suman Mookerji: On an adjusted basis. The company reported net income of $10 4 million or <unk> 70 per diluted share compared to net income of $7 9 million or <unk> 63 in Q1 2023, the higher net income and adjusted net income during the quarter were driven by the higher operating income and adjusted operating income.

Suman Mookerji: Additionally, our interest rate hedge helped to reduce our year-over-year interest rate. Now, let me turn to our second result. Our structural systems segment posted revenue of $83.3 million in the first quarter of 2024 versus $75.6 million last year. The year-over-year increase reflected $5.7 million of higher sales across our commercial aerospace applications, including the 787, 737 MAX, and the A220, in addition to selected commercial rotorcraft platforms, and $2.1 million of higher revenue within the military and space markets, driven by strength in the Black Hawk and Apache programs.

Suman Mookerji: Additionally, our interest rate hedge helped to reduce our year over year interest expense.

Speaker Change: Now, let me turn to our segment results.

Suman Mookerji: Our structural systems segment posted revenue of $83 3 million in the first quarter of 2024 versus $75 6 million last year the year over year increase reflected $5 7 million of higher sales across our commercial aerospace applications, including the 787 737, Max and the 820.

Suman Mookerji: In addition to selected commercial rotorcraft platforms, and $2 1 million of higher revenue within the military and space markets driven by strength in the Black Hawk and Apache programs.

Suman Mookerji: Structural systems operating income for the quarter was $2.9 million, or 3.4% of revenue, compared to $4.7 million, or 6.3% of revenue, for the prior year quarter. Excluding restructuring charges and other adjustments in both years, the segment operating margin was 7.8% in Q1 2024 versus 12.9% in Q1 2023. This can be attributed to higher costs in our Monrovia plant as it winds down production, reducing operating margin Our electronic systems segment posted revenue of $107.5 million in the first quarter of 2024 versus $105.6 million in the prior year period.

Suman Mookerji: Structural systems operating income for the quarter was $2 9 million or three 4% of revenue compared to $4 7 million or six 3% of revenue for the prior year quarter, excluding restructuring charges and other adjustments in both years the segment operating.

Suman Mookerji: <unk> margin was seven 8% in Q1 2024 versus 12, 9% in Q1 2023.

Suman Mookerji: This can be attributed to higher costs in our Monrovia plant as it winds down production, reducing operating margins year over year.

Suman Mookerji: Yes.

Suman Mookerji: Our electronic systems segment posted revenue of $107 5 million in the first quarter of 2024 versus $105 6 million in the prior year period.

Suman Mookerji: The increase was mainly due to growth across commercial aerospace platforms and certain military platforms, including the F-35, and naval programs such as the Phalanx close-in weapons system and submarine missile launch system, partially offset by the impact and timing of reductions in legacy platforms such as the F-18. Electronic Systems' operating income for the first quarter was $19 million, or 17.6% of revenue, versus $10 million, or 9.4% of revenue, in the prior year period.

Suman Mookerji: The increase was mainly due to growth across the commercial aerospace platforms and certain military platforms, including the F 35, and naval programs such as the failings closing the weapon system and submarine launched missile launch systems, partially offset by the impact and timing of reduction in legacy platforms, such as the F 18.

Suman Mookerji: Electronic systems operating income for the first quarter was $19 million or 17, 6% of revenue versus $10 million or nine 4% of revenue in the prior year period, excluding restructuring charges and other adjustments in both years. The segment operating margin was 18, 4% in Q1.

Suman Mookerji: Excluding restructuring charges and other adjustments in both years, the segment operating margin was 18.4% in Q1 2024 versus 11.6% in Q1 2023. The year-over-year increase was due to favorable product mix, including growth in our engineered products portfolio, strategic pricing initiatives, as well as savings from a restructuring program beginning to kick in during the quarter. The restructuring savings were driven by the transition of product lines from our variable performance center to other facilities.

Suman Mookerji: In 2024 versus 11, 6% in Q1 2023.

Suman Mookerji: The year over year increase was due to favorable product mix, including growth in our engineered products portfolio strategic pricing initiatives as well as savings from restructuring program beginning to kick in during the quarter.

Suman Mookerji: The restructuring savings were driven by the transition of product lines from our variable performance center to other facilities.

Suman Mookerji: Next, to provide an update on restructuring. As a reminder, and as previously discussed... We commenced a restructuring initiative back in 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 terms. These actions include the shutdown of our facilities in Monrovia, California, and Berryville, Arkansas, and the transfer of that work to our low-cost operation in Guaymas, Mexico, and to other existing performance centers in the United States.

Suman Mookerji: Next to provide an update on restructuring.

Suman Mookerji: As a reminder, and as previously discussed.

Suman Mookerji: We commenced a restructuring initiative back in 2022.

Suman Mookerji: 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.

Suman Mookerji: This includes the shutdown of our facilities in Monrovia, California, and very little Arkansas, and the transfer of that work through our low cost operation and Guaymas, Mexico to other existing performance centers in the United States.

Suman Mookerji: We continue to make progress on these transitions with excellent employee retention and engagement and are also working diligently with our customers, Boeing and RTX, to obtain the requisite approval. During Q1 2024, we recorded $1.4 million in restructuring charges.

Suman Mookerji: We continue to make progress on these transitions with excellent employee retention and engagement and are also working diligently with our customers Boeing and RPX to obtain the requisite approvals.

Suman Mookerji: During Q1, 'twenty 'twenty four we recorded $1 4 million in restructuring charges. The majority of these charges was severance and related benefits as we continue to wind down the two operations.

Suman Mookerji: The majority of these charges were severance and related benefits as we continue to wind down the two operations. The recertification process is ongoing, and we plan to complete production at both facilities by the end of the second quarter. We expect to incur an additional $5-6 million in restructuring expenses through the end of 2024 as we complete the program. Upon the completion of our restructuring program, we expect to generate $11-13 million in annual savings from our actions, and we are beginning to see the realization of these actions this year. We anticipate selling the Landon Building at both Monrovia, California, and Variable Arch.

Suman Mookerji: The recertification process is ongoing and we plan to complete production at both facilities by the end of the second quarter.

Suman Mookerji: We expect to incur an additional $5 million to $6 million in restructuring expenses through the end of 2024 as we complete the program.

Suman Mookerji: Upon the completion of our restructuring program, we expect to generate 11% to $13 million in annual savings from our actions and are beginning to see the realization of these actions in this year.

Suman Mookerji: We anticipate selling the land and building at both Monrovia, California and variable Arkansas.

Suman Mookerji: Turning next to Liquidity and Capital Research. During Q1 2024, we used $1.6 million in cash flow from operating activities, which was an improvement compared to Q1 2023 usage of $18.9 million. The improvement was due to a smaller increase in inventories and higher contract liabilities, partially offset by higher contract assets. As of the end of the first quarter, we had available liquidity of $208.1 million, comprising the unutilized portion of our revolver and cash on hand.

Suman Mookerji: Turning next to our liquidity and capital resources.

Suman Mookerji: During Q1 2024, we used $1 6 million in cash flow from operating activities, which was an improvement compared to Q1 2023 usage of $18 9 million. The improvement was due to a smaller increase in inventories and higher contract liabilities, partially offset by higher contract assets.

Suman Mookerji: As of the end of the first quarter, we had available liquidity of $208 1 million comprising of the Unutilized portion of our revolver and cash on hand.

Suman Mookerji: Our existing credit facility was put in place in July 2023 at an opportune time in the credit markets, allowing us to reduce our spread, increase the size of our revolver, and allow us the flexibility to execute on our acquisition strategy. Interest expense was $3.9 million compared to $4.2 million in Q1 of 2023.

Suman Mookerji: Our existing credit facility was put in place in July 2023 at an opportune time in the credit markets allow.

Suman Mookerji: Knowing us to reduce our spread increase the size of our revolver and allowing us the flexibility to execute on our acquisition strategy.

Suman Mookerji: Interest expense was $3 9 million compared to $4 2 million in Q1 of 2023.

Suman Mookerji: The year-over-year improvement in interest costs, despite a higher debt balance, was due to the interest rate hedge going into effect. In November 2021, we put in place an interest rate hedge that will go into effect for a seven-year period starting January 2024 and pegs the one-month term so far at 170 basis points for $150 million of our debt. The hedge resulted in interest savings of $1.3 million in Q1 2024 and will continue to drive significant interest cost savings in 2024 and beyond.

Suman Mookerji: The year over year improvement in interest cost despite our higher debt balance was due to the interest rate hedge going into effect.

Suman Mookerji: In November 2021, we've put in place an interest rate hedge that went into effect for a seven year period, starting January 2024, and begs the one month term so far at 170 basis points or $150 million of our debt.

Suman Mookerji: The hedge resulted in interest savings of $1 3 million in Q1, 2024, and will continue to drive significant interest cost savings in 2024 and beyond.

Suman Mookerji: To conclude the financial overview for Q1 2024, I would like to say that we had a strong start to 2024 and anticipate a strong balance of the year. I'll now turn it back over to Steve for his closing remarks.

Suman Mookerji: To conclude the financial overview for Q1, 2094, I would like to say that we had a strong start with 194 and anticipate a strong balance of the year.

Suman Mookerji: I'll now turn it back over to Steve for his closing remarks.

Stephen G. Oswald: Okay, thanks, Suman. In closing, Q1 was an excellent quarter, a record in some cases, with many highlights for the company and our shareholders. A strong start to the year with solid revenue and early growth certainly strengthens our path, delivering on the goals we set out in Vision 2027. 2024 is also our 175th year of continuous operation, a great achievement, and we'll be recognizing that throughout the year. I did the math recently, and the door at the company has been continuously open for over 43,000 businesses. A long time in a young country like the United States.

Suman Mookerji: <unk>.

Steve: Okay. Thanks Ahmad and closing Q1 was an excellent quarter a record in some cases with many highlights for the company and our shareholders.

Stephen G. Oswald: The strong start to the year with solid revenue and earnings growth certainly strengthens our path to delivering on the goals we set out in the vision 2027.

Stephen G. Oswald: Slide 24 is also our 175th year of continuous operation a great achievement, and we will be recognizing that through the year.

Stephen G. Oswald: I did the math recently in the North the company has been continuously opened for <unk>.

Stephen G. Oswald: 43000 business days.

Stephen G. Oswald: A long time and the young country like the United States.

Operator: What a great story with a very bright future ahead for the company and our shareholders. Thank you for listening. Let's now open up to questions. Thank you. At this time, we'll conduct the question and answer session. As a reminder, to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Stephen G. Oswald: What a great story with a very bright future ahead for the company our shareholders and all other stakeholders.

Operator: Thank you for listening, let's now open up for questions.

Speaker Change: Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one on your telephone and wait for your name to Vietnam.

Operator: To withdraw your question. Please press star one again, please standby, while we compile the Q&A roster.

Operator: Please stand by while we compile the Q&A roster. Our first question comes from the line of Mike Crawford of V-Valley Securities. Your line is now open.

Operator: Our first question comes from the line of Mike Crawford of B Riley Securities. Your line is now open.

Stephen G. Oswald: Steve, what are some of the main pressure points you're trying to avoid with the strategic inventory buys, like would it be titanium, which is? Thank you. Thank you. Good morning.

Michael Roy Crawford: Thank you Steve what are some of the main pressure points you or you are trying to avoid what the strategic inventory buys like would it be titanium which is.

Speaker Change: Coming to problem for some or what else are you yes. Thank.

Stephen G. Oswald: Yes, you know, look, titanium is obviously a big one. I mean, you know, as the white body, H350, and these other platforms start going up, and obviously with the situation in Russia, it's something that we've been very proactive over the last couple of years, and we're in really good shape with our titanium. The other thing we did on Strategic 5 was really around carbon. [inaudible] I know there's less drama now than there was in the past, but we did go out and buy ahead on certain things for circuit cards.

Stephen G. Oswald: Thank you. Thank you and good morning, Yes look titanium is obviously a big one.

Stephen G. Oswald: As the Wi Fi the <unk> hundred 50 in these other.

Stephen G. Oswald: Platform start going up and obviously the situation in Russia.

Stephen G. Oswald: Something that we've been very proactive over the last couple of years.

Stephen G. Oswald: Or are in really good shape with our titanium the other thing we did on strategic buyer was really around the card business.

Stephen G. Oswald: I know, there's less drama now.

Stephen G. Oswald: Was in the past, but we did go out buy ahead on certain things for circuit cards. Obviously, it's an important business for us is getting even more important so I'd say those two I think very good shape or we're not going to plan on doing as long as things titanium aside on things like for circuit cards were probably just continue to.

Stephen G. Oswald: Obviously, it's an important business for us, just getting even more important. So I'd say those two, I think we're in good shape. We won't, you know, plan on doing as long as things, you know, titanium aside on things like for the circuit cards, we're probably just. I encourage you to take it day by day, but those are the two reports I have.

Stephen G. Oswald: Take it day by day, but those are the two reports I have.

Stephen G. Oswald: Okay, excellent. And then, I mean, you called out the F-18 as a legacy platform that's in decline. One that might eventually get that way could be the Blackhawk, although that's, that's going up for you now. What are maybe some of the other key platforms that are growing for you?

Speaker Change: Okay excellent and then.

Stephen G. Oswald: I mean, you did call out the F 18 is a legacy platform it's in decline.

Stephen G. Oswald: It might eventually get that way it can be the blackhawk, although that's going up for you know what what are the <unk>.

Stephen G. Oswald: Maybe some of the other key platforms that are that are growing for you and Conversely.

Stephen G. Oswald: And conversely, you know, maybe phasing them out a little bit, just given the transition. Sure, sure. I'd say, look, you're spot on. The F-18 is the one, right?

Stephen G. Oswald: Maybe phasing out a little bit just given the.

Stephen G. Oswald: Sure sure I'd say look you're spot on the F. 18 is the one right. So we all know about the FAA team, we know what's happening in St. Louis we are going to see I think still good business and depot maintenance.

Stephen G. Oswald: So we all know about the F-18. We know what's happening in St. Louis. You know, we are going to see, I think, still good business in depot maintenance and other things. So, you know, that's still going to be an okay program for us. That's kind of the biggest one.

Stephen G. Oswald: And other things so.

Stephen G. Oswald: That's still going to be an okay program for us that's kind of the biggest one I talked about the <unk> missile again. These things are timing related so we're going to see the telecom back.

Stephen G. Oswald: I talked about the tow missile. Again, these things are timing-related, so we're going to see the tow come back. We're going to start shipping again, we plan, in 2025. As far as on the positive side, I mean, we couldn't be happier with, you know, the Blackhawk business. I mean, even though I know there's lots of discussion and everything, business is going great for us. The Apache. I'll also mention that we're just starting to move higher and higher on the Seahawk at Sikorsky as well.

Stephen G. Oswald: To start shipping again, we plan in 2025.

Stephen G. Oswald: As far as either on the positive side I mean, we couldnt be happier with the Blackhawk business I mean, it's even though I know, there's lots of discussion and everything of that business is going great for us the Apache I'd also mentioned that.

Stephen G. Oswald: We're just starting.

Stephen G. Oswald: And move higher and higher and the Seahawks.

Stephen G. Oswald: So our rotary business was terrific. Despite the F-18, we still had, you know, a great volume in the F-35 and some other programs. So we're feeling very good, especially with the backlog, Mike, and just getting a second cart. Some of the other missile programs, if I may add, are also giving us strength, including the MIR missile, the standard missile, and, as Steve previously pointed out, the SPY-6 radar and next-generation jammer.

Stephen G. Oswald: It's of course key as well so our rotary business was terrific.

Stephen G. Oswald: Despite the FAA team, we still grew.

Stephen G. Oswald: <unk> volume in the F 35, and some other programs.

Stephen G. Oswald: And.

Stephen G. Oswald: So we're we're feeling very good, especially with the backlog, Mike and is getting the second quart.

Stephen G. Oswald: Some of the other missile programs. If I may add are also giving us strength, including the mirror micelle.

Stephen G. Oswald: The standard missile.

Stephen G. Oswald: As Steve previously pointed out the specifics radar next generation jammer, so missile and radar programs are helping offset.

Stephen G. Oswald: So missiles and radar programs are helping offset the decline in the legacy program. Yeah, the transition timing, right? Okay, thank you. Just one final one for me, kind of related to the Rotary platform.

Stephen G. Oswald: The decline in the legacy programs.

Stephen G. Oswald: The transition timing right.

Speaker Change: Okay. Thank you just one final one from me kind of related.

Stephen G. Oswald: The rotary platform so.

Stephen G. Oswald: And last, it's now just over a year since you acquired BLR Aerospace, and I know one of the goals there was to maybe try to get some of their unique structures into military aircraft. Is there some progress there? We're working on it right now, and Mike, you're spot on about that. Our big opportunity is really with the Blackhawk, and that's really through the National Guard.

Stephen G. Oswald: And it's now just over a year since you acquired <unk> aerospace and <unk>.

Stephen G. Oswald: One of the goals there was the maybe try to get some of their unique structures into military aircraft is there some progress there.

Stephen G. Oswald: We're working on it right now.

Stephen G. Oswald: You're spot on on that our big opportunity is really with the Blackhawk and Thats really for the National Guard. So we have a lot of things I think.

Stephen G. Oswald: So we have a lot of things that these things obviously take time, but we're excited. We think that also with some of the other news about switching out the engine on that, there's more opportunity for that, so stay tuned. All right, excellent, thank you.

Stephen G. Oswald: These things obviously take time right, but we're we're excited and we think that also with some of the other news about switching out the engine.

Stephen G. Oswald: On that I think will be is more opportunity for that so stay tuned on that.

Speaker Change: Alright excellent. Thank you.

Stephen G. Oswald: Excellent.

Operator: Thank you, one moment for our next question. Our next question comes from the line of Michael Ciarmoli of Tourist Security. Your line is now open.

Speaker Change: Thank you we'll move for our next question.

Michael Frank Ciarmoli: Our next question comes from the line of Michael ceremony of courtesy Security. Your line is now open.

Operator: Hey, good afternoon, guys. Thanks for taking questions. Nice results. Maybe kind of a two part story, I guess, Steve or Suman, just the margins really strong in the ES segment, which you commented on.

Operator: Hey.

Michael Frank Ciarmoli: Good afternoon, guys. Thanks for taking questions.

Michael Frank Ciarmoli: Nice results.

Operator: Maybe.

Michael Frank Ciarmoli: Kind of a two part I guess, Steve or Mark just the margin.

Michael Frank Ciarmoli: Really strong.

Michael Frank Ciarmoli: Segment you commented on.

Stephen G. Oswald: Pricing, and I know you threw out the value-based pricing, and I think that's something we hear pretty often now. Anything you guys are doing differently with pricing outside of just taking advantage of the whole inflationary environment? And then just how do we think about these electronic systems margins going forward? I think that was a record level. I'd hate to kind of say, okay, let's extrapolate this. You know, it sounded like you got some mix in there as well, but any color on either of those items?

Michael Frank Ciarmoli: Are you seeing and I know you throughout the value based and I think thats something we hear pretty often now anything you guys are doing differently with pricing outside of just taken advantage of the whole inflationary environment and then just.

Stephen G. Oswald: How do we think about these fees.

Stephen G. Oswald: Electronic systems margins going forward I think I think that was a record level.

Stephen G. Oswald: To kind of say, okay, let's extrapolate this it sounded like you've got some some mix in there as well, but any color on both of those items.

Stephen G. Oswald: Yes, Mike, a great question. We're really happy with the electronic systems margins this quarter. As you noted, pricing is a key factor.

Speaker Change: Yes, Mike Great question.

Speaker Change: We're really happy with the electronic systems margins this quarter.

Speaker Change: As you noted pricing is a key factor and certainly as you have seen across the aftermarket in the industry pricing has been strong and we have seen the same kind of beyond that there are a couple of other things at play here kind of two teams that are key drivers of our vision 2027 strategy and one is growing the <unk>.

Stephen G. Oswald: And certainly, as you have seen across the aftermarket in the industry, pricing has been strong, and we have seen the same. But kind of beyond that, there are a couple of other things at play here, kind of two themes that are key drivers of our Vision 2027 strategy. And one is growing the engineered products portfolio. And as that continues to grow as a percentage of the revenue in the engineered electronic systems business, you know, the drop through is really good.

Stephen G. Oswald: Generic product portfolio and as that continues to grow as a percentage of the revenue and the engineered electronic systems business. The drop through is really good. So we've had good growth in kind of engineered product businesses and the second is the consolidation of footprint strategy right in there.

Stephen G. Oswald: So we've had good growth in the kind of engineered product businesses. And the second is the consolidation of the footprint strategy, right? And that has also started kicking in this quarter, with programs getting fully transitioned from our Variable Performance Center to our Joplin Performance Center and us taking out a significant amount of cost early in the quarter out of the Variable facility, which now has a skeleton crew and only one active program. Those other programs are now being produced out of Joplin without, you know, much addition to overhead and SG&A in that business.

Stephen G. Oswald: That has.

Stephen G. Oswald: Also started kicking in this quarter with.

Stephen G. Oswald: Programs getting fully transitioned from our variable performance center to our chocolate performance Center.

Stephen G. Oswald: And us taking out a significant amount of cost early in the quarter out of the variable facility, which is now has a skeleton crew and only one active program.

Stephen G. Oswald: Those other programs are now being produced out of Joplin without <unk>.

Stephen G. Oswald: So that's really driving the margins, those two factors. And, you know, outside of some minor impacts of product mix, I think the general trend is sustainable. And I mean, the current margins we're seeing within a narrow band is sustainable going forward. Okay, any way to quantify what you saw from the run rate consolidation savings? I know you said 11 to 13, annualized, so it sounds like you've got some way to quantify that? It's still in the early stages of that. It's over a million dollars during the current quarter.

Stephen G. Oswald: Much addition to overhead and SG&A in that business. So that's really driving the margins of those two factors and outside of some minor impacts of product mix I think the general.

Stephen G. Oswald: Trend is sustainable and I mean, the current margins we are seeing within a narrow band is sustainable going forward.

Stephen G. Oswald: Okay any way to quantify what you what you saw from the run rate.

Stephen G. Oswald: Consolidation savings I know you said, 11% to 13 annualize so it sounds like you've got some any way to quantify that.

Stephen G. Oswald: It's still in the early stages of that it's over a $1 million during the current quarter.

Stephen G. Oswald: Okay. Yeah, I think, Mike, I think this is a good story. I mean, look, we're thrilled with the number, right? You're spot on about, you know, the 18 percent.

Stephen G. Oswald: Yes, I think so.

Stephen G. Oswald: There's a good story I mean look we're thrilled with the number right you're spot on about.

Stephen G. Oswald: The 18% so.

Stephen G. Oswald: We're excited about that. We think that, again, as we move into the second year of Vision 2027, these things are coming together, and we're obviously driving value pricing across the board, right? So that's going to happen. Got it. And then conversely, on structural systems, you know, sounds like you're just dealing with overhead under absorption issues as you transition. And it sounds like, should we expect that margin rate to persist for the next two quarters? And, you know, I guess it doesn't sound like anything really out of the ordinary, except for just the kind of winding down drag.

Stephen G. Oswald: We're excited about that we think that again as we move into the second year of vision 2027, and these things are coming together and we're obviously driving value pricing across the board right. So that's been out.

Stephen G. Oswald: Got it and then I guess, Conversely on structural systems, it sounds like Youre just dealing with.

Stephen G. Oswald: Overhead under absorption issues.

Stephen G. Oswald: As you transition and it sounds like I mean should we expect that that margin rate to persist next two quarters.

Stephen G. Oswald: I guess it doesn't sound like anything really out of the normal except for just the kind of wind down drag.

Stephen G. Oswald: Yes, I mean our Monrovia Performance Center, which is being wound down, revenues were almost a third of what they were on a year-over-year quarter basis, almost half on a sequential quarter basis. So that's naturally going to create a significant amount of drag on margins, and as you can imagine in a facility being wound down, it's not that easy, right? So we do expect that to linger for the next one to two quarters but gradually improve.

Speaker Change: Yes, I mean, our Monrovia.

Stephen G. Oswald: <unk> centre, which is being wound down revenues.

Stephen G. Oswald: We're almost a third of what they were on a year over year quarter basis, almost half on a sequential quarter basis. So that's naturally going to create a significant amount of drag on margins.

Stephen G. Oswald: Can imagine in a facility being wound down its not its not that easy right. So we do expect.

Stephen G. Oswald: That to linger for the next one to two quarters, but gradually improve that.

Stephen G. Oswald: The trend is going to be improvement, and then really, the benefits of the complete closure will only kick in in 2025 when we not only shut down the facility in Monrovia here in 2024 but then start actively producing some of those products out of Guaymas in 2025. Yeah, and Mike, just for everybody on the call, you know Monrovia is... It's very close to Los Angeles, it's in that area, and you know, it's the size of an aircraft carrier. Okay, so it's not a small plant.

Stephen G. Oswald: <unk> is going to be improvement.

Stephen G. Oswald: And then really.

Stephen G. Oswald: The benefits of the complete closure will only kick in in 2025, when we not only shut down the facility in Monrovia.

Stephen G. Oswald: In 2024, but then start actively producing some of those products out of <unk> in 2025, and Mike just for everybody on the call to Monrovia is is very close to Los Angeles, it's in that area.

Stephen G. Oswald: Yes.

Stephen G. Oswald: Alright, so it's been around for a long time too. So, good things ahead there. I'm very, we're at the three-yard line here. So in my report... Got it. Last one for me, Stephen. I don't want to put words in your mouth or numbers here, but I think you started the defense offloading. I don't know if that was really in earnest in late 20 or 21.

Stephen G. Oswald: As of an aircraft carrier okay. So it's not a small plant alright. So it's been around for a long time too. So good things ahead, there are very.

Stephen G. Oswald: We're at the.

Stephen G. Oswald: Three yard line here so in my guidance.

Stephen G. Oswald: Got it last one for me Steven I don't want to put words in your mouth or numbers here, but I think you started the defense Offloading I don't know if that was really in earnest in late 'twenty or 'twenty one.

Stephen G. Oswald: But if you're thinking $135 million by 2025, I mean, I could go back and take your 20 defense revenue run rate, and I could get something, you know, north of $550 million by 2025. Obviously, you're losing some work in there, you know, F-18. I'm sure there are some other programs.

Stephen: But if youre thinking $135 million by 'twenty five I mean, I could go back and take your 'twenty defense revenue run rate that could get something north of $550 billion by 'twenty, five obviously youre, losing some work in there.

Stephen G. Oswald: I'm sure there are some other programs but.

Stephen G. Oswald: But, you know, how should we think about this defense growth trajectory? You know, again, it might not be apples to apples the way I'm thinking about it, but I can come up with some pretty sharp growth there. Yeah, you're right, it's a lot, it's some, you know, like even I'm looking at the numbers here as we speak here, you know, like a company like GA, right? So we've had a lot of really good years with GA, but you know, as you know, that whole market's been disrupted for them, lower cost UAVs and everything, right?

Stephen G. Oswald: How should we think about this defense growth trajectory.

Stephen G. Oswald: Again, it might not be apples to apples the way I'm thinking about it but I can come up with some some pretty sharp growth there.

Stephen G. Oswald: Yes.

Speaker Change: You are right.

Stephen G. Oswald: Some like even I am looking at the numbers here as we speak or like a company like <unk> right. So we've had a couple of really good years with GE, but as you know that whole market has been disruptive for them because of these lower costs Uavs and everything right. So our volume was down on their the face even talking about some other stuff, but a lot of what we are.

Stephen G. Oswald: So our volume is down on there; the FAC would talk about some other stuff, but you know, a lot of what we're seeing, we're seeing a lot of repeat orders, but we're getting like the next generation Jammer, you know, that's coming out of RTX, and we're getting an Appleton. So we consider that, you know, offload, right? You know, we consider that, you know what I mean? So even though you might say, well, you know, no, we, you know, they had it, they went to us and said, you know, we love what you guys are doing, take it, you know, same thing with the SPY-6. So, you know, I think that it's not apples to apples, but I think overall, the story holds pretty well.

Stephen G. Oswald: We're seeing we're seeing a lot of repeat orders, but we're getting like the next generation jammer.

Stephen G. Oswald: That's coming out of RPX in Virginia, Appleton, So we consider that.

Stephen G. Oswald: Outlook.

Stephen G. Oswald: So, even though you might say well no.

Stephen G. Oswald: They have it led to US we love what you guys are doing take it same thing with the <unk>. So.

Stephen G. Oswald: It's not apples to apples, but I think overall the story I think holds pretty well and that's what we want we want to progress as you know there's a lot of new programs out there and these things delay and all that but we want the stuff Thats got a long long life like <unk> right. It's got to be in the fleet forever and we want that current business and Thats what.

Stephen G. Oswald: And that's what we want. We wanna, as you know, there's a lot of new programs out there and these things take longer and you know all that, but we want the stuff that's got a long, long life, like the SPY-6, right? It's gonna be in the fleet forever.

Stephen G. Oswald: And, you know, we want that current business. That's what we're doing. I mean, as well as the new stuff, right?

Stephen G. Oswald: As well as the new supplement as.

Stephen G. Oswald: That's as well. So I think, you know, the more to come on that, okay, as well, we get to 26 and 2027, but let's hold it now at 135. Got it.

Stephen G. Oswald: As well so I think the BARDA com not that okay as well, we get to 2006 to 2027, but let's hold it now 135.

Operator: All right. Good stuff. I'll jump back into the queue, guys.

Speaker Change: Got it alright, good stuff I'll jump back in the queue guys.

Speaker Change: Thanks, Mike.

Operator: Thank you one moment for our next question. Our next question comes from the line of Ken Herbert of RBC Capital Markets. Your line is now open.

Speaker Change: Thank you one moment for our next question.

Operator: Our next question comes from the line of Ken Herbert of RBC Capital markets. Your line is now open.

Operator: Yeah, good morning, Stephen Suman. Morning, Ken. Good morning.

Kenneth George Herbert: Yes, hi, good morning, Stephen Schumann.

Kenneth George Herbert: Good morning, Ken Good morning.

Stephen G. Oswald: Hey, Steve, when we look at the gross margins in the first quarter, is there any reason that they don't step down in the second quarter? Or is this gross margin run right now something we should model moving forward? I'll take a first stab at that, Ken. And we are really happy with the gross margins in the first quarter, as I said, on the electronic side, driven by engineered product and restructuring savings. And those really were the key drivers.

Kenneth George Herbert: Hey, Steve when we look at the gross margins in the first quarter is there any reason that they don't.

Stephen G. Oswald: Step down in the second quarter or is this gross margin run rate now something we should model moving forward.

Speaker Change: I'll take the first half of that Ken.

Stephen G. Oswald: So we are really happy with the gross margins in the first quarter.

Stephen G. Oswald: On the electronics side, driven by engineered products the restructuring savings.

Ken: And Thats really were the key drivers if you look at the overall company. They were partially offset by the headwinds we had in Monrovia and the structures business.

Suman Mookerji: If you look at the overall company, they were partially offset by the headwinds we had in Monrovia in the structures business. However, outside of, I would say, you know, marginal benefits from product mix during the quarter, these gross margins within a fairly narrow band are sustainable. And I mean, if you were to look at our adjusted gross margin in Q4, it was 23.2% of last year. So, it's now 25%. So it's If you look at a quarter year over year.

Suman Mookerji: These outside of I would say.

Suman Mookerji: Marginal benefits from product mix during the quarter. These gross margins within a fairly narrow band are sustainable.

Suman Mookerji: I mean, if you.

Suman Mookerji: Or to look at our adjusted gross margin in Q4.

Suman Mookerji: It was 23, 2%.

Suman Mookerji: Last year, so and it's now 25% so.

Suman Mookerji: Yes, if you look at.

Suman Mookerji: You know, it's a big difference, uh, and especially with some of the adjustments, but I think we've been able to take more of the adjustments into the gap gross margin, which is a really good thing. And, uh, you know, I would say we feel really good about these margins going forward within that range. Great, thank you.

Suman Mookerji: Quarter year over year.

Suman Mookerji: It's a big difference.

Suman Mookerji: And especially with some of the adjustments, but I think we've been able to take more of the adjustments into the GAAP gross margin, which is a really good thing.

Suman Mookerji: <unk>.

Suman Mookerji: And all I would say, we feel really good about these margins going forward within a narrow range.

Stephen G. Oswald: And can you set us on your expected, I guess, either max deliveries this year or sort of a monthly or quarterly production rate, because it sounds like there's maybe a step down sequentially from the first to the second to the third quarter but maybe an anticipated uptick in the latter part of the year. Can you maybe sort of comment on where you are on that program and how we should think about the cadence for the year on the map? Yeah, so, Ken, yeah, a good question.

Speaker Change: Great. Thank you and can you.

Stephen G. Oswald: Level set us on your expected.

Stephen G. Oswald: Guess, either Max deliveries this year or sort of a monthly or quarterly production rate because it sounds like there's maybe a step down sequentially from the first to the second to the third quarter, but maybe an anticipated.

Stephen G. Oswald: Up tick in the back of the year can you maybe sort of comment on where you are on that program and how we should think about the cadence for the year on the Max.

Stephen G. Oswald: So, look, we had a fairly good, you know, first quarter because there were a lot of things still happening, right until... ®MD-BO Q1 was pretty good. April was a bit light, so we were going to anticipate a little bit lighter action on it. Because remember, we're both Feeding Spirit, which is a major customer as well as Boeing OEM, so PCA. Right now, we're thinking maybe it's in the mid-20s, lower to the mid-20s for the second quarter.

Ken: Yeah. Good question. So look we had a fairly good first quarter, because theres a lot of things still happening right until this tool.

Stephen G. Oswald: This terrible thing happens obviously in January then lots of things came after that so Q1 was pretty good April was a bit light so.

Stephen G. Oswald: We're going to anticipate a little bit lighter action on it.

Stephen G. Oswald: Because remember, we're both feeling spirit, which is a major customer as well as.

Stephen G. Oswald: Boeing OEM rates are <unk> so.

Stephen G. Oswald: Right now we're thinking maybe it's in the mid twenties.

Stephen G. Oswald: We'll have to figure out the third when we get there, right, based on their progress, but we see it coming back. The nice thing is, too, for shareholders..., for all of us. We're working real hard with, and I don't want to, can't go making any announcements right now, but we're working on gaining shares on the MAC, as well as the A221A. We're working on those types of things. And so, you know, I think, Ken, we're going to get a little shallower, maybe mid-twenties, you know.

Stephen G. Oswald: Lower to mid <unk> for the second quarter, we will have to figure out the third when we get there right based on their progress, but yes, we see it coming back the nice thing is to for our shareholders and for all of US I mean, we're working real hard with and I don't want to Keiko, making any announcement right. Now we are working on gaining share on the Max Okay as well.

Stephen G. Oswald: <unk> hundred one <unk> hundred <unk>. So we're working on those types of things and so I think we're going to get a little shallow or maybe mid twenties.

Stephen G. Oswald: Certainly, it's been a little lighter in April, but nothing, we're concerned, but we want to be transparent. But we have the 787, which I know has its own problems, but we're seeing a nice bounce back there. And we're happy with our Airbus back there, as well as GF. Great. And thanks. And just finally, Steve, where would you see the opportunity on the A320 or even the A220 to take a share? And what could be the timing around some of the share gains with Airbus on the narrow body portfolio?

Stephen G. Oswald: Certainly it's been a little lighter in April, but nothing where we're concerned.

Stephen G. Oswald: To be transparent when we have the 787, which I know has its own problems, but we're seeing a nice bounce back there and we're happy with our Airbus business, So as well as GFS.

Stephen G. Oswald: Great. Thanks, and just finally, Steve where would you see the opportunity on the <unk> hundred 20, or even the 220 to take share and what could be the timing around some of the share gains with Airbus narrow body portfolio.

Stephen G. Oswald: Yeah, we, you know, again, we're looking probably within 12 months. We're working on something right now. We'll see how it goes, right, because these things take time, but we think, uh... going again on the H320 and the H220 we can just continue to work, continue to grow, as you know that's a major program for us, and good things ahead. Thanks, Steve. Thanks, Jumaane. Thanks, Kenneth. Thank you. Thank you. One moment for our next question. Again, as a reminder, to ask a question, you'll need to press star 1-1 on your telephone.

Stephen G. Oswald: Sure.

Stephen G. Oswald: Again, we're looking at probably within 12 months. So we are working on something right now.

Stephen G. Oswald: We'll see how it goes right because these things are.

Stephen G. Oswald: These things take time, but we think within 12 months, we might have something.

Stephen G. Oswald: Going again on the <unk> hundred 20, <unk> hundred <unk>, we get discontinued or continue to grow as you know thats a major program for us.

Stephen G. Oswald: And good things ahead there.

Speaker Change: Great. Thanks, Steve. Thanks, so much thanks, Ken Thank you.

Speaker Change: Thank you gentlemen for next question.

Stephen G. Oswald: Again as a reminder to ask a question you will need to press star one on your telephone.

Operator: Our next question comes from the line of Jason Gursky of Citi. Your line is now open. Jason Gursky, your line is now open. Apologies, I had myself on mute.

Stephen G. Oswald: Our next question comes from the line of Jason Gursky with Citi. Your line is now open.

Operator: Jason Gursky your line is now open.

Jason Gursky: Apologies I had myself on mute.

Operator: Good morning, everybody. Thanks for taking the question. I wanted to ask a little bit more about Vision 2027 and, in particular, the M&A component of the vision there, because you've got some inorganic growth I think you'd like to get done. So, yeah, the question, I guess it's maybe a bit of a two-part question.

Jason Gursky: Good morning, everybody. Thanks for thanks for taking the question.

Operator: I wanted to Steve I wanted to ask about a little bit more about vision.

Operator: 2027.

Operator: In particular, the M&A component.

Operator: Of the vision, there because <unk> got some inorganic growth I think you'd like to get done so.

Speaker Change: Yes the question.

Operator: I guess, it's maybe a bit of a two part question.

Stephen G. Oswald: You know, we've got, you know, a company that recently went public that now has, you know, access to some more money that, you know, claims that it's going to go out and be heavily involved in buying up proprietary product type companies. So I'm just kind of curious what the competitive environment looks like these days for assets. So I guess, A, the pipelines, what's the pipeline looking like? What's the competitive environment like? And then,

Operator: We've got a company recently went public.

Stephen G. Oswald: <unk> now got.

Stephen G. Oswald: Access to some more money that claims that its going to go out and be heavily involved in and buying up proprietary product type companies.

Stephen G. Oswald: So I'm just kind of.

Stephen G. Oswald: Curious what the competitive environment looks like these days for assets. So I guess, maybe the pipeline what's the pipeline looking like what's the competitive environment look like and then.

Stephen G. Oswald: I also want to kind of get your take on the size and scale of things that you guys would be willing to chew on and maybe talk a little bit about the dynamic that's going on there with one of your big customers in Spirit and the Airbus work. Seems like, you know, it's a Boeing by spirit, that Airbus work has got to go somewhere, and I'm just kind of curious what kind of appetite you guys might all have for taking on some of that work, all in the context of your M&A strategy. Thanks. Yeah, no, thanks, Jason.

Stephen G. Oswald: I also wanted to just kind of get your take on.

Stephen G. Oswald: The size and scale of things that you guys would be willing to chew off and maybe talk a little bit about the dynamic thats going on there with one of your big customers in spirit and the Airbus work because.

Stephen G. Oswald: It seems like.

Stephen G. Oswald: If Boeing by Spirit that Airbus work has got to go somewhere and just kind of curious what kind of appetite you guys might all have four taken on some of that work all in the context of your of your M&A strategy.

Stephen G. Oswald: Good to be with you. Let me first just talk about our vision 2027 and, you know, the acquisition piece. We have a placeholder for $75 million, right? So we're a bit modest on that, you know, because obviously, it's only 2024. We have, you know, several years ahead of us. So, you know, we feel good about that. And again, it's a bit modest, but, you know, we're right now as we move forward in time. We've really been happy with what we're doing on acquisitions. I think it's been a real and Suman Mookerji to Winnie Formula for shareholders. I think, you know, 75 again is low.

Speaker Change: Yes, Thanks, Jason visiting with you on the first just on our efficient 2027, and the acquisition piece, we have a placeholder for $75 million right. So we're a bit modest on that because obviously, it's only 2024, we got several years ahead of us. So we feel good about that and again, it's a bit modest but.

Stephen G. Oswald: Were right now as we go forward in time.

Stephen G. Oswald: We've really been happy with what we're doing acquisitions I think it's been a real.

Stephen G. Oswald: Great thing for our shareholders and for the company and so, but we're looking more where we can do some maybe.

Stephen G. Oswald: <unk> looked at acquisitions, where they can again help our current engineered products portfolio, we're committed to that to build the business on that side I think thats smart and it's a winning formula for our shareholders.

Stephen G. Oswald: I think 75 again is low I think we're going to do more bolt ons.

Stephen G. Oswald: I think we're going to do more bolt-ons. But again, if we can find something... We're going to do that as well. For the next couple of years, that's sort of where we sit. As far as spirit.

Stephen G. Oswald: But again, if we can find something where there can be some consolidation we're going to do that as well. So I think for the next couple of years that sort of where we sit.

Stephen G. Oswald: Far as our spirit.

Stephen G. Oswald: Just to let you know, for Airbus, we ship directly, working with them directly. We don't really do any... For Airbus, for Spirits, Spirits is much more. We're not right now, so we'd be open to it. You know, I think it's, as I read the notes this morning on some of the situations at the meeting in New York last night, it's going to be difficult.

Stephen G. Oswald: Just let you know for Airbus.

Stephen G. Oswald: We ship directly to Toulouse.

Stephen G. Oswald: <unk> hundred <unk>, so we're really.

Stephen G. Oswald: Just working with them directly we don't really do anything for Airbus for spirit spirits much more I think in the <unk> hundred 50 World, which we're not right now so we'd be open to it I mean.

Stephen G. Oswald: I think it's.

Stephen G. Oswald: The notes this morning.

Stephen G. Oswald: On some of the situations in the meat into Europe last night, it's going to be difficult.

Stephen G. Oswald: But we're there. I mean, we have the capacity, you know, that could be an upside for us, you know, we have nothing to report on it, but we certainly, you know, think we could help out and, you know, Airbus, again, for all the business we do right now is a first tier, we do everything, director. Mm hmm.

Stephen G. Oswald: But we are there I mean, we have the capacity.

Stephen G. Oswald: That could be an upside for us.

Stephen G. Oswald: I have nothing to report on it.

Stephen G. Oswald: Certainly.

Stephen G. Oswald: I think we could we can help out at Airbus again for all the business. We do right now is our first year, we do everything with Duluth.

Stephen G. Oswald: Okay, great. So the $75 million placeholder, you know, looks like that, you know, through the 27 timeframe, you think is going to be pretty achievable. I'm just kind of curious, though, what the pipeline looks like today? What do you think the cadence of or potential timing of is?

Stephen G. Oswald: <unk>.

Stephen G. Oswald: Mhm.

Stephen G. Oswald: Great. So the $75 million placeholder it looks like that.

Stephen G. Oswald: Through the 2007 timeframe, you think is going to be pretty achievable I'm, just kind of curious, though what does the pipeline look like today.

Stephen G. Oswald: The cadence of potential timing of.

Stephen G. Oswald: of those acquisitions might be. Is this going to be, you know, near term, more back end weighted towards 2027? And just kind of what the competitive environment looks like and, you know, pricing on the kinds of assets that you might be chasing? Let me jump in.

Stephen G. Oswald: Of those acquisitions might be is this going to be nearer term more backend weighted towards 2027, and just kind of what the competitive environment looks like.

Stephen G. Oswald: Pricing on the kinds of assets that you might be chasing.

Speaker Change: Let me jump into the market say a few things okay. So we're always in the market.

Stephen G. Oswald: So, we're always in the market. So I'll just say that, all right? So, you know, we're always looking at things. We have an excellent team here led by Suman in M&A. You know, if something comes up this year, we're going to do it. Our cadence. So it's obviously slowed down from COVID for everybody, but we'd like to do at least one, if not two a year. Again, this year we just did BLR last April and May, so we have a little bit of time now. We're always in the market. It is competitive. I know you follow the company. We're always in the market. It is competitive.

Stephen G. Oswald: So I would just say that alright so.

Stephen G. Oswald: We're looking at things we have an excellent team here led by savant on M&A.

Stephen G. Oswald: That comes up this year, we're going to do it or cadences.

Stephen G. Oswald: Obviously slowdown from Covid for everybody, but we'd like to do at least one if not two a year.

Stephen G. Oswald: This is again this year, we just did DLR backend last last may So our last April and May so we'd have a.

Stephen G. Oswald: A little bit of time now so, but we're always in the market. It is <unk>.

Stephen G. Oswald: Competitive.

Stephen G. Oswald: You follow other companies.

Stephen G. Oswald: I will tell you that for what we've won and what we've done, I mean, we have a really good hit rate. We've had a lot of success with the things we've gone after. Not every single one, but it's up there.

Stephen G. Oswald: Many of them.

Stephen G. Oswald: <unk>.

Stephen G. Oswald: Crowded lobby, but I will tell you that for what we want and what we've done I mean, we've got a we've got a really good hit rate.

Stephen G. Oswald: Got a lot of success for the things that we've gone after not every single one but.

Stephen G. Oswald: So we're excited about building that as part of the business. It was a big thing for me when I came in 2017. So I'll let Suman. Do you want to say anything else on that?

Stephen G. Oswald: It's up there. So we're excited about building that's part of the business. It's a big Big thing for me when I came in in 2000 22017.

Suman Mookerji: So I'll, let somebody answer anything else either yes, we've been actively looking at businesses I would say there's been a pickup in deal flow in.

Suman Mookerji: Yeah, we've actually been looking at businesses. I would say there's been a pickup in deal flow in late Q1 and coming into Q2. We're seeing more assets come to market. The competitive environment, I wouldn't say necessarily has dramatically changed. The company you referenced that went public recently has been around and looking for similar assets for over 10 years.

Suman Mookerji: Late Q1, and coming into Q2, we're seeing more assets come to market.

Suman Mookerji: Competitive environment I wouldn't say necessarily has dramatically changed the company you referenced that went public recently has been around and looking for similar assets for over 10 years. So we have suddenly come across them in the past so I don't see that dynamic changing now.

Suman Mookerji: We've certainly come across them in the past, so I don't see that dynamic changing now. So we will continue to be aggressive for businesses that we really like and where we really think we can drive a lot of incremental value for our shareholders. So we will continue to be aggressive with those opportunities, and as we have demonstrated in the past five years, we can, despite the competitive environment, win assets at a price at which we can still drive additional benefits and ROI for our shareholders.

Suman Mookerji: So we will continue to be aggressive for businesses that we really like and where we really think we can drive a lot of incremental value for our shareholders. We will continue to be aggressive with those opportunities.

Suman Mookerji: And as we have demonstrated in the past five years.

Suman Mookerji: We can despite the competitive environment when asset.

Suman Mookerji: At a price at which we can still drive additional benefit and ROI for our shareholders. So we feel good about being able to continue doing that and timing as Steve said its difficult to predict the active work ongoing on several opportunities, but timing is always difficult to predict.

Suman Mookerji: So we feel good about being able to continue doing that. And timing, as Steve said, is difficult to predict. The active work is ongoing on several opportunities, but timing is always difficult to predict on M&A. And Jason, just to chime in here, you know, we're also very excited about Organic. We really want to get, you know, hopefully, the MAX will find its way by the end of the year.

Speaker Change: On M&A right now.

Suman Mookerji: Jason.

Suman Mookerji: We're also are very excited about organic growth.

Suman Mookerji: We really want to get hopefully the Max and find its way by the end of the year I mean, if there are 50 at some point in the future a drop through and everything else right now we feel very good about our current operation to delivering.

Stephen G. Oswald: I mean, if they're at 50 at some point in the future, you know, with drop-through and everything else, you know, we feel very good about our current operation. Okay, great. That's wonderful.

Stephen G. Oswald: I appreciate the time. Thank you, Jason. I always appreciate your time. Thank you. I'm not taking any further questions at this time. I would now like to turn it back to Stephen Oswald for closing remarks. Okay, thank you very much and thanks for joining us today. Obviously, you know, we couldn't be happier with our Q1.

Speaker Change: Okay, Great. That's wonderful I appreciate the time.

Stephen G. Oswald: Thanks as always I appreciate your comment.

Stephen G. Oswald: Thank you I'm showing no further questions at this time I would now like to turn it back to Steve Oswald for closing remarks.

Stephen G. Oswald: Okay. Thank you very much and thanks for joining us today, obviously, where we.

Stephen G. Oswald: We couldnt be happier with our Q1.

Stephen G. Oswald: I want to thank my team, all the people working hard every day at Ducommon and with our relentless approach to things. That's what we do here, and, you know, we are very encouraged as we come out of March to have, I think, a super year for everybody, for our shareholders and for our company and for all the other stakeholders involved with us. So, again, thanks for joining us. Have a great and safe day. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Subscribe For The Best Sinhala Songs

Stephen G. Oswald: Want to thank my team.

Stephen G. Oswald: People working hard everyday to comment and then with.

Stephen G. Oswald: With our relentless approach to things.

Stephen G. Oswald: Uh huh.

Stephen G. Oswald: What we do here at <unk>.

Stephen G. Oswald: We are very encouraged as we come out of March than ever I think a super year for everybody for our shareholders and for our company and.

Stephen G. Oswald: For all the other stakeholders involved with us. So again, thanks for joining us have a great and safe day. Thank you.

Stephen G. Oswald: Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

Stephen G. Oswald: Okay.

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