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Ducommun Incorporated Reports Second Quarter 2024 Results
Source: Nasdaq GlobeNewswire / 08 Aug 2024 05:30:00 America/Chicago
COSTA MESA, Calif., Aug. 08, 2024 (GLOBE NEWSWIRE) -- Ducommun Incorporated (NYSE: DCO) (“Ducommun” or the “Company”) today reported results for its second quarter ended June 29, 2024.
Second Quarter 2024 Recap
- Net revenue was $197.0 million, an increase of 5.2% over Q2 2023
- Net income of $7.7 million (increase of 225% year-over-year), or $0.52 per diluted share, or 3.9% of revenue, up 260 bps year-over-year
- Non-GAAP adjusted net income of $12.5 million (increase of 72% year-over-year), or $0.83 per diluted share
- Gross margin of 26.0%, year-over-year growth of 460 bps
- Adjusted EBITDA of $30.0 million (increase of 15% year-over-year), or 15.2% of revenue, up 130 bps year-over-year
“Q2 was another outstanding quarter for DCO as we grew our topline both year-over-year and sequentially, led by strength in both of our Commercial Aerospace and Military segments along with strong quarterly gross margins and Adjusted EBITDA margins,” said Stephen G. Oswald, chairman, president and chief executive officer. “Net revenue was a quarterly record $197.0 million, up over 5% compared to Q2 2023, with strong demand for business jets, select Airbus platforms, required buffer stock build for the Monrovia facility closure along with maintaining level load production rates on other commercial aerospace platforms despite the temporary slowdown in demand from aircraft OEMs.
"The other big news is Ducommun delivered a new quarterly record for gross margin, expanding 460 bps year-over-year from 21.4% to 26.0%. In addition, Adjusted EBITDA margins also were very strong as we now gain increased momentum on our Vision 2027 strategy and financial goals. Continued growth in our higher margin engineered products businesses, some benefits of favorable product mix, savings from our on-going restructuring program, value pricing along with productivity, all contributed to the excellent margin story in Q2.
“In December 2022, we laid out our Vision 2027 Plan to investors and now halfway through year two of the Plan, we have made solid progress in achieving our revenue and especially EBITDA margin growth targets. The team is driving the business and on track to deliver our longer-term goals as we remain relentless on meeting the commitments.
“Ducommun was also a participant at the Farnborough Air Show last month where there was significant focus on the quality challenges and supply chain constraints in the industry. I am proud of the Ducommun team for being laser focused on delivering high quality products to our customers, on-time while maintaining a strong position to meet the anticipated higher demand for Commercial Aerospace products later this year and in 2025. It also shows in our numerous A&D OEM customer awards over the last 18 months recognizing our performance.”
Second Quarter Results
Net revenue for the second quarter of 2024 was $197.0 million compared to $187.3 million for the second quarter of 2023. The year-over-year increase of 5.2% was primarily due to the following in the Company's key end-use markets:
- $9.9 million higher revenue in the Company’s commercial aerospace end-use markets due to higher production on selected single-aisle and twin-aisle aircraft, buffer stock build for the Monrovia performance center closure, and growth in regional and business aircraft platforms, partially offset by lower revenues from in-flight entertainment; and
- $3.2 million higher revenue in the Company’s military and space end-use markets due to higher rates on rotary-wing aircraft and naval platforms, partially offset by lower rates on fixed-wing aircraft platforms.
In addition, revenue for the Company’s industrial end-use markets for the second quarter of 2024 decreased $3.4 million compared to the second quarter of 2023 mainly due to the Company selectively pruning non-core business.
Net income for the second quarter of 2024 was $7.7 million, or 3.9% of revenue, or $0.52 per diluted share, compared to $2.4 million, or 1.3% revenue, or $0.17 per diluted share, for the second quarter of 2023. This reflects higher gross profit of $11.1 million and lower restructuring charges of $2.7 million ($0.9 million was recorded as cost of sales), partially offset by higher selling, general and administrative (“SG&A”) expenses of $5.7 million and lower other income of $4.1 million. A portion of the higher SG&A expenses were due to the $1.4 million of professional fees related to the unsolicited non-binding offer to acquire all the shares of Ducommun Incorporated and BLR Aerospace (“BLR”) SG&A expenses of $1.3 million which did not exist in the prior year period as the acquisition of BLR was not completed until the end of April 2023 as well as higher other legal and professional fees of $1.5 million, including for the evaluation of acquisition opportunities.
Gross profit for the second quarter of 2024 was $51.2 million, or 26.0% of revenue, compared to gross profit of $40.1 million, or 21.4% of revenue, for the second quarter of 2023. The increase in gross profit as a percentage of net revenue year-over-year was primarily due to higher manufacturing volume and favorable product mix, pricing actions, along with some improving benefits from the restructuring initiative, partially offset by higher other manufacturing costs.
Operating income for the second quarter of 2024 was $13.9 million, or 7.1% of revenue, compared to $5.0 million, or 2.7% of revenue, in the comparable period last year. The year-over-year increase of $8.9 million was primarily due to higher gross profit and lower restructuring charges, partially offset by higher SG&A expenses, which was noted above. Non-GAAP adjusted operating income for the second quarter of 2024 was $19.9 million, or 10.1% of revenue, compared to $15.2 million, or 8.1% of revenue, in the comparable period last year. The year-over-year increase was primarily due to higher GAAP operating income, partially offset by lower add backs of restructuring charges and Guaymas fire related expenses.
Adjusted EBITDA for the second quarter of 2024 was $30.0 million, or 15.2% of revenue, compared to $26.1 million, or 13.9% of revenue, for the comparable period in 2023.
Interest expense for the second quarter of 2024 was $4.0 million compared to $5.7 million in the comparable period of 2023. The year-over-year decrease was primarily due to the benefit from the interest rate swaps which became effective on January 1, 2024, along with a lower debt balance in the second quarter of 2024.
During the second quarter of 2024, the net cash provided by operations was $3.5 million compared to $9.2 million during the second quarter of 2023. The lower net cash provided by operations during the second quarter of 2024 was primarily due to higher contract assets and lower accounts payable, partially offset by higher net income and lower inventories.
Business Segment Information
Electronic Systems
Electronic Systems segment net revenue for the quarter ended June 29, 2024 was $101.4 million, compared to $107.1 million for the second quarter of 2023. The year-over-year decrease was primarily due to the following in the Company's key end-use markets:
- $1.8 million lower revenue within the Company’s military and space end-use markets due to lower rates on fixed-wing aircraft platforms, partially offset by higher rates on naval and submarine platforms and rotary-wing aircraft platforms; and
- $0.5 million lower revenue in the Company’s commercial aerospace end-use markets due to lower in-flight entertainment revenues, partially offset by higher rates on regional and business aircraft and large aircraft platforms.
In addition, revenue for the Company’s industrial end-use markets for the second quarter of 2024 decreased $3.4 million compared to the second quarter of 2023 mainly due to the Company selectively pruning non-core business.
Electronic Systems segment operating income for the quarter ended June 29, 2024 was $16.8 million, or 16.6% of revenue, compared to $9.5 million, or 8.9% of revenue, for the comparable quarter in 2023. The year-over-year increase of $7.3 million was primarily due to higher manufacturing volume, favorable product mix, pricing actions, and lower restructuring charges. Non-GAAP adjusted operating income for the second quarter of 2024 was $17.2 million, or 16.9% of revenue, compared to $12.2 million, or 11.4% of revenue, in the comparable period last year.
Structural Systems
Structural Systems segment net revenue for the quarter ended June 29, 2024 was $95.6 million, compared to $80.2 million for the second quarter of 2023. The year-over-year increase was primarily due to the following:
- $10.4 million higher revenue within the Company’s commercial aerospace end-use markets due to higher production on selected single-aisle and twin-aisle aircraft, buffer stock build for the Monrovia performance center closure, and growth in various business jet platforms; and
- $5.0 million higher revenue within the Company’s military and space end-use markets due to higher rates on fixed-wing and rotary-wing aircraft platforms.
Structural Systems segment operating income for the quarter ended June 29, 2024 was $10.6 million, or 11.0% of revenue, compared to $5.4 million, or 6.7% of revenue, for the comparable quarter in 2023. The year-over-year increase of $5.2 million was primarily due to higher volume, favorable product mix, pricing actions, and lower Guaymas fire related expenses. Non-GAAP adjusted operating income for the second quarter of 2024 was $14.7 million, or 15.4% of revenue, compared to $12.8 million, or 16.0% of revenue, in the comparable period last year.
Corporate General and Administrative (“CG&A”) Expenses
CG&A expenses for the second quarter of 2024 were $13.4 million, or 6.8% of total Company revenue, compared to $9.9 million, or 5.3% of total Company revenue, for the comparable quarter in the prior year. The year-over-year increase in CG&A expenses was primarily due to higher professional services fees of $2.9 million, of which $1.4 million was related to the unsolicited non-binding offer to acquire all the shares of Ducommun Incorporated, $1.5 million in other legal and professional services, including for the evaluation of acquisition opportunities.
Conference Call
A teleconference hosted by Stephen G. Oswald, the Company’s chairman, president and chief executive officer, and Suman B. Mookerji, the Company’s senior vice president, chief financial officer will be held today, August 8, 2024 at 10:00 a.m. PT (1:00 p.m. ET) to review these financial results. To access the conference call, please pre-register using the following registration link:
https://register.vevent.com/register/BI56958946b480425da35343eca4b411bf
Registrants will receive a confirmation with dial-in details. Mr. Oswald and Mr. Mookerji will be speaking on behalf of the Company and anticipate the call (including Q&A) to last approximately 45 minutes. A live webcast of the event can be accessed using the link above. A replay of the webcast will be available on the Ducommun website at Ducommun.com.
Additional information regarding Ducommun's results can be found in the Q2 2024 Earnings Presentation available at Ducommun.com.
About Ducommun Incorporated
Ducommun Incorporated delivers value-added innovative manufacturing solutions to customers in the aerospace, defense and industrial markets. Founded in 1849, the Company specializes in two core areas - Electronic Systems and Structural Systems - to produce complex products and components for commercial aircraft platforms, mission-critical military and space programs, and sophisticated industrial applications. For more information, visit Ducommun.com.
Forward Looking Statements
This press release and any attachments include “forward-looking statements,” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, in particular, any statements about the Company's 2027 Vision Strategy, long-term goals and the anticipated demand for commercial aerospace products through 2025. The Company generally uses the words “may,” “will,” “could,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” “intend,” “continue” and similar expressions in this press release and any attachments to identify forward-looking statements. The Company bases these forward-looking statements on its current views with respect to future events and financial performance. Actual results could differ materially from those projected in the forward-looking statements. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things: whether the anticipated pre-tax restructuring charges will be sufficient to address all anticipated restructuring costs, including related to employee separation, facilities consolidation, inventory write-down and other asset impairments; whether the expected cost savings from the restructuring will ultimately be obtained in the amount and during the period anticipated; whether the restructuring in the affected areas will be sufficient to build a more cost efficient, focused, higher margin enterprise with higher returns for the Company's shareholders; the strength of the real estate market, the duration of any lease entered into as part of any sale-leaseback transaction, the amount of commissions owed to brokers, and applicable tax rates; the impact of the Company’s debt service obligations and restrictive debt covenants; the Company’s end-use markets are cyclical; the Company depends upon a selected base of industries and customers; a significant portion of the Company’s business depends upon U.S. Government defense spending; the Company is subject to extensive regulation and audit by the Defense Contract Audit Agency; contracts with some of the Company’s customers contain provisions which give the its customers a variety of rights that are unfavorable to the Company; further consolidation in the aerospace industry could adversely affect the Company’s business and financial results; the Company’s ability to successfully make acquisitions, including its ability to successfully integrate, operate or realize the projected benefits of such businesses; the Company relies on its suppliers to meet the quality and delivery expectations of its customers; the Company uses estimates when bidding on fixed-price contracts which estimates could change and result in adverse effects on its financial results; the impact of existing and future laws and regulations; the impact of existing and future accounting standards and tax rules and regulations; environmental liabilities could adversely affect the Company’s financial results; cyber security attacks, internal system or service failures may adversely impact the Company’s business and operations; the ultimate geographic spread, duration and severity of the coronavirus (COVID-19) outbreak, and the effectiveness of actions taken, or actions that may be taken, by governmental authorities to contain the outbreak or treat its impact, and other risks and uncertainties, including those detailed from time to time in the Company’s periodic reports filed with the Securities and Exchange Commission. You should not put undue reliance on any forward-looking statements. You should understand that many important factors, including those discussed herein, could cause the Company’s results to differ materially from those expressed or suggested in any forward-looking statement. Except as required by law, the Company does not undertake any obligation to update or revise these forward-looking statements to reflect new information or events or circumstances that occur after the date of this news release, August 8, 2024, or to reflect the occurrence of unanticipated events or otherwise. Readers are advised to review the Company’s filings with the Securities and Exchange Commission (which are available from the SEC’s EDGAR database at www.sec.gov).
Note Regarding Non-GAAP Financial Information
This release contains non-GAAP financial measures, including Adjusted EBITDA (which excludes interest expense, income tax expense, depreciation, amortization, stock-based compensation expense, restructuring charges, professional fees related to unsolicited non-binding acquisition offer, Guaymas fire related expenses, other fire related expenses, insurance recoveries related to loss on operating assets, insurance recoveries related to business interruption, and inventory purchase accounting adjustments), including as a percentage of revenue, non-GAAP operating income, including as a percentage of net revenues, non-GAAP earnings, non-GAAP earnings per share, and backlog. In addition, certain other prior period amounts have been reclassified to conform to current year’s presentation.
The Company believes the presentation of these non-GAAP measures provide important supplemental information to management and investors regarding financial and business trends relating to its financial condition and results of operations. The Company’s management uses these non-GAAP financial measures along with the most directly comparable GAAP financial measures in evaluating the Company’s actual and forecasted operating performance, capital resources and cash flow. The non-GAAP financial information presented herein should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. The Company discloses different non-GAAP financial measures in order to provide greater transparency and to help the Company’s investors to more meaningfully evaluate and compare Ducommun’s results to its previously reported results. The non-GAAP financial measures that the Company uses may not be comparable to similarly titled financial measures used by other companies.
The Company defines backlog as potential revenue and is based on customer placed purchase orders and long-term agreements (“LTAs”) with firm fixed price and expected delivery dates of 24 months or less. The majority of the LTAs do not meet the definition of a contract under ASC 606 and thus, the backlog amount disclosed herein is greater than the remaining performance obligations disclosed under ASC 606. Backlog is subject to delivery delays or program cancellations, which are beyond the Company’s control. Backlog is affected by timing differences in the placement of customer orders and tends to be concentrated in several programs to a greater extent than the Company’s net revenues. As a result of these factors, trends in the Company’s overall level of backlog may not be indicative of trends in the Company’s future net revenues.
CONTACT:
Suman Mookerji, Senior Vice President, Chief Financial Officer, 657.335.3665
DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)June 29,
2024December 31,
2023Assets Current Assets Cash and cash equivalents $ 29,405 $ 42,863 Accounts receivable, net 106,585 104,692 Contract assets 210,314 177,686 Inventories 201,831 199,201 Production cost of contracts 6,181 7,778 Other current assets 14,398 17,349 Total Current Assets 568,714 549,569 Property and Equipment, Net 111,299 111,379 Operating Lease Right-of-Use Assets 27,128 29,513 Goodwill 244,600 244,600 Intangibles, Net 157,967 166,343 Deferred income taxes 641 641 Other Assets 21,151 18,874 Total Assets $ 1,131,500 $ 1,120,919 Liabilities and Shareholders’ Equity Current Liabilities Accounts payable $ 76,810 $ 72,265 Contract liabilities 50,034 53,492 Accrued and other liabilities 40,293 42,260 Operating lease liabilities 7,943 7,873 Current portion of long-term debt 10,938 7,813 Total Current Liabilities 186,018 183,703 Long-Term Debt, Less Current Portion 250,896 256,961 Non-Current Operating Lease Liabilities 20,414 22,947 Deferred Income Taxes 2,945 4,766 Other Long-Term Liabilities 15,328 16,448 Total Liabilities 475,601 484,825 Commitments and Contingencies Shareholders’ Equity Common Stock 147 146 Additional Paid-In Capital 208,930 206,197 Retained Earnings 436,553 421,980 Accumulated Other Comprehensive Income 10,269 7,771 Total Shareholders’ Equity 655,899 636,094 Total Liabilities and Shareholders’ Equity $ 1,131,500 $ 1,120,919 DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)Three Months Ended Six Months Ended June 29,
2024July 1,
2023June 29,
2024July 1,
2023Net Revenues $ 197,000 $ 187,320 $ 387,847 $ 368,511 Cost of Sales 145,761 147,198 289,665 291,622 Gross Profit 51,239 40,122 98,182 76,889 Selling, General and Administrative Expenses 36,061 30,348 69,012 56,573 Restructuring Charges 1,254 4,769 2,624 8,939 Operating Income 13,924 5,005 26,546 11,377 Interest Expense (3,975 ) (5,735 ) (7,858 ) (9,954 ) Other Income — 4,059 — 7,945 Income Before Taxes 9,949 3,329 18,688 9,368 Income Tax Expense 2,225 955 4,115 1,763 Net Income $ 7,724 $ 2,374 $ 14,573 $ 7,605 Earnings Per Share Basic earnings per share $ 0.52 $ 0.18 $ 0.99 $ 0.59 Diluted earnings per share $ 0.52 $ 0.17 $ 0.97 $ 0.58 Weighted-Average Number of Common Shares Outstanding Basic 14,775 13,403 14,735 12,799 Diluted 14,961 13,599 14,954 13,075 Gross Profit % 26.0 % 21.4 % 25.3 % 20.9 % SG&A % 18.3 % 16.2 % 17.8 % 15.4 % Operating Income % 7.1 % 2.7 % 6.8 % 3.1 % Net Income % 3.9 % 1.3 % 3.8 % 2.1 % Effective Tax Rate 22.4 % 28.7 % 22.0 % 18.8 % DUCOMMUN INCORPORATED AND SUBSIDIARIES
GAAP TO NON-GAAP NET INCOME TO ADJUSTED EBITDA RECONCILIATION
(Unaudited)
(Dollars in thousands)Three Months Ended Six Months Ended June 29,
2024July 1,
2023June 29,
2024July 1,
2023GAAP net income $ 7,724 $ 2,374 $ 14,573 $ 7,605 Non-GAAP Adjustments: Interest expense 3,975 5,735 7,858 9,954 Income tax expense 2,225 955 4,115 1,763 Depreciation 4,038 3,932 8,054 7,672 Amortization 4,207 4,022 8,544 8,271 Stock-based compensation expense (1) 4,028 5,036 8,286 8,117 Restructuring charges 2,111 4,769 3,481 8,939 Professional fees related to unsolicited non-binding acquisition offer 1,374 — 1,374 — Guaymas fire related expenses — 1,880 — 3,348 Other fire related expenses — 477 — 477 Insurance recoveries related to loss on operating assets — (1,677 ) — (5,563 ) Insurance recoveries related to business interruption — (2,160 ) — (2,160 ) Inventory purchase accounting adjustments 291 766 1,082 766 Adjusted EBITDA $ 29,973 $ 26,109 $ 57,367 $ 49,189 Net income as a % of net revenues 3.9 % 1.3 % 3.8 % 2.1 % Adjusted EBITDA as a % of net revenues 15.2 % 13.9 % 14.8 % 13.3 % (1) The three and six months ended June 29, 2024 included $0.5 million and $1.9 million, respectively, of stock-based compensation expense for awards with both performance and market conditions that will be settled in cash. The three and six months ended July 1, 2023 included $0.8 million and $1.2 million, respectively, of stock-based compensation expense for awards with both performance and market conditions that will be settled in cash. The three and six months ended June 29, 2024 each included $0.1 million of stock-based compensation expense recorded as cost of sales. The three and six months ended July 1, 2023 each included $0.2 million of stock-based compensation expense recorded as cost of sales.
DUCOMMUN INCORPORATED AND SUBSIDIARIES
BUSINESS SEGMENT PERFORMANCE
(Unaudited)
(Dollars in thousands)Three Months Ended Six Months Ended %
ChangeJune 29,
2024July 1,
2023%
of Net Revenues
2024%
of Net Revenues
2023%
ChangeJune 29,
2024July 1,
2023%
of Net Revenues
2024%
of Net Revenues
2023Net Revenues Electronic Systems (5.3) % $ 101,440 $ 107,124 51.5 % 57.2 % (1.8) % $ 208,979 $ 212,750 53.9 % 57.7 % Structural Systems 19.2 % 95,560 80,196 48.5 % 42.8 % 14.8 % 178,868 155,761 46.1 % 42.3 % Total Net Revenues 5.2 % $ 197,000 $ 187,320 100.0 % 100.0 % 5.2 % $ 387,847 $ 368,511 100.0 % 100.0 % Segment Operating Income Electronic Systems $ 16,806 $ 9,528 16.6 % 8.9 % $ 35,775 $ 19,539 17.1 % 9.2 % Structural Systems 10,559 5,385 11.0 % 6.7 % 13,427 10,130 7.5 % 6.5 % 27,365 14,913 49,202 29,669 Corporate General and Administrative Expenses (1) (13,441 ) (9,908 ) (6.8) % (5.3) % (22,656 ) (18,292 ) (5.8) % (5.0) % Total Operating Income $ 13,924 $ 5,005 7.1 % 2.7 % $ 26,546 $ 11,377 6.8 % 3.1 % Adjusted EBITDA Electronic Systems Operating Income $ 16,806 $ 9,528 $ 35,775 $ 19,539 Other Income — 222 — 222 Depreciation and Amortization 3,662 3,561 7,294 7,059 Stock-Based Compensation Expense (2) 91 119 171 251 Restructuring Charges — 2,071 459 3,945 20,559 15,501 20.3 % 14.5 % 43,699 31,016 20.9 % 14.6 % Structural Systems Operating Income 10,559 5,385 13,427 10,130 Depreciation and Amortization 4,547 4,335 9,209 8,767 Stock-Based Compensation Expense (3) 70 101 156 203 Restructuring Charges 2,111 2,612 3,022 4,908 Guaymas fire related expenses — 1,880 — 3,348 Other fire related expenses — 477 — 477 Inventory Purchase Accounting Adjustments 291 766 1,082 766 17,578 15,556 18.4 % 19.4 % 26,896 28,599 15.0 % 18.4 % Corporate General and Administrative Expenses (1) Operating loss (13,441 ) (9,908 ) (22,656 ) (18,292 ) Depreciation and Amortization 36 58 95 117 Stock-Based Compensation Expense (4) 3,867 4,816 7,959 7,663 Restructuring Charges — 86 — 86 Professional Fees Related to Unsolicited Non-Binding Acquisition Offer 1,374 — 1,374 — (8,164 ) (4,948 ) (13,228 ) (10,426 ) Adjusted EBITDA $ 29,973 $ 26,109 15.2 % 13.9 % $ 57,367 $ 49,189 14.8 % 13.3 % Capital Expenditures Electronic Systems $ 1,143 $ 1,923 $ 1,939 $ 3,774 Structural Systems 1,353 4,111 2,877 7,241 Corporate Administration 723 — 3,148 — Total Capital Expenditures $ 3,219 $ 6,034 $ 7,964 $ 11,015 (1) Includes costs not allocated to either the Electronic Systems or Structural Systems operating segments.
(2) The three and six months ended June 29, 2024 each included less than $0.1 million of stock-based compensation expense recorded as cost of sales. The three and six months ended July 1, 2023 included less than $0.1 million and $0.1 million, respectively, of stock-based compensation expense recorded as cost of sales.
(3) The three and six months ended June 29, 2024 included less than $0.1 million and $0.1 million, respectively, of stock-based compensation expense recorded as cost of sales. The three and six months ended July 1, 2023 each included less than $0.1 million of stock-based compensation expense recorded as cost of sales.
(4) The three and six months ended June 29, 2024 included $0.5 million and $1.9 million, respectively, of stock-based compensation expense for awards with both performance and market conditions that will be settled in cash. The three and six months ended July 1, 2023 included $0.8 million and $1.2 million, respectively, of stock-based compensation expense for awards with both performance and market conditions that will be settled in cash.
DUCOMMUN INCORPORATED AND SUBSIDIARIES
GAAP TO NON-GAAP OPERATING INCOME RECONCILIATION
(Unaudited)
(Dollars in thousands)Three Months Ended Six Months Ended GAAP To Non-GAAP Operating Income June 29, 2024 July 1, 2023 %
of Net Revenues
2024%
of Net Revenues
2023June 29, 2024 July 1, 2023 %
of Net Revenues
2024%
of Net Revenues
2023GAAP operating income $ 13,924 $ 5,005 $ 26,546 $ 11,377 GAAP operating income - Electronic Systems $ 16,806 $ 9,528 $ 35,775 $ 19,539 Adjustments to GAAP operating income - Electronic Systems: Other income — 222 — 222 Restructuring charges — 2,071 459 3,945 Amortization of acquisition-related intangible assets 374 374 747 747 Total adjustments to GAAP operating income - Electronic Systems 374 2,667 1,206 4,914 Non-GAAP adjusted operating income - Electronic Systems 17,180 12,195 16.9 % 11.4 % 36,981 24,453 17.7 % 11.5 % GAAP operating income - Structural Systems 10,559 5,385 13,427 10,130 Adjustments to GAAP operating income - Structural Systems: Restructuring charges 2,111 2,612 3,022 4,908 Guaymas fire related expenses — 1,880 — 3,348 Other fire related expenses — 477 — 477 Inventory purchase accounting adjustments 291 766 1,082 766 Amortization of acquisition-related intangible assets 1,785 1,701 3,719 2,938 Total adjustments to GAAP operating income - Structural Systems 4,187 7,436 7,823 12,437 Non-GAAP adjusted operating income - Structural Systems 14,746 12,821 15.4 % 16.0 % 21,250 22,567 11.9 % 14.5 % GAAP operating loss - Corporate (13,441 ) (9,908 ) (22,656 ) (18,292 ) Adjustments to GAAP Operating Income - Corporate Restructuring charges — 86 — 86 Professional fees related to unsolicited non-binding acquisition offer 1,374 — 1,374 — Total adjustments to GAAP Operating Income - Corporate 1,374 86 1,374 86 Non-GAAP adjusted operating loss - Corporate (12,067 ) (9,822 ) (21,282 ) (18,206 ) Total non-GAAP adjustments to GAAP operating income 5,935 10,189 10,403 17,437 Non-GAAP adjusted operating income $ 19,859 $ 15,194 10.1 % 8.1 % $ 36,949 $ 28,814 9.5 % 7.8 % DUCOMMUN INCORPORATED AND SUBSIDIARIES
GAAP TO NON-GAAP NET INCOME AND EARNINGS PER SHARE RECONCILIATION
(Unaudited)
(Dollars in thousands, except per share amounts)Three Months Ended Six Months Ended GAAP To Non-GAAP Net Income June 29,
2024July 1,
2023June 29,
2024July 1,
2023GAAP net income $ 7,724 $ 2,374 $ 14,573 $ 7,605 Adjustments to GAAP net income: Restructuring charges 2,111 4,769 3,481 8,939 Professional fees related to unsolicited non-binding acquisition offer 1,374 — 1,374 — Guaymas fire related expenses — 1,880 — 3,348 Other fire related expenses — 477 — 477 Insurance recoveries related to loss on operating assets — (1,677 ) — (5,563 ) Insurance recoveries related to business interruption — (2,160 ) — (2,160 ) Inventory purchase accounting adjustments 291 766 1,082 766 Amortization of acquisition-related intangible assets 2,159 2,075 4,466 3,685 Total adjustments to GAAP net income before provision for income taxes 5,935 6,130 10,403 9,492 Income tax effect on non-GAAP adjustments (1) (1,187 ) (1,226 ) (2,081 ) (1,898 ) Non-GAAP adjusted net income $ 12,472 $ 7,278 $ 22,895 $ 15,199 Three Months Ended Six Months Ended GAAP Earnings Per Share To Non-GAAP Earnings Per Share June 29,
2024July 1,
2023June 29,
2024July 1,
2023GAAP diluted earnings per share (“EPS”) $ 0.52 $ 0.17 $ 0.97 $ 0.58 Adjustments to GAAP diluted EPS: Restructuring charges 0.14 0.35 0.24 0.68 Professional fees related to unsolicited non-binding acquisition offer 0.09 — 0.09 — Guaymas fire related expenses — 0.14 — 0.26 Other fire related expenses — 0.04 — 0.04 Insurance recoveries related to loss on operating assets — (0.12 ) — (0.43 ) Insurance recoveries related to business interruption — (0.16 ) — (0.16 ) Inventory purchase accounting adjustments 0.02 0.06 0.07 0.06 Amortization of acquisition-related intangible assets 0.14 0.15 0.30 0.28 Total adjustments to GAAP diluted EPS before provision for income taxes 0.39 0.46 0.70 0.73 Income tax effect on non-GAAP adjustments (1) (0.08 ) (0.09 ) (0.14 ) (0.15 ) Non-GAAP adjusted diluted EPS $ 0.83 $ 0.54 $ 1.53 $ 1.16 Shares used for non-GAAP adjusted diluted EPS 14,961 13,599 14,954 13,075 (1) Effective tax rate of 20.0% used for both 2024 and 2023 adjustments.
DUCOMMUN INCORPORATED AND SUBSIDIARIES
NON-GAAP BACKLOG* BY REPORTING SEGMENT
(Unaudited)
(Dollars in thousands)June 29,
2024December 31,
2023Consolidated Ducommun Military and space $ 592,476 $ 527,143 Commercial aerospace 451,070 429,494 Industrial 24,469 36,931 Total $ 1,068,015 $ 993,568 Electronic Systems Military and space $ 447,441 $ 397,681 Commercial aerospace 85,601 87,994 Industrial 24,469 36,931 Total $ 557,511 $ 522,606 Structural Systems Military and space $ 145,035 $ 129,462 Commercial aerospace 365,469 341,500 Total $ 510,504 $ 470,962 * Under ASC 606, the Company defines performance obligations as customer placed purchase orders with firm fixed price and firm delivery dates. The remaining performance obligations disclosed under ASC 606 as of June 29, 2024 were $840.0 million. The Company defines backlog as potential revenue and is based on customer placed purchase orders and long-term agreements (“LTAs”) with firm fixed price and expected delivery dates of 24 months or less. Backlog as of June 29, 2024 was $1,068.0 million compared to $993.6 million as of December 31, 2023.