First Quarter 2023 Recap
- Net revenue was
$181.2 million , up 11%, all organic - Net income of
$5.2 million , or$0.42 per diluted share - Adjusted net income of
$7.9 million , or$0.63 per diluted share - Adjusted EBITDA of
$23.1 million , or 12.7% of revenue - Completed the acquisition of
BLR Aerospace after quarter end
“We are off to a good start in 2023, with double digit top-line growth, led by strong
“Finally, we announced last month we had completed the acquisition of
First Quarter Results
Net revenue for the first quarter of 2023 was
$19.0 million higher revenue in the Company’s commercial aerospace end-use markets due to higher build rates on other commercial aerospace platforms and large aircraft platforms; partially offset by$2.9 million lower revenue in the Company’s military and space end-use markets due to lower build rates on military fixed-wing aircraft platforms and military rotary-wing aircraft platforms, partially offset by higher build rates on other military and space platforms.
Net income for the first quarter of 2023 was
Gross profit for the first quarter of 2023 was
Operating income for the first quarter of 2023 was
Interest expense for the first quarter of 2023 was
Adjusted EBITDA for the first quarter of 2023 was
During the first quarter of 2023, the net cash used in operations was
Business Segment Information
Electronic Systems
Electronic Systems segment net revenue for the quarter ended
$5.0 million higher revenue in the Company’s commercial aerospace end-use markets due to higher build rates on other commercial aerospace platforms; and$1.5 million higher revenue within the Company’s military and space end-use markets due to higher build rates on other military and space platforms, partially offset by lower build rates on military fixed-wing aircraft platforms.
Electronic Systems segment operating income for the quarter ended
Structural Systems
Structural Systems segment net revenue for the quarter ended
$14.0 million higher revenue within the Company’s commercial aerospace end-use markets due to higher build rates on large aircraft platforms and other commercial aerospace platforms; partially offset by$4.4 million lower revenue within the Company’s military and space end-use markets due to lower build rates on various missile platforms and military rotary-wing aircraft platforms.
Structural Systems segment operating income for the quarter ended
Corporate General and Administrative (“CG&A”) Expenses
CG&A expenses for the first quarter of 2023 were
Conference Call
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Additional information regarding Ducommun's results can be found in the Q1 2023 Earnings Presentation available at Ducommun.com.
About
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 expectations relating to the commercial aerospace recovery in 2023 and 2024, and the
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, Guaymas fire related expenses, insurance recoveries related to loss on operating assets, insurance recoveries related to business interruption, and inventory purchase accounting adjustments), non-GAAP operating income and as a percentage of net revenues, non-GAAP earnings, and non-GAAP earnings per share. 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.
We define 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 our 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 our net revenues. As a result of these factors, trends in our overall level of backlog may not be indicative of trends in our future net revenues.
CONTACT:
[Financial Tables Follow]
DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
2023 |
2022 |
|||||
Assets | ||||||
Current Assets | ||||||
Cash and cash equivalents | $ | 17,115 | $ | 46,246 | ||
Accounts receivable, net | 95,774 | 103,958 | ||||
Contract assets | 194,316 | 191,290 | ||||
Inventories | 193,999 | 171,211 | ||||
Production cost of contracts | 5,368 | 5,693 | ||||
Other current assets | 8,803 | 8,938 | ||||
Total Current Assets | 515,375 | 527,336 | ||||
Property and Equipment, Net | 107,038 | 106,225 | ||||
Operating Lease Right-of-Use Assets | 37,204 | 34,632 | ||||
203,407 | 203,407 | |||||
Intangibles, Net | 123,576 | 127,201 | ||||
Other Assets | 19,478 | 22,705 | ||||
Total Assets | $ | 1,006,078 | $ | 1,021,506 | ||
Liabilities and Shareholders’ Equity | ||||||
Current Liabilities | ||||||
Accounts payable | $ | 98,879 | $ | 90,143 | ||
Contract liabilities | 39,682 | 47,068 | ||||
Accrued and other liabilities | 28,800 | 48,820 | ||||
Operating lease liabilities | 7,745 | 7,155 | ||||
Current portion of long-term debt | 6,250 | 6,250 | ||||
Total Current Liabilities | 181,356 | 199,436 | ||||
Long-Term Debt, Less Current Portion | 239,128 | 240,595 | ||||
Non-Current Operating Lease Liabilities | 30,831 | 28,841 | ||||
Deferred Income Taxes | 12,250 | 13,953 | ||||
Other Long-Term Liabilities | 14,129 | 12,721 | ||||
Total Liabilities | 477,694 | 495,546 | ||||
Commitments and Contingencies | ||||||
Shareholders’ Equity | ||||||
Common Stock | 122 | 121 | ||||
111,322 | 112,042 | |||||
Retained Earnings | 411,283 | 406,052 | ||||
Accumulated Other Comprehensive Income | 5,657 | 7,745 | ||||
Total Shareholders’ Equity | 528,384 | 525,960 | ||||
Total Liabilities and Shareholders’ Equity | $ | 1,006,078 | $ | 1,021,506 |
DUCOMMUN INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended | ||||||||
2023 |
2022 |
|||||||
Net Revenues | $ | 181,191 | $ | 163,481 | ||||
Cost of Sales | 144,424 | 131,006 | ||||||
Gross Profit | 36,767 | 32,475 | ||||||
Selling, General and Administrative Expenses | 26,225 | 23,352 | ||||||
Restructuring Charges | 4,170 | — | ||||||
Operating Income | 6,372 | 9,123 | ||||||
Interest Expense | (4,219 | ) | (2,402 | ) | ||||
Other Income | 3,886 | 3,000 | ||||||
Income Before Taxes | 6,039 | 9,721 | ||||||
Income Tax Expense | 808 | 1,622 | ||||||
Net Income | $ | 5,231 | $ | 8,099 | ||||
Earnings Per Share | ||||||||
Basic earnings per share | $ | 0.43 | $ | 0.68 | ||||
Diluted earnings per share | $ | 0.42 | $ | 0.66 | ||||
Weighted-Average Number of Common Shares Outstanding | ||||||||
Basic | 12,195 | 11,989 | ||||||
Diluted | 12,538 | 12,328 | ||||||
Gross Profit % | 20.3 | % | 19.9 | % | ||||
SG&A % | 14.5 | % | 14.3 | % | ||||
Operating Income % | 3.5 | % | 5.6 | % | ||||
Net Income % | 2.9 | % | 5.0 | % | ||||
Effective Tax Rate | 13.4 | % | 16.7 | % |
DUCOMMUN INCORPORATED AND SUBSIDIARIES
BUSINESS SEGMENT PERFORMANCE
(Unaudited)
(Dollars in thousands)
Three Months Ended | |||||||||||||||||
% Change |
2023 |
2022 |
% of Net Revenues 2023 |
% of Net Revenues 2022 |
|||||||||||||
Net Revenues | |||||||||||||||||
Electronic Systems | 8.4 | % | $ | 105,626 | $ | 97,466 | 58.3 | % | 59.6 | % | |||||||
Structural Systems | 14.5 | % | 75,565 | 66,015 | 41.7 | % | 40.4 | % | |||||||||
Total Net Revenues | 10.8 | % | $ | 181,191 | $ | 163,481 | 100.0 | % | 100.0 | % | |||||||
Segment Operating Income | |||||||||||||||||
Electronic Systems | $ | 10,011 | $ | 9,411 | 9.5 | % | 9.7 | % | |||||||||
Structural Systems | 4,745 | 4,887 | 6.3 | % | 7.4 | % | |||||||||||
14,756 | 14,298 | ||||||||||||||||
Corporate General and Administrative Expenses(1) | (8,384 | ) | (5,175 | ) | (4.6)% | (3.2)% | |||||||||||
Total Operating Income | $ | 6,372 | $ | 9,123 | 3.5 | % | 5.6 | % | |||||||||
Adjusted EBITDA | |||||||||||||||||
Electronic Systems | |||||||||||||||||
Operating Income | $ | 10,011 | $ | 9,411 | |||||||||||||
Depreciation and Amortization | 3,498 | 3,506 | |||||||||||||||
Restructuring Charges | 1,874 | — | |||||||||||||||
15,383 | 12,917 | 14.6 | % | 13.3 | % | ||||||||||||
Structural Systems | |||||||||||||||||
Operating Income | 4,745 | 4,887 | |||||||||||||||
Depreciation and Amortization | 4,432 | 4,203 | |||||||||||||||
Restructuring Charges | 2,296 | — | |||||||||||||||
Guaymas fire related expenses | 1,468 | 957 | |||||||||||||||
Inventory Purchase Accounting Adjustments | — | 637 | |||||||||||||||
12,941 | 10,684 | 17.1 | % | 16.2 | % | ||||||||||||
Corporate General and Administrative Expenses(1) | |||||||||||||||||
Operating loss | (8,384 | ) | (5,175 | ) | |||||||||||||
Depreciation and Amortization | 59 | 59 | |||||||||||||||
Stock-Based Compensation Expense(2) | 3,081 | 1,590 | |||||||||||||||
(5,244 | ) | (3,526 | ) | ||||||||||||||
Adjusted EBITDA | $ | 23,080 | $ | 20,075 | 12.7 | % | 12.3 | % | |||||||||
Capital Expenditures | |||||||||||||||||
Electronic Systems | $ | 1,851 | $ | 1,696 | |||||||||||||
Structural Systems | 3,130 | 3,372 | |||||||||||||||
— | — | ||||||||||||||||
Total Capital Expenditures | $ | 4,981 | $ | 5,068 |
(1) Includes costs not allocated to either the Electronic Systems or Structural Systems operating segments.
(2) The three months ended
DUCOMMUN INCORPORATED AND SUBSIDIARIES
GAAP TO NON-GAAP OPERATING INCOME RECONCILIATION
(Unaudited)
(Dollars in thousands)
Three Months Ended | ||||||||||||||
GAAP To Non-GAAP Operating Income | % of Net Revenues 2023 |
% of Net Revenues 2022 |
||||||||||||
GAAP Operating income | $ | 6,372 | $ | 9,123 | ||||||||||
GAAP Operating income - Electronic Systems | $ | 10,011 | $ | 9,411 | ||||||||||
Adjustment: | ||||||||||||||
Restructuring charges | 1,874 | — | ||||||||||||
Amortization of acquisition-related intangible assets | 373 | 373 | ||||||||||||
Adjusted operating income - Electronic Systems | 12,258 | 9,784 | 11.6 | % | 10.0 | % | ||||||||
GAAP Operating income - Structural Systems | 4,745 | 4,887 | ||||||||||||
Adjustment: | ||||||||||||||
Restructuring charges | 2,296 | — | ||||||||||||
Guaymas fire related expenses | 1,468 | 957 | ||||||||||||
Inventory purchase accounting adjustments | — | 637 | ||||||||||||
Amortization of acquisition-related intangible assets | 1,237 | 1,246 | ||||||||||||
Adjusted operating income - Structural Systems | 9,746 | 7,727 | 12.9 | % | 11.7 | % | ||||||||
GAAP Operating loss - Corporate | (8,384 | ) | (5,175 | ) | ||||||||||
Adjusted operating loss - Corporate | (8,384 | ) | (5,175 | ) | ||||||||||
Total adjustments | 7,248 | 3,213 | ||||||||||||
Adjusted operating income | $ | 13,620 | $ | 12,336 | 7.5 | % | 7.5 | % |
DUCOMMUN INCORPORATED AND SUBSIDIARIES
GAAP TO NON-GAAP EARNINGS AND EARNINGS PER SHARE RECONCILIATION
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended | ||||||||
GAAP To Non-GAAP Earnings | 2023 |
2022 |
||||||
GAAP Net income | $ | 5,231 | $ | 8,099 | ||||
Adjustments: | ||||||||
Restructuring charges (1) | 3,336 | — | ||||||
Guaymas fire related expenses (1) | 1,174 | 766 | ||||||
Insurance recoveries related to loss on operating assets (1) | (3,109 | ) | — | |||||
Insurance recoveries related to business interruption (1) | — | (2,400 | ) | |||||
Inventory purchase accounting adjustments (1) | — | 510 | ||||||
Amortization of acquisition-related intangible assets (1) | 1,288 | 1,295 | ||||||
Total adjustments | 2,689 | 171 | ||||||
Adjusted net income | $ | 7,920 | $ | 8,270 |
Three Months Ended | ||||||||
GAAP Earnings Per Share To Non-GAAP Earnings Per Share | 2023 |
2022 |
||||||
GAAP Diluted earnings per share (“EPS”) | $ | 0.42 | $ | 0.66 | ||||
Adjustments: | ||||||||
Restructuring charges (1) | 0.27 | — | ||||||
Guaymas fire related expenses (1) | 0.09 | 0.06 | ||||||
Insurance recoveries related to loss on operating assets (1) | (0.25 | ) | — | |||||
Insurance recoveries related to business interruption (1) | — | (0.20 | ) | |||||
Inventory purchase accounting adjustments (1) | — | 0.04 | ||||||
Amortization of acquisition-related intangible assets (1) | 0.10 | 0.11 | ||||||
Total adjustments | 0.21 | 0.01 | ||||||
Adjusted diluted EPS | $ | 0.63 | $ | 0.67 | ||||
Shares used for adjusted diluted EPS | 12,538 | 12,328 |
(1) Includes effective tax rate of 20.0% for both 2023 and 2022 adjustments.
DUCOMMUN INCORPORATED AND SUBSIDIARIES
NON-GAAP BACKLOG* BY REPORTING SEGMENT
(Unaudited)
(Dollars in thousands)
2023 |
2022 |
|||||
Consolidated Ducommun | ||||||
Military and space | $ | 444,318 | $ | 457,354 | ||
Commercial aerospace | 464,058 | 450,092 | ||||
Industrial | 52,329 | 53,374 | ||||
Total | $ | 960,705 | $ | 960,820 | ||
Electronic Systems | ||||||
Military and space | $ | 346,732 | $ | 361,582 | ||
Commercial aerospace | 108,373 | 125,590 | ||||
Industrial | 52,329 | 53,374 | ||||
Total | $ | 507,434 | $ | 540,546 | ||
Structural Systems | ||||||
Military and space | $ | 97,586 | $ | 95,772 | ||
Commercial aerospace | 355,685 | 324,502 | ||||
Total | $ | 453,271 | $ | 420,274 |
* 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
Source: Ducommun Incorporated