Ducommun Incorporated (DCO) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Ducommun Virtual Investor Day. My name is Maxine, and I'll be coordinating the call today. [Operator Instructions] I will now hand you over to your host, Chris Wampler, Chief Financial Officer, Controller and Treasurer, to begin. Chris, please go ahead when you're ready.

Thanks, Maxine. Welcome, and thank you for joining us for our Ducommun Investor Day. Our last Investor Day was in November of 2018. In the 2.5 years since that meeting, the DCO team has been executing on our strategic plan that was presented. Over much of that same period, the world and the A&D industry have and continue to deal with the impacts resulting from some unprecedented events. We are proud of how our team has worked together with safety and our customer focus top of mind. Today, we will update you on the progress of our journey as well as provide insight into where we are headed over the next several years. As Maxine mentioned, at the top -- at the end of the prepared presentations, we will hold a question-and-answer session. [Operator Instructions] A replay link to the Investor Day will be posted later today on our website. Please note the disclosures on Slide 2 related to forward-looking statements, industry and customer information, non-GAAP financial measures and others. Today, we will cover an agenda that includes the Ducommun overview from Stephen Oswald; updates on our Electronic Systems and Structural Systems businesses from Dave Wilmot and Jerry Redondo, respectively; our mergers and acquisition strategy from Suman Mookerji. I'll provide financial outlook; and Stephen will share some closing remarks. With that, I will turn the program over to Stephen Oswald, our Chairman, President and CEO. Steve?

Okay. Chris, thank you very much, and welcome, everybody. Very glad to have you. We're certainly hoping for the next time we meet will be in person. And again, thanks for your time as we get into this. We're going to try to move it along fairly quickly because we have a lot to cover. So if we go -- please go to Page 5. Okay. First, just a little overview of our company. A lot of you know this already, but top left, we had a bit of a stepped-back year, as we know, with the pandemic, as everybody did. So we came in at $629 million. We had a -- I think a good year in EBITDA margins and margins in general. And you can see our backlog is -- was fairly good despite all the challenges in commercial aerospace. Going down the left-hand part of the slide there, you see we really leaned into our military and space business, which certainly served us well. We have a lot of proprietary content, and we want to talk to you about that today. We're -- we'll get more into it as we go forward in the presentation, but we feel we're fairly strong in many areas of A&D. And you can see our commercial aerospace, we're in great shape on narrow-body. As we move forward, we think that's a big part of the game, as you all do, as we move forward in time, and hopefully, wide-bodies at some point. In the future, top right, you can see our many platforms and we're proud of all our accomplishments. You can see military aircraft. Commercial aircraft, we have great share. We'll talk more about that. Our missile program is -- our missiles program is really, I think, industry-leading in lots of ways. And we've made a lot of great progress in space and UAVs. So we're obviously very proud of that, and we'll talk more about that. You can see the broad range of customers we have here. And so -- and as we've talked about in the past, I mean we're really a Tier 1 -- we'll get into that, of complex electronics and structural systems. So we want to do things that are difficult to make, that are hard, that provide great value so we can go to the industry in that posture. And I think we're continuing to do that better and better all the time. Page 6, please. So I listed these -- I think it's important that we have a little conversation about where we see the company right now and where we're going through 2025. You can see at the top here, we are a Tier 1 industry player, in my opinion, and we get up every day to focus on A&D. So we're not thinking about industrial products or other platforms. And that's where we spend all our time. I think our defense business is a real great story, and it's growing. And I think despite some concern in changing budget environment, which will happen, we still feel great about our position and where we're going. The reopening trade in commercial aero is only going to benefit Ducommun and its shareholders. We've got a high share in narrow-body, and we're in great shape there. We do have an expanding portfolio of proprietary capabilities. We'll talk more about that, but one of the things I want to highlight is we're the worldwide leader in titanium for A&D. So that's something we've worked on for many years. Kind of what put us over the top is our Airbus business. So we're doing lots for Airbus. And so we're proud of that, being a small-cap and being a leader in titanium. And that's hot form and super-plastic forming processes. We do have an aftermarket. We don't really talk about it a lot, but we have an aftermarket franchise that's gaining momentum. I'll get more into that. We also have an operational excellent system we put in place, and this is a lot from our backgrounds for some of the executives, United Technologies and other places. We think we have really good margin improvement runway. And we've seen a lot of that already. We do have, I think, a very good function, M&A function and execution track record at Ducommun. We'll talk more about that. And we're doing, I think, a good job on ESG, which everybody is obviously concerned about, and we are. And to the right there, as I see it right now, I think we have a lot of good growth in shareholder value upcoming through 2025. We'll get into that a little bit more. Next slide, please. Okay, just a minute about what does Tier 1 means to Ducommun, what does it mean to our shareholders and our analysts. So top left here, I mentioned this already about we're involved in lots of complexity. That's what we like. That's where the margins are. That's where there's less competition. So that's pretty much where we spend our time. Top left, you can see the breakdown for 2020. We went over that already. The top right, I think, is the important one. It's that this is really -- we have relationships with all these companies either through the Chief Executive Officer, Vice President, Program Directors. And so we're involved directly with all these companies. And we're getting up every day, thinking about how we can provide value to them. And so we're pretty proud of that. I think it's important for investors and for our analysts to fully understand. And we do, do some Tier 2, which we're happy about as well. We have a great relation with Spirit, and we also do work with AVIC in China for the A220. So we're mostly though in Tier 1, and that brings a lot of strength, and I think it's going to help us in the years ahead. Next slide, please. As I mentioned in my opening remarks on the first slide here, we have -- I think we've got lots of great things going on in different platforms. Top left, we're going to talk more about Raytheon as we move forward in the presentation, but we did have a supplier agreement signed in July 2019 by myself and their leader in the procurement. And it's really kind of paid off, obviously, with Raytheon. That was legacy Raytheon. And then combining with United Technologies, things obviously needed to shake out a bit, but we've seen a lot of good progress. You can see the bottom there. We talk about the TOW missile, but we're also on the Patriot. Tomahawk is a long-term program for us. And we just got work on the SM2 for the dorsal fins. So that's something, as I've been talking about on my calls, that we're driving structural business, new business in defense, either offloading from the OEM or share shift from a supplier. So I think all of that's coming together nicely. You can see it in the P&L. The top right, you can see some other things that's happening with defense majors. We talked about GA before. Again, that was a major share shift from an incumbent supplier. Again, for everybody on the call, we're really just focusing on value. And can we provide value to the customer? We're not interested just winning on price because that's not for us. That's not for Ducommun. If we're going to help a customer, especially if it's something that's already with another supplier, we need to be able to -- we believe we need to be able to bring a couple of very significant things to the table. And that certainly happened with the TOW missile case, better quality, better delivery, higher volumes. So we've got a great start with -- on the TOW and also on this wonderful program with GA. You also see on Northrop. We've got a lot of activity with Northrop Grumman, not so much in the past. So that's another great story for us where Northrop now is a top 3 customer. And we're doing our part in space. So we do work with Aerojet. You can see us there on the RS-25 engine. So lots of good things there. I mentioned this in the past that we have 52 defense programs. This is in 2020, up from 34. It moves around a bit, but generally, that's the -- that's where these things are heading. And we're leaning in and driving more. So I think all that's very positive for shareholders. So that's for investment criteria #2. Next slide, please. Just a moment on some new-generation platforms for those interested. We're obviously engaged with GA, but we're working with Kratos and Raytheon and Northrop Grumman, as I mentioned earlier on UAVs, so lots of good things ahead there. We're also involved in hypersonics. I can't say too much about it, but we're involved in several programs, and we're going to be there for the long term. And we -- also, we're pretty strong in rotorcraft, and we're very involved with Lockheed Sikorsky on their FARA for the competition for the scout. And we think it's a great, great offering, and we're looking forward to hopefully them coming out as the winner in the next few years. So we also think we have some great things happening in these next-gen platforms. Next slide, please. Okay. Let's talk a little bit about commercial aero. There's a little defense just covered here. So we all know that the hope and the plans here for the situation -- I won't get too much into it, but the middle part, I think, is important for us. Again, we have a very good position in MAX. MAX used to be a $100 million program for Ducommun at the highest level in 2019. So that gives you a sense of the runway ahead for us. So we feel good about that. It's going to take a while as we know. And then the Airbus business has been, I think, great for shareholders, great for our company. We're going to -- the A320 is here to stay. It's going to certainly be at 60 before we know it, I'm sure. And that's a real strength for us. And again, that's something we didn't have in the company 5 years ago. And that's important for investors and analysts to note that that's really helping us and broadening our strength. So we feel great about that. We have -- on the right there, we know about the fleet renewals and things like that. So I think we're in great shape for commercial aero. It might take a little bit longer or maybe a little bit slower than we hope, but this thing is going to come and we're going to be ready. We have the capital, we have the people, we have facilities, and we have the know-how. So I think that -- along with Airbus, I think great things ahead for the company. Okay. Next slide. I also think it's important to talk about these proprietary capabilities. And you can see the left, the top left there. We have the trends, and I won't get too much into that because we know all that is happening. But the middle, I think, is important, the platforms that we're on for these capabilities. We have a very good position in A220 and through AVIC. So I think that's something we don't talk about very much, but it's another area where we're doing some very nice things for their plane. We think it's going to be a great volume increase -- have great volume increase in the near future. We're sole-sourced in a lot of these things. I talked about our titanium business. We're #1 in the world. We do have the VersaCore Composites. So we -- right now, we're mostly focused in on nacelles and -- but we're just getting started on that. So that's going to be very positive. And we're working through Airbus and Safran and Middle River on our program right now, so good things ahead. We make a lot of things that are ruggedized, and we make proprietary air switches and panels. We are trusted. We have a very, very strong domestic footprint, and we do things such as value engineering, engineering design, and rapid prototyping. So we do a lot of things that customers value. And at the end of the day, one of the biggest things we've -- I think on this journey we've been on the last few years, our service levels are now very high and they're going to stay that way. So customers, that's a very, very important piece, as you know. And our value proposition on the top right there. We are -- we do have innovative products and solutions. We do have niche capabilities, such as the trade secrets around our titanium business. We're focused, obviously. And we're going to be #1 versus the competition and service. That's just our commitment. So next slide. Okay. Let's go to aftermarket. I just want to talk about this for a minute because it's something I thought was more appropriate for Investor Day than on the call for our quarterly earnings. As you can see at the top, where the business has come from percentage of revenue, we went from 7% to 10%. In the past, this was just something where we -- I think in the past, just basically, we had good margins on it. And it wasn't really focused on very much, unfortunately. So when I came in, we did some nice things with this business. We exited some relationships with a distributor, or we're now with a much better distributor for some of our products. Our acquisitions are driving the growth up to 10%, and we're doing some Apache rotor blade repairs, which we never did before. So 7% to 10% is a nice -- I think for a couple of years, a pretty nice number. And we're going to be doing more of that as we continue to leverage our recent acquisitions, and we're going to grow share through M&A. So not -- so we like it at 20%. But from 7% to 10%, we like and we think it's going to go higher from there. Okay. Next slide. Okay. Let me just -- I want to put this slide in here just so -- I know folks have covered the company for a long time and know us, and we have long-term investors. And again, we thank you for your support over the years. I put this slide together just to kind of set the table as I go into my last section here, sort of what we are not post-2018, okay? So first, top left, we're much more than a build-to-print supplier. I think hopefully, you get a sense for that with our titanium business, our M&A, our proprietary products, some of our trade secrets around how we do things. So I'm hoping that we can move past that finally. We do a competitive advantage. There are certain things that we can make in the world that most people can't. So we're proud of that. We have a much bigger business than maybe in the past, where there's a lot of commercial aerospace structures business, and I understand why that was there because it was the truth. But now we've -- as you know, we've really changed the company. I think we're much stronger. We're not interested in low margins and commoditized products. We just -- we're not -- we don't do machining. We don't do a lot of things that -- where there's 100 competitors. We're just not interested in that. I put -- sometimes or at least once, we're considered a forging, castings supplier. We're not, as you all know that. We don't really get involved in wings and large fuselages. We used to have a little bit of that in the past, and we're just not interested. That's not for us. That's not for Ducommun. We do have aftermarket, so -- which I just talked about. We do have pricing power. We certainly want to provide value and be competitive and we will be, but we do use that. We're also -- in the past, we've had certainly loss positions in products and breakeven. We have a lot less of that now, okay? But that was not true in the past. So we're moving forward on that. And we're a lot more than just Boeing and Raytheon. I can understand that for years and years and years, that would -- they -- those were our top customers. And I understand that, and we value them very much. But we're much broader now. And I think all that on the slide, I think, is -- bodes well for our investors and for our future, for our company, employees and all the stakeholders. Okay. Next slide, please. Okay. I'm going to wrap up here. I just want to talk about a few more slides here, and then I'll turn it over to the team. First, we put this in here just to give you a sense from where we sit now, on May 26, what we see ahead in 2025. Certainly, this is a high-level look. And certainly, this is our best effort at this point. We'll have to come back to you next year and update it. But we still see -- I see a significant value creation at the company through 2025. Next slide, please. Okay. We're going to come in, and we'll see how the rest of the year goes, but that's really where analysts have us in that range for 2021. In the breakdown, you can see the mix on the left. We think -- we see the company growing at least 30% over the next few years. Again, this is where we are right now in 2021. We'll update it as we go through the years. But if we didn't have the MAX and the pandemic, obviously, that's a big -- it was a big change here. Certainly, we would be hopefully heading to $1 billion, but that's going to be a little further out. But that's our long-term, obviously, goal. It's to build scale and build a bigger player in A&D. So that's -- and 7% to 8% CAGR is -- I think, is pretty good. So we'll -- again, we'll talk more about it. Let me just get to the next slide here. Just some of the key tenets here. So it's pretty simple to us. We just need to be an industry-leading partner by providing technology. Technology could be all our proprietary products. It could be our trade secrets with titanium. It could be our card business, where we do -- I think it will provide a lot of value. And then be the best in the market it serves. Okay. It's not that hard to us. We're going to do M&A. We're going to do a lot of other things. But that -- at the end of the day, that's what we're driving. I think our defense business in the Vision 2025 is going to be $0.5 billion plus. We'll have to see where this goes, but we're pretty confident about defense because we're doing new things regardless of the budget. So I think that's going to be very good. Commercial aero, we certainly wanted to come sooner than later, but we do have leadership there in titanium worldwide. We put at $275 million to $300 million for now. Acquisition placeholder, $75 million, we'll have to see how that goes. Certainly, you want to drive that higher, but we feel at this point that's a good number to start. Our business mix, we're going to be more of a defense business. I know it's hard to believe, but that's really been a nice business for us. And I know commercial has been much bigger for Ducommun in the past, but that's probably maybe 60-40. We'll have to see. And I think we're going to do very well on our EBITDA margins. At this point, we're going to put them out at 18%. So again, my thanks for listening. I'm going to now take -- turn it over to Dave Wilmot.

Thank you, Steve, and good morning, good afternoon, everybody. Thanks for joining our meeting today. So as Steve said, I'm Dave Wilmot, Vice President of Electronics and Engineered Products. And I look forward to giving you an insight into Electronic Systems. So Electronic Systems, key products. We have 7 key product lines today that will add value to the A&D supply chain. We support complex defense programs across air, sea and land, and you'll see that as we go through this presentation. And the good thing is, is that the portfolio we have today is a good mix of legacy, share gain and new program wins. So we've got a lot of what's come from the past. We've got share gain that we're taking from our competitors. And then we've got new opportunities that customers, through our performance and quality and delivery, have given us the opportunity to bid and secure new programs. So just running down there, I mean we have complex ruggedized interconnects out of 2 of our facilities, Joplin, Missouri, and Berryville, Arkansas. Complex circuit card assemblies and some step-up builds from there in our Appleton, Wisconsin and Tulsa, Oklahoma plants. Integrated electronic box builds in Huntsville, Arkansas, and they are some complex units, and we'll touch on that as we move on. Cockpit avionic switches and panels, which you know is our legacy HMI product line out of Carson in California. Lightning protection systems out of Huntington Beach, which was the first acquisition under Steve's leadership in 2017. Complex motors and resolvers and custom RF components, again, both of those product lines come out of Carson. So we've got 7 distinct product lines. We also have some sort of adjacent products to that, but they are the key focus for us right now as we gain traction certainly in the defense market and waiting for the commercial market to come back to us. Next slide, please. So who are we? If you look at it, we're a leader in highly specialized, mission-critical defense electronics for harsh environments. So there's a lot of people out there doing interconnects. There's a lot of people doing circuit card assemblies. But as Steve said, we've got out of the business that was more build to print, lower technology, lower cost, where it was all just won on price. What we look for is opportunities with customers where the connects are more -- they're more complex, the boxes themselves have a lot of integration and testing them. So we're looking to where we compete with a much smaller supply base. We've been very successful at doing that. So what we do isn't easy, and that's where a lot of our proprietary process is coming because we have to build interconnects. We have to build boxes that have to be fit and forget on aircraft, land vehicles, sea vehicle, sea vessels that see a lot of thermal extremes, lot of vibration, and that's where we really focus. We have a lower-cost, trusted domestic manufacturing footprint. So most of our core electronic manufacturing businesses are in the Midwest, where there's a good pool of talent. We can get great people, but we can also have a competitive cost base when we bid the projects that we do. Long-term and high defense growth platforms. That's where we've been very successful. If you look at the Electronic Systems, our backlog growth from 2017 through 2020 has been 55%. So our backlog went from $304,000 to $470,000. So that grew at 55%, with our revenues still with healthy growth, 24%, growing from revenues in 2017 of $317 million to $393 million in 2020. So in terms of our book-to-bill, we've been very successful on the electronic system side in -- our backlog has outpaced our revenue by almost 2x. We have great success there, which is a testament to the direction we're going in, the leadership that we have. And then also, within the Electronic Systems group, we have a dedicated BD team we continue to add talent to that generates the relationships and the opportunities with the Tier 1s and the various sub-primes that we work with. Sole-source proprietary positions. So a lot of our positions there are sole source. A lot of them are sole source with proprietary technology and processes, especially within our engineered products group from the Carson and Huntington Beach businesses but more so and growing in the interconnect business in the box build business, too. So we've got 7 scalable performance centers. Three have cleared facilities from a military standpoint. So they are all set, and we are working classified programs there, and they've all got scale for growth. So all 7 centers today are well positioned for growth in the future. If we look at our end market breakdown, so the bottom-left pie chart there, 78% in military and space based on 2020 revenues. So you can see very strong defense play, which is really, really good for us with what happened in 2020. 12% with commercial aerospace, 10% industrial and other. If you look at the customer breakout, that continues -- Raytheon continues to be our #1 customer. Northrop Grumman is now our #2 customer in the electronics side, 13% of our 2020 revenues. And then we've got Lockheed Martin, Parker, Viasat and others. So we've got a lot of runway for growth, continue to grow our Raytheon business but a lot of runway with the Northrop Grumman, Lockheed, General Dynamics and other players in the market that we're working with right now. In terms of our platform breakdown, 28% in the missiles section, 12% in commercial aerospace. If you look then the 13% other military fixed wing, most of that is either transport, special missions or early warning systems. So a lot of our fixed-wing work goes into systems that go in for special mission aircraft, especially around the early warning and surveillance. Got a good footprint on the F-35 on the JSF, 8% of our 2020 revenues, and that continues to grow; and 4% in military helicopters. And then we do have a good footprint on F-15 and F-18, and that's mainly through our Raytheon business with the family of systems with what was the Raytheon SAS, where we provide the radar boxes for the F-15 and F-18 platforms. And then all others, the remaining, 29%. So that's kind of the who we are. And next slide, please. So our key sectors and applications. This is a busy slide. So I'll try and break it down. Take the far left block first in terms of our missiles. As Steve said, we have a very good presence on the TOW missile, which is more recent, following the signature of the agreement Steve signed in 2019. That enabled us to look at integrated systems, where we actually look at our offerings and technology from our structures and our electronics side, combine them together. And then to TOW missile, that means we ended up making the integrated launch case with the interconnects and harnesses building. So we supply the next-level assembly into Raytheon as our customer. The Tomahawk, we've been an incumbent on that for many, many years, but our share gain has grown and continues to grow. Five of our performance centers are involved in the Tomahawk. And with the Block V update, there's more opportunity for us there. It has been so as that -- the Tomahawk gets upgraded and more platforms are built, that's going to be very healthy in the future from that missile program there. And we actually did attend Block V handover ceremony in recognition of our contribution to that program. And then obviously, we've already mentioned Patriot. Steve mentioned the SM2, but we also have a lot of content on the SM3 and SM6 with our circuit cards, interconnects, actuation control units. And then more recently, again, new wins with Raytheon is we do -- we've got involved with wing deploy and control actuation system motors out of our engineered products group in Carson. Moving to the second block, military aircraft and UAVs. As mentioned with General Atomics on the Reaper and the Predator, they have been great programs for us. General Atomics had a problem back in 2019 with their supply base and getting it right. They came to us. We could answer their problem in terms of getting up and running very quickly and offering quality and value at the same time. So that's been great for us, and there's a lot more to come there. On the F-35 Joint Strike Fighter program, that's a great program for the Electronic Systems business from circuit card assemblies to interconnects and box builds. So we have a significant chipset content on the F-35 today, and that continues to grow both as the rate grows and share gain because we -- again, we continue to have new opportunities there. The F-18 fighter is a great example of Electronic Systems. If you recall my first slide, we had 7 distinct product lines. Six of those product lines are actually on the F-18. So the circuit card assemblies, interconnect, box builds, lightning protection, the HMI switches and panels, RF components. So the only thing that's not is our -- the entire electronics portfolio that's not on the F-18 is RF motors and resolvers. And again, that's a growing market for us, and we continue to see success there. On the naval side, again, right across the board of our Electronic Systems, we have a lot of product on the Virginia-class submarine in terms of interconnect, very ruggedized components, have to withstand the extreme pressures between pressurized and unpressurized bulkheads and such like. And so we support both the Virginia-class and the Columbia-class there. On the ship side, on the DDG-51 series of ships, they've been around for a long time but they're also there for the future as well. And they've got a lot of new advanced radar and defense systems incorporating new ships coming forward, and we're well positioned there, and we've already secured some contracts for circuit card assemblies for advanced naval radar systems on that platform as it goes forward, so great. And then on the top corner there, the AN/BLQ-10, which has been a long-standing, successful program for us on the Virginia and Columbia submarines. And again, that's been through various upgrades, so good content on the naval side. Space and communications. Starting with communications, we've got a good footprint with Viasat for modem and server electronic boxes for in-flight entertainment systems on the commercial aircraft fleets across the globe. Viasat is probably the supplier of choice for airlines today. So there's a lot of activity there both on new aircraft build and retrofit of existing fleets. And again, a lot more to come there. On the space side, we've got interconnect products for solid fuel boosters. We'll touch on that on a case study that we'll go into in a following slide. We do a lot of -- again, for communications, lightning protection for IFE radomes right across a gamut of the supply base there for both Boeing and aircraft -- Boeing and Airbus aircraft as well as the large business aviation platforms that have similar systems incorporated. We have resolvers, DC resolvers on the Mars rover or the Mars Perseverance. So it's good to see that that's been working in action. So that's used on the articulating arm that's collecting soil samples from Mars as we speak. And then we've got other satellite, high-power RF switch units for both commercial and military satellite applications. And then lastly, moving over to the commercial and business aviation side of things, which is more our -- we do, do some CCAs out of our legacy electronics business for commercial, for customers including Parker. But most of this is the engineered products side of things. So we do the HMI, the cockpit switches and panels that include the engine start switch in particular for the 737 MAX, and it goes back to all the legacy programs. We do time delays in other cockpit panels and switches for the commercial aerospace sector. We do lightning protection for nose, fuselage, tail, lighting protection both on the inside of the aircraft and the outside. And this particular business segment has a strong legacy aftermarket. So when Steve talked about the franchisees growing for aftermarket, we've got a big focus there in both, not just the commercial side but the military side as well, on the F-18, F-15, F-16 and other such programs. So a real focus on that, and that brings pricing value to the table. Next slide, please. So a Raytheon case study. Steve touched on it, but I'd just to add a little bit more color there. You can see we signed and we were the first supplier to sign the cooperation agreement with Raytheon. So we signed it back in July 2019 between Steve and Eugene Jaramillo. And we've achieved a significant amount of success since we did that, as you can see on the right-hand side. So these are our revenues. And this -- just for note, this is kind of the legacy Raytheon business before the merger. So this is really what was the Raytheon Missile Systems and what was the Space and Airborne Systems. So Space and Airborne Systems is now Intelligence & Space, and the RMS is now Missiles & Defense. But you can see our revenues have grown over the past few years. 2021 is going to be a great year for us, and that's as a result of an increase in our volume on the share shift on the TOW missile program, other missile programs, and the family of systems, radar boxes that we do on -- with the Space and Airborne Systems part of Raytheon on the F-18 and F-15. So 2021 will be a great year for us in terms of revenue. So you can see the growth there for yourselves. And in future years, we anticipate that, that will continue to grow. Next slide, please. So Electronic Systems share gain in defense -- with defense majors. General Atomics has been great. As we said, they came to us with a problem. We had the answers. We stepped up very quickly. We've put the necessary investment in place in both capital equipment and human capital, specifically in our Joplin plant to get this up and running, and it's been a great success. We met our customer's expectations, and more work has come. Northrop Grumman, we've had new wins on the Triton UAV program. And just with the -- coupled with the General Atomics above, top 3 defense customers who Ducommun have been driven by significant new product sales as well as share gain and platform growth, which is a testament to, I think, our performance on programs and the efforts of our BTD -- BD team and all of the performance centers that support the customers. Aerojet Rocketdyne on the RS-25 engine. Again, that was a new win for propulsion system. We do a large selection of electronic assemblies and interconnects for that engine. Again, that was a share gain because the prior supplier had some problems with moisture ingress into those interconnect assemblies. We worked with the customer, came up with a solution, and we now have just over 400 discrete Ducommun part numbers on that rocket engine system. And that's mainly for the Artemis moon mission that's going to be upcoming soon. And that's what we're actually testing, the fourth engine test on May 22 this year. So that program is moving forward, and we continue to support Aerojet on that program. And then we've got the other opportunities that we're pushing to penetrate the new programs, including the ground-based strategic deterrent and hypersonics, and more to come on that as we have future investor days. Touching back on Steve's comment where we've got 52 defense programs with more than $1 million in net revenues, just to break that down a bit deeper. 37 of those 52 are now over $2 million, and 18 of those 52 are actually over $5 million. So a huge improvement on where we were in 2017. Next slide, please. So in terms of the highlights for Electronic Systems. We're a growing base business. We've got a very good relationship with the Tier 1 suppliers. We're winning share gain. We're winning new programs and they're good programs and -- specifically on the defense line today. Our aftermarket franchise is gaining momentum. We understand the value of the aftermarket now. So we're getting the pricing value, and we're pushing that down through all of our performance centers for both domestic and on the defense side for both the domestic through the DLA and for foreign military sales. And then on the commercial side, as Steve mentioned, we changed our distribution channels. We're consolidated with one and that's -- they're seeing great success since we kicked that off in 2019. We're building scale at all of our performance centers. We now have 3 of the 7 Electronic Systems performance centers, getting very close to $100 million in annual revenue, and they're set to exceed that. And we have plans in place to support the growth beyond that in terms of both physical capacity and the manning that we need to support that. And as I previously said, we're in areas where we can get good labor and we can get it cost effectively. We've got good sole source proprietary positions in niche segments, and that's what we continue to focus on where we can. Either we do proprietary processes or having a unique sole source position. As I said, we're focusing on the more complex components and more complex opportunities that bring value to both Ducommun and our customers. And I've touched on the strong book-to-bill, 50% backlog growth for 2017 to 2020 compared to 24% revenue growth. I mean both of those are good. If you look at CAGRs, the revenues are just over 5% and the backlogs, around 12%. So we've been very successful there, and that sets us very well for the future. So with that, I'd now like to hand over to Jerry Redondo.

Hello, everyone. I appreciate the opportunity to share the highlights of our structural business today. Next slide, please. So key products. As shared, we have a broad array of high-complexity products that are focused on both defense and commercial. And the array of products includes engines, fuselage, missile, flight controls through acquisition, ammunition handling systems as well as extruded plastics. The key differentiating position that we've had with these products is our ability to produce very most complex products, repeated basis. We're performing at the highest cost and delivery levels and also our value engineering. We're working closely with all of our customers and products, such as we've noted, on affordability, which comes from improved designs, innovative processes. And as a result, we're providing greater value to our customers and performance. So the core focus here is on high technology, high-demand products, high complexity. As you can see, we're on engines, fuselage, flight control surfaces, rotary blades, and these combine a mix of processes that include titanium, stretch forming, composites and thermoplastics. Next slide, please. So who we are? Ducommun is the #1 provider of titanium forming end products to our customers. And that includes SPF and hot forming. And again, we're the #1 provider or the market leader in this space. We're very well positioned in commercial and defense. The narrow-body is the key focus on commercial. Our defense business is growing exponentially. We've grown about 40% between 2019 and '20, and we're -- our outlook today is about 20% growth in 2021. We do this -- we're doing this through 6 scalable performance centers. We're actually reestablishing our manufacturing operation in Mexico as well, and we'll have that up and running by the end of this year 2021. Next slide, please, so key processes. As shared, we have -- key focus is titanium, and that's both super-plastic and hot forming of detailed parts. The core niche there is the highest complexity. We have a great capability for scale and size of parts as well. Key value-add there, again, is the value engineering, and our customers are continuing to come to us more for that capability. But I shared composites, metal bond. This also includes our VersaCore Composite technology, which we continue to move forward with, stretch forming of large fuselage skins. As an example, we have most of the fuselage -- entire fuselage on the A220; and again, the extruded thermoplastics on the commercial aero side and interiors. Rotorcraft, ground missiles, defense, together, metal bond, abrasion strips on the rotorcraft. We have all the tail rotors. Since the inception of the program on Apache, we've been providing the tail rotors. We have a large presence on exhaust ducts, various titanium structural components, door surrounds, bulkheads and ammunition handling. And then as Steve shared previously, we are a government-approved repair depot, and we repair the main rotor blade and the tail rotor blade for the Apache today. On the missiles, the greatest growth that we've seen here recently has been through our missile cases. And that's a single solution we're able to provide back to our customer, Raytheon, and it includes integrated electronics into the case itself. And that's provided by 2 of our performance centers. And we've extended that program to be quite a -- really a great program for us; dorsal fins, titanium dorsal fins and then again, the ammunition handling systems. All of these points here on the missiles and the ground vehicles were greatly enabled through our value engineering and our ability to work with our customers, work on the product design itself and provide a much greater value, affordability and a better product for both them and when that was more producible. And then we have a good presence on the key platforms with business jets, both super-plastic forming, hot forming with titanium and stretch-formed structures. Next slide, please. So I shared, we are the world leader in titanium. Ducommun carries that. And so we're the top provider to Tier 1, Tier 2s. And we've continued and will continue to make investment in our technology and our capabilities. Over the past 4 years, we've invested about $35 million in technology, CapEx and our capabilities to remain and to continue to grow and extend our market position today. That comes from 40-plus years of experience with titanium. So we have a long pedigree of knowledge, lessons learned, and we continue to transfer through our workforce, and again, further technologies so we can extend our position even more. Key for us today, with Airbus, Boeing, Sikorsky, Raytheon is our ability to take a product in its current state and perform value engineering to determine improvements in that design or revisions in that design that are acceptable, meet form fit function, but also provide greater value, greater affordability and producibility. As you can see, there's a significant growth path, 8% CAGR through -- up to 2026. About 25% to 30% of that is stated to be around the titanium sheet fabrication market, and so we have a significantly strong position there. We believe we continue to strengthen that even further. And we're well positioned to take full advantage of the growth and be the top provider in this space. Next slide, please. So 2 key customers, 2 OEMs, Airbus and Boeing. Airbus specifically, our relationship began really about 5 years ago. And through the work and the partnership and the collaboration, we have really on a daily basis with Airbus, we've grown to become a true trusted partner and a scale provider of, again, the complex titanium structures that are used across the airframe and the cells. We are very proud to say that we've been 100% on time to Airbus over the past 2 years. And that will be sustained going forward, and that puts us in a position of providing the top technology, top products of complexity as well as performance to ensure parts are there when the customer needs them. Our IP technology, again, is proven. We continue to work to develop that even further. And with that, we're a key provider to Airbus and all the narrow-body and wide-body platforms. For Boeing, we've been with Boeing, long legacy since 1965. We provide SPF, platforming and metal composite solutions to support airframe cells and flight control services and all the leading platforms, both commercial and on defense, the Apache and the F-18 programs. As shared, we're the sole provider of the tail rotors for Apache. We've done that since the beginning of the program. And we're also a government repair depot for both the tail and main rotor blades. With that, we were included and awarded, and we're a participant in the premier bidding program with Boeing. And so we're proud of that, and we look forward to opportunities in front of us that will come from our participation there. Next slide, please. So on defense, our defense growth, it's been quite a good story for us. Since 2016, up through 2020, we've more than doubled our revenue. We've gone from $52 million to $114 million. And again, for 2021, we have a very strong trajectory to add another 20% over the course of this year. Growth drivers, again, titanium components, the complexity, the SPF, the HF, the value engineering that goes with that and then assemblies for rotorcraft, composite and metal bond as well as our ammunition handling systems. This is recognition of the team's performance and the value provided back to our customer. An example is Sikorsky. We received the Blackhawk Supplier of the Year award for Coxsackie, New York operation. We're quite proud of that. And that performance, the innovation, the value engineering has resulted in a significant scale for us to participate in an initial FERA program -- FERA awards where we're doing value engineering and prototyping. Next slide, please. So in summary, the highlights. We're ensuring rate readiness to execute growth and growth with defense, commercial, targeted additionally with share gain over the course of the rate rebound. We continue to focus on exemplary, 100% on-time delivery. We do that to serve and support our customers to be the best choice, but we also need and want to outperform our competitors and increase our market share. Expanding our #1 titanium market position, again, doing that through leveraging our titanium total value proposition, differentiating performance, really focused around the HF and SPF. Growth in defense. Again, significant growth targeted using the TOW missile case is a blueprint of success. Where we went in, and there was a product in place at the time, we performed extensive value engineering with our customer. And we did that very quickly as well as setting up an extensive line, along with the capital and the people to produce TOW missile cases at rate successfully. So it's a good model and we continue to focus on replicating that. And then for VersaCore, we're in a strong position here. We'll be introducing a product late in the year into production, and we continue to see additional applications where affordability and product performance are key focus. So we feel we have a real niche here and an opportunity to continue to grow VersaCore, and we're very excited about that. So those are highlights of our structures business. I appreciate the audience. And with that, I'll introduce Suman Mookerji.

Thank you, Jerry. Good morning, and good afternoon, everyone. I'm Suman Mookerji. I'm the Vice President of Strategy, Acquisitions and Integration of Ducommun. As Steve mentioned earlier, M&A is an important component of our growth plan, and I would like to take you through our strategy for acquisitions in some more detail. I'd also like to highlight our track record to date as well as our methodology to manage post-acquisition integration to ensure that we are executing on our plans for the deal and deriving maximum value. To start with, our vision is to build a portfolio of industry-leading niche businesses, businesses that set themselves apart from the competition with their unique capabilities or with the unique intellectual property in the design of their products, products that lead in innovation and continuously exceed customer expectations. In addition, we look to identify businesses where we, as Ducommun, can make a difference and create an inflection point in the EBITDA trajectory of the business. To this effect, we look to acquire businesses that meet this profile, and then with our programmatic integration approach, we drive on our profit expansion plan. Next page, please. We have acquired 3 businesses since my joining the company. And through the end of 2020, all 3 of them are ahead of the cumulative EBITDA projections we had set for them in our deal model. Each one of them had unique attributes that distinguish them from their competition, created barriers to entry and presented an opportunity for Ducommun to add value. Our first acquisition, which Dave Wilmot also talked about, Lightning Diversion Systems, is a world leader in the design and manufacture of lightning diversion systems used to protect radomes on military and commercial aircraft from lightning strike, ensuring that the underlying electronics remain protected and can continue to operate even after such a lightning strike event. With the continuing increase and the need for connectivity on both commercial and military aircraft, the need for such components and systems has been growing and will continue to grow for the foreseeable future. The business also, as Dave mentioned, has a significant aftermarket as the radomes are periodically refurbished and the underlying electronics are upgraded. Our second acquisition was that of Certified Thermoplastics, which is amongst a handful of companies globally that are capable of producing aerospace-grade extruded thermoplastics for use inside commercial aircraft. These extrusions are made with complex resins that meet aerospace standards, but as a result, are very difficult to manufacture. With the continued focus on light-weighting aircraft, we expect the market for such thermoplastics to continue to grow. And through our investment in capacity and in sales and marketing, we expect to maintain the growth momentum in this business. Our third acquisition was Nobles Worldwide, which is the world leader in the design and manufacturer of ammunition shoots. Almost the entire fleet of the United States fixed-wing fighter and attack aircraft use these ammunition shoots. In addition, their product is used on leading rotorcraft platforms, and in the past few years, they have also been expanding their position in the ground vehicle segment. Their ammunition shoots are known for being best-in-class in the world. They are capable of handling the toughest environments and designed to meet the most demanding specifications around size and weight. And each shoot is custom-designed to fit and operate in the contours of the available space within an aircraft or ground vehicle, which, as you know, can be very limited. All this, while still functioning flawlessly and without jamming. Since the acquisition, we have been able to continue to grow this business and improve the operations to drive higher profitability. Next page. Our success with these acquisitions is driven in part by our programmatic approach to integration. Each deal is based on a strategy to drive growth in revenue and profitability. This strategy is broken down into actionable plans with milestones that are tracked regularly to drive execution and accountability. This programmatic approach drives results and ensures things don't slip through the cracks. We use this approach to drive both revenue and cost synergy plans for each deal as well as all the functional integration, which includes our financial processes and our legal compliance requirements. We work hard to strike a balance between preserving the culture that has made a business successful while also incorporating the Ducommun values. Our team has had extensive experience in our prior lives at executing large acquisitions and successfully integrating them. We are able to bring this experience to work at Ducommun. Next page. Looking forward, we are optimistic about our ability to close on acquisitions. We have seen a resurgence in deal activity since last fall. But especially in the past several weeks, we have seen a further uptick in deal activity. More sellers are taking the step forward to sell for various reasons. Most of the activity is still focused on the defense side. Our pipeline is looking good, and we expect to be able to resume our cadence of one or more transactions every year. M&A is an important part of Steve's Vision 2025, and it will play a more significant role going forward in our business. With that, I would like to pass it on to Chris Wampler.

Thanks, Suman. And we'll jump into the financial outlook. If we can go to the next slide. Let's start with total shareholder return, and this is looking out over the last 3-year period. And the key here is you can certainly see the dark blue line, which is Ducommun performance against the benchmarks with the Russell, our peer group, the Dow, the New York Stock Exchange Composite. And we're certainly proud of our performance. The fact that over the 3-year period, between '18 and '20, we were in the 86 percentile, ranking 235 out of 2,000 companies in the Russell 2000 index during that stretch. And that really aligns up well with sort of the energy that came about when Steve joined in '17 in the past that we were on from there. Next slide. In the following slides, we'll basically lay out and demonstrate how we've come such a long way here in the last few years. And when you look at this slide here and you look at the market capitalization, enterprise value and some of the financial metrics, and you look at the type of change that has happened, you can see where 121% increase in market cap, 98% in enterprise value, along with the revenues, the revenue and adjusted EBITDA combination, only a 14% increase in revenues. But based on a lot of the commentary you've heard so far, certainly a step back in 2020 with the situations, yet yielding a 58% increase in adjusted EBITDA percentage, so about a 400 bps improvement. And with that, again, Steve arrived in January of '17. He brought a renewed energy to the group, some great work that's happened, and the results really are significant value creation, and that's what you see highlighted here on this slide. Let's go to the next slide. Just to baseline some of the historical financial data. If you look at the top line, as I mentioned, on a nice growth trajectory from '16, '17, '18, '19. And then certainly, the MAX situation, combined with all of the commercial aerospace impacts of the pandemic, bringing us back to $629 million growth -- nice growth trajectory through '19. Now we're sort of reset and ready to go again there. On the adjusted EBITDA, again, even with the step back there, able to demonstrate the continued margin expansion on the EBITDA percentage as we went from 10% up towards 14%. And then on the debt, you can see the debt and the leverage that essentially, that journey includes the 3 acquisitions that Suman talked about in 2017 with LDS bumping the debt up and then paying some down within CTT in '18 and Nobles in '19, and leaving us at the end of 2020 with a net debt leverage ratio of 3.0. Next slide. If we look at the segments, you can see basically, this will help -- what sets the table for this is, again, going back to sort of the inflection point in the 2016 time frame, and that's why we have those on there. There are some things headed from a top line perspective, if we look at electronic revenue as well as structure revenue. We're taking a step back and sort of figuring out where the business was headed, and then to turn that around and to get on the trajectory that we've been on the last 4 years has been good work. And when you look at electronics, which is mainly defense business, huge focus on the BD and how we went about interfacing and revving up some of the businesses -- the business with other customers beyond Raytheon, but certainly, Raytheon being the key one in that sector, and others now sort of ramping up as well. So with the work that we have going on on the defense side. So that's very helpful there. And what does that yield? Well, if you look at the adjusted EBITDA, you can see that path as well in terms of not just dollars, but also strong performance on the EBITDA margins. Structural side, again, mainly a commercial business. And you can see there nice trajectory on the revenue. '17, '18, '19, there's a step back and certainly in 2020, but yet, again, on the EBITDA percentage being able to keep a strong performance that has been critical for us. Next slide. A few other metrics on the highlight here, just as we walk through the margin progression, and we talk in a lot of our calls about our margin expansion journey, and you'll see that highlighted here. As we came through with sort of a systematic 19% through 22% range as we build up the margin, and from '17 through 2020. And then on the adjusted EBITDA percentage, the same thing, starting at 10%, working its weight up to 14%. And then on the adjusted operating income, starting at 5% and working up to 8%. And when you think about the drivers of that, what helped us get there, certainly, improved product mix and heavily in 2020, certainly leaning on the diversification of the business to keep things -- to keep the performance where we were able to have it. The pricing strategy, the focus on value. When you think about our performance -- our overall better operating performance that includes the performance center focused factory approach and really having that line of sight into what's happening in each of the performance centers. And then you -- per pay-for-performance culture, which has been embraced, and it includes all DCL employees. The cost reductions and investment decisions, along with the reduced layers of management certainly have yielded cost savings. That's a little -- there's less bureaucracy and more trust which equates to more speed. So that's what has really helped then the driver of getting those improved performance metrics. Next slide. This is a key part of the story, especially when you think about where -- what we did in 2020 and you look at this last 3 to 4 years. And I mentioned the defense business and you look at this backlog and we ended 2020 with all-time record on defense backlog and driven certainly by Raytheon, along with progress with Northrop and Lockheed along with others. And that's really been very helpful. As, again, overall backlog on a nice trajectory through '19. Certainly, the backlog in 2020 with the commercial aerospace impacts having an impact and the defense work helping offset that and leading us to where we're at there as we came into 2021. Next slide. All that backdrop sort of takes us to back to where Steve was at with the Vision 2025. And as he highlighted, our plan is, and we expect to be growing to $850 million to $800 million -- $880 million of revenue as we go from now to the point in Vision 2025. As a point of reference, our all-time high revenue is $742 million. So we expect on that journey that we will see that number and pass it by here during the early part of that journey, during part of that journey. And then as we do that, what else do we expect? We expect to expand EBITDA margins. As you can see, going from 14% up towards 18%, which is about a 350 to 450 basis point improvement. And then you can also see we're looking to expand the OI margins from 8% up towards 12%, which is -- it's a 50% increase over the 8% baseline. And certainly, that will be -- that's what we're looking to do. And how are we going to get there, and why is that going to happen? Couple of things. One is just the scale from the commercial aerospace recovery and the defense growth that has been discussed by everybody on the meeting so far. The strategic acquisitions that Suman went through. The pricing strategy and the focus on value and then continued evolution of our approach on the cost reductions and the investment decisions. So with that, that's what's going to help us drive to that place. Next slide. And just as we think about putting the bow on what we're expecting with Vision 2025, we do expect the net revenues to grow at 7% to 8% CAGR. Certainly, defense momentum and commercial recovery baked in there, expand margins of 350 to 450 basis points, leveraging available scale across the performance centers, the value-added pricing cost reductions. And then also, certainly, we're going to continue to invest. And 2020 was a tough year. I mean everybody had -- I think right now what we needed to do to get through 2020. But as you look forward and thinking about the long-term performance of the business and creating value, there's investments that need to happen in terms of the acquisitions, in terms of a lot of cybersecurity requirements as long as -- along with other technology to keep us in the market positions that we want to be. And that, along with just sort of the sustaining and nominal growth capital, will give us about a 2.5% of revenue run rate. And at the end of the day, we'll do all that, expand the margins and generate more than 100% of net income to free cash flow. So with that, I'll go back to Steve for closing remarks.

Okay. Thank you very much. Appreciate it, Chris. And thanks to the whole team, and thank you for everybody joining us today and hanging there. I know it's a lot of material. It's posted on our website. So please feel free to -- you can get all the information there. So let's go to the next slide. As mentioned, I think it's a good time as we come out of this terrible situation. It's a good time to kind of relook at Ducommun. I put these in here just because I think it's a good opportunity for all of us to kind of see the next few years and look at some of the highlights from investors. And again, we won't go -- I won't go through all these, but you can see them all. I think we hit on them properly. We see a lot of value creation through 2025, like I mentioned. Let's go to the next slide. And just to wrap it up here, where we are, we feel good about these numbers. Again, we will update them as we go forward. But we're very confident that we've got many good years ahead, a lot of it organic. But also, as Suman mentioned, we feel great about our M&A function and what we're doing there. And we're looking forward to many great years for the company, for our customers and obviously for our shareholders. So we'll close and go to Q&A.

All right. Well, my name is Raj Tata, and I will be serving as your moderator for today's question-and-answer session. First question we have is for Mr. Oswald. Where do you see the risk in your portfolio in the 2023, 2025 period relative to the flat to down defense budget?

Okay. Well, thank you for that question. And obviously, there's concerns about the budget. But from a Ducommun perspective, we have so many things that are new to the company. I mean our UAV business is going from like 0 to 100. We have so much activity now in UAVs, where 2 years ago, we had very little. So I feel great about that. I feel great about our structures businesses, driving defense. Also -- and we won't go too far into it, but there is offloading going on with parts. And because of our service levels, because of the value we add, because of our U.S. footprint, we're seeing great opportunities there. So I understand the nervousness about the budget. But as far as Ducommun for the next 3 or 4 years, even if we have some challenges in defense budget with some programs, we feel great about everything else that's going to augment it. And this $500 million, we feel very confident. I feel very confident about.

And as a follow-up, how does the M&A pipeline look? And are you more optimistic about future activity in either commercial or defense markets?

Yes, I'll take that again. So Suman mentioned it, we're obviously -- we're optimistic about both, but we certainly, I think, lean more into the defense market. We like -- we look at commercial opportunities, and we'll continue -- we will continue to do that. But we see a lot of activity in defense where we can -- like a Nobles, we can buy a worldwide leader with configuration control and aftermarket. And we're much more interested in that as far as our M&A strategy. But we also look at commercial, too, where there's an opportunity, especially if there's some proprietary product and some type of structure application, but we lean more towards defense, and we will continue to do that.

Okay. And maybe one for Mr. Wampler. How does the 2025 approximately 12% adjusted operating margin breakout by Structures and Electronics? And what are the assumptions in each segment?

Thanks, Raj. While not providing specific guidance on the segment level on the margins -- or on the operating income margins, I would say this that both are expected to contribute significantly. And they're both in different places at the moment. But if you look at where -- we talk about them a lot in terms of a range, a couple of percentage point range. And when you look at where Structures was back in the '19 time frame, we certainly would anticipate that, that's getting back there as we move through this part of the process is part of the formula. And then with -- also with Electronics, we're at a good jump-off point with where we've been in 2020 with them. And both will get the benefit of scale as we go through here. And then it tends a little bit too on where are the acquisitions, where do they do land and where they help out as well, but -- so the answer really is that both of them would be expected to be contributing significantly versus what you have seen in the last couple of years.

Thank you. And could you elaborate on the revenue target in 2025 of $865 million at the midpoint. The company was at $720 million pre-pandemic. So this bogey seems light, especially with the MAX recovering to 40-plus a month or more possibly by then?

Yes. Thanks, Raj. I'll take that as well. And I would say, thanks for the question. And we certainly are being -- trying to be careful in terms of what we -- how quickly we assume things are going to come back major -- it's not just the normal business, major items with MAX still coming through, all approvals worldwide, including China as well as how that does end up translating through back to the supply chain to us with all the production, along with the rest of the commercial aero recovery. So that is a key factor that has a lot of impact here. And then as well, just on the defense side, I think being careful over where we're at in terms of the programs and what the budget impacts may mean. Again, we don't have -- our defense programs are very -- one of our benefits there is we don't have huge singular programs that drive a lot of the risk and/or the reward, but we have a lot of programs. So we're looking to continue progressing there, but at the same time, just trying to be a little careful on what we have out there.

Raj, let me also make a few remarks on that. On the commercial aerospace, look, we agree that it is conservative, but certainly, one of the big questions we have is China. As everybody knows, China has not approved the MAX. And the last time I checked that the domestic flight activity is like 100%, and all their MAXes are on the ground. So with our geopolitical situation and everything else, we'll have to see -- we certainly wish for great things for Dave Calhoun and Boeing, and we're going to be right next to them as far as making things happen, but we like to see where the next 6 months goes. Again, as I mentioned in my opening remarks and when I first talked about this Vision 2025 is, we're going to update it yearly. So we certainly, I hope, and I'm planning -- I hope they have a better number out there, but I think it's appropriate that we're going to take our time a bit and then come back to everybody on the phone with maybe a new outlook, we hope, and a higher one next year.

And similarly, are we seeing or anticipating any defense budget changes that will have a material effect, positive or negative, on your business?

Yes. Let me handle that. I think, look, we're in a competition, global competition with China and probably less -- to a degree, Russia, but there's going to be a competition. Unfortunately, it's going to be decades. So it's not going to be 3 years. So I understand, again, the nervousness around the defense budget. I'm fairly close to certain aspects of the government and defense conversations. And we are going to see some things here and there. But from a Ducommun perspective, again, I'm very optimistic about the next 3 or 4 years. We not only are on great programs, which I think will continue. And even if they're a bit flattish, we have many, many other programs that are coming over the next few years that you're going to be tens of millions of dollars of revenue, in UAVs and other things that we're still working on, but we're highly confident we're going to come through. So again, I understand about the question and the concerns, but from a Ducommun perspective and where we are, we think $500 million plus is a great number, and it's very, very achievable from my perspective and the team's perspective.

Thank you. So switching gears a little bit, help us understand the M&A aspirations. $75 million cumulative revenue through 2025 seems a little conservative given more qualitative comments around significantly increasing resources for M&A since you joined, since Steve joined. Is the deal pipeline progressing slower than expected? Or are there underappreciated considerations to think about that may be governing the pace and magnitude of M&A?

Yes, Raj. Chris, I'll take that. So it's a placeholder, okay? So it's tough for us sometimes because you know that acquisitions, are first of all very hard, but they're also opportunistic. But I would just tell everybody on the phone that certainly, we have higher aspirations, but we did put a placeholder in there for now. And as I mentioned, as we go through the years, we'll update that. We're certainly -- we're coming out of a pandemic and coming out of a tough year. So we're going to have to really get things going this year, and I think we will. And I think there's great things ahead in 2022 and 2023. We'll have more borrowing power. We'll have -- we certainly have the team in place. I mean, we have folks that are working on deals that worked on $2 billion deals at UTC and other things. So everybody should take heart that we know what we're doing. We bought 3 companies that are all just fantastic for us, really accelerated margins and helped us get into new customers and we're thrilled with what we're doing. And obviously, last year, it was a tough year for everybody. So there was no action. But working on stuff now. Again, I would just more take this as a placeholder. We certainly want to walk before we run on certain things, and that's what we're doing. But we're very optimistic. And again, we have the team to make it happen. So that's the first thing, and that's the most important thing. And then we can worry about other things as we go forward. But we're very -- how I can say it, very interested in M&A. And again, more to come on that. I'll leave it there.

As a follow-up, how does the $75 million M&A placeholder factor into the $850 million to $880 million revenue level targeted for 2025?

Well, it's in there. So it's part of the plan. Certainly, again, we felt like -- and I know some companies might not put in M&A and just put in the organic, okay, fine. But for a company our size and some of the -- some of our aspirations, we probably we should put in a placeholder. And that's what it is. So it could be higher than that, absolutely. That's what we're driving towards. But at this point, in 2021, May 26, we felt like, okay, let's just put this in there for now, and we certainly have, again, higher aspirations, and we feel very good, and we'll be -- continue to update as we go forward.

Thank you. Then final question for Mr. Wampler. Can you share any goals you have regarding working capital intensity or any modeling assumptions for what level of working capital investment might be appropriate for the levels of multiyear organic growth you're anticipating?

Thanks, Raj. Yes, I think it's an interesting situation. As Steve mentioned, that sort of as we sit here, May 26, 2021, our working capital amount investment right now is certainly higher than we would like historically or that we would have historically for a lot of reasons. And mainly being certainly, the very unusual flow of the supply chain and the transition into the pandemic and then as we work through it. So with that being said, I mean, we're working off of a working capital percent of sales in the low 40% as we exited the year. And certainly, acquisitions aside, we would like to work that down through this Vision 2025 period back into where it was historically, which certainly is in the upper 20s in the mid upper 20s. And doing that, that also encompasses us being able to take on acquisitions and do other things to invest but still get back toward a more normalized rate. So over the course of this Vision 2025, I think you're going to see just a steady improvement with where we're at from a working capital percent of sales. And also then just from a capital structure nature, certainly have the ability to spend the money where we need to, to help support this strategy.

Thank you. With that, I will then turn it back over to Mr. Oswald for some comments.

Raj, thank you. We're almost an hour or 25 minutes. So I thank everybody, again, for hanging in there. I know it's a lot of information. I just felt it was important that with our situation now coming out of pandemic that we went fairly deep on information for all our investors. We feel great about the next few years. So I want to say that that as we move forward here, and we'll certainly be back to update everybody as we go forward on this Vision 2025. I know there's a lot of questions on defense. We're very confident about that. And we've got the team, we've got the executives. I think we came out of 2020, certainly, the best possible way we could, and that's due to our leadership and all our employees. So I just want to thank them as we finish and obviously thank our shareholders for supporting us through a very difficult time. And I think a lot of good things ahead. And so I'll leave it there. Again, I wish you a good day and a safe one.