Ducommun Incorporated (DCO) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to the 2022 Ducommun Investor Day. I'm Suman Mookerji, Vice President of Corporate Development and Investor Relations at Ducommun. We have a lot of people here attending today virtually, but also we're really grateful for those of you who made the effort to come here in person and meet with us, and hopefully, you'll find that interaction fruitful as well. We have a lot of good information to share with you. But before we dive into that, I would like to draw your attention to the disclosure on Page 2, particularly the language relating to the forward-looking statements, risk factors and non-GAAP financial measures referred to in the presentation. A few other logistics. From a safety perspective, there are 2 exits behind you. And so in the case of an emergency, please take those and then exit the same way you came in to the hotel. The presentation material that you're going to see is also posted on our website. So it'll be available to you as well as a replay of the event today. We will have a Q&A session at the end of the presentation. For those of you here in person, we'll take the questions live for those attending virtually, and I believe we have several people, 30 to 40 people right now who are joining us virtually. You will be able to submit your questions through the Q&A box on your screen, and those will flow through to the moderator to me and I will ask those questions. For those here in live, please wait for the microphone to come to you. Michael behind -- standing behind us there. We'll bring the microphone to you that way, everyone, including those attending virtually can hear you. So with that, let's take a look at the agenda. First, Steve Oswald will give you a quick recap of our performance in the last few years, as well as in 2022 and then go into the key items that we believe drive shareholder value at Ducommun. Then Steve will go through our post-pandemic strategy or plan. This will be followed by a deeper dive on our Electronics Structures Systems and Electronic Systems segments covered by Jerry Redondo and myself, respectively. I will then discuss our M&A strategy, after which Chris Wampler will come in and take you through our financial outlook. And then finally, Steve will come back and give his closing remarks as well as summary comments before we go into Q&A. The plan is to kind of cover our presentation in the first 90 minutes and leave 30 for Q&A at the end. So with that, I'd like to introduce Steve Oswald, our Chairman, President and Chief Executive Officer, on to the stage, please?

Okay. Thank you, Suman. I'm going to be down here. Is that okay? So you guys can follow me a little bit, okay? So thank you. First, I just want to welcome everyone. I really appreciate seeing everyone, and I know it's great to be back together plus everybody on our Zoom. We appreciate as well you joining us, and we look forward to a productive 2 hours. -- so we get started here. Okay. First, just a little bit of a recap. I think this is important. I put this in there. This is 2017 when we kind of started a new trajectory. I came in, in January of 2017. And we had, I think, a really nice run. Then obviously, what happened in '20 and 2021, we really got hit hard with commercial aerospace. But I want to also show that our defense business really came to the front. So because people would ask me, how is everything going at Ducommun. And I know commercial aerospace is really, really tough. I said, yes, but you know what, we did some really good things in 2018 and 2019, which prepared us to really get going in defense. And this really came to right. So from an investor standpoint, this was a real saver. And we built this out nicely as you can see here, which I'll get into next. Just a recap is we're going to be high single, that's confirmed. So coming out of '20 and '21, we feel a high single number is a really good number for us. So we'll have more to say, obviously, when we report our earnings, but we feel really good about 2022. We had a -- maybe not 60%, but we're going to be coming back very strong 2021 over 2022 in commercial. So that's a good sign for us is that we're in really good shape. We're just a bit dependent on build rates, but we continue to drive share on these programs and more to come there. Our defense business, I've mentioned this on the call before. We built out our defense business nicely. If I see a $100 million plus in defense each quarter, I'm pretty happy, we're a bit down this year. I mean not much but a little bit. And we know the story with OEMs, all the OEMs were down pretty much on revenue, and that impacts us somewhat. So just heads up on that. But I think overall, defense is a really good story. You're not hearing a lot of issues from us, regarding our supply chain and our labor shortages. So I think that bodes well for investors and for our customers. One thing I was saying about last night is that for Airbus, we're 4 years now, 100% on time. So 100% out of time for 4 years for all Airbus business. And so we're really proud of that. So we've been able to manage that. And lastly, which I'll get into -- we are involved and going to be involved in the next year or 2 in some pretty significant restructuring, which I haven't done in the past, and I will get into that in a minute. Okay. Delivering shareholder value. We put this in here. I think it's important to put it in the front of the pitch. When I came into the business in 2017, we had this engineered products business, HMI. We had RF, we had motors, okay? That's all we had. We had -- that was probably right around 9% of revenue in 2017. And through a lot of good work, we were able to add really 4 excellent businesses to our portfolio for Engineered Products. We have Nobles, magnetic seals, LDS and CTP. So you can see the acquisition dates there. All these -- and CTP, even though we are not proprietary, very similar with an aftermarket. These have been very, very important to shareholders and to the company. Suman is going to talk a little more about their performance, which we committed to in the past. So we'll mention that. But here's the target, okay? So 15% -- we're going to work to get to 25% by 2027 of revenue. So we're going to continue to try to do these bolt-ons, these acquisitions, which are really accelerators in lots of ways to our manufacturing services business and continue to be successful, I think, in this area. If we get to 25%, we'll be in great shape. And again, aftermarket, when I came in with only 6% of revenue was aftermarket, okay? And I told the board, I said, "Look, we need aftermarket, okay? This is part of the deal in aerospace." And I think we've done a good job to get it to 10% and we're targeting 15% by 2027. So I think that's the first takeaway is that we've had a lot of good success. We compete with all the majors. We compete with HEICO. We compete with all different types of companies on these acquisitions. For the most part, each one we really want it, we got it, and at a good price. So I think overall, more to come on this, and Suman get a little bit more into the performance. Okay. Next. This is brand new, okay? So we made a difficult decision to close some factors. And this is something that -- it's not easy to do, but it's the right thing to do for the long-term health of the business. First, Monrovia, California, okay? This operation is -- it's like an aircraft carrier. I mean, the size of this operation, okay? This is a major, major operation. It's been around since the 40s or the 50s, ran 24/7 during Vietnam, with lots of different operations. But we've got to the point where it just doesn't work for us anymore. So you can see the square footage is 274,000, but it's 9 acres. This facility is 9 acres in LA County in California. So we made the decision there also Berryville, Arkansas, which is our electronics business. This is structures, our Electronic Systems business, we've also decided to announce a closing. We told the employees, everybody is still on the team. We're going to continue to drive the business. But in 2023, we're going to consolidate these business. Mainly, it's going to go to Guaymas, Mexico. So Guaymas is our operation. We've increased square footage from 62,000 to 115,000. We just expanded. Here's a shot of our operations there. It is in Sonora County. This is over towards the Pacific, South Sonora County, Mexico. We've been there for over 10 years in this industrial park. So I just want everybody know -- they know us, we know them. We have a team that's been there for over 10 years. We're obviously going to expand the team with additional business, but we feel very good about this. And same thing with Berryville, we're going to -- maybe a little bit of Joplin. We are going to put one thing here at Coxsackie, which is the Apache back blade -- so we make the back blade for the Apache attack helicopter for Boeing. And that's just not a good idea to put it in Mexico. We want to -- we're going to put that up near Albany. At Coxsackie, New York. So we'll be able to do that and take care of that there. Now will we close these factories. We think at least $11 million to $13 million in annual savings starting in 2024, okay? We feel good about that number could be higher. But for today's purposes, that's where we think we are. And a lot of it comes to us is obviously headcount and everything else, but even our electric bills in Monrovia, for a year over $1 million. So there's a lot of savings there we're going to consolidate. And we really like Guaymas. We know Guaymas, they know us. We have a good partnership. And again, good things ahead. The other thing I want to just cover before I get into the May presentation is we did the sale lease back in Gardena. And you can see here that we -- the sale was $143 million in December of 2021 and -- so that was really at the height of everything as far as cheap money and lots of opportunities, and we were able to really get a nice price here. And after tax, we walked away with $113 million, which is a real home run for Ducommun. We bought MagSeal with that money. We also paid down some debt. And we're still there, right? We're going to be there for at least another 4 years, right? So we have a headwind because we have to pay rent now. And we have to pay real estate, right? So there's -- it was a really nice deal, but a few more years down the road, it's going to be a great deal. Same thing about Monrovia. We're going to sell this, okay, and we're going to move it. So no OI headwind for rent or real estate taxes or anything else. So all the proceeds for that sale are going to go to the company and shareholders. So this is going to be a big win for us. Again, it's 9 acres. We're targeting the second half of 2023 for the sale. So we'll keep you posted on that. Okay. So just some of the highlights. I wanted to just briefly go over and let me get into our post-pandemic plan. Okay. A lot of you I've seen this chart, maybe some have not. This is our LTM on the left here through Q3. You can see here, military and space is -- commercial is starting to come up a bit, which we want. We want some more -- at least one around 40%. And I think we're heading towards that. Right now, we're still heavy and military, which is fine. We like defense. We still do a lot of things proprietary. And what I mean by that, not only our engineered products, but we don't do machining. We don't have 5-axis machining businesses we don't have things where there's 200 competitors, okay? That's not our model. So when you think about the common, we do things that are complex. We do titanium, hot form, superplastic forming. We do very difficult circuit cards. We do very difficult ruggedized cables, okay? That's what we want to do, okay? We're not interested in -- and not to say about a machining business that could be very successful. We're not interested where we have 200 worldwide suppliers to machine apart. Okay, that's not for us. So that's why we say we have proprietary for most of our business. You can see here on the commercial aero and narrow-body is in great shape. We really lead into narrow-body the A320 and the 737. I mean we like our 787 business and other things, but this is really a strength for us. On the right here. You've seen these before. These are all the programs we're on. I talked about the Apache, the back blade here, okay? That's manufactured right now, Monrovia. You can see the rest of it over here, the commercial aerospace. We have a very nice position on the A220. We make the fuselage skins. So not a lot of people know that, but we're major players in A220 through our relationship with Airbus and before that Bombardier. Missiles, we're on lots of missile programs. I'm sure you saw the note that came out about the defense bill and both the Army and the Navy and the missile businesses are going to go way up in this budget. So that's -- we're going to feel that. and we're going to see that. So I think that's a big positive for us. One other thing I put in here, obviously, we're on space. This is we do cables for Artemis, but here's an interesting one, the Stryker. So this came to us through Nobles. So Nobles is the worldwide leader in ammunition handling and they're very big on tanks and ground vehicles. And that's been a big boost for us because we're now in that business, and we're making contacts and we're driving the business there. So there's more to come on that, but that's been a great thing. And you can see down here, some of our customers. We've talked about this before, Oshkosh Defense is the Stryker, just so everybody knows. And we're pretty much -- as we've talked about, we're a Tier 1, and we like our position there. Here's our team. We have lots of folks here today. So I want to thank my team for being here and all their hard work for this program. You can see that we don't have that many people. That's how we run it, okay? We really run a lean operation from corporate on down. We think that's the right thing. It certainly helped us during the pandemic. because you got to understand in 2020 and 2021, we didn't use any restructuring money. So we didn't have to, okay? We didn't have to redo corporate and do these other things because we have all these vice presidents. So that's a positive. I talked about Tier 1. I think for a small cap, we do an excellent job with our customers. We're really in contact with all the top people here for the most part. We have relationships and they know us, and we know them and we also have a few Tier 2 like Spirit. Shenyang is for A220 skin. So that's our relationship there. But overall, within aerospace and defense, we're in great shape. Just 2 slides on commercial aero. We all know that this is coming back. So thank God for that. We had the recovery expected. We've got improvements. We are planning for -- and seeing mid-20s in 2022. We certainly hope we'll get the 31 out of Boeing. And this is -- we like to see 50. We're not really sure at this point, but we think that might be in the cards for Boeing. We certainly -- Boeing is very important to us, very important to us. So we continue to work with them, support them, okay. We want them to be super successful. It's been a long, long road for Boeing. So -- but I think, hopefully, the best days are ahead for them again. Let's all hope so. We all know Airbus and their success. We are running right now around this rate. If they could get to 65 early 2024. I'm not really sure about that. I hope that's the case. But I will tell you, again, we're ready for this kind of uptick. And the thing about Airbus, you have to understand, they're the only true OEM that does titanium. So -- when you think about Airbus, we have a good position with them, but they have a lot of mouths to feed, right? They have the internal operation. They have a couple of small companies in France. But they've come to us in 2017. We're a major titanium supplier. And once they get to 60 or 65, we're really going to see a lot of that business because just like in the past, they just can't keep up. So we're ready. We have a good business. It's only going to get better. You can see the trajectory here on commercial [indiscernible], let you know where we're coming from here with the coming. So, better days ahead. Just next level down here for Boeing, we obviously -- the MAX is extremely important, 787. We're doing a lot of work. We not only do titanium work. We also do interiors with our CDP thermoplastics business, the lightning protection products, ramp-up, 787 production a positive. We are continuing to gain share in these programs. This is our shipsets right now. Airbus, we were -- and I've talked about this many times, we had no business with Airbus before 2017, zero. I mean, I know it's hard to believe. With only 2 people in the game. Well, we had zero. And so we've really come a long way with them. Again, Airbus is all about metrics, and they run a good shop. And they expect 100% every day, and that's what we give them. So it's really been a nice thing for us. We got a new contract. I mentioned that last year in a press release. So A220 fuselage working on getting more share here, A330, though not a large build rate was still on that, and we're working on A350. So we have some major things discussed on them A350, which is a major user of titanium. So stay tuned on that. Okay. Just a couple of things on defense. You can see here that we put -- we've kind of broken this out rest requests and the potential upside. I won't get into all the details. But I mean, the trending is very, very good for Ducommun. Missiles, aircraft. I'll get a little bit more into it in the next slide, but we have a really good defense business, and it's only going to get better. And you can see here the DoD -- I'm sorry, this is the global defense here. This looks great for our future. So everything is pointing in the right direction on defense. I've talked about offloading that continues. This is our major program. We already have this -- this has already been produced in Appleton, Wisconsin, but we have this -- this is one of the crown jewels of Raytheon. So it goes a little bit slower because this is a major -- to take these cards out of an operation, which we've been for a long time is really hard because you have a testing equipment, you have lots of things, everything is done in term. So we are working on that. We are making cards for that, SPY-6, but we still have work to do there. More to come later next year, we think we'll be ready to go on that and just as I mentioned earlier, our missiles businesses are excellent and all indications are the NDAA is going to be straight up on missiles, both for the Navy and the Army. Hypersonics, not too much to talk about that, but we are partnering there with different types of applications, UAVs as well. So good stuff on the next generation, lots of things happening here and a market that's going in the right direction. Okay. Just 2 more slides, and I'll turn it over to Jerry. So I talked about manufacturing services. So this is the other part of Ducommun, okay? This is the part I showed you the first slide with Engineered Products and things like this is the other part of our company. This is sort of our -- this is more of a legacy. But I think we've done some really nice work here. So I talked about titanium. We're the world leader outside of Airbus and titanium. So very few people can make titanium. It's not the biggest market in the world. It's like $600 million. So it's not like structures, fuselage is $20 billion. It's not that big a is very nichey, but there's like very few people that can do it and do it well. That's the [indiscernible]. You could do titanium, but you have to do it well. There's a lot of hand work. There's a lot of different things that happen. You have to heat it up to 800 degrees. You have big sheets of Titanium, it's not easy to do. So we feel very good about that. We had some investors up at our Appleton facility in Wisconsin. And you saw my note that we got -- we were over $100 million in Appleton. So we're really happy about that in revenue, 70,000 square foot plant. And these are the circuit cards, a lot of automation, defense, commercial, some industrial. We feel very good about our business there. This interconnect business is excellent. So this is all different kind of interconnects for Artemis, rugged eyes, molded, not just hand work, okay? Put it in perspective, Berryville, which we're closing, okay? There's a lot of hand work for those, okay? We're going to do those in lines. All right? But here, it's different, okay? It's much more of a full complement of manufacturing. So this is in Joplin, by the way. Chem mill, people say, well, Chem mill is not so great, but when you're like only 2 or 3 people who can do it in the world, and it's still -- people still use it, okay? I know it's -- from an ESG perspective, it might not be the greatest story, but it's used a lot in the industry. And for the kind of parts that we make, big parts, large structural parts, we do it, probably just a good spirit. So we're in that game still, and that's something we're going to stick with. And then finally, VersaCore. So this is also done at Guaymas. People might not be familiar with this, but this is a new composite that we own, okay? So this is actually our own material called VersaCore. And what we've done is we've made a lot of inroads in the cells. So for the GE LEAP engine, on the A320, we make the blocker doors now. So we make the beaver tail, which is the faring outside, we make close panels on the side, and we make blocker doors and we just commercialized that this year. So we send it to Middle River, it goes to Safran and that goes to the A320, right? So that's a very nice program for us. It's going to be about -- at least for that Nacelle application, that's $20 million of revenue. And that's only 55% of the A320, right? So we have more work to do there. So it's a very nice product for us. And all right, let me just wrap up real quick. So it's very important people know that we're expanding. We continue on engineered products, right? We're going to 25%. So think HEICO, right? -- everybody friend, Eric, okay? And some of the great work they've done over the last, they got a 20-year head start. You know I mean all the great work they've done. So we admire them. Obviously, we compete with them, but we like that mix, and we're going to keep charging ahead in that way. We like the recovery, defense. We think our defense business now is built out. We have a nice system there. We are a Tier 1 player committed to aerospace and defense. So we wake up every morning just thinking about A&D. We do -- when we're going to do manufacturing services, we're going to do it where we can have a niche. Very important. That's how the success of the game is with the niche. And then cost reduction? It's coming, okay? This is the first time I've really closed the major plans since I've been here, okay? And I don't like to close plants, but this was the right thing to do. And we closed 2, okay, we're going to close 2 next year. But the benefit for the shareholder is going to be significant. And it's the right thing for everybody in this room and our people at the company. So those are my opening remarks. Thank you. Turn it over to Jerry.

Thank you, Steve. Good morning. So I'm going to talk about our structures business. And with that, our focus on structures is with complex products, both commercial and defense, and our key focus there is on specialty products that require niche processes, as Steve had referenced earlier. Key products across our portfolio are quite an array. But again, the focus is on titanium, super-plastic forming, miscellaneous card metals, various forming assemblies, composites, VersaCore, and that translates to engine to cells in the bulk heads, fuselage skin panels as Steve referenced, we have the entire A220, the skins, Firewall and exhaust tax, that's a continuously growing portfolio for us. It's just recently expanded to include titanium, hard metals as well as integrated composites that go into that inlet duct assembly, and that's on the CH-53K. Flight control surfaces, in metal bond, Pylon auxiliary power units, rotary blades, primary there, the Apache tail rotors. We have Bell tail rotors. You also have a depot repair for blades. Structural missile components. We have dorsolfins as well as the case, the entire case for the toll missile. Ammunition handling , MagSeal, magnetic and mechanical sales and the extruded thermo plastics, all of which these last 3 were part of our acquisitions, which are all going well. So quite an array of products. But again, specialty complex products that require niche processes throughout. Titanium, who we are. So titanium, again, super plastic forming. Our focus there is on the larger, very complex, high-tolerance, highly contorted products that go into the major platforms. We have a significant portfolio on the single aisle that's also expanded on the wide-bodies as well. We're very well positioned for commercial space, the recovery we're capacitized, where we've provisioned for the materials. So we're provisioned for growth, as well as increased work share, which we prepared to support. We've also been very, very focused on our growing defense business. So more on that here shortly. And then our VersaCore composite as Steve shared, we're on the GE LEAP, the Nacelle, the blocker doors as part of the thrust reverser system, and we're actively working with OEMs and other opportunities. We're quite optimistic about VersaCore and what's in front of us. And we do all this through 7 scalable performance centers. So you can see our end market breakdown between narrowbody, military and space, wide-body, biz jets and other. We have a nice portfolio with Gulfstream as an example, and the progression looking forward looks very favorable there. Our customer breakdown, you can see Boeing Spirit, significant percentages there and Spirit [indiscernible] exclusively, but primarily Boeing product. And then Raytheon, Middle River, Middle River supports the Nacelles, which we provide the VersaCore [indiscernible] and all other. So quite an array of all other. And on our platforms, a significant portfolio on the 737 MAX. Our focus there is on increasing our work share. So there is some risk sharing as work share percentages. We're making good inroads there and increasing that as well as actively pursuing additional content parts that we don't have today. Same scenario for Airbus, right? We have a work share opportunity with Airbus. We feel there's good opportunities in front of us with Airbus, both with added proposals we're working on today as well as further supporting higher rates on both the A320 and A220. Base Jets Black Hawk, actually all the Hawk Seahawks were on all the 8 variants of the hawks with Sikorsky and GKN and then Apache, Stryker and all other. So key here is growing defense business, well positioned on the narrowbodies. And again, our focus is on niche processes. Key sectors and applications. As you can see, commercial military rotorcraft, the ground vehicles, missiles and then biz jets. Key on the commercial platforms, again, super plastic forming is a significant content for us, differentiating capabilities, performance throughout the composite metal bond. Again, on the flight control services, we actually have a nice outlook in that arena. And then large aluminum stretch form skins. So we -- I mean best example of content is on the A220, where we have most -- all of the entire fuselage skins, and we do that in California. The VersaCore composite the cell components, and we're looking at expanding that into other applications. So we're actively working with OEMs on opportunities there and then excluded thermoplastics. On the military rotorcraft, again, metal bond, abrasion strips, exhaust docks, inlet decks, a significant opportunity for us still in front. MagSeal, the ammunition handling is Steve had referenced, we had some nice success with the Stryker program. And then we are an approved OEM repair depot. Missile ground vehicles. The toll missile case has been a very good volume program for us. Dorsal fans is part of the missile bill of material and mission handling. And then on biz jets, kind of in parallel to what we do for the single aisles, superplastic forming of titanium stretch form skins and then MagSeals. And then the core key customers and platforms that we support. So again, to emphasize, again, we're a world leader in titanium, okay, world leader in titanium. And today, we're positioned as the #1 tier level supporter provider in the world of titanium. And this is titanium, stretch form, superplastic formed hot form products. We're very focused on innovation throughout as a build-to-print provider, what differentiates us is our capabilities, which result in value back to the customer, which is profitability, flawless performance, readiness for rate, capacity readiness. So we've continuously focused on how we reinvent our processes, how we improve them through, again, innovation, automation, just overall improvement to cost, quality and delivery. With that, we've invested over $40 million pre-pandemic on technology, which includes capital, people, IR&D, other things that will make us better. We do have many years, 40-plus years of experience with titanium and competitive advantage with our value engineering. So our customers come to us as Airbus as an example, as a "expert" in that arena. So we look at products in their infancy stages of design, we look at products throughout their life cycle and how that design can be enhanced to improve producibility, cost and overall value to the customer. You can see our projection here, 2020, the A&D titanium sheet market going from $560 million to close to $900 million in 2026. And our content represents, we believe, about 25% to 30% of the AMD sheet metal fabrication. So Airbus and Boeing, Airbus, we've worked very, very hard with Airbus over the past 5 years with a lot of emphasis. We are now a detailed parts partner, and we have been. So we're very, very actively engaged with Airbus. They come out and they visit us in our plants and we're actually headed out there twice here first part of the year. So very, very active with them in collaborations, which include IR&D projects, significant growth over this past 5 years. Again, we're very confident and positive about our growth with new products as well as work being an increased work share partner and providing that rate relief in that capacity to Airbus. We've been very focused on value provide value and performance. So we're coming up now with -- Steve referenced 4 years being flawless to Airbus as far as our on-time delivery. And with that comes different fluctuations of rates. At times, there are surge requirements and we're provisioned for that, and we've been actively able to support that. Our super-plastic forming, I mean we're the go-to regarded by Airbus as the go-to for that technology and key provider across the narrow and wide-body platforms. Boeing, we've been with Boeing quite a long time. We support of array products, SPF, hot form, metal bond solutions. We're heavily on the 737 MAX, and we have content throughout all the other platforms, the 87, 67, Apache and F-18. So we're both on the commercial and defense. We've been a sole provider of the Apache tail rotor for a very long time since the inception, and we're quite proud of that and we continue with that. And we're very actively involved with Boeing on continuous opportunities as well as increased work share for the products that we do have today. Defense. So very, very much a focus for us these last couple of years, especially, and our plans in front of us, very active this arena. A result of that, we've grown from $59 million to over $110 million since 2016. And we feel very confident about the trajectory in front of us based on the engagements we have today with our key OEMs. Growth focus is on titanium, again, super-plastic forming, hot forming, complex metal assemblies. Again, the array includes rotorcraft composite, metal bond, missiles ammunition handling systems. Significant content wins on the Sage 53K we're referencing the DUCs, both exhaust and inlets and then the striker upgrades. And we have had good engagement on the FARA program as an example, where we've worked initially on value engineering designs with our customer, their IP, but we work actively in the designs, and that's resulted in us having those initial awards on the FARA. Light content on the [indiscernible], but very heavy content on the FARA, all of which, upon the wins and the awards that we'll be actively involved in the production contracts and computing without. Mexico, Steve highlighted this earlier. We're quite proud of the processes that we do in Mexico today and the expansion. So we've grown from around 60,000 feet to well over 115,000 square feet. We had our grand opening here recently and kicked that off. Some of our customers came out, and we have a very strong presence of legacy team. Retention is -- rounding here is about 100%. We're quite proud of our team, the talent. And our focus in Mexico wasn't simply to go to Mexico because the rates are lower. The focus in Mexico was the readily available workforce, right, the labor workforce, the talented engineering, the graduate engineers that we're able to hire there, the professionals that are available there as well. So we worked through a provider in the Maquila -- and so we have a quite array of products and processes there and we'll continue to grow our footprint as well as our content in Mexico. We've been quite successful, and we're looking forward to the months and years ahead of us. So highlights for structures is ensuring rate readiness, right? Single-aisle rate readiness, focusing on significant defense growth, continuation on our trajectory, commercial share gain on the products we have and then being there for the rate rebound. Exemplary performance. It sounds like a standard thing, deliver quality products on time, and that's what you have to do, and that's what we do do. But it really is a differentiator. We're seeing work shift. We're seeing new awards we're seeing different value being placed on our products and our proposals because our customers can count on getting a product on time with the right quality. Expansion of our titanium market position, again, leveraging our value proposition, our differentiating performance and key is our value engineering, right? Our value engineering to help our customers design products, both legacy and new that are affordable -- more affordable and producible. Again, defense targeted growth is a key focus for us. Our Mexico footprint, provides a continued margin enhancement, right? So the results of the products that we do there through this process through the team, the cost structure, we're confident about the margin enhancement available for capacity expansion. That includes both people and square footage and a readily available talent there that we work with our provider on. and then applications on VersaCore. So we're quite active today in our pursuit and our engagement with the OEMs on applications where VersaCore can replace metal bond, composite even metals, the differentiating point there is equal or better performance and lower cost, which equates to lower price. So it ties in nicely with what our OEMs are targeting. With that, I'll introduce Suman for our Electronic Systems.

Thanks, Jerry. Okay. So give you an overview of the key products within our Electronic Systems business first with the manufacturing services, our differentiated manufacturing services businesses. We have ruggedized interconnects. These are interconnects that are used in really harsh environments, high reliance applications. They're used in a nuclear submarines. They're used in rockets. They're used in missiles. So really, applications where you can't have it -- the product fail and in really very harsh environments. We have complex circuit card assemblies. Again, these are used in products ranging from missiles. These are used in commercial applications as well, which we'll talk about in a little bit with customers such as Viasat and then we do the integrated box builds. So this is not just selling an individual interconnect or a circuit card assembly but combining multiple circuit card assemblies with interconnect and sometimes with third-party products to provide an integrated subassembly, which is higher value add. And when we do -- we have a number of instances of that, examples include like radar boxes, modems or servers for in-flight WiFi and other electronic boxes that go on missiles, which I'll also talk about in a little bit. Then moving to our engineered products. We have cockpit avionics switches. So these are push-button switches that are found in the cockpit of a military or commercial aircraft. We have lightning protection systems, which is from our acquisition of LDS a few years ago, where they are the leader in providing protection for radomes, again, on military and commercial aircraft. And they have the best capability and technology on a worldwide basis there. And then motors and resolvers, these motors and resolvers are used -- again, higher line rough environments. Examples include, for example, you see the Mars Rover there. Our resolvers are used there. They're also used on metals for wing-deploy actuation systems. So can't fail situation where we have an engineered product, which is sole sourced on that platform and is a key element of that product. And then finally, RF components, which is mainly microwave switches for various A&D applications. So how does all this position ourselves and how are we positioned in the market with all these products? From a manufacturing services perspective, we believe we are the leader in this highly-specialized mission-critical systems for defense for harsh environments. We provide a lower-cost trusted domestic footprint for our customers, which is invaluable, especially in today's geopolitical environment. And so we really think we bring some real value to our customers by providing that. And then as we look at the future, we have positioned ourselves on the long-term, high-growth defense platform. I'll talk you through some of those next-gen platforms where we have secured positions to drive growth into the future. On the Engineered Products side, where we have more proprietary products, we have sole-source positions in niche segments of the A&D market. And that's really the unique differentiator for those businesses for us. And finally, across both of these types of businesses, we have 6 very scalable performance centers, that we continue to optimize, to maximize revenue and generate maximum margin, and we'll talk about that as well a little bit. If you look at our revenue breakdown and a few different cuts are presented here: first, by end market breakdown. You can see that our Electronic Systems business is skewed towards defense, which we call military and space. From a customer's perspective, Raytheon is our largest customer, and we've had great success with them over the last 5 or 6 years. But we also have sizable businesses with Northrop Grumman and Viasat, which is a rapidly growing customer. From a platform perspective, missiles is a big franchise for us. Steve talked about that a little bit, and I will go into some of the more detailed platforms in which we have presence. We also have commercial aerospace, which includes the work we do for ViaSat as well as presence on a number of fixed-wing aircraft, including the F-35, F-18 and F-15EX. And most recently, we are now able to broadly say that we're also supporting the B-21 with our products, which we are very proud of. And it kind of is a reflection of the fact that we are viewed by our customers in a way in which they feel like we are the right people to partner with on these next-gen programs, including a sixth-generation bomber aircraft. So some more detail now on the sector's locations for our products. Missiles and radar, as I said, that is a very strong franchise for us, in particular, when it comes to missile defense and radar systems, we are really very strong. If you look at the slide here, the Patriot missile, where we have product on the missile as well as the next-generation radar system for the Patriot missile defense system, which is the LTAM system, where we have a lot of content. If you look at the NASAM System, which is a midrange air defense system. And some of you may have seen the recent award to Raytheon last week for $1.2 billion for systems that we're going to send to Ukraine. We have content both on the Sentinel Radar, which is part of the NASAM System as well as on the AMRAAM missile, which is the missile portion of this NASAM System. And then you can see the SM-3 and SM-6, which is part of -- which is also a missile defense -- has a missile defense application. And then we're also on the THAAD system with the TPY-2 radar. So we have a really strong franchise when it comes to missile defense and RADAR, which we think is going to be a big growth area going forward and get a lot of attention and allocation from the defense budget. And of course, also, should fail to mention the Tomahawk, which is kind of a key program for our nation and where we have had content for many years. Moving to the military aircraft and UAVs. We have content on the F-35. And I mentioned that F-35 and B-21, we're really proud of that. We do things from electronic boxes, radar racks. We do interconnects for avionics, fuel and weapon systems. And then we also have engineered products. So I talked about the push button features, which are on -- in the cockpits of many of these fighter aircraft. And these are sole-source positions with our proprietary IP and is a great business for us. Similarly, lightning protection, another engineered product business, where we provide the diverted strips that protect the radomes, no stale and other radomes on these aircraft from lightning strike. And finally, RF components as well. Third, our naval business. Again, you can see that we have good content on missile defense when it comes to naval both with the SPY-6 radar, which is kind of the latest and greatest naval radar system that's being installed on our ships as well as with the Aegis system -- Aegis ballistic missile defense system, which is being, which is deployed on our destroyers. The combination of which provides us the ballistic missile defense, along with the SM-6 missile, right? The combination of the Aegis system, with the SPY-6 radar and the SM-3 missile gives us that list defense capability from our ships. And we have content on each of those 3 components, which is -- which I think is going to really position us well for the future. Moving to Space & Communication. We do work with Viasat, which I mentioned, and I'll cover that in a little bit more detail on the next page. But we also have interconnects, as Steve mentioned on the Artemis program, the solid fuel boosters that are used on the rocket for the Artemis program. So we're very proud of that. And last but not the least, the Commercial and Business Aviation segment of this business where, again, we have a lot of content with our engineered products with our stock -- it was our switches, including, for example, the start [ star ] switch on the 737 MAX, which we build is a proprietary switch of powers. And then the lighting protection products, including there, beyond lighting diverter strips, we also make suppressors on the 787, and we have good content. So these suppressors are protecting the electrical system in a 787 in case the lighting damage kind of penetrates through the skin of the aircraft. So this is, again, a very confident position for us and should provide us with upside as the 787 program has now restarted and continues to recover. So then what's going to be kind of got a flavor of the products, the revenue mix? What's going to drive growth going forward. Clearly, the growing defense budgets, as Steve pointed out, is going to be a strong tailwind for us. But beyond that, what are we doing proactively to drive this growth. First, the theme of defense prime offloading, which Steve has mentioned in the last few quarterly calls and really is a big driver for us. You can see the targets that we've laid out for ourselves. And we've been able to hit the numbers for last year and this year and well positioned to hit it going forward. And you can see some of the examples of the successes we've had. It really is -- we really have a very strong value proposition when it comes to defense prime offloading. And it's a win-win both for the defense prime, and it's a win for us. There is enough value there to be shared between them to work off from a higher cost location, higher overhead location to a lower-cost location that we have and with lower overhead structure. So I think that's going to continue to be a driver of success for us and for growth. Second is moving to higher value level assemblies. So not just providing, as I said, the individual interconnects or circuit card assemblies, but providing integrated systems. Two examples out here, first Viasat, where we are providing the server and modem boxes for the in-flight WiFi. So not just the circle cards, but we're a full system that is plug-and-play for Viasat. And it can take -- both Viasat and the other example that I'll give with Raytheon, this move to higher-level assemblies can take us from providing products that are several thousand dollars per unit to shipset values, which are several tens of thousands of dollars. So really is a good driver for us as we move to these higher level assemblies. So the Raytheon example is for the SM-3 and SM-6 missile, where we are taking several complex circuit card assemblies along the with all the interconnects on that missile, combining it with the actuation system from a third party and providing an integrated unit that is controlling the nozzles of that -- of the rocket in that missile, and is controlling the direction of that rocket. So again, high reliance cannot fail application where we are providing a higher level assembly and bring value to us as well as reduce complexity for our customer. And then the third element that's going to drive growth is our positioning on next-gen platforms. You saw a lot of these on the previous page. But again, I'd like to emphasize our strong position on missile defense and radar, which we think is going to be a growing business going forward. Our -- the way we positioned ourselves with hypersonics partnering with multiple large OEMs and multiple programs. So I think we are well positioned to benefit from the growth in hypersonics. And then on fixed wing military aircraft as well, you get 2 really large programs in the fixed-wing multi-aircraft side, we have content in both the JSF and the B-21. And on the naval side with the nuclear submarine and the work we do on the destroyers, we really think we have a good portfolio mix, which is in the right segments -- in the right platforms to drive growth for the future. So now that I've talked about growth. You're, I'm sure, also interested in understanding how we're going to grow margins, right? And Chris is going to in a little bit, take you through our margin targets for Ducommun as a whole. But a couple of things that I wanted to highlight in terms of what we're actually going to do to get to those margin targets. One is gaining operating scale at our performance center. And a few months ago, we had a press release talking about Appleton getting to $100 million plus in revenue this year. And that is really a great example of a performance center that is moving towards an optimum state. 77,000 square foot facility, more than 300 employees, working 3 shifts, high level of automation and robotics that really help drive -- and maximizing the revenue out of the square footage out of the people and are able to -- and also driving higher profits. And that's the model that we are replicating in our other performance centers. Huntsville is also at $100 million plus. And then we have our other 2 manufacturing services performance centers that are kind of in that $50 million to $100 million but we will -- our intention is to take those up to more optimum levels to drive margin. And then the second element is to drive cost down, right? And both Steve and Jerry alluded to this, we have this facility, which is being expanded in Guaymas, Mexico. And not only will it be used on the structure side of our business, but also on the electronics side, where we're going to move selected interconnect work from our U.S. locations, which are already lower cost, but will move it to even lower cost and benefit from that not just the labor arbitrage, but also access to the great talent pool that is more readily available there to help us. And -- what's not on this page that I'm going to talk about when I get to my M&A section is the accretion from acquisitions and that's going to also drive margin enhancement going forward in the electronics business. I'd be remiss not to talk about Raytheon when we talk about our Electronics business. As I -- as you saw on the previous slide, they are our largest customer, and we've had really great success with them. We signed a strategic supplier agreement with them in July of 2019, and we've gone from strength to strength with them. And you can see from $46 million in revenue back in 2016 to $120 million last year. And this is just the legacy Raytheon business, not the UTC portions where we also have a good position and significant revenues from. So with that, I'll summarize electronic systems for you. What are the key highlights. On the manufacturing services side, we have positioned ourselves really well on the next-gen platforms. We'll continue to execute on our prime -- defense prime offloading strategy, which is really working well. We'll continue to build scale at our performance centers to drive margin enhancement and move to low cost -- lower cost locations where appropriate, again, to further enhance margin. On the engineered product side, with our sole-source proprietary positions in niche segments and through acquisitions, we'll continue to build -- drive revenue growth as well as margin enhancement. And finally, one statistic that I want to leave you with in the Electronic Systems side is the growth in our backlog. If you look at the growth from 2017 to our latest third quarter 2022, we've had a 75% growth in backlog. Compared that with growth in revenue in the 12-month period 2017 versus LTM third quarter of 2022, we've had 30% revenue. So you can see kind of the implied book-to-bill ratio there and the continued strength in us bring up our order book and our backlog is going to be a strong positive for us going forward. So with that, I'll move now to our M&A strategy. So what are we looking to do on a day-to-day basis on the M&A front. We're looking to acquire proprietary product businesses, engineered product businesses that are primarily focused on aerospace and defense. And we like businesses where we have a significant runway to create value for Ducommun and our shareholders. And where does that take us? That takes us, as Steve mentioned, to a portfolio at Ducommun, which has an increasing amount of engineered product content. And the target that we have laid out for ourselves there is 25% of revenue by 2027. And we are at 15% now, having gotten to that from, as Steve said, a much lower number 5 years ago. And as most of you know, acquiring these engineered product businesses automatically, in most cases, provides us access to aftermarket, which we really find attractive. And so we intend to grow our aftermarket as we grow our engineered product businesses both through the acquisitions as well as focusing on our organic growth of aftermarket in our existing engineered product businesses to drive and get to the 15% aftermarket mix of our revenue by 2027. So what do we do with these acquisitions that we execute on? And how do we ensure that we derive the value that we see in an acquisition upfront. It's fairly simple. We have a detailed programmatic approach to kind of taking those synergy opportunities that were identified, those value creation opportunities that were identified upfront in the deal process and operationalizing them into discrete actionable items with specific accountability to individuals and then tracking them on a regular basis to ensure execution. So sounds fairly simple is not very difficult to do, but just requires that rigor and discipline and can lead to great success with acquisitions. What are those value creation opportunities that we typically see in the deals that we do. They tend to be more on the revenue side and a lot of companies going to hesitate on kind of signing up to revenue synergies, we've had great success with it and are proud of that. And there are 3 buckets in which we see those. One is driving share gain after buying these acquisitions. And how do we do that, right? We've got -- we buy companies which have got strong engineering capability. We invest further in that engineering capability. We invest further in the sales resources. We invest further in distribution where needed or adjust the distribution strategy of the business to optimize growth and are able to, in many cases, fulfill unmet needs in the market. You may have a large incumbent supplier that has a significant share in the market is not really very customer-friendly, not -- does not provide that level of engine support that is needed by customer when they're going through new product development, and we're able to fill that void. We're also able to fill and grow by investing in new product development. A great example of that is Nobles, which Steve alluded to with the Stryker program, they were the leader in ammunition shoots when we bought them. The worldwide leader in ammunition shoots. And they had a strategy, which we post acquisition help them execute to move into broader ammunition handling systems. Again, this is an example where an ammunition shoot, which can be several thousand dollars versus an ammunition handling system, which can be tens of thousands of dollars. So now they were able to with the investments we've made in engineering resources and in driving that development program move from just being a shoot provider to establishing a new product line in a new segment for ammunition handling and a great success with the Stryker program, which is a huge Stryker upgrade program, which is a huge program where we are providing a latest and greatest technology in a linkless ammunition handling system, which is far superior than a similar product from competition, and has really helped the Nobles business exceed our projections. And finally, given the nature of this business and the value that we're bringing to our customers, we want to make sure that we are pricing our product appropriately. And so we constantly monitor that and ensure that we are benefiting and getting pricing that we deserve for the value that we provide. So a little bit about the actual acquisitions that we've done in the past 5 years. Lighting Diversion Systems, which I referred to. There is a leader in enlightening protection for radomes. And we bought that business for $60 million back in '17. Certified Thermoplastics, which is amongst the less than handful of companies globally that can extrude these difficult resins for aerospace and defense applications. And we've had great success with them. Nobles Worldwide, which I already talked about. And then our most recent acquisition, MagSeal, which is the only magnetic seal provider for aerospace and defense applications. There are other companies that do it for industrial applications. but no one is able to kind of take that technology to the level needed in an aerospace and defense application, and it's a great business. So what is -- what are the common attributes across all of these businesses that we bought. Just to reiterate again, focus on aerospace and defense, they're engineered products. They have significant sole-source positions. They have sizable aftermarket and access to that aftermarket. They're leading brands in those niche segments in which they play. And each of them provided us a runway for growth so that we can create further value for Ducommun and our shareholders. So you've heard about the strategy. You've heard how we do execution on individual transactions. You've heard about specific deals that we've done. How have we actually fared in terms of metrics. And that's something I know that a lot of you have wanted to hear for some time. And we've laid out 3 items here. First, the EBITDA targets that we set ourselves for each of these transactions in our deal models. So if we look at all 4 of these acquisitions from the time of acquisition through to the end of this year, we are on track to exceed the EBITDA on a cumulative basis across these transactions. There are some puts and takes. Clearly, commercial aerospace has been softer than one would have expected in these last 2 years. But we've been able to offset where we've had weakness in commercial aerospace with growth in defense. -- so that overall, we have exceeded our EBITDA targets across these 4 transactions. How have we done in terms of return on the capital we are investing, right? Are we deploying our capital in a smart way to generate good return for our shareholders. And so if you look at our ROIC for all the transactions that have closed for more than 4 months, that's the first 3 transactions. We have double-digit ROIC for each one of those transactions already, some of which are within the last 2 or 3 years, which we think is really good. I mean, we've not -- that's driven, one, by the fact that we haven't overpaid for those transactions. And two, we've been able to, through our systematic approach, execute on the EBITDA expansion targets that we have for each of those transactions so that we are able to generate this strong ROIC on each of those transactions. And then finally, accretion, right? And if you look at the multiple that we paid for these businesses on an LTM basis when we bought them, versus the LTM through third quarter of this year. There has been a 4x reduction in the multiple for these 4 transactions that we've done. So again, a sign that we are buying companies at reasonable multiples and then aggressively growing the EBITDA to reduce the effective multiple that we paid for them. So that kind of relative to where we trade these deals become accretive. So with that, kind of summarizing where are we today in terms of M&A? And what's our outlook 2022 has been a slow year, as all of you know, on the M&A front. A lot of the businesses that we look at is a engineered product businesses. They generate strong positive cash flow even in a downturn and in tough environments, the owners of these businesses are not going to sell in an uncertain environment. So I think that's kind of driven a little bit of the slowness in 2022. But we are beginning to see things warm up. We're seeing more activity in the market over the past few weeks and months. And we do feel good about being able to continue to execute on our M&A game plan and do one or more transactions every year. And then for every transaction we do to aggressively execute on our EBITDA plan so that we can drive shareholder value. So with that, I will pass it on to Chris Wampler, our CFO, for the financial outlook.

Thanks, Suman. Good morning, everyone. Right. Before I jump in with a quick summary of where we've been and where we're going. Just a quick comment. I mean I've been with the company about 10 years, Steve joined almost 6 years ago, and the Board clearly identified somebody with a huge energy and somebody bringing that sort of growth mentality to the business. And it was critical. Once he got here, I mean the culture changed in terms of increased focus on managing what we couldn't control, working through that, being aware of the other things that are out there and really that accountability and that customer focus. And you can see that served us well over the past several years, and it's going to be necessary as we along with everybody else sort of move forward through this environment. So if you take a look at the total shareholder return, the TSR, and it goes back sort of just not long after Steve join. And you can see we've got the various compares there with Ducommun on the blue line and then the Russell 2000. We've got our peers, the Dow Jones Industrial and then the NYSC composite. And you can see as we sort of escalated through those first few years as some of the changes were being made and some of the ramp-up on commercial was happening. That's where we get some nice separation and then have managed through pretty well here through the last through last couple of years as we got through the end of 2021. And you can see from over that 4-year period, if you look at where we're at versus any of those indexes as well as where we're at with our peers, Ducommun and investment in Ducommun has been a good investment. Take a step back, too, just to look at sort of what's changed over this time horizon. And you think about this. And if you look at all these metrics that are out there and these 5 that we put on here, I think if you -- all of them except for revenue, if there was no pandemic, I think we'd say, okay, that's probably pretty decent, probably pretty decent results when you think about market cap, when you think about enterprise value, adjusted EBITDA was 70% and 400 bps on the margin. And then the fact that there was a pandemic in the middle of it sort of adds a level of difficulty to it. But the thing that certainly the 25% there, a big impact from the pandemic for the reasons that Steve, Suman, Jerry, all sort of alluded to as they've gone through things here. But if we hadn't had the pandemic and who are sitting here today -- we're talking about a business that's probably $850 million plus on the top line, but that's our reality. And so we've sort of had to, like I said, manage through and take care of the things we can control to try to put our best foot forward and continue to serve customers and shareholders. So if you look at some of the financial data, and Steve hit on sort of the revenue trend here. But if you look at where we're at from an adjusted EBITDA percentage and part of our story here as we ran through the growth of the commercial super cycle up towards 720 in '19 and then the MAX challenges along with the pandemic sort of bringing us back down. Again, 2 things. One, that decrease -- the 720 to the 630, it's 2 pieces. I mean it's a significant commercial decrease, and then it's our defense business coming up to sort of get us net-net back to that compare and doing that and still keeping adjusted EBITDA percentages on an expansion basis during that stretch was critical for the company, and it's put of kept us that foothold so that we can continue to move forward from a good spot. Additionally, from a net debt perspective, that as Suman has executed and the company has executed all the acquisitions. The net debt still in the mid-200s as we sort of went through over the last several years. And you get to where our trailing net debt to EBITDA, our leverage sort of running north of 3% or right around 3%. And then as Steve talked about a little earlier, we had our sale leaseback at the end of last year, which helped us not only pivot and get MagSeal, but also pay down some debt and put us in a good position right here as we finish 2021 with a leverage of about 2.3x, which is certainly the lowest that we've had since -- in many, many years. And if we look at where we're running this year, sort of similar there as well. On the overall financial performance, we'll look at margin, adjusted EBITDA, operating income margins. And you could see the pattern sort of similar here, nice improvements in the business through the commercial super cycle. And then as we sort of flexed over and picked up the defense strength as well, -- and that's what got us into the low 20s with the gross margin and then getting the EBITDA up to 14% and then our adjusted operating income running right around 8%. How did we get there? Again, it's been referred to in different parts of the presentation today, but you think about what we're doing from the cost structure, the high-performance culture, some of the cost takeouts, pricing, and the product mix, and that's what's helped us sort of get this foothold of operating performance. This is a key point of the of what Jerry and Suman were talking about a little bit with the customer base and what we've been doing as well with the -- with our backlog. And at the bottom of the slide, you can see I mean customers speak with orders at the end of the day. Business several years ago was a backlog of about $640 million. Certainly, a lot of change in that as we now are in the mid-$900 millions. And how did we get there? And you can see, again, it's -- this slide, in particular, just demonstrates some of the benefits of our diversification. It also highlights some of the emphasis, as Steve got here and said we've got to sort of get back after and rebuild some of our defense business as well. You're going to see how that plays in because we had the commercial super cycle that was happening. We picked up that backlog as we went into '17. And then you saw the balance of commercial and defense sort of in '18 as that business started to come back some which then played out well over these last few years and the defense business then continuing to ramp up really carried the day through the pandemic on the backlog as the commercial challenges were there. And then now flexing back with commercial, driving a little more of that growth. So that's what keeps us now with a near an all-time high backlog, very strong place with both businesses in a good spot. Now we'll shift though looking backwards and look ahead, with the key here being, as I said, significant long-term value creation opportunities at Ducommun. And as you've heard from Steve, and you've heard from Jerry and you've heard from Suman, hopefully, you can feel and capture the type of energy and confidence we have about what's ahead of us over the long term. Vision 2027, when you look at this, you say, okay, where are we at today? Where are we going? We're going to -- as Steve has signaled on the Q3 earnings call, we're going to be high single digits for the top line growth. So we'll end up north of $700 million for the year. Over the horizon, we anticipate that going to $950 million and toward $1 billion in growth. And there is some level of acquisition there that we'll also talk about on the assumptions. But that organic growth along with the acquisitions, you're getting us on that trajectory. When you look at the mix, and we've already sort of seen it, again, Flex, which has been very helpful. now we're back to more of a 60% defense lead with commercial aero more like 35%. And we see that continuing to move a little more back towards commercial, but still in the 55% to 60% defense over the next several years. So with that, we see that being a pretty key enabler of getting our top line scale that we're going to need to continue to drive the business, satisfy customers drive large. Overall, that's going to take us to about a 6% or 7% CAGR for the period. Then you take a look at where we're at from an adjusted EBITDA percentage and adjusted OI margin. Again, both Jerry and Suman and Steve, all of them talking about ways we're going to continue to do this. And if you look at what we're going to do, we've certainly, again, managing what we can control, sort of seeing what else is happening in the world and trying to adjust to that as we go. So with that being said, we're running about 14% on the adjusted EBITDA margin. We anticipate that moving up towards 18% as we go through towards Vision 2027, which is about a 350 to 450 bps improvement. And then on the adjusted operating income, we're running at roughly 9%, and we're looking at continuing the improvement there, up toward about 45% of an increase to get us up near 13% in Vision 2027. And again, it's -- as it lists on here, it's scale. It's the acquisitions that Suman was talking about, which are critical to our acceleration of the growth expansion. It's a pricing, which is always part of the game. It's facility consolidation, which has been a newer piece of it this year to help us drive where we think we need to be and then the related cost reductions and the other improvements that will come along with that. When you think about the model that we just sort of walked through, these are just a few things that are underpinning the logic. So defense business is strong. It's going to run out there at $525 million plus on that side of it. Commercial Aerospace, as Jerry talked about, getting fully leveraged there, Titanium leadership at $325 million. We've got about $75 million in there for a placeholder on the acquisitions. I talked a little bit about the mix and then that's where we end up with the adjusted EBITDA. I got a few other slides here, just to share on some other I call, I mean they're more topical. And when you think about -- when we think about investors and people watching our company over the next stretch of time, things that are, I think, important notes and important things to take away. One of them is that we believe that we've got a significant working capital cash flow opportunity here. When we look at, again, what we could control, what we thought was happening in '19 over the next few years played out very differently. And so reacting to that and trying to put our right foot forward with customers, et cetera, and put ourselves in a position, right with some different things. I mean, number one, it was just an immediate sort of change from the level of velocity on the performance and the production rates that was happening on the commercial side of the business. So that had an impact on what happened with our -- what we had with our inventory and sort of put us in that spot. And then from there, we had to make decisions on how to produce to go forward to hit what we're going to need on this recovery. And so there was some level loading of how we're going to produce to sort of get to those places knowing that there's some challenges over labor and over supply chain, et cetera, that we just want to feel like we've got our best foot forward on controlling that. And -- and lastly is just to make sure we're ready for the customer drop in other things that they may need and feeling like in a tough material market that we've got the inventory that we're ready to move forward with. So that keeps us in a better position to be opportunistic and take advantage of those when others can't. So with that, that's what has sort of where we're at today. What do we expect? We expect to get to normalized cash flow certainly throughout this period that our goal of 100% conversion of free cash flow to net income still there. Believe we're going to step toward that in '23 and then '24 and on, we think we can run at that level or beyond. And how are we going to get there? Continuing to support the growth in the business. We've got a working capital investment that's there today. We think we can leverage that. So it basically move forward the next couple of years without having to put that incremental working capital investment there. You look at where we're at as we sort of finish 2022, what will that translate to? That translates to about a $30 million increase in cash flow in the next year. And then you go out a couple of years, and it's $40 million plus. Just a couple of minutes then on our credit facilities and our interest and also our hedge. We did take advantage of the environment and sort of where we were with our debt facilities earlier this year. The sale leaseback, which has gotten mentioned a few times, put us in a position with a very reasonable debt situation. As we work through the early part of this year, we were staring at loans that were out there, their debt maturities are out there in 2024 and 2025. So just opportunistically, we went out and got in place basically a Term Loan A for $250 million, with a $200 million revolver and took out our other term loan A, existing Term Loan A and then our Term Loan B, which was at certainly a much higher interest rate. We got that done in July. So that's where we're at. Certainly, the backdrop on interest for everybody has been very dynamic and unpredictable over the last few quarters and even going forward. So this is just really to try to help everybody calibrate on what's the common situation, what might be interesting to them or what might be interest rate environment and mean to them. And really, what you're going to see is we're going to finish this year with this scenario we put in here, we're going to finish this year with about $12 million about $12 million on our interest line this year. And assuming what we have in here, which you can see on the or the assumptions we have as far as where the 1-month SOFR rate is. You look at what our spread is on our debt, which is now 1.625% at the leverage we're at. Then you can see that we've got -- basically next year, we would run at about a 7% unhedged rate. And that would take us from about 12% -- $12 million up to about $18 million, which is a roughly 40% headwind. But what we also did in November of last year was put in place forward hedge that kicks in the beginning of '24 for $150 million notional and that flips $150 million from floating to fixed. And so that will -- that will take that piece of our debt down to 3.33%, which ironically then sort of takes it back towards -- in this scenario takes it back toward a $12 million interest line. And then that will exist, that hedge will exist out there in 2024 through 2031, and it puts us into that type of a hedge situation. So with that being said, we feel like we're just -- what we did has us in a good support -- a good position to support the business with this facility as well as the current business as well as the growth strategy we have moving ahead. And then lastly, it's gotten some discussion already from Steve and others on the restructure, and this is just one more time to just put it back in front of everybody. It's -- I would say it this way, when you back up to the end of the Q1 call, and we talked about restructure and Steve mentioned it on the call, we were doing that because we knew we had certain situations in front of us. And what we were trying to do with our Thailand facility, for example, as far as just pulling back out of there and moving that supply chain back on to -- back over to the U.S., which was critical. As the year went on, and then when you're in a restructure window, a lot of times, you just continually assess what's going on and what does it look like? Where are we headed? And that's what brought up and got us to where we made the decision Steve talked about with Monrovia and Berryville, we think about the long-term strategy, what's the best place for us to be, and that's what we've got going on there. So all of that being said, we're going to end up with over the program, which we believe we're done with the footprint type of conversations. And then we're in the final parts of sort of other restructure activities. It's $20 million to $26 million over the whole program, getting that payback within a couple of years and $11 million to $13 million annualized savings. And then at the end of that, he talked about Monrovia as well, we'll anticipate selling -- no selling the assets. So with that being said, I'm going to turn it back over to Steve for closing remarks.

Great. Thank you, Chris. Okay, everybody. Thanks for hanging in there. Okay. I really appreciate. I know it's a lot of information and I appreciate everybody listening, and thanks for coming again and also being on our electronic feet. So just last slide here, just to kind of regroup here. I talked about proprietary product businesses when I first started, okay, very, very important to our future, very, very important to shareholders. We've done a nice job in the last 5-plus years. Okay. We're going to continue to do that. Suman talked about M&A. I think we have a very good plan. So that's a big part of it. We feel good about commercial aero. We liked it to go a little faster, right? I think we all would, especially on the Boeing side. But we face reality as it is, not as we wish it were, right? So that's kind of where we are, but we have really good prospects there. I think our defense business is real good. And I've showed you that chart at the beginning, just kind of where we went on the defense over the last couple of years. So anything over $100 million a quarter is a good number for us, and it's going to continue to build up. I talked about first tier, aerospace, our manufacturing services businesses, we won over those. So I think that's clear. This cost reduction is a big deal, okay? That those cost reductions are real. Again, Monrovia is 9-acre factory, 9 acres. That's a big, big footprint, okay? And we're going to close it, and we're going to move it to lower-cost facilities, and we're going to sell the building and we're going to sell the land. And there's going to be no headwind associated with that. With Gardena, there's headwind at least for the next couple of years, okay? Talked about that. M&A, you heard from Suman, he's the right person. He's doing a great job with him and the team, our whole team. So no disasters, right? Because everybody gets nervous about M&A, right? I hear all these stories and then it doesn't come through. Well, these 4 deals have been all good for us and for our shareholders, and we're proud of that. And then we have our ESG report out okay? It's on our website. I think for a company our size, small cap company, I think we've done -- we do in above average job on ESG. We do have a report -- so for your investors and people you're talking to, that is available, and we continue to take that we take that for real. This is not just corporate advertising on ESG. We're really trying to do better things for our environment and for the places that we live in our neighborhoods. Okay. So again, thanks for hanging in there. We're going to go to Q&A. I'm going to join the team over here. Michael, you have a microphone, correct?

Yes. So we are [indiscernible] questions?

All right. You're going to make the mics live. Okay.

Ken Herbert with RBC. Steve and Chris, maybe just to start off. When we look at this relative to what you gave last year, you sort of brought your top line CAGR down a little bit. Obviously, it's apples and oranges somewhat in terms of the time frame and it sort of held the margins flat at the 18%, 25% and 27% now. Can you just walk through the moving pieces of that on the top line and the margin, obviously, but the top line maybe in particular. Is that a slower pace of recovery on aerospace relative to what you had last year? And I think when you gave the margin targets last year, you maybe you hadn't fully factored in the restructuring yet. So maybe if you can just bridge sort of last year to this year and the few pieces that changed?

Absolutely. So I'll take margin first. So we talked, I think, May 2021 with all sincerity. And to be honest, with we thought Boeing we would be in a much better place, okay? So that's the biggest rock in that story, okay? We felt we'd be 38, [ 40 ], maybe we'd be really in a much better place. 787 as well, those types of things. And like I said earlier in my remarks, Boeing is very, very important to Ducommun. So I think we've gone through, hopefully, the worst of it. And I think the next couple of years are going to get better. But we were more hopeful and we put more of our plans in for Boeing to be stronger earlier. And that just didn't happen, okay? So I think that's the biggest answer, I think the most relevant for shareholders. We think eventually, it's going to get there. but it didn't get to where we wanted it to be. Chris, do you want to talk about margin?

Yes. This absolutely, Steve. So on the margin side, Ken, I mean, number one, I think we would have assumed just a stronger uptick as we saw in the short term here. That was before sale leaseback as well. So you had some headwind in there over that horizon. As they've gone through this year, and I think as everybody -- we've said the Trust conference a couple of days ago, talking through that with many investors, the dynamic of just what everybody is seeing in terms of how quickly some of this recovery is happening on the commercial side how things are happening on defense side and then how we're able to put that through our facilities. It's just kept us from really probably quite the way. We would have said those first few years. So things have moved out a little bit, but the long-term view of where we're going to land and how we're going to get there. That's part of the reason you're seeing the actions we have because we still feel like that's the right answer to get to performance like that, and these are the things we think we need to do to get there.

Yes. Just one thing on the margins again. So we were looking at it a little bit different world in 2021 in May. We really thought we're going to get there. And unfortunately, it's going to get pushed. So that's I guess that's the end of that answer.

Mike Ciarmoli with Truist Securities. I guess, Chris or Steve, just looking at the longer-term interest rate assumptions, and I think you said there was a placeholder in there for maybe $75 million of acquired revenue. You've got the hedge in place, so we've got the interest going up, then dropping down. How should we think about just I guess, the capital deployment and interest, I mean, you're going to have the 2 facility sales, too. I mean -- and I guess just target leverage over that time frame, it seems like there could be a lot of moving pieces.

Yes. I want to kick it off. I think what doesn't change is the fact that we're pretty simplistic and minimalized on the per capital spend. The footprint we have in place, we've talked about for a few years, even with these repositionings of Berryville and Monrovia, has us out there and able to support our growth through this horizon. We're talking about with some incremental sort of expansions in a few of these facilities that we highlighted, but no major expansion there on the capital side, which then leads us to the acquisition side that Suman walked about -- walked through. And I think in the interest rate environment we are, I mean, in the leverage that we have, we just got to be -- find the right ones, and that's what Suman has been able to do over and over. So we still see that as why it's still built into the model. We still think we'll be able to do that and keep that going. So having said that, our appetite to lever up probably is a little less than what it was before, but getting to the right assets and it's still going to be key, and I know that's what we'll work for.

Yes, Mike, just great point about -- it's a bit dynamic, right? It won't be upfront about what we see. But if we do this sale in California, which we're anticipating to do as well as we're also going to sell Arkansas, which is not going to be anything, I think, great but it's going to be a bit dynamic. So we're hoping that we don't want to pay any more on interest rates, let's put it that I mean, but we want to be upfront with everybody going in. But it's going to be dynamic, and I know Suman's going to work hard as well as for as whatever we're going to -- if we're going to do something, which we like to do, we're going to be very disciplined like we have on our acquisitions. And I think his report out -- yes, we can't give you everything -- I know people want some more, but I think what we gave you today at least shows you that the money that we use was well spent.

Brendan Hartman from Royce Funds. You mentioned in your opening remarks, you guys have done a pretty good job with supply chain constraints relative to some others, especially in the electronics space. But can you just drill down into that a little more and talk about maybe where the pain points are. And importantly, as you look at the aggressive forecast for Boeing and Airbus to ramp production as well as the increase in defense spending. Are you going to be able to meet that demand? And where might the [indiscernible]?

Yes, it's a good question. I know there's a lot of discussion around supply chain. First of all, so we just let you know, we do -- we have commodity management, right? So we have a commodity Vice President, commodity. We have a Vice President of Commodity Management or. So we look at everything, titanium sheets, okay? Circuit card materials, semiconductor. We're very -- we drill down when we're very granular about how we manage our supply chain. And one of the things that -- and it's not great sometimes for our cash flow. But during the pandemic, we didn't use a lot of titanium sheet that we had, right? So we're a little bit lucky too as far as that goes. But systematically, what we do is we take a commodity management approach, okay? We're 5 levels deep on it, okay? We're not a $10 billion company. So we don't -- the complexity is -- even though it's there, it's not that high. But we're also in a situation where we do do strategic buying for certain products, okay? Because we know that we're a little bit, wouldn't say Gorilla tactics, but we're a little bit more fat on our feet when it comes to being able to be a little quicker around bigger companies. And that's how we kind of get our margins up or we get our share up. So we like that. Again, what I said in my remarks is that I'm proud of my team, Jerry leads that is that we were able to manage most things. But we do -- it's not just through luck. It's not just like, oh, we didn't have automotive chips. So we did better, right, because we could get these. No, it's really about systematically driving the business through commodity management and then being smart about what we buy. We do -- we'll go out a little bit if we feel like, you know what, just to be on the safe side, we need to buy some mix or titanium sheet, we will. So thank you for the question. Appreciate it.

It's Doug [indiscernible] DC Capital. Just looking at your financial reports, the contract capital like a big prominent on your balance sheet. You've got $160 million net there. It's about 1/3 of your capital. And your customers are big and prosperous. And why are you having to bear that burden and with the increased interest rate environment, the opportunity cost is going up pretty dramatically on that capital. Is there a way to reset that relationship?

Yes, it's a good question. It's absolutely a challenge. It's something we certainly know about. You guys want to?

Yes. I mean just -- well, I'll get [indiscernible] first, Jerry, absolutely can jump in too. But part of that is, again, there's an element of that contract assets, which is us choosing to build toward that longer term for the customer. So they're going to take product when they're going to take it. We know what we need to deliver, what we forecast to deliver over a period of time. So some of that is us saying, okay, we want to be able to do that so that we're not beholding to. Can we get the labor when they want it. It's more puts us in control a little bit, but it is an investment that we've got on the balance sheet. It's part of that working capital that I alluded to that we feel like, okay, with where we're at now, we got to lever the business up without further investing in that working capital when those contract assets are a key part of it.

Yes. One of the key things that we're doing today over the last year, a lot more emphasis, especially going forward, it's on progress billing. So we're very, very actively always looking at the horizon as far as lead times, titanium, electronic components, all the various things that we buy. So we're very vertical, right? So on the structure side, we buy raw material, right? And that's the essence of our supply chain. And so the majority of that is with Airbus and with Boeing. So it's the con bid process with Airbus and it's TMX with Boeing, right? So we provide ourselves a horizon. We get those forecasts from Boeing and Airbus, and then we put our take on that, right? And we're always more optimistic in the rate than our customer is always, right? We do that for 2 reasons because we want to be prepared for that optimistic reality, but we also do that because sporadically, our work shares increased. We're 50-50, more times than not. The other side of the 50 isn't performing and a customer comes to us and we're there and we're ready, right? So we do that, that drives inventory. On the electronics side, more specifically, we have many opportunities for progress billing, right? So we have like performance-based payments from Raytheon, right? They like that. We like that. And as a practice now, we're doing this. So we look ahead, and our customers don't always order at lead time, right, because lead time is kind of a variable based on the market of the supply chain. So we'll look forward and we'll project maybe an 18-month lead time, our orders might fill in because we're under contract. It's just when those orders firm up, why not firm up for 6 months part of that release. So we, on our own, have internal sales orders, and we'll launch that constantly doing that. We're looking for it. We haven't been burned once yet in doing an internal sales order where that didn't come to fruition. But when we do that, we carry that inventory, right? So what we're doing now and our customers have all said to us, those that we do that with, that that's absolutely a differentiating customer service value add that we provide to them, and "No others do that." But in doing so, we have opportunities to progress billing. And we were reluctant in the past. We're doing much more of it now, and I'll say surprisingly we're not getting a lot of pushback because we're protecting the customer, we're protecting the supply chain and we're carrying that inventory on hand.

But I will say this, it's too high. Okay. Yes. We understand that. It's a good question. I will just say this is just popped into my head is at. I've been at this company now for close to 6 years. When I came in, it was a real turnaround or it was kind of a mess. And a lot of our customers are pretty unhappy with us, okay, and for good reasons, okay? And I was at the Regan National Defense Forum last weekend, I was at the AAA media in November. I was at the Paris -- I don't mean the Paris, the London Air Show. I've been with all our customers in the last 3 or 4 months. And I would just tell you that we have never been in such a good position with all our customers. I mean everybody, I mean 100% on time, great quality. You can see it in the backlog. So I just want to make that point that I understand your question, it's a good one. But in certain ways, it has paid off.

Just before I turn this mic for question. Have you commented on the increased content or what your shipset would be on the 320, if they get to the higher level on your participation on the titanium side is much higher.

It's going to be more I mean it's tough for me to really say. But I mean, again, we saw this previously, and obviously, it's in a low now, right, a little bit because they can't get engines. But the they have an internal operation, okay, which is, okay, that's what they have, the Airbus built vertically integrated at the beginning because they want jobs, right? So there's jobs in France there. And they have a couple of small French suppliers that have been with them since the A300 for 1983, right? They're not going anywhere. But what happens is that they can't deliver. So we're 100% on time. So all of a sudden, they say, hey, you're 50% on A320 for this to sell part, we need 100 for the next 6 months. We need 100 for the next year. And that's what's going to happen. So it's going to go up. I'd be -- I'm a little reluctant to give you a number, but it's going to be more. Sorry about that. Stay on me on that, okay. Do you have anything coming in from our guests on the line?

No. We are good for now.

Can we do a few of those?

No, we are good for now.

Have no one -- no questions.

Not at this time.

Okay. I didn't hear you. I'm sorry, I didn't hear you. Okay. Great.

Steve, how should we think about margins in '23 and '24? It sounds like we've been sort of stabilized at this 14% range for a few years now. Do we see much of an inflection in '23 with the restructuring and everything going on? Or is '23 at similar levels with maybe that inflection in '24 and beyond?

Ken, it's a great question. I think we're more the same. I think '23, but a big increase -- I mean, '24 is going to be. I think the margin is going to be really good. I mean we're going to -- just -- it's not easy to close factories as you know. And usually, the payback is 3 years, at least in the big company, large cap at least that was my experience, 3 years, close a factory and get payback. We're going to -- we're going to try to get less than 2, the payback, right? And I think that's going to happen. And we're going to see a lot of that coming in because of the 2-year window, more in '24, I mean, '23, I think, is going to be decent, but I think '24, you're going to see major, I think, very good increases. I mean just from a loan -- I got to brought this up earlier, I know you've gotten a lot of information this morning. We have Monrovia. It's a nice plant. They've had their ups and downs a little bit, right? So -- but there may be $50 million, $55 million, not that big, but okay. And maybe 170 people, and they run 1 shift, maybe 2, I think -- and not that much activity. I mean, our electrical loan is $1.5 million. $1.5 million, that's just turned on the lights and run some auto plates. So that is going to go right to the bottom line, okay? I mean so those are the kind of big things on top of the sale, on top of doing things at Mexico, the productivity. I hate to say productivity is better there, okay? You know what I mean, that's just our learnings. So we get more for less. So I feel very good about -- I feel very -- but it's a great question. I think '24 is more where we're heading.

Great. And if I could just sneak in one more. You've talked for a while about the success with Raytheon. Can you just give any more color on the opportunity with the other defense primes to replicate that offloading. Is it -- is Raytheon maybe sort of a one-off? Or is there really a structural opportunity with the other primes? How do you see that now?

Yes. I think it's a little bit of both. I think what you see with Raytheon with the changes in the leadership and more of a UTC focus. I mean, you just see a little bit more of an opportunity where people are moving work out of the [indiscernible] of the Northeast. I mean and things like that. I mean, I think that's just something that has just ingrained that. So I think there's a little bit of cultural change there. But I think it's structurally sound. I think that what I've learned is that an OEM will sign up for a 7-year deal, right? Let's say they give a 7-year contract for a missile, right? Okay, fine, okay? And so they'll bid it and they'll run it and around year 3 or 4, what I was told is there's just no other way to get any profit out of it at the first -- when you get to year 3 or year 4, just no opportunity. So that's why within those 7 years, you take the cards out of an internal plan, you put them to the comment, okay, or some other supplier, okay? You can actually continue to drive your margins because generally after year 3 or year 4, you're kind of -- that's what I've been told, okay, by the ex CEO of Raytheon. It can adjust gets flat, okay? So I think that structurally, I've talked to Kathy Ward in Northrop Grumman. I mean, we've -- we're working with other primes. We have had a lot of success at Northrop. We wish it was more, I think it will be. But a lot of these businesses are very -- you look at it, they're very vertically integrated. And I'm telling you one of the reasons why they are because they're like, "You know what, we need the parts. Their programs are so important at the front end that they feel like we can't give this out to a supplier. You know why? Because we're not going to get our parts on time. And I think that's one thing, as I talked to you about our position with our customers is that they trust us. And that's why we're getting the SPY-6. I mean, that's -- there's no fooling around with that. I mean that's a real -- that's a top-level program from a major prime. So anyway. So hopefully, that's -- but I think heading forward, more to come. I think it's going to be better.

You mentioned capacity readiness a few times and at the same time, some footprint consolidation. So moving towards that 2027, $950 million to $1 billion of top line, do you have the capacity there now that you can reach that level? Or would you need CapEx and investment to get in there?

That's a great question. Jerry, you want to take that?

And so if you go back a few years, right, we were at [ 55 ] plus on the MAX, right? We're at higher rates on A320. And so we were capacitize several years ago for much higher rates than we're at today. Since that time, when you look across the business from a structure standpoint, I think we're well positioned from a capital standpoint. Only differentiator for us to get to much higher levels is really staffing, and we work across multiple shifts. So I think we're well positioned there. Our focus on capital has been more on automation, efficiency, innovation in our processes that require some level of capital, but also that's increased our capacity. We're doing things quicker and more efficiently. On the electronics side, you look at the harness business, and that's really driven by people, right? It's supply chain and people, right? There's not a lot of technology there. It's more about hand work and then test. Much of that, we're transitioning to YMS, we more than doubled our footprint there, right? And we have readily available, very high talent, very trained, very scaled people there to grow. So we're in good shape there. On the circuit cards, the next level of controllers, the higher-level assemblies we have capacitized with our Surface Mount technology, right? So our footprint in Appleton, right, their footprint in Tulsa, where we produce circuit cards. We've invested in new SMT equipment, automated optical inspection. We're putting in robotic soldering. We'll have that -- some capital in by the end of this year for that. So I think we're well positioned there as well. From a capital standpoint, we're expanding today. We're expanding the Huntsville operation. We're adding around 25,000 feet a couple of weeks ago. We're about 2 months out of being complete. And so we're adding square footage there. Is it populated? No, it's not. It's building, it will come, right? So we have a new building that's just adjacent to a nice walkway between our main building. So I think we're well positioned. We're very frugal in our capital so that we're buying technology and funding innovation. It's really about people and grateful to our HR team, [indiscernible] earlier. They've done a really nice job of continuously looking at opportunities and how we join people. So we feel very confident. It's not relying in weight. We're actively working on ensuring we're ready. And our customers are asking us to. Airbus says, R75, R75. So we'll be up there in February and then later again in March in sharing with Airbus, how we are prepared R75.

The only thing I'd add there on the electronics side of the business is that the minor additions that Jerry is talking about, those aren't the same scale as, for example, the investment we've made in our titanium business, $30 million to $40 million. We are talking about a few million dollars to increase 20,000 square feet at Huntsville or if we need to expand Appleton at some point, those are not going to be huge capital outlays.

And we actually have a plan to expand Appleton. We have the real estate, we have the square footage that's on the campus there, and we have the plans to do that. So we're set to do that. We have another about $1.5 million SMT equipment coming in within the next 60 days. That's been a word for a while.

So -- we're going to be frugal though about [indiscernible]. We want to use Mexico and we want to consolidate. I mean that's -- we want to have a big time shareholder value event with that versus adding more space. We want to use the space we have. But we are going to be selected. Let's put it that way. You have another question?

Steve, just on that 2027, how should we think about any share gains? Are those already contemplated? You just talked about the potential on the 320. And I think earlier in the presentation, you hinted at the A350. Would those be additive?

I think Mike, at this point, I'd say that they're in the mix, okay? I mean as far as we're anticipating -- look, the A350 is a titanium -- I mean it's titanium or us. I mean it's so much -- and we don't -- we're not on it I think we're going to be on it. And there might be some slight, I think, based on the volume, maybe there's $10 million or $20 million out there that's not -- we're not contemplating. Maybe if Airbus gets the 70, which I'd be shared for if they do, we were going to see definitely maybe some uptick, maybe another $10 million, $20 million. But I would say at this point, everything is kind of locked in. We think that the A350 is something that we can certainly help them with the A320, I told you about the situation there. I think it's -- there could be some upside, though, but maybe $20 million to $30 million. Okay. I want to be true to our time here. We have just a few -- we have 5 minutes left. But if we're -- everybody's give questions, I'm just going to wrap it up real quick. So we're okay very good. Okay. Great. All right. So look, I just -- again, I want to thank everybody for coming. I know it's been a long time. I think we met -- I think our last investor meeting in person, because of the pandemic was in the end of 2018, that's a long time, right? So I want to thank everybody for hanging in there. I know it's a lot of information, okay? And you got to get kind of locked in there. But we feel very good about where we are. Hopefully, you do as well. We have, I think, a couple of big events coming up. These factory closures are going to drive earnings, okay? These are major things we're going to do. This consolidation is going to be really important. M&A is good. I told you about our customers. I mean no customer no company, right? Okay? That's the deal, right? And our customers really, really like what we're doing. We're the biggest player? No. But you know we're really part of this whole industry and we're counted on. We feel good about -- so hopefully, you do too, again, I want to wish you a great holiday season. Thank you again for coming to be with us, everybody that dialed in. We thank you as well. We very appreciate everybody's support. On behalf of the team and I, we just again want to thank you. Okay. Appreciate it.