Ducommun Incorporated (DCO) Earnings Call Transcript & Summary

Well, good morning, everyone. Welcome to Ducommun's Investor Day, both all of you here in person as well as an even larger number of people who are joining us remotely today. I am Suman Mookerji, Chief Financial Officer of the company. And with us today, we have Steve Oswald, Chairman, President and Chief Executive Officer; Jerry Redondo, Senior Vice President, Electrical and Structural Systems; and Clay Bringhurst, Vice President, Engineered Products. To get us started here with the fun stuff, the forward-looking statements and disclosures Certain statements we make today that are not historical facts, including any statements as to future market and regulatory conditions, results of operations and financial projections, including those under our Vision 2027 and Vision 2032 game plans for investors are forward-looking statements under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks uncertainties and other factors that could cause actual results to differ materially from the future results expressed or implied by such statements. Please refer to our annual report on Form 10-K quarterly reports on Form 10-Q and other reports filed with the SEC for a discussion of the particular risks facing the company. Statements made today in today's presentation are only as of the time made, or as otherwise specified. We do not intend to update any statements made in the presentation, except if and as required by regulatory authorities. Today's presentation also includes non-GAAP financial measures. Please refer to the appendix at the end of the presentation for a reconciliation of non-GAAP measures to their GAAP counterparts. With that out of the way, I will pass it on to Steve Oswald. Steve?

Again, let me welcome everybody for our Investor Day. Very much appreciate everybody that came here in person and those online as well. Want to thank you. It's a very important day for us, for our company, for our shareholders. We don't do this very often. Does anybody know how many days it's been since our last Investor Day. You get a price. Over 1,000 or under 1,000? Good job. Okay. You get some kind of price, okay? 1,379 days since we last spoke about to comment at our Investor Day. So I wanted to -- I did -- I actually had somebody to help me with the math. I'm just kidding, but help me with the math on that yesterday because I think it's an important metric or important number because we don't get together that often for these type of things. So again, a very important day. I want to welcome everyone. We're going to be very efficient. Okay. We've got quite a few slides and stories to get through. So if you hang in there with us, we're going to do our best for you and make sure it's interesting and compelling Okay. Just for the agenda, I'm going to give an update on the Vision 2027. This is something you all know about. You're probably sick and hear me talk about it, but you're going to hear it a little bit longer. Then what you're waiting for the Vision 2032 plans. So I look forward to presenting that and I hope that you're excited as we are. Then Jerry and Clay are going to go over both the structural and electronic systems product lines. I think they'll be interesting. And then Soma talk about M&A, where M&A is a big part of who we are, and we'll continue to be. So we look forward to those remarks, financial performance by Suman, then I will close, and then we're going to have plenty of time for Q&A. So let's go. Okay. First, for those that don't know, are not that familiar with our story. We're the oldest company in California is still active today. So that's kind of cool, right? So we're found in 1849, Ducommun is a family name, Charles Ducommun walked across the United States, it took them 9 months to get from the East Coast to the West Coast. Almost starve to death but made it got out to the Pueblo of Los Angeles and was a watchmaker, looked around and said, "I'm going to starve if I keep going with these watches. So basically turn to picks and axes and then got into the general store business for a long time. I guess one other thing just to start off. So there's a very important 100th anniversary next year in aviation. Okay. Does anybody know what that is. But all these smart people here live. I think someone knows, right? No. Okay. All right. So next year is the 100th anniversary of the Spirit of St. Louis and the flight by Charles Lindbergh. And the reason I bring that up is that Ducommun actually supply the tubular steel for an aluminum for that plane. And people don't realize that play was actually built in San Diego by Claude Ryan, the old Ryan heir. So we're going to celebrate that next year. Hopefully, you can celebrate with us. We're really proud of those kind of things, and we'll keep going from there. So a little bit of background of the company, which we like now just real quick on the Vision 2027. I'm happy to report that pretty much we're on target. For those getting used to our story, these numbers are the numbers we presented back in December 2022. And okay? So these numbers -- these goals have not changed, okay? These goals are the same goals. We put them out there. The team has worked extremely hard, and I'm happy to report that as we stand here today and looking to next year that we will meet our revenue on the left, which is a nice job with all the drama we have with Boeing in 2023 and in 2024 and some other things. The adjusted EBITDA margins, we signed up a 500 basis point improvement. We're going to deliver. So that's, I think, a very nice job. And then Engineered Products, which we're going to talk a lot about today. We are also committed to having that roughly 25% of our revenue by the end of next year, and that also is on track. So just a little bit of that. We will report on Vision 2027 next year. It's not going to be like, okay, we had the Investor [indiscernible] 2032. Let's forget about the usual corporate stuff. That's -- we're not usual corporate people, okay? We're committed -- we will make sure we report on it next year and meet our commitments at the end of 2027. So thank you for that. Okay. So when you set goals and you work hard, right, and you have success and -- or your people are engaged and you have good products and customers love what you're doing. This is what happens, okay? So this is a little bit -- you can see the journey for our Vision 2027. And over the last 2 years, the magnificent increase in our stock performance. This is a tribute to my team and also our loyal shareholders getting behind our story. You can see the TSR since the end of 2022 is 243%. The market cap has gone way up. And also our average daily traded volume has gone up as well. So we've, I think, really set things up nicely the last 4 or 5 years coming out of COVID, coming out of these terrible Max crashes. And I think now just a side reflecting on today, I mean, it could be a better time for Ducommun have Investor Day, right? So it's -- obviously, we're proud of what we do, but also it's going to be a little lucky. I mean this is a great time to talk about the comment on our markets, and we'll tell you why. Revenue growth, I'm not going to get into this too much. This is 2027. I know you're here for the next phase here. But we've had great growth in missiles, radar, commercial aerospace. I'm happy to report is really coming back, as you know. I was just up at Boeing with the folks a couple of weeks ago for the 737 MAX line and super impressed, Kelly and everybody is doing a great job up there. So thanks to them. And we've had a lot of organic growth in Engineered Products, which we'll talk about. How do we get there on the adjusted EBITDA margins of 500 basis points? Well, first and foremost, it's the change in our revenue mix going more to engineered products and aftermarket. That is critical. That's when I first came in, that was the #1 goal, okay, is to make sure we change our mix, and we build our aftermarket, and we build sole-source engineered products, okay? [Foreign Language], okay? And that's what we've been driving towards as well as making sure, to the right there, we're getting all the value we can and the value of the pricing for contract manufacturing. And then also we're doing some smart things, I think, on restructuring. And we've done some of that as well for footprint consolidation. Here's the Engineered Products growth, just to look under the hood a bit here. So in 2022, were $110 million. Next year, we're going to be $250 million. And I just want to point out that over $100 million of that is organic growth. So we just say that again, over $100 million of that is organic growth. So that's our engineering team is getting stronger. Our engineering teams getting broader putting out new products that customers need and want, okay? So it's not just acquisitions. I mean, acquisitions are important. They will be important part of our story going forward. So stay tuned for that. But a lot of this is on the right there, all the things we've done to build organic growth in engineered products. So we're thrilled with it. You got to see this chart a lot. This is our sort of engineered product portfolio. You've seen some of this morning. left to right, you can see all the different businesses. We've done 5 acquisitions since I started in 2017, and they're noted there. You can see them and at the bottom there. When I came in, in 2017, were 9% engineered products, 6% aftermarket. And you see where we are today, and I think we're in GJ for 2027 target. So overall, I think an excellent report card, and we're going forward. Okay. Vision 2032 plan. So let's get into it. A lot of you have seen this chart. Let me just get baseline for those that are getting -- are new to the story. From left to right at the top, you can see our revenue or LTM, our margins and also very important, our RPOs. We're very proud of our order book. The RPO has gone considerably up in the last year or so. So customers, we always say, speak with orders, right? So customers speak with orders. And so we really like that saying. And you can see we're 58% military, that's probably going to stay for a while just because of our missile radar and other products that we produce, but that's going to modulate probably a little bit in the next 3 or 4 years. You can see the mix of commercial at the bottom here for the commercial aerospace business, we're sort of narrow bodies of us. We like narrow-bodies. We do have some significant content on the 787 as well, but we're primarily focusing on narrow bodies and some other things like business jets. On the right are all the products we're on. I'm not going to go through those because Jerry and Clay are going to get into that, but you can just see the pictorial there. The range of our customers and we're mainly a Tier 1 that we do a lot in Tier 2, which we'll also highlight in the next few slides. Okay, our segments. So this is how we go reporting for our segments. Again, for those new to the story, left to right, we have electronic systems and structural systems, you can see the revenue for both. You can see the adjusted EBITDA margins. The products that are on the slide there, the highlight of products in yellow are engineered products. And then obviously, we do a lot for customers and contract manufacturing were let me just point out, again, we have a lot of IP in our processes. We have trade secrets. We have things that we've been doing for decades, okay, which we're really proud of. And we always like to think about, okay, what kind of moat are we building around our contract manufacturing, okay? We know that engineered products, we have a considerable moat, we have considerable strength for market, for competitors. And we're always trying to build around our contract manufacturing to make them stronger with better pricing power. And we'll talk more about that. You can see our key customers both at the bottom for both electronic and structural systems. So that's a little bit on our segments. Okay. It's a good-looking group, right? So this is -- I think this is important to show. First of all, I want to obviously show our leadership, but also just get your understanding of how we work in Ducommun, okay? We're very lean. But we like it that way. Okay. I think when I came in, in 2017, Ducommun had like 16 Vice Presidents, okay? That's a true story. I said, what all these people do all day? So that changed quickly. So we really just have myself. We have my 5 direct reports, and then we have the performance centers, and we'll talk about those, and those are the people that are making the products and driving the teams each day. So proud of this team. It took me 6 years to get this in place, but we have an excellent team, and I thank them for all their support. We talked about this just previously about supplier. So we like to one because we're talking to customers, we're talking to RTX. We're talking to Lockheed, we're talking to Northrop. So we get a lot of information on markets on how to get better in our business and actually add more value for that, but also we do a lot of Tier 2, which is fine as well. Tier 2 is also a very good place to be in aerospace. So that's just a little bit there. Again, you'll see this chart again and again, but this is one of our favorite charts. Again, this is just the engineered products. Engineered products as you know, is a little less than 25% of our business. And shortly, I'll tell you where we're going to take it. So that's a little bit there. On our manufacturing services, we'll talk more about this, and Jerry and Clay will help as well. From left to right, the takeaway from this chart is that we're only going to be involved in sort of manufacturing services where it's really hard to do. Okay. We only want to be in businesses where it's just really difficult to make these things, okay, because that's where you're going to develop your manufacturing IP. That's where you're going to build your moat. That's where you're going to have some pricing power. That's where you're going to have less competition because it's either too hard or there's just too many things or people look at and they say, you know what, let you [indiscernible]. And a good example is titanium hot form and super plastic forming. I mean we're the only ones, we're the top supplier outside of Toulouse that does this product. And there's other small players, but we're #1 in the world outside the OEM, Airbus. So that's a good example. Circuit cards. We'll talk about that interconnect stretch form. We do a great job versa cores or composites. So I'm very happy with where we are with our contract manufacturing and our manufacturing services IP. So all good stuff for our investors. Okay. So here's our plan. All right. So we're going to get into this a little bit we'll spend them a little more time. So no secret here. The first bullet is we're going to double down on Engineered Products and aftermarket revenue organically. So we have stronger and stronger engineering teams, bigger platforms. We're getting better every day. These things take time. But I told you about organic growth over the last 4 or 5 years has been over $100 million. So that's not going to change. One of the big changes here is the acquisition size. So we're going to basically -- we've kind of always been a $750 million, $125 million player in acquisitions. Maybe if we had to, we had -- we could go to $150 million. But that's all we could have done in the past. But I'm happy to report because of our growth in EBITDA, because of our stock price, because of all the things that we've done together that -- now we're going to be able to look at a $300 million deal. Now we're going to be able to look at a $500 million deal, okay? So we've never done that. That's the most -- it's big takeaway, okay? I mean this is fantastic news. I mean, we've I can't tell you how many times we told them back, you know what? We love it, but we got to pass. And we did that in the past because we just couldn't afford it. All right. So this time, we're going to really step it up. It's all because of the Vision 2027. It's all because of the success of our team, where the market is today in aerospace defense. So I'll be looking for us to really increase our view of what's possible for Ducommun, up to a $500 million deal, which we can now do. We talked about the defense revenue. I mean, I was just talking to Ken earlier, I mean, it's -- sometimes it's good to be good and sometimes it's good to be lucky. And we're kind of both, all right? So being in this place right now with the industry where it is, I'm just going to also mention this is late-breaking news is that our radar business was always just an okay business. Now it's really come on. I've talked about this SPY-6 forever. On the calls, I'm sure you guys are sick hearing about it. But just yesterday, I'm happy to report we got a $72 million order from Raytheon for SPY-6. That's only 2 circuit cards. So just think about that. 2 circuit cards, $72 million. We got the order yesterday. It's now on our backlog, so I can officially discuss it. And the other radar news that we got just a few weeks ago. You guys familiar with the [indiscernible] the E7? The E7 [indiscernible], which has been a lot of drama in Washington, whether we're going to fund it or not, and they're finally going to fund we just got an order a few weeks ago on the MESA radar system for over $53 million for the first 5 units. So a credit to Jerry and his team for doing that. Thank you, Jerry. And really delivering. So we have this amazing missile bid, we'll talk more about that, but this radar business as well, just from a lot of hard work the last few years is exploding. Okay. Number four, commercial aerospace production ramp -- we all know that's going to happen. Kelly is now at Boeing, Airbus is going to do their thing. The most important thing for our investors is that it's going to require very little capital. So we don't get to build a new factory, do a greenfield, spend your money on things that maybe we don't really want to. We don't have to do that. So that's going to be terrific for the financials. Strategic pricing, repricing and just -- that's something we live and breathe every day. I will tell you that our Airbus contract is up at the end of this year. So we're repricing with Airbus. So that's the news. And -- so more to come there. We're in engagement with them right now, but that contract ends at December. And we're highly engaged with Airbus, and we'll have more to report out on the quarterly call. So repricing, strategic pricing, engineered products, build the moat, all the things that we need to do and that you want us to be doing. Finally, on the last one, we're even though we're still in -- we are going to add talent, top tally of the organization, we have to with these numbers going up, right? So we're going to have to have some more talented executives. I always believe in the [ Jack Welch ] rule is it's people first strategy second. So people first, then strategy, not the other way around. So that's going to happen. Goals on the right. We're thrilled with this revenue goal. We hope you are as well. We generally have always been about a mid-single revenue player year-over-year. Now we're really stepping up and this is the CAGR, this isn't just 1 year. So we're thrilled with that. We're going to sign up for 600 basis points of EBITDA. We're not going to hedge it. We're not going to do 400 to 600, and we're going to kind of have an opportunity to kind of. We're going to go for 600. Remember, in 2022, we said 500. We didn't say 300 to 500. That's not who we are, okay? We basically say this we're going to do and this is where we're heading. Our EP mix is going to be 40% I'd like to see it a little bit higher. We'll have to see, I mean, 5 years in a long time, 5, 6 years a long time. So -- but that's the floor. And then aftermarket 20%. All right? So that's -- we'll talk more about, but that's kind of the headline right there. Okay. How are we going to -- the road map now on Engineered Products. We're going to have the new product pipeline. I told you about organically how we're going to do that with new content moving to adjacencies. The volume growth, we've seen good growth across our businesses, and we talk about pricing. So it's basically new products, ride the volume and making sure we get paid for our value. That's the goal for the 40% and 20%. Now the acquisition piece I talked about, we're going to step it up here. This -- again, this is something that's brand new, especially for new investors. This is something that we could never do. I've been to comment almost 10 years now, was not happening. But now it's going to happen, okay? So we're excited, and we love big deals. We just couldn't do them before. So we'll do the step change deal. We'll continue with the tuck-ins. And we're going to get to this 40%, and we're excited to deliver for you. Okay. So that's a little bit on a little bit on M&A. We know about the defense spending. This is sort of where we think it's going here. So I know you're all clued in on this, so we don't need to spend a lot of time on this. But this is an important chart here. This is the missile and weapons part broken down just for Department of War budget. What we see for the next 6 years, including 2027. And you can see the missile and weapon number is really big. And on the right is all the programs that we're on. And just as you know, we -- all our revenue, everything to date does not have any of the 7-year deals in it. So that's all coming forward for investors, all coming forward for Ducommun and we'll make sure you all know that. And we're waiting for major orders, especially on the Tomahawk. We think that's imminent. Now that Raytheon has their $22 billion order for Tomahawk. We know about Standard Missiles. [indiscernible], PAC-3 is just I was just again talking to Ken earlier, I think the 3x of the PAC-3 is going to be higher. We're major players on the PAC 3. We're the sort of go-to person for circuit cards for Lockheed on PAC-3 in our Tulsa facility. And I think that's set going to go higher. I mean I think interceptors are going to be even more demand in the next few years. So stay tuned on that. But this is a great chart for us. Again, this is a great day to have an investor meeting with all this in front of us. We hope you're excited we are, too. You can see on the left here, just the many products that we support. You can see in the radar, the SPY-6, and the [ Mesa]. So I mean that's -- I mean our SPY-6 [indiscernible], it's over $100 million, right? [indiscernible] thank you, Jerry, is right on that. Good job. And you can see -- so that's a new piece for investors. I've been talking about it for a while, but it's really starting to come home now as well as the missile is just off the charts. And you can see on the right here, our franchise, we expect mid-teen CAGR through 2032, which is a big number. It's a big number. So we're very excited. We hope you are as well. And also, let me just say about the new defense. On the left here, you can see all the things we're doing here, missiles and radars. We're in the Navy do good work for the Navy. The war fight is there as well, hypersonics and the counter UAS, but we're also starting to work with Ander. So Adderall is actually our neighbor. [indiscernible] they lucky, they get to work in Orange County, California, too. Like me. So they're out there in the sun and so am I. And I'm also very happy that we have a better and better relationship now with [indiscernible], and I have developed a good relationship we're really working hard with AeroVironment to help them with their products and obviously, Kratos and a few others. So we are not only the legacy thing, which is going to be there for a long, long time. So we're excited about that. We're also working with these new players -- it's a little tricky because the new players, if Lockheed is going 50 miles and now, the new players are going 150 miles now. I mean just await is. So -- but we're small enough and we're lean enough that we can keep up. So we're excited about that. We know about commercial aerospace. It's all great for Ducommun. We're going to get to 63%. The guys will talk about that later as far as picking up content on lots of things. So we're excited about that. We make skins. We make different things now for the MAX. We never made skins for the MAX before. I mean this is like a really big business. And when Boeing Wichita looks at their business and they're going to go to 6 fuselages a month. I mean, to capitalize that and to hire all those people to get to 63, they're going to think twice and I know that. So they're going to look for us to maybe pick up 15 or 20 skins. And maybe we just like 4 skins now, and there's over 40 on the fuselage of the MAX, but we think we're getting a lot more share, and these are things just that are coming our way. So it's all just baked in the cake, as they say. So lots of good things. Airbus will do their thing, and we will get the repricing done. I'm fully confident with Airbus in the next month or 2. Okay. The guys will get into this. This is just sort of the key commercial platforms we're on. You can see the shipset numbers below. Again, this presentation will be on our website this afternoon. As standard with us. It will stay on our website. It will not change. Just like in 2022, we put the presentation on the website, and it stayed there, okay? This is our commitment. This is who we are and transparency, 1,000%. So we'll talk more about that. Okay. I'm going to wrap up here and turn it over, but I do want to just kind of go again over the Vision 2032. So no surprise here on the DoubleDown organically for EP and aftermarket revenues. This is something we really couldn't talk about in 2022 because we didn't really have any [indiscernible], we really didn't really have much [indiscernible]. We had -- we did okay. But now after 3 or 4 years, building out the teams, getting better talent, new products, knowing what we're doing. I mean, this is going to be a home run for investors. This acquisition size is a big deal, okay? Again, I'm just being honest with you. We never thought we could ever do a $500 million deal. I wish, and I wish, but that was just not in the cards and now it is. So that's a huge thing for us. $300 million, $500 million, that's wonderful. I talked to you about the fence. The guys are getting to it more commercial aerospace, only one way, but up again, just count on us for the pricing, count on us to sell value. Look, we -- when I came in to Ducommun in 2017, -- the thinking was it was all about just the size of the order. It wasn't about what you were going to make. It was just like, oh, we got a $50 million order. We got to win this thing. Our life is over if we don't win this, right, okay? And the answer to that is no, it's not, okay? If we're going to sign up to take this kind of order, okay, we have to get paid. We have to get paid for our effort and paid for our value. And that's totally been changed. Okay, over the last 7, 8, 9 years. And that's a great thing for investors. And I'm going to tell you this, we're fair with the customer. If the customer can get a better deal and go down the road and we can't match the value hey, we'll work out something else working on something else, nothing personal. Well, we support the customer and don't get me wrong, the war fight a whole thing, but it's just -- that's kind of how we operate. Obviously, the talent you see the goals here, okay? So you guys will see that more. And okay, I'm a little bit early, which is good because I want to keep be efficient here. Now I'd like to introduce Jerry and Clay and they're going to walk you through some of our wonderful products.

Thank you, Steve. Thank you. Okay. Hello again. Clay and I are going to give you a little more color and background behind our structures and our electronics. And we'll talk about who we are today, what our focus is and then most importantly, what's the trajectory? What are we looking at? What are the key things that we're focused on going forward. structural systems. So highlighted here our key products. And again, this is a mix of engineered products and contract manufacturing. And we'll talk more about each of those, but contract manufacturing from our presence. These are highly proprietary processes, it's niche processes. It's the most complex products within these arenas and where we have positioning, leverage, pricing power, and some exclusivity with the competition. [indiscernible] Lodge panels, firewall exhaust, forming, hot forming, super-plastic forming, flight control surface assemblies. Metal bond composite, right? An example of that is the Boeing spoilers, the true shipsets that we referenced earlier. [indiscernible] power units, rotary blades. The example here is the Apache tail rotor blades. So we're on 100% work share on the tactile rotor blade. We've had that for many years. We did that out of our New York facility. Missile assemblies. We have a large array of products, significant, and we'll talk about that more. But electronics and structures as well. Structure as example is a toll missile case acquiring array of electronics that go across the missile platforms. And then MAG sale extruded thermoplastics, the air structures that Clay shared earlier, key engineered products that we'll give you more color on. So looking at the sectors kind of a highlight on the top, you look at the key point here is world leader in titanium, right? Titanium for us are the aerostructures on the commercial platforms as well as key defense programs. Proprietary process internally. We're 1 of 3 in the world. We're openly regarded by our customers as a world leader in this arena. We have the greatest capability, the creates a depth, the greatest capacity. And so we have that leverage. We have that pricing power. We've been regarded for our world-class performance with awards. And most importantly, continued awards and pricing power with that. We're well positioned across the commercial platforms. Steve shared, the single-aisle A320, the MAX strongly positioned there, A220 and then defense, we say robust defense and growing. So we'll talk about the key programs, our focus there but we're heavily weighted. Our growth trajectory, along with the commercial growth, the recovery is on defense. And then we do that through 8 scalable performance centers, and we highlight the term scalable. And we're very well capitalized today. So if you go back several years, the steps we've taken to prepare for the rate ramps on the commercial side, what we've expected in the market on defense has grown significantly beyond that. But we've equipped ourselves to do that. We'll look at what that CapEx investment looks like going forward. but it's very minimal in contrast to the growth and to the synergies that we're going to gain from that. And then the VersaCore projectary process, a process within Ducommun. We acquired that many years ago. And at the time, there was a high-tech product called a surfboard, right, in California, and this product process was used to produce surfboards. So we took that process and we industrialize it and we put some engineering to Capstone on top of that. And now we produce aerospace products. Key product is the -- one of the key products is the blocker doors that go into GE LEAP-1A engine for the A320. So we're 100% work share there's 10 blocker doors around the circumference that pivot and manage the controls of the thrust reverser and then that we have fairings and panels within that nacelle. So we have actually assembly parts within each nacelle, 52 per ship set on the GE LEAP and the A320. So key markets, as you can see, military we weighted 34%, our narrow-body, 35%. And these are, again, looking where we're at today and with the growth in the single aisle, both the 37 and the A320, we expect that to grow. Live body and bizjets and then commercial aero, which is weighted on rotorcraft. We're also focused on opportunities where we're increasing our work share, and we're increasing the scope, the part count and so more to come on that following in the near future here, but we're adding to our bill of material. Our customer breakdown, you can see the weight here with Boeing, our Shenyang aircraft, Again, we produce the entire fuselage for the A220, all the skins, okay? And we ship those to China. They do the interior fasteners and then it goes straight to Airbus to several plants that produce A220 today. SC engineering previously known as Middle River. It's where the GE LEAP 1A product goes. And as you can see, RTS, TIG HEICO, which is product that goes to Sikorsky. We work very closely with Sikorsky along with TIG and then all other is noted. Platforms, as we spoke to, you can see that the key programs are all noted here. So key sectors and applications. Again, commercial aircraft, military, commercial rotorcraft, our missiles, fixed wing and other and then our biz jets. As Steve had shared in one of his previous slides, again, this SPF, the super-plastic forming, the metal bond, the composite, both the process that was designed for that product, such as the spoilers and then the VersaCore technology metal bond process with a core that's proprietary that's under our IP. And then, as Clay shared earlier, share more, are excluded thermoplastics, which is a highly proprietary process for a very specialized high requirement plastics, and that's been one of our acquisitions that's been very successful. Military rotorcraft, commercial, again, titanium [indiscernible]. Example, the CH-53K. We have the [indiscernible], and that's a complex assembly, titanium and hard metals, that we produce in our Osaka New York site. And then we also have the inlet DUCs as well, which is a mix of metal and composite that we produce. [indiscernible], just a ride array of titanium products and then ammunition handling and then the Fast fin, which Clay will share more about missiles, okay? Missiles is a significant growth trajectory for us today. Significant backlog. And we're the incumbent and all the programs that we'll be looking at here that Steve has shared. [indiscernible] from the structure side, we build the SMT Darsefins, initially that was an opportunity for us. There was a customer design. We looked at that design, we had a -- we felt a better solution to that design. So we designed that [indiscernible] product collaborating with Raytheon, obviously, their IP, their formal design, their release, but we produce those as the incumbent. And just an example of where we integrate with our customers on the design side, puts us in a strong position as the incumbent and for legacy demand going forward. And then the biz jets, again, super plastiforming, stretch forming and then the winglets and propellers again, part of our engineered products.

I'll jump in here, Jerry. As Steve pointed out, you're going to see this slide again and again and again and again, we'll say it two more times here. Within structures, I just want to talk about some of the engineered products portfolio that we have here. We're going to dive deep into each of these. But this is our playbook. This has worked really well for us with each of these businesses, proprietary design sole-source positioning, aftermarket content, that's how we win in these businesses. We have pricing power. And good news is also as we're continuing to develop new products, internal research and development as our new products hit the fleet. And as we service them in the aftermarket, we're always looking to invest to make sure that we are on the cutting edge of product. On to the next slide, Jerry. All right, magnetic seals. We love magnetic seals. Once you're spec-ed in, designed in, you're there to stay. We've been doing magnetic seals since 1954. We are the leading designer of magmatic seals. If you flew here on a 737 or a 320, 321, you were flying with magnetic seals. We're proud of what we do. Anything that really spins you're going to find magmatic seals in those that were here for the product showcase. We showed you several different designs of those great business for us. We've -- we've grown that business 3x since acquisition. And some of that is just through restructuring some of our channel partner deals. We go direct now to OEMs. We go direct to DLA, which now we have control of that. In the past, they used other channel partners to do that. And it's -- it's helped us tremendously. On the right side here of the slide, ammunition handling system, Nobles Worldwide, near and dear to my heart, that's how I came to be part of Ducommon Nobles was established in 1948 and it is the center of the universe when it comes to ammunition handling systems. When we were acquired, we were just mainly dealing with components. We are dealing with shoots, ejects, some boxes, but the strategy was we were going to go more of an engineered product meaning we are going to design systems, other systems. Anywhere the ammunition was stored, we were going to take it to the gun, and that's been very successful for us. We've grown our content 2x to 3x on the ammunition side. Again, we do have the subject matter expertise in engineering. We've got a great team out in [indiscernible], Wisconsin. And I do want to reiterate, we are the center of the universe. We were just awarded a contract through Rymatel Italia, which is a business that usually would work through Germany for their shots. And now we're providing these shoots in for a new system that they've been fielding for quite some time. So we're also displacing others. Talk a little bit about next generation, what's coming next, 50 millimeter. The XM30, some of you may have heard that program from -- if you're in tune to defense, it's the Bradley replacement I've been part of the Bradley replacement for 20 years. And I -- my fingers are crossed that we're finally to the point that we are going to replace the Bradley and we're awfully close. The down select for the M30 started years ago. And we're to the point next year where they will choose between [indiscernible] General Dynamics Land Systems. I'm happy to say, proud to say that we are on both teams. So well positioned well positioned for that down select and looking forward to supporting the war fighter. That program will grow our business tremendously. Just the truly nearly exponential growth when this thing is in full rate production, and we're servicing it in the aftermarket. Another component with 50-millimeter speaking directly about 50-millimeter new program, Canon-based their defense. Again, those who weren't here for the product showcase speaking a bit about drone defense drone to feet. We talk a lot about missile shooting high-dollar missiles at drones, cheap drones. We talk about shooting lasers. Lasers are not -- they don't operate in all environments. So at the end of the day, you still need a direct fire canon system. And we are partnered with Northrop Grumman on their Canada-based air defense system, which is part of the golden dome. And we are developing a hybrid system that as deep magazines. And again, that's -- we're seeing huge quantities for it, and there's demand across the globe for that specific system. And with that, I'll turn it -- I'll go over to BLR Aerospace, aerodynamic Structures. Again, another business near and dear to my heart. Steve has entrusted this business to be out there in the Pacific Northwest. So I -- so you're right now the weather is great, but it's not about me. So maybe we can find another business, so I can go somewhere else just get it. So main products there Fast Fin. Fast fin. We modify tail booms on helicopters bottom line as we reduce drag and increase lift. And we are from the factory, we are factory installed on the Bell 412. We are factory optional on the H125. And Black Hawk, I know some of you have we've been tracking our progress there with the US and Ls that are leaving the U.S. Army fleet, they're going into firefighting outfits those firefighting outfits need additional if they come to us for that additional lift successful for us. And as more and more of those aircraft hit the fleet similar to the Bell 412 I might add from -- went back when those were retired from the Army we will start seeing a pickup in business there. We have a partnership with MT Prop on the fixed wing side. We are exclusive distributor of MT Prop for King Air. We also are the patented provider of King Air Wing lens. We have an STC for the 200. And we've -- I'm happy to say that we just received our supplemental type certificate for the 300. So we will be servicing the aftermarket with the plan to -- with our friends at Textron capture the -- that OEM business as well. So a lot of good things going on there. I just want to touch base on one more initiative we have. Because our MT relationship is so successful, we're looking to clone that and look for other businesses where we could distribute 4 different businesses, mainly in Europe, aerospace businesses, and there's an outfit out of Italy Bose Aerospace that we've just signed an exclusive agreement with and we will be distributing their products into the Americas. Products I'm excited about are the baskets working on STC right now, mirror systems, and they have a next-gen camera system. So good relationship, and that's just starting now, and we're looking to push that forward. Lastly, I'll just touch from a BLR perspective, the Black Hawk. I will say that within 12 months, we will be flying on a U.S. Army Black Hawk helicopter, both the victors and mic models. There is challenges at altitude, and we are working directly with those units that are required to fly at altitude, and we're working on a program to integrate and test. Moving on to Certified Thermoplastics. Jerry touched on this as well as I did in the showcase. Highly proprietary process we use for extrusions. We compete against Pexco, we do hard things. We extrude material pelt that are resins that are difficult to work with to keep tight tolerances and we've got a great team out in Santa Clarita, who is doing that for us. And again, most likely if you've probably flow in with some of our products on the way out here or on when you do travel. Turn it back over to Jerry.

Okay. Well, a little more color on our superplastic forming Again, we're the largest non-OEM provider of SPF and the other OEM is located in France. So you can probe figure out who that is but we're a key customer and provider to Airbus on this as well. So again, we're on all the leading platforms, commercial. We're on defense, proprietary process, and we have significant capacity that we've made available. We're growing with the program rates, but we're also capturing focused on capturing new part numbers and more to come on that, but we're very close to that, not ready to announce anything yet, but we're very close to capturing additional part numbers for the leading platforms. We've invested in our technology -- we're well positioned today as shared. We spent about $40 million over the past 8, 9 years on expansion, press capacity and all the ancillary equipment. So we're well positioned today to support the growth rates and to add additional part numbers to our bill of material to our backlogs. Aluminum stretch forming, and we shared this in the showcase, leading provider, stretch form skins, again, Steve shared, we're on the MAX now, and we've been working very closely with Boeing. Steve was in Seattle a couple of weeks ago. We met with Blaine Steve and I last Friday. And executing together and partnering on increasing that work share for additional skins to support Boeing Wichita where those skins are produced today. Airbus and Boeing, when you think of structures relative to titanium, metal bond assemblies, the products that we produce for Airbus, we've been engaged with Airbus for about 10 years. We've been a top provider. We've been receiving the top award. It was in Tolouse a couple of years ago and got called to stage. We've got a big detailed parts partner, D2P award for performance. We've become a growth partner with them a trusted partner. We've been performing at 100%. So we're highly regarded for our performance and as well as the niche process and the key position we're at with the super plastic forming as well as hot forming, but there's not really an alternative other than to bring that in-house, OEM bring it in-house and then there's one other. But we far surpassed the capabilities and the scope and the depth to perform. So again, it's contract manufacturing, but it's highly proprietary IP. It's our process -- and we're able to produce large complex, highly contrary parts to all the requirements. Boeing, a lot of legacy here since the mid-60s, really the same story on the SPF, the hot forming on the metal bond process, as we shared, a key example of that is the Boeing 737 spoilers. We produced the whole shipset to spoilers in our Games Mexico operation, which we put in place who's been there for quite a long time, 12, 13 years, the new building we put up about 2 years ago. It's a state-of-the-art facility, and it's positioned to grow and with the capacities that are needed. We note that [indiscernible] just as an example, sole provider. And we're continuing to engage highly engaged with our customers, both Boeing and Airbus on renegotiating agreements where we can pricing leverage as well as increased opportunities, new part numbers [indiscernible]. Just a few thoughts on the words on our [indiscernible] operation. So today, it's Metalbond, it's VersaCore and it's hard metal fabrication, but heavily weighted on the metal bond, the VersaCore products, despoilers, the toll missile case, the Middle River, the GE LEAP 1A engine product key focus there. We've expanded. We have about 115,000 square feet. We have about 200 employees, and they say, well, why Mexico? Logistically, it's an easy spot to get to for us. And we found that the talent that we're able to draw on board, the technical talent, the technicians, the engineering has provided leverage, pricing power, margin power. And it's been a great operation for us. And so we've reset that. We've expanded. We've invested in capital, and we're pretty well set today with what we have there to support the rates and further growth. highlights across structures. Again, niche engineered products is key, niche processes where there's contract manufacturing. We're very, very focused on value pricing, value pricing and how do we acquire value pricing is because we have niche processes. We have state calls at a moat that we built. And we're able to apply that leverage based on a simple as this sounds, 100% quality and 100% delivery, right? When you're talking with customers about pricing and opportunity delivery and quality is ultimately the end objective, and we've been providing that. We provide that. Capacity, we have sustained the capacity. We built the capacity. We're positioned today for the growth. We've expanded in all the key areas, super-plastic forming, hot forming or composites. Our footprint in Mexico has been a success story. It will continue to grow and we'll continue to seek opportunities to apply the VersaCore technology across metal bond opportunities. So we're very excited about our structures, again, both engineered products and highly proprietary process for contract manufacturing. So we'll jump over to electronics or electronic systems. Our key products as shared in our showcase, ruggedize interconnects. So our whole strategy behind electronics isn't to be a circuit card provider. It's to provide solutions to our customers for the programs and the platforms, and that's really key. And those solutions equate to the most complex, the highest requirement products that are within the system. So regulize interconnects. These are examples of the Tomahawk missile and other key defense products where the requirement, the test requirements, the environment that they are in, complex supply chain, test requirements is really our focus. As shared circuit card assemblies, the next level, control boxes, a key focus for us. Avionics, engineered products, lighting production systems, motors, resolvers, okay, motion control measuring that motion and then custom RF components. Again, electric medical switches, which we're taking the RF signal, and we're communicating that to make that switch command. Who are we electronic systems. So again, considered a leader by our customers, and we're hardly regarded by our customers for the products, for our performance that we're operating in, very, very harsh requirements that our products work through, high requirements from a product test requirement. We have a trusted domestic footprint. So the only out-of-country facility we have is in Guaymas, Mexico, or the electronics is domestic. Again, highly, highly focused on our robust high growth on defense platforms. We're the sole proprietary market position with these niche segments across the board. And then we do all this through 7 scalable performance centers. And we'll talk a little bit about the CapEx investment we've made and what's still in front of us, but very, very minimal in contrast to the growth trajectory that we're on today. end markets heavily weighted on military and defense on our electronics commercial and other noted customer breakdown. Largest customer is RTX. So we're highly, highly engaged almost on a daily basis with Raytheon directly myself and our team very much. So across all our customers. Northrop and Steve shared the Mesa E7 win. So a great opportunity, but we're continuing to grow with Northrop. They set up a supplier council, a small group, with their senior team and fortunate to be included in that panel. So we have a lot of engagement with Northrop -- and then other customers noted a Simmons precision, previously noted as Collins. So recent PAC-3 award their platforms, we can see missile radar, electronic warfare, military, commercial, F-35, heavy content and F-35 another. So the key here is this is our snapshot today their growth trajectory heavily focused on defense, heavily focused on missiles, where we are the incumbent, and we're working through those agreements today literally on a daily basis to set forth the next pattern for the horizon in front of us. Key sectors applications. Again, I'm sure the key points here, but missiles, the military aircraft, UAVs, naval nuclear submarines. So basically, what this depicts is land sea and air, land and are across our electronic sectors, space and communications. We focus on space and communications where there's ultra-high requirements, there's some scale to that. And so we're growing in that arena as well. Our key programs, as we shared in the previous slide, noted, again, it's highly proprietary processes complex, the niche processes, difficulties and the longevities to be qualified and we're positioned today on the programs that we're on. So our pricing power is strong. Our opportunities to continue on these programs is solid based on the difficulties to make a change with these sources. And the capstone behind all this is performance, right? We deliver on time, we're delivering quality and we're maintaining a high engagement with our customers on all the initiatives that they take place on. So Steve shared this slide. Key takeaway for us, the highlight here, missiles and weapons, okay, new missiles and weapons. And if you look to the right, the programs noted, MRAM through that, all in between, we are on all these programs today. We have our bill of material across all these programs today. We are the incumbent. We've been regarded as a top performer -- we're working today through the rate increases, delivering to higher rates, and we're deep into the process literally on a daily basis with our customers. I am , our team is on setting up the next wave of agreement. As you know, the landmark agreements, Tom Maxis an example of that. So we'll be meeting week after next in Phoenix on the Tomahawk and working to get closure on the next wave, the go-forward plan and agreement for that. So very strong position. Our focus is to support the rates provide value pricing, not low pricing, value pricing that's aligned with the performance and what we've contributed, what we do contribute, but we're very well positioned today to execute to the rates forecasted the portfolio, you can see the programs, you can see the growth. A key part of our vision. Steve shared, 2032 vision, we consider ourselves a franchise, missile and radar proud to share the wins that we just had. We had a nice 1 yesterday. Timing was great for that to support the CAGR in our Vision 32. So scaling our production to meet capacity. So the question is, can you do it, right? It's always a question for our customers. Can you do this? Are you prepared to execute. So noted are the kind of the snapshot between Apple Japanese Huntsville, Appleton and Tulsa are focused on highly complex defense circuit cards as well as the next level controller Joplin, harness, interconnect, cable assemblies, Huntsville, Arkansas an array of electronic controls, complex SM-3, SM-6, stress vectoring is an example of a Huntsville product. So noted is the CapEx investment, and this is looking back a year looking forward, what's the investment to ensure that were established for our capacity requirements going forward we're equipped with the automation, with the technologies that are needed to support the programs, our competitiveness and the end requirements. So about 80% of this spend has been launched. I mean about 90% of it by the end of next year will be spent. So we've either acquired it or it's been launched for the most part. And then as those lead times are in play, the end of 27 will be where we're at. So there's pretty minimal CapEx investment. A large percentage has already been spent. It's already behind us and then the balance of it will read through now through the end of 2027.

Here's that slide again. I can't promise this is the last time you're going to see it, but this is the last time I will brief it. So within electronics with our Electronics Group engineered products from left to right, human machine interface products, person California. Lightning protection also in California, RF switches and motion control. Steve hit on this. This is our playbook, proprietary design, sole-source positioning, aftermarket content. That is what wins the day for us again and again with the portfolio -- with this portfolio here. All right. Human and machine interface, we've been doing this in Carson or we've been doing this for 50 years. We designed and manufactured proprietary sole-source push button, rotary and electronics switches used in military and commercial aircraft. We talked about it at the product showcase display, one that's very interesting to me is the FAA team watt program. And the reason that was developed is when the sun would hit the cockpit just right, you couldn't actually see the warning panel. So we redesigned a fix for that, now it's going into all FA '18, which is great news. Engine start switches and Jerry has some other news on -- from a human machine interface wins.

Yes. So as we shared, we're on the F '18, we talked about the push button switches and more to come that we're working through so that our future is bright and we're highly, highly engaged with our customers. We're building the products. We're designing the products. It's our IP. And so there's typically no work share. It's our product, and we have the OEM and the aftermarket. So it's definitely a growth trajectory for us, and we have an aggressive growth target, and we're highly 100% confident we're going to hit it look at our engineered products in the Carson facility operation and we've got a good future ahead of us with ACMI specifically.

Then on lighting protection we shared that an aircraft is struck by lightning once a year, 1,000 flight hours, if you haven't been in one, maybe it's close. But the good news is, we've been protecting you since 1982 from lightning protection perspective. diverter strips protect avionics, they protect electronics surge suppression. If we do have big surge within the aircraft, obviously, we need to express that before it moves on to critical components, and we're doing all that in Huntington Beach. I mentioned today, shock tape. Shock tape, we were awarded a contract last year through Lockheed Martin for that to help with lightning protection on the actual launcher itself. And we're qualified. We don't have a production contract, but that's an area that we're going to look to it's an adjacent market that we're going to look at. Obviously, you need lighting protection across the board. Why not launcher? So we're going to be pushing into that. And another recent award for us Starlings when you guys are accessing the Internet, please think of us because we're providing that lighting protection for those domes on the sterling piece as well.

So motion control, again, motors, resolvers, motors, control motion and the resolvers measure the positioning again, proprietary design, OEM, aftermarket, our IP. We're on Lance and air, highly specialized products and get our customers come to us for their solutions. The radio frequency products, RF products, focused again, electrical mechanical switches, processes the RF signal within the system, and then we direct that to given needed commands highlights. Just also before we go to want to share key new product line that we're working on, and we're in really strong, great position. So it's LVDT, linear vein, directional transducer. And so what an LVDT does it measures the positioning of a flight control actuator, right? Measures positioning, the electronic signal that measures that positioning. So every flight control actuator requires that positioning, sensing that measurement. And so we're currently -- it's a brand-new product line for us, and we have 13 that we are working closely with an OEM with leading flight control provider. We have 13 in design. We'll have those 13 designs completed this year, and then those will transition. And the strategy here is to get on board a brand-new product line for us, get these implemented into the flight controls and then continue to cascade this throughout not only the target initial customer but throughout other platforms. But again, all the flight control actuators across every airplane has an LVDT and it controls and measures. So we're quite excited about this. It's a leap that we took, and we have a really strong engineering team. They've gone through the development. The first design is complete, and we're working through the balance, which are very scalable. And so we're more to come on LVDTs, but this will be a great growth trajectory, we believe for us to do coming. We just emphasizes the key focus here is -- it's look at opportunities on ensure products. Where is there a market need, where is there a competitive advantage where there's a flyer and the competition that we can capture. We want programs of longevity and depth and scale. And that's our focus. Again, being sole-sourced proprietary has been our strategy as our focus is where we sit today. That's a key part of what we're looking at going forward. and then value-added pricing, right? Where do we have the leverage? What do we have the pricing power, how do we gain that pricing power. That's our focus. And the First thing, without question is performance, right? We're performing. We're delivering the requirements that the customers have, and we're solving something for them. It's a solution, right? And we put value to that, we put pricing to that as we go forward with incumbent products and with new products. So we're well positioned for growth. I mean our book-to-bill has been strong. We expect that to continue to strengthen from where we've been and we're well positioned for the growth. We've made our investment. Most of that's behind us. We have some remaining the balance of this year into the first few quarters of next year, but we're well positioned to support the programs that we run in those growth trajectory. So we're very excited about both aerostructures, structures and electronics, and we thank you guys for your time.

Thank you, Jerry and Clay. And I hope everyone is really excited with what you've heard so far on our Vision 2032 strategy. We certainly are as a management team. We appreciate all of you here attending in person. And also, I've been told we have more than 3x as many people joining us virtually. So thank you, [indiscernible] to those joining us on the Internet here today. So what I'll do now for the next 20 minutes is take you through our M&A strategy and then also provide a financial update. And that will take you through the close, and Steve will wrap up then with his closing remarks, and we'll have some time for Q&A as well after that. So the M&A strategy. I want to start off by saying that by 2032 and at the same time to grow the aftermarket content in our revenues to more than 20%. And in aftermarket typically is a subset of our engineered product businesses. So as the engineered product businesses grow aftermarket content grows as well. And as Steve has told many of you, and he always reminds us on the management team, a successful aerospace and defense business has to have aftermarket, and that has been one of the key tenets of our strategy ever since he took on leadership of the company. We've had a great track record of doing acquisitions. If you look at the 5 deals on this page that we have done under the current management teams tenure, we have bought businesses ranging from an enterprise value of $30 million to $115 million. I won't go into the individual product line details, again, Jerry and Clay talked about that already with you. But each one of these businesses have the attributes I discussed just a short while ago. they have design IP. They're specked into the drawings of their customers. They are sole sourced. They have access to the aftermarket for those products that they make and they are low capital intensity. All attributes we really love and our present in these businesses, and that has been key to our success. As we look to do acquisitions of businesses with these attributes, it's not just about acquiring these businesses, but then what are we doing with them? How are we creating value for our shareholders? How are we creating a stronger return on the invested capital once we bought these engineered product businesses. And these metrics out here for the 5 deals that we have done really reflect that. First, and we have been able to reduce the multiple that we have paid on these transactions we have done by AX across the 5 transactions we have done. There's an ATX reduction in the multiple from what we bought them at. I mean all of you know engineered product businesses trade at pretty healthy multiples. And so on average, we bought these businesses at a mid-teens multiple. They are now with the EBITDA expansion that we have done, we've been able to reduce the effective multiple on those down to mid-single digit which is a great outcome for our shareholders and tell you how we have created value from each one of these investments we have made in the 5 companies that we have bought and should give you confidence in our ability to be able to do this going forward. Our return on invested capital, as you would expect based on the previous metric I said, is really strong. We have well into the double digits return on net invested capital on average across our five acquired business. businesses. And we have been able to meet and exceed our revenue and EBITDA margin targets cumulatively across these 5 businesses. through the end of last quarter. So again, great execution on the part of the team here to be able to deliver this kind of value. And we buy these businesses that are either family-owned founder-run businesses or businesses that may have been through one round of private equity and there is a lot of value that remains to be created at these businesses. We bought the business [indiscernible], which we talked about earlier, which was run by two brothers who inherited the business from their father. And there hadn't been a lot of investment in that facility for decades. So we came in and over the last 4 years, we have invested $4 million to $5 million of capital, and it's a brand-new facility in terms of all the equipment there. And as Clay mentioned earlier, we are now in 4 to 5 years, generating 3x the revenue in that facility with that same footprint and with approximately the same number of people. which is incredible, right? So you can only imagine how much more money we are making in that business since we bought it. And that's what gets us that 8x multiple reduction. That's what gets us the double-digit return on invested capital. which you should be really happy about as shareholders. How do we do this? We have a playbook. We have a playbook where we -- when we are buying a business, we put together for us a clear road map of how we are going to expand the EBITDA. How are we going to create value? We have a detailed road map going into the acquisition. And then once the deal is closed, we operationalize that plan into clear action items were signed to specific individuals and then tracked daily weekly, monthly at all levels within our company to make sure we're executing on that plan. And that programmatic approach is what gives us the success on the deals that we have had. How have we created the value? I gave you a couple of examples. But we buy these businesses to invest and grow them and to make them more profitable. And that makes us more attractive to owners of businesses as well. Our focus is not to cut our way to success. And Steve often says is you can only generate higher margin by cutting our way to success for 1 year. And after that is gone, it's already in your P&L. But if you're investing in growth, if you're investing in new product development, if you're investing in engineering and sales resources, if you're investing in equipment and machinery and processes that will drive better productivity, that will generate rewards again and again and continue to help you improve margin in that business. And that's what we do with our acquisitions and value pricing. These are highly engineered proprietary products and bring a unique proposition to the customers and the end user applications that they serve. And we should, where we are bringing this kind of value, get paid for it. And we make sure that is the case for both our existing portfolio of engineered product businesses but also certainly for our acquisitions. And that has been also a key driver in our margin expansion story at our acquisitions. So we've had a lot of the success that I've talked about here with our acquisitions, but we also recognize that we haven't done a deal here in the last 3 years. So what are we going to do differently going forward that will give you the confidence that we are going to be able to execute on the goals that we have on Vision 2032 for our acquisition strategy. First, we have deployed additional resources. I have a new Director of Corporate Development, who is highly capable and has been in the job now for more than 6 months. And we are building up the team underneath him to add more capacity to the M&A team to be able to do deals. We are working actively to build out our proprietary pipeline so that we are not just looking at bank run auction processes, which can sometimes be frothy. I mean we are well networked into the broker, the dealer network, the broker network, the M&A boutique banks that are doing deals in the space and they understand our acquisition strategy, but we are also spending a lot of time building out our own proprietary pipeline, both through internal resources through a search firm and in other ways, so that we have an active pipeline that we can engage with. And then the other very important thing that Steve highlighted is that we have expanded our aperture. We have expanded our aperture to be able to look at larger transactions. There have been numerous instances over the last 5 years where we have had to give up and on an opportunity because it was beyond our size range. We had a very narrow range of options for us in terms of deal size. We could look at things up to $125 million, maybe $150 million in enterprise value. Beyond that, it was difficult for us to be able to execute a transaction with our capital structure at that point. But now with the growth in the EBITDA in the business, with the equity valuation of our stock where it is, we have the ability to do much larger deals, 3x to 5x what we have looked at in the past and be able to do deals, as Steve said, that are $300 million in enterprise value or even $0.5 billion in enterprise value we have the ability to be able to fund those kinds of transactions that increases the aperture, that increases the scope of opportunities that are in front of us and gives us a much better chance of success moving forward. So we will look to do larger transactions. We will look to do the tuck-in acquisitions that we have done and been very successful with, and we will grow this engineered product portfolio from 23% to 40% or more of our revenue base. as you can see on the bar chart there on the right. We have the road map to get there, and we have a placeholder of $250 million to $300 million in revenues from acquisition of Engineered Products in our overall revenue target. This is just to summarize again, I'd say that we are actively engaged in multiple opportunities. We have the team in place to be able to execute, we have a plan in place already and in motion to continue to build out our pipeline of opportunities, and we are going to step up going to do more transactions. We're going to do bigger transactions, and we're going to be able to move the needle for DCO on the engineered product front with that. So with that, I'll move to the finance section of the presentation and give you an update on Vision 2027 as well as our Vision 2032 financial goals. But before I do that, I wanted to share a couple of charts on our performance under the current management team. So Steve came on board as CEO at Ducommun in January of 2017. And this chart here shows our financial and market performance since the end of 2016. And you can see our market cap during this period is through the end of last quarter, up 10x. It's up 10x. And even with the pullback we've had in the past few weeks, we are up more than 8x versus where we ended in 2016. And so a huge achievement in being able to grow the market cap so many fold in the last 9 years. If you look at the financial performance of the company, revenues are up 57%. So that's a modest number. But you have to keep in mind, we went through a pandemic. We went through all the disruptions in commercial aerospace OEM production. And so we're still happy with the 57% growth that we have had over these years. But more importantly, more importantly is the quality of those revenues. The quality of the $550 million in revenue we had back in '16 versus the $865 million in revenue we've had in the LTM period. The change in the quality of those revenues is significant. We have today much more engineered product content in those revenues. We have revenues that come in at a much higher margin because as we mentioned earlier, we are not chasing business for the sake of adding top line. We are chasing business where we can add value, where we can solve a problem for a customer. And when you do that, and when you're not competing on price, what you're able to do is you're able to demand a better price, demand get and earn a better margin on those sales. And so that focus has enabled has really transformed the quality of our revenue base despite the more modest growth. And that's what we're really proud of. And that's reflected also in our margin expansion. So over this tenure, we have expanded EBITDA margins by 700 basis points, 700 basis points in these 9 years, which is incredible. And all of it has come from improvement in GAAP gross margin, which is up 900 basis points during this period. 900 basis points improvement in GAAP gross margin, no adjustments, no funding numbers there. GAAP gross margins are up 900 basis points over these 9 years. So that's something that we are really proud of. And as you would expect, I mean, you're probably asking, okay, market cap grew 10x. What was it for an individual shareholder. What was it different in individual share. And so if you look at TSR, we have done exceptionally well on a TSR basis as well. Our TSR relative to the S&P 500, our TSR relative to the Russell 2000 and our TSR relative to our proxy peer group. And you can see the names of those companies at the bottom there later on the chart, we are significantly higher in terms of TSR over this current management team's tenure and by a very wide margin, again, something we're very proud of. So with that, I will move into our -- a quick update on the Vision 2027 and our performance on key metrics. First on revenue, 6% CAGR during the last 3.5 years, under Vision 2027 is it's -- we've only been 3.5 years into that plan, but we've had 6% growth which I think is really healthy, given what we have seen in commercial OEM production rates and the delays we've had there for us to have had 6% growth is pretty good. And -- but more importantly, during the same period, we have grown our RPO at a 9% CAGR. That's 50% faster than the growth in revenue. 50% faster growth in our RPO or what is effectively backlog during the same period in which revenues have grown 6%. And we have taken that RPO, which is definitized orders from our customers for which revenue has not yet been recognized, we have taken that to $1.16 billion. So that's something that is really good for everyone here. You've heard about some of the big orders we have won recently. You've heard the fact that the framework agreements for the missile programs are not yet in this number, and yet we have had such strong performance. Our book-to-bill ratio in the last 12 months is 1.3x. All this is great news for U.S. shareholders. It's great news because it shows that there is a lot of growth ahead in revenue for the company. If you look at EBITDA margin in these last 3.5 years, they're up 400 basis points. And again, I'll go back to GAAP gross margin. All the improvement in our EBITDA margins has come from improvement in GAAP gross margin. So these are real change -- a real transformation in the business as we continue to grow our margin profile. And if you look at EPS, that's up at an 8% CAGR over these last 3.5 years. Again, strong growth in EPS, and this is despite the equity offering we had in May 2023. So we issued a little over 2 million shares back in May of 2023. It was something that was long outstanding, long overdue for Ducommun, and there were a lot of good reasons for us to do that. And all the things that we expected to come out of that offering -- we were able to achieve all those objectives. So despite that offering, we have still been able to grow EPS at an 8% CAGR during this period. So it's something that we can all be happy about. And then cash conversion, right? At the end of the day, you have to generate cash. And that is a reflection of how much money you're really making, and that's up dramatically from a pandemic era low in 2022 of $13 million only of annual free cash flow. In the last 12 months, we've generated $83 million of free cash flow. And we had the benefit of some onetime items, some NOLs that we could take advantage of. We had some benefits from OBB that are onetime and that helped us. and have taken us actually in excess of 100% of adjusted net income. But even adjusted for those, we are at a very healthy cash conversion ratio today that we cannot be happy about. So great achievement here in the last 3.5 years. Now I'll move on to what we have set ourselves up for Vision 2032. So we have key metrics that Steve talked about earlier for revenue, for revenue mix, for our margins and then cash conversion revenue. We're going to get to $1.6 billion to $1.7 billion in revenue by 2032. That incorporates a 7% to 8%. That reflects a 7% to 8% organic CAGR in our business and has an acquisition placeholder of $250 million to $300 million. And we're going to -- as we grow these revenues, change the mix to 50% and coming from engineered products and at the same time, grow our margins by 600 basis points over the baseline in 2026. And we're going to get to our 18% EBITDA margin by the end of next year, by the end of 2027, as we have committed under our Vision 2027. So we're going to continue to track our progress against our Vision 2027 targets. So those are not forgotten. But then we're going to have another 500 basis points, another 500 basis points in the following 5 years under Vision 2032, that will take us to 23%. And I'll talk a little more about both our revenue and margin target in the next couple of slides. But touching on cash flow conversion, again, our target here during this period is to have 90% to 100% cash conversion from adjusted net income. Now there are -- there's going to be a significant ramp-up in revenues. We continue to see pressures in the supply chain. Lead times are long. And so we're going to have to maintain some amount of working capital investment in the business to support the growth and to make sure that we are able to deliver despite the constraints in the supply chain. So we are going to see improvement in working capital. We're going to see an improvement in working capital turns but it's going to be modest, but we are still going to be able to get to 90% to 100% cash conversion, which I think is an important metric for you to remember as either current or potential shareholder. So with that, jumping into revenue in some more detail. So 2026, we are expecting to come out at 880 to 890 million, which is in line with guidance we shared after our Q2 earnings and right around kind of a little above 7% growth at the midpoint there. And we're looking to take that to $1.6 billion to $1.7 billion in Vision 2032. And that reflects, as I just said earlier, a 7% to 8% organic CAGR in the business with higher growth expected in the earlier years supported by growth on missile production and supported by ramp-up in commercial aerospace OEM production rates. We expect the defense business to grow at a faster clip at an organic growth of 8% to 9%, supported by strong growth in missiles and radar platforms. You heard Steve and then Jerry talk about our very strong missile franchise and our presence on virtually every missile program that is covered by these framework agreements by the Department of War. We're on the cusp of signing up to the agreements to be able to deliver to our OEM customers these framework agreements, and that's going to drive growth for us at 8% to 9% with the missile and radar portion growing at mid-teens, mid-teens growth in our missile and radar franchise, which should more than double that business over this time frame. Our commercial aerospace business, we expect will grow at 6% to 7% organic growth CAGR during this period, again, higher growth in the initial years, given by the expected ramp in OEM build rates over the next couple of years, particularly on the MAX, on the 787 as well as on the A320neo, we're going to see good growth there in commercial aerospace. And then finally, going back to Engineered Products, we're going to take that from 25%, which we will get to at the end of next year to 40% of revenue through acquisition as well as organic growth. We have a placeholder of $250 million to $300 million in revenues acquired of Engineered Products. And then we're also going to continue to grow our existing portfolio at a strong clip and at a rate which is actually faster than the rest of the business. margins. So we have a 600 basis point expansion plan here. 10 basis points, getting us to 18% by next year as we have committed under Vision 2027 and then getting us another 500 basis points in the following 5 years. Where is that going to come from? What's our plan to be able to achieve that margin expansion. We're going to -- it's going to come from the acquisition of Engineered Products. That's going to be a key part. As we continue to shift that portfolio to businesses where we own the design IP and where after buying these businesses, we do the things I talked about operationally to get more value out of those businesses. we're going to be able to improve the overall margin profile of our company. We're also going to grow the existing portfolio at a faster clip than the rest of the business, and that will help with the margin improvement. So if you look at our engineered products business over the last 3.5 years, we have grown in the teens organically. We've had growth in the teens organically over the last 3.5 years in our engineered products business. So you should feel confident about our ability to be able to continue to grow that business. And with all the new products that Jerry and Clay also talked about across the board, there are a number of opportunities for us to be able to grow that engineered product portfolio and be able to improve our overall margin mix. We're also going to drive margins through better pricing. We are going to get paid for the value we provide. We are not -- we are never egregious with our customers. We're always respect our duties towards the war fighter or to commercial aerospace. And -- but we also want to make sure that we are getting a reasonable return on our investments. We're getting a reasonable return on the products we make. And we have to get paid a decent margin on any product that we sell. And as LTAs come up for renewal, we have the ability to make sure that, that is happening in each and every 1 of those contracts. So we are still not done with the repricing opportunity that we have across various programs, and that will help drive margins over the next few years. And then finally, with revenue growing at 10% to 11%, we are going to benefit from operating leverage as well, and that will also help with the margin story. So with that, I'll wrap up the finance section here. We have a great portfolio here. It's leveraged to missile production. It's leveraged to the commercial OEM build rates. And the tailwinds in those end markets are really going to help us drive strong organic growth here over the next 5 or 6 years. We're going to continue to see the shift towards engineered products, both organically and through acquisition. And we have a strong plan in place, a strong team in place and a great playbook to drive value through acquisitions, which we have demonstrated in the past and we're going to execute on going forward. And then we're going to have strong cash generation. We've seen strong cash generation here in the last year or 2, and we're going to continue and maintain that momentum and continue to have good cash conversion, which I know is important to all of you as shareholders. And with that, I will pass it back over to Steve for his concluding remarks.

Okay. Thank you, Suman. Appreciate it. Okay. First, just let me go through these 2 charts real quick, okay? And then we'll go right to Q&A. We're going to keep everybody on time here, and you can get out to your next responsibilities today. So we talked about Vision 2027. So we're all set there. Vision 2032. Again, this is what we've shown you several times now. Let me just say a few things. First of all, on deals, okay? We're now reconstituted to really get to the next level on M&A, all right? I know we haven't done a deal in a while. There's good reasons for it, okay? One of the big reasons is we really sort of -- we were limited as far as what we could look at for many years when I was at when I've been at the common. We just had to tell the banker, sorry, it's $250 million, can't do it. $275 million, $300 million, can't do it. Can't do it. I mean, and they just moved on, right? So we were really, really limited. And that was our reality, and that's what we did. Now it's a different ballgame. So I just want you to -- all of you to know M&A is a big part of this plan. It's a big part of my job and the job of our team, and we will close deals and you will be happy, okay? Because you got to understand the other thing is we know what we're doing when we're looking at deals. That's the other thing. We do very good due diligence. You saw the report on the deals. That's the best part. As we know, sometimes you do deals, they don't work out, right? Just ask [indiscernible] Sporting Goods and the Foot Locker. Sorry, I shouldn't pick on them with -- not so great. Anyway, so -- but they're still a great company, just not so great. Anyway, so -- but this is, I think, a tremendous plan for investors. We're excited about the next 5, 6 years. This there's no mystery here. This is my plan, okay? So I plan on being here. All right. So that's something else that this important for investors to know. And I have a great team. I want to thank them again today. And I appreciate everybody hanging in there both in the room and on the phone. I know this is a lot of data in a long meeting. So with that, again, thank you, and let's -- we're going to go to Q&A real quick, right? So I'll let invite my team up, let's get some chairs here, and then we'll turn it over to you. Okay. I'm going to -- I'll just sort of be the facilitator for the Q&A. So I'll sit right here. Perfect.

Great. We got everybody [indiscernible] have a seat. We'll go to the room first. Those online, please send in your questions. We'll do our best and let's go down the front here. Just wait for a second. [indiscernible].

John Godyn at Citi. Thanks for doing this. Steve, you, Suman, others really emphasized M&A obviously. It's the second bullet on the Vision plan. I wanted to just spend an extra minute on the contours of that. The plug in the guidance versus stepping up the size was not particularly large. It seems like you could exceed that maybe it's just me, but I got the impression that maybe M&A is going to be front-end loaded in the plan. I don't know if that's true or not. And then in terms of just the targets, are they going to be accretive to the 2032 goals. Is that the way to think about it, that we should be seeing deals that have 20% plus adjusted EBITDA margins significantly higher EP aftermarket mix. Is that the way? Maybe we could just kind of in on some of these pieces.

Thank you, John. That's a great question. Why don't you, Suman, you want to [indiscernible] first?

So we're actively working on a number of opportunities at any given point of time, including right now. The exact timing is unpredictable. So I wouldn't say necessarily that they're going to be front loaded, but we expect to be able to execute over the next 5 to 6 years on acquisitions. But we do hope to be able to announce things here within the next 6 months as well. So -- but it's not necessarily expected to be front-loaded. The size of acquisitions again, the -- whether we're going to do the next deal is going to be a $50 million or $100 million or a $300 million deal is difficult to predict. Again, we look at multiple things, and it depends on which one we get across the line, which one is the right one for us to get across the line. It will depend on whether we do something bigger upfront or later down the line. But we have an active pipeline with a wide number of opportunities that we think are executable over the next 5 to 7 years.

We work on something right that we're really excited about. So obviously, these things are opportunistic, but we're deep and diligence on one right now. So that's positive. The other I'd say is that the deals we're going to do are going to be accretive. So that's sort of our -- it's been our playbook. We're just -- I mean, the big takeaway in the M&A is that we reconstituted our team, and we have a lot more money. And the great thing is the track record even though it's been a couple of years. We've done these things. We not only bought them at a good price, and we didn't have a disaster like with something we found out later on, but we also were able to, as Suman said earlier, cut the multiple in half. over time, right? So we're excited about that. So we take a lot of good things ahead, but thank you for that thoughtful questions. And we'll go to [indiscernible] want to go first?

Mike crawford at B. Riley Securities. Just to continue on that M&A front. So I think the midpoint of that $250 million to $300 million of deal revenue at a multiple maybe, I don't know, 15x for like a 28% EBITDA margin business, which I think is maybe what your engineered products do today. that applies like $1.1 billion to be invested. So to do that as a mix of equity and cash.

Yes. Suman, do you want to have that [indiscernible].

The good thing is we have options. We had options. And our preference is always, first, to be able to finance it with debt with lower cost of capital first. but where there is an attractive opportunity, which makes a lot of sense. We have a clear path to maximizing EBITDA in the business. It's a great fit for what we are looking for, we would be open to considering some amount of equity to be able to finance the deal. I think where we're trading right now at the DCO level gives us that optionality, which we probably didn't have in the past. And so it creates more options for us.

Yes. We want to do -- if we could do it in debt. We want to do it debt, but we're realistic, right? If there's something that's really special that comes along that shareholders would cheer us on as far as this is the right thing to do, then we would consider it. But we have to seriously consider it, okay?

But I mean if you look at the $500 million deal, today, we have right now available capacity to finance up to $350 million, still stay under 3.5 turns leverage, still be well within the covenants of our existing credit facility and the amount available under our revolver and cash on the balance sheet. So we're not necessarily looking at this is not us contemplating a huge equity issuance to do a $500 million deal which is kind of one of the larger side of deals that Steve discussed, you're talking about another $150 million in equity, right? So that's just going to be kind of an incremental thing to support a deal if that's needed to get something.

But you got to be very patient, okay, for $500 million, it's got to be absolutely something that came along that we've been looking at, that it's the right time, okay? Because that's obviously -- that's a big swing. And you got to get that right. A lot of the smaller deals, 200, 250, 300 million, we can just do through debt.

And just one more just the dynamics of expanding as much as [indiscernible] is there some level of conservatism built into your assertion that missiles and radars just start going to continue to only grow in the mid-teens?

That's where we see it right now. I mean, we've got to go further along with a 7-year line mark, okay, you have to understand that these 7 landmark deals. The reason -- one of the reasons why they haven't gone as quickly is because the OEMs or also negotiating what happens if it changes, okay? I'm going to build factories. I'm going to do this. And then if we have a new President in 2 years that thinks you know what, this isn't the greatest thing in the world. Okay, how are we going to get our downside. So there's a little conservatism in there, but I think it's appropriate until we really get going. But at least the first couple of years, it's going to be gangbusters. So stay tuned.