Ducommun Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
February 15, 2024

There are 5 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Q4 2023 Ducommun Earnings Conference Call. At this time, all participants are in a listen only mode. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Suman Mukherjee, Senior Vice President and Chief Financial Officer.

Operator

Please go ahead.

Speaker 1

Thank you, and welcome to Ducommun's 2023 4th Quarter Conference Call. With me today is Steve Oswald, Chairman, President and CEO. I'm going to discuss certain limitations to any forward looking statements regarding future events, projections or performance that we may make during the prepared remarks or the Q and A session that follows. Certain statements today that are not historical facts, Including any statements as to future market conditions, results of operations and financial projections are forward looking statements under the Private Securities Litigation Reform Act of 1995 and are therefore prospective. These forward looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from the future results expressed or implied by such forward looking statements.

Speaker 1

Although we believe that the expectations reflected in our forward looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. In addition, estimates of future operating results are based on the company's current business, which is subject to change. Particular risks facing Ducommun include amongst others, the cyclicality of our end use markets, the level of U. S. Government defense spending, Our customers may experience delays in the launch and certification of new products, timing of orders from our customers, legal and regulatory risks, The cost of expansion and acquisitions, competition, economic and geopolitical developments, including supply chain issues and rising or high interest rates, The ability to attract and retain key personnel and avoid labor disruptions, the ability to adequately protect and enforce intellectual property rights, pandemics, disasters, natural or otherwise, and risk of cybersecurity attacks.

Speaker 1

These risks and others will be described in our annual report on Form 10 ks once it is filed with the SEC, and our forward looking statements are subject to those risks. Statements made during the call are only as of the time made, and we do not intend to update any statements made in this presentation, except if and as required by regulatory authorities. This call also includes non GAAP financial measures. Please refer to our filings with the SEC for a reconciliation of the GAAP to non GAAP measures referenced on this call. This year, we expect to file our 2023 Form 10 ks on Thursday, February 22, 2024.

Speaker 1

The additional time is to complete the documentation of our internal controls and preparation of the Form 10 ks for filing. In the 2023 Form 10 ks, we expect to report a material weakness in our internal controls over financial reporting related to our revenue recognition process. This material weakness resulted in immaterial adjustments to net revenues and contract assets as of and for the quarterly period ending December 31, 2023. We do not expect the material weakness to result in a restatement or change to the reported financial statements. We will make the necessary changes to the design and operating effectiveness of these specific revenue recognition internal controls during 2024.

Speaker 1

I would now like to turn the call over to Steve Oswald for a review of the operating results. Steve?

Speaker 2

Okay. Thank you, Sumant, and thanks everyone for joining us today for our Q4 conference call. Today and as usual, I'll give an update on the current situation at the company, after which Suman will review our financial results in detail. Q4 was a very good quarter as we wrapped up 2023. Revenues exceeded $190,000,000 for the 2nd consecutive quarter to $192,200,000 driving a full year revenue of $757,000,000 with the last high mark set in 2012.

Speaker 2

Strong growth in our single aisle commercial aircraft business helped to drive the revenue. The continued recovery in commercial aerospace once again delivered in Q4 with Boeing Single IO Platform Business in aggregate being up 46% year over year along with Airbus A220 program showing strong growth of 73% year over year. Overall, Commercial Aerospace with Airbus and Boeing and others was up 18% from Q4 2022 Despite Boeing's and Spirit's continued challenges with MAX quality issues. We are now in our 10th quarter of year over year revenue growth commercial aerospace, a continued excellent sign for DCO and the industry. While our defense business was slightly down in the quarter With sunsetting programs such as the F-eighteen having an impact, the company also experienced strong demand in the Apache program as well as increases for F-thirty 5 and the Mir missile platforms.

Speaker 1

The Defense business was over $100,000,000

Speaker 2

in revenue once again At $103,000,000 of revenue for the quarter, we remain optimistic about the growth ahead. As we go through a timing transition on certain programs, The ever growing backlog in Defense tells the story with backlog up $70,000,000 from last year $33,000,000 from Q3 2023. Defense backlog now stands at over $500,000,000 at 527,100,000 Another real bright spot in Q4 was gross margins of 21.7 percent for the Q4 up 120 basis points year over year from 20.5 percent as we began realizing benefits from our strategic pricing initiative, productivity improvements and some initial restructuring savings. We are now also in the final stages of operation at our Berryville, Arkansas and Monrovia, California performance centers are targeting a full shutdown by June 30. The final approval stage with RTX for the Tomahawk harnesses going to Mexico, the last product still being produced at Berryville is close.

Speaker 2

And we continue to give a full effort with BA BCS and BA Defense on the MAX spoilers and Apache tail rotors respectively, working with them on approval and building buffer. Due to the low level of production at both sites, We do have some headwind, but this is temporary and will clear after the closures. For adjusted operating margin in Q4, The team delivered 8.3% compared to 8.1% in Q4 2022, a nice result. While investing some of the gross margin improvement after a few lean years during COVID and the ramp up of commercial Aerospace. The GAAP diluted EPS was $0.34 a share in Q4 2023 versus $0.65 a share for Q4 2022 and with the adjustments diluted EPS was a solid $0.70 a share compared to diluted EPS of $0.85 in the prior year.

Speaker 2

Some key drivers for the lower GAAP diluted EPS include higher interest expense due to higher interest rates, higher inventory purchase accounting adjustments and higher SG and A expenses as we invested in the business to position it for the future. The total company backlog performance increased both sequentially and compared to the prior year. Total company backlog ended 2023 at almost $994,000,000 increasing over $30,000,000 both sequentially and compared to the prior year. Defense backlog as mentioned earlier also increased $70,000,000 compared to the prior year to the end at a record of $527,000,000 The strong defense backlog reaffirms the common defense business remains in good shape with more positive news to come. The commercial aerospace backlog however decreased slightly year over year primarily due to industry issues with single aisle production rates, Specifically, the MAX issues mentioned earlier with BA and Spirit, but still ended Q4 2023 at a solid 429,000,000 For offloading from defense primes, the work continues.

Speaker 2

We are expecting roughly $90,000,000 for the full year in 2024 as committed to, mainly in our circuit card business for RTX in new areas such as radar for the SPY-six. As communicated, the long term run rate of these defense programs already commercialized or in development for offloading will be over 125,000,000 by 2025 once transition work is completed. In Q4, our team delivered another good quarter managing the supply chain as evidenced by positive revenue growth along with significant gross margin expansion compared to a year ago. Another great example of productivity improvements and people is the revenue per employee number, which granted is a high level number, but did increase significantly by 16% in 2023 versus 2022. That is a terrific job everyone at the company.

Speaker 2

2023 record revenues of $757,000,000 was a solid 6.2% growth over 2022 and in line with the guidance of 6% to 6.5% we provided to you during the Q3 call. We are obviously happy with this record number last set in 2012 especially in light of the 737 MAX headwinds with BA and Spirit That created a more modest pace than expected in single aisle production rates in 2023. For revenue guidance in 2024, we believe that with the uncertainty surrounding BA, Spirit and the FAA at this point on the MAX, The best approach is to guide to mid single digits and look to further updates on future earnings calls. The commercial aerospace recovery will continue to expand along with growth in defense, which is backed by a record backlog. We continue as well to be active with acquisitions.

Speaker 2

As in 2020, we have a very strong acquisition last April and believe this is another catalyst to drive us possibly higher in the year ahead. Now let me provide some additional color on our markets, products and programs. Beginning with our military and space sector, we experienced our 2nd consecutive quarter of revenues over $100,000,000 at $102,800,000 compared to $108,400,000 in Q4 2022. While lower, we saw some bright spots including strong demand for the Apache Tail rotor blades with over 380% year over year growth and increased demand for other military and space products, other military rotary wing platforms F-thirty 5 and the Mir missile as well. The 4th quarter's military and space revenue represented 53% of Ducommun's revenue in the period, down from 58% last year and this trend will continue to reflect more balance with commercial aerospace, which we like.

Speaker 2

We also ended the 4th quarter with backlog in excess of $500,000,000 to $527,000,000 an increase of $70,000,000 year over year and represents 53% of Ducommun's total backlog. Within our commercial aerospace operations, 4th quarter revenue saw double digit growth once again increasing 18 year over year to $80,000,000 driven mainly by build rate increases on large aircraft platforms including the 737 MAX and A220 platforms and twin aisle commercial aircraft platforms, commercial rotary wing aircraft platforms and regional and business jets. As many of you are aware, the FAA announced in January that will increase its oversight of Boeing as well as require Boeing to get approval for production rate increases or additional production lines for the 737 MAX until it is satisfied that Boeing is in full compliance with the acquired quality control procedures. This will likely cap the production of the 737 MAX, but we need to see how things go in Q1 of 2024 in the FAA going forward plan. We do however expect the long term trend to remain positive once the issues are fully addressed.

Speaker 2

The backlog within our commercial aerospace sector was $429,000,000 at the end of the 4th quarter. And while it was $21,000,000 lower year over year, it increased $7,000,000 sequentially, a solid number given the temporary weakness in commercial Aerospace. With that, I'll have Sumant review our financial results in detail. Sumant?

Speaker 1

Thank you, Steve. As a reminder, please see the company's Q4 earnings release for a further description of information mentioned on today's call. As Steve discussed, Our 4th quarter results reflect another period of good performance. We again saw a significant increase in our commercial aerospace revenues. We remain encouraged by the continued strength in domestic and global travel, which should support higher long term demand for aircraft as we work through some of the industry issues impacting single aisle production rates.

Speaker 1

In addition, we are encouraged by the strong backlog growth in our military and space business that should help drive our revenues in that end user segment going forward. During the quarter, We also continue to make progress on our restructuring program, and I will provide some more color shortly. With all this, We feel like we have entered 2024 with good momentum that will continue to drive our performance. Now turning to our Q4 results. Revenue for the Q4 of 2023 was $192,200,000 versus $188,300,000 Q4 of 2022.

Speaker 1

The year over year increase reflects $12,100,000 of growth across our commercial aerospace platforms, partially offset by $5,600,000 of lower revenue within the military and space sector due to lower build rates on various missile platforms and military fixed wing aircraft platforms such as the F-eighteen, partially offset by higher build rates on military rotor wing aircraft platforms such as the Apache. Newcom and total backlog at the end of the 4th quarter was $993,600,000 This includes A record backlog in our defense and end users defense end users segment, which grew by $33,000,000 to a total $527,000,000 The backlog in our commercial aerospace business increased slightly during the quarter from $423,000,000 at the end of Q3 to $429,000,000 at the end of Q4. As a reminder, we define backlog as potential revenue based on customer purchase orders and long term agreements with some fixed prices and expected delivery dates of 24 months or less. We posted total gross profit of $41,700,000 or 21.7 percent of revenue for the quarter versus $38,600,000 or 20.5 percent of revenue in the prior year period. We continue to share adjusted gross margins as we have certain non GAAP cost of sales items in the current and prior year period relating to inventory step up amortization on our recent acquisitions, restructuring charges and the impact of the Guaymas fire on our operations.

Speaker 1

On an adjusted basis, our gross margins were 23.2 percent in Q4 2023 versus 21% in Q4 2022. The improvement in gross margins was driven by favorable product mix, better pricing and improved scale in our commercial aerospace business. We continue to work through a difficult operating environment with supply chain and labor. However, through our proactive efforts, including strategic buys and our inventory investments, we have been able to avoid any significant impacts thus far on our business. In parallel, We continue to look for opportunities to unwind our working capital investments to improve our cash flow.

Speaker 1

During the Q4 of 2023, We were able to reduce our inventory by $16,000,000 sequentially compared to Q3. We also reduced our contract assets net of contract liabilities by $15,000,000 Ducommun reported operating income for the Q4 of $8,900,000 or 4.6 percent of revenue compared to $9,700,000 or 5.1 percent of revenue in the prior year period. Adjusted operating income was $15,900,000 or 8.3% of revenue this quarter compared to $15,200,000 or 8.1 percent of revenue in the comparable period last year. The company reported net income for the Q4 of 2023 of $5,100,000 or $0.34 per diluted share compared to net income of $8,100,000 or $0.65 per diluted share a year ago. On an adjusted basis, The company reported net income of $10,400,000 or $0.70 per diluted share compared to net income of $10,600,000 or $0.85 in Q4 2022.

Speaker 1

The lower adjusted net income during the quarter, despite a higher level of adjusted operating income, was driven mainly by higher interest costs, partially offset by lower income tax expense. This was primarily due to the impact of Fed's rate hike on short term interest rates. I will discuss this along with our interest rate hedge, which took effect on January 1, 2024, shortly. Now let me turn to our segment results. Our Structural Systems segment posted revenue of $85,600,000 in the Q4 of 2023 versus $68,200,000 last year.

Speaker 1

The year over year increase reflects $12,300,000 of higher sales across our commercial aerospace applications, mainly for single aisle aircraft for the 737 MAX and A220 platforms and $5,000,000 of higher revenue within the military and space markets, mainly from the ramp up in sales in the Apache program and other military rotor wing aircraft platforms. Structural Systems operating for the quarter was $6,600,000 or 7.7 percent of revenue compared to $4,400,000 or 6.4 percent of revenue last year. Excluding restructuring charges and other adjustments in both years, the segment operating margin was 14.6% in Q4 2023 versus 10.8% in Q4 2022. Strong year over year improvement was driven by favorable product mix, better pricing and higher more scale in the businesses as our commercial aerospace revenues have continued to grow. This has been another great quarter for our Structural Systems segment.

Speaker 1

Our Electronics Systems segment posted revenue of $106,700,000 in the Q4 of 2023 versus $120,000,000 in the prior year period. The decline was mainly due to lower revenues with the company's military and space customers, including the impact and timing of reductions in revenues on sunsetting programs such as the F-eighteen not synchronized with growth in sales from the company's position on next gen platforms. Electronic Systems operating income for the 4th quarter was $9,800,000 or 9.2 percent of revenue versus $13,000,000 or 10.8 percent of revenue in the prior year period. Excluding restructuring charges and other adjustments in both years, the segment operating margin was 10.2% in Q4 2023 versus 12.9% in Q4 2022. The year over year decrease was due to unfavorable product mix and as Steve mentioned earlier, due to the loss of manufacturing volume and inefficiencies at our variable performance center as we wind down their operations.

Speaker 1

To clarify, such inefficiencies have not been considered as restructuring charges in our calculation of adjusted operating income or adjusted EBITDA. Next on the restructuring. As a reminder and as discussed previously, we commenced a restructuring initiative back in 22. These actions are being taken to accelerate the achievement of our strategic goals and to better position the company for stronger performance in the short and long term. This includes the shutdown of our facilities in Monrovia, California and Berryville, Arkansas and transfer of majority of that work to our low cost operation in Guaymas, Mexico with the remainder going to other existing performance centers in the United States.

Speaker 1

We continue to make progress on these transitions with excellent employee retention and engagement and are also working diligently with our customers Boeing and RTX to obtain the requisite approvals. During Q4 2023, we recorded $1,900,000 in restructuring charges. The majority of these charges were severance and benefits related as we continue to wind down the 2 operations. The recertification process is ongoing and we plan to close both facilities fully in the first half of twenty We expect to incur $5,000,000 to $7,000,000 in restructuring expenses through 2024 and that will conclude the spending. Upon completion of our restructuring program, we expect to generate $11,000,000 to $13,000,000 in annual savings from our actions and expect a portion of those savings to be realized starting in the second half of twenty twenty four.

Speaker 1

We anticipate selling the land and buildings at both Monrovia, California and Variable, Arkansas. Turning next to liquidity and capital resources. During Q4 2023, we generated $26,500,000 in cash flow from operating activities, which was up from $14,300,000 in Q3 2023. For the full year 2023, we generated $31,100,000 in cash flow from operating activities. This is despite cash payments of $10,700,000 for restructuring and $18,300,000 for taxes relating to changes in rules for R and D tax credits relating to 20222023.

Speaker 1

At the end of the Q4, we have available liquidity of $218,900,000 comprising of the unutilized portion of our revolver and cash on hand. Our existing credit facility was put in place in July 2022 at an opportune time in the credit markets, allowing us to reduce our spread, increase the size of our revolver and allowing us the flexibility to execute on our acquisition strategy. Our debt through Q4 2023 was 100 percent floating and linked to SOFR. As a result and as I highlighted before, increase in our interest costs from $3,500,000 in Q4 2022 to $5,400,000 in Q4 2023 was driven by the run up in short term rates due to the Fed rate hikes. In November 2021, we had put in place an interest rate hedge that went into effect for a 7 year period starting January 2024 and pegs the 1 month term so far at 170 basis points for $150,000,000 of our debt.

Speaker 1

This will help drive significant interest cost savings in 2024 and beyond. To conclude the financial overview for Q4 2023, I would like to say that we had a strong finish to 2023 and anticipate another strong year in 2024. I would now like to turn it back over to Steve for his closing remarks. Steve?

Speaker 2

Okay. Thanks, Shimon. So just a couple of more comments before we go to questions in closing. I think Q4 was a very good quarter with many highlights for the company and our shareholders. In addition, achieving all time highs for annual revenue and adjusted EBITDA of $757,000,000 $102,000,000 respectively in 2023 are wonderful milestones.

Speaker 2

And I'm very happy for the hardworking Ducommun team and all of our other stakeholders for those achievements. I also want to mention that 20 24 will be our 100 and Final note is our 2027 strategy, which we've talked about. We had a strong 1st year with both engineered products and aftermarket gaining a larger percentage of revenue for the company in 2023 versus 2022. And the future is very bright. With those remarks, I will conclude and open it up to questions.

Speaker 2

Thank you for listening.

Operator

Our first question We'll be coming from Griffin Baugh of B. Riley Securities. Your line is open, Griffin.

Speaker 3

Hi. Thank you for taking my question. So Steve, you just mentioned the engineered products and aftermarket parts. Are there any more specific details you can give on percentage of revenue there and how you would characterize that trending going forward versus the rest

Speaker 1

of the business?

Speaker 2

So I'm not going to disclose an actual number, just not at this time. We will probably do something as we go forward in our Investor Day meeting, but It was certainly up quite a bit, I will say that both in revenue and aftermarket for Engineered Products and We're moving we have

Speaker 1

a 25%

Speaker 2

target for 2027 for revenues for Engineered Products and let me just say that We're tracking very strongly towards that and to beat it.

Speaker 3

Okay. Great. Fair enough. I appreciate the color. And then, so we saw a Sequential slight sequential decline in gross margin.

Speaker 3

Just curious if you can add a little bit more color on what you're seeing there and how you're thinking about that in the next quarter and going into 2024?

Speaker 1

Repeat that question a lot more, Griffin.

Speaker 3

Yes. So We saw a sequential decline in gross margin. I was just curious if you could give some more color on what was driving that and how you're about that trending going into 2024?

Speaker 1

That's right. So the sequential decline was driven by one product mix, but also because we have 2 facilities that we are in the process of winding down. And we're just producing inefficiently there given the much lower volume of operations versus the size and scope of those facilities. And that's causing a drag, particularly on the electronic systems side, But also some drag on the structural systems side, and we expect that headwind to linger, but casually go down as we close those both those facilities in the first half of twenty twenty four.

Speaker 4

Yes, I

Speaker 1

think that's good. Let me

Speaker 2

just put some color on that for Berryville for instance, during the quarter, obviously we have a lot less people that quarter we would run sort of $7,000,000 a quarter at Berryville and now we're less than $1,000,000 just making the tomahawk. So that's why there's a little bit of a timing issue where we have some

Speaker 3

Okay, great. Thanks for the detail on that. And then just last one for me. I apologize if I missed this in the prepared remarks. Can you give us an update on how the offloading opportunities are trending and how you're thinking about potential upside to those 2025 targets on that front?

Speaker 2

Yes. Thank you for the question. Yes. This is I've been talking about this. We think there is some potential above the $125,000,000 that we still have A little more work to do here.

Speaker 2

It's all very positive. It's actually moving us in as I mentioned in my remarks more into the radar business. For this is a lot of it is cards. But so what happens is just it's when you're dealing with RTX And you're moving work out of their facility. They have lots of inventory.

Speaker 2

They have lots of different things we have to overcome. They have test equipment that they either want to keep or they don't want to keep. They have that test equipment has lead times. It's over $1,000,000 for some of these test equipment machine. So there's a lot that goes into it, but once it gets to Tulsa or gets somewhere else in Appleton, We're off to the races here.

Speaker 2

So, we are actively heads down, working very hard in 2020 forward to get a lot of this past sort of the finish line here. So we'll have an update later in the year, but we're feeling real good about where we are and We hope to have better report on the 125 plus towards the end of 2024.

Speaker 3

Okay, great. Glad to hear it. Thanks for taking my questions. Appreciate it.

Operator

Our next question will be coming from Michael Ciarmoli of Truist Securities. Your line is open.

Speaker 4

Hey, afternoon guys. Thanks for taking the questions. Steve or Suman, just I guess if we look maybe to piggyback on the offloading, but if we look at Defense revenues down sequentially. You finished the year, I guess, down 2 years in a row. And I guess you haven't really parsed out headwind.

Speaker 4

I mean, I know you called out the F-fifteen wind down, but is there anything else impacting the defense revenue growth?

Speaker 2

Yes, it's again, this is Mike, good to be with you. It's a little bit of a mix. I mean, look, the F-eighteen is significant, right? Not for the total business, but the F-eighteen. We also, earlier in say 2021, 2022 we did these toll missile cases for Raytheon.

Speaker 2

And they were running 15 or 20 plus a year. And what happens with the total missile cases, they have problems with supply chain and they can't get the motor for the missile and then all of a sudden the case of business dries up for a year or 2. And we're a little bit in that valley right now. So there's just a couple. There's nothing systemic to the business.

Speaker 2

We like where we are. We're getting pinched here and there a little bit, but we think that coming out of this thing we're in really good shape. And the F-eighteen was we had a great run with it, but Those things sometimes they come to an end.

Speaker 4

Okay. Okay. And did I hear it right? The offloading was $90,000,000 expected to be in 24 because I think you called out maybe seeing that step up to 125 in 2025?

Speaker 2

Yes. That's where we're heading. So again, we're again, it's One of the big rocks here is the SPY6 and there's a number of cards, right? So we have the first cards already being made at Tulsa and that's just those cards alone are $15,000,000 $20,000,000 a year, right? So we have those going.

Speaker 2

Okay. But we've got other layers of cards that are just they're in Andover. It's tough to get them over here. We're working it right. Initially, we get all the material from them because they get all the inventory, right?

Speaker 2

So our revenue is tamped down a lot. But what's the breakthrough? We're doing very good about 2024 on these changes. It's just it's great business, but Fortunately, coming out of a big OEM, it's a bit of a long time coming.

Speaker 4

Got it. Got it. And then

Speaker 1

just I'd like to highlight again, The, our defense backlog is the highest it has ever been in the last few years. So yes, we had some decline in the current year, but the backlog is at the highs and that's kind of a 2 year look, when we our backlog numbers. So that's a good position

Speaker 4

Yes. No, no, noticed that. Yes, definitely positive there. And then just I guess what's the level of conservatism or prudence that you've sort of built in for the MAX in 2024. Can you even give us a sense of What you're delivering to the Spirit, what you're assuming?

Speaker 4

I know we've heard kind of Several commentary from Boeing about lower first half picking up second half, but where exactly are you guys and what are you embedding?

Speaker 2

Yes, I hate to say a little bit it's a little bit of a moving target, okay? So we're seeing better things, ramping up a little bit of Spirit and Boeing and now things are as you know from the reports on January, we feel that too, right? But we're probably speaking for Samad here, we're probably In the $32,000,000 $34,000,000 range, right, for 20.24, I'd say, right?

Speaker 1

Yes, dollars 34,000,000

Speaker 2

Yes, dollars 34,000,000 we'd like to see it higher, but Again, we have to I think this momentum is just going to push us forward hopefully after we get through this FAA audit and rightly so, right? But we're being a little modest right now, but we certainly expect things to ramp up. The good news is, Mike, we have the capacity and we have the people. Just need yours.

Speaker 4

Yes, makes sense. Okay, perfect. I'll jump back in the queue and then if I need you all to get back in. Thanks.

Speaker 2

Thank you, Mike. Thank you, Mike.

Operator

And I'm showing no further questions. I would now like to turn the conference back to Steve Oswald for closing remarks.

Speaker 2

Okay. All right. Let me finish up here. So look, I just to thank everybody for joining us today. Obviously, we had a very, very good year in 2023.

Speaker 2

I'm thrilled that we're able to Breakthrough our record last established in 2012 and we're marching towards our 2027 commitments and we're building more engineered products and We're driving more aftermarket and we're cleaning up our contract manufacturing and taking costs out of that and driving hopefully Much better day once we get these 2 factories closed and I believe that's going to be the case. So looking forward to a great year ahead. We again thank everybody for their And I want to again thank our employees for all their hard work in 2023. Thank you.

Operator

And this concludes today's conference call. Thank you for participating. You may now disconnect.

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Ducommun Q4 2023
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