Ducommun Q2 Earnings Call Highlights

Key Points

• Record Q2 performance: Revenue rose 12% year over year to $224.5 million, while adjusted EBITDA margin improved to 17.1% from 15.1%. GAAP earnings increased to $1.31 per diluted share from $0.84.
• Defense and aerospace demand remained strong: Missile revenue surged 68%, supported by PAC-3, SM-6, AMRAAM, Tomahawk and other programs, while commercial aerospace sales grew 16% on higher Boeing and Airbus production and a 737 MAX retrofit opportunity.
• Outlook reiterated despite slower second-half growth: Ducommun maintained its full-year 2026 forecast for mid- to high-single-digit revenue growth, but said some production pulled forward into the first half will lead to low- to mid-single-digit growth in the third and fourth quarters. Record remaining performance obligations reached $1.16 billion, with a 1.4x quarterly book-to-bill ratio.

Ducommun NYSE: DCO reported record second-quarter revenue as growth in commercial aerospace and military programs lifted sales, margins and earnings. The company said it remains on track to meet its full-year revenue outlook despite expecting lower growth rates in the second half after pulling forward some production activity into the first half.

Second-quarter revenue rose 12% year over year to $224.5 million, marking the company’s fifth consecutive quarter above $200 million and its 21st consecutive quarter of year-over-year revenue growth. Chairman, President and CEO Steve Oswald said commercial aerospace revenue increased 16%, while military and space revenue grew 7%.

“The Q2 2026 results show again that the strategy initiatives are working,” Oswald said, citing expansion in engineered products, facility consolidation, strategic pricing and aftermarket content.

Margins and Earnings Improve

Gross profit increased to $62.9 million, or 28.0% of revenue, from $53.0 million, or 26.4% of revenue, a year earlier. The company attributed the margin improvement to savings from its facility consolidation program, strategic pricing initiatives and higher manufacturing volume.

Ducommun said it has mostly realized its expected $13 million in annual savings from the facility consolidation program. Adjusted operating income rose to $26.7 million, or 11.9% of revenue, compared with $20.6 million, or 10.2% of revenue, in the prior-year quarter.

Adjusted EBITDA increased to $38.4 million, or 17.1% of revenue, from $31.7 million a year earlier. The company’s Vision 2027 plan targets adjusted EBITDA margin of 18% in 2027.

GAAP net income was $20.4 million, or $1.31 per diluted share, compared with $12.8 million, or $0.84 per diluted share, in the second quarter of 2025. Adjusted net income rose to $18.4 million, or $1.18 per diluted share, from $13.6 million, or $0.90 per diluted share. CFO Suman Mookerji said GAAP results also benefited from a one-time executive compensation clawback associated with a restatement published earlier this year.

Missile Programs Drive Defense Growth

Military and space revenue reached $124 million, up from $116 million a year ago. Growth was led by the company’s missile portfolio and fixed-wing aircraft programs, partly offset by temporary declines in radar, naval and space programs due to order timing.

Ducommun’s missile business grew 68% during the quarter and was up 29% over the trailing 12 months. Mookerji said growth was broad-based across PAC-3, SM-6, AMRAAM, Tomahawk and Naval Strike Missile programs. Missiles, radar and electronic warfare programs together represented about 35% of the company’s trailing-12-month defense revenue and more than 20% of total company revenue.

Oswald said PAC-3 was a significant contributor to the quarterly missile growth. He added that the company expects production on programs including PAC-3, SM-3, SM-6, Tomahawk, THAAD and AMRAAM to increase as defense primes ramp output.

The company said its remaining performance obligations reached a record $1.16 billion, up more than $250 million from a year earlier and $85 million sequentially. Ducommun recorded $310 million in second-quarter bookings and $1.1 billion in bookings over the past 12 months, producing a quarterly book-to-bill ratio of 1.4x and a trailing-12-month ratio of 1.3x.

Defense remaining performance obligations increased $197 million year over year, while commercial aerospace obligations rose $54 million. Management said the backlog does not include the company’s potential share of orders related to certain multiyear missile framework agreements between the government and defense primes.

Commercial Aerospace Strength and Retrofit Opportunity

Commercial aerospace revenue rose to $89 million, driven by higher production and deliveries on Boeing and Airbus single-aisle platforms, including the 737 MAX and A320, as well as growth on wide-body platforms. The quarter also included revenue from an aftermarket retrofit order on the 737 MAX.

Mookerji said Ducommun designed the switch involved in the retrofit program and owns the related intellectual property. The company expects the retrofit work to generate revenue for several years and said the product could eventually become line-fit content on the aircraft.

Commercial aerospace growth offset declines in business jet and commercial rotorcraft operations. Management said it expects destocking in commercial aerospace to be largely resolved by the end of 2026, though it remains a headwind through the remainder of the year.

Segment Results, Cash Flow and Outlook

• Structural Systems: Revenue increased to $93 million from $91 million. Adjusted segment operating margin rose to 15.7% from 12.8%, supported by consolidation savings and higher volume.
• Electronic Systems: Revenue increased 20% to $131 million, reflecting higher military and space sales, Boeing-related commercial aerospace growth and increased industrial production orders. Adjusted segment operating margin increased to 19.7% from 19.1%.

Cash flow from operations was $33.5 million in the quarter, compared with $22.4 million a year earlier. Year-to-date free cash flow totaled $38.3 million, representing 127% conversion against adjusted net income, according to the company. Ducommun ended the quarter with $410 million of available liquidity.

Management reiterated its expectation for mid- to high-single-digit revenue growth for full-year 2026. However, Oswald said revenue pulled forward from the second half to support plant scheduling and expected higher delivery commitments later in the year will result in low- to mid-single-digit growth in the third and fourth quarters.

Ducommun plans to present its Vision 2032 strategic plan at an investor day in New York on Sept. 17.

About Ducommun (NYSE:DCO)

Ducommun Incorporated, through its Electronics and Structures segments, provides engineered products and integrated systems for the global aerospace, defense and space markets. The Electronics segment focuses on high-reliability electronic assemblies, cable and wire harnesses, connector systems and harsh environment electronics for flight-critical applications. In the Structures segment, Ducommun manufactures complex metallic and composite components such as flight control surfaces, skin panels, heat exchangers and other aerostructures for commercial and military platforms.

Founded in 1849 in California as a hardware and stagecoach parts supplier, Ducommun expanded into aerospace manufacturing during World War II and has since grown its capabilities through targeted acquisitions and organic investments.

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