Good day, ladies and gentlemen, and welcome to the Ducommun Second Quarter Conference Call. At this time, all participants are in a listen-only mode. Following management's prepared remarks, we'll hold a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded today, August 12, 2021. I would now like to turn the conference over to your Investor Relations Advisor, Chris Witty.

Thank you and welcome to Ducommun's 2021 Second Quarter Conference Call. With me today are Steve Oswald - Chairman, President, and CEO; and Chris Wampler, Vice President, Chief Financial Officer, Controller, and Treasurer. 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&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 perspective. 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. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurances 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 among others, the cyclicality of our end use markets, the impact of COVID 19 on our operations, our customers, the level of U.S. government defense spending, timing of orders from our customers, legal, and regulatory risks management changes, the cost of expansion and acquisitions, competition, and disasters natural or otherwise. These risks and others are described in our Annual Report on Form 10-K filed with the SEC and our forward-looking statements are subject to those risks. Statements made during this 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 cost 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, we filed our 2021 second quarter Form 10-Q with the SEC today. I would now like to turn the call over to Mr. Steve Oswald for a review of the operating results. Steve?

Well, thank you, Chris. And thanks everyone for joining us today for our second quarter conference call. Today, as usual, I'll give an update on the current situation of the company after which Chris Wampler, review our financials in detail. The company remains focused first and foremost on the health and safety of our employee's, team has done an excellent job with safety protocols put in place since March 2020. We continued to work with the authorities on best practices throughout our many operations. The total number of cases is roughly 214 since the beginning of the pandemic and within the company, we had 14 cases in Q2 2021. As mentioned in the press release Ducommun's second-quarter results were very strong, with the company's delivering year-over-year revenue growth of 9%, all organic, for the first time since Q1 2020. The Company's defense business continues to be a major success with momentum growing again year-over-year and was the main contributor to the quarter. The challenges in the commercial aerospace -- the aerospace market were overcome again by the team that we have seen some good signs for example with growth at Spirit Aerosystems in Q2, we're optimistic that we'll start seeing meaningful OEM build rate increases starting in 2022. In addition to revenue growth, we posted growth gross margins of 23% which is the highest level reached in 10 years of the company, along with adjusted EBITDA margins of 14.6%, which is an increase of 80 basis points year-over-year. The team also posted an adjusted operating income margin of 9% which is excellent progress, the quality of earnings was highest as well with the company reaching GAAP diluted EPS of $0.69 a share versus $0.43 of a share for Q2 2020 and adjusted diluted EPS of $0.74 a share versus $0.48…

Thank you, Steve, and good afternoon everyone. As a reminder, please see the company's 10-Q and Q2 earnings release for further description of information mentioned on today's call. As Steve mentioned, Ducommun's second quarter marked our first quarter of top line year-over-year growth since the pandemic began early in 2020. This growth, all driven organically, combined with our strong margin performance in the second quarter, helped deliver outstanding overall performance. We anticipate the favorable year-over-year compares on revenue to continue throughout the remainder of 2021. We see this as we expect measured improvement in the commercial aerospace market, while military demand remained strong. Turning to our second-quarter results, let me review some of the highlights. Revenue for the second quarter of 2021 was $160.2 million versus $147.3 million in the second quarter of 2020. The 8.7% increase year-over-year primarily reflects $18.5 million of higher revenue within the military and space sector partially offset by $2.1 million of lower revenue across our commercial aerospace platforms. Ducommun's overall backlog at the end of the second quarter was approximately $814 million, slightly higher than that at the end of Q1, reflecting program timing, slowly improving commercial demand and an uptick in industrial orders. As a reminder, we define backlog as potential revenue based on customer purchase orders and long-term agreements with firm fixed prices and expected delivery dates of 24 months or less. We posted total gross profit of $36.8 million for the quarter versus $32.7 million in the prior year period. Gross margin rose 80 basis points to 23.0% from 22.2% in the 2020 second quarter, with the increase primarily reflecting favorable manufacturing volume along with a strong product mix and cost control efforts. The 23% gross margin was our highest quarterly gross margin performance in more than a decade. For the…

Okay. Thank you, Chris. And well, look, we're certainly proud of the results this quarter, just gets us better positioned from a commercial aerospace rates going meaningfully higher in 2022. We met our commitments and our strength in the company through this difficult period. Really due to our effective strategy, our dedicated people, and our operational leadership. I also like to take this time to welcome our newest board member to Ducommun, Sheila Kramer who currently serves as Vice President and Chief Human Resource Officer at Donaldson Company Incorporated, Sheila will bring important expertise to the company as we work through the pandemic and drive the long-term growth of the company. In closing, I'd like to again, this quarter take this time to tell our team, our employees, very proud of them and all their efforts with the many challenges since the pandemic started back in March of 2020. Our team members show up at the operation every day and though stressful continue to get the job done for our customers, our nation and one another. So with that, I will turn it over for questions. Thank you for listening.

[Operator Instructions] And our first question comes from the line of Mike Crawford with B Riley Securities. Your line is open. Please go ahead.

Thank you. Of your near-quarter of a $1 billion in structural Systems sales, what percent of that is titanium?

I'm sorry, Mike -- say that again Mike, we just came across together. Can you say that again, please.

Yes, around what percent of your structural Systems sales were titanium?

Well, yes, I don't think, Mike, we'd typically disclosed that percentage, but I would say that everything that those key components, those key programs that the one Steve alluded to with Airbus, those are the core of what we have along with whatever is growing back here through the rest of the commercial recovery.

It's a meaningful -- meaningful number.

And what about, first of all at one point, I think you were particularly excited about that proprietary process and technology and I think that's probably a very small portion of your overall titanium sales, but where do you see that growing to in the coming five years?

Yes. So, first, its composite is not titanium, just to let you know, but we are very excited. Just you know certainly because of the pandemic and the slowdown on the build rates that's part of the business back, at least probably, I don't know maybe roughly a year but we're picking momentum again, this product is for the Leap engine we're working on for the Airbus A320 so good things ahead there, right. So, we'll have more to say about it in the future, but just as a note that we were excited about our prospects VersaCore though we have been slowed down a bit because of obviously all the challenges on the bill rates.

Okay, great. And then, is there anything in the forthcoming government fiscal year budget that you are particularly looking out for that would help or not to Ducommun?

Yes. I would just say look, I mean, I know there was an extra $25 billion put in by the committees and I know that things are being worked through. We're obviously -- we're missile people, we're like electronic people with cars and make interconnects. We do a lot of things we're very, very comfortable that as we go forward in time that what we see the defense budget leading into in certain ways is going to benefit us. So, we -- again to my remarks -- my remarks earlier, we feel, -- we feel overall very good about where we're going to be the next few years.

Great, thank you very much.

Thanks. Mike.

Thanks. Mike.

[Operator Instructions] Our next question comes from the line of Michael Ciarmoli with Truist Securities. Your line is open. Please go ahead.

Hey, good evening, guys nice results. Thanks for taking the question. Steve, can you give us or Chris, I guess a little bit more maybe detail on this Airbus deal. And I guess specifically where your content per platform or annual revenues would be tracking now, I think you know from one-year-old decks you had shown the A320 maybe was kind of running around, I guess it was, it was just under $20 million. So can you give us any directionally what that -- is it a 2x deal, or is it -- just maybe any more color on where you are in terms of.

Absolutely. So it's going to be a bit difficult because of our expectations from the customers for disclosure just from Airbus (inaudible), but I would say this is on the A320, which is a big part of the game here, A330 obviously is less and you know about the A320. But I know we've disclosed in the past, it's going to be a meaningful increase, the one thing that I do want to mention about is that this is the first time we're recognized as a partner with Airbus. We kind of got in the game here. In 2016, 2017, I came in early 2017 and this has been a long road. And we really weren't even in the game before 2016 - 2017. So for us, to kind of get in there, expectations at Airbus are sky high and be able to meet their operational and other value propositions. I think it's just -- it's a big deal. Like I said in my press release. So it's going to be meaningful. It's going to be A320, we're hoping, obviously it's going to continue to evolve because now we're partners where we weren't before.

Can you give any more detail as to how you won the selection, was it Airbus looking for more suppliers, or they -- are you, did you displace or take a more material amount of share from the previous vendor or any details on how this came about?

Look, at the beginning, I think this titanium business which I'm on record saying outside of an OEM where we're really the world's leader here on this (inaudible). They saw something in Ducommun they like and gave us a shot and it took us four or five years to kind of operationally value add it, I would say, as far as where the business came from that probably came from other partners who maybe aren't there anymore. And they also have internal operations for titanium. So I think it's a mix.

Okay, got it. And then, can you -- sorry, guys.

No, it's about the best I can do Michael on that.

Okay. Yes, perfect. What about, can you give us any sense as to where you are on production rates, maybe the MAX, obviously the 787 is the blemish out there, you talked about seeing more, more work from Spirit presumably on the MAX there. But are you kind of in-sync with where everyone else is, are you kind of tracking and thinking about this 31 per month in early 2022?

Yes. Well, let me first say the headline is we're hungry, okay. I mean we got -- we got the process, we got the capital, we got the right people in place now running all of our operations. Yes, we are definitely leaning into everything I think you pointed at the right way. I mean, we're obviously supporting the customer, but we're excited, hopefully, 31 is going to come, that's going to be a big deal for us, as you know. And obviously what we're hearing out of Airbus is to get to 70 a month would be an absolute home run for Ducommun, So we're ready to go. That's all I would say.

Okay, got it. Last one -- last one from me any updated thoughts on kind of the M&A environment, capital deployment. I know you hold out Noble's with some of the success there, but what's the latest pipeline? how are you guys looking at deal flow?

Yes, well for it obviously. And thanks for bringing that out, the Noble thing, I mean we are -- this is a big deal for us to win that back in October, 2019 and yes, it's got a great future. And when we look at our model. We're looking for engineered products, so we can get to improve our mix there as well as growth opportunities. So that's very positive. All three of those have done well for us. I would say the current environment is competitive. I think you probably hear enough from other folks. There's a lot of money out there, but we have our -- we have our functional people and we still have the same team that we acquired last year. And we are active. So we like acquisitions. We think we can integrate it. Well, we think that track record has been good for shareholders and good for our P&L, so hopefully more to come sooner than later, Mike.

Got it. Thanks a lot. I'll jump back in the queue here.

Yes, thanks.

[Operator Instructions] I'm showing no further questions at this time. And I would like to turn the conference back over to Mr. Oswald for any further remarks.

Great. Well, again thank you and thank you everybody for joining us today. Both our analysts and most important our shareholders and our team. We're obviously pleased with the return to growth as I talked about, I think it was in my Q2 remarks in 2020 that we're going to return to growth this year and this is our first quarter doing it. So you can argue with organic growth, I mean 9% is more than, even though it was off of a lower base in Q2 2020 is still a great number, we're thrilled with gross margins at 23%, and I think we're doing a lot of the right things. So again, we always appreciate your support and your commitment and we look forward to speaking to you again soon. Thank you.

Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.