Ducommun Incorporated — Third Quarter 2026 Earnings Summary

Financial Performance:

• Net revenue reached a record $227.0 million for the quarter ended October 3, 2026, representing a 6% year-over-year increase compared to $214.4 million in Q3 2025.
• Gross margin expanded to a record 28.9%, an increase of 140 basis points year-over-year from 27.5%.
• Net income was $13.9 million ($0.89 per diluted share), a significant improvement from a net loss of $60.8 million ($4.06 per share) in the prior year period.
• Non-GAAP adjusted net income was $18.8 million ($1.21 per diluted share).
• Adjusted EBITDA was $39.7 million (17.5% of revenue), up 6% year-over-year and 10 basis points from 17.4%.
• Operating income was $25.8 million (11.4% of revenue), compared to an operating loss of $75.3 million (35.1% of revenue) in the prior year.
• Net cash provided by operations was $32.7 million, up from $18.1 million in the prior year quarter.
• Interest expense was $3.1 million, compared to $2.9 million in the prior year.
• Remaining Performance Obligations (RPO) reached an all-time high of $1.3 billion.

Guidance and Future Outlook:

• Management launched the "VISION 2032 Plan" with annual revenue targets of $1.6 to $1.7 billion, an engineered product mix of 40%, an aftermarket mix of 20%, and an Adjusted EBITDA margin target of 23%.
• The company is nearing its VISION 2027 financial goal of 18% Adjusted EBITDA by the end of 2027, having achieved 17.5% in Q3 2026.
• Management expects momentum to continue in the defense business in 2027, supported by record RPO and bookings.
• Commercial aerospace revenue is nearing a $100 million quarterly run rate, driven by single-aisle aircraft platforms (Boeing 737 MAX and Airbus A320).

Business Segments and Product Lines:

• Electronic Systems: Net revenue was $129.6 million (up 3.5% YoY). Operating income was $28.7 million (22.2% of revenue). Growth was driven by commercial aerospace large aircraft platforms, partially offset by lower rates on selected radar and naval platforms.
• Structural Systems: Net revenue was $97.4 million (up 9.3% YoY). Operating income was $11.9 million (12.3% of revenue). Growth was driven by large aircraft, aero engines, and business jets, partially offset by lower rates on military rotary-wing and ground vehicle platforms.
• Defense Bookings: Defense bookings were strong with a book-to-bill ratio of 2.2x, driven by missile platforms (Tomahawk, MIR, TOW) and fixed-wing aircraft (F-15).
• Commercial Aerospace: Revenue growth was led by the ramp in commercial aerospace, specifically Boeing 737 MAX and Airbus A320 platforms.
• Industrial: Revenue increased $0.8 million year-over-year, primarily due to timing of orders and production.

Market and Competitive Landscape:

• Defense bookings achieved a 2.2x book-to-bill ratio, indicating strong demand in the defense sector.
• Commercial aerospace end-use markets saw higher rates across large aircraft, business jets, and rotary-wing aircraft platforms.
• Military and space end-use markets experienced lower rates on selected ground vehicles, rotary-wing aircraft (Blackhawk, Apache), and radar programs, partially offset by growth in missile and fixed-wing platforms.

Risks and Challenges:

• Military and space revenue was temporarily weakened by the timing of orders and production on ground vehicles and rotary-wing aircraft platforms.
• Gross margin expansion was partially offset by unfavorable product mix.
• SG&A expenses increased by $5.8 million year-over-year.
• Income tax expense increased by $22.4 million year-over-year.
• Pension plan settlement loss of $3.9 million was recorded in the current period.
• The press release notes general risks including cyclicality of end-use markets, U.S. government defense spending levels, customer production delays, supply chain issues, and geopolitical developments.

Management Commentary and Tone:

• Stephen G. Oswald, Chairman, President, and CEO, described the quarter as "excellent," citing record revenue and gross margins as progress toward VISION 2027 goals and a foundation for VISION 2032.
• Management highlighted gross margin expansion as a "very important story" for investors, noting the 140 bps year-over-year growth.
• The tone regarding the defense business is positive, with management stating "the future is very bright" due to record RPO and bookings setting the stage for multi-year growth.

Other Key Points:

• The prior year period included $99.7 million in litigation settlement and related costs, net, which did not reoccur in the current period.
• Corporate General and Administrative (CG&A) expenses decreased significantly to $14.9 million (6.6% of revenue) from $110.8 million (51.7% of revenue) in the prior year, primarily due to the absence of litigation costs.
• Capital expenditures for the quarter were $5.6 million.
• A teleconference and webcast were held on November 5, 2026, to review results.
• The company restated Q3 2025 revenue in its Form 10-K/A filed on May 8, 2026.