Ducommun Incorporated Price & Performance (DCO)

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. 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, our ability to obtain additional financing and service existing debt to fund capital expenditures and meet our working capital needs Legal and regulatory risks the cost of expansion, consolidation and acquisitions competition, economic and geopolitical developments including supply chain issues, international trade restrictions 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, risk of cybersecurity attacks. Please refer to our annual report on Form 10 ks quarterly reports on Form 10 Q, and other reports filed from time to time with the SEC as well as the press release issued today for a detailed discussion of the risks.

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 statements made in this presentation except as 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. We filed our 2024 Annual Report on Form 10 ks with the SEC today.

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

Keith? Okay.

Thank you, Sumant.

Thanks everyone for joining us today for our fourth quarter conference call.

Today, and as usual, I will give an update of the current situation at the company, after which, Saman will review our financials in detail.

Let me start off again on this quarterly call with Ducommun's Vision 2027 game plan for investors.

The strategy and vision were developed coming out of the COVID pandemic over the summer and fall of twenty twenty two. Unanimously approved by the Ducommun board in November 2022 and then presented to investors the following month in New York. We got excellent feedback. Since that time, Ducommun's management has been executing the Vision 2027 strategy. By increasing the revenue percentage of engineered product and aftermarket content, which finished 23% for 2024, up from 19% in 2023 consolidating our rooftop footprint and contract manufacturing continuing the targeted acquisition program, Executing our offloading strategy with Defense Primes, and high growth segments of the Defense budget driving value added pricing and expanding content on key [indiscernible] aerospace, All of us here as well as my fellow Board members continue to have a high conviction and believe that many catalysts ahead present a unique value creation opportunity [indiscernible] The Q4 twenty twenty four results are another example of our strategy initiatives working. With much more to come in the next few years. Q4 was our fifteenth consecutive quarter with the year over year growth in revenue. Growing 2.6% over prior year to $197,300,000 despite significant headwinds in commercial aerospace build rates. Destocking at BA and SPR, and the strategic pruning of our non core industrial [indiscernible] Which I've mentioned in the past.

It was also our sixth consecutive quarter above $190,000,000 in revenue. Strong growth in our missile electronic warfare programs, F-sixteen and military ground vehicle programs drove our military and space revenue to 5% growth over prior year.

The Fence business has now been over $100,000,000 in revenues for the fifth time in the last remain optimistic about the growth ahead.

I also want to point out that three of our top five customers in Q4 were defense primes. And that is consistent with all the quarters in 2024.

There is great momentum as we move to build scale at other defense crimes such as Northrop outside of RTX, our largest customer.

Also on the defense side, obviously, a lot of discussion going on for European defense budgets.

On January 6, we put out a press release and did announce a major order in Q4 from Byron Kemi, a new customer for DCO based in Germany.

And is 100% owned by MDBA.

This order is in support of NATO and the Patriot PAC two missile.

Byerin, Kemi makes the Rocket Motor and came to DCO in Joplin, Missouri For best in world cabling solutions. All POs received in Q4 which totaled over $40,000,000 in cable assemblies and shipments will begin in 2025 through 02/1930.

We're obviously thrilled with this new customer and expect more activity with FMS in 2025. Are very well positioned In our commercial aerospace business, we continue to see excellent growth on the A220 program where we make the skins for the entire fuselage. The A220 program grew more than 40% during Q4 and we continue to see growth on other Airbus platforms as well. The commercial rotorcraft business grew over 50% in Q4 over prior year with strong growth on the S92 platform as well as our BLR fast fin business for helicopters. DCO's most recent acquisition. This growth was partially offset by weakness on Boeing platforms, that we all know as they slowly resume production after the strike in Q4. Overall, Commercial Aerospace grew 4% year over year in the quarter.

And we have now grown year over year revenue on our commercial aerospace business, for fourteen consecutive quarters. This is a great story showing the resilience of our business even in a challenging environment with Spirit and Boeing. Gross margins also grew $4,700,000 to 23.5% in Q4, up 180 basis points year over year from 21.7% so we continue to realize year over year benefits from our strategic value pricing initiatives productivity improvements, the engineered products portfolio with aftermarket and initial restructuring savings, partially offset by some unfavorable product [indiscernible] and one time expenses during the quarter. Monrovia, California facility is now closed and our Berryville Arkansas facility is down to less than 10 people to maintain capability until the receiving plant in Guaymas, Mexico is certified. For the Tomahawk missile [indiscernible] That is expected very soon. Are already seeing cost savings for these facility closures and we'll see those savings be higher as the receiving plants ramp up [indiscernible] in 2025. For adjusted operating income margins in Q4, the team delivered 8.2% which is about flat to the prior year of point 3%. We continue to be pleased with the growth in our Engineered Product businesses and are encouraged by the performance in our electronic business this quarter resulting from the impact of our strategic pricing initiatives.

Our restructuring savings during the quarter was offset by lower margins in our structures business due to unfavorable mix and one time expenses. Adjusted EBITDA continues to grow compared to last year at 13.8%, up $4,300,000 and exceeding $27,000,000 great to see. This represents an expansion of 180 basis points above prior year. Continues our year over year momentum we've seen each quarter in 2024.

As we work towards the 18% goal, in our Vision 2027 plan. GAAP diluted EPS was $0.45 a share in Q4 twenty twenty four. Versus $0.34 a share for Q4 twenty twenty three. And with the adjustments, diluted EPS was a solid $0.75 a share, compared to diluted EPS of $0.7 in the prior year quarter. The higher GAAP and adjusted diluted EPS during the quarter was driven by improved operating income as well as lower interest costs due to our proactive hedging strategy which took effect in January 2024. Company's consolidated backlog continues to be strong at $1,060,000,000 increasing $17,000,000 sequentially and over $67,000,000 year over year despite headwind from BA. The defense backlog increased $98,000,000 compared to the prior year quarter and is now at $625,000,000 with new orders from previously discussed Bayer and Chemie the TOW missile case, Mesa airborne surveillance, as well as other platforms. As discussed, we experienced a pause in the order cycle for the toll but now we're coming back strong. With better pricing, we manufactured in our Guaymas, Mexico facility where previously was produced in Monrovia, California. The commercial aerospace backlog decreased sequentially by $14,000,000 Full year 2024 revenue grew 3.9% to a record $786,000,000 Our commercial aerospace business grew 8% in 2024.

With strength in Airbus, commercial rotorcraft and business jet platforms, partially offset by weakness on Boeing platforms.

Our military and space business grew 4% in 2024, driven by strong performance across missiles, missile defense, radar, [indiscernible] F-fifteen programs, partially offset by weakness on the F-eighteen F-thirty five programs. Our non core industrial businesses was down 24% as well in 2024. As we continue selectively pro non core business, to refocus our portfolio for the long term.

Full year 2024 adjusted EBITDA margins expanded 140 basis points to 14.8% an excellent performance as we make steady progress towards our Vision 2027 target of 18% EBITDA margins. I'm also delighted to share a significant progress of what I believe is the number one strategic goal under our Vision 2027 strategy. December 2022, we set a target of generating 25% plus of our revenues from engineered products up from 9% in 2017 fifteen percent in 2022. In 2024, engineered product revenue was was 23% of our total revenue. Up from 19% in 2023 positioning us well ahead of the curve achieving our Vision 2027 goal. And we're pushing for a lot more.

We achieved this both through focused investment driving organic growth on our current businesses as well as the BLR acquisition. This tremendous progress and I could not be happier. As for 2025 revenue, are positioned to benefit from the expected bone recovery as the year progresses. As well as the upcoming certification of three major revenue programs being transferred from our closed We are guiding to mid single digit growth for the year with a flattish first quarter due to destocking and lower build rates. Slightly better revenue in Q2, and then renewed strength in the second half. Of 2025.

Now let me provide some additional color on our markets, products and programs. Beginning with our military and space sector, we saw revenues of $109,000,000 compared to hundred and $4,000,000 in Q4 twenty twenty three. Was driven by missile programs such as the MIR, the TOW circuit cards along with next generation Jammer and the F-sixteen. These are partially offset by weakness on the F-thirty five Apache and the well documented F-eighteen.

Fourth quarter military and space revenue represented 55% of Ducommun's revenue in the period, down from 59%. For the full year back in 2022, and 70% in 2021. We expected this trend and reflects commercial aerospace getting stronger for DCO providing good balance.

We also ended the fourth quarter with a backlog of $625,000,000 an increase of $98,000,000 year over year. Representing 59% of Ducommun's total backlog. In our Commercial Aerospace operations, fourth quarter revenue continued to grow increasing 4% year over year to 40 excuse me, $82,000,000 driven mainly by growth on the A220, and S-ninety two platforms offset by lower rates on the MAX. As mentioned earlier, we believe a much better story is ahead for BA and the MAX Now the production is ramping up again. We also have high confidence in Kelly Hartberg and his team. Backlog within our commercial aerospace business was $416,000,000 at the end of the fourth quarter. Decreasing $15,000,000 compared to the prior year driven by Boeing by the Boeing strike. We expect this to recover as production rates ramp up in 2025. Revenues in our industrial business declined by a third to $6,000,000 during Q4 as we continue to strategically prune non core business from the portfolio. This will benefit the company in the longer term as we transition that capacity to our core aerospace and defense [indiscernible] Okay. With that, I'll have Sumeet review our financial results in detail.

Sean? Thank you, Steve.

As a reminder, please see the company's 10 ks and Q4 earnings release for a further description of information mentioned on today's call.

As Steve discussed, our fourth quarter results reflected another period of solid performance with growth in both our commercial aerospace and military end markets. We also continue to make good progress on our facility consolidation projects which are now nearing completion and will drive further synergies in late twenty twenty five and into 2026 as we close out the recertification of the various product lines at the receiving facilities over the next few months. As Steve highlighted earlier, we also made great progress in continuing to build up our engineered product portfolio with those revenues now contributing 23% to our mix. These actions along with our strategic pricing initiatives drove strong margin expansion in 2024 and has put us on a strong footing to achieve our Vision 2027 goals.

Now turning to our fourth quarter results. Revenue for the fourth quarter of twenty twenty four was $197,000,000 versus $192,200,000 dollars for the fourth quarter of twenty twenty three. The year over year increase of 2.6% reflects growth in both commercial aerospace and military and highlighted by $5,100,000 of growth across military and space platforms, and $3,000,000 of growth in our commercial aerospace platforms. We posted total gross profit of $46,400,000 or 23.5% of revenue for the quarter versus $41,700,000 or 21.7% of revenue in the prior year We continue to provide adjusted gross margins as we have certain non GAAP cost of sales items in the current and prior period relating to inventory step up amortization on our recent acquisitions and restructuring charges. On an adjusted basis, our gross margins were 24% in Q4 twenty twenty four versus 23.2% in Q4 twenty twenty three.

The improvement in gross margin was driven by our growing engineered product [indiscernible] strategic pricing initiatives productivity improvements and restructuring savings partially offset by unfavorable product mix in our Structured segment and one time expenses. We continue to make progress working through a difficult operating environment with 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. Going forward, we will continue to work to improve the working capital turns in the business The common reported operating income for the fourth quarter of $10,400,000 or 5.3% of revenue compared to $8,900,000 or 4.6% of revenue in the prior year period. Adjusted operating income was $16,100,000 or 8.2% of revenue this quarter compared to 15,900,000.0 or 8.3% of revenue in the comparable period last year. The company reported net income for the full quarter of 2024 of 6,800,000.0 or $0.45 per diluted share compared to $5,100,000 or $0.34 per diluted share a year ago.

On an adjusted basis, the company reported net income of $11,400,000 or $0.75 per diluted share compared to adjusted net income of $10,400,000 or $0.7 in Q4 twenty twenty three.

The higher net income and adjusted net income during was driven by the higher operating income and adjusted operating income Additionally, our interest rate hedge helped to reduce our year over year interest expense. Now let me turn to our segment results. Our Structural Systems segment posted revenue of 90 versus $85,600,000 last year. The year over year increase reflected $6,400,000 of fire sales across our commercial aerospace applications including the A220, and S92 rotorcraft platform. 5% driven primarily by a decline in Apache revenue as we shut down production in our Monrovia facility partially offset by growth in Blackhawk, and other military vehicles. Structural Systems operating income for the quarter was $3,200,000 or 3.6% of revenue compared to $6,600,000 or 7.7% of revenue for the prior year quarter. Excluding restructuring charges and other adjustments in both years, the segment operating margin was 9.2% in Q4 twenty twenty four versus 14.6% Q4 twenty twenty three. The decline in margin during the quarter was driven by unfavorable program and higher one time costs.

Our Electronic Systems segment posted revenue of $107,000,000 in the fourth quarter of twenty twenty four versus $106,700,000 in the prior year period. Higher revenues from The Mirror next generation jammer and F-sixteen platforms were offset by lower revenues from in flight entertainment electronics along with a reduction in our industrials business as we chose to selectively prune non core work. Electronic Systems operating income for the fourth quarter was $19,000,000 or 17.7% of revenue versus $9,800,000 or 9.2% of revenue. In the prior year period. Excluding restructuring charges and other adjustments in both years, segment operating margin was 17.7% Q4 twenty twenty four versus 10.2% in Q4 twenty twenty three.

The year over year increase was primarily due to a higher mix of engineered products strategic value pricing initiatives, as well as savings from the restructuring program. The restructuring savings were driven by the consolidation of product lines from our variable performance center into our Joplin Next, I would like to provide an update on our ongoing restructuring program. As a reminder and as discussed previously, we commenced a restructuring initiative back in 2022 These actions are being taken 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 the transfer of that work to our low cost operation environment Mexico, and to other existing performance centers in The United States. We continue to make progress on these transitions and are working diligently with our [indiscernible] Boeing and RTX, to obtain the requisite approvals which are expected to be completed over the next few months. During Q4 twenty twenty four, we recorded 2,300,000.0 in restructuring charges. We expect to incur an additional $1,000,000 to $1,500,000 in restructuring expenses as we complete the program. Upon the completion of our restructuring program, we expect to generate $11,000,000 to $13,000,000 in annual savings from our actions and have already seen some realization of savings from these actions in 2024.

We expect the synergies to ramp up in late twenty twenty five and into 2026 as the product recertification is complete and the receiving facilities move up the learning curve and ramp up production. We also anticipate selling the land and buildings at both Monrovia, California and Berryville, Arkansas. Turning next to liquidity and capital resources. In 2024, we generated $30.34200000.0 dollars in cash flow from operating activities which was an improvement compared to $31,100,000 in 2023. The improvement was due to net income growth of 15,600,000.0 offset by investments in working capital.

We paid down $15,000,000 on our revolver and $7,800,000 on term loan for a total of 22,800,000.0 during the year. As of the end of the fourth quarter, we had available liquidity of $228,000,000 comprising of the unutilized portion of our revolver and cash on hand. Our existing credit facility was put in place in July 20 at an opportune time in the credit markets allowing us to reduce our spread increase the size of our revolver and allowing us flexibility to execute on our acquisition strategy. Interest expense in Q4 twenty twenty four was 3,600,000.0 compared to $5,400,000 in Q4 twenty twenty three.

The year over year improvement in interest cost was mainly due to our interest rate hedge In November 2021, we put in place an interest rate hedge that went into effect for a seven year period starting January 2024 and pegs the one month terms of our 170 basis points or $150,000,000 of our debt.

The hedge resulted in interest savings of approximately 1,800,000.0 in Q4 twenty twenty four and will continue to drive significant interest cost savings in 2025 and beyond. To conclude the financial overview for Q4 twenty twenty four, I would like to say that the fourth quarter results continued our momentum this year and positions us well for 2025 and beyond. I'll now turn it back over to Steve for his closing remarks.

Okay. Thanks, Samad. Just in closing, Q4 was another very good quarter. DCO to finish, I believe, an excellent year. In 2024, we achieved record revenues with record margin expansion, And the Vision 2027 strategy in its second year really kicked in. We also delivered full year EBITDA margins of 14.8%, which was an expansion of 140 basis points during the year. Solid progress towards our target we've been mentioning this morning of 18% by 2027. We also discussed our Vision 2027 target of the very important 25% plus of engineered product revenues. And 2024 coming in at 23% was terrific news. Finally, with the BEA strike now behind us, commercial bill rates heading higher along with I believe a a very good defense backdrop for DCO. Including FMS. I feel great about what lies ahead In the next few years for us, our shareholders, and our other stakeholders. So with that, let's go to questions. Thank you.

Thank you. At this time, we'll conduct the question and answer session. And our first question comes from the line of Ken Herbert of RBC Capital Markets. Your line is now open. Yes. Hey, good morning. Steven, Good morning.

Good morning.

Hey, Steve. Maybe just to kick off, appreciate the twenty twenty five mid single digit top line outlook as we think about the year. Specifically, can you provide any color on expectations for Defense and commercial markets commercial aerospace. And then I guess within commercial aerospace, where are you shipping today on maybe the MAX or I guess what do you see as continued destocking risk on that particular program into the first part of the year of 2025? Yes.

All right. Ken, thanks for the question. First, let me just tackle the commercial part. I mean, a big part of our MAX business is through Spirit, right?

So that's a large part of our shipments including what we sent to Boeing as well. Lesser so.

We think that everything we're hearing is that first the first quarter and probably through the first half, there's certainly destocking headwinds in spirit. Okay. So I can't tell you exactly what, but that's why we feel like first half of the year is first quarter, especially the first half of the year is a bit challenging on the destocking. And I think after that, things will open up a bit. I really all indications are that they're going to get to the mid mid-30s at least, okay, we were hoping and we think that's in the cards now. So So we think the second half could be better than the first. Our military side, I mean, I know I know the services companies and lots of other folks are seeing tremendous headwinds. I mean, I can only talk to our backlog.

Our backlog is real good. We're on these programs that we like. I mean, I mentioned this this new customer, Ken, who is just one of many.

But this whole NATO buy that we got in Q4 that just because we're good at cabling, really good, And we've been working with Raytheon in the past, we're able to get that that order. So I feel good about defense. I think that we're going to ride up more commercial aero in the second half of the year. First half, destocking and sort of still moving bill rates higher, I think is the story for DCO.

Okay. So if I had to We are seeing improvement between January and February this year in our shipments both to Spirit and Boeing. So we have seen a ramp up from the teens into the 20s both with Boeing and Spirit going from January to February. So that bodes well for Q1. And rest of 2025. The Spirit has a lot of fuselages as you know Ken.

Yes. No, I appreciate that. So if I think about again relative to the mid single digit, maybe maybe upper end of that range in defense and lower end of that range or better growth in defense, I guess, in military and space in '25 relative to commercial? Is that the right way to think about it?

I think we're going to see we are expecting to see good growth in commercial as well, but it's going to be more back half. I think defense growth is going to be more even through the year.

Okay, perfect. And just a clarification, what percent of your maybe defense sales ultimately end up in Europe and how much will you benefit just from what's expected to be a surge in defense spending there?

Yes, that's a good question. This whole order we got is $40,000,000 plus order is frankly one of our first okay.

So we are getting lift with the the Polish order for the Apache helicopters and those type things. We get big lift from that, but that goes through our our U. S. Defense price. This is a new thing for DCO. So we're open for more on that. It's early but this is a direct shipment into Germany. So it's I think it bodes well for hopefully more this year and next year.

Perfect. Thanks. I'll pass it back there.

All right, Ken. Thanks. Thank you. One moment for our next question. Our next question comes from the line of Mike Crawford of B. Riley Securities. Your line is now open. Thank you. I know it's a little early, but with Potential offsets to defense budget spending where things are report prioritized under the new administration.

As much as 8% targeted. Where does Ducommun Ducommun in the mix? Like let's just take for example growing platforms like the XM30 that is like a new next generation combat vehicle that's probably okay, but maybe some other older platforms might get hit on reprioritization of spending. So As we look at it now, would you characterize your position amid Yes, Mike, I hate to give you that answer. I'll give you two two parts of the answer. First, it's tough for us to know right now.

So that's the first answer I'll give you. The second answer is that we feel like when we look across what we have, we feel very good about where we are with our circuit cards, with our cabling, with our we've got chock full orders for Apache, even though that program as I mentioned is offline right now and will be certified in the next couple of months and will be made in New York at Okrasaki facility. The Tomahawk missile is going to be there as you know. So SPY6, maybe here, maybe there, we feel like at least what we know today, we feel good about the breadth. What I would say about our defense business.

We don't have strong reliance on any one program. No individual program is more than 10% of our defense revenues. Including programs such as the F-thirty five, the F-sixteen or F-eighteen, So I think we are diversified in that way. And also the focus as Steve mentioned on our missile, missile defense, electronic warfare, our focus in those strategic areas, I think it's going to bode well if there is that pivot that you're talking about and we should hopefully see further growth in those areas. Offsetting weakness on the more legacy platforms.

Only thing Mike we've been writing down is the F-eighteen. Which we've signaled the last, I guess, year or two on the call, right? So we've been writing that down. But the good news is, is that a lot of that lower revenue now is in the base. So we're not going to see as much headwind on that.

That's our view.

Okay. Thank you. And just to switch gears a little bit. So in the IFC business, you have this great relationship with Viasat that has just about 4,000 commercial planes in service and another fifteen seventy planes in backlog. So that's still going to continue for a few more years, but this has been a great growth business for you in the last few years. But at what point do you start planning for capacity where that business will slow down at some point if it's not next year or 2027, it's going to happen at some point. So when do you start planning for that transition?

Yes, we're actually how about lucky and good, right? So all that all that work really comes out of Appleton. Wisconsin. That's all the hard work we do for ViaSat and the great partners. And we have next generation jammer going in there. We have lots of things that are queued up. So we we actually are probably in the next year to looking for more space even though the ViaSat work will go down. We've got We've got lots of high demand for our Appleton products. So I'd say at least from where I sit today, we're in good shape.

Okay. Thank you. And just the last one is what if anything, are you seeing that that's different or interesting in your M and A pipeline?

So we are continuing to work on multiple opportunities deal flow in the lower mid market for the engineered product business that we've seen has been slower. In the past twelve months. But there are active things in the hopper that we continue to work on and we remain optimistic about being and confident about being able to execute our acquisition strategy and meeting the vision 2027 goals. [indiscernible] Thanks, Mike.

Thank you. One moment for our next question. Our next question comes from the line of Jason Gerfie of Citi. Your line is now open. Hi. This is Jeremy Jason on for Jason Gershey. I just kind of wanted to understand sort of how much of the margin hit this quarter in Structural Systems Was Like Mix As Opposed To Like Cost That Would Fade Away Once Mexico is up and running? And so like if it's mix, how long does that mix sort of persist for? [indiscernible] I would say it's kind of about evenly split between mix as well as onetime expenses that were specific to the quarter. And the mix as well was unusual to the quarter and we do expect the margins in the structures business to fully recover in Q1.

Got you. Got you. I really appreciate that. And so my follow on question is just, if the that's the case, so, sounds like Boeing programs are a bit more profitable than Airbus. So first of all, is that the case? And also, what can you guys do to like improve Airbus program profitability?

I think we would no, we avoid talking about specific customer or product line profitability. That being said, we ensure that we're getting paid for the value that we bring to the customer and we continue to work on opportunities with both the customers you mentioned to raise prices where it is appropriate and make sure that [indiscernible] earning sufficient margin and those actions have taken place over the last year as you've seen growth in our margins. And there are active ongoing initiatives to drive that going forward in 2025 as well. Perfect. And then one last one, just you so much for this. So how much of like additional cost did you guys sort of incur in past quarter that were not backed out like And sort of when do those potentially go away?

So are you referring to the Structures segment?

Yes.

So it's about half of the drop in margin was on account of one time expenses. Just for the score? Just for the quarter. Just for Q4.

Got you. I appreciate the color. I'll pass it back.

Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Alexandra Mandary of Trues Securities. Your line is now open.

Hi.

This is Alexandra Mandory on Michael Ciarmoli with Tuohy Securities.

Thank you for taking my question. I just had a question on the cash flow statement. It looks like there's one item titled legal fees for unsolicited non binding acquisition offer. Of $7.38 ks in 4Q and $3,145,000 year to date. Can you just add more color on this item and Yes. So it's not an expense we are happy about that we didn't want to spend certainly spending shareholder money on something like this, but it was the right thing for us to do to protect shareholder interest And make sure that we preserve the value of the company for our existing in making sure that we were properly the management and the Board was properly advised in response to the offer received from Albion River We did engage both financial advisors as well as legal advisors over the course of the year. And those are the fees that were paid to both those legal and financial advisors that advised Board and management.

Now since in Q4 and then in February of this year, we did see 13 gs filings stating that Albion no longer holds. A position in Newcomen Ducommun they have sold off their entire [indiscernible] So we are not expecting these expenses to continue in 2025.

Okay, great. That makes a lot of sense. And I just had a quick follow-up related to defense exposure and programs. So do you have any thoughts on Doge and potential changes for the better or worse as a result of Doge? Thanks. Yes.

Thank you for the question. I know it's top of mind for everyone. We don't really have a viewpoint right now. Again, mentioned earlier on the call, we feel we have a wide breadth of products that we make for defense. A lot of it is electronic warfare A lot of it is things cards, cabling, things that are important for missiles and missile defense and we do feel good about all our programs. I mean, I did signal a year or two ago for the F-eighteen, and that's the one program which we are winding down and most of that's already in the base. So we feel good. But again, we don't we're not we don't have any view as yet as far as on the doge side.

We just have the DC overview.

Okay, great. Awesome. Thanks.

Thank you. One moment for our next question. Our next question comes from the line of Noah Popanac of Goldman Sachs. Your line is now open. Hello, Noah, your line is now open.

Think there may be a connection issue. Let's move forward.

Okay. I'm showing no further questions. I'll now turn it back to Chairman, President and CEO, Stephen Oswald for closing remarks. Okay.

I want to thank everyone for joining us very much appreciate it. Again, I felt we had a very good quarter.

I think we're well positioned. I know there's lots of discussion about defense right now. Again, me reiterate finally that our view is at least from our product line, we feel very good about about this year. So we'll have to see what we that's our view. We feel strongly about our Vision 2027. And look forward to speaking with you after the first quarter. So thank you again for your support. And have a great and safe day.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.