On Tuesday, Ducommun (NYSE:DCO) discussed first-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

Ducommun reported a record Q1 2026 revenue of $209 million, marking 9% growth year-over-year and the fourth consecutive quarter exceeding $200 million in revenue.

The company continues to execute its Vision 2027 strategy, with gross and adjusted EBITDA margins improving, and a target of 18% EBITDA margin by 2027.

Ducommun's commercial aerospace segment showed strong growth, with an 18% year-over-year increase, while the defense segment also performed well, driven by missile programs.

The company is actively engaging with defense primes for future missile production contracts, anticipating significant growth in this area by 2027.

Management reiterated guidance for mid to high single-digit revenue growth for 2026 and highlighted continued strong bookings and a positive outlook for both defense and commercial aerospace markets.

Full Transcript

OPERATOR

Good day and thank you for standing by. Welcome to Ducommun's first quarter 2026 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised to withdraw your question. Please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Suman Mukherjee, Senior Vice President Chief Financial Officer. Please go ahead.

Suman Mukherjee (Senior Vice President Chief Financial Officer)

Thank you and welcome to Ducommun's 2026 first quarter conference call. With me today is Steve Oswald, Chairman, President and Chief Executive Officer. 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 the Company's progress and value creation opportunity for shareholders under our Vision 2027 game plan for investors beliefs about the company's Vision 2032 strategic plan, potential destocking headwinds and their impact on the Company's business for the remainder of 2026 expectations related to the US Department of Defense long term framework agreements for key missile programs with defense primes and their impact on the growth of our defense business. Expectations relating to certain commercial, aerospace, single and twin aisle platform build rates through 2027 and beyond estimated synergies to be realized under the Company's facility consolidation projects and the outlook for our commercial, aerospace and defense businesses for the remainder of 2026 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. 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 US Government defense spending Our customers may experience changes in production rates or delays in the launch and certification of new products Timing of orders from our customers which are subject to cancellation, modification or rescheduling our ability to obtain additional financing and service existing debt to fund capital expenditures and meet our working capital needs legal and regulatory risks, including pending litigation matters generally, as well as any potential losses arising from third party subrogation claims related to the Guaymas Performance center fire that may become material the cost of expansion, consolidation and acquisitions competition economic and geopolitical developments, including supply chain issues Our ability to successfully implement restructuring, realignment and cost reduction initiatives that could adversely impact our ability to achieve our strategic objectives International trade restrictions and our ability to obtain necessary US Government approvals for proposed sales to certain foreign customers the impact of tariffs and elevated interest rates Risks associated with a prolonged partial or total US Federal government shutdown 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 Please refer to our Annual report on Form 10-K, a quarterly report 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 to update any statements made in the presentation except if and as required by regulatory authorities. This call also includes non Generally Accepted Accounting Principles (GAAP) financial measures. Please refer to our filings with the SEC for a reconciliation of the Generally Accepted Accounting Principles (GAAP) to non Generally Accepted Accounting Principles (GAAP) measures referenced on this call. We filed our Q1 2026 Quarterly Report on Form 10-Q with the SEC today. I would now like to turn the call over to Steve Oswald for a review of the operating results.

Steve Oswald (Chairman, President and Chief Executive Officer)

Steve okay, thank you Suman. Thanks everyone for joining us today for our first quarter conference call today and as usual I will give an update of the current situation at the company after which Suman will review our financials in detail. Let me start off again on this quarterly call with the Commons Vision 2027 game plan for Investors as we continue to make great progress in our fourth year of the plan. Strategy and Vision were developed coming out of the COVID pandemic over the summer and fall of 2022, unanimously approved by the Common Board in November 2022 and then presented the following month in New York to investors where we got excellent feedback. Since that time, the Commons Manager has been executing the strategy by increasing the revenue percentage of engineered product content which is at 23% over the past year and up from 15% in 2022 consolidating our rooftop footprint in contract manufacturing Continuing our focused acquisition program, executing the offload strategy with Defense Primes and high growth segments driving value added pricing and expanding content on key commercial aerospace platforms. All of us here, as well as my fellow board members continue to have a high level of conviction in the Vision 2027 strategy and financial goals and believe the market catalysts ahead present a unique value creation opportunity for shareholders. The Q1 2026 results show again that strategy initiatives are working with gross and adjusted EBITDA margins continuing to stay on track to meet and exceed our Vision 2027 goals. With more opportunities to come for Ducommun for Q1, I'm happy to report that revenues reached a new first quarter record of 209 million 9% growth over last year, our fourth consecutive quarter over 200 million in revenue and our 20th consecutive quarter with year over year revenue growth. We have particular we had growth in both our commercial and military end markets, with commercial aerospace in particular showing a major turnaround in the quarter with 18% year over year growth a very positive sign. We saw production and deliveries continue to wrap driven by higher OEM production rates as well as lower than previously anticipated Destocking While this is great news, we are not past the destocking issue entirely as yet. We expect it to have some impact in the remaining 3/4 of 2026. In addition, company's remaining performance obligations RPOS remained at over 1 billion, almost 1.1 billion, increasing 86 million compared to Q1 last year. The growth in RPO year over year is primarily in Defense where our book to Bill is at 1.2 in the last 12 months and our commercial arrow book to bill is at 1. We closed on over $175 million of bookings in Q1 and have closed on 925 million in the past 12 months. Our bookings do not reflect any upside of potential orders from Defense Primes under the seven Year Missile Framework agreements entered into by them with the Department of War in the past few months. We are in active discussions with the Defense Primes to support them on these major agreements and are well positioned as an incumbent supplier of many of the programs, which is great news for Ducommun and its shareholders. Production on many of these missile programs such as Tomahawk PAC 3 and Standard Missile 3 and 6 are expected to grow several fold and this will be a big driver of growth for the Ducommun defense business over the next few years. Stay tuned for more news on this front in the coming quarters. Gross margin grew by 5.8 million in the quarter to 26.9%, a nice improvement from 26.2% last year. In Q1 we continue to see the benefits of our Vision 2027 strategy and gross margin expansion due to Ducommun's engineered product portfolio with aftermarket strategic value pricing initiatives, restructuring actions and productivity improvements. Reading through to the P and L cost saving expectations are also on track for the run rate of $13 million in savings from our facility consolidation program by the end of 2026. For adjusted operating income margin in Q1 the team delivered 8.6% well above the prior year of 4%. This was supported by growth in adjusted operating income margins in electronic systems segment during the quarter as well as lower stock based compensation expenses. Adjusted EBITDA continues to improve towards our Vision 2027 goal of 18% in 2027 from 13% in 2022. Ducommun achieved 16.9% in the quarter or 35.4 million, up 5.7 million from Q1 2025 which is excellent to see as we start off 2026 GAAP EPS was $0.64 per diluted share in Q1 2026 versus $0.09 for Q1 2025. With the adjustments, diluted EPS was $0.75 a share in Q1 2026 versus 23 cents in the prior year quarter. The higher GAAP and adjusted diluted EPS during the quarter was driven by higher operating income. As mentioned earlier, over the past 12 months we closed on over 925 million in bookings, a trailing 12 month book to bill of 1.1, the positive momentum in commercial aerospace and increased defense spending, we have strong tailwinds in both our primary markets. On the outlook for the rest of 2026, we expect to see continued strength in the defense business and a recovery in our commercial aerospace business. We reiterate our previous guidance of mid to high single digit revenue growth for the full year 2026. With the higher than previously anticipated strength in our commercial aerospace business in Q1 and with some of the destocking impact previously expected in Q1 deferred, we now expect the quarters to be relatively level loaded in 2026 and growth for each quarter between mid to high single digit depending on the level of destocking. Now let me provide some additional color on our markets, products and programs. Beginning with our military and space sector, we saw revenues 118 million compared to 112 million in Q1 2025. This represents 5% growth and was driven by another quarter of strong performance in our military fixed wing and missile franchises, partially offset by weakness in our radar and electronic warfare, ground vehicle and marine business due to timing of orders. Ducommun's missile business grew 20% in 2025 and in Q1 it continued to grow increasing 22% compared to Q1 in 2025. As I mentioned earlier, RTX, our largest customer and Lockheed will significantly increase production on many programs including PAC3, SM3, SM6 and Tomahawk amongst others and we are ready to get moving. Ducommun is well positioned on all these programs and also in great shape of capacity at our operations to fully support the required ramp up. These framework agreements and Ducommun's push to increase production ASAP should be a strong catalyst for growth in our military and space segment starting in 2027 and beyond. As a reminder, Ducommun is a key supplier in over a dozen missile platforms including Amraam, Mir, Pac 3, Sm2, Sm3, Sm6, Tomahawk, Ram, Naval Strike Missile, Thaad and TOW amongst others. This is an exceptional and unique time for Ducommun within this market segment and excellent news for significant future revenue along with generating high levels of shareholder value within our commercial aerospace operations. First quarter revenue increased 18% year over year to 84 million with strong growth on Airbus platforms including the A220 and A320 as well as the 737 Max. With Boeing. We also saw good growth in our commercial rotorcraft business as we ramp up production on Bell platforms out of our Kawasaki New York facility. The outlook for commercial aerospace is promising as Boeing increases their 737 max build rates from 42 to 47 by this summer and with the new production line in Everett going live this year. While we expect to see some destocking headwind for the next couple of quarters, it should start to dissipate as we get to the end end of the year, especially at Legacy Spirit Max fuselage operations in Wichita. Additionally, Boeing is building momentum on 787 builds and making big investments in its South Carolina facility to increase capacity and ramp up production to 10 by the end of this year with further rate ramp in 2027 and beyond. I also want to mention that Ducommun has 150,000 per ship set content on this platform and so this will help us as we drive at a higher rate. We're also monitoring the production at Airbus as they work through their engine issues, but overall remain optimistic about Ducommun's Commercial Aerospace business in 2026 with more growth ahead in 2027 and beyond as we get past destocking and industry supply chain issues. Our balance of defense and commercial aerospace businesses is helping drive growth for the company in 2026 and we very much like the mix and the balance it provides. The outlook going forward is very positive for both end markets, the best I've seen in my nine plus years leading Ducamet, and that's exciting news for the company and its shareholders. With that, I'll have Suman review our financial results in detail.

Suman Mukherjee (Senior Vice President Chief Financial Officer)

Simon thank you, Steve. As a reminder, please see the company's 10-Q&Q1 earnings release for a further description of information mentioned on today's call. As Steve discussed, our first quarter results reflected another strong quarter of revenue with a strong recovery in commercial aerospace and growth in our military end market. Gross margin and EBITDA margins both continue to show improvement on a year over year basis. We completed our facility consolidation projects at the end of 2025 and those synergies will continue to build through 2026 as we ramp up production of the various product lines that were moved. These actions, along with our strategic pricing initiatives drove continued gross margin expansion in Q1 and keeps us on pace to achieve our Vision 2027 goal of 18% adjusted EBITDA margin. Now turning to our first quarter results, revenue for the first quarter of 2025 was 209 million versus 192.5 million for the first quarter of 2025. The year over year increase of 8.6% reflects strong growth in Commercial Aerospace of 17.5% driven by growth on single aisle platforms including the A220, A320 and the 737 Max, as well as growth on commercial helicopter platforms. As we ramped up production for Bell at our Coxsackie facility, the strength in the commercial aerospace business was supported by higher than previously expected production and and deliveries and lower than previously expected destocking. We expect some of the lower destocking to be caught up in the remaining quarters of 2026. This pull forward of revenue into Q1 is helping us better level load the quarters. Across 2026, our defense business grew 4.8% year over year with continued strength in missile and fixed wing platforms partially offset by declines in radar and roadcraft. The missile business grew by 22% during the quarter and our missiles, radar and electronic warfare franchise combined now represents approximately 33% of last 12 month defense revenues or more than 19% of total Ducommun revenue. It's a strong franchise and a great platform to drive significant upside for Ducarmon in 2027 and beyond as we see an uptick in OEM production activity on the various missile platforms. As Steve noted earlier, we posted total gross profit of 56.2 million or 26.9% of revenue for the quarter versus 50.5 million, or 26.2% of revenue in the prior year period. Operating income for the first quarter was 15.7 million, or 7.5% of revenue compared to operating income of 5 million, or 2.6% of revenue in the prior year period. Adjusted operating income was $18 million, or 8.6% of revenue this quarter compared to $7.6 million or 4% of revenue in the comparable period last year. The company reported net income for the first quarter of 2026 of 9.9 million or $0.64 per diluted share, compared to 1.4 million or $0.09 per diluted share a year ago. On an adjusted basis, the company reported net income of 11.7 million or $0.75 per diluted share compared to adjusted net income of 3.5 million or $0.23 in Q1 2025. The GAAP net income and higher adjusted net income during the quarter was driven by higher adjusted operating income. Now let me turn to our segment results. Our structural systems segment posted revenue of 91 million in the first quarter of 2026 versus 83 million last year. The year over year change reflected 8 million higher revenue in our commercial aerospace business driven by single aisle platforms including the A220, A320 and the 737 Max, as well as commercial helicopters. The military and space business within this segment was flat on a year over year basis with growth in missiles offset by weakness in military rotorcraft and ground vehicles. Structural systems operating income for the quarter was 10.4 million or 11.4% of revenue compared to 9.9 million or 11.9% of revenue for the prior year quarter. Excluding restructuring charges and other adjustments in both years, the segment operating margin was 13.4% in Q1 2026 versus 14.5% in Q1 2025. The decrease in year over year margin was driven by unfavorable sales mix partially offset by savings from plant consolidation. Our electronics systems segment posted revenue of 118 million in the first quarter of 2026 versus 109 million in the prior year period. The year over year change reflected 5.3 million in higher revenues in military and space applications driven by strong growth in military fixed wing aircraft, missiles and rotorcraft. Commercial aerospace in the quarter grew 4.6 million driven by growth on the 737 and A220 platforms. Our industrial business decreased 1.4 million during Q1 due to timing of orders. Electronic systems operating income for the first quarter was 23 million or 19.5% of revenues versus 17 million or 16% of revenue in the prior year period. Excluding restructuring charges and other adjustments in both years, the segment operating margin was 19.8% in Q1 2026 versus 16.4% in Q1 2025. The year over year increase was driven by higher manufacturing volume and favorable sales mix. Turning now to liquidity and Capital Resources, in Q1 2026 we generated 11.2 million in cash flow from operating activities compared to 0.8 million in Q1 of last year. The significant increase in cash generation is a great start to the year for us and was driven by higher net income and contract liabilities, partially offset by higher accounts receivable and lower accrued liabilities in the quarter in Q4. In Q4, the company amended its credit agreement, which now includes a $200 million term loan and a $450 million revolver. The new $650 million facility lowers our cost of capital and gives us incremental capacity to execute on our acquisition strategy. As of the end of the quarter, we had available liquidity of 384 million comprising of the unutilized portion of our revolver and cash on hand. Interest expense in Q1 2025 was 4 million compared to 3.3 million in Q1 of 2025. Year over year increase in interest cost was primarily due to higher debt balances offset by lower interest rates on our debt. 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 term so far at 170 basis points for $150 million of our debt. The hedge is still in place and will continue to drive significant interest cost savings in 2026 and beyond. To conclude the financial overview, I would like to say that the first quarter results demonstrate that our Vision 2027 strategy is working and that we are well positioned for 2026 and beyond. I'll now turn it back to Steve for his closing remarks.

Steve Oswald (Chairman, President and Chief Executive Officer)

Steve okay, thanks Shimon. In closing, we had a great, great start to the year with Q1 results. Revenue growth was strong and margins continue to improve. It was also our fourth consecutive quarter of revenue over $200 million and gross margin and adjusted EBITDA margins were at 26.9% and 16.9% respectively. This is wonderful news. As we talked about, already on track to meet our Vision 2027 goals. In addition, the Company's engineered product revenues over the past 12 months was 23% in excellent shape. As we drive higher OEM and AM aftermarket products through the P and L. As everyone knows and as we spoke about in previous calls, driving this percentage as high as possible is our number one strategic focus. And with 100% commitment, finally, with increasing defense budgets ahead and commercial bill rates heading higher, I'm very optimistic about the rest of 2026 and the next few years. Okay, so with that, now let's go to questions. Thank you.

OPERATOR

As a reminder, if you'd like to ask a question at this time, please press Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our first question comes from John Godden with Citi.

John Godden (Equity Analyst at Citi)

Hey, guys, thanks for taking my question. I wanted to follow up on two things just to better understand kind of the revenue outlook going number one on commercial OE and the inventory issues, and number two on missile growth, maybe on commercial oe. First, can we just unpack this inventory overhang a bit more? And it feels like there may be a point toward the end of the year or next year where really your volumes have to kind of snap back and catch up and grow even faster than OE growth. Am I thinking about that shape the right way? Maybe you could just offer some color.

Steve Oswald (Chairman, President and Chief Executive Officer)

Yeah, just a couple things. First, you know, a big part of our program, especially on the max, is through Wichita, the legacy spirit business, which obviously now is owned by Boeing and which we're very happy about. And, you know, they obviously produce the fuselage. You know, they still have lots of fuselages that they built. So that's a big part of, you know, the common story is that that's something that we're just going to have to overcome. And I think, you know, this is going to be the year. I mean, the best thing that we're going to see over the summer is the increase in the rate. So as that rate goes up in Washington State and they continue to build the Maxes, those fuselages will go down to some level, which is basically at safety stops. So, you know, I think, again, this year is going to be, you know, destocking. Whether we see it in one quarter or two quarters, you know, we're going to, you know, get through it by the end of the year. Then I think we're going to be clear. We're going to see, I think, some nice growth, you know, going ahead on the max. Airbus is sort of steady because, I mean, obviously they had some problems with fuselages and their engines, but their order rates tend to be pretty steady when they get to 75. You know, I don't know about that. We'll have to see over the next couple of, next couple of years. But so I think what I've said in the remarks is probably going to be just about the best I can share right now is mid to high level the next three quarters. And we'll just have to, we'll have to see how it goes the rest of the year. John.

John Godden (Equity Analyst at Citi)

Okay, that's helpful. And then on missiles, another big kind of growth driver, you have a great chart that you guys distribute the missile production outlooks over the next few years. You're on a lot of different programs. It seems like there's even more kind of upward pressure to missile production when we talk to the primes, et cetera. I just wanted to plug into kind of your long term thinking. I mean, it seems like this is something that could really drive revenue growth for multiple years here and I'd love to just understand that shape as well.

Steve Oswald (Chairman, President and Chief Executive Officer)

Yeah, thank you, John. Yes. And John, that's my favorite chart, just so you know. Okay. So thank you for bringing it up. That's a good thing. Me too. It is, exactly. So anyway, so look, you know, just top level. We are heavily engaged with rtx as I mentioned, they're our largest customer. We're on, you know, pretty much every one of their platforms for missiles. And the problem, not the problem, but the challenge is with RTX is that, you know, the big companies move a little bit slower than maybe any of us would like, but that's where we are. So we're incumbent on it. So we make a lot of the products already. So I think we're market wise, strategic wise. We're right where we need to be. We're a little, we're hedging a little bit. We think it's more of a end of year, early 2027 where this thing's really going to start to pop. And I mean we're looking at, on a lot of these programs we're looking at 3x and even more than that, I mean, you know, we're major players on the Tomahawk. And you know, I think maybe it's not 10x from our sheet, but it's going to be at least 8x. And you know, we make this for people. We make the cabling. We make lots of cabling for the, for the Tomahawk and you know, that's a big money maker for us as well. So 2027, 2028 looking great.

John Godden (Equity Analyst at Citi)

Okay. And just a Quick clarification. It sounds like you sort of see it accelerating at year end into early 27 and then continuing for a while. Is that the right visual? 100%. Excellent, thank you. Thank you, Jon, appreciate you.

Steve Oswald (Chairman, President and Chief Executive Officer)

Certainly from an orders perspective, I think revenues may, it starts reflecting in revenues later in 2027. But from an order perspective, yes, late into this year, into next year.

OPERATOR

Our next question comes from Mike Crawford with B. Riley Securities.

Mike Crawford (Equity Analyst at B. Riley Securities)

Yeah, thanks, Suman. I was just going to ask about when you would expect to start seeing these orders, these missile orders in particular, coming into your backlog. You're saying second half of 27? No, 26. Second half 26. I mean 26. Yeah, yeah, yeah.

Steve Oswald (Chairman, President and Chief Executive Officer)

So yeah, yeah, we're just like, we're in heavy discussion right now. We don't really anything to report on this call. We'll certainly have more when we talk to you again in August. But you know, we're heavily engaged. We just don't have anything to report on the order side. Okay. And then just on the MA front, it's been over three years since you acquired BLR Aerospace and Everett and I think it had like 40 million revenue at the time. Willing to share like what revenue run rate might be for that business or any of your other engineered products businesses. And then I guess the second part of this is like what's been the hang up? You just can't find quality companies or people are asking too much or you've come close or not in the last three years. Because I know if in a perfect world, if I could do one of these a year.

Suman Mukherjee (Senior Vice President Chief Financial Officer)

Yes, Mike, good question. So first, when it comes to the growth in our engineered product businesses, they have been growing very nicely, even organically. Right. So if you see the mix shift over the last few years in our business, from 2022 through 2026 here Q1, we've gone from 15% to 23% only as you noted, a smaller portion of that has come from acquisitions. Less than we would like. But the good thing about that story is that the business, the engineered product business, has grown organically very well over the last few years, taking us therefore from 15 to the 23%. We are actively engaged in pursuing acquisition opportunities. We have gotten close on a number of opportunities over the last 18 months, but we continue to remain disciplined on valuation. We continue to remain disciplined to make sure that any deal we pursue will create value for our shareholders. We do believe there are enough opportunities out there for us to be able to execute and we definitely remain hopeful that we will here over the next several months be able to bring one or more of these opportunities home.

Steve Oswald (Chairman, President and Chief Executive Officer)

Great. Thank you very much, Mike. Let me jump in here. Mike. O.J. yeah, look again, I mentioned this in the past. You know, we're picky eaters, like I said previously, we had a couple of things we looked at. Just, at least one just couldn't get there and some others we've worked pretty hard on and just has not worked out yet. But we have the money and we have the team and we're optimistic that something's going to happen soon. So just stay tuned. All right, thank you. Thanks, Mike.

Alexandra Mandery (Equity Analyst at Truist Securities)

Our next question comes from Alexandra Mandery with Truist Securities. Hey, thanks for taking my question. Do you anticipate any capacity expansion being required later in the year to ramp production once orders are received for missiles?

Steve Oswald (Chairman, President and Chief Executive Officer)

Yeah. Welcome Alexandra. Great to have you with us. No, we don't. Fortunately we've in a couple of our sites we have footprint which wasn't being utilized and we were a little bit proactive on some others. We were more lucky where we had some extra building in the back which wasn't being utilized. So as far as footprint, I think we're in excellent shape. And you know, the other nice thing is that we don't, we don't run our factories. We do some, we do in some areas but we're not running, you know, a heavy second shift operations. So we also have a lot of hours that we can still maximize. So we have the footprint, we have capacity and hours. You know, the only challenges or you know, the obvious thing is once we get the orders, we have to bring highly high qualified people in and train them. And that's the only thing I would say that still is not, has not been done yet, obviously.

Alexandra Mandery (Equity Analyst at Truist Securities)

Great. And then another question, you mentioned weakness in radars and rotorcraft and military and space due to timing. So what were those timing issues and will they be alleviated and I guess will we expect an uptick in on maybe timing of those orders being pushed back?

Suman Mukherjee (Senior Vice President Chief Financial Officer)

Yes. If you look at radars, for example, we have a very strong radar franchise right from the Spy 6 radar used across the Navy to the gator program to LTAMs which is used on the Patriot missile. So we have a very strong franchise. It is a matter of kind of timing of those orders, changes in some cases to specification of specific components we make by our customer that affects the timing of when we build and ship out product. So those are all pure timing related issues. The franchise is really very strong. And as demand for radar systems just independently or radar systems linked to missile defense. The demand for those continue to grow. We are well positioned and expect to see growth in that particular segment in the medium to long term military rotorcraft. We have good presence on both Apache and Black Hawk and we do expect demand to stay stable. There are often pushouts by the customers that may affect timing within quarters, but we do expect that business to stay stable. We are also positioning ourselves well for the Black Hawk replacement and have been supplying prototypes to Bell to support that program. So we do feel like our rotorcraft franchise is one where we are either maintaining or growing. Share.

Steve Oswald (Chairman, President and Chief Executive Officer)

Yeah, I think that's right. And I think also, and I know you're catching up on the story is, you know, we moved our rotor blade, our back rotor blade for the Apache across the country from California to New York. And that, you know, has been, we've been basically ramping that up and that's going to be in much better shape later in the second quarter. So more June timeframe. So that's also going to help.

Alexandra Mandery (Equity Analyst at Truist Securities)

Awesome. Very helpful. Thank you.

OPERATOR

Our next question comes from Ken Herbert with RBC Capital Markets.

Kevin Lu

Hi, this is actually Kevin Lu on for Ken Herbert, but thank you for taking the question and strong results. Thank you. So you guys had really Strong EBITDA margins 16.9% in the quarter coming out of the gate this year, despite margins typically starting off a bit slower and building throughout the year. So could you maybe talk about how investors should think about the margin cadence for the remainder of the year? And is there any reason we shouldn't expect sequential improvements throughout the year you typically see.

Suman Mukherjee (Senior Vice President Chief Financial Officer)

So we do the margins were strong during the quarter, some favorability due to product mix. But I would, you know, it is not as much as we had in Q3 and Q4, where we had much more maybe skewed product mix favorability in the revenues. So it could be 20 basis points approximately of that here in Q1. But outside of that, we do expect margins to maintain and strengthen as we go through the rest of the year. That's right. We're heading to 18.

Kevin Lu

Awesome. I'll leave it at 1. Thank you.

Steve Oswald (Chairman, President and Chief Executive Officer)

Thanks for being with us.

OPERATOR

As a reminder, if you'd like to ask a question at this time, please press star11 on your touchtone phone. Our next question comes from Noah Papanak with Goldman Sachs.

Will Ortmiron

Hi guys, this is Will Ortmiron from noaa. Thanks for taking our questions. Two parts here. First, can you talk a little bit more about the recent appointment of the prior head of Northrop Mission Systems to the board. The press release mentioned that the appointment would help support the missile and radar franchise. Is there any specific initiatives there or just generally adding support for the growth we've talked about today? Yeah, I think it's just general. First, we're delighted to have Mark, you know, join us. I think it, you know, also says a lot about Ducomina to be able to attract someone like Mark to our board. You know, he, for those who don't know, he was a top level executive executive with Northrop. Long track record of success. He just, he just joined us and we're thrilled with that. I think it's more general support. You know, we are obviously, you know, Raytheon being our biggest customer. Northrop is a big strategic customer as well for us. So we continue to work those areas where we can grow with them. And Mark can only help. Right. Just for insights and just generally just helping us guide us a little bit. So, yes, thanks for bringing it up. And yeah, we're thrilled to have Mark. Great. And then following up on that, you mentioned that missiles, radars and electric warfare is about 19% of total revenue. Would you be willing to help us size how big missiles and radar are individually today and maybe how big should we think about those being, say, three years down the road?

Suman Mukherjee (Senior Vice President Chief Financial Officer)

So. Good question. And we'll have more color on the defense business and different portions and areas where there are more significant growth opportunities. During our investor day in September, we do. We have in the past said that missiles represent about 20% of our defense revenues. That still continues to be kind of in that ballpark. And we do expect that that business is going to grow much more exponentially than the rest of the defense business. So that is going to be the key driver for our defense growth over the next several years. We do have a page in the deck which shows the growth expected on some of the key platforms. But in terms of specific percentage mix of missiles in out years, we'll have more color around that when we.

Steve Oswald (Chairman, President and Chief Executive Officer)

Good question, you guys, sorry you're just going to have to wait till September. But it'll be a good story. I promise you that that's helpful. We look forward to it. Okay, thanks for being with us.

OPERATOR

I'm showing no further questions in queue at this time. I'd like to turn the call back to Steve Oswald for closing remarks.

Steve Oswald (Chairman, President and Chief Executive Officer)

Okay, thank you again for everyone for joining us. Obviously, we're very, very happy with the start of 2026, proud of our results and believe with our markets heading in the right direction on both sides. We're going to have a terrific year. We're also looking forward to our Investor day. Let me just mention that that's going to be in September. We're going to have a press release out this Thursday before the bell on details for that. And we look forward to sharing not only an Update on Vision 2027, but but also a very exciting roadmap and new phase for DCO called Vision 2032. So we look forward to that meeting. Very much so. Again, thank you for your time and have a great and safe day.

OPERATOR

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

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