Good day. And thank you for standing by. Welcome to the Fourth Quarter 2022 Ducommun Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] I will now like to turn the conference over to Ducommun’s Vice President and Chief Financial Officer, and Controller and Treasurer, Chris Wampler. Please go ahead. .

Thank you, and welcome to Ducommun's 2022 fourth quarter conference call. With me today is Steve Oswald, Chairman, President and CEO. 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, 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, among others, the cyclicality of our end-use markets, the impact of COVID-19 on our operations or customers, the level of U.S.

government defense spending, timing of orders from our customers, legal and regulatory risks, the cost of expansion and acquisitions, competition, economic and geopolitical developments, pandemics 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 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 2022 Annual Report on Form-10K with the SEC today. I would now like to turn the call over to Steve Oswald to review the operating results.

Steve?.

Okay. Thank you, Chris. And thanks everyone for joining us today for our fourth quarter conference call. Today and as usual, I'll give an update of the current situation of the company, after which Chris will review our financials in detail. I'm happy to report that the Ducommun’s fourth quarter top line performance was very strong.

The company delivered year-over-year revenue growth of 14% to $188.3 million. As mentioned in the press release, not only shows that our end markets are in very good shape, but also highlights Ducommun’s operational strength, managing the supply chain and workforce.

Turning to the markets, the continued recovery of commercial aerospace was a real bright spot once again in Q4. The Boeing 737 MAX business is up 37% year-over-year and the Airbus A320 also having significant growth, up 72% year-over-year. Overall, commercial aerospace with Airbus, Boeing, Gulfstream and others was up over 60% from Q4 2021.

The commercial aerospace business as well show year-over-year revenue growth now for the sixth consecutive quarter, an excellent sign as the industry and build rates recover.

The company's defense business after two years of unprecedented growth in 2020 and 2021 was only down slightly in Q4, but once again delivered solid performance of over $100 million in revenue as we prepare for increasing DoD budgets and FMS in the years ahead.

The company posted solid gross profit of 20.5%, down year-over-year due partially to several one-time factors which Chris will cover in his remarks. The team also posted adjusted operating income margins of 8.1%. Adjusted EBITDA of $24.5 million was strong and increased slightly year-over-year.

Ducommun had adjusted EBITDA margins of 13% in Q4 as well and we anticipate EBITDA to be solid this year with much stronger numbers in 2024 once the plant closures and restructuring activities in 2023 are behind us. Quality of earnings was good with the company reaching GAAP diluted EPS of $0.65 a share, versus $9.05 a share for Q4 2021.

But with adjustments, the diluted EPS of $0.85 a share was comparable to diluted EPS of $0.88 in the prior year. Some key drivers for the lower GAAP diluted EPS include restructuring charges and the prior year benefit from the significant gain on the lease sale back of our Gardena performance center’s industrial property.

One Airbus business I would like to highlight as we move out of the pandemic related headwind in the past few years is the significant improvement of our commercial aerospace business within our Structural System segment during 2022. Commercial aerospace revenue within structures was $165 million or roughly 55% higher than in 2021.

In addition, Q4 commercial aerospace revenues were $43 million or 45% higher than a year ago. As we see very nice growth continuing in this part of the business. I will also add that this includes very little 787 business, which we see as an additional catalyst in 2023 through 2025.

Finally, the backlog at the end of Q4 2022 stood at $325 million or 17% higher than Q4 2021. So, we are set up for excellent growth now and in the future.

Investors should also keep in mind our structures business is component based, not wings or other large capital intensive products and we strive as well to produce products of only industry niche technology such as titanium hot form and super-plastic forming.

Switching to the company's backlog performance, the commercial aerospace backlog increased sequentially for the seventh consecutive quarter from $266 million at the end of Q1 2021 to $450 million at the end of Q4 2022. That's an increase of 69%.

And this was led by the 737 MAX, Viasat for inflight entertainment, the A320, A220 and Gulfstream, all which you would expect after we came out of a very tough 2020 and 2021 for this part of the Ducommun’s business. Defense backlog remained solid in Q3 as well and ended the quarter at $457 million.

Offloading for defense prime work continues – and it did meet and it significantly exceeded our target of $45 million in 2022, up from roughly $31 million in 2021. 2023 is a big year as well.

We're expecting roughly $90 million with a great deal of that in our circuit card business for Raytheon at sites such as Appleton, Wisconsin; and Tulsa, Oklahoma. Long-term run rate of these defense programs already commercialized or in development for offloading will be over $125 million for Ducommun by 2025.

As Primes continue to drive cost reduction and challenge the reasoning of keeping certain types of production in-house. Company's cost actions and lead organizational structure continue to pay dividends too.

Our team delivered another excellent quarter as well in Q4 managing the supply chain, and this not only shows in our financials, but we also could not be in a better place with our customers regarding our odd time delivery and quality. Corporate costs as a percentage of revenue, were also very favorable at 4.1%, compared to 5.3% last year, in Q4.

I also want to mention our very successful Investor Day on December 8. First, my thanks to all who participated both in person and virtually. And we very much appreciate the great feedback.

We certainly disclosed more of that meeting than in the past, especially around our strong results for our four acquisitions and the post-pandemic game plan now is in place. The path ahead for the company and the investors is now clear through 2027.

In addition, Chris will provide further details, but we're off to a very good start in 2023 with the plant consolidations and other restructuring activities, along with preparing for the planned real estate sales. For revenue guidance in 2023, we see the company's revenue coming in at the low- to mid-single digit range.

The commercial aerospace industry recovery will continue to lead the way and revenue will be solid over the quarters ahead as we see more and more volume return with the defense being solid though impacted by some timing on a few programs, but still having a very good backlog.

The two plant closings will also see some slide reduction in revenue as we prune non-strategic and low volume business. We continue as well to be active and opportunistic with acquisition opportunities as in the past and believe this is another catalyst to drive us possibly higher in the year ahead.

Now let me provide some additional color on our markets, products and programs. Beginning with our military and space sector, we posted fourth quarter revenue of $108.4 million, a slight decrease versus 2021, despite being down as mentioned earlier, was greater than $100 million and a solid showing for the business in Q4.

We saw increases in demand for our missile programs, [indiscernible] and Patriot along with F-18. The fourth quarter military and space revenue represented 58% of Ducommun’s revenue in the period down from 69% last year. And this trend will continue to reflect more balance with commercial aerospace, which we like.

We also ended the fourth quarter with a solid backlog of $457 million, which represents nearly 50% of the company's total backlog.

Within our commercial aerospace operations, fourth quarter revenue increased year-over-year to $68 million, driven mainly by build rates increases on large aircraft platforms, in-flight products for Viasat and other commercial aerospace platforms.

Ducommun expect to continue improving the commercial aerospace market overall to gain momentum in 2023 and the future is bright across our product offerings. Our delivery and quality also continues to stand out as we move ahead.

The backlog within commercial aerospace stands at $450 million at the end of the fourth quarter and with $117 million higher or 35% increase year-over-year from Q4 2021. With that, I'll have Chris issue our financial results in detail.

Chris?.

Thank you, Steve. As a reminder, please see the company's 10-K and Q4 earnings release for further description of information mentioned on today's call. As Steve discussed, our fourth quarter results reflected another quarter of strong performance. The fourth quarter results saw significant increase once again in commercial aerospace revenue.

We remain encouraged by the continued strength in domestic and global travel, which should help support higher long-term demand in shipments going forward. There were multitudes of positive themes as we closed out 2022 and combined with actions being taken to our restructured program, we're looking forward to building on our 2022 performance.

Now, turning to our fourth quarter results. Revenue for the fourth quarter of 2022 was $188.3 million versus $164.8 million for the fourth quarter of 2021. The year-over-year increase reflects $26.4 million of growth across our commercial aerospace platforms, partially offset by $4.7 million of lower revenue within the military and space sector.

A portion of the year-over-year increase is directly attributable to MagSeal, which we acquired in December, 2021. So our overall growth was a combination of organic and inorganic growth. Ducommun’s overall backlog at the end of the fourth quarter was approximately $961 million. This reflects recent growth across our commercial aerospace platforms.

Our defense backlog was $457 million and we remained positioned for continued solid performance as we begin the new year with our defense business. 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 $38.6 million for the quarter versus $37.3 million in the prior year period. While gross margins were 20.5% and 22.6% in 2022 and 2021 respectively. On an adjusted basis, gross margins were 21% and 23% in 2022 and 2021 respectively.

Throughout 2022, we've had adjustments for items such as Guaymas fire related costs, MagSeal inventory, step up amortization, and cost of sales related restructure expenses. As we finish 2022 and head into 2023, we expect these types of adjustments to wind down by mid-year.

While gross margins of 20% to 21% plus are good from a historical perspective for DCO, they continue to lag the levels we ran at in 2021. The globally recognized challenges around supply chain and labor availability have had some level of impact on nearly all manufacturing companies.

However, as Steve mentioned, we continue to manage through without significant supply chain impacts due to the proactive supply chain efforts, executing strategic buys, leveraging our performance center flexibility and utilizing inventory investments.

But we have seen certain performance centers continue to have more of a challenge on various program flow through, products mix and profitability. Two of which are Monrovia, California and Berryville, Arkansas operations.

As mentioned during our Investor Day dialogue in December, 2022, we anticipate repositioning production from these facilities during the first half of 2023.

The consolidations will redeploy the production from these performance centers, which have been unable to perform at expected profitability levels and allow us to better utilize our low cost manufacturing facility in Guaymas, Mexico.

In addition to taking out these fixed costs, we continue to aggressively manage our discretionary spending all with the purpose of driving margin expansion. Ducommun reported operating income for the fourth quarter of $9.7 million or 5.1% of revenue compared to $11.8 million or 7.2% of revenue in the prior year period.

Adjusted operating income was $15.2 million or 8.1% of revenue this quarter compared to $15.3 million or 9.3% of revenue in the comparable prior period last year. The company reported net income for the fourth quarter of 2022 of $8.1 million or $0.65 per diluted share compared to net income of $110.8 million or $9.05 per diluted share a year ago.

On an adjusted basis, the company reported net income of $10.6 million or $0.85 per diluted share compared to net income of $10.8 million or $0.88 in 2021. Adjusted EBITDA for the fourth quarter was $24.5 million or 13% of revenue compared to $24.4 million or 14.8% of revenue for the comparable period in 2021. Now let me turn to the segment results.

Our Structural Systems segment posted revenue of $68.2 million in the fourth quarter of 2022 versus $58.8 million last year. The year-over-year increase reflects $13.4 million of higher sales across our commercial aerospace applications, partially offset by $4 million of lower revenue within the company's military and space markets.

Structural Systems operating income for the quarter was $4.4 million or 6.4% of revenue compared to $5.1 million or 8.6% of revenue last year. The year-over-year operating margin decrease was primarily due to unfavorable product mix and higher restructuring charges, partially offset by favorable manufacturing volume.

Excluding restructured charges and other adjustments in both years, the segment operating margin was 10.8% in 2022 versus 12.2% in 2021. This is a solid operating performance from the Structural Systems segment. As a reminder, the results of our MagSeal business, which was acquired in Q4 2021, are part of the structures business.

Our Electronic Systems segment posted revenue of $120 million in the fourth quarter of 2022 versus $106 million in the prior year period. These results reflect $13 million of higher commercial aerospace revenue, partially offset by $0.7 million of lower revenue across the company's military and space customers.

Electronic Systems operating income for the fourth quarter was $13 million or 10.8% of revenue versus $15.4 million or 14.6% of revenue in the prior year period, primarily reflecting unfavorable product mix and higher restructuring charges partially offset by favorable manufacturing volume.

Excluding restructured charges and other adjustments in both years, the segment operating margin was 12.9% in 2022 versus 15.8% in 2021. Now at the top end of the range, this segment has operated, this was a solid quarter for the electronic segment.

As a reminder and discussed at our recent Investor Day, we commenced to restructure initiative back in Q2 2022. The identified restructure actions are being taken to accelerate the achievement of our strategic goals and better position the company for stronger performance in the short and long-term.

During Q4 2022, we incurred $2.9 million in restructuring charges. The majority of these charges were severance and benefit related. We expect to incur an additional $12 million to $16 million in restructure expense for facility consolidations, severance, and impairment of long-lived assets during 2023.

Most of the expected remaining charges related to the repositioning of a portion of our restructure initiative that I mentioned earlier. The majority of the production being moved is going to our low-cost operation in Guaymas, Mexico with the remainder going to other existing performance centers in the United States.

Once we wind down production at Monrovia and Berryville, we anticipate selling the associated land and building at both locations. These initiatives are progressing as expected and when we complete with our restructure, we anticipate our efforts will generate annualized savings of $11 million to $13 million.

We have available liquidity of $246 million as of the end of the fourth quarter. The fourth quarter of each year is typically our strongest from a cash flow generation perspective in 2022 with no exception. And we are pleased with the generation of $32.1 million of cash flow from operations this quarter.

Cash flow from operations in Q4 of 2021 was $11.7 million. Our 12 months debt-to-adjusted EBITDA ratio was 2.2 and is amongst the lowest in the last several years. We finished 2022 with a full year effective tax rate of 13.6% versus 20.5% in 2021.

The rate was lower this year as the majority of the tax in 2021 related to our gain on sale, at least back transaction, which was taxed at a rate in excess of our effective rate excluding such transactions. Interest for the full year 2022 was $11.6 million versus $11.2 million in 2021.

While our debt refinancing during 2022 was timely and beneficial, the rising interest rate environment drove the increase year-over-year. Assuming no pivot on interest rates during 2022, we expect interest expense to be approximately $18 million in 2023.

And when our interest rate hedge becomes effective January 1, 2024, we anticipate it will provide significant beneficial offset in the longer-term.

Just one additional comment from me, 2022 is the third consecutive year with an environment of significant market and macro economical change and during the time we’ve attempted to continually assess and adjust our priorities as we focus on daily execution to deliver for our customers and all other stakeholders.

And we look forward to building on the strong foundation we have established as we move through 2023 and beyond. I’ll now turn it back over to Steve for closing remarks.

Steve?.

Okay. Chris, thank you. Well, it certainly was a strong quarter. I hope you’re pleased. And the year in 2022 was our best top line since 2019. So we feel good about it. As mentioned earlier, the path is now clear coming out of our investor meeting in December. I think we’re off to a very good start in 2023.

We’ve got a lot to do and I think it’s all going to provide a lot of value to shareholders and to the company going forward. In addition, all the meetings I’ve been having and attending and industry news I’ve read shows, I think there’s great opportunities as we all know ahead over the next several years.

And Ducommun team will be ready to capture the upside when available. My thanks, as always to our employees and investors for the support, as we include again, a very good year and lots of positive things ahead. So again, thank you for listening. I’ll now open it up for questions..

[Operator Instructions] Our first question comes from the line of Ken Herbert from RBC Capital Markets. Your line is open..

Hey, good morning Steve and Chris..

Ken, good morning. Thanks for joining us..

Yes. Hey maybe just wanted to first talk about the low to mid-single top line expectations for 2023. And I wondered, Steve, if you can break out a part a little bit by market. It looks like commercial aero should continue to see some obviously nice growth based on the backlog and build rates.

What is your assumption for growth in that market? And then what are your assumptions for growth in defense?.

Well, it’s really going to grow in commercial aero, Ken. We’re a little bit – we’re – as we’ve talked about we’re ready to go, right? So we’re a little bit – with Spirit and Airbus and Boeing, we’re sort of – I wouldn’t say we’re capped, but we’re absolutely going to see growth in commercial aero this year.

But we certainly are cheering for them to get to the next level of production. So that’s the first thing I’d say. The second thing is I’ve mentioned in remarks with defense.

I mean, we have a couple of programs that either through timing order – the order situation right now, we’re going to basically bring defense in probably right around flat to this year. But we’re encouraged with our backlog and we think 2024 is going to be a better year.

But we think this year with a couple of things, F-18, we have a little bit of a program there and Apache and a few others that are just more timing based. We’re going to be above $100 million, but we’re going to be pretty – I’d say pretty flash..

Okay. That’s helpful.

And for defense, does that flattish reflect as well the – it looks like you’ve got an incremental, call it $45 million or so, $40 million to $45 million from offloading benefits in 2023 relative to 2022?.

Yes. It’s going to – it won’t be that high. It’s going to be – we came in – I don’t want to come write down the number there, but we’re probably going to get tailwind of say $30 million from the offload, maybe $35 million, because we came in pretty good shape. But again, these offloads are also helping with some of the timing on these programs.

So it’s definitely going to help us. We’re going to certainly hold, serve as they say. And going into 2024 because you have to understand when we’re moving cards for the Patriot or for other things, I mean, these have a long tail as far as getting everything over to Tulsa. As I’ve mentioned earlier, some of these programs are Raytheon.

But we continue to make progress and I mentioned in my remarks that Primes are eager for cost reduction and they’re certainly challenging and questioning their in-house operations. So that’s helping us..

And if I could just one – yes, just I appreciate that. Just one final question on the defense outlook. I mean, budgets are up sort of 10% in fiscal 2023. There’s obviously some uncertainty around fiscal 2024, but we’re seeing higher international spend.

Do you – you’ve called out timing on a couple of programs, maybe those help in the latter part of the year.

But do we see then a sort of a material inflection positively in defense into 2024? Or how do you think about this longer-term? Because the flattish sales, I can appreciate because it’s consistent with what a lot of other companies have talked about.

But I’m just curious, Steve, your view on when we start to see the funding catch up or get better reflected in your results..

Yes. We feel much better about 2024, Ken. Okay. Certainly with what we’re seeing, I mean, we had a – maybe we don’t disclose that our electronic systems defense business had a great order quarter in Q4, which was sequentially, I’ll just give you that number, probably at least over 40%, 45% versus Q3. So orders are coming in.

I mean, obviously, there’s timing on deliveries. Is it going to be 2023, 2024? We feel good about 2024 as far as being able to move forward again..

Yes. And one other comment too, Ken, is just as you – I think as we’ve seen everything turning from order to delivery to shipment is pushing out slightly as you’ve come through these last couple years. So that’s why we’ve got – we’re looking at this next whole months and saying sort of hold, serve and then start to see it pick up..

Yes.

And Ken, as it rolls out you might see a little bit of other suppliers for these Primes that are struggling or have other issues, right? Other issues where it’s certainly a little bit of challenge for us because I mean, we’re pretty much ready to deliver, but there’s other things happening with some of these programs either there’s hiring challenges at some of the Primes or there’s other suppliers that are late.

So we’re feeling a little bit of that too this year. We’re hoping for a much better activity next year..

Great. All right. Thanks, Steve. Thanks, Chris..

Yes. Thanks for the question. Always appreciate it..

One moment for our next question. Our next question will come from the line of Mike Crawford from B. Riley. Your line is open..

Thank you.

I think would you agree that supply chain constraints are easing? And if so, how much of an opportunity is there to bring in some working capital to take that back into cash?.

Mike, good question. I think that it is easing, I think it’s a little bit sort of down the middle on commercial aero because one of the reasons where we’ve been winning more is that we have titanium sheets and we have other things that maybe some of the suppliers don’t, we’re able to kind of come in and help.

So I would say that second half of the year we see that in a better place easing and we’re certainly interested in getting our turns up..

Okay.

And then are there any other specific programs that you’re really aiming to be to gain business via offloading from Primes, or you just don’t want to get into that level of detail on this call?.

I probably don’t. I mean, just because I want to be sensitive to the customer and/or the customers.

But I will just tell you that, especially in the card area, I mean, we put that note out about Appleton being over $100 million now, which is a 70,000 square foot plant, which is – and that’s all cards and that’s all people coming and saying, hey, we want you to do it here as well as, Tulsa now is onto the next phase and we’re expecting really good things.

And again, I mentioned – I talked a little bit about one program just because I mentioned earlier is that, taking something out of a major operation, test equipment, those types of things. I mean it’s – these things need to take time and they should. So that’s why we’re more bullish in the 2024 period..

Okay. Thank you. And then last question might be more for Suman, but what if any changes or opportunities are you seeing on the M&A front where you’re looking for more of these niche suppliers protected….

Yes. No, appreciate the question. And that’s why I kind of put in my remarks as well. So look, we were – as I mentioned, we were more forthcoming and rightly so at our Investor Day in December. And hopefully everybody was pleased with those – with all four of our operations because we’ve really – I think, done a nice job at all of them.

And I will just say that we’re active, the model works for us. It does accelerate our margins, does lots of things for us and that's kind of where we're heading right now, Mike, at least for the next year or two these same kind of profile acquisitions you've seen in the past..

Okay, great. Thank you..

Thanks for your time..

Thanks Mike..

[Operator Instructions] Our next question comes from line of Pete Osterland from Truist. Your line is open..

Hi, Steve and Chris, thanks for taking our questions today. So first we've heard a few different things across the supply chain about expected build rates this year, particularly for the 737 MAX.

So just wanted to know what build rate are you currently producing at on the MAX and are you actively planning for production rate increases this year? Is that something that's reflected in your sales guidance or would that represent upside if it were to materialize?.

Yes. So look we're – we've been down this road a lot, the whole industry, right? So we're taking [indiscernible] month at least for this year, okay. We hope that that's going to go up and certainly we do not have that fully baked in, I'll tell you that. So, that is some upside for us.

I will tell you a bright spot would be the Tier 1 spirit because they're obviously ahead of the chain. So Boeing is trying to wrap up or we're going to feel that from spirit ahead of time.

And again, we're – we've been more modest with our bill rates this year just because we want to make sure that we're not too far out over our skews as they say because we're concerned about other supplier deliveries, we're concerned about them able to hire enough mechanics and people to get the work done.

So I would say if things go – if things break the right way we're going to – we're going to have a better year..

That's very helpful, thanks. And then just as a follow up well, I know you didn't give specific guidance on this, so was wondering if you could just help calibrate us on margins for the upcoming year. So just any color you could give on pricing versus cost inflation.

Do you expect that to be a headwind this year? And just in general, should we be thinking about seeing margins up this year as sales grow and you start to see the benefits of your restructuring or just how are you thinking about that?.

Yes. No, thanks Pete. So yes, I think as you look at this year and you see where our jump off point is, yes, we would say and then we sort of signal this in some of the dialogue at the investor day. We do view it's sort of a transition year on margins.

I mean, we're – those same pressures are still there, so we don't think there's going to be incremental headwind. We think we're going to just continue to work through it.

And again, hopefully we will find our way to some type of improvements as we go through the first half of the year, especially with where we were last year and then the restructuring benefits in the back half of the year as we finish up. And that's where we'll start to get the more significant lift just on the base business.

When the growth hits too that's always going to be another element to it. But as you've sort of heard in the forecast we have, it's not – it's not a growth driven year, it's going to be more about what we can do with the business, what we can do with the cost structure and the repositioning is a big part of that..

Yes. Let me just jump in here. So look, as I mentioned this in the Investor Call, we don't take plan consolidation lightly here. But I will tell you the two factories that we're going to close didn't really help us in 2022, okay, from margin perspective. Okay, I'll leave it there.

You can interpret that but the second point is that once we consolidate those into low cost centers we take all the expense out, that's going to, I think delivered very nicely in the midterm for our margin story, Pete..

All right. Very helpful. Thank you..

Thanks for calling in. Appreciate it..

One moment for our next question. One moment for next question. And our next question will come from the line of Ken Herbert from RBC Capital Markets. Your line is open..

Hey, Steve, I just wanted to follow up on the – on your last comments on the restructuring.

How much of the – how much of the work at Monrovia and Berryville have you already transitioned and how much is left to do there? And then how much of a working capital headwind is that this year, I'm sure you've built safety stock and inventory and provisions in anticipation of the move?.

Yes. Okay. A couple of things, as I'll let Chris handle the second part of that. Let me just handle the first part. Look, we've had I think excellent or the best you can – the best you can expect announcements to the teams, okay. And I'm happy to say that for the most part we still have teams working hard in those facilities.

We are actively either engaging with customers, as far as I said – mentioned earlier, pruning some things that really just aren't good for us and for shareholders going in the long term. So we're actively doing that.

And we're also putting plans in place and as we go forward, building buffer for – to be effective and to have this thing sort of innocuous to customer experience with the commons.

So we are active, we pretty much we're probably going to be going through the first quarter pretty much tight with the group, and then we're going to start moving out on moving things and accelerating. So but as I mentioned earlier, I'm happy how we started off.

Again, these things are always tricky and we're off to a very good start and we feel we have the plans and we have the right practice for keeping people on the team and for all the things you need to do to be effective to move the work in place.

And Guaymas as well as we mentioned in the – I think it was in the investor call, we have another building down there now. So we're in a very good shape with a floor space and workforce to take the majority of this work in Mexico. Not everything, but the majority of it..

Yes. And just on the inventory or the investment, Ken, I would say modest investment here the first half of the year, Steve mentioned a little bit of safety stock. I mean, there's an element of that but we do view that sort of being first half of the year.

Transitions are happening, working it down and so by the time you get to the end of the year it's nominal in sort of what the full year view would look like, but there could be a little bit of investment here the first half of the year..

Okay. Helpful. And if I could one other quick follow up. Airbus today announced some aggressive or planned aggressive rate moves on their wide body portfolio with maybe the rate increases on the A320 family pushed out to the right a bit.

Can you level set us on where you are with Airbus, maybe as a percent of your aerospace business and opportunities with their supply chain disruption and issues to either take share and how much will you participate in the accelerated production on their wide body aircraft, the 330 and the 350?.

Yes. Ken, I did see that note. I only briefly, I didn't read it, I just briefly saw some of the things. So first of all, just at the highlight we're in fairly good shape on the A330, so we were not that optimistic about it a couple years ago. So to see that moving in the right direction, that's something that we actually were players on.

I won't get into exactly what the percentage is, but we're going to – that's going to be benefit us the A330. We're in the middle of trying and as you know, these things take time to get a position on the A350 which is something that we're engaged in actively. So more to come there. We like to see those increases.

I think the year-over-year number that I said about the A320 and Airbus was pretty dramatic. We think that, that's going to continue. As I mentioned in my Investor Day back in December, you have to always be a little bit careful. With Airbus they have a lot of mouths to feed and but they need the parts to produce.

And we're pretty much, even though we might be slightly off now, we're pretty much been 100% on time the Airbus for over three years with a little, maybe one, one or two misses here or there. So we're in great shape with Airbus, not really ready to go fully on what the disclosure is on the, the amount of business, but it continues to grow.

And we're hopeful and we feel good if these – if they're running hard, we're going to feel share gain, that's what we want..

Okay. Thanks Steve..

Thanks Ken..

Thank you. And I'm not showing any further questions in the queue as at this time. So pass it back to Steve Oswald for any closure remarks..

Okay, thank you. And okay, thank you again everyone for joining us. I thought it was a very good Q&A as well as hopefully you felt the script, what was helpful. We have a lot going on at the company.

We're going to, I think if things go our way we're going to hopefully do a little bit better than our revenue guidance, but we always try to be thoughtful and we want to be as transparent as we can on these calls and help investors and help our analyst partners. So – but we feel good – very good about 2024. We're closing these factories for a reason.

It's all going to benefit from the mid- to long-term especially in the margin area and other things. We're excited about our Atlantis operation going to the next level, which is a big part of our future. And we're active with acquisitions and we're feeling good. So again we appreciate your support and thank you again for listening..

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