All right, I think we're getting...
Yeah, whatever you want to.
We're going to get started here. Let me just make sure I've got my questions handy here.
Right.
Well, good morning, everybody, to those in the room and on the webcast. Again, Jason Gursky from Citigroup. I'm the company's aerospace and defense analyst, and I have the great pleasure today of sitting here on the stage this morning with the CEO of Ducommun. Steve, thanks for joining us. I appreciate it. Let's see here. I always like to start these conversations a little bit higher level.
Sure, absolutely.
Yeah, particularly for those that may not be as familiar with the company. I know the company has a very long heritage, and that'll be kind of caught up in this question I'll ask here. But maybe start with what's the problem that you're trying to solve for your customers, how you all go about doing it, and kind of what differentiates the company. And maybe start, kick it off with a little bit of the history of the company.
Sure, absolutely. Well, again, it's great to be with you, Jason. Thank you for having us. And it's my first Citi conference, so we very much appreciate that. And just a little background, Ducommun, this year, 2024, will be in business for 175 years. So we've had the doors open for 175 years. We're the oldest company in California. We're looked at because we were obviously founded in 1849. So general store initially, and then morphed into lots of other things. But we've been open for 175 years this year, so we're proud of that and our employees and everything else. So we're mainly an A&D. A&D is what we think about. We get up every day. We think about aerospace, defense. We have a little bit of industrial, but very small. So I came in in 2017.
So after a long career at RTX, which was UTC at the time, and then did a stint in private equity, and then came into Ducommun, it was, for the most part, a turnaround story for me to get moving on it. The things that we do for customers, obviously, solve problems. We have a significant manufacturing services component to our business, but we're very focused on sort of niche manufacturing, such as titanium. So we take titanium sheets, and we hot-form them. It's called superplastic forming, which is with nitrogen. We handwork it. We do a lot of sort of stretching, chem mill for lots of larger sort of skins. We make all the skins for the A220, so we're really proud of that. So we've got a lot of sort of very sort of in the manufacturing services business, harnesses, cards, all things that are tough to make.
So people come to us with tough things, and that's what we want, right? Because when you're solving hard problems, you get paid more, right? So that's sort of our thing. And there's a little less competition because it's sort of it's not just a machining company, so we like that. The other piece, which I've been focused on since I've been there, is really building up sort of our Engineered Products business. Okay? So we do everything with a world leader in Lightning Diversion Systems. So every plane you're on has a lightning strip, pretty much, from Ducommun, which makes you safe in case there is a, God forbid, a strike on your plane. It gets dissipated through these strips. So we do that. We do lots of Magnetic Seals for the Apache engines, for Pratt & Whitney Canada.
So we're involved in the engine business there, so we like that. And then we're in other military applications. And my goal is obviously to solve problems, to make a difference in the industry, to have a team that's focused on quality, which we all know is something super important right now. But we've done, though, since 2017, we've really added on a lot of aftermarket, and we've added a lot of Engineered Products into our revenue mix. And so instead of when I came in, we were pretty much mostly Engineering Services or Manufacturing Services Businesses, people call it contract manufacturing, we're moving more and more into Engineered Products as well.
Our goal in 2027, and we had our Investor Day a little bit over a year ago, was we were going to get at least 25% of our revenue to Engineered Products by 2027 and get to about $1 billion in revenue. And I'm happy to report, after our first year, we're pretty close to getting halfway there already. I mean, and what we do with the Engineered Products is that we buy them, but then we invest in them. Okay? We make sure we do the right thing on the capital side, the BD side. A lot of these businesses we buy are anywhere from $50 million- $75 million- $100 million, $125 million. So we really look at that's our sweet spot for now, as we work to get bigger, and we work to be able to buy something bigger in the future.
But what we do is we take them, and we drive them, we operate them. I mean, I'm a large-cap person. My background, we get into these smaller companies. We kind of have a lot of experience and know what to do. And I'm happy to report, we did this just recently, is that our first four acquisitions, first of all, after 12 months, we have a double-digit return on invested capital. So that's public, as well as we reduced the multiple by four already, driving EBITDA. So we're pretty happy where we are, and we're excited about the future.
Okay, great.
You got through all of our questions.
Sorry.
No, we're going to dive a little bit deeper on that.
Sorry, I get excited. Absolutely. Yeah, nice.
No, look, let's dive a little bit deeper into the Investor Day and some of the targets that you put out there for 2027. Because not only did you talk about driving the engineered product content to 25% of the business, but you put out some margin targets there as well. So maybe let's just step back and talk about big, broad brushstrokes. You're there, and I think, December of 2022, I think it was the timing on it.
You did?
Yeah, New York, yep.
Yeah, so talk a little bit more about that day. What were the targets that you threw out there? And maybe starting with the top line, margins, the mix of the business, and quantify after one year, where are you?
Absolutely. So we met in New York in December of 2022. Coming out of COVID, obviously, COVID was a big deal for DCO and for lots of other folks, right? Because half our business was commercial aerospace, right? But the nice thing is we were able to kind of ride through COVID a little bit on a real big increase in defense. So one of the things we were able to do through the dark times of 2020, 2021, et cetera, we were able to hold our EBITDA margins pretty good and pretty flat, right? So that's a nice thing when 70% of our commercial aerospace business appeared for a little while, right? So we felt it was the right time. Let's go into New York. Let's meet with investors. And the first thing we did was say, look, we're coming out of this thing.
We have wonderful build rates ahead. Okay, even though we're disappointed, I know everybody in Boeing and what's happening right now, but we feel the MAX does have a life to get to hopefully 50+ sooner than later, right? So we're hoping for that. We'll have to work through the issues and make sure everybody's safe, first and foremost. But we put out a number where we came up about a seven, 7.10-ish, 10-ish when we had the meeting out of 2022, and we said we're going to do $1 billion, okay, or close to it in five years. So this year, we just had our earnings. We're 7.57, so we have at least good traction, over 6%.
With issues at Spirit, they kind of hurt us a little bit because we're a big supplier of Spirit, and they kind of didn't get to where we thought they would in 2023. So that was okay. But one of the big things we're doing is driving EBITDA margins. Okay? I know that's top of mind for investors, top of mind for me. And so we put out a number of 18%. Okay? So right around, we're 13-ish. So we put out 500 basis points, which is, I think, a respectable number and something we have to work hard to get. But we think that at least in 2023, even though percentage-wise, we were a little bit up. We had our best year in EBITDA in 2023 as far as actual dollar amount.
As far as the Engineered Products business, we want to change the revenue mix, as I've talked about, to more aftermarket Engineered Products. So we put out a 25% of revenue by 2027, which is a respectable number, a little light. Okay? But you want to five years is a long time, right? So you want to kind of, but we're already almost halfway there. So from the $1 billion, we're at $750 million, almost $760 million, a little bit up on EBITDA margins, 13% and change, but we didn't go down, right? And then on the Engineered Products side and aftermarket, and you say, well, how'd you do that so quickly? Well, we had a great year with our Engineered Products business. We just did, more so than we thought. And this is just lots of demand coming through the system and lots of demand on aftermarket.
We have good pricing power in aftermarket. So all these things we think about as management and think about these goals. We take them to heart, and I think we're tracking nicely towards all that, and we think good things ahead.
Right, right. And on getting to that, well, let's see here. If you had a good year on the engineered product and your margins were up a bit, I would think that there was probably some downward pressure on some of the other areas of the business. And so maybe talk a little bit about that. I know there were some I don't want to call them one-time costs, but some costs that are going to fade away on you, right?
Absolutely.
Maybe talk a little bit about, as we think about 2024 and 2025 in particular, kind of the medium term as it relates to the margins, some of the things that are going to help drive those margin rates higher.
That's a great question. That's a very fair question. So we announced we were going to shut down two factories, right? And so that's 350,000-400,000 sq m. These are one much bigger in California and one in Arkansas. And what you have is you have timing on when these things are approved to move. Okay? So for instance, for Berryville in Arkansas, everything has gone except one product, two harnesses. Now, these two harnesses are on the Tomahawk, right, which is the offensive missile for the United States. Okay? So to move that, and we're moving that to Mexico, which is going to be great, and we have great people there, so there's no issue there and great on costs and everything else, you have to get State Department approval. You have to get RTX approval.
We're in the final. We already have State Department approval on most of it, so we're in the final. So what happened was with the net income in Q4 especially, we had two harnesses and a big factory, right? The same thing in California, where we have two products left. Okay? We have the spoilers for the MAX, and we have the back blade or the rotor blade for the Apache. That's it, right? So again, that is something we're working on. We're targeting by mid-year, by the end of June, to have all the operations in both those sites. Then all that cost, which we've been carrying because we have nothing, no production to sponge it up, right, is going right to the headwind for the bottom line.
So that's one of the big things we feel in the second half of the year. And in 2025, we're going to see a really nice uptick in that. And that's the biggest issue. That's the biggest issue right now. And I think the other thing, just getting back to this, so to manufacturing services and thinking about how that business looks, we're really focused on really hard things. And that's coming even better now as far as our margins, all right? So our gross profit was way up this year versus last, right? So we've been kind of floating around a certain level, and then we're up, I think, 150 basis points or something year-over-year, so overall. So that's starting to bleed through because we do think about price. We do think about value pricing. Okay? You know what I mean?
We're not just running after orders, which we used to do before I showed up, right, just because I had a big revenue number. We thought it was great. Well, it's not great if you can't make any money. So I think all that's positive, it's all going to drive this EBITDA 18%, which is going to be terrific. And the last thing I'd say is that we're still in the game for acquisitions. And we talked about this, Jason and I, about we have the hedge that just came in for $150 million of our debt. And we run about 250-260 in debt. So more than half of it now is going to be at 170 basis points because we did this thing back in 2021. So it's going to be at least $4 million-$5 million savings in interest this year.
So that's going to be a nice thing for net income.
Yeah.
So I think a lot of things are in the mix. Again, it's a little bit of a timing issue. Investors have been patient, and I appreciate that. But we're at sort of like the three-yard line. I hate to say it, but we're still not in the end zone yet.
Yeah, yeah, no, fair enough. So you mentioned a couple of things there. Let's double-click a little bit on. So on the M&A front, the potential to be acquisitive here, and I think given the strategy around the Engineered Products side of the business, that's probably where the acquisitions would be focused on at this point.
Right where the action is.
Yeah, that's where the action is.
So what are you seeing in that market these days with availability of properties and assets? And I suspect there weren't all that many available during the trough times, and now they're starting to come to market. Is that the right way to think about it?
I think that's the right way. I think that's accurate. I think even more so this quarter and more so sort of the fourth quarter, things are starting to really pick up again, which obviously we like. We're very opportunistic, so we look at lots of things because obviously, we have a big target ahead of us. But so the market has definitely gotten better, certainly much better than 2022, early 2023-ish. So we are seeing things. We're looking at things. We're meeting with management, so we're doing all these types of things that are important. And just so everybody knows, we're still in this sort of $75 million-$150 million sort of deal size, and we like that. I mean, it's really worked for us. It's really this whole I hate to call them bolt-ons because they're really not because we use them.
We're not just bolt them on and then go on to something else. I mean, we invest in these things, and we work hard to get them better. But we think that our track record now, we have five deals. We bought BLR, which was back in April of last year. BLR was our biggest acquisition to date since I've been there. That's been terrific as well because that's a whole another helicopter business, aftermarket, wing tips, general aviation, really good pricing power there, FastFin, which is a very unique thing. They put on a helicopter so it can lift more weight. It's an aftermarket opportunity for us, and we're doing that a lot, retrofit, not aftermarket. So I think that's all positive for us.
When we buy these things, because we have such a large contract manufacturing base, they immediately are positive for the P&L. You know what I mean? Because I won't get into details, but obviously, they're going to be accretive versus our contract manufacturing business.
Right, right. OK, great. And then just going back to those 27 targets and the ability to get to that being 25% of your revenue, what was the baseline assumption in December of 2022 about organic growth versus inorganic growth to get you there?
Yeah, well, our assumption really for organic was just mid-single. Yeah, we thought mid-single was appropriate. Even at the time, even in 2022, it wasn't good as far as but we obviously, we count on we're very close to the market, so we count on all these build rates going up. And eventually, we think they will. You know what I mean? Especially on the BA side, we're going to be even more, as we go into 2025, bigger players on the 787. So we're going to pick up more content there. So it's already kind of in the cake, as they say. And then when that gets up to 10, and it will because the book there is going to be has to be delivered, right, and with the MAX and everything. So we sort of at least in 2022, and we'll update it.
We'll have another investor conference, and we'll tighten it up. But we fell sort of mid, and we had like a $75 million or probably $75 million placeholder for acquisitions, right around there.
Yeah, OK, that makes sense. Yeah, I think the mid-single digit number has probably been running a little better, right?
It has been. But again, we're very tied in, and I think it's a good thing because eventually, it'll pay off. We're very tied in the build rates. You know what I mean? We're just really and Spirit. Spirit's a big customer. We have vendor-owned inventory, so we have a ton of our work sitting, waiting to get pulled in Spirit. And so we get daily updates, and we're either cheering or we're kind of down. But that's part of the aerospace game. We think that with all going on and Shanahan in there now, and I think the FAA, even though they don't have 1,000 people, they're going to hopefully help them. And we think there's better days ahead.
Once that gets going, I mean, MAX before in 2019, when we were going to 55 or 57, I mean, the MAX alone for DCO was $130 million, just that one point, $130 million. So that gives you a sense of, then it went down to $20 million. You know what I mean? So it gives you a sense, though, that we've got, I mean, a lot of dry powder once these build rates, I mean, if we get to 45 or 50, we'll be in great shape.
Yeah, yeah, and you've mentioned the word build rates quite a few times here, so let's double-click on that.
Yeah, exactly.
So I think you mentioned on your call last week that the expectation here is kind of the mid-30s right now on the 737. I think you and one of the casting guys, Howmet, talked about 34, I think. So any sense of how long that lasts?
No. I mean, other than yeah, we think sort of the back end. Here's the thing about, and it's maybe not talked about enough, is that when you become a new employee at Spirit and Spirit, I used to go to Spirit before COVID. It was 20,000 people, or you know what I mean? And then it went down to 8,000. So to get all those people back, first of all, a lot of them aren't coming back. But second of all, the type of training you have to do is 12, sometimes 16, and you want these people trained. So you think about, OK, we have this issue. We have supply chain.
But I'm banking on in the second half of the year, Spirit having fully trained 2,000 people since they started hiring people again, that it can be in there that can actually be working at an 85% versus a 60%, right? You know what I mean? And I know they went through the union, and they had a problem there. And hopefully, that's been worked out and everything. But I know Spirit just from the inside a little bit, it's an absolute fight every day at Spirit to get those fuselages built. I know that. So I think they're going to come out of it. They're our friends. We obviously support them any way we can. But I think that better days in the second half, I think a big part of it is the manpower or the people, the men and women working.
They've got to be trained. They've got to be indoctrinated. And that's just not something that can, you can't go from 20,000- 8,000-1 2,000 and have 4,000 people you have to train and be like, OK, everything's going to be fine in six months. It's not going to be fine. Yeah, so anyway, so I think better days ahead, tailwind ahead. I think second half of the year, I'm hoping that we'll see maybe 38 by Q4. But I'm not going to think that's probably the best I can tell you.
Right, right. OK, great. So talk to us a little bit about the labor dynamics at your own company in that context, right? Because you had a lot of moving pieces, right? Not only did you see your 737 revenue go from $1.30 to $20, right? So you probably had to react a little bit there as well. But you're also moving some factories around and training some new people down in Mexico. So just kind of walk us through how you all have been able to come through this.
Sure. So first of all, it hasn't been easy, right, because you have these things that happen. It's nobody's fault. But what we tried to do is fill in as much defense work as we can. And that's sort of what we did. I mean, our defense business went way up in 2020 and 2020. So we're able to kind of maneuver a bit. But we've had at least we kept as many of the people we could in sort of the MAX businesses, people that were very well trained, leads and everything. We just kept them. You know what I mean? And we had our Engineered Products businesses that were going pretty well in aftermarket, right? So that was good.
So we were luckier than most because we were able to kind of float some things and just sort of make all the numbers respectable, but just keep people still employed. So that's one thing we did. And then as things bounced back, we have even though we're closing two factories, a lot of our factories, our largest factory is like 450-500 people. OK, and we like that. OK, that's a little bit of our secret sauce, right? We want to have smaller, more focused. And they're P&Ls. I mean, everything's a P&L, but you get up every morning, I'm going to make a card. Yeah, I got 400 people, 300 people, right? I mean, everybody's head, right? Because you can do that with 300 people in a factory. You can't do that with 3,000.
So we're able to, because we have sort of at least on the people side, we're not having to go out and hire 2,000 people. We were able to manage it fairly well. So we did have layoffs. But we didn't do any restructuring. That's the one thing that I tell. We didn't use any shareholder money during COVID for restructuring. We did restructuring after COVID because we looked at the world, and we said, you know what? The Monrovia plant, good people, their future is not good. And Berryville, the same thing. There was just no future there for those folks and for that business. So we're going to move everything, and that's what we did. So I think overall, I'd give my team and our leadership high marks because we were able to move everything and keep the business at a respectable level. And then we come out.
Do we have issues in the Midwest hiring people? Yes. You know what I mean? But we're hiring 30 people or 40 people, and I have to hire 1,000 like Spirit, Wichita. So good stuff there. But there's inflation concerns, and we try to do our best there. I mean, just for a little more color, we're a very bonus-centric company. And really at the top of mind, we just had the bonus last week. And so we're a very big pay-for-performance. We try to keep the base reasonable because when you hit a tough year, your base is your base, right? You got to carry that no matter what.
So we tend to do a little bit with the private equity side, which I came from before Ducommun, and really kind of be like, hey, if you hit these marks and you hit this performance, OK, you're going to get a big bonus. And just one example, MagSeal. They're Magnetic Seal. We bought them in 2022. And I saw it in 2021. They had an outstanding year in 2020. Everybody got their biggest bonus in the history of their career. Yeah, fantastic. You know what I mean? It was an easy answer. They were fantastic. So we try to manage human resources that way.
Yeah, makes sense.
We like that.
Yeah, yeah. Let's talk a little bit about some of the programs. Specifically, we talked a little bit about the 737 and the build rates there. But there's another angle to the 737, right, which is getting some more content on that aircraft. And I know you've got some things here on the 787 with some additional skins, I believe, right?
Absolutely.
Yeah, yeah. So talk to us a little bit about the scope of that project and when you expect those to start feathering into the revenue line.
Sure. Great question. So we've been with Spirit for a long time. And so we have a factory in Gardena, California, which has a lot of unique things. They do a lot of stretch forming. They do wonderful chem mill. I mean, they're really like they're top of the industry. And so we're talking about this and that. And we had the former CEO of Spirit come out and join us in Gardena. And he goes out there, and he sees the skins for the A220, and they're all hanging from the you know what I mean? And he looks at me, he goes, I didn't know you guys did this. You know what I mean? So that struck up a conversation where the Spirit folks were like, you know what? No one else is making these skins other than us for the MAX.
We said we'd be totally interested. But we're not going to do a buy the drink sort of thing, like, hey, I need six this month. I need four this month. We're not going to do that, OK? So to there, they committed to 15 skins a month, right? You know what I mean? And they'll write up their own thing, but they'll take 15 skins. And so they gave us an initial order for four. So there's about 40+ skins that they're all sort of put together for the MAX. And there's different sizes and shapes. And so we started having a discussion. And so we got an order for four skins initially, like I mentioned. And so now we're doing the tooling right now. So the tooling is being done, and we're going to be we're targeting to be commercial early Q3.
So our view is, and it's about $4 million a year. So it's not but it's for looking to get another 20, right? Because we think we can do it. So it's kind of like baby steps, and I'm fine with that because we have to learn too. But we have a very I talked about this. So this is manufacturing services, right? So they give us the blueprint, and they tell us it's totally fine. But we have the know-how, and that's how we get paid. And so this is another area where we're sort of very niche business, where Spirit is a supermarket of structures. I mean, you go to Spirit, it's every machine. They can make everything. They can stretch whatever, right?
And to have the CEO come to a Gardena facility and be like impressed, like, wow, we didn't know we're trying to look for people that can do this stuff, it says a lot. And so we're on tour of four. We'll get those done. And then we're going to try to get; we like to get the whole thing. I mean, we make the whole fuselage for the A220. I mean, and that's great business for us. I mean, this is a wonderful thing. And we had gotten that when it was the C Series, right? So this is a long, long time. So we're hoping for that. It's definitely going to happen. And then as we go forward in time, I mentioned the 787 content coming on. That's more titanium work and things that are coming back to us now for the 87.
That's going to be additional dollars. We'll talk about that later in the year once that firms up. So we have that. But I mean, we need the MAX, right? The industry needs the MAX. MAX isn't going anywhere, God forbid, right? So I think that whether it's Q4 or whether it's the middle of 2025, we're going to increase content on the MAX. We're already a legacy, or sort of we're very strong in everything we do. The other thing I just mentioned was performance. So we're fortunate that we have good people, quality mindset. We just got a big award from Airbus in 2023 for supplier of the year. And this is for all our work on the A320 family. This is structures, right? So this is our titanium work. And they don't give those things out, Airbus.
They're a very tough customer, certainly global in all aspects, in my opinion, the way they do procurement, the way they look at this landscape. And so the reason we got that award is we've been pretty much on time for like four years, every product, every month, 100%. And it's not like we have a bunch of stuff where we have in France that just we stack all this inventory, and we're always good. No, we're shipping things from Parsons, Kansas. So I think that's the other thing as far as the winning, more programs, more contents, is that customers trust us. And one other thing I'll just tell you on the defense side is that we talked about this a little bit. So we're now making cards for the radar system. So we always made cards for missiles, right? So we made cards for all types of missiles.
We make them in Tulsa. We make them in Appleton, Wisconsin, those kind of things. But this new SPY-6 business, which is coming from RTX, which has taken a while, these are some main circuit cards in this radar system. And we already have the first card. And I'll talk about it later in the year. And then we have other cards that are all coming from Andover, the facility in Andover, Massachusetts. And the best thing about this is that it takes a while to do it. But once you get it in the factory, it's there. They're not going to move it. Yeah, you know what I mean? And always be fair to our customers. And believe me, they're a tough customer on pricing and everything else.
But we feel great that even though it's taken time, and it's a lot of effort, and sometimes you have to buy a test machine for $1 million and some other things, right? We know that this SPY-6 is sort of one of the crown jewels of RTX.
Makes sense. So on the 87 really quickly, so rates going up clearly. I think Boeing talked about being in five here recently, seven then going on to 10. So those are good growth rates for you, obviously. But you talked a little bit about more content. And you said titanium, and you said coming back. So did that, during the lower volumes, did that business go away? And then now the volumes are going up.
No, actually, quite frankly, it left us because we held firm on price. So this was a few years ago where we basically and they said, OK, we're going to go somewhere else to make it. And that came back to us.
At the same price?
Better. I really don't want to get into it. But so this is what happens sometimes because we are value pricing. And that's what you want. You want us to be like, we're not giving stuff away. If we're really good, and we have a moat or something, we're not going to go crazy. But we're going to be fair to our employees and to our shareholders too. So we price it that way. And sometimes people say, you know what? Thanks. You've been doing it for 10 years. But we're going to Algeria. We're going to go here. We're going to go there. And then lo and behold, 18 months later, they come back. And they say, OK, you know what I mean? And I think this is what's paying off for the 87. That's a true story, by the way.
That's how it's coming back to us. But I'm really high on the 87. By the way, the other cool thing is that we make lightning diversion suppressors throughout the 87. So our lightning business, LDS, which is a world leader, we have 80% or very high market share. We're the number one by far. We're going to pick up a ton of business now going forward once that goes. So we sell it.
Did they change something out there on the 87, on that Lightning Diversion System?
No, absolutely not.
Same thing.
Absolutely. So yeah, it's a suppressor system. So it's the suppressors we make. We sell them to TTM, and they sell them to Collins. And Collins obviously has the electrical system. And so that's how we get the chain. So we're back in the back. But we have these meetings. I'm always asking LDS, so what's going on with the 787? Because it's such good business for us. And it's something that, fortunately, with the shutdown of the 787 and building inventory and then having to fix 100, you know what I mean? And then they're doing three or four, it's been zero. But we know it's coming back in a big way. So there's a lot of, I think, very positive things on the 787.
Yeah. So shifting gears then over to Airbus. We know rates going up on their narrowbody fleet. Any opportunities for additional content?
Yeah, yeah. Airbus, well, look, first of all, the A220 has been a home run for us, right? But that's all through Montreal. That's not a lot of Toulouse. And the A320 family is what we want to be on, right? The problem you have is that the A350 is struggling to make money. So to get on an A350 to do whatever, you have to come in with a major price reduction, you know what I mean? Because they're already tight on their and I don't want to speak for Airbus. But it's a program. They're trying to and so we just don't do it. I mean, we're not going to go unless there's something that we can really add value. We're just not going to want to get on the A350 just for price. We're not going to do it. So we're on the A220.
We're on the A320 family, which is really the show there, right? And we're not on the A330, or we do A330 retrofit. But we're not on the A350. But we have a great relationship with Airbus. We think that because Airbus is the only company we deal with that has internal titanium operations. So this is like a legacy thing, right? They're all vertically integrated when they started, right? And they still have, so they make titanium like we do. So we go into their operation. We see the same machines we have in Parsons, right? But we feel, and it's kind of played on the past. Once they get to 55, 60, 65, right, they're going to need more help. You know what I mean? We already have a good business with them, but it's only going to get better.
So as the pressure goes on, my view, the DCO revenue goes up because they have to they've got to meet they've got to meet the numbers, right? They've got to meet the deliveries. So we feel very good about that. Again, we have a great relationship with Airbus. Funny thing is, your Airbus wasn't even a customer of Ducommun until 2017. So they had nothing with them. You know what I mean? It's hard to believe, right? We're only two major OEMs. But that was the story. And so when I came in, they had signed a contract, my predecessor, all credit to him. They had got something going. But then we, four or five years of pain, learning, Airbus comes in and says, this is how you have to do it if you want to be a supplier. So we had to basically change everything we did.
But the cool thing about Airbus is they made us better. They made us better. They were hard on us, and they spent a lot of time. It's not easy to get to Parsons, Kansas, from Toulouse. But all credit to them because they got on planes. They came over, and they helped us with their whole operating system. And so now it's been a real success.
Yeah. OK, great. Yeah, a few more questions here. We're going to run out of time quickly. I want to make sure I get a few more in here. On the defense side of things, the year-over-year revenue has been a little lackluster. The bookings have been pretty strong, which portends some growth in front of us. Maybe you can just talk to us a little bit about some of the dynamics that are going on there and when growth begins to reflect.
Yeah, fair, fair, fair question. Look, a couple of things. First, and I've talked about this in the past, a little bit is this timing, OK? So we have some issues. But so that's a little bit of it. The other thing is just in the defense here, when you have sunsetting programs, right? So the F/A-18 is a program that over time has gone down sort of $10 million a year each year for us. So there's headwind there. We had big years for the TOW missile case, which we took from a supplier because we were better at it. And those were great years in 2021 and 2022, OK? But they can't get the motors for the missile from someone else, OK? So the TOW missile kind of among other things. So it's not nothing to do with the business, our BD, our performance.
Those are the most important things, right? BD, performance, leadership, all those things, quality, all those things are terrific. And we're down a little bit year-over-year. But a lot of it is the F-18. And some of it is timing on some of these programs where they get Raytheon will tell you it's like a bathtub, right? So they'll say, coming out of 2023, we got a little bit of a bathtub until we get to 2025. You know what I'm saying? Because things have to cycle up. And that's a little bit where we are. But the great thing is that we had record backlog for defense. You know what I mean? And that's the thing that we're going to take off with. It's a little tricky. And I can understand investors saying, OK, but the backlog I always tell my team, customers speak with orders.
I mean, that's at the end of the day. So this is going to come through. We feel very good about the rest of the SPY-6 cards. We feel really good about more on this moving from the Andover's to the Ducommun's. And the last thing I'd say about that is that it's very hard for an OEM to send things outside their control unless they really trust you, unless they really say, you know what? We're going to do this because we really trust these guys because we've got to get because there's penalties and all sorts of things. And I think that's a great thing for investors to keep in mind. I mean, we have one of the top defense companies in the world saying, you know what? We trust you guys. We know we're going to get the quality on the Navy radar system.
The SPY-6 is, that's the system. You know what I mean? So I just think that's something to mention.
No, no, it's great. Your comments align perfectly well with the way Raytheon is describing that business to the external world.
Is that right? Yeah, yeah, yeah.
Good to hear you guys are aligned.
Absolutely. I met with Wes Kremer before Wes left. He told me the same thing. Wes, you know what I mean? Great guy.
Yeah. You mentioned interest expense earlier. I've got to admit, you guys are probably the only company in my coverage universe that's going to see interest expense go down.
We'll take it. Thank you.
I don't know if it's better lucky than good kind of thing. But yeah, you got some swaps that are starting to pay off, right? It's going to drop through to the bottom line with you all, provides a little bit more operating cash flow, free cash flow for you all. So that maybe kind of leads into the question about capital deployment, cash deployment, and just your general approach to this point.
Yeah. I mean, look, we have over $200 million of our revolver and cash on hand. And our debt to equity is 2.5 or a little bit less. So I think we're in good shape. And we had a good cash year, certainly the second half. I have a new CFO. Folks don't know that. But my Suman started in May. And I think that's going to be very positive for investors and cash flows to go forward, OK? So he's built his team now. We're off to the races. So we had a very good second half. So it's good there. So I think our cash flow from operations is going to continue to get better. Our debt to equity is good. We like that. Maybe go up for an opportunity. We got the revolver.
And then we have this wonderful. It was actually they did it in 2021, believe it or not, where they looked out and they said, OK, we're going to do this peg for $150 million of our debt, 170 basis points. So that's good. You know what I mean? So I give all credit to them and our advisors. I was around. I was in the building. But those guys made the decision.
You need to sign off on it.
Exactly. I did, by the way. I'll take a little credit. But all credit to them. So I think that's great for investors because we really have this thing going now. You know what I mean? And it's going to get through these factory closures, keep going on the M&A, generate more and more cash to deploy it properly, OK? We're taking every cost we can out of the manufacturing services business. So those margins are going to go up, right? You know what I mean? So we're really looking to have a wonderful we have a really good second half. But we really think 2025 is going to be great for investors. Yeah, really do.
Perfect. My last question was going to be the walk-off the stage question. But you already did it.
I'm sorry. OK, yeah. That's all right. Yeah.
Yeah.
Yeah.
I think we're over, right?
Yeah. I think I can't tell.
Yeah, we're over. But yeah, it's going to be good.
Oh, yeah. We're counting up. Yes. We're going the wrong direction.
Perfect. Well, thank you, everybody here in the room and those that listened in online. Steve, can't thank you enough for joining us.
Jason, thanks for having me in. It's a pleasure always.
Yeah, perfect.
Thank you.
All right. We're done.