Thank you for joining us for the Q1 2020 Ducommun Earnings Conference Call. I will now turn the call over to our speaker, Mr. Chris Witty, who will moderate today's discussion. Please proceed.

Thank you and welcome to Ducommun’s 2020 first quarter conference call. With me today are Steve Oswald, Chairman, President, and CEO, and Chris Wampler, Vice President, Interim Chief Financial Officer, Treasurer, and Controller. I am 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 question-and-answer 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 Federal Private Securities Litigation Reform Act of 1995 and are therefore perspective. 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 be 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, management changes, the cost of expansion and acquisitions, and competition. 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 as required by regulatory authorities. This call also includes non-GAAP financial measures. Please refer to our filings with the SEC for a reconciliation of the GAAP to non-GAAP measures referenced on this call. We filed our 2020 first quarter Form 10-Q with the SEC today, and you will find a link to all our filings with the SEC on the company’s website under the Investor Relations tab. I would now like to turn the call over to Mr. Steve Oswald for a review of the operating results. Steve?

Okay. Thank you, Chris, and thanks everyone for joining us today for our first quarter conference call. I hope that you and your families are healthy and getting through this pandemic as best as possible. Today, as usual, I will give an update on the current situation of the company, after which Chris Wampler will review our financials in detail. Generally, it’s been a time of rapid change and judgment at Ducommun as we manage through these challenges with the top priority being the health and safety of our employees. I am happy to report that despite having facilities in highly impacted areas such as Southern California and one operation south of Albany in New York State, the virus spread has mostly had zero impact on our team with only one case reported, which we believe was not contracted at work. We also remain diligent in putting even more effective safety protocols in place. As we move forward, our facilities are sharing best practices and ideas across the company to sustain this performance. Despite the challenges of the pandemic to the nation and the markets, Ducommun’s first-quarter performance was excellent. The reasons for this result I believe is our team has been working diligently over the past three years, improving all our operations, developing our product portfolio, driving new technologies, focusing on providing high value to customers, having an effective cost structure, and making strategic acquisitions. This has been particularly evident recently in the progress of Ducommun’s defense business revenues and orders. Overall, the company’s first-quarter revenue rose 1% year-over-year and marked the ninth consecutive quarter of year-over-year growth, not a material increase. I want to remind everyone that we improved revenue, not only with the impact of the virus in March but also over $25 million of 737 MAX headwinds from last year, which for the size of our P&L is impressive. As mentioned previously, Ducommun’s defense business has started showing its strength, especially in Q1. The majority of the gains in the quarter include increases from our new weapon system business, Nobles Worldwide with the Clouded Leopard armored fighting vehicle, the F-35, the Patriot Missile, Apache helicopter, F-15, F-16, and F-18 and other industry programs. Many areas of defense were just getting started, pulling some great progress in developing business in UAVs. One thing we are most proud of and I want to highlight is the continued defense revenue growth of Raytheon. As you may recall, Ducommun was the first company selected to sign a preferred supplier agreement last July with the former Raytheon Missile Systems business, now known as Raytheon Missile and Defense. Through that relationship, I am happy to report that we have fully commercialized our first structures product for them, which is the missile case for the toll missile program. This is a major step forward as all other current deliveries for Raytheon are electronic products. This win also continues to build value offerings in the areas of defense within Ducommun’s structures business. We took the opportunity and booked a $20 million plus order for the program in Q1. Additionally, another significant story is the rotation of our customer rankings. Although it was only one quarter, the top five companies ranked by revenue now are Raytheon, Boeing, United Technologies, Northrop Grumman, and Spirit Aerosystems. For context, since I arrived at the company in January of 2017, each and every quarter, Boeing and Spirit always held either the first, second, or third place. This should be a clear indicator that the diversification of our portfolio and balance is working at Ducommun, showing material strength while the commercial aerospace business is significantly impacted by the pandemic and the 737 MAX. We believe at least in the next year or two, this trending will continue to favor defense, and the team is driving every opportunity. Also, despite the tough news and current situation with commercial aerospace, Ducommun continues to gain share at Airbus, achieving positive growth year-over-year in Q1. As you may recall, Airbus was not even a customer of the company four years ago. Though the rates are down, opportunity still exists for a larger percentage of the A320 program. The other bright spot for the quarter ending in Q1 was the backlog of $876 million. It is sequentially down from Q4 but still a great number based on the environment bolstered by strong orders across numerous key defense platforms, which included Apache, the Tomahawk missile case previously discussed, UAVs, weapon systems for ground vehicles, F-35, F-18, and others. This part of Ducommun continues to deliver. Obviously, the strength helped offset commercial aerospace order pressure. Overall, the company is off to a solid start in 2020, in both revenues and earnings. As previously communicated, Ducommun took action early in January to ensure all costs that our effective operations were proactively managed due to the 737 MAX production shutdowns at Boeing and Spirit Aerosystems announced in December 2019. Actions have continued as we now deal with the pandemic to ensure the company adjusts its costs. You can see the effectiveness of our actions within this tough environment in Q1, with both very positive gross profit and operating income percentage posted, and the team has certainly done a great job. We continue to be proactive in the area of costs, and I also want to mention that our leadership team has the experience and background to manage through the financial crisis in 2008 and 2009 to navigate through this difficult time as well. In regards to the Q2 outlook, we see our strong backlog in defense with the many growth programs mentioned earlier, including the strategic supplier agreement with Raytheon, providing year-over-year growth. The Nobles acquisition will also help provide additional inorganic growth. But with the unprecedented challenges in commercial aerospace, along with the 737 MAX, the company revenue is expected to be lower in Q2 in the range of 16% to 20% year-over-year. We think that within the current circumstances, it’s a solid effort and we also expect operating income percentage for the quarter to be between 5.5% and 6%. As we look to the second half of the year, we estimate that defense revenue will improve again, but the business overall will be down year-over-year by 8% to 12% due to commercial aerospace. Operating income, we believe this time will be between 6% and 7%. As you saw in the first quarter, we overcame $25 million plus for MAX at the beginning of the pandemic. All the hard work over the past three years, including process improvements, restructuring, leadership development, cost discipline, and others have clearly made a material difference. And despite the short-term outlook, the business has a great long-term future. Now, let me provide you more color on our markets, products, and programs. Beginning with our military and space sector, we posted first-quarter revenue of $100.8 million, up 32% versus 2019. We drove sales across a broad variety of defense platforms in nearly every aspect of our product portfolio. As mentioned earlier, we saw increases in demand for our military fixed-wing aircraft programs with particular strength in shipments for the F-15, F-16, F-18, and F-35, as well as top-line expansion for helicopters, like the Apache. In addition, the Patriot missile system rose again this quarter, and we saw significant growth across many other military and space applications. We are well positioned for further growth across our defense platform over the next three quarters in all sectors and ended the first quarter with a backlog roughly $474 million for defense, up an impressive 36% year-over-year. I am also happy to announce that Ducommun was recognized as the Black Hawk supplier of the year in 2019 by Sikorsky, a Lockheed Martin company. Within our commercial aerospace operations, first-quarter sales declined year-over-year to $62.5 million, but we did see continued share gain at Airbus and despite the rates posted year-over-year gains with this customer. Ducommun also continues to work on adjusting costs and managing the downturn and is well positioned once rates start to stabilize in the long term. Ducommun’s expansion with Airbus since 2017 is clearly helping and puts important balance in our portfolio. Airbus A320 and Airbus A220 families represented a larger and larger share, both directly and indirectly in Ducommun’s commercial revenue in Q1. The backlog within our commercial aerospace sector stood at roughly $376 million at the end of the first quarter, with the majority of the decline for the 737 MAX program. At this point, I will turn it over to Chris.

Thank you, Steve, and good afternoon everyone. As a reminder, please see the company’s filings and Q1 earnings release for further description of information mentioned on today’s call. As Steve discussed, we were pleased with the first quarter’s overall results, even as we faced the dual challenges of lower 737 MAX production and the growing economic impact from the COVID-19 pandemic. We feel confident that our ability to flex production parameters and rapidly evolve our lean operating structure to external conditions will serve us well in the months and quarters ahead. Now, I will move to the details of our overall results. Revenue for the first quarter of 2020 was $173.5 million versus $172.6 million in the first quarter of 2019. This performance was driven by $24.2 million of higher sales within the military and space sector, partially offset by $23 million of lower revenue from our commercial aerospace customers. Industrial sales were essentially flat year-over-year. As mentioned in our year-end earnings call, we expected our military and space business to directionally offset the headwind in Boeing's 737 MAX commercial demand. Ducommun’s overall backlog at the end of the first quarter was approximately $876 million, near record levels. Growth in the military and space backlog continues to drive a sustained, strong backlog. 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. Once again, we posted solid gross profit for the quarter as gross margins rose to 21.2% from 20.7% in the prior year’s comparable period. The increase year-over-year was due to favorable mix and lower compensation and benefit costs. Gross profit rose to $36.8 million from $35.7 million last year. We do expect downward pressure on gross profit as we move through 2020, and we manage through the environment of reduced commercial aerospace demand. SG&A was $23.2 million in the first quarter versus $22.8 million in the first quarter of 2019. The company reported operating income for the first quarter of $13.6 million or 7.8% of revenue compared to $12.8 million or 7.5% of revenue in the prior year period. The year-over-year improvement was due to the increased revenue and the higher gross margins. Interest expense was $4.2 million in the first quarter versus $4.4 million in the prior year period, reflecting the favorable impact of lower interest rates on our new credit facilities, more than offsetting the higher amount of debt outstanding during the quarter. The increased debt outstanding during the quarter was primarily due to funding the company’s acquisition of Nobles in October 2019. The company reported net income for the first quarter of $7.9 million or $0.67 per diluted share compared to net income of $7.5 million or $0.64 per diluted share for the first quarter of 2019. The year-over-year increase was primarily due to higher revenue and stronger gross margins, as I previously mentioned. Adjusted EBITDA for the first quarter of 2020 was $23.2 million or 13.4% of revenue compared to $21.1 million or 12.2% of revenue for the comparable period in 2019, an increase of 120 basis points. Now, let me turn to the segment results. Our Electronic Systems segment posted revenue of $98.1 million in the first quarter of 2020 versus $84.2 million in the prior year period. These results reflect a $12.9 million increase in sales with the company’s military and space customers and a modest uptick in revenue across our commercial aerospace platforms. Electronic Systems posted operating income for the first quarter of $15.1 million or 15.4% of revenues versus $9.2 million or 10.9% of revenues in the prior year period. The improved performance reflects favorable manufacturing volumes and product mix. Our Structural Systems segment posted revenues of $75.4 million in the first quarter of 2020 versus $88.4 million last year. The year-over-year decrease was due to $24.3 million of lower sales across our commercial aerospace applications, reflecting current demand dynamics, partially offset by $11.3 million of higher revenue within the company’s military and space markets. Structural Systems posted operating income for the quarter of $5.4 million or 7.2% of revenue compared to $10.5 million or 11.9% of revenue last year. The year-over-year operating margin decline reflected unfavorable manufacturing volumes and product mix, partially offset by lower compensation and benefit costs. Corporate general and administrative expenses for the first quarter of 2020 were $6.9 million or 4% of revenue versus $6.9 million and 4% of revenue as well in 2019. Turning to liquidity and capital resources, we have available liquidity of $115 million. We drew down $50 million on our $100 million revolver toward the end of the first quarter and in abundance of caution as the uncertainty grew related to the potential impacts of COVID-19. We held this drawdown in cash on our balance sheet at quarter end. We used $12 million of cash from operations during the first quarter of 2020, compared with $1.7 million during the prior year period. The first quarter is historically our weakest cash flow quarter. We operate with significant performance variable compensation – performance-based compensation and the annual incentive for the prior year is paid out in the first quarter of the subsequent year. Additionally, accounts receivable and inventory investments, partially offset by higher net income added to the outflow from operations. We are in full compliance with the covenants of our credit facilities, which are not scheduled to expire until 2024 and 2025. As a reminder, we have a covenant life credit facility with a leverage ratio of covenant ceiling of 4.75. Our debt-to-EBITDA was 3.0 at quarter end. We have reinforced our focus on cash generation with our lean operations and lean structure, and as we are restricting discretionary spending and optimizing working capital in this volatile environment. As a result, we expect to generate positive free cash flow during the remainder of 2020. In terms of capital expenditures, we spent $3.9 million during the first quarter and anticipate spending between $12 million and $14 million in 2020. In alignment with our cash conservation initiative, this anticipated spending will result in a capital expenditure decrease of more than 20% from our 2019 capital spending level. We’re again pleased with our quarterly performance and remain cautiously optimistic about the future even as we manage through the uncertainty of the COVID-19 impacts, which create a very challenging operating environment. I’ll now turn it back over to Steve for his closing remarks.

Thanks, Chris. While I hope we have provided some important information to shareholders today as we work through 2020, I thought the first quarter was excellent despite the challenges and believe we have a lot of runway in the long term, especially in defense and other areas such as Airbus. I would also add that we do have the right footprint, cost structure, discipline, and operational leadership to continue developments in the face of this current crisis. I also want to thank our customers, shareholders, and all of our other business partners as we work through these difficult times together. In closing, and most importantly, I’d like to take this time to tell the Ducommun employees, I’m proud of them and all our efforts with the many challenges from the pandemic. Roughly 90% of our team members show up at our operations every day. And they stressfully get the job done for our customers and our nation. I just want to thank their families for the support. It is never easy when loved ones leave the home with shelter-in-place orders from the authorities. We’ve also given out $700,000 to local area charities where we operate, and we’ll add another $300,000 to reach $1 million in donations from the company to help our neighbors. Thank you for listening. Let’s go to questions.

Our first question comes from Edward Marshall with Sidoti & Company. Your line is now open.

Was I unmuted? Hi, Steve, Chris, how are you? Well, I hope your families are doing well. Thanks, thanks. So last quarter, we talked about the MAX program. And I just wanted to – just based on the 216 shipsets that were expected for 2020. Are you anticipating that you’d ship those this year? Or has that been pushed over to the right as a result of the COVID?

Ed, right now, we’re at 216. As far as we’re working right now with our customers, but I don’t really have anything. Chris, anything else on that or I think we do.

No. I mean I think beyond – I mean if we all listened to Boeing’s call yesterday, we’ve been in contact with them. I mean certainly, from our year-end call until now, there’s been a little more caution that’s been put out there, but they were fairly confident on their call yesterday that they worked through the slow ramp-up that they’ve got in front of them this year to hit back toward a 31 rate as they get to 2021.

We have no new – yes.

Okay. So as you plan production, first, did you restart production? And you talked about maybe a more even build throughout the year to look at your operating costs. Did that occur in Q1? And do you anticipate that you’ll start that you’ll start that in Q2?

We actually did that in Q1. I mean we got out of the gate early because, obviously, we got the news in December about the shutdown, right? So by the middle of January, we already had furloughs in place and lots of other things. So we managed it. We’re working closely with that. We manage them in Q1. And then Q2, again, we just continue to be as proactive as we can on the cost side.

Got it. You talked about the Electronics margin potentially getting higher than the 10% that it did in Q1 when – or in Q4 that you posted, this quarter you executed toward that. And I’m just trying to get a sense of maybe what’s embedded in that number? How repeatable is that? It sounds like it might be taking a step back. And then I have a follow-up for them.

Yes. No, Ed, I think it is a step forward for us for sure. And did we expect it to take the leap quite that much? I don’t know. There was a nice leap this year, this sort quarter in Q1. Can we sustain it? Yes, if the volumes do. I mean the key here was getting a little more volume at several of the performance centers, which dropped certainly much stronger than I know we’ve mentioned as we’ve gone through. But also getting all of the performance centers up to a more efficient level, and we sort of had that breakthrough as well. So, in Q1, the shine that Electronics had on it in Q1 certainly helped us balance out the quarter. And we’re going to look for that as we move forward. Yes, there will be a little more headwind. And Q2 is a little bit – as Steve alluded to, is going to be a tough one overall. We do look for Electronics to continue to keep a very strong profile.

So maybe I can ask one step further, the guidance that you provided, whether it’s on the quarter, on the year. Could you talk about what’s embedded from that – the operating profit margin for those two business segments to just kind of roll up to the consolidated number that you’re looking for?

Well, I think I will take a little bit. First, we are benefiting from scale on the Electronics side, obviously being driven by defense, right? So we have a lot of – our operations are really tight. And so we’re obviously benefiting from that volume. So that’s certainly going to help us. And then on the other side is, as I mentioned earlier, on the commercial side in those factories, I mean we’re very proactive on cost. We know how to do this, and we’re doing it. So that’s why we’re seeing fairly nice numbers, though the revenue is down.

So the 5.5%, 6%, what’s embedded from – at the segment level? I mean that’s kind of what I was getting at?

Yes. I mean directionally, Ed, we’re – the volume – Q2 is going to be a tough one to repeat for Electronics. So I don’t know that it would stay quite there. You saw the step back in structures in Q1’s operating margin. It’s going to be a challenge to take that one much higher. So I think if you build it out more of what you see in Q1 with Electronics until we get our volume back to this level we were at, that’s probably a fair look.

Got it. Got it. And thanks, by the way, for providing the guidance. I think this is probably the first time I can remember Ducommun doing that, so thank you. Maybe a little bit of an easier question then. So if I were thinking about your interest expense and tax, would there be any meaningful changes from what we saw in Q1? I got to assume no.

Well, the only place is going to be – from what you saw in Q1, yes. I mean I’ll take them both. I mean interest expense, we certainly – the whole market changed a little bit as we got toward the end of Q1. So with our with our variable debt facilities, I mean we are – we should come through a little cleaner in Q2 through Q4 than the $4.2 million that you saw and get there in Q1. So definitely where we were at the year-end call, it’s a more favorable interest rate environment. And so that number should probably be more in the $4 million a quarter versus what we were talking about at the year-end call. So that will help out that line. And then on the tax side, I think we’re still – we’ve gotten to a pretty decent repeat process on where we’re at under the new tax laws over the last couple of years. Pointing you to a 19% to 20% full year is probably still the right answer. We definitely cut some favorability with some of the SBC tax laws hit in Q1, that were a discrete item for us. But generally, it should be back to that 19% to 20% as we go through the year.

Stay safe and do well.

Thank you. Our next question comes from Ken Herbert with Canaccord. Your line is now open.

Hi, Steve and Chris. Really nice quarter. Steve, I just wanted to first ask on the cost takeout in the first quarter. Can you maybe comment on how much of this is permanent versus temporary and how much sort of buffer or excess capacity are you going to have to carry this year on the cost side to support MAX rates back up to 30 next year or depending upon when Boeing gets to those numbers?

Yes. Ken thanks. So look, first, obviously, we got to make some tough decisions on furloughs. And we try to do the best we can with that, but the orders aren’t there, and the outlook isn’t where it needs to be. We furlough. And if there’s no real light as far as being able to bring people back, we do something for them and then we move forward. So I think on the people side, we’ve got a good handle on it. It’s variable. The other thing I’ll say is that we’re – we really try to drive low capital intensity where we can. So we do have obviously operations, that carries maybe some more machines than others. But I think overall, as you can see from our margins, we do a pretty good job managing the overheads, and we manage the variable costs. So I think that throughout the year, again, we’ve been through this before, management and myself. So as long as you’re proactive and stay ahead of it, like we used to say, companies to work at using in good shape. So I think overall, this year, we’re going to be okay on both ends.

Okay. And then I guess it’s fair to say that you won’t need to be looking to add much cost to support rates, higher rates on the MAX, if and when Boeing is able to execute and push that up?

Yes. That’s good. Yes. I want to confirm that. Yes, we are in good shape.

Okay. Okay, perfect. And I just wanted to – you’ve talked obviously a lot about the defense side and clearly benefiting from a lot of the actions you’ve made and initiatives there. What are you seeing, Steve, in terms of your customers and payments? I mean, you are actually starting to see a benefit in terms of any accelerated either contract awards or payments from the government or through the prime contractors. I mean there has been obviously a lot of talk about ensuring that the industrial base on the defense side is well supported in light of COVID-19. But what are you seeing on that front?

I’ll take that one, Ken. I mean we – there is a little – I mean there’s chatter that some of that may be happening, but reality is we’re seeing a lot of business as usual on the defense side. I mean there can be a contract or a situation where we might get quicker agreement on an advanced payment to cover some long lead time items or something like that. But overall, I mean it’s essentially – it’s very business as usual on the defense side and what we’re seeing on the cash flow.

Yes. No change here, Ken. Pretty much been the same thing. I know there’s been some news about Lockheed and some other folks, but to comment, it’s just standard call.

Okay. That’s great. And if I could, just one final comment. I know obviously, commercial markets are a bit pressured today, but can you maybe help to just sort of level set us or quantify where you are with the VersaCore product line? Because I know obviously, you put a lot of resources into that, and it was, obviously, some great share gain and growth. But what’s the outlook for that product line now and what are you seeing there?

Yes. Sure. Thanks for that question. And so, VersaCore, we’ve been working on for a few years. We commercialized it. And now we have it fully operational in our Guaymas, Mexico facility. We started with a small focus on the LEAP engine and now we are working in other areas, such as the blocker doors. And we’re right now in the middle of that. Obviously, it’s been pushed off a bit. But we are still planning on fulfilling that commercialization target probably in the second half for the blocker doors camp, which is a majority of that contract. Without a big disruption, we feel like coming out of the end of this year, we’re going to at least have a $15 million run rate on VersaCore. We’re also looking at other opportunities with other companies. So we think it’s got a big future. We think it’s a check the box with Guaymas, check the box this fall with the blocker doors, which is a big part of the sell, as you know. And then we are having conversations with other OEMs for new things that we can maybe talk about later in the year.

Great. Great to hear. Thanks a lot, Steve and Chris.

Thank you. And our next question comes from Mike Crawford with B. Riley FBR. Your line is now open.

Thank you, Steve. I am glad to hear that you think you still have the right footprint after all the actions taken previously and no need sounds like to do any further kind of shuffling. But could you couch the expected gross margin decline with fixed cost absorption and capacity utilization level? Is that within your existing footprint?

Yes. I mean I’ll take that one, Mike. I mean it’s we do have the sort of the tale of two cities here with the different setup of the two businesses with electronics and structures. But I mean we’re – I think your point is clearly on the structure side, as we’ve got the headwind that they’re – what is that going to translate to us? I would – I’ll say it this way, we – a lot of reasons that the performance center structure we have still works well for us. It does allow us to flex pretty quickly. The fixed cost structure that we do have at any one facility isn’t so heavy that we could handle significant headwind and still be able to make money at a various performance center. That’s really what this first four months of the year has been about. As the new information comes forward, as the new – most of it’s been headwind, clearly on the structure side. But as it comes forward, what does that mean? Back to sort of Ed’s question earlier, how is that going to – what’s that going to do to our approach on how we want to build, how we want to fulfill the different products and being able to flex it that way. So with that being said, that’s one of the benefits we have with where we are at on how we’ve got the structure set up, to your point, that’s why we’ve not talked about consolidating physical footprint at this point. It’s just been more around flexing and trying to scale to it as best we can.

Okay. Thank you. And then, Chris, given the decline in revenue for the rest of the year, I imagine you’ll be taking in some of these working capital accounts and really having outsized free cash flow relative to EBITDA. So, that should further – even further improve your balance sheet where net leverage is now down just 3x. So you’re getting to a level where the company could do more M&A to further accelerate this move up-market into strong niche applications with high margins and few competitors. And so to that end, what does that pipeline look like? And are people answering phones and just not able to in this environment?

Is the question more on the working capital lead in or on the acquisition tail part of that, Mike?

Well, I mean question one, am I thinking in the right way in terms of free cash flow? And then, two would be is M&A kind of a standstill?

Okay. Let me take the first part. Yes. I mean, Mike, absolutely. So as you laid it out, there’s uncertainty with sort of each piece of that puzzle. But if they happen the way you said it, then absolutely, the end game would be some additional free cash flow. I think a big part of it is, as we mentioned, the messaging you heard from Steve, related to top line and profitability, here on April 30 is very different than where it was in February. So that part of the equation and how profitable we will be is a key part of that as well as some of that give and take between what we drop-through from the facilities. And then to the working capital question, again, we’ve got tail of two cities. So there’ll be some places as we look to grow the business on the defense side this year, where there are going to be some investment there while hopefully pulling down some of the working capital taken on the structure side as we gain the right size over the next several months.

And Mike, on the acquisition, certainly, right now, we’re in a pause phase. But we still have our people engaged and in place. And so we’ll see how the second half looks in early 2021. But right now, for the most part, we’re on pause probably for the next few months at least.

Okay, great. Thank you very much.

Yes. Thanks Mike.

Our next question comes from Michael Ciarmoli with SunTrust. Your line is now open.

Good evening guys. Thanks for – how are you guys doing? Thanks for taking my question. Glad to hear everybody is safe and healthy. Maybe just some housekeeping ones first. Chris, would you guys disclose organic revenue growth in the quarter or tell us what the Nobles contribution was?

Sure. Let me – it’s less than 5%. Okay. I’ll leave it there, Mike.

Got it. And then just on the MAX, did you guys actually restart? And are you shipping product on the program now?

We are – basically, we work through the first quarter, the best we could, obviously. We do have relationships with Boeing for certain products that you really just can’t make one a week, okay? So we are working with them on ship in place and some other things. So I’d say it’s a bit of a mix, but we’re certainly getting started now with Spirit. Obviously, we need to give these guys time to get going, but we’re on a bin program with Spirit. So once the bin starts – once things start moving forward, the bin moves up again. But we are moving forward.

Yes. And we did have a decent stretch in Q1 there, Mike, and into the start of Q2 here where those temporary shutdowns did – they did impact us. I mean they did impact our ability to ship, absolutely.

Yes. Absolutely, yes.

Maybe that’s a good lead-in to, especially with the comment on Spirit with the bin programs. I mean how are you – obviously, appreciate the guidance and obviously, nobody really knows what’s going on here. But do you expect further pressure from either supply chain realignment to these lower rates? Do you get a sense that there is a lot of buffer stock in the system that has to be drawn down? And I guess as I’m looking at this, you guys already had the MAX headwind built into this year. Do you expect any of these pressures, even something like 87 does it last into ‘21 as some of these rates are coming down pretty significantly?

Mike, as I sit here right now, my answer will be no, okay? I mean as far as – I think we are going to see some production. I think things are going to – who knows for sure, right? But I think that the activity, I think we’re going to continue to roll forward. I think that the 87 reduction is a little further out. It’s okay. So I think overall, I would say, a top level would be no.

Okay. Okay. And then last one, just on the Electronics segment, obviously, defense business as usual across the board. But as you guys are looking at your product lines, the demands there, do you see any risk in that supply chain, either from COVID-related disruptions or any of your suppliers in different geographies, dealing with facility shutdowns, anything that would pose a threat to your planned growth there or expected shipments deeper in the supply chain?

Yes. I mean I think what I would point to, Mike, is, as Steve mentioned, I mean the whole team lived through something like this before. So we’re not trying to be naive. And definitely, there are data points where we can have issues. It could be a supplier here, it could be a push out of the supply there or a shutdown. But having said that, when you look at a high level, the answer is no. Again, benefited from the various ways that we’ve got the performance center set up, where the product lines are set up and how much on the supply chain side, how invested we are with any one particular company. I mean we have a diverse supply chain, so if we hit a bump in the road with one that we can shift and we can keep moving. So overall, it’s not a prevalent problem that we see right now, but we still got room to go.

And we don’t see anything material right now, Mike.

That’s right. Yes, okay. And then even on inventory, I mean, it sounds like that could potentially be a source of cash for you as you kind of just right-sized to new levels. But you don’t envision having a stockpile of anything or do any pre-buying there?

No.

No.

Okay, perfect. Alright. Thanks guys. Stay safe.

Thanks, Mike.

Okay. I appreciate it.

Our next question comes from Ken Herbert with Canaccord. Your line is now open.

Yes, hi, Steve and Chris. Just a couple of real quick follow-ups. On that – the free cash flow discussion, it sounds like from your comments that the second quarter is likely a use of cash, again, just with everything going on, but you inflect positively in the second half of the year to get to positive free cash flow for the full year, is that the right framework?

I think it’s a little more optimistic than that, Ken. I mean we are still – even though there’s the headwind on the top line and profitability year-over-year for Q2, we’re still anticipating being able to generate some cash flow here in Q2 and then build from there, the momentum as we go through the rest of the year.

Okay. That’s great. And then second, considering where rates are going to go on 787 and sort of a 35% to 40% volume reduction between Boeing and Airbus. Do you see any potential risk to goodwill or intangibles when I think about LDS in particular and some of this exposure to the 787?

Yes. I mean – so to answer that question, I mean there’s been – as the COVID pandemic has taken hold, like all companies, we’ve gone through a lot of scenario planning and looking at what risks are out there. That includes physical assets as well as intangibles and goodwill. And no, I mean as those reporting units are evaluated, and we look at what’s in front of us right now with various scenarios, we are comfortable with having quite a bit of cushion before we would have to get into that from where we sit right now. Clearly, every quarter is going to be a new quarter, but right now, we don’t anticipate any issues.

We feel good about it, Ken. We feel good about it.

Great. Thank you.

Thank you. And we have a follow-up from Edward Marshall with Sidoti. Your line is now open.

Two quick follow-ups. One, we’re focused on kind of the near-term with commercial. But as we kind of step – we step to the next generation, let’s say, 777, 777X, what is the potential – we always think of Ducommun as narrow-body, but with the larger aircraft coming through, I know you do quite a bit of work on the Dreamliner. What’s your thought on the 777X and maybe Ducommun’s participation in that program?

It’s light. It’s light. It’s – 777X is light. We do have a few things on there. I think that if you look at – just in general, you look at our single-aisle bookings or single-aisle revenue versus wide-body, we generally run 2x, okay?

Okay, okay.

So we are generally at 2x. And I think we do have things on the 777X, but we are definitely in the 2x range, much more players in single aisle, and that’s going to continue.

Got it. The second part of that is any further developments on the topic we brought up last quarter on wind, wind energy and LDS.

So look – yes, Ed, first, we love LDS. It’s been a great thing for the company. It was our first acquisition that myself and the team did together, so it’s been a great thing for us. We are – we’ve got a product in the field. We’re working with at least one company on doing some trials and we should have more information at probably midyear.

Got it. Thanks very much.

Okay, thank you.

Thank you. And we have a follow-up from Michael Ciarmoli with SunTrust. Your line is now open.

Hey guys, thanks for taking this one. Steve, I think you mentioned some progress on UAVs and defense. Can you maybe just elaborate there what you’re saying?

Yes. I guess I want to put it in there because I think we’re going to be talking more about it in the future. I can’t disclose it right now. Just let you know, I did tell you that we did book an order in UAVs. I’ve got to be careful here, it’s not commercialized yet. I don’t have the authority to say anything, but I just – I thought it was important to put it in here because it’s a new area for us, and I thought it was important for the shareholders and analysts to know that we’re moving forward in that area. It should be good.

Can you give us a hint of the structure side or Electronic Systems?

Electronic – electronics.

Okay, okay perfect. Thanks guys.

See you, Mike.

Thank you. And at this time, there appears to be no further callers in the queue. So I’ll turn the call over to Mr. Oswald for any closing remarks.

Thank you very much. Well, thanks, everybody. Obviously, thank everyone who joined us today. Thank our analysts. I’d just to wrap up here that we had a great conversation. I appreciate again the support. We’re all working arm in arm here, trying to do the best we can, the most important and keep our people safe, help out our communities and obviously take care of our customers. So I want to wish everybody good health and safety, and we look forward to seeing you – talking to you soon. Take care.

Ladies and gentlemen, thank you for your participation on today’s conference. This does conclude your program and you may now disconnect.