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Ducommun (NYSE:DCO)
Q2 2019 Earnings Call
Aug 05, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good afternoon, ladies and gentlemen, and welcome to the Ducommun's second-quarter earnings conference call. [Operator instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Chris Witty, you may begin.

Chris Witty -- Investor Relations Contact

Thank you, and welcome to Ducommun's 2019 second-quarter conference call. With me today are Steve Oswald, chairman, president, and CEO; and Chris Wampler, vice president, interim chief financial officer and treasurer, controller and chief accounting officer. I'm going to discuss certain limitations to any forward-looking statements regarding future events, projections or performance that we may make during the prepared remarks or the Q&A session that follows. Certain statements today that are not historical facts, including any statements as to future market conditions, results of operations and financial projections are forward-looking statements under the Federal Private Securities Litigation Reform Act of 1995, and therefore, our 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 level of U.S.

government defense spending, legal and regulatory risks, management changes, the cost of expansion acquisitions and competitions. 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 or call, 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 non-GAAP measures referenced on this call to the most similar GAAP measures. We filed our Form 10-Q with the SEC today, and you will find a link to all our filings 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?

Steve Oswald -- Chairman, President, and Chief Executive Officer

Thank you, Chris, and thanks, everyone who is joining us today for our second-quarter conference call. As usual, I'll begin by providing an update on recent developments of the company. After which, Chris Wampler, our interim CFO, will review our financial results in detail. Second quarter was another one of accomplishment for Ducommun as we continue to benefit from strong business execution, growth on key platforms, a diversified customer base and robust product demand.

Revenue grew an impressive 16.6% year over year to $180.5 million, driven by higher shipments across a variety of large narrow-body platforms, such as the Boeing 737 MAX, Airbus A320 family, as well as JSF, Raytheon Missile platforms and the Apache helicopter program. Revenue related to the 737 MAX rose at a substantially higher rate year over year, reflecting the current build rates of 52 per month at Spirit Aerosystems and 42 per month at Boeing. While Boeing works to address the 737 MAX situation, we continue to communicate with them and are operationally ready to increase production if and when required. For Ducommun, with strong momentum in revenue and backlog across a variety of amount of customers, we do not expect any material issues to our top line view of 7% to 9% growth across our commercial aerospace and military platforms for the rest of 2019.

For the second quarter, operating income was substantially increased on an adjusted basis by 23.7% from the prior year. Gross margins also rose again this quarter to 21.1%, compared to 20.7% last year, while Ducommun's operating margin was significantly higher by 390 basis points year over year to 7.5%. We posted as well $22.4 million adjusted EBITDA for the quarter, an increase of nearly 20% over the comparable period in 2018. This performance is driven by our structures segment due to higher overall production rates, scale and the many actions we've taken in the past to streamline the business.

The electronic segment's segment margins were equal to the prior year. We ended the quarter with a backlog of $853 million, a decrease from the first quarter, primarily reflecting some order timing. Our backlog remains near-record levels for the company, underscoring our unique manufacturing services and technologies, engineered products and strong customer relations, both at the OEM and at the first-tier level. The team at Ducommun was also delighted with the announcement last week of our newly signed strategic supplier agreement with Raytheon Missile Systems.

Being the first supplier to be selected by RMS for this initiative is an honor and a great step forward for a stronger relationship and higher revenue opportunities for the company in the future. This partnership will allow us to collaborate and compete on every RMS platform, either new or existing, and that includes structural components, which will be a key growth area for the strategic customer in 2019 and subsequent years. We also very much appreciate the recognition of our Monrovia, California Performance Center being selected in July as the 2019 Raytheon Supplier Excellence Premier Award winner. This is our first major customer award for the company since 2017.

We had very good activity too, at the Paris Air Show, and saw both interest and enthusiasm for our products and services across the board. The show is always great to be with customers, discuss future growth initiatives and highlight our technology and value. During the show, we announced that the company was on track with its $200 million contract to supply Middle River Aerostructure Systems with LEAP engine nacelle components for the Airbus A320 platform, using our proprietary VersaCore Composite process technology. This is a great development, and the Ducommun team is working hard at our Guaymas, Mexico facility to deliver on this important opportunity.

Now let me provide some additional color on our end markets, products and programs. Beginning with our military and space sector, we posted second quarter revenue of $77.2 million, up nearly 10% over 2018, reflecting stronger sales across a number of missile and defense programs. We saw a substantial growth in electronics for the Patriot missile; the Joint Standoff Weapon, or JSOW; the Chinook; Joint Strike Fighter; and F-15, along with various other applications for Raytheon and L3. Given the recently passed federal budget outline for fiscal 2020, the market for military spending remains very strong.

And Ducommun plays a key role on many of the most important defense programs. We ended the quarter with military and space backlog of approximately $366 million, which is close to record levels. Within our commercial aerospace operations, second quarter sales rose nearly 30% year over year to $92 million. The growth was primarily fueled by large fixed-wing narrow-body aircraft such as the Boeing 737, Airbus A320 family and new Gulfstream models.

Our A320 business grew substantially year over year, and mostly all our Boeing platforms, including not only the 37, but 787, 777 and 767, all rose double digit as well. We also posted significantly higher sales to Gulfstream this quarter as the OEM ramps up production on these new models. In summary, our large fixed-wing business is seeing excellent growth, clearly highlighting the key platforms that we serve, the value we provide, the overall market conditions and continued operational improvement at the company. The backlog within our commercial aerospace sector stood at roughly $433 million at the end of the quarter, again, near record levels.

We continue to be optimistic about the outlook for this part of our business, as well as the military market. With that, I'll have Chris review our financial results in detail. Chris?

Chris Wampler -- Vice President, Interim Chief Financial Officer and Treasurer, Controller and Chief Accounting Officer

Thank you, Steve, and good day, everyone. As a reminder, please see the company's filings and today's press release for a further description of matters under discussion during the call. I'll begin with details of our overall results. Revenue for the second quarter of 2019 was $180.5 million versus $154.8 million in the second quarter of 2018.

This performance includes $20.1 million of higher revenue with our commercial aerospace customers due to increased shipments for key narrowbody platforms such as the Boeing 737 and Airbus A320, as Steve mentioned, and $6.9 million of greater sales in the military and space sector, primarily reflecting strong demand for various military programs. Ducommun's overall backlog was approximately $853 million as of June 29, down from last quarter's record amount. As a reminder, the company defines backlog as potential revenue and is based on the customer placed purchase orders and long-term agreements with firm fixed prices and expected delivery dates of 24 months or less. Moving to gross profit.

Our gross margin was 21.1% in the second quarter versus 20.7% in the prior year's comparable period. The increase year over year was primarily due to favorable manufacturing volumes and favorable product mix, along with many streamlining measures taken last year, as previously discussed. SG&A was $24.5 million in the second quarter versus $21.2 million in 2018, with the increase primarily reflecting onetime severance charges and higher compensation of benefit costs. The company reported operating income for the second quarter of $13.6 million or 7.5% of revenue, compared to $5.6 million or 3.6% of revenue in the prior-year period.

The year-over-year improvement was due to higher revenue and gross profit, as well as the impact of $5.4 million in lower restructuring charges partially offset by higher SG&A expense. On an adjusted basis in the second quarter of 2018, operating income was $11.0 million or 7.1% of sales. The increase in the second quarter of 2019 operating income versus 2018 adjusted operating income was $2.6 million, which is an increase of 23.7%. Interest expense was $4.4 million in the second quarter of 2019 versus $3.8 million last year due to greater utilization of our credit facility for the Certified Thermoplastics acquisition in April 2018, along with higher interest rates.

The company reported net income for the second quarter of $7.8 million or $0.66 per diluted share, compared to net income of $1.6 million or $0.14 per diluted share for the second quarter of 2018. The year-over-year increase was primarily due to $6 million of higher gross profit. Restructuring charges were also lower year over year by $5.4 million, partially offset by $3.3 million of higher SG&A, $0.7 million of increased interest expense and greater income taxes of $1.1 million. On an adjusted basis in the second quarter of 2018, net income was $6.4 million or $0.55 per diluted share.

The increase in the second-quarter 2019 net income versus 2018 adjusted net income was $1.5 million, which is an increase of 23.1%. Adjusted EBITDA for the second quarter of 2019 was $22.4 million or 12.4% of revenue, compared to $18.7 million or 12.1% of revenue for the comparable period in 2018, an increase of nearly 20%. Now let me turn to our segment results. Our electronic systems segment posted revenue of $89.3 million in the second quarter of 2019 versus $84.5 million in the prior-year period.

These results reflect a $5.9 million increase in sales to our military and space customers, slightly offset by lower revenue within our industrial end-use markets. Commercial aerospace shipments were relatively flat year over year. Electronic systems posted operating income for the second quarter of $9.9 million or 11.1% of revenue versus $8.7 million or 10.3% of revenue in the prior-year period. Excluding restructuring charges last year, Electronic's adjusted operating margin was also 11.1% for the 2018 second quarter.

Our structural systems segment posted revenue of $91.2 million in the second quarter of 2019 versus $70.3 million last year. The year-over-year increase was due to $20 million of higher sales across our commercial aerospace applications, particularly large airframe single-aisle platforms, and a slight increase in revenue within the company's military and space markets. Structural systems posted operating income for the quarter of $11.8 million or 12.9% of revenue, compared to $5 million or 7.1% of revenue last year. Excluding restructuring charges and inventory purchase accounting adjustments, Structural's adjusted operating margin was 12.7% for the 2018 second quarter.

Corporate general and administrative expenses, CG&A. CG&A expense for the second quarter of both 2019 and 2018 was roughly $8.1 million or 4.5% and 5.2% of revenue, respectively, for each year. The year-over-year results reflect the absence of $1.1 million in restructuring charges that were incurred in the second quarter of 2018 and the lower professional services fees of $1 million in 2019, partially offset by one-time severance charges of $1.7 million. Turning to liquidity and capital resources, we generated $9.8 million of cash from operations in the second quarter of 2019, compared with $15.9 million during the second quarter of 2018.

The decline year over year was primarily due to an increase in working capital investment to support growth, partially offset by higher net income. We expect more typical cash flow patterns for the remainder of 2019 and, excluding any unforeseen acquisitions, anticipate using cash to further reduce the company's leverage this year. In terms of capital expenditures, we spent $5.9 million during the second quarter and expect to spend approximately $16 million to $18 million during 2019 in total to support new program wins. We're once again proud of our quarterly performance, which puts us on track for solid results in the second half.

I'll now turn it back over to Steve for his closing remarks. Steve?

Steve Oswald -- Chairman, President, and Chief Executive Officer

OK. Thanks, Chris. OK. So looking to the rest of the year, as mentioned earlier, we continue to be optimistic about our revenue growth, our solid margins and backlog.

I believe the company is in very good shape with strong momentum. So always like to see in both revenue and earnings. Ducommun's innovative technology and the value we provide, along with our strong relationships, as I mentioned earlier with Boeing, Raytheon, Airbus, Gulfstream and many others in aerospace and defense, I think has positioned us well now and in the years ahead. Before we go to questions, I do want to also mention that August is the month we recognize the founding of Ducommun, and we are very happy to be celebrating the 170th year of the company, which started in 1849 in California.

Ducommun is proud to be recognized as the oldest company in the state. We look forward to many great years and decades ahead. So with that, operator, we'll now open up the call for questions. Thank you.

Questions & Answers:


Operator

[Operator instructions] We have your first question coming from Edward Marshall with Sidoti and Company.

Edward Marshall -- Sidoti and Company, LLC -- Analyst

Hey, good afternoon, guys. How are you?

Steve Oswald -- Chairman, President, and Chief Executive Officer

Good afternoon. And you?

Edward Marshall -- Sidoti and Company, LLC -- Analyst

Good. So I can see you had some pretty good color on the 737 MAX, you talked about no material issues for the balance of 2019. And as I look through the platform, you talked about your key customer there. There seem to be some rationalization of costs on their 2Q call that they talked about.

What are your contingency plans in the event that production continues to weigh in here or, at the worst-case scenario, does stop briefly? And then ultimately, when you look at the platform, longer term, how do you think about the growth rate there? I imagine it eventually gets flattened out for a while before it reaccelerates?

Steve Oswald -- Chairman, President, and Chief Executive Officer

Yes. Sure. No problem. So first, look, we're obviously locked in with Spirit pretty much half of our volume at 52 and then, as I mentioned, Boeing at 42.

And the one nice thing about Ducommun is, I think we're the right size to be really nimble if we do have to make some changes if there is anything that's going to be happening down the road. We certainly are ready to -- we're very close to Boeing. And as I mentioned earlier, we're very close to the situation. And we're certainly hopeful, but we'll be ready if we have to make some changes, the one way or the other.

As far as the platform, the nice thing about us that, I mean, just talking about structures in general, is if we're getting fairly more -- we're getting more diversified as we go, OK. So we might see some flattening if the MAX takes a little more time, and we might have a little bit of a lift there. But we -- we're -- we've got a really good growing business at Airbus. We have the Gulfstream business, we -- down the road, we're going to hopefully pick up some structures business at Raytheon.

So I think we've got a lot of diversification that I think is going to help.

Edward Marshall -- Sidoti and Company, LLC -- Analyst

OK. With that in context, if you look at that 7% to 9% rate that you're looking at for commercial and within structures, do you think as we move into 2020 without a rate increase, you could see that on the lower end? Or would it fall short of that range?

Steve Oswald -- Chairman, President, and Chief Executive Officer

We feel -- like I said, very confident about 7% to 9%. As usual, when we think about our following year, right now, we're mid-single.

Edward Marshall -- Sidoti and Company, LLC -- Analyst

I understand. OK. And then if you think about -- if I look at the incremental margins within structures, they've been running in the 30s to 40s on the OI side. Dropped down to 22% in this particular quarter.

I'm wondering has the majority of the increases kind of passed? Or what are the next levers that you're seeing on the margin side? I mean, obviously, you had a very good margin quarter, and the comps are starting to get tougher and tougher. So can you talk about maybe what's left in the tank, and what levers you can pull without kind of thinking about acquisitions and what that might bring to the business overall?

Steve Oswald -- Chairman, President, and Chief Executive Officer

Yes. No. There's a couple of things, I think. First off, we are still on the journey with all the different facilities of fine-tuning and finding incremental improvements within.

So as some of these newer platforms are taking hold, some that we've been building up over the last several quarters, a couple more that we're taking up to rate over the next few quarters, that's going to continue to be a little bit of a lift there. And then again, you mentioned the volume impact, too, is going to be another key piece of the puzzle. So it's all that against sort of the item that Steve alluded to, with 737s. So that's why we feel comfortable with sort of how we're operating now and continuing just to make inroads as we move forward.

Edward Marshall -- Sidoti and Company, LLC -- Analyst

Got it. Got it. And then finally, I guess, when -- it would be silly of us not to talk about Raytheon. It sounds like -- can you talk about the frame-up? It sounds like to me this is a -- the opportunity to kind of bid on new business? Or does it come with extra content on existing programs or new programs, kind of, maybe elaborate just a little bit.

Steve Oswald -- Chairman, President, and Chief Executive Officer

Yes. I think it's all of the above, I think. One thing to make note of is we were the first ones they signed. Right? So they get lots of -- RMS is, what, an $8 billion or $10 billion revenue company.

So we're really proud of that that we're the first ones out of the gate. It's got to be for new. It's got to be for existing. It's their whole portfolio, we're excited because we do pretty heavy things with them in electronics, but there's new opportunities to open up some structures business, we hope.

Right? And so working on that for some of the SM missiles, standard missiles. So more to come there.

Edward Marshall -- Sidoti and Company, LLC -- Analyst

Great. Thanks, guys. Appreciate it.

Steve Oswald -- Chairman, President, and Chief Executive Officer

OK. Thank you.

Operator

We have your next question coming from Mike Crawford with B. Riley.

Mike Crawford -- B. Riley FBR -- Analyst

Thanks. Stephen, you talked about hopefully picking up some structures business with Raytheon. Can you -- would that be VersaCore primarily? And also, could you just maybe differentiate what you've been doing with the mix of electronics versus structures with Raytheon today versus what it might be in the future?

Steve Oswald -- Chairman, President, and Chief Executive Officer

Yes. So because it something that -- let me get to the second one, first. Pretty much on the structure side, Raytheon is pretty much zero. So looking back, it's really, really no action there.

It's mostly all circuit cards, connectors, boxes, that type of thing. So we're excited about that. It could very well be VersaCore. We do a lot of work up in New York and Kentucky on things and kind of have different blendings of metals and that type of thing.

So we think that we're in pretty good shape there going forward. And hopefully, we're going to build some of that business.

Mike Crawford -- B. Riley FBR -- Analyst

OK. And then VersaCore, the revenues to date from that product have been about how much? And maybe if you could just gauge what level of revenue you think you might see from that this year versus next year into the future.

Chris Wampler -- Vice President, Interim Chief Financial Officer and Treasurer, Controller and Chief Accounting Officer

Yes. So we're -- this is sort of top level on rough, but we're running for that program, or the VersaCore, right around $5 million this year. And that's going to roughly double next year. And then so we've -- we had, I think we got some nice things setting up for 2020, Mike.

Mike Crawford -- B. Riley FBR -- Analyst

OK. Great. And then last question is, I know you had the favorable manufacturing mix on the healthy gross margin this quarter. But based on general outlook and assuming that the 737 MAX kind of resolves itself in the next six months, how much variance would you expect around that gross margin number quarter to quarter?

Chris Wampler -- Vice President, Interim Chief Financial Officer and Treasurer, Controller and Chief Accounting Officer

Yes. No, Mike. So as we move, as I mentioned, as we move forward, I mean, I think it'll continue to strengthen, but no huge step function. It's going to be continued work in making each location a little better.

And again, getting some of the goodness that happens with the increase -- with the increased volume. So we're expecting over a longer period to be able to keep it moving in the right direction. But as we work through the second half of this year, we expect, we were running at a pretty strong level. We had our highest compare to prior year in Q2, and we build upon that compare, and we're looking to do that or more in the next couple of quarters.

Mike Crawford -- B. Riley FBR -- Analyst

Well, Chris, just, let me just continue on that. Because the gross margin's higher than we've had in our model, and yet, maybe if you had maybe a less favorable manufacturing mix, like how much might -- how many basis points is it like? Are we talking like a hundred or a few hundred that it could actually dip down the other way with respectable mix?

Chris Wampler -- Vice President, Interim Chief Financial Officer and Treasurer, Controller and Chief Accounting Officer

Oh, yes. No. Yes, I mean, if things to go against us, I think we're talking a range now of sort of 100 --

Steve Oswald -- Chairman, President, and Chief Executive Officer

And Mike, I think that --

Chris Wampler -- Vice President, Interim Chief Financial Officer and Treasurer, Controller and Chief Accounting Officer

We're moving in the right direction.

Steve Oswald -- Chairman, President, and Chief Executive Officer

Mike, I think it's minimal. I think to be honest with you, I see more runway in the future for structures' margin, so let's say at this point.

Mike Crawford -- B. Riley FBR -- Analyst

Awesome. Thank you.

Steve Oswald -- Chairman, President, and Chief Executive Officer

Thanks.

Operator

And we have your next question coming from Michael Ciarmoli with SunTrust.

Michael Ciarmoli -- SunTrust Robinson Humphrey -- Analyst

Hey, good evening, guys. Thanks for taking the question.

Steve Oswald -- Chairman, President, and Chief Executive Officer

Sure.

Michael Ciarmoli -- SunTrust Robinson Humphrey -- Analyst

Steve, just on the Raytheon supplier agreement. Can you give maybe a little bit more? I mean, obviously, you've been a big supplier to them. But was there more of a push sort of with the DoD looking to shore up their defense electronic supply chains and go all domestic? Was that a factor in anything behind the supplier agreement?

Steve Oswald -- Chairman, President, and Chief Executive Officer

Yes. It's a real good question. I just -- I can't answer that. I feel like what my view would be is that Raytheon is really looking to get to the next level with suppliers and they're looking to find people they can work with that can really provide value, but also provide a big-time portfolio, right, to help them get to the next level.

Can't give you any insight at the DoD.

Michael Ciarmoli -- SunTrust Robinson Humphrey -- Analyst

Got it. What about -- even with -- in the context of Raytheon. Maybe this -- there's definitely some scrutiny around this merger with United Technologies. I mean, how do you guys view that? Because certainly, I think the perception is there's not going to be a lot of internal synergies.

I mean, optically, does it create more opportunities for you? I mean, I'm sure it's probably still very early, but what are the initial thoughts there?

Steve Oswald -- Chairman, President, and Chief Executive Officer

Yes. I think -- look, it's early in the game. As you know, it won't close until next year. And obviously, top 10, it will be with the company, right, for a while too, on the defense side.

But I would say this, I would say that we do have Raytheon, we do have Collins Aerospace. So I feel like, over the long term, we're hopeful. That's what I would say at this point.

Michael Ciarmoli -- SunTrust Robinson Humphrey -- Analyst

OK. And then structural, just back to the margins, the 12.9% operating margins. I think, certainly, a multiyear high there. Hard to tell.

I mean, MAX, if you don't get any increased volume, or if you stay at these lower levels, I mean, do you think you can hold these margins here? I mean, certainly, it sounds like one of your big customers, Spirit, looks like they're going to be staying at 52 all of next year regardless. Not sure what's going to change on the Boeing side from what they complete at. But how are you guys thinking about the maybe the sensitivity on margins, given some of these unknowns on the MAX?

Chris Wampler -- Vice President, Interim Chief Financial Officer and Treasurer, Controller and Chief Accounting Officer

Yes. No. With just alluding back to what Steve said earlier in the call, I mean, our size and the number of various products that we have sort of in play that we can move around and sort of make work for our model in a given facility in a given month, gives us a lot of ability, I think, to manage through. It's on to one quarter sort of with this uncertainty, we've managed through in a pretty strong fashion.

We look forward to the next couple of quarters and feel like we've got our -- we've got ability to manage through again to any ebb and flow that sort of comes through from them.

Steve Oswald -- Chairman, President, and Chief Executive Officer

And I won't know -- this is Steve. I also say, look, we're also, as I mentioned in the calls in the past, in the last couple of years, are really starting to build our business with Airbus. We got the G500, G600 going up. OK? We've got -- believe it or not, we've got 767 business, 87 business, 777s, everything.

Obviously, we have concerns in this variability, possibly with the 37. But Spirit's half the book, and now we got these other platforms. So we -- overall, we feel good, Mike.

Michael Ciarmoli -- SunTrust Robinson Humphrey -- Analyst

Got it. Perfect. Thanks a lot, guys. Good evening.

Operator

Thank you. [Operator instructions] Your next question comes from Austin Moore [Sp] with Canaccord Genuity. Your line is now open.

Unknown speaker

Hi, guys. This is Austin on for Ken. So I just wanted to expand a little more on the -- your relationship with Raytheon. And I -- so I was wondering what the growth profile looks for you guys in missile markets? And more specifically, missile defense sales, given your work and content on the standard missile.

And what that that growth profile looks like over the next few quarters for you guys?

Steve Oswald -- Chairman, President, and Chief Executive Officer

Yeah. Look, we feel good about it. Obviously, there's a component of Raytheon which is FMS. Right? So it's -- there is some opportunistic business that runs through RMS.

And -- but if you look at their recent performance, their bookings, we're happy that we're going to continue to grow with Raytheon. Obviously, this agreement is going to, think be great for us because it's not only going to tie the teams together in a sort of working format, it's also going to tie myself and the leadership at RMS as far as how we're going to grow the business. So as far as numbers, I'd say, it's certainly -- it's got to be high single as we move forward.

Unknown speaker

And so you guys have content on the standard missile and Aegis, do you also have any content on other missile defense systems like FAD or Patriot or just specifically standard and Aegis?

Steve Oswald -- Chairman, President, and Chief Executive Officer

No. We absolutely have business on -- we have business on the Patriot, Big, we have Paveway, which is not a missile defense program, but it's a big Raytheon program, JSOW and we're working on many, many others.

Unknown speaker

Great. Thank you.

Steve Oswald -- Chairman, President, and Chief Executive Officer

Hey, thanks for joining us. Awesome.

Operator

Thank you. I am showing no further questions at this time. I would now like to turn the conference back to Mr. Steve Oswald for any closing remarks.

Steve Oswald -- Chairman, President, and Chief Executive Officer

OK. Thank you very much. I want to thank everybody for joining us today. Thank you for your questions, too.

I think, overall, we're still early innings on our journey here, but certainly pleased with the quarter. I think one thing to take note of, obviously, we've worked hard on lots of things in the last maybe four, five, six quarters that are really coming through on the margin side, but the thing that really is encouraging is our growth on the top line. I think that says a lot about our position, where we are, and hopefully I'm confident where we're going. So I'll leave it with that.

Again, thank you very much, and have a good rest of the day or evening.

Operator

[Operator signoff]

Duration: 35 minutes

Call participants:

Chris Witty -- Investor Relations Contact

Steve Oswald -- Chairman, President, and Chief Executive Officer

Chris Wampler -- Vice President, Interim Chief Financial Officer and Treasurer, Controller and Chief Accounting Officer

Edward Marshall -- Sidoti and Company, LLC -- Analyst

Mike Crawford -- B. Riley FBR -- Analyst

Michael Ciarmoli -- SunTrust Robinson Humphrey -- Analyst

Unknown speaker

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