Q1 2022 Park Aerospace Corp Earnings Call
[music].
Good morning.
My name is Michelle and I'll be your conference operator today.
At this time I would like to welcome everyone to the Park Aerospace Corp, first quarter fiscal year 'twenty..2 originally the conference call of an investor presentation on.
All lines have been placed on mute to prevent any background noise. After.
After the Speakers' remarks, there'll be a question answer session, you'll like to ask the question James session Somebody for Star then the number 1 of your telephone keypad.
If you would like to withdraw your question press the pound.
Thank you at this time all the time of today's call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, You May begin your conference.
Thank you operator of this is Brian welcome everybody welcome all to our Q1 Investor Conference call with me of course as usual my for borrowers CFO.
So of Park, we announced all of our earnings early this morning, you wanted to check that all of our earnings release of because in the earnings release their instructions as to how to access the presentation that we're going to go through now in order to make this call a more meaningful you really want to have the presentation in front of you. The presentation is also available on our website, it's wanted to adopt.
So what's.
What's interesting about this call is that it.
Less than 2 months ago, the restaurants before so there's not a lot of new stuff, but there are some of those things will give you some updates on.
And Ah, we're trying to make an interesting by not having everything you're saying some of the slides are actually almost identical for the Q4 slides, but we felt we kind of had to include them for perspective. Some of you may be totally on top of and remember every every 1 of our Q4 presentation, but I suspect most of the chart that.
You know on top of it so some of the slides work of lease skirt quickly go through just for the perspective and.
Like I said be able to skim through those but they're there for perspective.
The presentation, you know could take all of 45 minutes for mountain <unk> to go through so I just want to warn you, partly because we're including the number of fly from Q4, just for that perspective and context. Then of course you after of mountain I go through the presentation. We will answer the questions for you. Okay. So 1 of them we get moving on slide 2 is on.
Our forward looking disclaimer of if you have any questions about it just what of snow.
On slide 3 where you start familiar of cable content. So the first on slide 1 of the presentation of <unk>.
1 as supplemental financial information, which is something we've included in our presentations for several quarters now our appendix 2 in the appendix 3 of our new environmental and community considerations diversity on the work Force. These statements Park statements were actually posted on our website I think maybe early June we put them up there, but because.
We suspected of lot of people aren't aware of every last thing when it goes on the website and on probably don't check. It every day, we just wanted to attach the 2 statements out of its appendices to this presentation. Just so you know we bring it to your attention. So you're aware of it we don't you're aware of the we don't intend to go over them.
During this call, but we wanted to you know put it out there. So you can see them and like you know anything else you have any questions or comments. Please let us know okay. Let's go to the slides for this.
It's going to take a little bit more time to go through.
So when do we start with the Q1 the.
The numbers are sales of 13 million of 594000, and let's just compare that to Q4 for a second because this is for.
Perspective, Q4 was 14 million for and for 41000, but remember we covered this Q4 included 3.5 millions of dollars of our debt.
That debt.
A central component, we keep talking about that for missile programs. So basically that's the of past, where we had the relationship with the supplier overseas we buy this.
This product and we sell it to the some of the customers and we charge of markup, but theres no production involved and the very low margins evolve. So really if you want to get apples to apples you might want to subtract about $3.5 million from the 14 point for some of that's approximately $11 million.
Compared to the for Q4 compared to the 13 million 5.9 for how you want to look at up and just walking out for perspective gross profit of $5 million for Q1.5 million for 72 and gross profit gross margin, 43%, which are the worst is something I don't remember, saying that maybe ever over 40 per se.
Gross margin debt.
Quite good you know, we normally don't like of the winter margins. The gross margins go below 30.
So about 40 years of it was quite good the adjusted EBITDA of $4.1 million I don't formulary of 104000, I don't remember how long ago was debt, we had EBITDA above 4 million on the quarter. It's been a while any way you can look at the historical quarters, you don't see anything even close to it and the 30.
<unk> reported 2% adjust.
Adjusted EBITDA margin also quite good and look at the history of Youre not going to see anything like that so let's see what do we say about Q1 during our.
May 13.
Teach out of 13.2021, 2 for Investor call you know when we say about it are we set of sales estimate was 13.3% to 31.8 so our sales came in right in the range, which is good and that's what we want and I'll explain that 1 of them I mean by what we want a second adjusted EBITDA estimate was 3.6 to 4 for 1.
So we came out of the top end of range, but let's say, we're still within the range of by well, Yeah, where we're just sort of the top end of range now remember of forecast philosophy of remind you of the assist but every quarter is we don't play. This what we've considered would be of game, where we give you numbers that we know we can be so we could be heroes. We think that's kind of silly, it's insulting to you and plus it.
It violates 1 of our principles, which is we we always tell the truth yourself and.
As we know we could be wrong, we can make mistakes, but we'll if we believe something we're gonna telling you we're not going to tell you. We believe ex where we're going to tell you ex -3 per cent or something like that so we could be heroes.
A lot of companies do that and probably almost all of them do it but that's not for us. So we just want you to understand that so we give you an estimate of prediction as to what we think it's going to happen we could be wrong, but that's what we think is going to happen, we're not changing it to look like heroes on certain factors, which affected.
The 2 for in Q1 sales of margins.
2 for sorry for had mentioned that the words that $3.5 million of sales of <unk>.
The central component for missile programs very low margins, just a markup and a Q1 actually was the other side of the coin. The other side of equation about approximately $1 billion of sales of materials for those the missile program. So those are very high margin. So you see the flip there eventually all of those.
The central components will be used and produced income pre brag and sold it.
At good margins from Leach, that's your expectation of.
2.1 or other factors of favorable product mix in some respects and also of course factors, which were favorable for Q1, so but that's only part of the story first of all of the route you know no real unusual items, there's nothing special or unusual that pushed up the bottom line for Q1.
Like we said you know good mix.
Those are of those sales of the we call it of blade of materials of materials for missile programs.
And I just want you to the.
To highlight we will get back to this later that there was a very steep G ramp oh with no extra people so.
So would you need to say Oh, what's the you know a good mix and stuff like that but somebody how to make it happen and that's our people making enough and also with relatively low waste. You know you increase your your production by significant amounts of actually compare it to Q3, but Q3 compared to Q1.4 times G E program sales for times Forex.
Oh, that's a very very steep ramp.
Our people handle the and handle it really well so.
Q1, we won't see those kind of the gross margins and EBITDA margins for at least the next couple of quarters, but it does give us some perspective on what's possible.
All the cost side, we need to hire people, we have as you'll see from the presentation. We haven't been successful of that but we're still planning on hiring people Teeny will increase is 1 example of course, increasing because you know what to cope with the pandemic of we were willing to travel and nobody was willing to see us and you know we'd go on core customer while we're not their rural homes. So no hard to visit a customer of <unk>.
They are not there but.
Well, we're hoping that will that will recover.
Cover so there's going to be some increased and of course.
Of course as you.
Go for it which is what we want the good thing let's go on to slide 5 this is just a historical perspective.
Look at those gross margins, it's nothing close to.
From close to 40 per cent and EBITDA margins nothing close to 30 per cent, even during those sort of so-called goodyear's like fiscal 2020.
So enough on that 1 let's keep moving Ah slide 6 on slide 6 okay, Matt is going to take over on slide 6 so good on that please help us out of the slide 6.
Sure on.
On the cash.
Cash investment yields on.
Just to let you know at the end of the quarter of cash and marketable securities for approximately $117 million very similar to the fiscal 2021 yearend cash marketable securities.
Ark invest in highly liquid high rated U S treasuries agencies and corporate bonds.
For Q1 of our corn for portfolio yielded 0.35%. So our rates very low this is reflecting the decrease in rates on investments in our longer term investments maturing.
And as they get reinvested so far this calendar year until just recently treasuries as long as 3 years have been yielding of less than 0.35 per cent.
For the comparisons at January 1.2020 treasury yields for 1 year for all the way through the 3 year treasuries were all between 1.5 per cent and 1.6% highly rated corporate bonds on a little bit better but not much.
Just to give you some perspective, the last calendar year, our investments earned last calendar year.
Investments earned on average $1.76 per cent for the trailing 12 months that just ended.
They earned 0.91% steep drop off.
And for the first quarter this first fiscal quarter on it.
Our investments earn 0.35% as I mentioned before.
How fast rates have dropped dropped off on 1 year treasuries right now on less than 10 of the person.
Net investment income.
We will remain very low until we.
We see a recovery in short term interest range.
So moving on to the tax rate our effective tax rate for the first quarter was 30% 30 points here of what percent of this was higher than normal actually wrote down some deferred tax assets in Singapore, and we feel are not going to be realized.
Assuming nothing unusual comes up during the year the range going forward the effective tax rate on powertrain of fiscal year should be closer to 27% for each quarter.
Of course, the change in the federal corporate tax rates could change all of that and I spent a lot of talk about potentially pumping up the federal tax range.
Moving to depreciation.
Depreciation will climb to the remaining quarters of the year as we bring online our expansion.
For the full fiscal 2022 year depreciation will be similar to last year's last year's depreciation on this roughly $1.2 million.
But it will start low and growth throughout the year throughout the quarters of the year net.
The next year's depreciation of whether or not all of our expansion assets for all online after on running the depreciation will increase.
So much significantly as we kind of full year depreciation on all of those expansion of assets.
That's it for me, Brian unless there's anything okay.
No that's great. Okay. Thanks, Matt Alright, good deal of let's go on to slide 7 as we keep moving here.
So this is just.
The slide that we've.
Included before this information actually on 1 of our shareholders who have the missed it last quarter. So we decided we would just put it back in.
So I think in all of the story of zero long term debt. The metro met of recovered $117 million on cash and then we have the dividend history $546 million paid since the fiscal 2005, when we keep it on so you can ask any questions about the dividend history, let of snow, but when we just keep moving so.
We don't get too bogged down got lots of cover slide 8.
This is a slide that's been come I'm kind of.
I guess standard for our presentations of the top 5 customers in alphabetical order, so and we have nice pictures associated with most of the customers.
First of a aerospace that's the law.
The picture on top right of the NASA Oriole program those are a blade of materials, we supply into their program. The next 1 is GKN aerospace look the top left of Boeing 787, GKN is of contractor and we wanted.
Wanted to mini program through GKN, but we chose the 177% for this presentation materials for structural components of what.
Park supplies of credo of they're pretty common top 5 customer of these days than we do.
Usually provide a for a picture of 1 of their drones.
On the be QM SSA T and I think we've mentioned this before but we believe it were the main supplier of composite materials for the other drone programs for the structures for the drone programs and on the bottom right actually some people were surprising. This is for Nord in these are right on materials for the weather weather master rate of all of them that are.
Or used for the some 37 and 737 Max of where northern we also supply of northern them through multiple multiple programs that we saw with select us from 37, Max just for a change of pace a little bit of of Boeing orientation here.
The Middle River memories, we got plenty of coverage about them as we go into of the picture for them for a slight 8 let's go on to slide 9.
Kind of interesting I think that looks like the.
This is the use of the pie charts, which I think of interesting parts of estimated revenues for aerospace market segment.
But what's interesting is sort of Q1 of the fiscal 'twenty..2 they are starting to look like a fiscal 2020, obviously fiscal 'twenty..1 was the big difference with the commercial being way down on the military being up.
But now it looks like we're kind of return returning more to the pattern of fiscal 2020.
Let's move on slide 10 of park loves niche military Aerospace program, just as another standard slide that we have and using them on our last the 2 presentations this sort of project as well as the top 5 for.
Don in the lineup.
The interesting programs to talk to you about these programs aren't necessarily big or small there just programs. We think would be of interest. Let's just go through a ratio on MTA sixth guided missile. That's the newer program for US we supply the blade of materials into the program Lockheed.
Lockheed C 5 galaxy pretty.
Aircrafts, that's been around for quite a while and we supply of materials for the structural components. The ball in the Apache helicopter patrols for secondary primary structures of the.
Textron systems Shadow, which is the drone obviously materials for aircraft structures, but on this program for a while with multiple variance and here's the something interesting Airbus The C.
295 materials for interiors, we consider a rate on rock analysis of drones to be kind of the niche areas for park in the military but part of our business why don't you go on Slide 11. This is just the teaser for you like I said, we're going to try to make this a little interesting.
Launches planned for the James Webb space telescope.
November of 2021.
And going where no man or woman has gone on before that's I think from Star Trek. This.
This is a program that we feel really really pleased and privileged to be on will probably do.
More of a detailed discussion of the James Webb, maybe when we announce Q2 expense the launches because at the end.
November 2021, but we thought we'd provide us just a little bit of the teaser for you.
So why don't we just keep going want to cover like I said slide 12.
Are the update on our major expansion of our Newton, Kansas facility of total budget $19 million in spending to date $16.5 million funding to go when you do the math $2.5 million the expenses based on complete some dribs and drabs still coming in but the expansion is basically complete managed.
<unk> factored trials expected to begin later on this month qualification runs expected to begin in September of this year.
Just 1 little caveat there.
We've discussed this over the last couple of quarters, but we continue to be challenge with are the supply chain raw materials we.
We continue to fight the Battle every day, so we're going to have to see if we feel we have enough raw materials to actually do the qualification starting in trials starting on these dates because what we don't want to do is start qualifications and trials and then not be able to produce for production that would not be of good choice. So well, let's see what happens at this point, though this is our plan.
And the last item I think important we push forward with our major expansion among many others for slashing their capital spending good thing. We did good thing we did because we've been in a world of hurt right now if we didn't do this remember will cover this layer of this was originally supposed to be a redundant facility for the GE programs.
But if we hadn't done the.
Especially based upon the indications that Airbus of giving about the <unk> hundred 20 Neo program, we've been of World of hurt right now because you don't do an expansion get a qualified the 6 months that doesn't happen. So all of your very good. We did this is very good which talked about guidance. It didn't falter in place and went ahead and completed the expansion.
So that's on pictures in the bottom right picture as Donna with the door open to kind of welding in welcoming to the us in the sand come on and the expansion is complete that's what the.
On the front entrance. So good let's go on the slide 13.
Slide 13 is really just kind of review slides will cover it.
Ah quickly like I said, we're including the slides for perspective, maybe some of you don't remember everything we cover during Q4.
This relates to single aisle in particular of higher jet fuel prices and environmental concern provide extra motivation for airlines to move quickly to replace less fuel efficient legacy single aisle aircrafts more fuel efficient modern single modern single aisle aircrafts, such as day 320 Neo family look at those crude prices. They go up on up and up I know they're down.
The little bit of unless they are too, but they go up and up on up and that needs motivation motivation motivation for the zero lives the replaced or less fuel efficient airplanes with more of fuel efficient airplanes remember at the beginning of the pandemic. We said Oh Boy you know all of these crude prices. So low there's not much motivation motivation is very big right now.
Doing quite well with domestic.
Aviation day, a little bit of a setback with the COVID-19 outbreak and locked down in Guangdong province, but they are still at the level. They were at the pre COVID-19. They were actually up even more than that and the other kind of back of that level of so still very positive for <unk>.
I'll now domestic translates to single aisle international translates to wide body of U S. Domestic aviation recovered to approximately 84 per cent of pre COVID-19 levels of ex peso of report I read recently for recovery expected 2022.
I haven't heard of some airlines, who say they expect for recovery by again this year very positive for single aisle sales and although it is the way to go European domestic aviation starting to recover a positive. That's also a positive sign for single aisle sales, you've probably read this United just did a huge single aisle order that's all.
The good news good indications that was not only for the base for 'twenty on deal that was for the Max as well a simple.
Aisle aircraft place to be in of commercially in commercial aviation at least for now that's our opinion, let's go on the slide 14, we're continuing the same thing now these are the 2 new items, though so let's look at these U S and European Union resolve there are 17 year long trade dispute involving subsidies of Boeing and Airbus. Okay.
We all read about debt I think but this is kind of interesting I feel a little strange according to the U S. Trade representative quote we're finally coming together against the common threat and she mentioned China. The thought there was an interesting the comment from her and then the next 1 Boeing recently stated as of no hurry to develop a new single aisle aircraft.
The 5 ex to compete against the Airbus <unk> hundred 21 ex L. R that was both of those were a little surprising to me. So we'll circle back on both of those.
The points throughout the presentation, if that's okay slide 15.
We go through the slide pretty much every quarter.
Remember we have the this is the aviation jet engine programs remember we of the firm pricing LTA the requirements contract from the 2019 for 2021 with middleware of the Aerostructures systems since the mris of solve the S. T Engineering Aerospace let me just remind you that.
The Mris was the sub of G aviation and that's why all of the programs run through of Empress RGA does your programs a couple of years ago GE Aviation sold Airbrushed S. T engineer of aerospace, which is of major aerospace company based in Singapore, a redundant factory construction really should say basically complete now nearing completion. So that's on us.
Missed that 1.
But remember that that was our deal once we entered into the LTA. We agreed okay. We're gonna go ahead Bill day ever done in factory and where people are worried. So we went and did that but as I. Just said that's pretty darn good and we did it because we'd be in a world of hurt right now if we hadn't done that not for the not for redundancy, but for capacity.
We're sole source on for composite materials for engine themselves and thrust reverser for multiple amorous programs. The first let's see you went through the legs are those are 5 or <unk> hundred 20 Neo family.
Anders of Boeing 747 of the Comex 919 to call back of the RJ 'twenty, 1 which is original Jed on the.
Bombardier Global 7500.
You can see some of these corp, we all of us.
We're sole source for widen the short materials well top right.
Park composite materials are also sole source on primary structural components for the passport 20 engine for.
For the global 7500, but that's not part of the amorous LTA the picture of the legendary Boeing 747.8.
At June yourselves I Love this picture of abuse. It gives you a perspective as to how huge these things are on everything you see here is made with park materials in terms of the themselves also of the soft stuff inside thrust reversers and.
And and the fixed structure, which you can't see let's go on to slide 16, let's do a little bit of update on how the on the G aviation programs. Some of it should just review with some of them, it's new let's start with the 820 <unk> Neil.
<unk> family of aircraft that's the.
For the Big Kahuna for Park anyway.
So the first couple of items, we covered during our last or Q4 call.
Currently the rate of 40 go on to 43 by Q3 and 45 by the end of the year and that was confirmed by.
The Airbus CEO during the.
Investor call on April 29, you also mentioned the steep ramp in 'twenty 2 'twenty 3 for the single aisle airplanes when needed for 'twenty family.
Then this is new April sorry May 27, 2001 news release from Airbus. This is just coding for news release of systems.
So this is an easy 1 just direct quote pace for 'twenty family Colon Airbus confirms an average age of 20 family production of 45 aircraft per month by Q4.2021, Okay. That's consistent with the prior items and calls on suppliers that means us to prepare for the future for of securing a firming of 64 up for.
The month of going from 64 per month by Q2 of 2023 in anticipation of continuing recovery continued recovery Airbus has all the also asking suppliers, meaning for us to enable a scenario of rate of 77 zero by Q1.2020 for longer term of Airbus is investigating.
Opportunities for rates as high of 75 for 2025, let me just explain what 75 means that 75 would represent 22 on chart, 21% higher.
And the peak of our long term forecast of reusing.
That's very significant if it pans out bulk of units and in dollars and let me go to the next item because of kind of an important that you understand how we get the debt the 21% of number ex item on slide 17.
As of the end of May 2021, CFR on meeting the leap on of engine of like 60% of its actually I think about 64% share of firm orders for the egg through 20 Neo family of aircraft. That's the source of that is Aero engine news so.
For 'twenty Neil too.
2 engines or on the Asian truly new the leap on a line of credit engine. So this is saying that in terms of firm orders. This is not forecasting. This is not speculation of this is not some smart guy who thinks he knows what's going to happen. This is 60% of firm orders. So when we do the math, we use 60 per cent of that may not pan out.
But that's what we use just once you understand that so we say that 75 in the prior page translates to a 20 <unk> 21 per cent increase over the top of our forecast where it peaks.
Upon assuming a 60% share for a day for a for the leap on the engine, Okay, let's keep going on the slide 17, another little interesting thing on May 21, 2021, CFM and Indigo India's largest airline announced the indigo selected the leap 1 day to provide.
The power of an additional 310.3.
3 of 10.20 Neo family of aircraft, representing Cfm's largest order ever of number of units on what's interesting here also a little side note is India has had some trouble with the Covid as you probably know recently so it's been a setback for its commercial.
Domestic aviation industry, but you know the should be of for smart or if they're going ahead.
So they're going ahead and ordering of these.
Airplanes for these engines, which obviously is good for park than them.
Last item on 17, Airbus recently announcing of resuming work on on our newest some of the liner to loose for <unk> hundred 21 Neo aircraft, the Airbus announced assembly the system New Assembly line of scheduled the operational by the end of 2022 why is that significant so some people look back at the last item on 16, and say Oh, Yeah Airbus.
The Gulf talk you know they don't really mean it.
But maybe this is Airbus, saying, they're not all the talk of maybe they are putting their money, where the mouth as I tend to listen Airbus you know.
I'm not I think they're smart people and they were talking about just for example last year. They were saying we're not going to go below 40 of and you know of lots of the smart analysts and commentators all of it's not going to happen, they're going to global 40.
So we didn't know what's going to happen, we certainly paid attention of Airbus. When he said, we're not going to blow of 40 and they never went below for you. So we'll see what happens you never know, but I just wanted to you of that perspective, Theres, a nice picture of the day through 'twenty Neal.
Sorry.
'twenty 1 deal.
With the leap 1 of engines like 17 lets go to slide 18, let's talk about this XLR of 321 of the XLR. So some of this we covered some of the there's new first test aircraft nearing final assembly for slight expected next year certification of entering the service. That's 2023, that's like a you know.
Tomorrow, and the commercial aviation timeframe like talk about dog years doing years at nothing.
And they've been saying this they're not backing down so that's pretty important is this going to be a game changer, a lot of people say, yes, it might be.
Because the the concept is that this airplane could replace wide bodies on many missions, which with much lower cost. So here's the key question is the single aisle 5000, plus statute miles of range 225, plus seat capacity the market being ceded to the Airbus <unk> hundred 21 extra.
The <unk> by Boeing Boeing.
Say, if they're not on any hurry come up with the competitor I know what that means I'm just telling you what Boeing has said.
But either way this is sort of I think it'll be a pretty my feeling is this could be of big airplane for.
Airbus and for Park, and we will see what Boeing does.
We'll just have to see I'm, just telling you. What you said I don't have any inside track on the bowling on not inside guys volume I'm, just telling you what they said so a little.
About debt like I commented previously, but nevertheless, that's what they've said, let's go on to slide 19.
With the updated GE aviation jet engine programs. The 909. This was the coal Mac or a plane that's designed to compete against the Max and the <unk>.
Is for 'twenty, that's the single aisle hold.
<unk> continues to maintain the intend to certify the blend to begin deliveries of the aircraft before the end of this year. So we'll see what happens.
I think originally it will be for the Chinese market, but the intent.
Coal Mac of Chinese they Wanna be real players and commercial aviation so as compared to the.
On the regional jet, which is really kind of of China airplane. They want this to theater of play not just for China. The 919. They want this to be an airplane for the world. Many of you'll have to get of served by the FAA and the Asa that kind of thing, but I think it'll begin with the Chinese certification delivery.
2 of China. This airplane could be of a pretty big opportunity for park once it gets going but here's a couple of questions. How will the recent peace treaty between Boeing and Airbus intended to deal with the our quote common thread on quota effect commack in the 9 month non program I don't know I mean, it's a good question.
Since it will not affect the domestic sales of Chinese domestic sales, but we'll see we'll see what's going to happen here, it's kind of I think the strange development and I think it was strange that the U S. Trade representative was sold blunt about you.
You know the attention about the of the Street piece rating and then the other thing is commack recently reiterated plans to complete the development of domestic engine alternative to leap 1 see engine for the C 919 by 2025.
So what I would say about this is that in my opinion, it's much more difficult of certified engine airplane serious I can engine is the big Big deal as the engines are very complex and a lot going on with engine. So we'll see if that happens maybe it will maybe of 1.
Slide 20.
Moving on with the updates on the global 7500, and the RJ 'twenty 1 the.
We've been saying these programs on the ramp mode for the last couple of quarters. That's based on 1 of the forecast we've been given but now of the nice thing is we're seeing it on it and the <unk>.
Order patterns with the pest for 'twenty for the global 7500, the even beginning and with the ALJ 'twenty, 1 we're actually starting to see it on the order patterns.
Nice pictures of these airplanes. So that's good news so let's go on to slide 21, and last but definitely not least the Boeing 747, 8 Boeing announced that it will terminate production of the Queen of the skies.
In 2022 long lived the Queen to me. This is a very very special airplane and if we got pictures the 11th legendary bolus from 47, Queen disguised in real life real life needs at these pictures of all taken at Anchorage Airport and all taken by me from.
From the cockpit of an airplane by airplane the.
Top of pictures I always taxing behind these airplanes by the way you don't taxi too closely behind the sub 47 of just in case you ever are the that experience or have that option don't do that and the other 1 is just the the the.
The middle picture of the airplane of landing right in front of me go shows with the.
Of course, holding short of the 1 weighted.
Slide 22.
This is all review.
And I wanted to include the slide visa kind of gears.
Like the pictures Dodd of picked out for the slide of but it gives some perspective on just how bad things were with commercial aerospace last year, you know I'm not going to go for each item.
But you know, it's just that everything we've heard about commercial aerospace it was negative but I'll do I'll.
For the last item aviation analysts and commentators predicted for recovery would knock on for many years or may never come end of day scenario.
Use the term again in the presentation, let's go on to kind of 'twenty..3 continued this is I'll review, but part of the park, we didn't completely by the Doom and Gloom news, we didn't by the end of the day's work and we made a deal with them, whereas to maintain minimum baseline critical mass production. We discussed there's so many times, we won't go into the details, but I'd just say.
Important to park of Amyris. If this didn't happen we would be in the world of hurt Amyris will be in the world of her guests, who also will be in the world of hurt their message customers because of we allowed our production to go to levels, where we couldnt recover then.
There'll be big problems, not just for us, but for mras and the customers and I don't know what we would do about the and then the last item in the layoffs for widespread and preserve pervasive we didn't lay anybody off.
Very happy about that decision and it also was very important to park. So we laid off people we'd be on a real world will hurt right now.
You'll see later on we were having trouble hiring people, but it would be laid off people we've been of real war.
World of hurt right now so good thing we didn't do the slide 24.
Continuing with this.
Your view are we.
We spoken of went during all of this all for calls in 2021 about the significant divergence from the mismatch between the minimum baseline critical mass and the and the then current end market requirements.
For the Chi programs, we talked of inventory Destocking, We said, Kansas stock Destock below zero. We don't you know use the negative numbers for inventory don't think GAAP of loves that and the divergence was mathematical unsustainable just pure math and the western with some dramatic step down day of reckoning was going to come and well it came.
The destocking of Zen to at least for the programs. We're on let's go to slide 20 of <unk>.
5 you're trying to hustle through.
So the first item we've covered this before the second item interesting perspective, I think we alluded to this right at the beginning in the Q.
Q3 of last year Gene program sales $1.8 million to 1 of the sheer 7 million that's about a 4 times increase in 2 quarters. That's a big deal that's not just talking about forecasting. This actually happens folks you know so we talked about.
These programs ramping up all of that did happen that's not just forecasting or somebody's opinion. This is just facts, let's go on to slide 26.
So slide 26.
We're continuing the same thing, but so we talked about this we received the updated long term forecast for memory.
And you can look on long term forecast basically very similar total number through the 2029 calendar year as the pre Covid forecast now we have an opinion about this so it may not fully capture the Oh.
I'm sorry, why are the steep ramp up of days for 20 new of for King.
Aircraft family production discussed by the air but by Airbus and their May 27 news release, we referred to on Slide 16, and then the significant potential ex all of our sales opportunities, especially in light of Boeing's recent statement about not being in a hurry to develop an aircraft to compete against the ex L. R. I always mention on slide 14 of these 2 maybe together maybe.
This significant and Ah indication by Airbus of significant upside may be related to the extra of law and there are opportunities or optimism about the extra Laura I think in prior quarters I mentioned that it didn't seem like our long term forecast the received from Emirates of fully capturing the ex all our opportunity. So our point is.
That there is significant.
The significant upside and where he mentioned that.
When you talk about 75 that represent 75 per month that represents a 20% increase over the the of the peak of our of the forecast we received from Mris for the day 2.
20 deal on important question, though keep coming back to is how of the commercial aerospace manufacturing supply chain respond to the steep ramp of this is more of a short term consideration of many eventually catch up but nevertheless, a very important consideration and there's a lot of talk about you know the supply chain struggling and we see it as well slide 20.
7.
The spark responding to this.
2 of the GE aviation programs ramp up all of butter people car Park current people count 105, like what the heck is going on here people still getting paid not to work.
So how do we do that how do we do that with GE programs going up by 4 times since Q3.
And by the way Q3 of look at the presentation for Q3, there was 107 at that time on down to 105 now for Q3, and we said we announce Q3, we plan to add 15 to 20 people what happened.
So we didn't didn't get done very difficult to hire people right now again, it's very very important in the lay anybody off and you.
We've been on time and rails of relatively low waste with the incredibly steep ramp that we had to handle with less people not more people less people. So.
Park people are stepping up for getting the job on that's what park people do and they're not parks people aren't big on excuses wanting just to get the job done thank goodness for our customer flexibility program. We've talked about this every quarter Ken.
Can't emphasize enough how important this is ramping down ramping up it gives us flexibility that is a very significant adjusted godsend without this program I think it would be very difficult for us to get the job done a big deal.
Slide 28, let's continue your thank goodness, we did not lay anybody off the case, we've already covered this even on the darkest days of the commercial aircraft Aerospace industries Armageddon.
We then deep deep you know what right now if we'd like people of.
We only have a 105 really people off I don't I think we'd be at the point, where we couldn't even get it done. Thank goodness for park right people without them, we would not be able to get the job done.
The enough park is fortunate and blessed to have the great people at has can't say the enough.
Just so you know every park person, including Madden, Brian received the $250 bonus for the dedication and outstanding on its outstanding work to them during the fiscal first fiscal first quarter.
Let's go on to slide 29, a little of a busier here.
Aviation programs sales history and forecast estimates the top of the page is history of Q1.7 million I think we already alluded that and the during our Q4 call. We predicted 6.5 to 7 million. So we came in.
At the top of that range of our prediction now, let's look at the the forecast so.
2 for GE programs for forecasting 6 to $6.6 on a quarter of million pre.
Previous forecast, we gave you during our Q4 was $6.5 to 7 months, we brought those numbers down and we'll talk about on the second Q3 Q4. Those are new we haven't given your forecast for Q3 Q4 previously the.
The 2 sorry, the visceral 22 total that's unchanged 26 to 28 million that's what it was before so for sure.
Short term, let's talk about what happened in Q2, Walgreens numbers down short term, it's always difficult to nail because of inventory practices.
Which can move things per quarter per quarter.
So and also I mentioned before that Emirates uses a.
The company of the manage inventories so there's multiple layers of Emirates as of this company and it's difficult sometimes for US. The seats grew we get inconsistent information not that anybody is giving us information that I don't believe is correct or misleading of leading us adjusted is complicated. So we do the best we can we work at it real hard but all we can do is kind of.
Yes, a little bit.
Ultimately what matters the only thing that matters of long term has nothing to do with this is how many <unk> hundred 20 Neo sooner of bus produces and sells how many called my time on nights that commack produces in sales how many global 75 hundred's. The Bombardier produces and sells that's what matters long term, there will be movement from quarter to quarter, but.
Long term, that's what matters and we pay a lot of attention to the input we get from the Oems, which are not weaken of directly just public you know public statements.
So but.
We're not changing the the tough to.
The forecast for the year and just you know we believe there are some upside potentials baked them on some of the indications that we're getting from or hearing from some of the Oems, but last island supply chain risks of the forecast, where he mentioned that I'll mention it again, probably mentioned the every quarter now it's something that's of Battle daily Battle with the manage so for ROE.
Okay, but you know raise your kind of thing Okay. Let's go on to slide 30, the smell of parks financial performance history and force get forecast estimates of.
A little more involved here so the of the top of the page is a history of just for perspective, you already know the history. So we won't spend a lot of time on that.
Certain factors, which affected our Q4 and Q1, we've ever talked about that that's a the $3.5 million of essential components for the missile programs in Q4.1 million of sales of missile program on materials in Q1, but we haven't spoken about it in Q2 approximately a million of.
The central component sales all of the sales that have been very low margins. So just wanted you to be aware of that for Q2 now for Q2, but we did we gave you a forecast for Q2, when we announce Q4 and we brought 2.2 down.
On the topline was 14 of $15.13 of the quarter to 14 of the quarter. The EBITDA or cash previously was 3.3 of for now 3 to $3.7 basically what we did we brought Q2 down the debt.
Company, 2.2 down to the of revenues or sales by the reduction in the G for cash for Q2, which is kind of past debt reduction through so not a lot of.
Math going on there are pretty straightforward.
Let's see we have not changed the forecast for the fiscal year of though at this point no no reason to do that let's.
Let's see what else you want to talk about here.
So what are the risks we talked about just a little bit, but we probably want to talk about again international shipments and transport. That's a risk for Q2. These are the shipments park shipments to customers that are overseas international shipments of.
From more and more challenging so we might be where the ship something but of the the shipping company is not ready to do it you know what side of sale until we ship.
We of costs that are elevated or escalating I should say some costs are covered we pass on true some cost youre locked in we of long term agreements with suppliers and some may not be other the supply chain risks, we talk about debt you know with respect to G and off of them also with respect of park and then there's of course we.
What about this earlier, we're hiring people we obtained either will probably go up. So we just want you to keep those things in mind of Q2, 1 was a little unusual and irrespective of we weren't able to hire people and the team is still pretty low because we're unable to travel very much. The C. Customers. We're also concerned of our rest of the economy inflation.
Concerns about or the economy, and our country, we need to keep our hedge about US you know as we say we didn't by the end of day scenario last year with the pandemic, but we don't necessarily buy the happy days are here against the neuro either Oh.
What was it Oh greenspan irrational exuberance or something like that I think that's what he said we're concerned about that and we're just really paying attention carefully watching carefully and the most important thing for park, we didn't lose our head last year, let's not lose your head. This year lets that got caught up on the irrational exuberance of stuff because we think there are some risks.
And about.
The economy, and maybe to our country generally the long term forecast of.
A few of you have asked US what are we gonna ratio long term forecast, obviously not now.
In Q2, but probably I think more likely Q3 and here's the thing.
We just went through there still of lot of risk of lot of uncertainties. We don't want to give you a forecast of just you know put numbers out there obviously no forecast is guaranteed but 1 of have some reasonable confidence day. Yeah. These numbers look like the reasonable numbers until we get there it doesn't make sense just to put numbers out for you, which kind of doing a disservice to you when it's insulting to you to give the numbers that we.
Don't really believe in you know not that theyre guaranteed but the numbers that we feel of reasonable so we'll see but that's our feeling about the long term forecast slide 31 update on the acquisitions other strategic investment activities, sorry, I know, what's going on really long, but it will children hustle from here.
The banker led auctions, but we're still trying we did 1 where participated and won recently and got to the second round and we backed out the it's the reason, it's often not where we want these of aerospace companies, but that's on enough of it has to be something that makes more sense for park and also we're competing against this cheap and easy money, which makes it even more difficult we're not going to overpay, just because there's a lot of cheap and easy money.
The out there what do they say, we've got to give or hedge about us and not get caught up on the mob mentality of hysteria. So what we're doing is strategic targeting of aerospace industry market segments and product lines. We think this makes much more sense and we've done a lot of work on it.
Identified segments, we've reached out to probably about tender of our companies. This is more difficult 1 because when we go on to watch it guess what the companies for sale.
So our contacting companies that.
Target market normally not for sales. So we have to you know open the discussion up and it takes some time and be patient of J D still working on them and the potential strategic investments in key aerospace and aircraft programs. That's something that we are pursuing on.
Number of different programs, you've reached out to Oems.
And you will see what happens, but we think that's of an interesting opportunity for park and in some cases I think of it.
Reached out to us because of why don't we keep moving here living of Strange times. These are final slides. So again apologize for the very long.
Time on the presentation strange days of found US I think that's from the doors.
People getting paid not to work free money being force fed into the system you know on the <unk>.
Old days of people believe work was something honored and value of gave the person's self respect the self alliance dignity, but now and you know maybe not.
The free money used to be that you worked hard you sacrificed you were frugal with your money and 1 day. This is not sort of the person of company.
The deal to use that hard earned money that you guys had some real value that's something important for our company, but now it's just a you know use of cheap and easy money the bell.
The work out well it doesn't really matter because of endeavor was really your money anyway.
So it's kind of sad actually and you know why bother to work hard and sacrifice because you know what why do that when it didn't why don't just happen to do the other cheap and easy money, it's kind of a tragic and our opinion, but you know the win.
So sorry for continuing to world seems upside down it backwards for us what we're supposed to matter doesn't what was not supposed to matter does.
But in the day, you know park, we're not philosophers of politicians, we work for a living.
Keep pressing forward, we do not stop we did not back down we did not relent.
Don't do those things it is not in our nature lets just set of park, we work for a living not philosophers of politicians and the park, we make money for owners of ultra 2 old fashion concepts that we still believe in let's go onto slide 33, our family of our park family stitched together, we take care of of each other.
We honor the 1 we lost.
We will not forget ever.
Park is a strange and unusual company filled with wonderful on special people, we were very fortunate when it comes to our people.
The park, we're not like the others, we play for keys for not fooling around both of them to make an impact the.
We always end of her presentations with the picture of 1 of our crews or teams. This is our Q1 of the production lab team are the top row Bally April she's actually of QE now Erin Leo Who's the.
Normally you for awhile, great guys ease of the second shift supervisor heavily Patricia a front row, Nancy She's first shift supervisor tailored Scott didn't make the photo op and if you're the only thing about our business, you're probably saying well Where's everybody no. Sorry. This is debt. This is this is our lab crude production of their crew for.
For our Q1. This is all we had and we you know we charge the people since Q1, so you'd say Oh my God, how did we get stuff done.
Production of lab work for from the businesses is quite complicated quite involved and it's part of the you know all of it as part of the production process. Just like manufacturing is critical you cant we can't ship product of customers until that's been to the they've been tested and sometimes the test is very complicated involving multiple steps involving multiple days for sure but.
These folks all most of the job category approvals under the customer Flex program and the all stepped up.
The state of it's not tested it's not ship and we shipped we shipped everything a great job, but he's a great dedicated park people. Thank you very much to do so of people and that concludes our presentation. Thank you on operator of hopefully the people if somebody still listening who's ready to take questions now.
As a reminder to ask the question. Please press Star then 1.
So for your question hasn't answered and you'd like to remove yourself from Q press the pound key again Thats star 1 to ask the question.
We have a question from Brad Hathaway with fear of you. Your line is open.
Hi, Congrats.
Congrats on another day.
The quarter.
I appreciate that you're not giving a specific long term guidance, but I was curious on your commentary on the kind of 21% increase in the Airbus the.
The versus your kind of prior long term forecast.
And I'm, just curious kind of if you look.
Just kind of the design by business line I mean, how do you think you know just directionally most of what you're seeing compares the kind of what you previously thought of natural gas.
Who do you mean like by segment by segment brand is that what you're referring to.
Maybe I'd be on commercial military business don't have you on okay.
Got it.
So commercial is very dependent on the on to of course, 1 actually business aircraft very dependent on these GE aviation programs. There are definitely on the programs run for commercial and business, but those are the big dogs are the.
Thing that probably drives the commercial at this point of you more than anything else is the <unk> hundred 20 Neo program. Although the other programs are significant and I know of moving up it's really hard for us to figure out what to make these are these Airbus the statements in the news release, there were some skeptics to say well you know.
It doesn't.
What was the airports have to lose you know they just wanted to get the supply chain ramped up and it doesn't materialize well that's the problem on the supply chain.
I'm not in that camp exactly you know like I think the we should listen to what they're saying and you know, we'll see what happens of.
But that difference is a multimillion dollar difference between how our <unk> hundred 20 tops out in the for because we have from Mris are forecast with for a member of its just based on units I think I explained that before so we have the units we know per year, we know what the content is per unit. So it's easy to do the math.
And figure out what the revenue sorry, it's many millions of dollars difference.
So would you say debt just seemed a little perspective. The rest were just kind of really want to wait and see I think.
It's kind of weird.
Situations because some people are happy days are here again, and and some people skills on a little Doom and gloom and I think we're kind of in the middle and we're not sure what the believe and where things go on we see some real risks, but then we see the upside as well.
But you know Brett it's just hard at this point for us to rake of quantitative chunk judgment, but that could translate into numbers in terms of top line.
And like I said, we think we'd be doing you would just sort of risk by just kind of throwing stuff out there military that's interesting. It's just something that we keep working on working on the working on every quarter. We give you some new pictures of new military programs, not maybe not do that quarter, but you know the Newton 2 the presentation and we real people real incur.
<unk> of about a military I think that's a real good opportunity for us, especially on the niche areas of where.
Were you know a lot of others, just don't want of bother us too much trouble you know, it's not worth it goes on where the good margins are for.
For us anyway. So we're encouraged about about military that third segment business aircraft is largely going to be driven by that of Bombardier.
Bombardier Global 7.500, but the other programs other business aircraft programs that we're on that don't relate to GE aviation.
That's of no let's call it the big dog in a visit your craft. The if you want a separate until the <unk> separately.
Separately the into those 3 segments.
Got it great. That's helpful. So okay. So I guess, it's kind of waiting to see.
Whether these kind of 75 in 2020 'twenty 5 for me about the.
The real number.
Okay.
Got it.
Sorry.
I thought you could pay for it.
Oh, Yeah, I think Brian well, we'll wait to suggest sort of follow up with just saying well wait to see what other what other comments come out from Airbus and we'll just be watching what happens in the market.
You know when you've got the indigo entering what type of ordering loads of airplanes with each of leap engine. That's a plus right. So we've got to watch and pay attention of pretty much everything.
And what do you think about the long term potential for the coming back 91.9.
How big of programs the depth and can be.
My opinion is it won't be the size of the day for 'twenty, but it could be significant that's true.
Significant potential.
So we have a lot of content on those engines and it has significant potential let's see what happens as you know we we hope that they are successful in getting the airplanes certified and in production at least for China, We hope for successful and certifying and and.
The rest of World, we're not sure of what to make of the Peachtree between Boeing and Airbus now of that affects their coal Mac. So kind of a lot of things going on that are hard to judge but in terms of even the forecasts we have memorized significant opportunity with the 91.9 for park.
Great.
And then finally I guess on the on the M&A front.
So it sounds like you're participating on a deal for me.
The I was curious about the strategic investment in the aerospace and the aircraft again can you give a little more color on what that actually means.
What we're doing in other words growth.
Yes, the way try to do.
What the potential things you might be when you talked about the strategic investment as opposed to like the joint venture.
Oh, Okay. So just for perspective, we did actually participate in the auction maybe I think of about a month to go and we got into the I guess, the second round, but the we decided the back out because we had the kind of a.
I dunno gut check of whatever you call. It comes of Jesus internal meetings.
We determined this is really a stretch it's aerospace yes, but it's so far removed from anything park does the synergy was just not there on when you say, okay. It's aerospace, but other than that I mean, there were not no way in which 1 on 1 equal to the week of sorry equal more than 2 that we can figure out what we have done we decide do I think about <unk>.
6 months ago, we decided to target is for us.
A specific aspect of aerospace materials that closely related to the composite neutrals user of other materials that are used to produce composite structures for aircraft.
We thought it made a lot of sense. It has a lot of more synergy technically what we're doing now also and polymer chemistry based on I'm going to go too far because I don't you know its still something we want to keep a little confidential.
So we did it was you know the kind of typical thing we did the survey we came up with the usual suspects of 40.50 companies and we start narrowing it down I think we've reached out to about maybe 8 or 10 of them and not surprisingly you know from well some said, okay, well, let's talk let's talk some more and some well we're not for sale maybe the other talked thought about it getting back to us.
2 categories 1 of independent companies, that's little different owned by maybe the individual and the other would be a sob or division of a very large company.
The very kind of different approaches the M&A because the very large company of contact of there's no development Guy Okay. We'll get back to you, let's look into it with the individual owner.
You know much more delicate and careful and you know respectful I would say of the you know the individual on there you know the personal investment of the company and that kind of thing and we're doing both you know so.
So it's harder because it sounds like we contacted any of them. They said Oh, great you call. It because of just about to put it up for sale that would've been on realistic.
So it could take a little more work, but if were successful it will be a lot better for park I believe than just you know of participating it's something that's auction, which often is in aerospace, but other than that doesn't really connect the parks business very well.
Okay, great. Thank you very much I appreciate all of the color.
Sure the nice talking to you.
Again to ask the question. Please press Star then 1 of our next question will come from Christopher Hillary with Roubaix. Your line is open.
Hi, it's good to speak to you on.
Hi, Chris.
It's great to see the the.
The strong profitability embedded in your outlook.
I wanted to ask.
As you look out maybe a little bit farther without giving guidance per se.
Are there aspects or other other ways in which the business has developed where you anticipate either greater efficiencies as you for example exchange of capacity with.
The latest production technology or are there areas, where you see maybe the margins being a little bit more challenged because he's gone through this home.
Supply chain disruption the need to maybe carry higher inventories and I'm curious if there's any developments and how you're thinking about your.
Opportunity to capture margins in the medium term.
Yeah.
So the efficiencies I know with the expansion of printers.
I don't know about that I'm not I don't think we're expecting anything significant in terms of manufacturing efficiencies.
I think for a minute I think our Aurora pretty efficient actually.
No that was it a little bit of a dangerous thing to say because you know you're always going to look for opportunities to better, but I think we have a pretty lean pretty low cost structure I think it's an appropriate cost structure of it but it's also a free lean pretty low costs are pretty low cost structure for manufacturing.
And.
Of course.
Yeah, that's of concern of we pass on and we get our raw material increases we often pass them on a in some cases, we of long term agreements, which for which required the supplier not to give us increases.
Something that we can pass on some things you can't pass on like supplies. As an example, where we just have to deal with the labor cost of utilities. So.
For a lot of talk of them.
You know on the news about inflation and.
We certainly see it I mean, just of the airline cost of the travel.
The you know much more than it was 6 months ago. So some of these.
The other costs are going.
Going up in <unk>.
To some extent you know they'll be contained in some extent may not be but.
But it's something we have to.
Watch for in terms of maintaining more inventory, we'd like to meet the important Victoria, but we're not able to because of these big components of what I said, where we're having some concerns about supply.
They had the same forecast we have so if we say 1 of the order more through the state.
Kind of give you more on that kind of give you more than your forecast, we'd like to be able to maintain the cushing inventories, but it's on it's pretty hairy I guess I would say and it's a battle every day to manage the inventories if we could.
You know when if we could increase or moving towards we would I don't believe that would increase of our cost structure very much in the effect of our balance sheet, but I'm not sure how it'll take within reach of our cost structure very much in itself just by increasing the inventories.
Okay, and then maybe on a more of.
Given that youre of domestic manufacturer, particularly as it relates to military business.
Desire to have more domestic production in the onshoring come into play in any way with your existing portfolio of products or maybe how you're thinking about.
The opportunities.
Yeah, I wouldn't I'm not sure about the M&A part of it but I believe the the fact that we were 1 of 2.
Domestic manufacturers of composite materials for aerospace it does help us in that regard.
It gives us more opportunities to develop additional military business.
So well have to see how that plays out a little bit there's certainly a lot of talk about it but the extent that it's a factor at all it would be of a plus.
Great. Thank you for your tonnes a day.
Sure Chris Thank you for your input.
There are no further questions I'd like to turn the call back over to Brian shore for any closing remarks.
Thank you operator, and thank you all for hanging in this probably the record in terms of long shore we've ever done.
As I said at the beginning of little difficult because we felt we needed to include some of the slides from Q4 for for perspective and it made.
Maybe are getting through the presentation.
You just took longer but anyway. Thanks again for listening we really appreciate it calls for any time, you can reach out to Matt or me anytime you want and otherwise have great summer and we'll talk to you soon.
Good day.
This does conclude the program you may now disconnect.
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All of them.
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