Q3 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, third quarter fiscal year 'twenty two earnings release conference call and Investor presentation all.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there'll be a question and answer session.

I would like to ask a question. During this time simply press Star then the number one or your telephone keypad. If he would like to withdraw your question press the pound key.

At this time I will turn today's call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, You May begin your conference.

Thank you operator this is Brian welcome all happy New year welcome to our Q3 Investor Conference call with me as always as usual mascara borrowers CFO.

So we announced their earnings. This morning, there was a news release and the earnings are released or instructions as to how to access the presentation, which we're about to go through when you Wanna get a presentation in front of you wrote the social posts on our website. That's another avenue to get the presentation in front of me, but without actually doing the presentation. This.

Paul will be less meaningful I think as usual what we tried to do with these calls is mix it up a little bit try to provide useful.

And interesting information to you for three perspective, we can we're not into just going through a dry analysis with numbers and data.

We can always do that for you later, if you want a call back.

So we you know this dilemma that keeps calling every every quarter, which is the stuff. We cover every quarter until we go through it again the problem is the presentations get warmer longer we should want to discuss new stuff as well. So we're going to skip over at least skim over a couple of sectors that we've.

On topics, we've covered before multiple times in prior presentations and calls.

So I guess, that's it just want to warn you I guess just to go through the presentation. It's a long presentation, we'll try to go through it as quickly as possible, but it could take it up to 50 minutes, maybe a little bit more that's five zero not one five.

Then after we're done with the presentation to the extent you have any questions, Matt and I will be happy to answer them. So why don't we get started on slide number two as a forward looking disclaimer information statement. If you have any questions about that where the snow. So on slide three is our table of contents and slide four we can't go through slide four quite as quickly.

There's a little bit of a busy slide so let's talk about Q3 results.

Sales of 13.864 million gross profit of 3 million to 863 and EBITDA adjusted EBITDA 2 million 670 kind of interesting to look at the progression from quarter to quarter. You can see that evolution in terms of bottom line just is a down quarter from Q1 or two too.

Let's talk about what we said.

We predicted if you will but they're not really predicted what we our forecast estimates that we provided you when we did our Q2 call regarding Q3, we saw.

The rest of it for sales was $13 million to $13 5 million and adjusted EBITDA of 3 million to $3 4 million. So its kind of a strange thing, we actually exceeded our sales estimate but didn't get to our EBITDA estimate not hum.

That's the requires explanation, which we're about to go into but before I do that let me just remind you what you always do our forecast philosophy. When you provide your forecasts. We're telling you what we think is going to happen to the best of our ability obviously, we're wrong, sometimes but we're saying at the time. This is what we think is going to happen. We don't play this kind of well go out a game, where we gave you a low number.

With that we can beat and then be heroes.

To us that's not that's not how we do it we think that's kind of insulting but other people don't listen that's fine. That's just on how we do it I think you know that by now.

Let's go to the bottom of the.

Slide here, but it's a big but this is an important thing it'll come up a couple of times or so during our presentation. There were $2.4 million of missile programs Central component sales, which were expected in Q4 what occurred in Q3 now we did our Q2 call. We told you about this we said that's going to be Q4, that's what we expected.

We now can call. This a product suite to be until now it's been kind of an anonymous product, but we just announced yesterday a deal with Ariane and we'll talk about it later, so we know Polish products suite to be.

It's a very specialized proprietary fabs.

Fabric that's used.

US to produce the later product for missile rocket program.

So we'll get into the product a little bit later, but anyway, let's just call. It seek to be made for shorthand rather than saying what are we called [laughter] central component sale missile program in central component sales and it's kind of a mouthful, but anyway.

Our sales took place in Q3, not Q4 that wasn't really are doing this is driven by the Oems remember how this works. So there's just a component. It is a critical component for the missile programs are sole source on these programs. It comes from well we've been saying.

A country, that's an ally of the U S. It's a French company areas, a huge company huge company, but I guess some of the Oems old Dervish. These are companies that are maybe missiles and rockets programs.

Making sure they have a secure supply of the seat to be so they ask us to go buy the product from them from sorry from Erin.

We have a relationship with her and we do that and then we sell this product to our customer and we hold it for them.

It's in our factory, although with their image where they own it.

And is it just a markup involved when we do that so it's a very low margin sale as well now the good news is and that's where there is a lot of good news here is that ultimately we plan to use that product produce our ablative materials and those materials. When we produce those materials are very high margin. So net net very good but the first part of the transaction can be used.

Sort of because its a lot of revenue and very low margins and it was supposed to be Q4 ended up being sorry, it's supposed to be Q4 ended up being Q3, so that kind of throws everything out of whack here a little bit.

So, let's just think about that $13 $9 million of sales in Q3, but let's just for the purpose of kind of getting to put some perspective here that subtract that $2 4 million was supposed to be Q3 anyway that would say that it's more like $11 5 million without that seek to be sale $1 5 million out $1 5 million.

<unk>, what we were predicting 13 of 13, a half well that's millions of half below the bottom of the range. So now you start to see what's going on here actually understanding that you say gee that that EBITDA is pretty good and it is pretty good considering the circumstances based upon the top line.

So.

Well, let me see what else I have here or just a little interesting point of Oh, maybe interesting to you. When you currently have over $5 million worth of the seat to be product in our factory is not owned by US it's owned by our customer, but that's good because that means there's a lot.

A lot of ablative sales that are coming.

And it won't be next quarter, that's not how it works they want to have a secure supply for a long time well that's good because this kind of money in the bank for park because ultimately the plan is that we would want our customers tell us will it take to actually to be product and with our proprietary resin systems produce there's a blade of material and that's where the.

Sales the margins end up being very good on those.

No sales.

So I guess I think that covers that let's why don't we move on to slide five.

And there are other factors, which affected.

Q3 sales and margins.

Not just to see two things so let's talk about the supply chain challenges daily Battle. We spoke about this when we did Q2, but we didn't see this coming exactly but they're actually from our perspective worse in Q3 and worst currently than they were when we announced Q2 so.

When people say, it's getting better and all your reports about this newspaper articles Wall Street Journal I Dunno World, They're ready, they're not novel that's for sure our role that's not been better and under supply chain challenges difficulty sourcing raw materials international shipments domestic shipments freight issues additional cost for expedited freight shipments.

So all together when you look at the first three bullet items.

$600000 of sales that we didn't have.

In Q3, but most of these things are there.

Couldn't get someone to ship the product domestically or internationally and difficulty sourcing raw materials, we couldnt get the raw material to produce the product and ship them by the end of the quarter.

So.

My feeling is are people doing a really good job under very difficult circumstances, but we were not able to get all the raw materials we needed.

For the quarter. So you take all those three those three things together 600, we actually know exactly what the number it was like 593 or something like that but we're not going to give you. The breakdown that's a little bit more information that is useful we think we can compute that number that's a hard number.

Remember I said, there was a $1.5 million gap, the topline, where there's 600000 of it but that's still a lot left what happens to the rest of it went up to the other 900000.

Well, let's talk about that.

Supply chain issues impacted aerospace industry generally so what does that mean this is not our supply chain. It means we're not the only one.

Of course, we know everybody is struggling with this that really puts the brakes, you know a drag on the whole industry the whole aerospace industry, because we can't get stopped other people probably arent getting stop either.

If Europe OEM.

Park, they're good they're one time they can get you what you want but that's really nice, but you know I've got 25 other suppliers aren't getting these are components that I need for from them. What's the point of making these extra airplanes or missiles, whatever if I can hold to get all the raw materials. So it kind of puts a drag on the whole industry. So now we're talking about our top line not just the $600000, which.

We could compute can't really computing.

Hard to know.

But it's it's there it's very it's very palpable as far as we're concerned.

So the other item.

Our cost efforts associated with bringing new plants online and equipment trials as far as hitting the P&L directly these are minimal cost as far as the efforts concern major called major major record I should say so.

So the next one is a another important item.

Supply chain issues impact the aerospace industry and delays and a proven defense budget. Those are two items, which to me really explain why some of our market is soft right now and probably will be.

Soft into Q4, but this has nothing to do with GE by the way. That's the one exception geez just going according to plan and <unk> programs.

Other than GE, so for us other G is gonna be largely a lot of it is going into the military. So when you hear a lot a lot a lot about how the delay in approving the defense budgets has affected the defense and military industry I just saw reports for large company. This morning.

Seeing earnings that yeah, they really they didnt make their numbers because of the.

The lack of approval of defense budgets. So the budget was recently approved.

This is you know Washington stuff, that's I don't understand this stuff pretty well, but that was the defense authorization Bill that was signed into law on December 27th, but then there's something else called defense Appropriations Bill that's not signed yet I guess, that's a big one because that means that authorizes the actual spending our money. So this is left.

The defense industry in limbo.

Lots of lots of reporting about this so I you know it's.

It's certainly not just our perspective. So are you just see what else I'm looking at my notes here sorry about that.

Uh huh.

The defense industry, sorry, the authorization Bill has been signed.

I hope that's a positive I guess about people, saying well, we need the appropriations bills will be signed as well.

But hopefully that will be done and then the defense industry will get back to business right. Now I think some programs are still kind of on hold maybe some of the Oems are waiting to see what happens.

Ah well look at that later and so there's actually a little good news on the authorization Bill I'll talk about that later in the presentation, let's go to slide six.

Inflation, okay here below about inflation these days.

Everything raw materials freight suppliers utilities pretty much everything we do pass a lot of costs on.

We will quote businesses.

Quote of recalled.

Business to our customers I mean, but you know the big question I think it was my mind any wage how long can these costs.

These increased costs to be personal customers, where they're talking about consumers you're talking about other businesses, how long because you know.

It's almost just physics, there has to be a winner.

And it's always the same thing you don't know where that limit is how far can you push it off or for you to push it.

Sometimes when these things nobody knows they keep pushing and pushing and pushing and it's like a one day everything stops we've had it without paying these price anymore and that's usually a pretty often.

Often in the past and he's been a kind of a severe event a lot of people that are smarter than me. He says it's not going to happen. This time, so maybe the right I don't know.

But these are not our list of excuses. These are factors, we think you'd want to know about we think we should we think you'd want to know about these kind of things. We're struggling with these difficulties are not.

Not accuses though not excuses, we're not a hope it's clear we're not apologizing for the quarter actually I think our people did a pretty damn good job under the circumstances without difficult things were.

Thank you know this but maybe it's worth just taking a second to explain.

For us quarter to quarter topline there is only a limited impact we can have on a quarter to quarter topline short term it doesn't really work that way.

So because we can't tell Airbus how many acres 20, something I can't call as CEO of Europe Us and say look you know, we're a little short of topline this quarter because you could could you want a couple more <unk> hundred <unk> produced a couple of more <unk> hundred twenty's or or call. Some airlines, but the order somewhere 800, twenty's or some missile program can make a couple of missiles. This quarter because you know we want to.

Our top line up obviously and people not facetious, that's ridiculous, but that's kind of the examples.

It illustrates the.

Illustrative of some of.

The situation so for us we need to run our business real hard every quarter really tight really hard and then make sure. We're working on developing new opportunities and not getting into that bunker mode. Oh things are tough, we're going to go high somewhere which we see a lot of.

And I guess in the world maybe in our industry, but it's real important we don't do that they will keep pushing we keep looking for opportunities because that's the key we had little control about the top line quarter to quarter, because we can't tell the Oems window order stuff when they're not order. So we can't control. The fact the defense industry.

He is kind of down the dumbest, because you know Washington hasn't approved the defense budget, we can't really control the supply chain mesh that's really seem to have seem to affect the whole industry. We really can't do that and there's other program issues. You know there may be a reason why a certain you know the Oems.

Wait till next quarter to produce more missiles I mean, that's their prerogative of course, they may have their own reasons and those are things, we really can't control, but we can't control again is running our business really tight really hard and working hard to develop new opportunities and not letting ourselves getting the bunker mode. Oh things are bad So you know will it.

From a bunker.

Whenever you know the problem is.

In reality people never merge from the bunker, but we'll talk about that later, okay. Why don't we keep going because we got a long way to go here and a multi cover page sorry slide seven.

Just annual stuff.

Just to put in perspective, you'll see on slide 25, but.

The forecast for 'twenty, two fiscal year sales of 53.8 to $54 3 million and EBITDA of 13 to $13 5 million. So it's interesting with all get back to that 'twenty fiscal 'twenty.

Year in terms of top line, but it seems like we probably get around the EBITDA number for that fiscal 'twenty.

Also interesting looking at the first nine months compared to fiscal 19.

And you see that.

EBITDA was about the same in the first nine months compared to 19, but the topline there was 51 million compared to $41 million. So that means something probably means that our margins are better maybe our product mixes better maybe with developing and introducing products that are higher margin, maybe let's go on to slide eight try to keep moving.

Here, So we'll try to skim over this pretty quickly we cover this every quarter balance sheet cash cash dividend history, no there's $110 million.

Arrow item kind of interesting.

C to b cell kind of distorted our cash as well because we had a sale of a cash sale of cash sorry, if I'm wrong.

The sale to seek to be.

Occurred in Q3, but we didn't get paid for it until last month until Q4, so the the.

The invoicing and payment.

The end of Q3 straddle those two items, so really in a way that $110 million short by a couple of million dollars because the sale occurred in Q3, the payment of the big items special item didn't occur until Q4, but in any event.

You might want to do a little math and you could take that number and you subtract how much we have to spend on the expansion and transition taxes totaled payments you'd say, yeah conceptually anyway, maybe about $96 million, that's a conceptual kind of discussion analysis.

Other page of cash dividend history, well just go to the last checked item $550 million in cash dividends since the beginning.

2005.

So normally comment that's a lot of money for a small company like Park, let me just cover the first check right unless you do that well, while others were canceling.

Dividends are cutting their dividends during the crisis economic crisis of the pandemic, we did not do that we maintained our regular dividend throughout let's go onto the next item of slide nine is our.

Top our top five customers, we do that every quarter, what's locked at home too hung up on this most of these names you're familiar with because you know you see them.

Quarter after quarter.

Aerospace that's the rates you're on S. M two missile.

Spiro matrix, we do multiple programs within GKN. That's just of course he helicopter program. Our credo is obviously is the valkyrie at the bottom left and a middle River Mras.

Some 47 eight engine the Salt program, so, let's keep moving here Ah Slide 10, I think we have.

The interesting thing to me here or give a little perspective look at the bottom right Pie chart.

And you say yeah, well this is the.

The Twitter so linked quarter not not year to date. So it just it just Q3.

$13 9 million was the revenue and look at military or 41%, that's about $5 $7 million of military, saying, well, that's not too bad except a $2 4 million back to the seat to be that's the military part of the Pie chart. So we weren't expecting that in Q3, but Q4, if we backed out the to back out the two point for it.

That's only $3.3 million, that's a pretty low number look at the history, but they're pretty low number not just percentage wise, but absolute wise. So again it goes back to the discussion what's going on with the market.

We're quite sure why.

Sure we haven't lost any business any market share that's not the story at all we think we're you know we're getting opportunities new programs. That's not the story at all if the end market itself that we believe is the driver here, let's go on to slide 11.

Our niche military aerospace programs again, we do this kind of just for entertainment purposes, almost kind of a fun programs that we.

We share with you the J star's that's our parks, we make with our material.

E S. S M blade of materials for rocketry and the standard missile three that's also a blade of materials and just you know kind of funds back debt as of March 16, and March 18 missile that would be considered to be fast I know that's a.

Technical term, but lets called fast.

So military.

Affected by supply chain budget delays and also the choppy nature of Miller Jets were talking about before you know some some programs will be after this month and next month they won't be over this quarter will be active next where they won't be that's an indication of the program going up or down that's just how the for US anyway. The military business is as important as footnotes.

Bottom.

We still do love our military aerospace programs.

Slide <unk>.

12, Okay. So we're going to do here. This is one of the things we cover every quarter for last several quarters.

On slide 12, all the way to slide 16, we're going to skip over this we're not going to I'm not going to go through each item I'll just.

Hey, this is a discussion as to how the aerospace industry, especially commercial aerospace industry guidance that are predicted minutes and now you know the whipsaw effect, we talked about it many times I think that we try to lay it out pretty clearly in the slides themselves. So why don't we skip over it just your if you have any questions. Let us know at the end of this little group slides would you point out.

This is what everybody else did that got into the end of days mode. Armageddon mentality. This is not those terms and all kind of a two turns but I don't think I'm exaggerating.

The industry just died.

<unk> Park.

We never bought an NDA stuff whenever laid anybody off and he was like all of our people we didn't stop our spending on our expansion budget, we didn't cut our dividend, we do any of that stuff.

Of course, we didn't know if we were right at the time you know you you want a company or you have to make decisions, but I think history will prove that we were right and the rest of the world was probably not right at least the rest of the world. We got into the Armageddon kind of mentality, which is most of it.

Aerospace industry.

Okay. So you could probably on the back later for for that but I just wanted to mention that we didn't go that way, let's go to slide 17. This is another.

Topic, we cover every quarter, so kind of skip over this this is basically saying that yet.

Domestic aviation recovering more quickly that international aviation commercial I'm talking about commercial commercial domestic translates to single aisle international trends wage the wide body. So we think single aisle is where its at for now it's just for now not for always looked for now okay.

Let's go on to slide.

It looks like it's 18.

G Aviation jet engine programs, we use we give you this slide every quarter because it's it's kind of I know, it's not new stuff, but it's good for context for perspective, maybe some people out on the calls before the top item top left a firm pricing LTA through 2029 with Middle River Aerostructure systems Mras, such a subsidiary of <unk>.

The engineering, let me stop for those who don't know.

This was a subsidiary of GE aviation for a long long long time until G. Aviation sold the sub two S. T engineering in Singapore, a couple of years ago, but the history is why all the programs you look at here are let.

C G programs legacy G programs. So redundant factory, we said look as soon as we sign this LTA with building a road and factory we did the.

Next item sole source for composite materials for engine nacelle and thrust reversers on multiple programs I'm not going to go through all of them. The top five we call the <unk> hundred 20 Neo family.

Aircraft programs, you've got the sub 47 coal Mac programs, we'll talk about that later.

Both the <unk> and 919 in the regional jet the global 7500, Tom.

Top right. They talked about just say this is a different structure.

Primary structure for this passport 20 engine and this is true GE, it's not two mris.

All right I'm, sorry, slide 19.

Let's go through some updates on what's going on with GE aviation.

Key programs. So the slide 19. This is actually something that was in the.

Prior presentation, our Q3 presentation, maybe even two I'm sorry, Q2, maybe in Q1. This is really important statement and it came from the.

Airbus CEO, we kind of laid out his plan lays down a law. This is what we want to supply chain is expected to do.

So Airbus maintained theyre not going below 40 per month, a bakery 20 deals throughout the pandemic and there's all these dollars and analysts are they're going to have no she's going to drop they're not going to be able to maintain it and that was really not good because people read the analyst reports they wouldn't believe Airbus I believe there are I believe the analysts and they wouldn't ramp up there.

So it ended up making things worse from that perspective.

But anyway. They never went below 40, and now they're saying yeah 45 by the end of last year and then they go to 64 in 2023 70 by 'twenty 475, but by physical chart.

Keeping fiscal leisure calendar years, I'm, sorry calendar 'twenty five brushy so.

I've been clear on slide 20, let's just continue.

We're still on the <unk> hundred 20 topic.

So as of the end of October 2021, CFM. That's the manufacturer the lead point of engine and a 60% share of firm orders for <unk> hundred 20 family of aircraft.

Based upon your Orange news, which is kind of a Bible a lot of really interesting and.

Detailed data in the Aero engine news, that's pretty good information now.

You know.

A lot of ballast in that that percentage is.

This program is shared with Pratt CFM and Pratt why is that just over 10000 from orders over 10000. So in other words, if somebody got some older 50 up or down it's not going to move that percentage out most a lot of ballast.

Big backlog for these engines and also for these airplanes.

So assuming the bullet I didn't mirror 60 per cent CFM market share. It was 75 <unk> hundred 20 aircraft family per month that rate represents approximately $30 million per year of revenue the parks starting in 2025, when they say they want to be at the.

75 per month rate, we haven't giving you this information before kind of danced around it and say, it's like better and bigger than a bread box that kind of stuff. We decided to give you. This information because it's just gotten to be such a significant program for park that we saw.

The right thing to do you communicate that information to you so.

Continuing or sometime soon but Airbus suppliers. Some tension has developed over the aggressive Airbus <unk> hundred 20 aircraft family forecasts at forecasted ramp up.

Public stuff, which to me is kind of strange you think they'd had these discussions.

Behind closed doors somewhere, but Airbus continues to indicate its not backing down it's doubling down or being pretty firm about their intentions are for <unk> through 'twenty and I think there in the Catholic seat here.

I think they are because of the fact they are two engines on the program.

They can leverage one off the other and there's a lot of evidence they've been doing that as well to see towards the supply chain support them to get to that target of 75.

Slide 21, we're still doing on <unk> hundred 20 family. The route for 'twenty, One X L. R.

Okay.

Z here they completed Airbus completed the.

First assembly of the first test aircraft final Assembly, rather first flight expected. This year a certification entry into service next year, that's pretty fast if we're 21 extra large currently positioned as the only single aisle aircraft with 5000, plus miles statute range statue mile range.

225, plus seating capacity.

It's a big deal it's a game changing aircraft I don't know of a lot of people think it is why is that because this aircraft has the ability to replace.

Wide bodies uncertain emissions.

That kind of range that kind of seating capacity replace wide bodies, which are much more expensive.

Certain missions and that's a big thing this point Boeing doesn't have response to this airplane, whether they're working on one or not is not clear people say they are but the problem is that this airplane in the extra large coming out in.

2023.

So it takes a long time to develop new airplane so.

I hope Boeing will get into the game, but even if they do it's going to take many many years for them to get an aircraft that would be in production on our available for sale that could compete against the XLR.

The 820 Neo aircraft family sold well in Dubai.

Airbus recently receive large <unk> hundred 20, Neo aircraft family orders from KLM and Qantas.

From traditional loyal Boeing customers, so that's kind of a big thing.

Appealing Airbus just peeling way to Boeing customers now, we all know everybody knows that Boeing had trouble with the Max and we wish them well, we'd like to get on the Max program and on the program. So no problem the Max.

But.

My sense is that Airbus and their CEO are trying to capitalize on the opportunity this window to gain market share and would be pretty aggressive.

My sense, it's I think it's maybe comment we believe that to be the case.

Sort of going after Boeing customers as you know nothing sacred I guess.

<unk> hundred 20, Neo recently surpassed the 20 as the aircraft in the <unk> hundred 20 Neo family was the most of them orders, that's really interesting because you know that.

Airbus is really focusing on the <unk> through 'twenty, one that did not that are not folks.

And then through 'twenty, but really focusing April 'twenty one deal.

You're setting up a new plant in Palouse, maybe just for the April 21, So it's interesting that that's actually more popular airplane and the <unk> hundred 20 at this point and then the last item here was a little concerned anything.

<unk> recently announced an enhanced version of a T. T. S engine with <unk> hundred 20 Neo family deliveries to begin in 2024 and you know this is the engine that the other edge of option for the <unk> hundred 20, Neo So CFM shares a program with Pratt.

So far as CFM share of 60%.

So, but you know, perhaps coming out with enhanced engine should see F N B concern.

Hope they are because I, you know I would take a press seriously.

They're not asking me, but it's in my opinion anyway, 22 slide 22.

So let's go on to some other GE program updates here.

919, so <unk>.

<unk>. This is the the Chinese aircraft companies nine one nigel to be a competitor to <unk> hundred 20 deal.

Some 37 the Max.

Until very recently until the beginning of December Commack was maintaining that they were going against airplane certified in China anyway, and begin deliveries in China before the end of last year.

And then oops, just very late and.

In the Euro in December.

The China F a hey, let's call it that.

<unk> set the Commack 919 is not expected to complete certification until 2022, that's this year.

That's been indicated that as of early December 2021.

909 prototypes had completed only 34 276 required certification flights. So that's you know that's kind of good information because its not just delayed a little bit of a long way to go in terms of certification.

I just saw.

A report this morning now from Commack, not from the China Chinese FAA that yeah. In fact, the programs delayed they're not talking about when the planes get certified alone there the Chinese FAA just talking about this year and our coal Mac I think talk about Covid delays you know, there's a lot of serious lockdowns end.

China as a region one of the reasons anyway.

For the delay in the certification.

Shipping over in this presentation and discussion will global 7500 younger AAR Jody J 'twenty, one so that they're not important it's just they're not really many changes in those programs and we're trying to move through the presentation here on.

Slide 23, Okay. Some 47, we're going to include us until the end of <unk>.

You're about to 747, Boeing has announced will terminate production with the Queen and skies in 2022. The last time 47 are expected to be delivered in October 2022, that's around the corner.

David one of the best maybe the best My my opinion inches up their commercial aircraft ever built long lived the Queen. So this is really a sentimental favorite for US. This is the first program we got on.

G Aviation program, we got on and back in 2014.

My favorite airplane.

I would always want to remind you.

Even though it's a sentimental favour, it's little lesson to less than $2 million in revenue for us.

There are two new photos left and right. So these are current photos of the 747 in Anchorage, Alaska and see a lot of sub 40 sevens in Anchorage.

Those are preferring.

Slide 24, Okay. This requires us to slow down a little bit.

A lot of information here.

So let's look at the top part of the the slide for perspective on what happened with lets you sits at almost a proxy for the.

Commercial aerospace industry. So in fiscal 'twenty, we had about $29 million of sales, it's really about let's call. It 28, because there was a million dollars of sales on the.

On the 19th.

My next program, which is not an active program for US right now dormant so, let's say 28 million and the reason I like $28 million divide by $4 7 million that kind of works nicely, so $7 million per quarter and you could see in 'twenty. One you know now the pandemic is starting to affect US one two the numbers are going down a lot 7 million as a starting point.

Fiscal.

Q3 fiscal 'twenty, one to three 1.8 million, that's a that's 25% of $7 million and 75% drop that's a pretty precipitous drop I would say, but then look what happened we go from.

Q3 of 'twenty one.

To Q1 'twenty to Q1 of this year, that's just two quarters.

It goes up from $1 8 million to $7 million, that's a lot harder going up and going down you know that's a four times Forex and two quarters, that's a big big ramp up in you know we handled obviously those are are those ourselves.

And we're kind of at that $6 million to $7 million per quarter right now good perspective, but you know what's interesting here, it's a little bit of a different story.

Close.

Airbus never went below 4800 20 units per month.

And there's some 47 was flat during this period. The other programs are ramping up so it wasn't really an end market program issue. What was it was destocking. It was just kind of end of days Armageddon mentality, where the supply chain shut everything down and not only that they wanted to get rid of older inventory that we're selling off their inventory.

And they're not only not producing they're not they're selling your inventory whatever they could sell.

So that really I think is the kind of the message behind our numbers. So it wasn't so much the end market then program markets. It was the Destocking that was just kind of widespread and rapid throughout the industry.

And of course that puts the industry in a tough position because as you know we go back to the part we skipped over.

They are back on their heels.

Laid off lots and lots and lots of people not so easy to hiring them back and guess what they have no inventory left to Cushing and ramp up.

So the supply chain.

Got itself into a real predicament here.

The Q2, let's go to the bottom the top portion of the the.

The group of numbers up.

Fiscal 'twenty to Q3 the quarter just ended at $6 2 million our forecast when we did our Q2 presentation for Q3 was six in a quarter to seven and a quarter.

So we're kind of at the bottom of the range I wouldn't read anything into that decent numbers move up and down a little bit based upon you know.

Something shifts to being in a quarter than this quarter, but I wouldn't read anything into that.

Going down to the lower part of the page our Q2 fiscal 'twenty to Q4 forecast the current forecast to $6 6 million to $7 1 million in Q2 that was six in the quarter to seven a quarter. So we're kind of tightening the range, we're not really changing very much tightening up because it's a this quarter.

More information about it that makes the total forecast for the.

Fiscal year, 'twenty, six 3% to $26 8 million and go back to Crystal 20, $28 9 million, but maybe adjusted of $28 million were getting close we're not quite there, but we're close certain factors that may affect our forecast well how about supply chain how about.

Covid disruptions. So those are two with all those factors, we talked about to discuss at the beginning of the presentation slides five and six they apply but I would say supply chain that maybe COVID-19 disruptions are the things that.

Could have the most impact in our forecast.

The orders for Q4, new orders are booked so.

Those orders aren't shipped I mean, something happened that prevented them from being shipped.

So let's talk about.

The orders are booked in talking about her she not for.

Not for everything with Q4.

Let's go to slide 25, little more to discuss your we've got to go back and talk about that a $2.4 million a seat to sales.

So for.

Let's go right down in Q4 and at the bottom fiscal year 'twenty to Q4.

Our forecast is.

12 month, three quarter of million to 13, and a quarter of million topline. So what's going on here in Q2, we predicted 15.75 to 67 five now you subtract out that $2 4 million.

What it is supposed to be Uh huh.

That was supposed to be in Q4 and it won't be Q4.

That still doesn't get us there that would bring us to 13, three five to 14.35 I understood Hussein take what we gave you in terms of forecast for Q4, and Q2 sort of packet 2.4. It still gives US 13 and $13 three let's say to $14 three which is higher than the $12 75 to 13.25 why is that.

These are things that affected Q3, we think are continuing into Q4, you see its not chi it's all the other stuff, especially military and we talk about the bottom line, a 3 million to $3 5 million again for for Q4 for the current fiscal year Q4, and Q2, our predictions were three five to $4 five so.

We're bringing that number down obviously driven by the top line and.

That's really the story nothing about the bottom or the top line of one piece of good news I'm going to share with you for Q4. We told you about this in Q2, we did the Q2 presentation, we still expect about $1 million of the plate of material sales in Q4, that's not to see to be that's our materials, where the margins are quite good.

So okay, a long term forecast.

Sorry, let me skip over certain factors and risk, which may affect the forecast those are similar to the factors, which affected Q3 listed in slide five and six so again go back to those four of those risk factors supply chain and market for defense non G. Covid disruptions. Those are the things that you know I would probably highlight as the biggest risk.

Guidance long term forecast we've been at the peak.

They asked us when are we going to reissue long term forecast, we like to do that but at this point. We just feel there is a little bit too much uncertainty in the market for us to do that and we don't want to give you something that's a guess you know we want to have some level of confidence that the forecast makes sense. So.

It is possible with my promising but it's possible when we announced Q4, which is in may maybe at that point some.

Some of the dust will have cleared you know won't be able to give.

To give you some kind of longer term forecast.

Let's keep going here.

In late.

Slide 26, our expansion in Kansas, we could just get them through this stuff.

<unk> speak for themselves. The film line trials are complete that's a good thing that's a big accomplishment taper off blind trials in progress planning to begin qualification.

January.

And just make the point, while many others are slashing their capital spending are canceling their capital budgets altogether, we push forward with a complete or a major expansion. Good thing we did because at this point, if we hadn't we'd be in a world of hurt, especially if you look at things like that 75 per month for a prediction from Airbus, we'd be way behind power or not.

Just for redundancy, but for capacity.

I painted parks people slide 27, so our people count is 112.

It was 114, when we did our Q2 presentation. So went down not off we're trying to push it up so it continues to be very difficult to hire the people want a higher that's not.

Not a minor issue it's a major issue I know, we're not the only one but we're talking about parks. So what you know about that.

We know we're not the only one having difficulty hiring people.

Parks people facing many challenges and they're doing a shorthand it.

Major supply chain, we're revealing things that we've discussed but just want to put in a context. These are these are the things that people have to deal with everyday major supply chain freight challenges a daily battle a lot of work and what does this lead to at least the abrupt adjustments and changes to production planning and scheduling required to accommodate supply chain issues, you know people run a fact.

They like to have some kind of predictability. So they can plan their factory. So maybe a couple of months out or so that's the ideal that's not for us because okay. We're planning to produce this product next week, but when you get the raw materials. So we're going to switch everything around what are the moving people around we are going to produce something else, where we have enrolled materials.

So it's a big challenge.

A lot of extra work and effort that goes into managing a business under those circumstances COVID-19 challenges still living with them or you know, it's been a difficult quarter for us with Covid and we're off to a rocky start.

At the beginning of the new year with Covid I guess you saw them across.

I can tell you just so you know with two concerns one obviously the most important is our people.

Most of our people done fine I mean, they're okay to recovered, but it also causes pretty big disruption for our production.

With the supply chain issues were going to move production around and then people you know they.

If somebody at home test positive or they test positive and maybe okay to maybe five but they are out there the quantity and it sounds like a vacation where you give somebody noticed it's like no.

Somebody calls in I just had to.

Positive for Covid or not feeling well.

And I'm getting tested and I have to wait for my test results.

Hum.

It's definitely in the category of a challenge.

Stress and anxiety caused by vaccine mandates. So I know you hear a lot about this stuff how wonderful it is booked for people actually work for a living.

Of course, a lot of anxiety.

They are thinking what am I gonna lose my job now and it'll get vaccinated, we get vaccinated, maybe before you got COVID-19.

I'm not going to get into a discussion about the you know the.

The merits of the vaccine.

My area.

But in the discussion about our people. We told people is not we're not you're not getting fired for not getting vaccinated.

Lot of people spoke up and said Theyre very relieved because they thought they were going to get fired that doctor can lose their jobs now with this osha rule you probably know this but the stream Supreme Court doesn't strike it down you're supposed to be a testing option, which is good so in other words.

People understand that people not vaccinated can test as an alternative and we will do it for them will buy the tests.

Pay for the test well bring them in rally do whatever once you know once a week maybe on Monday, we'll have to figure that out if we can get the tests. That's in it right now so we'll see what happens with that.

Bringing the new plant up in online new equipment trials. This is a big big Big deal.

Major consuming project. There are people are handling short-handed without reinforcements, let's go on to slide 28 here still dealing with our people dealing with managing our parks new projects and initiatives will talk about some of them that takes a lot of work a lot of effort to do that that's what he's talking about before a lot of times when companies.

Feel pressed or stressed they have lot challenge. They go into a bunker. We don't go into a bunker, we don't stop and also it's still we could go and look for opportunities we pursue opportunities, but it's a lot of extra work. Our people are handling that major consuming projects or people are handling without reinforcements against short handed.

But no matter.

Our fiscal 'twenty to Q3 parks people once again stepped up that's what Bob parks people do everything that could be produced and shipped got produced and shipped notwithstanding the many obstacles or roadblocks, which our parks people how to overcome and once again, thank goodness for parks customer flexibility program.

Talk about that's usually every quarter, so I'm not going to go into details, but it's really a godsend. It was guys. Soon when business was going down a godsend and when it's going back up.

Slide 29.

And most importantly, thank goodness for park right people Park is very fortunate and blessed to have these great people, what others laid off their employees by the thousands and thousands of park held onto <unk> kept all of our people throughout the pandemic and economic crisis.

When either ask for and or took any government money for keeping our people.

We don't need government money or government incentives to keep our people we keep our people because you want to keep our people.

Parks people are precious that must make that Pete parks people are what makes park park.

Pictures from our holiday Party every year, we haven't.

Paper airplane contest the Winter's day shift the night shift, it's actually taking pretty seriously. These guys who are like you know kind of almost aeronautical engineers in how they design their paper airplanes of consciousness, who can throw it to further so.

Those are the winners of our holiday airplane.

Paper airplane contest.

Slide 32.

Let's talk about some of what are we doing that's new not being in the bunker. So we got the change web.

This is just really an exciting thing launch on top of Hum.

French Guiana Christmas day on top of that era and implies a rocket that's that same company by the way.

So we have the distribution agreement with <unk>.

<unk> is currently in route to Lagrange to Warped point, located approximately 1 million miles from the Earth James Webb space telescope.

Just for perspective, the Moon is about 239000 miles from the nearest decided about 3 million miles downhill.

I don't know about you, but I never heard of Lagrange points until about two or three weeks ago now hear about them about 20 times a day, because there's a lot of news about the.

Well actually there's a German Facebook, there's like a page on Facebook that you can go onto where you can join I guess, where every day is a lot of really interesting news about the James Webb and there's a website that you can track its progress to do that.

Like range, two point, which kind of.

At least for us, it's fun and fun and exciting so.

James Webb Space Telescope mission is look back at the beginning.

A time universe existence.

So this is kind of a big thing.

There's a lot of theoretical.

Beliefs scientific theories about how the universe began but we never actually been able to see how the universe began.

Just as began so.

For instance, what did exist before the beginning of existence was your interesting questions and this is maybe not the topic of an investor call you talked a lot numbers and stuff like that but nevertheless for us. It's a very you know.

A very big deal a big deal the James Webb space telescope that we're participating in it that we participated in the.

And the structure, let's go on to slide <unk>.

Three.

30.

31, sorry.

Slide number so the bottom of page.

It's a James Webb space Telescope strategic mission again, same kind of top with wearable standing achievements of human race, well, that's a pretty big one I would say going back to the very beginning of time.

Reis anyway pretty big achievement, if it's successful to really see back to how life began how these university can how existence began to big deals. So you can do you can fill in the blank here.

But I would say, it's you know what's up there and the bottom of page so our proprietary sigma stretch or incorporate into the structure of the James Webb space telescope.

Parker's along for this ride a rise to say the park is honored to play a part.

Credible mission of the James Webb would be the understatement of a lifetime really a very it's hard to describe how big a deal for US. This picture here is kind of interesting that's a little diagram obese Lagrange points.

James Webb is gonna be orbiting around just L. Two point and the right side of the little diagram. There. Let's go on slide 32. So there was a news release about this yesterday, so you might have seen it.

About the.

Business partner agreement that we entered into with Aerion group in France. So we.

We purchased our <unk> type product.

This company for a long long time, I've actually personally visited them in Bordeaux I think around 2005, so we've been working with them a long time loved this company Great Company very special company and they asked US if we could be the exclusive distributor for this product will keep buying it for our own account, but they asked us to we could be their exclusive distributor for the U S.

Really honored to say, yes of course, so that's a really big deal we're happy about that let's go onto slide.

33, I guess it is so another what's new with park, a major potential private project initiatives, a new plant yeah, sorry, we can't give you much more detail about it we're just not in a position do that now but these are big things, we're working on and so at least we want you to be aware of them. So somebody asked what the heck with someone who visit our plant what they are.

You do want that used new plant. It was an interesting question posed by observing the smart person because this person saw the huge plant and some of it was spoken for we have a new ones in the pipeline and the phone line.

Have a freezer space, we have slitting, we have a warehouse, but there's still a lot of space in there and there is also a space you remember we talked about this before for another.

Melt tape line or solution line, but that would be to add to our current capacity, but that's for something were currently doing some other line and those are the hot melt line or solution line that would be a no wind that would be added to our.

Our our equipment inventory to increase our capacity, but that would be something we're already doing we talked about before that's not what this is pages about there was additional space in a new plant, which is set aside for new project initiatives, including two potential project initiatives. We're currently working actively on both of these projects if all the purchase installation of major new quick.

All lines, which would bring new capabilities in market offerings to park, one relates to a joint development project with an important customer another project.

It's something we would do on our own.

We're currently reviewing both projects with equipment suppliers and just for perspective, we went forward with these projects is probably about six to eight a $69 million purchase of equipment and installation costs. Let's go onto the next slide slide 34 I believe.

Continuing on the same topic Theres no hard deadline for final decision, making on these projects, but they're both front burner projects and we'll keep you posted although these projects relate to the manufacturer of composite structures. So its not a big departure into something totally different.

They both would bring new capabilities to market all things for park because of things. We currently do not do.

Let's go on to slide.

35 are still under what's new at park, a topic and form a partnership with an established aerospace manufacturing company partnership in pulp because it's not a formal partnership a formal agreement. It's a collaboration kind of arrangement again, sorry, we can't say much about this one area. We can't give you details, but its still preliminary but what I'd tell you.

But some important things we're working on so we're going to tell you about this park believes its established aerospace manufacturing companies its important capabilities, which are complementary to parks. So they do things that we don't do we do things. They don't do that often can be the formula for a great point quote partnership or collaboration anyway.

And as a former partner of Coke oven collaborating on certain defense programs. It's about defense. This collaboration has already led to an important new Defense program Award for our partner and us and our partner and Us and parks are.

Currently collaborating.

On a.

Carport partner and we are currently collaborating on an RFP for another significant defense program, hopefully get it and we'll see and we'll keep you posted but we believe with some form of partnership is with potential open up significant new opportunities for park and our former partner.

Let's go on to slide 36.

Or are they just kind of last slides. So sorry were taken so long as you can tell I'm rushing.

Stumbling over some of it by rushed by going too fast.

Let's just start with the top year. Some say the economy is doing great and that all is well with the world and you know we hear this a lot I read about a lot.

The financial press them all we could say is that's not our world you know maybe somebody elses World, maybe it's a world of Wall Street investors, but not the world for us.

Mainstreet World.

That's not the world we live in parks World is full of challenges going to review some of the challenges there just for perspective your neighbor major supply chain and transport challenges. Some say these are improving we don't see it not yet anyway daily battle and abrupt adjustments in production planning and scheduling very difficult to hire the people, we need still living with Covid. It's many.

<unk> vaccine mandates, we've talked about that are bringing new plant online recruitment trials major effort major effort and our people are facing these challenges shorthand. It we can hire people, let's go onto the next slide which is 37, but here's the key thing even in the face of these many challenges which are people and fun and deal with every day.

They are people continuing to press forward with major initiatives. That's the key point here, we got a lot going on a lot of a lot of challenges a lot of difficulty just how it is we're not complaining about it just a world. We want you to know about it but that doesn't mean go into a bunker and hide until things get better we keep pushing for press report that's what we do that's what our Pea.

People to our new business partner agreement. These are some examples we just spoke about with Aaron group with two major initiatives in Dublin development projects were pursuing their new plan major new opportunities were pursuing through collaborations with our informal aerospace manufacturing company quote unquote partners numerous other initiatives. The point here is all these new things take a lot of effort.

Lot of dedication a lot of time.

So we could say yeah were really tied up with all these difficulties and all of the challenges you're facing we'll do this all the time, but we don't believe in that that's not who we are to us. The other time never comes so we'd do it now we press forward, we keep developing opportunities. So that's what we do in the face of challenges and difficulties. Other makes it may seek shelter in the bunker.

And wait for things to get better, but apart we do not give bunkers you cannot wait for us the bunkers were going to die, but I guess the last slide.

38 Park, even a world full of challenges we press forward. We attacked we don't stop. This is all we know this is what we do at park, we're swinging for the fences.

We're not like the others at park, we play for keeps now at the end of every presentation and show you a picture of one of our departments or groups or teams. This is unusual. This is like a bunch of different departments. These are people taking responsibility for equipment trials and bringing new plants online. This is a major major effort.

People are from warranty engineering facilities production, there's about four others that didn't make the photo op I don't they won't shift or something like that.

But I'm going to read the names to you back row Christian Dexter, David frontal fill up their savak or Kelly, Dave or stay way mall Martine Leo like I said several people didn't make the the phone.

But what's going on here. These are not new people. These people will work for us a long time. So four months ago. There was no new plan to bring online or no trials. These people didn't have a lot of free time that I can remember. So these people are the people who are doing this major project of the trials and bring on a new plant online, even though they have a day job.

And it's not one department, it's not like Okay. We have we try to hire people who cannot or people. So our existing people are dealing with it and deal with it very effectively very aggressively doing the trial as I said the the film line trials are complete we are in the tape line trials now the qualification a lot of other aspects of bringing new plants online.

So that's just kind of an example, we're talking about alright that concludes our presentations.

Apologize that took a whole hour.

Operator, if anybody has any questions, Matt and I'd be happy to answer them at this time.

As a reminder to ask a question. Please press Star then one.

If your question has been answered and you'd like to move yourself from the queue press the pound key.

Yeah.

Our first question comes from Brad Hathaway with scan you. Your line is open.

Hey, Brian Thank you for the detailed presentation.

Especially I appreciated the commentary on what.

And Mras program could look like in that with the 80 20 and in 2025 that would be.

Incrementally helpful. So thank you for that.

One quick question for you and then one quick one is can you give us any kind of thought on the materiality of the area and space I guess feels relationship that was announced yesterday.

So.

We can't quantify it.

Yes, I'll answer this way first of all we already buy a lot of this product.

From my perspective, it's a big deal already in terms of being distributor in salaries, but others were just really getting started we'll have to see we really hard to predict.

These are very critical.

Component.

Fabric seem to fabric that she was a lot of missile programs.

So if other companies want to get involved in the missile programs, they're going to need this material.

They'd have to get it through a lease in North America, but I can't really quantify it. It just I mean, just yesterday I think the news release link we signed this agreement with them just about a month ago. So maybe not even a month ago sometime mid December.

So I have to get back on that.

To update you as we go I wouldn't expect though because the way the nature of how aerospace works and in particularly defense that next quarter, we're going to tell you. We've got $5 million of sales of this product I think it's kind of a more of a long term effort to develop this business.

Got it understood way any future detail you can give on the materiality of the long term.

Sure.

Hum.

Second question. The second question is on capital and we just got to make.

Presentation, you talked about I guess.

Project.

<unk> $69 million of capital.

But you still have you know even with the conservative calculation basically close to $100 million of capital on the balance sheet. How do you think about I guess your alternative capital going forward and what are you seeing in terms of things you're excited about or thinking about as excited about compared to where we were six months ago.

So we certainly don't need that kind of.

The amount of money to run our business on a day to day basis, I mean normally we generate cash.

Like to be conservative so we want to have some working capital available.

So that's our opportunity money.

Really.

I know it was $6 million to $9 million I mean for some companies that would be a lot for us it's probably not that much I mean, it's a important money because we had to earn that money you don't know if he gave it to us.

That's kind of our mindset and our money in order, we don't spend it casually, but to your point it doesn't make a huge dent in the cash position now.

And you know this is a.

Probably a little bit of a maybe frustrating discussion for for you and some other shareholders. Because all we can do is say, we're working on things a number of things, but we really can't identify or quantify what those things are including acquisitions.

And I know, we've been talking about for a long time, so I wouldn't believe blame some shareholders being a little skeptical of that.

I wouldn't blame on at all.

Our standards a little different we're not looking to just buy something to buy something we cover that you know probably dozen times.

But let me just go back to what I said to US this is our opportunity money for the future.

And whether we do something or other you.

We've done a lot of dividends in the past we tend to pay a regular dividend that's something that obviously, we will consider but my hope would be that we still are able to use a good portion of cash to develop opportunities for parks in the future.

And to be clear in my preference has always been if you can find a high return use of that capital whether it.

An acquisition or whether its a joint venture or whether it's an investment in another factor he could go towards him and he's not doing because you're going to be incredible that would be my preference.

But just to push a little bit more.

You've got as you said the aerospace industry would guide a year ago and is now recovering.

So I guess, if you couldn't get the if you couldn't find a deal that would work in the last 18 months.

At what point do you say you know what.

It's gonna be actually even harder I think if you value.

Asia Pac you would going forward and maybe you know.

Youre not going to deal with it.

Good question, so you're right, we thought that when the you know the.

A market collapse that there would be a lot of great opportunities maybe companies that were good solid companies, but has too much debt or that kind of thing and the valuation needs to be really good.

But that didn't happen I am not the expert on that topic, Greg, but I understand that there's just so much free money. So much fed money around that people were able to hang on.

Rather than selling at these kind of distressed levels bargain basement levels hang on and get through the difficult times, which is I think what a lot of people did and you're quite correct. The devaluation never went down to as much as we would have liked but they certainly are very high right now everything is high.

Asset cars houses both planes.

Businesses.

And that's obviously not our friend that's not good for us maybe with interest rates going up maybe nobody wants interest rates go up except us because we're the ones who are the cash maybe that'll help us a little bit.

It seems like the 10 years up a little bit again, so that might actually be good news for us.

But the.

These more direct answer is that we have to keep adjusting our focus and looking at other ways of other things, which is what we've done what we're doing because you're right. I mean, so I would say keep doing the same thing expected and result.

The definition of being insane so.

Just to keep at it and saying Oh, we're still doing the same thing it is not putting its logic to it when you do your.

Your point is correct and we have not had that success. So we do is we keep adjusting our focus and refocusing retuning looking some other perspective, and we're pretty actively doing that actually right now and you know the frustration with M&A stoppers, obviously, there's only so much I can say.

Hmm.

We can't really give any specifics.

I'm sure you understand that it's not something that's possible.

So.

I don't want to say, except I am hoping that you'll see some some.

Some interesting things in the future on the M&A side.

We're continuing to work at it but you know very good point, not just continuing to Peter head against the wall of doing the same thing.

Our focus will be go so that we have a better chance of being successful.

Great excellent. Thank you very much for your efforts.

Pardon me.

Happy New year, Brian.

Again to ask a question. Please press Star then one.

I'm not showing any additional questions I'd like to turn the call back over to.

Brian shore for any closing remarks.

This is Bryan again of course, so happy new year to all thank you very much for listening to our very long presentation every time I want to make sure that it gets longer.

But Matt and I wish you, a happy new year, and all the best and feel free to call Us. If you have any follow up questions as always happy to talk to you Thanks and goodbye.

This concludes the program you may now disconnect everyone have a great day.

[music].

[music].

[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, third quarter fiscal year 'twenty, two earnings release conference call and Investor presentation.

All lines have been placed on mute to prevent any background noise.

After the Speakers' remarks, there'll be a question answer session.

I would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question press the pound key.

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 this is Brian welcome all happy New year welcome to our Q3 Investor Conference call I have with me as always as usual mascara borrowers CFO.

So we announced their earnings. This morning, there was a news release and the earnings are released or instructions on how to access the presentation, which we're about to go through when you want to get to that presentation. In front of you. It's also posted on our website. That's another avenue to get the presentation in front of me, but without actually doing the presentation. This.

Paul will be less meaningful I think as usual what we tried to do with these calls is mix it up a little bit try to provide useful.

And interesting information to you and for three perspective, we can we're not just going through a dry analysis with numbers and data.

We can always do that for you later, if you want a call back.

So we have this dilemma that keeps calling every every quarter, which is the stuff. We cover every corner and do we just go through it again on the problems of presentations get longer longer we should want to discuss new stuff as well. So we're going to skip over at least skim over a couple of sectors that we have.

Yes.

Topics, we've covered before multiple times in prior presentations and calls.

So I guess, that's it just want to warn you I guess just to go through the presentation. It's a long presentation, we'll try to go through them as quickly as possible, but it could take up to 50 minutes, maybe a little bit more that's five zero not one five.

Then after we're done with the presentation to the extent you have any questions, Matt and I'll be happy to answer them. So why don't we get started on slide number two is our forward looking disclaimer information statement. If you have any questions about that let us know so on slide three is our table of contents and slide four we can't go through slide four quite as quickly so.

There's a little bit more because your slides so let's talk about Q3 results.

Sales of $13 million 864000, gross profit of 3 million to 863 on EBITDA adjusted EBITDA 2 million 670.

Didnt look at the progression from quarter to quarter, you can see that bullish in terms of bottom line. This is a down quarter from Q1 and Q2, let's talk about what we said.

We predicted if you will but they're not really predicted what we our forecast estimates that we provide you when we did our Q2 call regarding Q3, we saw.

The rest of it for sales of $13 million of $13 5 million and adjusted EBITDA of 3 million to $3 4 million. So its kind of a strange thing, we actually exceeded our sales estimate but didn't get to our EBITDA estimate not hum.

Excellent. That's it requires explanation, which you brought to go into but before I do that let me just remind you what you always do our forecast philosophy. When you provide your forecasts. We're telling you what we think is going to happen to the best of our ability obviously, we're wrong, sometimes but we're saying at the time. This is what we think is going to happen. We don't play this kind of well go up again, what we gave you a low number.

That we can beat and that'd be heroes.

To us that's not that's not how we do it we think that's kind of insulting but other people that wasn't that's fine and that's just not how we do it I think you know that by now.

Let's go to the bottom of the.

So I hear that but it's a big but this is an important thing it will come up a couple of times or so during our presentation. There were $2 $4 million of missile program in central component sales, which were expected in Q4, but occurred in Q3 now we did our Q2 call. We told you about this we said that's going to be Q4, that's what we expected.

We now can call. This a product suite to be until now it's been kind of an anonymous product, but we just announced yesterday a deal with area and then we'll talk about that later, so we now have Polish products used to be.

It's a very specialized proprietary.

Fabric that's used.

For us to produce a laser products for missile rocket program.

So we'll get into the product a little bit later, but anyway, let's just call it seem to be maybe for shorthand rather than saying what are we call them [laughter] central component sale missile program in central component sales as kind of a mouthful, but anyway.

This sale took place in Q3, not Q4 that wasn't really are doing this is driven by the Oems remember how this works. So there's just a component. It is a critical component for the missile programs are sole source on these programs. It comes from well we've been saying.

Our country, that's an ally of the U S. It's a French company areas, a huge company huge company, but I guess some of the Oems old nervous. These are companies that are maybe the missiles and rockets programs.

Making sure they have a secure supply of the seat to be so they asked us to go buy the product from them from sorry from Aaron.

We have a relationship with her and we do that and then we sell this product to our customer and we hold it for them. It's a it's in our factory, although its their inventory they own it.

And is it just a markup involved when we do that so it's a very low margin sale as well now the good news is and that's where there is a lot of good news here is that ultimately we plan to use that product produced our ablative materials and those materials. When we produce those materials are very high margin. So net net a very good but the first part of the transaction can be here.

Stuart of because its a lot of revenue and very low margins and it was supposed to be in Q4 and ended up being sorry. It supposed to be yeah, Q4 ended up being Q3, so that kind of throws everything out of whack here a little bit.

So, let's just think about that $13 $9 million of sales in Q3, but let's just for the purpose of kind of getting some perspective here that subtract that $2 4 million was supposed to be Q3 anyway that would say that it's more like $11 5 million without that seek to be sale $1 5 million out $1 5 million.

Paired with what we were predicting 13 to 13, yeah, well, that's a million and a half below the bottom of the range. So now you start to see what's going on here actually understanding that I can say geez that EBITDA is pretty good and it is pretty good considering the circumstances based upon the top line.

So.

Well, let me see what else I have here or just a little interesting point of Oh, maybe maybe interesting to you. We currently have over $5 million worth of there seem to be product in our factory is not owned by us or told by our customer, but that's good because that means just like a lot of ablative sales that are coming.

It doesn't mean it won't be next water that's not how it works they want to have a secure supply for a long time well that's good because this kind of money in the bank for park because ultimately the plan is that we would [noise] when our customers tell us will it take that C to b product and with our proprietary resin systems produce there's a blade of material and that's where the.

The sales the margins end up being very good on those.

Those no sales.

So I guess I think that covers that let's why don't we move on to slide five.

And there are other factories, which affected.

Q3 sales and margins.

Not just to see two things so let's talk about that supply chain challenges daily Battle. We spoke about this we did Q2, but we.

We didn't see this coming exactly but they're actually for our from our perspective worst in Q3 and worst currently than they were when we announced Q2 so.

When people say, it's getting better and all your reports about this newspaper articles Wall Street Journal I Dunno World, There and they're not novel that's for sure our role that's not getting better and under supply chain challenges difficulty sourcing raw materials international shipments domestic shipments freight issues additional costs for expedited freight shipments.

So all together when you look at the first three bullet items.

$600000 of sales that we didn't have.

In Q3 abuse of these things are there we just.

Couldn't get someone to ship the product domestically or internationally and difficulty sourcing raw materials, we couldnt get the raw material to produce the product and ship them by the end of the quarter.

So I.

My feeling is are people doing a really good job under very difficult circumstances, but we were not able to get all the raw materials, we needed for the quarter. So you take all those three those three things together 600, we actually know exactly what the number it was like 593 or something like that but we're not going to give you. The breakdown that is a little bit more information.

As usual, we think we can compute that number that's a hard number.

Remember I said, there was a $1.5 million gap, the topline, where there's 600000 of it but that's still I left what happens to the rest of it would happen to the other 900000.

Well, let's talk about that supply chain issues impacting aerospace industry generally so.

What does that mean this is not our supply chain. It means we're not the only one.

As far as we know everybody is struggling with this that really puts the brakes, you know a drag on the whole industry the whole aerospace industry, because if we can't get stop other people probably aren't going to stop either.

And if Europe OEM.

Park, they're good they're there on time, they can get you what you want but that's really nice, but you know I got 25 other suppliers under getting music component that I need for from them. So what's the point of making these extra airplanes or missiles or whatever if I can hold to get all the raw materials. So it kind of puts a drag on the whole industry and I were talking about our top line not just the $600000.

We could give you can't really computing.

Item hard to know, but it's it's there it's very it's very palpable as far as we're concerned.

So the other item.

Washington efforts associated with bringing the new plant online and equipment trials.

As far as hitting the P&L directly these are minimal cost as far as the efforts concern major major major effort I should say.

So the next one is a another important item.

Supply chain issues impacting aerospace industry and delays and a proven defense budget. Those are two items, which to me really explain why our market is soft right now and probably will be swapped into Q4, but this has nothing to do with G. By the way. That's the one exception G is just going according to plan.

Programs.

All other than G E. So for us other G is going to be largely a lot of it is going to the military. So when you hear a lot a lot a lot about how the delay in approving the defense budgets has affected the defense and military industry I just saw a portion of a large company. This morning.

I'm seeing earnings that they're yeah, they really they didnt make their numbers because of.

The lack of approval of defense budgets. So the budget was recently approved.

And this is you know Washington stuff, that's I don't understand it stuck very well, but that was the defense authorization Bill that was a time I guess signed into law on December 27th, but then there's something else call defense Appropriations Bill that's not signed yet I guess, that's a big one because that means that authorizes the actual spending our money. So this is less.

The defense industry in limbo.

See lots of lots of reporting about this so it's you know it's it's.

It's certainly not just our perspective. So are you just see what else I'm looking at my notes here sorry about that.

So the fact that the defense industry, sorry, the authorization Bill has been signed.

Hope that's a positive I guess now people, saying well, we need the appropriations bills will be signed as well.

But hopefully that will be done and then the defense industry will get back to business right. Now I think some programs are still kind of on hold maybe some of the Oems or what do you see what happens so well look at that later and there's actually one a little good news on the authorization Bill.

Talk about that later in the presentation, let's go to slide six inflation, okay here below about inflation these days.

Everything raw materials freight suppliers utilities pretty much everything we do pass a lot of costs on a when we re quote businesses. So we quote of recalled.

Business.

To our customers I mean, but you know the big question I think my mind anyway is how long can these costs.

These increased costs to be passed onto customers when they're talking about consumers you're talking about other businesses, how long because you know.

It's almost just physics, there has to be a limit.

And it's always the same thing you don't know where that limit is how far can you push it out bar for you to push it.

Problem is sometimes when these things nobody knows they keep pushing and pushing and pushing and it's like in one day everything stops we've had it without paying these price anymore and that's usually a pretty you know we would.

Often in the passenger where he has been a kind of a severe event a lot of people that are smarter than me say, it's not going to happen. This time, so maybe the right I don't know.

But these are not our list of excuses. These are factors that we think you'd want to know about we think we should we think you'd want to know about these kind of things. We're struggling with these difficulties are not not accuses though not excuses, we're not a hope it's clear we're not apologizing for the quarter actually I think our people that are pre Dan.

Good job under the circumstances without difficult things where.

I think you know this but maybe it's worth just taking a second to explain.

For us.

Quarter topline there is only a limited impact we can have on the quarter to quarter topline short term it doesn't really work that way.

So because we can't tell Airbus how many acres 20, Meg I can't call as CEO of Airbus and say look you know we're a little short on top line. This quarter. If you could could you order a couple more age which will produce a couple of more <unk> hundred twenty's or alcohol. Some airlines when you order somewhere 800, twenty's or some missile programs can make a couple of missiles. This quarter, because you know we want to get our.

Top line up obviously and people a facetious that's ridiculous, but that's kind of the examples illustrate.

Illustrative of of the situation so for US we need to run our business real hard every quarter really tight really hard and then make sure we're working on developing new opportunities and not getting into the bunker mode. Oh things are tough, we're going to go high somewhere which we see a lot of and I guess in the world.

In our industry, but it's real important we don't do that they will keep pushing we keep looking for opportunities because that's the key we had little control about the top line quarter to quarter, because we can't tell the Oems window order stuff when they're not order. So we can't control. The fact, the defense industry's kind of down in the dumps because no washing.

Didn't hasn't approved the defense budget, we can't really control the supply chain mesh, that's really seem to have seem to affect the whole industry. We really can't do that and there's other program issues. You know there may be a reason why a certain.

OEM is going to wait till next quarter to produce more missiles. I mean, that's their prerogative of course, they may have their own reasons and those are things, we really can't control. What we can control again is running our business really tight really hard and working hard to develop new opportunities and not letting ourselves getting the bunker mode. All the time.

Things are bad so you know we will emerge from the bunker.

Whenever you know the problem is.

The reality people never emerged from the bunker.

Talk about that later, okay, why don't we keep going because Oh, we got a long way to go here and a multi cover page sorry slide seven.

This is just annual stuff.

Just to put in perspective, you'll see on slide 25.

Our forecast for 'twenty.

'twenty two fiscal year sales of 53.8 to $54 3 million and EBITDA of 13 to $13 5 million. So it's interesting with all get back to that 'twenty fiscal 'twenty.

Year in terms of topline, but it seems like we probably get around the EBITDA number for that fiscal 'twenty.

Also interesting looking at the first nine months compared to fiscal 19.

<unk>.

And you see that.

EBITDA was about the same in the first nine months compared to 19, but the top line. There was 51 million compared to $41 million. So that means something probably means that our margins are better than maybe our product mix is better maybe developing introducing products are higher margin, maybe let's go on to slide eight try to keep moving here.

Your so we'll try to you know skim over this pretty quickly.

This every quarter balance sheet cash cash do you have an history.

There's 110 million in the second.

ROE item kind of interesting.

C to b cell kind of distorted our cash as well because we had a sale of a cash sale of cash sorry, I'm rushing the sale of the seat to be.

[noise] occurred in Q3, but what do you get paid for it until last month until Q4, so the the invoicing underpayment.

The end of Q3 stride on those two items, so really in a way that $110 million short by a couple of million dollars because that sale occurred in Q3, the payment of the big items special item didn't occur until Q4, but in any event.

You know you might want to do a little math and you could take that number and subtract how much we have to spend on the expansion and the transition taxes dome of payments you'd say, yeah conceptually anyway, maybe we are about $96 million. That's a conceptual kind of discussion analysis. That's about other page of cash dividend history, but just go.

The last I checked item $550 million in cash dividends since the beginning of 2005.

So normally comment that's a lot of money for a small company like Park. Let me just cover the first check right unless you do that well, while others were canceling their dividends are cutting their dividends during the crisis economic crisis of the pandemic. We did not do that we maintained our regular dividend throughout let's go onto the next item of slide nine is our.

Top our top five customers, we do that every quarter lets not that hung too hung up on this most of these names you're familiar with because you know you see them.

Quarter after quarter.

Aerospace that's the Raytheon S M two missile.

ERO matrix, we do multiple programs for them GKN. That's just of course the helicopter program. Our Credo is obviously is the valkyrie at the bottom left and a middle River Mras, Yes. Some 47 eight engineers salt program. So, let's keep moving here Ah Slide 10, I think we have yeah.

Interesting thing to me here or give a little perspective look at the bottom right.

Pie chart, and you say yeah, well this is the.

The Twitter so linked quarter not not year to date. So just just Q3, a $13 9 million was the revenue and look at military or 41% that is about $5 $7 million of military, saying, well, that's not too bad except a $2 4 million back to the <unk>. That's in the military part of the Pie chart. So we weren't expecting.

And in Q3, but Q4 will be backed out to do back out to 2.4, that's only $3 3 million, that's a pretty low number look at the history, It's a pretty low number not just percentage wise, but absolute wise. So again it goes back to the discussion on what's going on with the market.

We're quite sure why.

Sure we haven't lost any business any market share that's not the story at all we think we're you know we're getting opportunities new programs. That's not the story at all if the end market itself that we believe is the driver here, let's go on to slide 11.

Our niche military aerospace programs again, we do this kind of just for entertainment purposes, almost kind of a fun programs that we share with you.

The J star's that's our parks, we make with our material.

E S. S M bleeder materials for rocketry and the standard missile three that's also a blade of materials and just you know kind of funds back debt as of March 16, the Mach 18 missile.

It would be considered to be fast I know that's a.

Technical term, but lets called fast.

So military.

Affected by supply chain budget delays and also the choppy nature of Miller drafts were talking about before you know some some programs will be active this month and next month they won't be over this quarter it'll be active next where they won't be that's an indication of the program going up or down and that's just how the for US anyway. The military business is as important as footnotes.

Bottom.

We still do love our military aerospace programs.

Slide <unk>.

12, Okay. So we're gonna do here a week. This is one of the things we cover every quarter for last several quarters.

It's slide 12, all the way to slide 16, we're going to skip over this we're not going to I'm not going to go through each item I'll just.

Hey, this is a discussion as to how the aerospace industry, especially commercial aerospace industry guidance at a predicted minutes and now you know the whipsaw effect, we talked about it many times I think that we try to lay it out pretty clearly in the slides themselves. So why don't we skip over it just if you have any questions. Let us know at the end of this little group slides would you point out.

That this is what everybody else did they got into the end of days mode.

Again mentality. This was not it was those terms and all kind of a two turns but I don't think I'm exaggerating.

The industry just died.

<unk> Park.

Par whenever bought N J stuff whenever laid anybody off like all of our people we didn't stop our spending on our expansion budget, we didn't cut our dividend, we do any of that stuff.

And of course, we didn't know if we were right at the time you know you you run a company or you have to make decisions, but I think history will prove that we are right and the rest of the world was probably not right at least the rest of the world. We got into the Armageddon kind of mentality, which is most of it.

The aerospace industry.

Okay. So you could probably be on the back later for before that but I just wanted to mention that we didn't go that way, let's go to slide 17. This is another.

Topic, we cover every quarter, so kind of skip over this this is basically saying that yet.

Domestic aviation is recovering more quickly that international aviation commercial I'm talking about commercial commercial.

Domestic translates to single aisle international trends weights the wide body. So we think single aisle is where its at for now just for now not always but for now okay.

Let's go on to slide.

It seems like it's 18.

G Aviation jet engine programs, we usually give you this slide every quarter because it's it's kind of I know, it's not new stuff, but it's good for context for perspective, maybe some people on the call before the top item top left a firm pricing LTA through 2029 with Middle River Aerostructure systems Mras, that's a subsidiary of <unk>.

The engineering, let me start for those who don't know this was a subsidiary of GE aviation for a long long long time until G aviation sold as sub two S. T engineering in Singapore, a couple years ago, but the history is why all the programs you look at here are legacy GE programs legacy G program.

So we're done at factory, we said look as soon as we sign this LTA with Dolby Road, Doug factory, we did at.

Next item sole source for composite materials for engine nacelle and thrust reversers on multiple programs I'm not going to go through all of them. The top five we call. The <unk> hundred 20, Youll family of aircraft programs, you've got to have some 47 coal Mac programs, we'll talk about that later.

Both the <unk> and 919 in the regional jet the global 7500.

Top right. They talked about just says this is a different structure. Its a primary structure for the passport 20 engine and this is true GE, it's not through mras.

All right I'm, sorry, slide 19.

Go through some updates on what's going on with GE aviation are the key.

Programs. So the slide 19, this is actually something that was in the.

Prior presentation, our Q3 presentation, maybe even two I'm sorry, Q2, maybe in Q1. This is really important statement and it came from the.

The Airbus CEO, we kind of laid out his plan lays down a law. This is what we want resort to supply chain is expected to do so.

So Airbus maintained they're not going below 40 per month, basically 20 deals throughout the pandemic and there's all these daughters and analysts so they're gonna have no she's going to drop they're not going to be able to maintain it.

It's really not good because you know people read those reports they wouldn't believe Airbus I believe there are I believe the analysts and they wouldn't ramp up their business.

So it ended up making things worse from that perspective.

But anyway. They never went below 40, and now they're saying yeah 45 by the end of last year and then they go to 64 in 2023 70 by 'twenty 475 buy buy a physical chart.

It keeps them physical leisure calendar years, I'm, sorry calendar 'twenty five brushy so.

I'm not being clear.

20 lets just continue.

We're still on the <unk> hundred 20 topic.

So as of the end of October 2021 C. F. M. That's the manufacturer the lead point of engine and a 60% share of firm orders for <unk> hundred 20 family of aircraft that start based upon your Aero engine news, which is kind of a Bible a lot of really interesting and.

Detailed data in the Aero engine news, that's pretty good information now.

You know.

A lot of ballast in that in that percentage.

This program is shared with Pratt CFM and Pratt why is that just over 10000 firm orders over 10000. So in other words, if somebody gets a little over 50 up or down it's not going to move that percentage out most a lot of ballast long big backlog for these engines and also for these airplanes.

So assuming there's bullet I didn't mirror, 60% CFM market share. It was 75 <unk> hundred 20 aircraft family per month that rate represents approximately $30 million per year of revenue the parks starting in 2025, when they say they want to be at the.

75 per month rate, we haven't giving you this information before kind of danced around it and say, it's like better and bigger than a bread box that kind of stuff. We decided to give you. This information because it's just gotten to be such a significant program for park that we thought the right thing to do you communicate that information to you, so continuing or sometimes with Airbus supply.

Here are some tension has developed over the aggressive Airbus <unk> hundred 20 aircraft family forecasted forecasted ramp up kind of public stock, which to me is kind of strange you think they'd had these discussions.

Behind closed doors somewhere, but Airbus continues to indicate its not backing down it's doubling down there they're being pretty firm about their intentions are for <unk> through 'twenty I think they're in the catbird seat here.

I think they are because the fact they have two engines on the program. So they can leverage one off the other and it's a lot of evidence they've been doing that as well, we see towards the supply chain support them to get to that target of 75.

Slide 21, we are still going on <unk> hundred 20 family the 20th XLR.

[noise] adult kind of newsy here, they completed Airbus completed the.

First assembly of the first test aircraft final Assembly, rather first flight expected. This year a certification entry into service next year, that's pretty fast, it's where 21 extra law is currently positioned as the only single aisle aircraft with 5000, plus miles statute range statue mile range.

And 225 plus exceeding capacity.

It's a big deal. So again game changing aircraft I don't know of a lot of people think it is why is that because this aircraft has the ability to replace.

Wide bodies uncertain emissions.

That kind of range I kind of seating capacity of plays wide bodies, which are much more expensive.

Certain missions and that's a big thing at this point Boeing doesn't have response to this airplane, whether they're working on when they're not as you know not clear people say they are but the problem is that this airplane in the extra large coming out in.

2023.

So it takes a long time to develop new airplane so I.

I hope Boeing or will it get into the game, but even if they do it's going to take many many years for them to get an aircraft that would be in production on our available for sale that could compete against the XLR.

The <unk> hundred 20, Neo aircraft family sold well in Dubai.

Airbus recently received large eight grew 20, new aircraft family orders from K O N and Qantas.

Was there a progression loyal Boeing customers. So that's kind of a big thing now appealing Airbus just peeling away. The Boeing customers now we all know everybody knows that Boeing had trouble with the Max and we wish them well, we'd like to get them to match program and on the program. So no problem in the Max.

But my sense is that Airbus and their CEO are trying to capitalize on the opportunity this window to gain market share and are being pretty aggressive that touch on my sense. It's I think it's maybe comment we believe that to be the case.

So they're going after Boeing you know customers as you know nothing shake with I guess.

<unk> hundred 20, Neo recently surpassed the 20-F.

The aircraft in the ACR 20, Neo family was the most from orders that's really interesting because you know that Airbus is really focusing on the April 21 that did not that are not.

Focusing into 'twenty, but really focusing April 'twenty one deal.

I think you're setting up a new plant in Palouse, maybe just for the April 21. So it's interesting that that's actually more popular airplane NDA through 'twenty at this point and then the last item here was a little concerned anything.

<unk> recently announced an enhanced version of which D. T F engine, where they through 'twenty deal family deliveries to begin in 2024 and you know this is the engine that the other edge of option for the <unk> hundred 20, Neo So CFM shares a program with Pratt.

So far as CFM share of 60%.

So, but you know perhaps coming out with enhanced engine should see F. N B concern I hope they are because I you know I would take a press seriously.

But they're not asking me, but it's in my opinion anyway 'twenty to 'twenty two.

So let's go on to some other GE program updates here are commack 919 so.

<unk>. This is the the Chinese aircraft companies nine when Nigel to be a competitor to <unk> hundred 20, Neo and the <unk>.

Some 37 the Max.

Until very recently until the beginning of December Commack was maintaining that they were going against airplane certified in China anyway, and begin deliveries in China before the end of last year, you know and then oops just very late and.

In the era in December.

The China F. A hey, let's call it that announced that the Commack 919 is not expected to complete certification until 2022, that's this year.

Now it's been indicated that as of early December 2021.

919 prototypes of a completely only 34 276 required certification flights. So that's you know that's kind of good information because its not just delay a little bit and they have a long way to go in terms of certification.

I just saw.

A report this morning now from Commack, not from the China Chinese FAA that yeah. In fact, the programs delayed they're not talking about when they you know they plan to get certified alone there. The Chinese FAA I was talking about this year and our coal Mac I think talked about Covid delays you know there are lot of shooters lockdowns end.

China as you know as a reason one of the reasons anyway.

For the delay in the certification.

Shipping over in this presentation and discussion with Goldman Sachs type lender.

E J 'twenty, one so that they're not important it's just they're not really many changes in those programs and we're trying to move through the presentation here on slide 23, Okay. So some 47, we're going to include us until the end of a discussion about the 747.

Boeing has announced will terminate production of the Quintin skies in 2022. The last time 47 are expected to be delivered in October 2022, That's you know around the corner I said, Dave one of the best maybe the best.

My opinion is up their commercial aircraft every bill long lived the Queen. So this is really a sentimental favorite for US. This is the first program. We got on a GE Aviation program, we got on and back in 2014.

My favorite airplane.

But I would always want to remind you even though it's a sentimental favour, it's little lesson to less than $2 million in revenue for US. There are two new photos from left and right. So these are current photos of the sub 47 in Anchorage, Alaska and see a lot of sub 40, Seven's and I encourage.

Those are appropriate.

Slide 24, Okay. This requires us to slow down a little bit a lot of information here.

So let's look at the top part of the the slide for perspective, what happened with let's use it almost a proxy for the.

Commercial aerospace industry. So in fiscal 'twenty, we had about $29 million of sales, it's really about let's call. It 28, because there was a million dollars of sales on the.

On the a nine.

My next program, which is not an active program for US right now dormant so, let's say 28 million and the reason I like 28 million to buy back for that 7 million that kind of works nicely. So 7 million per quarter and you could see in 'twenty. One you know now the pandemic is starting to affect this one to the numbers you're going down a lot used $7 million of starting point right.

Fiscal Q.

Q3 fiscal 'twenty, one to three $1 8 million, that's a that's 25% of $7 million and 75% drop that's a pretty precipitous drop I would say, but then look what happened. We go from Q3 of 'twenty one.

To Q1 'twenty to Q1 of this year, that's just two quarters. It goes up from $1 8 million to $7 million, that's a lot harder going up and going down you know that's a four times Forex and two quarters, that's a big big ramp up in you know we handle obviously those are are those ourselves.

And we're kind of at that $6 million to $7 million per quarter right now good perspective, but you know what's interesting here, it's a little bit of a different story because.

Airbus never went below 4800 20 units per month.

And there's some 47 was flat during this period. The other programs are ramping up so it wasn't really an end market program issue well was it was destocking. It was just kind of end of days Armageddon mentality, where the supply chain shut everything down and not only that.

I don't want to get rid of older inventory that we're selling off their inventory.

And they're not only not producing or not.

Your inventory with whatever they could sell.

So that really I think is the kind of the message behind our numbers. So it wasn't so much the end market being program markets. It was the Destocking that was just kind of widespread and rapid throughout the industry.

And of course that puts the industry in a tough position because as you know we go back to the part we skipped over they're back on their heels.

They laid off lots and lots and lots of people not so easy to hire them back and guess what they have no inventory left to Cushing and ramp up.

So the supply chain.

Got itself into a real predictable here.

Q2, let's go to the bottom of the top portion of the the.

Group of numbers up.

Fiscal 'twenty two Q3 the quarter just ended at $6 2 million our forecast when we did our Q2 presentation for Q3 was six in a quarter to seven and a quarter or so we're kind of at the bottom of the range I wouldn't read anything into that decent numbers move up and down a little bit based upon you know or something shifts to being headquartered in the quarter.

But I wouldn't read anything into that.

Going down to the lower part of the page our Q2 fiscal 'twenty to Q4 forecast. The current forecast is $6 6 million to $7 1 million in Q2 that was six in the quarter to seven a quarter. So what kind of tightening the range, we're not really changing very much tightening up because it's a you know just this quarter.

More information about it that makes the total forecast for the.

Fiscal year 'twenty six three to $26 8 million and go back to fiscal 'twenty $28 9 million in but maybe adjusted of $28 million were getting close we're not quite there, but we're close certain factors that may affect our forecast well how about supply chain how about.

The Covid disruptions. So those are two with all those factors, we talked out to discuss at the beginning of the presentation slides five and six they apply but I would say supply chain that maybe COVID-19 disruptions are the things that.

We have the most impact in the forecast.

The orders for Q4, the orders are booked so.

Those orders arent shift I mean, something happened that prevented them from being shipped.

So let's talk about.

When I say orders are booked I'm talking about for G E not for the no not for everything with Q4.

Let's go to slide 25, little more to discuss your we Gotta go back and talk about that a $2.4 million a seat to sales.

So.

Let's go right down to Q4 and at the bottom fiscal year 'twenty to Q4.

Our forecast is.

12, three quarter of million to 13, and a quarter of million topline. So what's going on here in Q2, we predicted $15 75 to $16 75, now you subtract out the $2 4 million.

What it's supposed to be Oh, that's that was supposed to be two four and it won't be Q4 that still doesn't get us there that would bring us to $13 three 5% to 14, three five or so to say take what we gave you in terms of forecast for Q4 and Q2 subtracted 2.4, there's still gives US 13 $313 three.

Let's say the $14 three which is higher than the $12 75, a 13.25 why is that these two things that affected Q3, we think are continuing into Q4, you see its not chi it's all the other stuff, especially military and then we talk about the bottom line.

3 million to $3 5 million again for for Q4 for the current fiscal year Q4, and Q2, our prediction was three five to 4.5, so we're bringing that number down obviously driven by the topline and.

That's really the story nothing about the bottom line. The top line of one piece of produce I'm going to share with you for Q4. We told you about this in Q2, we did the Q2 presentation, we still expect about $1 million in the blade of material sales in Q4, that's not to see to be that's our materials, where the margins are quite good.

So okay, a long term forecast.

Sorry, let me not skip over certain factors and risks, which may affect the forecast those are similar to the factors, which affected Q3 listed in slide five and six so again go back to those four of those risk factors supply chain and market for defense Nanci Covid disruptions. Those are the things that I would probably highlight as the biggest risk.

Guidance long term forecast we've been at me.

They asked us when are we going to reissue long term forecast, we like to do that but at this point, we just feel there's a little bit too much uncertainty in the market for us to do that and we don't want to just give you something that's a guess you know we want to have some level of confidence that the forecast makes sense. So.

It's possible with my promising but it's possible when we announce Q4, which is in may maybe at that point some.

Some of the dust will have cleared you know won't be able to give.

Give you some kind of longer term forecast.

Let's keep going here.

In late.

Slide 26, our expansion in Kansas, we could just skim through this stuff.

<unk> speak for themselves. The film line trials are complete that's a good thing that's a big accomplishment tape Brookline trials in progress plan and begin qualification.

January and just make the point, while many others are slashing their capital spending are canceling their capital budgets altogether, we push forward with a complete or a major expansion. Good thing we did it because at this point, we hadn't we'd be in a world of hurt, especially if you look at things like that 75 per month for a prediction from Airbus we'd be.

Way behind power curve, not just for redundancy, but for capacity.

I painted parks people slide 27, so our people count is 112.

It was 114, when we did our Q2 presentation. So went down not off we're trying to push it up so it continues to be very difficult to hire the people want a higher that's.

Not a minor issue it's a major issue I know, we're not the only one but we're talking about parks. So what you know about that.

We know we're not the only one having difficulty hiring people parks people facing many challenges and they're doing a shorthand it.

The major supply chain, we're revealing things that we've discussed but just wanted to put in the context of these are these are the things that people have to deal with everyday major supply chain and freight challenges a daily battle a lot of work and where does this lead to at least the abrupt adjustments and changes to production planning and scheduling required to accommodate supply chain issues, you know people run it.

They like to have some kind of predictability. So they can plan their factory. So maybe a couple of months out or so that's the ideal that's not for us because okay. We're planning to produce this product next week, but what do you get the raw materials, so I'm going to switch everything around where the mover, but people around we're going to produce something else, where we have the raw materials.

So it's a big challenge.

A lot of extra work and effort.

Goes into managing our business under those circumstances COVID-19 challenges still living with them or you know, it's been a difficult quarter for us with Covid and we're off to a rocky start.

At the beginning of the new year's Eve with Covid I guess, you saw them across a quite contagious. So you know with two concerns one obviously the most important is our people.

Most of our people done fine I mean, they're okay to recovered, but it also causes pretty big disruption for our production we're dealing with the supply chain issues were going to move production around then people you know they they if somebody at home test positive or they test positive that maybe okay, maybe five but they're out there with the quantity and it sounds like a vacation where you give somebody noticed just like.

Yeah somebody calls in I just touch it.

Positive for Covid or not feeling well.

Getting tested and I have to wait for my test results.

Hmm.

It's definitely in the category of a challenge.

Stress and anxiety caused by vaccine mandates. So I know you hear a lot about this stuff how wonderful it is booked for people actually work for a living it's of course, a lot of anxiety, because they're thinking what am I gonna lose my job now, but it'll get vaccinated, we get vaccinated, maybe before he got Covid.

I'm not going to get into a discussion about the you know the merits of the vaccine.

I saw in my area.

But Andrew discussion about our people. We've told people is not we're not you're not getting fired for not getting vaccinated and a lot of people spoke up and said theyre very relieved.

Thought they were going to get fired if doctor to lose their jobs now with this osha rule you probably know this but the stream Supreme Court doesn't strike it down you're supposed to be a testing option, which is good so in other words.

People understand that people not vaccinated can test as an alternative and we will do it for them will buy the test when it happens.

Pay for the test well bring them in Raleigh do whatever once you know once a week maybe on Monday, we'll have to figure that out if we can get the tests. That's in there right now so we'll see what happens with that.

Bring in the new plant up in online new equipment trials. This is a big big Big deal.

The major consuming project there are people are handling shorthand it without reinforcements, let's go on to slide 28 year Yep still dealing with our people dealing with to managing our parks new projects and initiatives will talk about some of them that takes a lot of work a lot of effort.

To do that that's what he's talking about before a lot of times companies feel pressed or stressed.

Challenge they go into a bunker, we don't go into a bunker, we don't stop but also it's still we keep going and we look for opportunities we pursue opportunities, but it's a lot of extra work. Our people are handling that major consuming projects or people are handling without reinforcements against short handed.

No matter in fiscal 'twenty to Q3 parks people once again stepped up that's what Barclays parks people do everything that could be produced and shipped God produced and shipped notwithstanding the many obstacles or roadblocks, which our parks people had to overcome and once again, thank goodness for parks customer flexibility program.

I talked about that's usually every quarter, so I'm not going to go into details, but it's really a godsend. It was guys, saying when business was going down a godsend and when it's going back up.

Slide 29.

And most importantly, thank goodness for park right people Park is very fortunate and blessed to have these great people or others laid off their employees by the thousands and thousands of park held onto <unk> kept all of our people throughout the pandemic and economic crisis.

Neither as Ford or took any government money for keeping our people.

The only government money or government incentives to keep our people we keep our people if you want to keep our people.

Of course people are precious that must make that Pete parks people are what makes park park.

These pictures from our holiday Party every year, we have a paper airplane context. He uses the Winter's day shift and night shift it's actually taken pretty seriously. These guys who are like you know kind of almost aeronautical engineers in how they design their paper airplanes are conscious with sue can throw it to further so.

The winners of our holiday airplane.

Paper airplane contest.

Slide 30, so let's talk about some of what are we doing that no not being in a bunker. So we've got to change web. This is just really an exciting thing a launch on top of Hum.

French Guiana on Christmas day on top of that era, and five rocket that's that same company by the way.

So we have the distribution agreement with <unk> is currently in route to its style Lagrange to Warped point, located approximately 1 million miles from the Earth, The James Webb space telescope.

Just for perspective, the mood is about 239000 miles from New York decided about on 3 million miles.

So I don't know about you, but I never heard of Lagrange points until about two or three weeks ago now hear about them about 20 times a day, because there's a lot of news about the.

James will have actually there's a German Facebook, there's a I don't want you to like a page on Facebook you can go on to where you're enjoying I guess, where every day is a lot of really interesting news about the James Webb and there's a website that you can track its progress.

Great.

Range two point.

Just kind of.

At least for us, it's fun fun and exciting so.

James Webb Space Telescope mission is look back at the beginning.

Of time universe existence.

So this is kind of a big thing you know.

There's a lot of theoretical.

Beliefs scientific theories about how the universe began but we never actually been able to see how the universe began.

Oh, just as began so.

For instance, what didn't exist before the beginning of existence those are interesting questions.

Maybe not.

Topic of an investor call, you talked a lot numbers and stuff like that but nevertheless for us it's a very very.

A very big deal I think the oldest son, James Webb space telescope that we're participating in it that we participated in the.

And the structure, let's go on to slide <unk>.

Three.

30.

31, sorry, I can't see the slide numbers at the bottom of page.

It's a James Webb space Telescope strategic mission again, same kind of topic, where it will stand the achievements of the human race, well, that's a pretty big one I would say no going back to the very beginning of time.

Reis anyway pretty big achievement, if it's successful to really see back to how life began how these university can how existence began to big deal. So you can do you can fill in the blanks here, but.

But I would say, it's you know it's up there in the bottom of page so our proprietary sigma stretch or incorporate into the structure of the James Webb space telescope.

Park is along for this ride of rides to say the park is honored to play a part this incredible mission of the James Webb would it be the understatement of a lifetime really very it's hard to describe how big a deal. It is for US. This picture here is kind of interesting that's a little diagram obese Lagrange points.

James Webb is gonna be orbiting around just L to point to the right side of that of the us Little diagram. There. Let's go on slide three two so there was a news release about this yesterday, so you might have seen it.

About the.

Business partner agreement that we entered into with Aerion group in France. So are we.

We purchased a R C to B type product.

From this company for a long long time.

I actually personally visited them in Bordeaux I think around 2005, so we've been working with them a long time loved this company Great Company very special company and they asked US if we could be their choice of distributor for this product will keep on it for our own account, but they asked us to we could be either exclusive distributor for the U S and what we're really honored to say, yes of course, so that's really big.

Deal ever happy about that.

So on to slide.

33, I guess it is so another what's new with park, a major potential private project initiatives and new plant Yeah, sorry, we can't give you much more detail about it. We've just signed up you shouldn't do that now but these are big things. We're working on so at least we want you to be aware of them. So somebody asked what the heck with somebody you visit our plant what they are.

Can you do once at huge new plan. It was an interesting question posed by observing the smart person because this person saw the huge plant and some of it you know as you've spoken for we have a new lineup of tape line phone line.

Freezer space, we have slitting, we have a warehouse, but there's still a lot of space in there and there is also a space you remember we talked about this before for another.

Tape line or solution line that would be to add to our current capacity, but that's for something were currently doing some other line and those are the hot melt line or solution line that would be in a line that would be added to our.

Our our equipment inventory to increase our capacity, but that would be something we're already doing we talked about before that's not what this is pages about there's additional space in a new plant. We just set aside for new project initiatives, including two potential project initiatives. We're currently working actively on both of these projects if all the purchase installation of major new quick.

All lines, which would bring new capabilities in market offerings to park, one relates to a joint development project with an important customer another project.

It's something we would do on our own.

We're currently reviewing both projects with equipment suppliers and just for perspective, we went forward with each project is probably about six to eight a $6 million to $9 million purchase of equipment and installation costs. Let's go onto the next slide slide 34 I believe.

Continuing on the same topic Theres no hard deadline for final decision, making on these projects, but they are both front burner projects and we'll keep you posted although these projects relate to the manufacturer of composite structures. So its not a big departure into something totally different they both would bring new capabilities to market offerings for park. These are things. We currently do not.

Two.

Let's go on to slide I'm.

There's 35.

Still on the watch North Park, a topic and form a partnership with an established aerospace manufacturing company partnership in pulp because it's not a formal partnership signed a formal agreement. It's a collaboration kind of arrangement again, sorry, we can't say much about this one area. We can't give you details, but it's a little preliminary but what I'd tell you about some important things are working.

So we're going to tell you about this park believes its established aerospace manufacturing company, it's important capabilities, which are complementary to parks. So they do things that we don't do we do things. They don't do that often can be the formula for a great quote unquote partnership or collaboration anyway parking to support partner of Coke oven collaborating on certain defense programs.

Fence. This collaboration has already led to an important new Defense program award for our for our partner and Us and our partner and US and parks are currently.

Collaborating.

On a.

Car.

Partner and we are currently collaborating on an RFP for another significant defense program hopes would get it I will see you will keep you posted we believe has some form of partnership has the potential to open up significant new opportunities for park and our former partner.

So let's go on to slide 36.

You've kind of last slides so sorry, it taken so long as you can tell I'm rushing.

Probably stumbling over some of it by rushed by going too fast.

So, let's just start with the top year. Some say the economy is doing great and that all is well with the world and you know we hear this a lot I read about a lot.

The press release, the financial press and all we can say is that it's not all world you know maybe somebody elses world, maybe it's a world of Wall Street investors, but not the world for US you know the main Street World.

That's not the world we live in parks World is full of challenges going to review some of the challenges, though just for perspective your neighbor major supply chain and transport challenges. Some say these are improving we don't see it not yet anyway daily battle and abrupt adjustments of production planning and scheduling very difficult to hire the people, we need still living with Covid and its many challenges.

Vaccine mandates, we've talked about that are bringing a new plant online do equipment trials major effort major effort and our people are facing these challenges shorthand. It we can't hire people, let's go onto the next slide which is 37, but here's the key thing even in the face of these many challenges which are people and fun and deal with every day.

Our people continue to press forward with major initiatives. That's the key point here, we got a lot going on a lot of a.

A lot of challenges a lot of difficulty just how it is we're not complaining about it just our world. We want you to know about it but that doesn't mean go into a bunker and hide until things get better we keep pushing for press report that's what we do that's what our people to our new business partner agreements. These are some examples we just spoke about with Eric group. The two major initiatives in Dublin development projects.

Pursuing their new plan major new opportunities, we're pursuing two collaborations with their own form of aerospace manufacturing company quote unquote partners numerous other initiatives. The point here is all these new things take a lot of effort a lot of dedication and a lot of time.

So we could say yeah were really tied up with all these difficulties and all the challenges you're facing will do there's some over time, but we don't believe in that that's not who we are to us. The other time never comes so we'd do it now we press forward, we can developing opportunities to actually do in the face of challenges and difficulties. Other makes it may seek shelter in the bunker.

And wait for things to get better but at park, we do not give bunkers, you've not wait for us the bunkers, where they go with a dark but I guess the last slide.

It's 38 at park, even a world full of challenges. We press forward. We attacked we don't stop. This is all we know this is what we do at parks, we're swinging for the fences.

We're not like the others at park, we play for keeps now at the end of every presentation that showed a little picture of one of our departments or groups or teams. This is unusual. This is a bunch of different departments. These are people taking responsibility for equipment trials and bringing new plants online. This is a major major effort.

If people are from warranty engineering facilities production, there's about four others that didn't make the photo op I don't they won't ship or something like that.

But I'm gonna read the names to you back row Christian Dexter David front, we'll fill up there's the Voc or Kelly, Dave or stay away more Martine Leo like I.

I said several people didn't make the the photo but what's going on here. These are not new people. These people will work for a long time. So four months ago. There was no new plan to bring online or no trials. These people didn't have a lot of free time than I can remember. So these people are the people who are doing this major project of the trials and bring on a new plant online even though.

I have a day job.

And it's not one department, it's not like Okay. We have no we try to hire people. We can hire people. So our existing people are dealing with it and deal with it very effectively very aggressively doing the trial as I said the the film line trials are complete we are in a type one trials now the qualification a lot of other aspects of bringing new plants online.

So that's just kind of an example, we're talking about alright that concludes our presentations are going up.

Apologize that took a whole hour.

So operator, if anybody has any questions, Matt and I'd be happy to answer them at this time.

As a reminder to ask a question. Please press Star then one.

If your question has been answered and you'd like to move yourself you can press the pound key.

Yeah.

Our first question comes from Brad Hathaway with scan you. Your line is open.

Hey, Brian Thank you for the detailed presentation.

Especially appreciated the commentary on what the and <unk> program could look like and with 80 20 in 2025 that would be incrementally helpful. So thank you for that.

One quick question for you and then one longer when they pick one is could you give us any kind of thought on the materiality of the area and space I guess feels relationship that was announced yesterday.

So.

We can't quantify it I guess I'll answer this way first of all we already buy a lot of this product.

From our perspective, it's a big deal already in terms of being distributor in salaries, but others were just really getting started we'll have to see and we really hard to predict.

These are the very critical component, there's fabric seem to fabric that she was a lot of missile programs.

So if other companies want to get involved with missile programs, they're going to need this material.

And then they'd have to get it through a lease in North America, but I can't really quantify it just I mean, we just yesterday I think the news release, we signed this agreement with them just about a month ago. So maybe not even a month ago sometime mid December.

So I have to get back on that.

Well have to update you as we go I wouldn't expect though because the way the nature of how aerospace works and in particularly defense that next quarter, we're going to tell you. We got $5 million of sales of this product I think it is kind of a more of a long term effort to develop this business.

Got it understood what any future detail you can give on the materiality of the long term would be greatly appreciated.

The second question.

Second question is on capital and we just got to make.

In this presentation, you talked about I guess.

Project.

$69 million of capital.

But you still have your you know even with the conservative calculation basically close to $100 million of capital on the balance sheet. How do you think about I guess your alternative use of capital going forward and what are you seeing in terms of things you're excited about or thinking about excited about compared to where we were six months ago.

Okay.

So, we certainly don't need that kind of that.

That amount of money to run our business on a day to day basis, I mean normally we generate cash.

To be conservative. So you know we want to have some working capital available.

So that's our opportunity money.

Yeah.

I know its $6 million to $9 million I mean for some companies that would be a lot for us is probably not that much I mean, it's a important money because we had to earn that money you know nobody gave it to us.

That's kind of our mindset and our money and all that we don't spend a casually but to your point it doesn't make a huge dent in the cash position now.

And you know this is.

Probably a little bit of a maybe frustrating discussion for for you and some other shareholders. Because all we can do is say, we're working on things a number of things, but we really can't identify or quantify what those things are including acquisitions.

And I know, we've been talking about for a long time, so I wouldn't believe blame some you know shareholders being a little skeptical of that I wouldn't blame it all.

Our standards a little different we're not looking to just buy something to buy something we cover that probably dozen times.

But you know let me just go back to what I said to US this is our opportunity money for the future.

And whether we do something or other you know we've done a lot of dividends in the past we tend to pay a regular dividend that's something that obviously, we would consider but my hope would be that we still are able to use a good portion of cash to develop opportunities for parks with the future.

No and to be clear my preference has always been if you can find a high return use of that capital whether it's.

An acquisition or whether its a joint venture or whether it's an investment and then another factor you can do in terms of the new factory that they can go to the incredible that would be my preference.

But just to push a little bit more.

Did you say the aerospace industry would guide you know a year ago.

And it is now recovering.

So I guess, if you couldn't get if you couldn't find a deal that works with park.

Last you know 18 months.

At what point do you say you know what it's going to be actually even harder I think it fits your evaluation pack going forward and maybe.

You're not going to be a casual.

Good question, so you're right, we thought that when the you know.

The market collapsed that there would be a lot of great opportunities maybe companies that were good solid companies, but it has too much debt or that kind of thing and the valuation needs to be really good but that didn't happen.

You know the the expert on that topic, Greg, but I understand that there's just so much free money. So much fed money around that people were able to hang on rather than selling at these kind of distressed levels bargain basement levels hang on and get through the difficult times, which is I think what a lot of people did and you're quite correct. The devaluation never went down too.

As much as we would have liked but they certainly are very high right now everything is high with any asset cars houses both planes.

Businesses.

Obviously, not our friend that's not good for us and maybe with interest rates going up maybe I know nobody wants interest rates go up except us because we're the ones who have the cash maybe that'll help us a little bit.

It seems like the 10 year is up a little bit again, so that might actually be good news for us.

But the.

These more direct answer is that we have to keep adjusting our focus and looking other ways and other things, which is what we've done what we're doing because you know you're right I mean, I can say you keep doing the same thing expected result, that's a definition of being insane. So just to keep at it and saying Oh, we're still doing the same thing.

It is not growing it's logic to it when you are.

Your point is correct I mean, we have not had that success. So we do is we keep adjusting our focus and refocusing retuning looking.

Some other perspectives and we're pretty actively doing that actually right now and you know the frustration with M&A stoppers, obviously, there's only so much I can say.

We can't really give you any specifics.

I'm sure you understand that it's not something that's possible.

So.

I don't want to say, except I'm, hoping that you'll see some some some interesting things in the future on the M&A side.

We're continuing to work at it but you know very good point, not just continuing to Peter head against the wall doing the same thing.

Our focus will be go so that we have a better chance of being successful.

Great excellent. Thank you very much for your efforts and have you ever smaller parks.

Sure.

Happy New year, Brian.

Again to ask a question. Please press Star then one.

I'm not showing any additional questions I'd like to turn the call back over.

So Brian shore for any closing remarks.

This is Bryan again of course, so happy new year to all thank you very much for listening to our very long presentation every time I want to make sure that it gets longer.

But Matt and I wish you happy new year, and all the best and feel free to call US. If you have any follow up questions as always happy to talk to you Thanks and goodbye.

This concludes the program you may now disconnect everyone have a great day.