Q4 2022 Park Aerospace Corp Earnings Call

Good morning, My name is Howard and I'll be your conference operator today at this time I would like to welcome everyone to Park Aerospace Corp, fourth 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 will be a question.

And answer session. If you 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 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, Hello. This is Brian good morning to everybody welcome to our Q4 Investor Conference call Nice to have you aboard.

So I'm just warning you know, we lost our earnings or as an earnings release, and you probably want to pick that up in the earnings release or instructions as to how to access the presentation were about to go through through.

Through the webcast also on our website.

So we always give you a little caveat, we can't cover everything we've heard of a lot, but we try to focus on we don't go through a real dry number analysis. We can do that for you later, if you like but we try to highlight some areas that we think might be interesting to you and might give you some interesting perspective, we'll.

We'll skim over a certain portions of the presentation is very long. Some of it is just include for context, we're not going to cover every item in the presentation. When all the time for that and it could still take 45 minutes to go through this and I just want to warn you about that Oh of course to answer any questions you have at the what we're doing going through the presentation.

Okay. So let's do it is they say well why don't we go to slide two our forward looking disclaimer. If you have any questions about our forward looking disclaimer just give us a call on slide.

Slide three there's table of contents.

Slide one.

Presentation brought to go through our appendix one we have our normal supplemental financial information as appendix one I wanted to go on to slide four it probably takes a little more time on slide four then the first three slides.

So in slide four we have our Q4 results, so which you probably were already aware of because of the also obtain a news release.

So I won't spend a lot of time in the numbers and numbers of dairy see the topline is off.

From the prior quarter's and but one thing we're happy about is that the gross margins back over 30, we don't like it like last quarter for Q3, when it was under 30 that doesn't make us too happy.

And the adjusted EBIDTA margin as well.

Also in the area, we'd like to see we'd like to see better than that but at least it's not like below 20%, which was a Q3 two.

Percentage as well EBITA adjusted EBITA was $3 million were pleased about that okay. What do we say about Q4 during our Q3 conference call. We said sales estimates were 12 and three quarters to 13 a quarter. So we didn't we didn't make that number we're under that number 12, and a half adjusted EBITDA of 3 million to $3.

Five so we came in within that range I would always remind you I forgot to that that when we give you forecasts a we don't call guidance.

Our estimates we're telling you what we think is going to happen, we're not playing what we consider being a little game that probably 90% of other corporations do well. They give you a low number so they can beat it and be heroes, we think that's kind of silly and insulting. So we tell you what's going on what do you think is going to happen, where sometimes wrong, but we say that we're telling you what we really believe is going to happen.

Anyway, even though we came in under the topline the bottom line with where we want it to be and I would say that was an outstanding job by park's people to make the EBITDA number considering that the top line, we did not make and considering all the other things were about to talk about in terms of the day to day life of park, that's going to slow.

<unk> five Oh, there we go live in the life.

Of the park life in Q4, Q1 and beyond.

These things are not going to surprise you if you listen to other conference calls or what's the business news these days supply chain supply chain supply chain Wow.

This is really something.

Just wanted to note that we were told by you know people talk to know that just is going to and you know that there's probably going to end the last year or.

It was a hard year for that of course, it didn't end until as far as we're concerned it gets us where we never thought this bad or freight freight freight yup daily Battle severe staffing shortages will get back to it later total missed shipments in Q4 close to $1 million, mostly because the supply chain issue, it's close to $1 billion of stuff. We would have shipped could shift if we had to.

The raw materials that when we need it but let's go on to slide six.

Okay, we're continuing on that.

What park is living with stuff inflation inflation inflation.

Raw material costs, a few bad freight costs utilities supplies pretty much everything so again.

To tell you the issue there everybody knows about this should go to the grocery store gas station you're in it you're seeing at your feeling it but up in place. It was supposed to be transitory and we got a double hard not transitory.

Still signed out I Wonder this is not a loose list of excuses excuses, that's a dirty water Park, we don't get into juices, but you know as investors. We think you would like to know what we're living with everyday our parks. So that's what we're telling you these things.

Slide seven.

On a more of a supply chain hub Yep, we never saw it like just before it's become a free fall order order in the supply chain just broken down it's chaos pervades and some cases, you have a confirmed PR or not being on or so.

What I mean by things breaking down and normal business. You know, there's just kind of trust. Good state that is required for businesses operate.

We get a we get our pricing quote from a supplier Oh, we have a P. O confirm P. O. We turn around and we are pricing to our customers and it is based upon that our cost of course based upon the raw material costs based upon what we have from our supplier then it goes up and down the supply chain like that there's always Stan just on good faith, we don't get to work.

For about every time we.

We don't kind of talk that the law firm every time, there's a P. O appeal confirmation. This is how our business operates but right now none of this really works anymore, not only our suppliers not able to meet their delivery commitments that we understand because maybe they're not getting their raw materials in time, so that we understand.

Or maybe they are staffing shortages, but the other thing that's happening which are disappointing to us, but not shocking as that.

In some cases people companies arent, even honoring the pricing that's an appeal a confirmed PR because they know we're not going to honor that pricing. So what position it puts us in they said, okay. We've assumed our price can we get pricing to our customer so.

Kind of interesting dynamic, but that's why I say the supply chain kind of chaos. So did everything you want to count on for normal business. It's these are assumptions that we just couldnt take what used to take for granted you can't take them for granted anymore.

But at park, we don't panic, even though the panic page, we're saying it will live with the chaos of Chaos comes your way. So we'll deal with whatever comes our way. It's very unfortunate that this is the world we're living in it because there's a lot of time and effort to deal with this stuff it would be better to be dealing with other things, but we'll deal with whatever we have to deal with it that's how we do with park a park honor integrity are what matter most.

At a park principles do not come cheap more of this later, but youll, probably get where we're going with this we honor our commitments, we honor our commitments in terms of or any kind of pricing. We have a confirmed PR. We don't go back and say sorry, our costs went up let's say we have a confirmed delivery. So it can be three months when we go back to the customers. So I sorry, our costs went up.

We're not going onto the pricing, we don't do that.

That's not in the Parkway anyway, Okay lets people and we'll get back to that later.

On slide eight.

It's interesting because that's the.

The annual look at the Daniel.

The annual fiscal year look at the the the park history.

And we highlighted as you can see fiscal year 'twenty and fiscal year 'twenty. Two we thought maybe we could focus on those two years for a second because we think the comparison is kind of interesting note of course that in fiscal year 'twenty two.

The topline was offers for them a fifth year 'twenty, partly because some of the reasons we're talking about.

But nevertheless, it was off.

But there's a very nice spot here looking at gross margins. The gross margins were better in 'twenty two 'twenty, even though 20, the topline was much higher.

He was a good year, let's think about that our fiscal year ends in February so 'twenty, what's a pre COVID-19 year right before Covid started.

Obviously, 'twenty two with a prequel over here.

Not at all not a pre.

Pre COVID-19 and pre economic crisis year.

So even in the cold second cold year, our fiscal 'twenty two.

Economic crisis here, our gross margins were actually better I look at the adjusted EBITDA not just a percentage the actual number.

It's better.

$14 million in fiscal 'twenty to approximately $13 1 billion, a little bit better, but we'll take it in 'twenty two 'twenty.

'twenty two.

We had what Colby disruptions supply chain chaos.

Inflation.

Staffing shortages. These are the things we live with in 'twenty, two but nevertheless look what our people were able to achieve even though you didn't do adjusted EBITDA margin also very nice.

Excellent excellent outstanding job by park's people under extremely difficult circumstances to deliver that kind of performance. So if you ever want to send a thank you know Congress is taking note of the park's people not me I didn't I didn't do any of it. It's our people to do all of it let's go on to slide nine I will just get through this this is something we do every.

Quarter now one of our really good investors. Good ideas said, we should cover this every quarter. So sure we do it the only thing that I'll mention covers the bottom on slide nine the bottom arrow point with interest rates rising fast in Arab cheap and easy money coming to an end we hope maybe.

Maybe parts of hard earned money will finally be worth something but its all frustrating having money and everybody else gets free money and we're trying to compete let's say on M&A and if prices go way way through the roof, because somebody else is that they're using other people's money, we use our money.

And the other People's money is cheap so hopefully there'll be a little bit of a change to your.

Slide 10, the only single coverage the last item just an update we paid $554 million or $27.05 per share cash dividend since fiscal year 2005 by comment I think you know what it is that's a lot of money for a small company like park.

Slide 11, okay.

The warmer kind of fun stuff your top five.

Customers in Q4.

There's a picture of a Boeing 747, 87, but that relates to GKN that relates to the Gen X. One b engine always provide materials Boeing Oh side and subject chaser, that's a nord in that.

That relates to Doherty group and actually that because this is a sub character usually the weather master radome, we produce the materials for that rate on that order and produces.

And the Patriots.

<unk> capability Pac three missile system. This is a big one we'll talk quite a few times during the presentation or that relates to a company called Aae, we supply the.

The materials for the sort of play the materials for the fourth.

For the rocket nozzles for the <unk> and Gremlin, you probably guessed at a rate. That's our credo is designed and built a gremlin drone and we don't have a picture for for Middle River, but will cover them later on okay, let's keep going slide 12.

We're staying a comparison in fiscal 'twenty to 'twenty two.

That the pie is kind of coming back more or less.

Cool off in 'twenty, two and coming back to more or less would look like in 'twenty, except military slowed down as compared to 21 now go into 'twenty one and.

Our feeling with that as a military is really a something we really feel good about especially for the future. It will get done in a minute, but and 'twenty fiscal 'twenty two.

We think military was kind of held back because they were really big delays in approving the budget to budget is now approved.

We'll see what happens with that let's go on to Slide 13 Park loves a niche military aerospace programs. So we wasted just for fun. This is a project that Donna and lane of work on every quarter coming up with some kind of a fun stopped at parks are involved with.

Sometimes it's the little niche stuff, sometimes it's not big volume, sometimes it is so Boeing our C 135.

<unk> for structures are the MK, one twenty-five warhead for the U S M six missile.

That's our materials for structures, that's an ablative actually not cases that structures Collins class submarine nuts for the Royal Australian Navy materials in our materials for the Harrier.

Let's keep going.

We keep track of the time here, but a lot to cover slide 14, Okay. So we're going to do something a little different here, we're going to cover a tug.

Talk about trends in the military markets and talk about trends in the commercial markets. We haven't done that in prior quarters. So we're trying to provide a little bit of a different perspective for you, which we think is timely military markets trends and considerations of new World order, what's the new World Order a sea change in attitudes about defense defense industry instead of spending.

Based upon the war in Europe .

So overnight happened almost overnight and what a difference a war makes the war is a horrible thing of course, but it certainly has an impact has had an impact upon the global defense industry. It seems that way anyway.

I just talked about this to U S.

2022 defense Appropriations Bill was signed into law. So defensive industry is no longer in limbo and the 2023 defense budget includes additional spending increases including.

For missile Defense systems, that's something we'll talk about a lot of your missile defense systems, such as our Pac three we've talked about that and hypersonic missile systems, such as yes on three muscle we're in that program as well, but let's go on to slide 15 <unk>.

Continuing with military market trends.

But Europe may be the real Big defense spending store you know, we talked about the U S and everything what about Europe .

Because of these these products may be made in the U S, but where they are being used in purchased certain countries like Germany have already significantly increase their defense budgets and many others are considering or in the process of considering increasing their budgets and not surprisingly what are you not surprisingly all of those circumstances, what's the emphasis missile.

Defense systems, well I guess, we know why that is because nobody likes missiles getting shut at them.

So that's a big thing and I think that's kind of a maybe a part of that.

What do we call a sea change we don't use that term paradigm shift of parks. So we use we don't like that and.

Don't forget about Asia, that's a happy place these days, either with everything going on with China and Taiwan.

<unk> recently contracted upgrades to its factory missile system, Japan uses utilizes that Pac three missile system defense system as a central part of this missile defense strategy, South Korea, not surprisingly user utilizes a patriot missile defense system to counter North Korea is bullish to missile capabilities lets go on to slide 16.

<unk>.

Well, it's still military market some trends.

The new or new World order.

So Lockheed recently commented comment sorry in Russia, a little bit commented that rushes attack in Ukraine has boosted demand for their missile defense systems Walkie CEO stated, we've got demand signals for THAAD and Pac three from around the World. You continued when you see missiles hitting hospitals and train stations.

Ukraine governments are now thinking that it might be worthwhile might be worthwhile to have an effective missile defense system. You know you'd think so next item erode yet which is also a big contractor for the Pac three.

Not significant increases in the Pac three missile system activity, just recently, so and parks as we've already commented supports the Pac three missile defense system with specialty ablative composite materials. So here. We go what's the conclusion here is a strong trend towards increased defendant sorry defense spending in North America, Europe and <unk>.

Asia.

Undeniable as far as I'm concerned anyway, but there was a broad supply chain issues could at least temporarily limit to speed of the ramp up of spend spend spend and that's a significant item because the supply chain now may not be able to respond as quickly as some of these countries want to want to.

Upgrade their defense systems. It may take a little while for the supply chain to catch up that seems to be always the case.

So what are we going to slide 17, we cover defense trends now commercial aerospace markets.

Trends in considerations, there's a little more complicated so it will take a little bit more to go through it. So let's start with commercial aviation continues to recover largely driven by continued improvement in U S domestic and Trans Atlantic.

A single aisle, we talk about that a lot continues to lead the recovery over wide body single aisle aircrafts as hard to service those domestic routes as well as the short range.

International routes like Trans Atlantic U S domestic commercial air Air travel now running about 90% of pre Covid levels. We've heard it's been reported in any way even business travel, which.

Which leg of personal air travel recovery appears to be getting to recover nicely I'm not we're not.

Go about business Jets, we're talking about business people traveling on commercial airlines.

Analysts believe 2019 global aircraft levels be matched in 2023 surpassed 24, well, let's see about that and then several U S. Air carriers recently reported strong passenger demand and an.

Increased our revenue guidance.

Carriers have recently comment that they plan to pass along jet fuel cost or let's talk about that a little bit later to their customers and they expect their customers to pay the increased ticket prices I just saw a report this morning I.

I'm one of the financial news programs that just last month ticket prices went up 18%.

Don't hold me to that because I.

It's like a news program, sometimes they get this stuff, along but but not surprising.

So slide 18, continuing with commercial aircraft, sorry aerospace trends.

So all the signals seem to be quite positive happy days are here again, we're going to celebrate and generally higher jet fuel prices provide airlines with extra motivation or more quickly replace less fuel efficient legacy aircraft with more fuel efficient modern aircrafts, such as the 20, new but as a general rule higher jet fuel prices are greater motivation.

So generally speaking airlines don't want to replace the legacy airplanes early because the economics don't are against that but once the jet fuel prices. It gets so high than those economic shift and there is motivation to replace the legacy airplanes with the more moderate plays more quickly the Neal.

It's much more efficient fuel efficient I should say than the legacy <unk> hundred Twentyish comparison, and even come to that but okay. Big Bud here, though is there a limit to how much additional cost the market will be willing to absorb nobody seems to be talking about this too much but you know, it's our job to think and not just listen to what people say jet fuels considered to be the largest piece of the operating cost pie for neuro.

Right now.

That was the case, even before the sharp increases in jet fuel prices jet fuel cost approximately twice what it cost a year ago, resulting very significant very significant increases in airline operating cost that maybe even more than twice now because it seems like every week goes up more and more.

In order to maintain their margins airlines they have significantly increased ticket prices will likely to increase even more to keep up with those escalating jet fuel prices, let's go to slide 19. So it is true that certain people.

Want us out a lot of pent up demand for air travel as the world recovers from the pandemic and also a lot of people have loose money or pockets. So people want to get out and stopping locked down in one travel so that there's no doubt about that but they never go back to the but again are the individual business travelers going to continue to be willing to pay the greatly escalate ticket prices forever.

Ever with no end in sight does that make sense really.

Is that the biologic.

So there's a divide history, Oh, yeah device history I find out to work.

Not how it's worked in the past does it defied gravity.

And I don't know maybe it does what about that Dirty R word what happens to a recession, where people keep flying at paying the greatly escalated.

Waiting ticket prices, if the economy stalls outgrowth in reverse something to think about let's go on to slide 20.

Still on commercial aerospace trends, so it's something to think about while we're celebrating with exuberance you know how great things are in our commercial aviation.

And of course, we would have to ask if that's irrational exuberance if people start flying less.

Ah well airlines, who are less willing to order new airplanes.

Maybe.

Something you consider anyway.

If that happens well commercial aircraft manufacturers scaled back their production rates.

Here's an interesting thing suddenly and some may not something to consider now this is what maybe where we get to this diverging duopoly things.

Boeing is from what we were told from their reports.

Focus on cash flow.

Airbus from their reports no their focus on dominating the single a world. So the reaction may be different for <unk>.

Boeing they say yeah, they've got to pull things in understandably I'm not criticizing Boeing Airbus May go the opposite direction. So we'll have to we'll get back that later, but it's real interesting going to watch, especially if the economy slows down and goes into reverse let's go on to slide 21.

Slide 21. This is a slide that said every presentation. So this is just kind of review we have that firm L. T a requirements contract.

Through 2029, with a middle River Aerostructure systems, Mras, which as you saw with S. T engineering I always have to remind you that <unk> used to be a saba GE aviation that explains why roll on all these GE aviation programs. So we got these programs when <unk> was still a solid with GE aviation, we built a redundant factory for them.

Our sole source for composite materials for engines, sorry, the cells and thrust reversers for the first five.

Check the items, what we call the <unk> hundred 20, Neo family aircraft with elite want a engines 747, two commack airplanes and global 7500 aircraft, let's keep moving I always like to point out this picture.

Those are Boeing 747, yourselves and look at the size of them compared to the guy in the background.

The picture, Okay Slide 22.

So some new developments G. A D. So this is kind of nice parks, a new film adhesive product.

Developed under our joint development of Mou agreement, we called an Mou between them restaurant Park.

Element of this film film He's a product take a long long time when it is complete and now our new film. He's a project is undergoing qualification with Emirates. That's very good news, we're happy about that it's a long process.

Lucky strike protection LSP material Park park's LSP material was also developed jointly with Emirates is currently in use biomass or the age from 20 Neo aircraft family and our coal Mac 919 program were sole source in those two programs. That's good that start doing so.

Here's the news top of slide 23, our top on top our parks <unk> materials now in the process of being approved for use on the global 7500 program that has cheat a passport 20 inches. That's very good news for park also.

Sure of the timing on these things if I, even if I had some confidence about them I would tell you, but I don't know next one fan case containment wrap for the G agenda.

Next engines for the Triple seven Max aircraft well. This is really good news until about a week ago after being dormant for almost two years of fan case containment wrap program has become active again.

There are still desired risk remember, we told you about this that there could be a redesign of the fan.

Fan case, though that the containment wrap is not no longer necessary, but even if that happens youre sold number of containment wrap that need to be produced. So we're very pleased me back on that program at least for the time being we actually were expecting like any day for this program to get restarted again any day than Boeing pulled the rug out from under us.

Surprised I think a lot of people by announcing they're pushing out the triple seven the next entry into service until 2025, that's a two year delay. So that's obviously disappointing at this point, it's very unclear how that'll impact at containment wrap program what it obviously could lead to program delays, so that's a little bit of a.

Good news, but maybe some putting throwing some cold water on it as well, but let's go on to slide 24.

Right. So we spent a lifetime talking about the.

<unk> hundred 20 Neo family.

With the leap <unk> engines, because it's so important to par.

This is why we've had I think two or three presentations are ready this is where Airbus, we're kind of putting down a marker saying. This is what we're going to do this is this has been a year ago may of last year. This is what we're gonna do okay. As soon as they did that the supply chain gets kind of freaked out and there's a lot of push back a lot of quotes to my shock and a supply chain support that and so.

You've got to be tension right away between Airbus and supply chain, let's go on to slide 25.

Background here of Airbus delivered 40.

Average 40, a neo family aircraft per month in 2021. They said they wouldn't go below 40. They didn't even you know at the beginning of the pandemic. You said, we can hold to 40, so many doubters so my daughter's birthday.

Through the work.

Next item currently delivering 20 Neo family aircraft a rate of 49 per month, which I think is pretty much what they were planning so that ramping up already.

Airbus recently stated they plan to this is a big one reached a rate of 65 <unk> hundred 20 Neo family aircraft deliveries per month by the Middle of next year, which is about 14 months from now.

So obviously for Airbus to get to that rate the supply chain needs to ramp up really before that date and maybe even now.

And in a recent speech.

The aviation week raw material supply.

Infection supply conference. This is a conference where the Airbus people are talking to their suppliers.

What do they say.

He says.

Interesting you need we need you mean to suppliers and the audience to follow air buses rate increase indications would have phased into rate increases indicated by Airbus. You also told the audience. We can do not to second guess so you see Airbus is getting a little bit in patient a little bit noisy with a supply chain. That's my take on this anyway like stop questioning what we're doing.

Get onboard so there's a tension there.

Slide 26, our GE aviation. This is I think important Ah recently stated publicly we're experiencing an unprecedented ramp in leap production and further stated we're aligned with the air Framers that means your bus what we need to produce through 2023. So this is potentially step in and be a G was want to aviation one of those companies.

The supply chain that was publicly questioning the aggressiveness of Airbus has indicated.

The rate increases Okay. Let's go on the next one and it's been reported this is a theme. We you know keep going back to the current very high oil and jet fuel price are motivating. Many legacy engaged 20 operators, who consider upgrading day through 'twenty Neo aircraft more quickly again, Neil much more fuel efficient than the legacy <unk> hundred Twenty's and then the last one this is important.

And kind of news.

Recent news just before this was a one year. After the original indication member may of last year, which I think was a part of their Airbus is Q1 earnings announcements looking beyond 2022, we see continuing strong growth in commercial aircraft demand driven by the <unk> hundred 20 family.

As a result, we're now working with our industry partners to increase 820 family production rates of 75.

Aircrafts a month in Tucson, and twenty-five CS are not tracking down we're actually doubling down in the news release. They further stated commercial aircraft production basically 20 family.

Pressing toward a monthly rate of 65 aircraft by summer 2003 that the other thing I've been saying 65 by Middle of next year 75 by 2025 Fogging analysis. This important global customer demand as well as assessment of industrial ecosystem readiness, I mean really the supply chain.

He is now working with our suppliers and partners to enable monthly production rates of 75 in 2025 during the conference call.

Airbus also said they assessed a large number of suppliers and theyre coming back and saying okay. We've.

All the questions about it we've worked with our suppliers. We're doing this but that's at least my take on it so slide 27.

Keep going at the end of March 2022.

The leap one a CFM in at 57, 4% share of <unk> hundred 20 family aircraft orders. So this is the Bible Aero engine news the Asian Puny Neal There's two approved engines wanted to leap one a that's the one we're on through <unk>.

The other one is the Pratt engine, which were not on so that percentage really important piece. We're only on the leap portion to 7.4, so assuming that 57, 4% and you know what.

Obviously, it goes up and down every month, but just what was that number that's the correct number.

<unk> five <unk> hundred 20, Neo aircraft family per month represents approximately $28 seven 5 million per year revenue Park, starting in 2025 last item.

X L R.

We're talking about this every quarter kind of a big thing that we're doing at a time that's so good.

First flight expected this.

This year, our certification entry into service early 2024.

Very unique or a plane for single aisle in terms of its seating capacity range 500, or 15 firm orders as of February 2022, and this is a big one still no response from Boeing Boeing does not have response for this airplane and we're not hearing anything so don't know what to make of that but it seemed like Airbus is planning to own. This.

Base less Boeing moves pretty quickly, let's go on to slide 28.

On the GE aviation jet engine programs update commack time, when nine so that's supposed to important program for park supposed to be entering into service at the end of this year, we'll see and then the global 7500.

<unk> 39 last year and they also delivered the 100.

Aircrafts recently, let's go on to slide 29 of some 47, we cover this every.

<unk> Boeing is terminating the production of the 747 I guess the last one was supposed to be delivered in October . This is a real sad thing for us because we just loved this airplane real important airplane also this is the first airplane first GE aviation.

Jim Colgan, there that we got on back in the 2014.

So its sentimental for us as well slide 32.

So we won't go through the history, you can read up yourself at the bottom of the page. Our forecast. This is a GE aviation program shale history sales history in history. The forecast for Q1 6 million to $6 5 million now Q1 is over an.

Intuitive weeks, but there's still a lot of risk in Q1 did you see that's down Q4 was $6 7 million.

That's the reason it down as 100% because the supply chain limitations, we believe.

So let's go on to the next item, which is the forecast for park part of our financial performance history and forecast estimates again, the top part is history, what's our forecast.

Poor sales for Q1, 12.75 to $13, two 5 million and the EBITDA too.

2.753 to five so.

We're talking about not a great numbers.

But remember at the beginning of the presentation. We're talking about Q4, we said we missed about a million dollars of sales because of supply chain issues, mostly well. These numbers take into account, we're probably going to miss another million dollars of sales in Q1. Other words, if we add everything was great at the supply chain was there.

We had everything we needed the sales would be a lot higher so let's keep going let's talk about some comments to our forecast kind of outlook.

First of all forecasting is highly problematical, probably not even a very meaningful in the current environment of supply chain chaos and disorder predicting the future in such an environment is somewhat of a guessing game probably more than someone forecasting for park and GE aviation programs, just problematical, even if for Q1 Q1 engine two and a half weeks, but the thing is.

It's back end loaded a lot for production for us because people haven't got difficult getting raw materials. So the thing is there's a lot of risk even though the forecast. We gave you. The forecast we gave you takes into account.

A lot of stuff that we're not going to be able to ship in Q1 because of supply chain issues, but just further risk because in order to get to the numbers. We forecasted things have to go well there was a hiccup and we more disappointments with supply chain, even that even those numbers are at risk. So I know what the Saints trains you have two and a half weeks ago, how could it be so much risk world, we're living in Nevada unused.

Well times.

Yeah, the supply chain chaos disorder. So it's very hard to predict things in that environment. You know, it's really hard to predict one week out. So we talk about long term forecast well, that's kind of silly and we gave you a forecast would have long term forecast and just be very little value. When all way through time was something that has very little value. However.

And there is a big however.

We believe we can provide.

Meaningful I'm just checking the time at sites into our company outlook. So let's break it down between military and commercial military first based upon the new World order caused by the war, we believe the outlook is.

Sorry quite.

Quite promising for park, particularly in the missile defense system area for reasons. We discussed we believe there is the water well new order dynamic is also not a temporary thing believe it is an emerging longer term sustainable phenomenon. It's like the world kind of got a wake up call here and it's not going to go back to sleep I mean, you know.

War is so if you could talk about was when you have a war you see it on TV every day, you know what happens it gets people's attention, obviously for Europe . It even gets more of your attention because it's in your backyard.

People remember well I don't know that they would probably not two people are still alive.

During World War, two but they probably heard about it.

About what could what could happen to Europe in other words in a case of a you know a a war.

Slide 33 hour session to pack the outlook for our military business, we believe not much because there's too much at stake when the country seeking to increase their defense budgets, you know theres again that will drag which is the supply chain, but you know if you're concerned about missiles coming your way it probably prioritize your missile defense system over.

Other stuff, maybe fixture roads or whatever other countries spend our money on.

Commercial aircraft business outcome, because there's no more complicated, but let's go into it.

We break it down by program because I think when you look at the key programs that helps us understand H 'twenty, Neil obviously, we're starting without one Airbus as aggressively.

Attempting to aggressively push up the rates for this critical program, how would a recession impact this program.

We believe Airbus is attempting to aggressively exploit what they believe is always perceived weakness in order to take as much single Isle share as possible and to establish an irreversibly irreversibly dominant position in single aisle as a result, we believe Airbus would.

At least could attempt to press your advantage even more aggressively recession didn't occur. This is kind of an important moment in time for commercial aircraft I mean, if you're American you may not like it that much but I think they believe there's a window of opportunity or bus.

To break the duopoly permanently.

Take dominant share of single aisle single hours, where it's at so.

They're very good I'm kind of mindset between Boeing and Airbus from what I could tell Airbus Airbus you seem to be really aggressive there's a recession. My guess is they'll believe would go even more aggressively.

That's my guess I don't know them right. So I'm, just kind of thinking allowed with you folks.

Nobody took no I don't nobody bear was just telling me stuff I'm just reading what you can read in Illinois.

Public information slide 34.

Well, let's talk about us pulling back programs E. R. J, a small problem and now we're spending a lot of time and the C. 1919 is has significant upside potential ballpark. Once the aircrafts are certified how would a recession impact those programs difficult to say, but a key consideration. These aircraft are intended to be sold into China market a market controlled by centralized China government.

So to 919 is an important prestige program for the Chinese government. They May press the program forward human a recession something to think about.

Slide 35, let's talk about that global 7500 program.

Ambitious yet, but we're including in our commercial just I guess for simplicity in the presentation clearly a very key program for Bombardier.

Its actually we believe it's a mandatory success program from Bombardier, but good news is they havent successful so far clearly, placing a greater emphasis on the program how would a recession impact are pulled them interesting to think about.

Not completely clear, but it's possible that the success drivers for the program we stay in place even during a recession.

In a recession the typical buyer of 40000 Bucks Chevy may hesitate, but would a recession or slowdown in the typical buyer of the 73 million dollar airplane I don't know, but it's a different kind of buyer with a different kind of mindset. You know clearly the guy who wants to buy that share my Chevy awful lot below actually there are no shut ins and a lot right now because of the I guess.

Shortages and other supply chain issues, but in theory, if there was a sharp eye on what the guy could buy one for points out and Buffy you might hesitate.

Based upon the above consideration dispute.

Punchline here, although there are serious concerns about the economy inflation workforce shortages in supply chain chaos. We believe the outlook for park is actually quite positive based on what we just talked about okay, we're going to try to hustle a little bit here.

Changing gears quickly it's all major expansion, we're not going to go through the numbers, except the second to last item.

Film and tape line qualifications in progress, where they have been delayed because of some supply chain issues staffing limitations and just you know.

Lounge are being run operating for the qualification by R&D and engineering people, we do what we Gotta do you know what.

We prefer to do but we do what we need to do everybody does what they need to do at par.

So just quickly I don't want to spend a lot of time on this but if you look at the top picture that's the.

One of our new building.

It's actually the front of our existing building, we're expanding the offices.

Florida Middle that's the most beautiful part of our expansion that's a conference room and when we decided to do is dedicated to Linda Berge. Linda died about a year and a half ago. She was very special employee of ours, a lot of harsher broken when she died so we decided to.

The coldest room.

Linda Berge observation deck at overseas the airport property that runway is very beautiful room and.

We had a little dedication your family come over very nice little event.

So I just wanted you to know about that let's go onto slide 37, if not a little bit departure here at the James Webb space telescope, now, but a million miles from Earth and it's really when you think about it you know this.

Based on the scope has a lot of our Sigma stretch in corporate in the structure of the what's called the bus I think.

And so you know those are those little those not little OS.

It was strides were made in a little factory I'm, putting a little.

Compared to a million miles in Kansas and other a millionaire floating space orbiting a million miles from the Earth Moon is only a quarter mile millions of miles from your perspective.

Yeah.

There's.

Mary instrument.

I guess, that's the extremely cold in order for it to operate properly. So they haven't you know a real cold temperature I, just don't it's kind of a fun little factor, let's keep going since we're short on time of course.

Okay, and we are showing time parks people always talk about park's people.

So yeah. This is our.

Staffing crisis here.

For challenge, maybe I shouldn't say crisis, but severe challenge. We currently have 105 people, but we just added seven people last week. So we were bumping along at 98 9900 for awhile there ideal people count for US would be 120, 528 minimum use it properly hopkinton functions under 15.

So many other companies are throwing money at people you hear about everywhere.

Offering money to people to hire them lots of money and of course, it's a problem for us.

It makes it more difficult to recruit people they bid up people and they are needed in short to them for your investor people out there you know what that means throw them onto garbage sheet, when they're not commodities to be traded like pork bellies.

Park, it's kind of heartbreaking to see that we believe throwing money at people and paying them. What they have not earned can be cool and hurtful to them.

It can destroy their sense of dignity self-respect humanity and self worth.

Clearly more difficult and challenging for Parker route people in a world, where others are throwing money at people to recruit them and where parks not willing to do that.

But park, we stick to our principles and monitor how difficult or inconvenient throwing money at people as if they were commodities that's not for us our people. They're not commodities are people are precious or people family Slide 39, Parker people earn everything they get little gift giveaways.

We think our people are constantly properly, but the area where they get so they have some dignity no giveaways no free lunches, we respect and admire people too much to marginalize them demoralize them did humanize them by giving them stuff that you haven't heard.

Dominion to a person to do that.

Condescending, meaning what will happen, if there's an economic downturn or recession, well those companies throwing money at people, they're going to hold onto them all the people. They hire what do you think.

But but park when we hire someone to park or attitude as we hired them for life. It doesn't always laugh because it would work out then they quit or maybe if theyre not rights Louis they will stay with.

But that's our attitude anyway.

Throughout the depths of the pandemic and economic crisis, we kept all of our precious people every last one of them I.

Remember that pandemic enough.

Sorry, economic crisis, where sales were in kind of fell out of bed.

Roughly that Donald just went off a cliff I guess, you say fly.

Slide 20, remember the pandemic uncertainty about whether world would even survive remember that two years ago. When we really didn't know what's going to happen. There's so much uncertainty so much fear what do we do we.

And not let go of any of our people than wood.

Would you let go of any of our people if there's a recession.

What do you think.

Then, let's keep going.

Interesting little one culture eats strategy for breakfast from Peter Drucker, maybe some you know Peter Drucker is I can take the sudden you folks out there listening you I'm sure know who he is.

So how will we be able to make our Q4 EBITDA number was such a severely reduced workforce whats at magic and I don't think so our people working very long hours. Some cases 70 hour weeks weekend and week out.

It doesn't have a salary people, including our V P and G. M worked aligned during Q4.

Putting the three day Presidents' day weekend that was P. B cells right before the end of Q4, and we have a lot of production really get up to make our numbers.

Nobody really asked our people do it they just did it.

Stand, how very fortunate and lucky we already have the wonderful people, we have understand why we love our people. That's a question I am sorry, a slide 41 on hustle here.

People will talk lots about strategies, sometimes develop a fancy Ivy League consulting firms, we got nothing against page I'll leave consulting firms, but that's off of where the strategy has come from.

But this is the key thing that so many people Miss somebody I leaguers Miss Ivy Leaguers, Miss with a dedicated motivated and inspired workforce a company can move mountains.

That's such a work for as a company can move nothing no matter how it was elegant their strategy might be but don't get us wrong, we have a strategy to but its our wonderful people, who make those powerful and home.

Updated our customer Flex program, we talk about this every quarter. So I won't read the numbers for you except to say critical program for part B very difficult for us to really get done will you have to get done without their program. We love that program, let's go on to slide 42.

Closing thoughts, we get there will there be a recession the excess in the economy and our society seems hold stream to us are they sustainable but people be willing to continue to pay highly elevated prices, where almost everything when money supply is being tightened in the days of cheap and easy money are coming through and earn good things to continue that way forever does that makes sense.

So I'm going to think about we're not economist of course, but we believe recessions likely under these circumstances, how do we feel about it.

Well, we know it sounds harsh winter weather, we hope there will be a recession because to us that may be the only way some sense of balanced proprietary.

Friday logic order at Sandy can be restored to the economy and our society, what would we do differently in a recession.

Not much.

Slide 43 closing thoughts continue principles are not cheap so we're circling back on principle to not cheap the only count when it's it can be to hold true to them.

You know what somebody else principles when it when they're holding true them when it's not convenient when it's convenient and it doesn't matter.

It doesn't give you any cause super parked honor our P. O is an appeal confirmations in a world where many others not doing so.

But apart we do what we say we're going to do.

A part of where does or buying it doesn't matter how it can be it is how close when it is awarded as our bonds. We don't go against our word.

It is getting and I'm talking about pricing and appeal I'm not talking about you know suppliers that are late that's not your fault you know these their supply chain by supporting them.

And to confirm appeal.

And is it convenient for park not to throw money at people in order to recruit them in a world where many others are doing just that.

Parker people are precious our people are not commodities to be bid up were sold short depending on which way. The wind is blowing others need to to make their own choices about what matters to them and what does not.

And they have to live with those choices that's their business, but a park honor integrity are what matter most.

At Park principles are not cheap.

Slide 44.

Whats an extra park really nothing new Ginger press forward and continuing to attack.

We go after things aggressively we continue to make money for our owners that's something that we all are people understand is important we make money for our owners, we always do and that's our objective anyway.

And we keep swinging for the pensions, we don't play small ballpark.

We're always swinging for the fences and park, we're not like the others are not fooling around here.

We're looking to make an impact.

To go for Greatness Park, we play for keeps.

Lastly, we always talk about is our picture and this is a little different because the people picture. This is not everybody. We tried to get everybody, but it was a storm and people couldn't make it type storms in Kansas, you know you've heard about that wizard of Oz and but it's only about half of workforce.

But we thought we'd do a company picture because really we wanted to recognize everybody in Q4, everybody did such a great job and interestingly that little thing above that touch a little above the folks that's an actual tran.

Transco structure the day through 'twenty Neal it was given to us as a gift from mris.

<unk> got copper stuffs looking stuff, that's the actual lightning strike material.

So you can kind of get a perspective on that.

The size of the.

Of the the Transco and engine yourselves. So I think that covers it how are we doing with time not so good 50 minutes. So operator, if there's any questions, Matt and I always happy to answer them.

Ladies and gentlemen, if you have a question or comment at this time. Please press Star then one on your telephone keypad.

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Again, if you have a question or comment at this time. Please press Star then one on <unk>.

Allophone keypad.

We have a question or comment from the line of Brian Glenn from.

Look at square investments your line is open.

Hey, Brian and Matt.

Hey doing Brian .

Yeah. Thanks for all the FX.

And the work around them.

I know there was this goes back to the quarter ended May 2020, there was a small buyback it was like 137000 shares.

And the stock price is about the same the outlook.

For me as an outsider tremendously better and more certain even if there is a ton of uncertainty back in may of 2020, we had.

No vaccine no timing air travel was shut down.

Globally and now it looks like.

Youre getting larger exposure on some existing programs like the film adhesive for the 7500.

<unk> hundred 20, <unk> ramping up.

Those statements are out you had your comments around China's commack in and.

And then the military spend and the stock price is about the same stuff. They live it cheap enough to buy back then.

What's changed in terms of any sort of repurchase whether small or large now.

Okay. Thanks, Brian .

So.

That's a very good point right now.

We're pretty much in a blackout, but it's something we need to consider you know we haven't been real aggressive with buybacks as I think you know our histories.

Use the return of capital with cash Board.

Actually use, especially rather special dividends more than buybacks.

Thanks for the input something consider I, just Wanna comment Yeah, I agree I agree with you. The short term forecast, we can't even give you wanted to be there since.

Such difficulty in the market right now, but I agree with you that the outlook and its hard to condi outlook because of all of those short term factors, let's call temporary factors that I believe you're right the outlook is positive.

So oh, okay. So thanks for the input something for us to think about it you know going to be an answer of course, but we will discuss as well.

I'll discuss next board meeting so that's why I can tell you at this point.

Okay.

I appreciate it and then can you remind me if the eight 321. The XLR that you mentioned is that within that long term agreement for MRI or that's outside of it I think he had mentioned prior.

Salary call.

It's within the L T a C.

No.

That's a that's a leap <unk> engine.

So that's all within the L T.

Understood and then I guess last one if I can sneak it in.

Any comments around the timing of <unk>.

Actual workflow being done in the new facility.

Have you even happens.

The timing of work.

Starting with <unk>.

The facilities.

So we're still going through the qualification.

Go ahead sorry.

Yes, yes, no got you.

Alright.

We're still going through the qualification as I said, that's been delayed you know we have we had to actually choose between the qualification and production and we chose production.

I don't want to disappoint, our customers. So the qualification with delay just because raw material shortages and the staffing I mean as I said the people that are actually running the equipment our people from R&D and engineering, which is not what we want we want you know operators to be over there.

So.

At this point, we're not being pressure will Hardy had qualification complete which is good so it could take a little while longer but once we get the qualification complete then we'll start producing in that factory for mris in other customers as well.

But I don't have a hard timing for you on that and it's kind of one of those things that's influx based upon all of the other supply chain issues that we're dealing with.

Okay. Thanks, I appreciate that thanks for the effort.

Good luck with the 747 coming to an end I know that's kind of taking it.

Personally.

Yeah.

Thank you very much.

So all of that.

Thanks for all the hardware.

Thank you.

Thank you again, ladies and gentlemen, if you have a question or comment at this time. Please press Star then one on your telephone keypad.

I'm showing no additional questions in the queue at this time Sir.

Thank you very much operator, and thanks, everybody for listening hanging in there I apologize these calls keep getting longer and longer we do our best to rush through them. So anyway. So have a good day and you know if you you always can reach Mad at me. If you want to have any follow up questions. You have to always take your questions have a great day goodbye.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program you may now disconnect everyone have a wonderful day.

Okay.

Okay.

Okay.

Yeah.