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spk01: 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 22 earnings release conference call and investor presentation all lines have been placed on mute to prevent any background noise after the speaker's 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. Thank you. 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.
spk03: Thank you, Operator. Hello, this is Brian. Good morning to everybody. Welcome to our Q4 Investor Conference Call. Nice to have you aboard. So this morning, as you know, we announced our earnings. And you probably want to pick that up. In the earnings release, there are instructions as to how to access the presentation we're about to go through, through the webcast, also on our website. So we always give you a little caveat. We can't cover everything. We cover 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'd 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 skim over certain portions of the presentation. It's very long. Some of it is just included for context. We're not going to cover every item in the presentation. We don't have time for that. And it could still take 45 minutes to go through this, and I just want to warn you about that. Matt and I will, of course, answer any questions you have when we're done going through the presentation. Okay, so let's do it as they say. Why don't we go to slide two? forward-looking disclaimer. If you have any questions about our forward-looking disclaimer, just give us a call. Slide three is table of contents. Slide one is the presentation we're about to go through. Appendix one, we have our normal supplemental financial information as appendix one. I want to go on to slide four, probably take a little more time on slide four than the first three slides. So in slide four, we have our Q4 results, which, you know, you're probably already aware of because of the also Canadian news release. So I won't spend a lot of time on the numbers. The numbers are there. You see the top line is off from the prior quarters. But one thing we're happy about is that the gross margin is 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 EBITDA margin is 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 at Q3 last year. percentage as well. EBITDA, adjusted EBITDA were $3 million. We're pleased about that. Okay, what did we say about Q4 during our Q3 conference call? We said sales estimates were 12 and three quarters to 13 and a quarter, so we didn't make that number or under that number, 12 and a half. Adjusted EBITDA, $3 million to 3.5, so we came in within that range. I will always remind you, I forgot to do that, that when we give you forecasts, we don't call it guidance, or estimates, we're telling you what we think is going to happen. We're not playing what we consider to be a little game that probably 90% of other corporations do where 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 you think is going to happen. We're sometimes wrong, but we're telling you what we really believe is going to happen. Anyway, even though we came in under the top line, the bottom line was where we wanted to be. And I would say that was an outstanding job by Park's people to make the EBITDOT number, considering that the top line we did not make and considering all the other things we're about to talk about in terms of the day-to-day life of Park. Let's go on to slide five. Oh, here we go. Living 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 watch the business news these days. Supply chain, supply chain, supply chain. Wow. This is really something. And I just want to note that we were told by, you know, people supposed to know that this is going to end, you know, that this problem is going to end last year. There's a ha there for that. Of course, it didn't end. As far as we're concerned, we never saw it this bad. Freight, freight, freight, yep, daily battle, severe staffing shortages. We'll get back to that later. Total misshipments in Q4, close to a million dollars. mostly because the supply chain is huge, close to a million dollars. So stuff we would have shipped, could have shipped if we had the raw materials that we needed. Let's go on to slide six. Okay, we're continuing on what Park is living with stuff. Inflation, inflation, inflation, raw material costs, you bet, freight costs, utilities, supplies, pretty much everything. So again, you don't need us to tell you this. Everybody knows about this. You go to the grocery store, gas station, You're hearing it. You're seeing it. You're feeling it. But inflation will still be transitory. We'll get a double ha on that. Remember transitory? Are the people still saying that? I wonder. This is not a loose list of excuses. Excuses, that's a dirty word at Park. We don't get into excuses. But, you know, as investors, we think you would like to know what we're living with every day at Park, so that's why we're telling you these things. Slide seven, more of the supply chain. Yep, we never saw it like this before. It's become a free-for-all. Order in the supply chain is broken down. It's chaos pervades. And in some cases, even confirmed POs are not being honored. So, you know, this is what I mean by things breaking down. In normal business, you know, there's just kind of trust, good faith that is required for business to operate. You know, we get a pricing quote from a supplier. We have a PO, confirmed PO. We turn around and we give pricing to our customer. And it's based upon our cost, of course. based upon the raw material clause, based upon the quote we have from our supplier. Then it goes up and down supply chain like that. This is always done, it's just done good faith. We don't get a law firm out every time, we don't contact a law firm every time there's a PO or PO confirmation. This is how business operates. But right now, none of this really works anymore. Not only are 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 have staffing shortages. But the other thing that's happening, which is disappointing to us but not shocking, is that in some cases people, companies, aren't even honoring the pricing that's in a PO, a confirmed PO. They say, no, we're not going to honor that pricing. So what position it puts us in is that, okay, we've assumed that price. Can we give pricing to our customer? kind of interesting dynamic, but that's why I say the supply chain is kind of chaos. Everything you want to count on for normal business, these are assumptions that we just kind of used to take for granted. We can't take them for granted anymore. But at Park, we don't panic, even though the panic rage we're saying, and we live with the chaos if chaos comes our way. So we'll deal with whatever comes our way. It's very unfortunate that this is the world we're living in 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. That's how we do at PARC. At PARC, honor integrity is what matters most. At PARC, principles do not come cheap. More on this later, but you probably get where we're going with this. We honor our commitments. We honor our commitments in terms of any kind of pricing we have that are confirmed PO. We don't go back and say, sorry, our costs went up. Let's say we have a confirmed PO delivery, so it's going to be in three months. We don't go back to the customer and say, sorry, our costs went up, so we're not going to honor the pricing. We don't do that. That's not the parkway anyway. Okay, let's keep going. We'll get back to that later. Slide 8. Slide 8 is interesting because that's the annual fiscal year look at the park history. And we highlighted, as you can see, fiscal year 20 and fiscal year 22. 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 22, the top line was off from fiscal year 20, you know, partly because some of the reasons we're talking about. But nevertheless, it was off. But there's a very nice but here. Look at the gross margins. The gross margins were better in 22 than in 20, even though in 20 the top line was much higher. 20 was a good year. Let's think about that. Our fiscal year ends in February. So 20 was a pre-COVID year, right before COVID started. Obviously, 22 was not a pre-COVID year, not at all, not a pre-COVID, pre-economic crisis year. So even in the second COVID year, our fiscal year was 22. the second economic crisis year, our gross margins were actually better. And look at the adjusted EBITDA. Not just the percentage, the actual number is better. $13 million in fiscal 20 to approximately $13.1 million. A little bit better, but we'll take it in 22. In 22, we had COVID disruptions, supply chain chaos, inflation, staffing shortages. These are the things we live with in 22, but nevertheless, look at what our people were able to achieve, and the adjusted EBITDA margin also very nice. So I would say excellent, excellent, outstanding job by parks people under extremely difficult circumstances to deliver that kind of performance. So if you ever want to send a thank you note to the parks people, not me, I didn't do any of it. It's our people that do all of it. Let's go on to slide nine. We'll just skim 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 cover is the bottom on the slide, on the bottom arrow point. With interest rates rising fast and the era of cheap and easy money coming to an end, we hope, maybe parks or hard-earned money will finally be worth something. It's been so frustrating having money, and everybody else gets free money, and we're trying to compete, let's say, on M&A, and the prices go way through the roof because somebody else says they're using other people's money. We use our money, and the other people's money is cheap. So hopefully there will be a little bit of a change there. Slide 10, the only thing we'll cover is the last item, just an update. We've paid $554 million or $27.05 per share in cash dividends since this year, 2005. By comment, I think you know what it is. That's a lot of damn money for a small company like Park. Slide 11, okay, a little bit more of our kind of fun stuff here, top five customers in Q4. There's a picture of a Boeing 747, sorry, 787. That relates to GKN. That relates to the Gen X-1B engine, which provide materials. Boeing Poseidon subchaser, that's a Nordam. That relates to Nordam, the Nordam group. And actually, because this subchaser uses the Weathermaster radome, we produce the materials for that radome that Nordam produces. And Patriot, Advanced Capability Pack-3 Missile System. This is a big one. We'll talk about this a few times during the presentation. That relates to a company called AAE. We supply the depleted materials for the rocket nozzles for the Pack-3. And Gremlin, you probably guessed it already. That's Kratos designed and built the Gremlin missile. We don't have a picture for Middle River, but we'll cover them later on. Okay, let's keep going. Slide 12. Yeah, interesting comparison to fiscal 20 to 22. You see that the pie is kind of coming back more or less to fiscal in 22, coming back to more or less what it looked like in 20, except military is a little down as compared to 21. Now I'm going to 21. Okay. Our feeling with that is military is really something we really feel good about, especially for the future, and we'll get to that in a minute. But in fiscal 22, we think military was kind of held back because there were really big delays in approving the budget. The budget is now approved, so we'll see what happens with that. Let's go on to slide 13. Park loves niche military aerospace programs, so we always do this for fun. This is a project that Donna and Elena work on every quarter, coming up with some kind of fun stuff that PARC's involved with. Sometimes it's little nifty stuff, sometimes it's not big volume, sometimes it is. So Boeing RC-135 materials for structures, the MK-125 warhead for the SM-6 missile, that's materials for structures. That's unoblative actually in that case, that's structures. Collins Class Submarine, that's for the Royal Australian Navy materials and materials for the Harrier. Let's keep going. We'll keep track of the time here. Got a lot to cover, slide 14. Okay, so we're going to do something a little different here. We're going to cover, 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. The new world order. What's the new world order? A sea change in attitudes about the defense industry and spending based on the war in Europe. Almost overnight, happened almost overnight, and what a difference a war makes. Well, you know, the war is a horrible thing, of course, but it certainly has had an impact upon the global defense industry. It seems that way anyway. I just talked about this to you, Esther. 2022 defense appropriations bill was signed into law, so defense 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 here. Missile defense systems, such as the PAC-3, we talked about that, and a hypersonic missile system, such as the SM-3 missile. We're in that program as well. Let's go on to slide 15, continuing with military market trends. But Europe may be the real big defense spending story. You know, we talked about the U.S. and everything. What about Europe? Because these products may be made in the U.S., but where are they being used and purchased? Certain countries like Germany have already significantly increased their defense budgets, and many others are considering or are in the process of considering increasing their budgets. And not surprisingly at all in those circumstances, what's the emphasis? Missile defense systems. Well, I guess we know why that is, because nobody likes missiles getting shot at them. So that's a big thing. And I think that's kind of maybe part of that, what do we call it, sea change. We don't use that term paradigm shift at PARC, so we don't like that. And don't forget about Asia. That's not a happy place these days either with everything going on with China and Taiwan. So Taiwan recently contracted upgrades to its factory missile system. Japan utilizes that packed-free missile system, defense system, as an essential part of its missile defense strategy. South Korea, not surprisingly, utilizes the packed-free missile defense system to counter North Korea's ballistic missile capabilities. Let's go on to slide 16. Still military markets, some trends about the new world order. So Lockheed recently commented, sorry, I'm rushing a little bit, commented that Russia's attack in Ukraine has boosted demand for their missile defense systems. Lockheed's CEO stated, we've got demand signals for THAAD and PAK-3 from around the world. He continued, when you see missiles hitting hospitals and train stations in Ukraine, governments are now thinking that it might be worthwhile to have an effective missile defense system. Yeah, you think so? Next item, Aerojet, which is also a big contractor for the PAK-3, Announced significant increases in a factory missile system activity just recently. And parks, as we've already commented, supports the factory missile fence system with special blade of composite materials. So here we go. What's the conclusion here? The strong trend toward increased defense spending in North America, Europe, and Asia, undeniable as far as I'm concerned anyway. But, and there's a but, supply chain issues can at least temporarily limit the speed of the ramp-up of dispensed spending. That's a significant item because the supply chain may not be able to respond as quickly as some of these countries 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 why don't we go on to slide 17. We covered defense trends, now commercial areas, space markets, and trends and considerations. It's a little more complicated, so we'll take a little bit more to go through it. So let's start with commercial aviation continues to recover, largely driven by continuing improvement in U.S., domestic, and transatlantic. Single aisle, we talk about that a lot, continues to lead to recovery over wide-body single aisle aircraft designed to service those domestic routes as well as the short-range international routes like transatlantic aircraft. U.S. domestic commercial air travel now running about 90% of pre-COVID levels, we've heard. That's been reported in any way. Even business travel, which lagged a personal air travel recovery, appears to be beginning to recover nicely. We're not talking about business jets. We're talking about business people traveling on commercial airlines. Analysts believe 2019 global air traffic levels be matched in 2023, surpassed in 2024. Let's see about that. And then several U.S. air carriers recently reported strong passenger demand and increased revenue guidance. Carriers have recently commented that they plan to pass along jet fuel costs, uh-oh, 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 on one of the financial news programs that just last month ticket prices went up 18%. Don't hold me to that. It's like a news program. Sometimes they get this stuff wrong, 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 to more quickly replace less fuel-efficient legacy aircraft and more fuel-efficient modern aircraft such as the H-420neo. As a general rule, higher the jet fuel prices, the greater motivation. So generally speaking, airlines don't want to replace the legacy airplanes early because the economics are against that. But once the jet fuel prices get so high, then those economics shift, and then there's motivation to replace the legacy airplanes with the more modern airplanes more quickly. The neo is much more fuel-efficient, I should say, than the legacy H-420 as comparison. Then you come to the but. Okay, big but 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 fuel is considered to be the largest piece of the operating cost pie for an airline. 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 in very significant, very significant increases in airline operating costs. That may be even more than twice now because it seems like every week it goes up more and more. In order to maintain their margins, airlines have significantly increased ticket prices and will likely need to increase them even more to keep up with those escalating jet fuel prices. Let's go to slide 19. So it is true that people point this out, a lot of pent-up demand for air travel as the world recovers from the pandemic. Also, a lot of people have loose money in their pockets, so people want to get out and stop being locked down and want to travel. So there's no doubt about that. But, and here we go back to the but again, are the individual and busy travelers going to continue to be willing to pay the greatly escalated ticket prices forever and ever with no end in sight? Does that make sense really? Does that defy logic? I don't know. Does it defy history? Oh, yeah, it defies history. That's not how it's worked in the past. Does it defy gravity? Well, I don't know. Maybe it does. What about that dirty R word? What happened to the recession? Will people keep flying and paying the greatly escalating ticket prices if the economy stalls out, goes 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 commercial aviation. And, of course, we have to ask if that's irrational exuberance. If people start flying less... will airlines be less willing to order airplanes? Well, maybe. Something to consider anyway. If that happens, will commercial aircraft manufacturers scale back their production rates? Here's an interesting thing. Some may and some may not. Something to consider. Now, this is what may be where we get to this diverging duopoly thing. Boeing is, from what we're told from their reports, they're focused on cash flow. Airbus, from their reports, no. They're focused on dominating the single aisle world. So the reaction may be different. Or Boeing may say, yeah, they've got to pull things in. Understandably, I'm not criticizing Boeing. Airbus may go the opposite direction. So we'll get back to that later. But it's a real interesting thing 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's in every presentation. So this is just kind of review. We have that firm LTA requirements contract through 2029 with Middle River Air Structure System, MRAS, which is a sub of ST Engineering. I always have to remind you that MRAS used to be a sub of GE Aviation. That explains why we're all on all these GE Aviation programs. So we've got these programs when MRAS is still a sub of GE Aviation. We built a redundant factory for them. sole source for composite materials for engines, sorry, nacelles and thrust reversers for the first five checked items that we'll call the A320neo family of aircraft with elite 1A engines, 747, the two COMAC airplanes, and the Global 7500 aircraft. Let's keep moving. I always like to point out this picture. Those are Boeing 747 nacelles and Look at the size of them compared to that guy in the background. Love that picture. Okay, slide 22. Oh, some new developments. This is kind of nice. Park's new film adhesive product developed under a joint development MOU, which, you know, agreement, we call it MOU, between Amherst and Park. Development of this film adhesive product has taken a long, long time, but it's complete. And now our new film adhesive product is undergoing qualification with MRAS. That's very good news. We're happy about that. It's been a long process. Parkes Lighting Strike Protection LSP material, Parkes LSP material, was also developed jointly with MRAS. It's currently in use by MRAS on the A320 NEO aircraft family and a COMEC 919 program. We're sole sourcing those two programs. That's good. That's not news, though. But here's news. Slide 23 on top. Park's LSB materials now in the process of being approved for use on the Global 7500 program that has GE Passport 20 engines. That's very good news for Park also. Not sure of the timing on these things. If I had some confidence about them, I would tell you, but I don't know. Next one, fan case containment wrap for the GE 9X engines for the 777X aircraft. Well, this is really good news until about a week ago. after being dormant for almost two years, the fan cage containment wrap program has become active again. There is still design risk. Remember we told you about this, that there could be a redesign of the fan cage so that the containment wrap is no longer necessary. But even if that happens, there's still a number of containment wraps that need to be produced. So we're very pleased to be back on that program, at least for the time being. We actually were expecting POs like any day for this program to get restarted again, any day. And then Boeing pulled the rug out from under us. They surprised, I think, a lot of people by announcing they're pushing out the 777X entry into service until 2-10-25. That's a two-year delay. So that's obviously disappointing. At this point, it's very unclear how it will impact the containment wrap program, but it obviously could lead to program delays. So that's a little bit of good news, but maybe throwing some cold water on it as well. Let's go on to slide 24. All right, so we spent a lot of time talking about the A320 NEO family with the LEAP 1A engines because it's so important to PARC. This slide we've had in, I think, two or three presentations already. This is where Airbus were kind of putting down a marker saying, this is what we're going to do. This was a year ago, May of last year. This is what we're going to do. As soon as they did that, the supply chain gets kind of freaked out and a lot of pushback, a lot of, oh, it's too much. How can the supply chain support that? So it got to be tension right away between Airbus and the supply chain. Let's go on to slide 25. Just some background here. Airbus delivered an average 40 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, said we're going to hold to 40. So many doubters, so many doubters, but they held to the word. Next item, currently delivering A320 NEO family aircraft at a rate of 49 per month, which I think is pretty much what they're planning, so they're ramping up already. And Airbus recently stated they're planning, and this is a big one, reach a rate of 65 A320 NEO family aircraft deliveries per month by the middle of next year, which is just 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 at the Aviation Week Raw Material Supply Manufacturing Supply Conference, this is a conference where the Airbus people are talking to their suppliers. What do they say? He says, it's kind of interesting, we need you, meaning the suppliers in the audience, to follow Airbus' rate increase indications and have faith in the rate increases indicated by Airbus. He also told the audience, we kind of do not to second guess. So you see, Airbus is getting a little bit impatient, a little bit annoyed with the supply chain. That's my take on this anyway. Like, stop questioning what we're doing. Just get on board, you know. So there's a tension there. Slide 26, GE Aviation. This is, I think, important. Recently stated publicly, we're experiencing an unprecedented ramp in lead production today. And further stated, we're aligned with the airframers. That means Airbus is what we need to produce through 2023. So this is potentially significant because GE Aviation was one of those companies, the supply chain, that was publicly questioning the aggressiveness of Airbus's indicated rate increases. Okay, let's go on. Next one. And it's been reported, this is a theme we, you know, keep going back to in current very high oil and jet fuel prices are motivating many legacy A320 operators to consider upgrading the A320 NEO aircraft more quickly. Again, NEO, much more fuel efficient than the legacy A320s. And then the last one, this is important kind of news. This is very recent news, just on May 4th. This was... One year after the original indication, remember May of last year, this I think was part of their Airbus Q1 earnings announcement. Looking beyond 2022, we see continuing strong growth in commercial aircraft demand driven by the A320 family. As a result, we're now working with our industry partners to increase A320 family production rates to 75 aircraft a month in 2025. You see they're not tracking down. They're actually doubling down. In the news release, they further stated commercial aircraft production of A320 family is regressing toward a monthly rate of 65 aircraft by summer 2003. That's the other thing they've been saying, 65 by middle next year, 75 by 2025. Fog analysis, this is important, of global customer demand, as well as assessment of industrial ecosystem readiness, that means really the supply chain. The company is now working with its suppliers and partners to enable monthly production rates of 75 in 2020. During the conference call, Airbus also said they assessed a large number of suppliers, and they're coming back and saying, okay, we've heard all the questions about it. We've worked with our suppliers. We're doing this. That's at least my take on it. So slide 27, let's keep going. At the end of March 2022, the LEAP-1A CFM had a 57.4% share of A320 family aircraft orders. So this is the Bible Aeroengineers. The Asian Community NEO has two approved engines. One is a LEAP 1A. That's the one we're on through CFM. And the other one is a PRAT engine, which we're not on. So that percentage is really important because we're only on the LEAP portion. So assuming that 57.4%, which obviously goes up and down every month, but just let's use that number. That's the current number. The 75 A through 20 NEO aircraft family per month represents approximately 28.75 million per year revenue per park starting in 2025. Last item, the XLR. We talk about this every quarter, kind of a big thing. We're doing on time, not so good. First flight expected this year. Certification entry into service early 2024. Very unique airplane for single aisle in terms of its seating capacity and range. 515 firm orders as of February 2022. This is a big one. Still no response from Boeing. Boeing does not have a response for this airplane, and we're not hearing anything. So don't know what to make of that, but it seems like Airbus is planning to own this space, unless Boeing moves pretty quickly. Let's go on to slide 28, continuing on the GE Aviation Jet Engine Program update. COMAC 919, so that's an important program for FAR. It's supposed to be entering into service at the end of this year, we'll see. And then the Global 7500 produced 39 last year, and they also delivered their 100th aircraft recently. Let's go on to slide 29. 747, we cover this every quarter. 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 love this airplane, real important airplane. Also, this is the first airplane, the first GE Aviation engine program that we got on back in 2014. So it's sentimental for us as well. Slide 30. So we won't go through the history. You can read that for yourself at the bottom of the page. Our forecast, this is G aviation program sales history. The forecast for Q1, $6 million to $6.5 million. Now, Q1 is over in two and a half weeks, but there's still a lot of risk in Q1. And you see that's down. Q4 was $6.7 million. The reason it's down is 100% because of supply chain limitations, we believe. So let's go on to the next item, which is the forecast for Q2. Park, Park's financial performance history and forecast estimates. Again, the top part is history. What's our forecast for sales for Q1? 12.75 to 13.25 million. And the EBITDA, 2.75 to 3.25. So, you know, we're talking about not great numbers, but, you know, remember at the beginning of At 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. In other words, if we had everything was graded, 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 and our outlook. First of all, Forecasting is highly problematic and probably not even very meaningful in the current environment of supply chain chaos in this order. Predicting the future in such an environment is somewhat of a guessing game, probably more than somewhat. Forecasting for park and GE aviation programs is problematical, even for Q1. Q1 ends in two and a half weeks. The thing is, it's back and loaded a lot for production for us because we've been having difficulty getting raw material. So the thing is, there's a lot of risk even in 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 there's further risk because in order to get to the numbers we forecasted, things have to go well. There's a hiccup. There will be more disappointments with supply chain. Even those numbers are at risk. So I know it's strange. You have two and a half weeks to go. How could there be so much risk? Well, we're living in very unusual times. Again, supply chain chaos disorder. So it's very hard to predict things in that environment. It's really hard to predict one week out. So we talk about long-term forecasts. Well, that's kind of silly, and we give you a forecast. We'd have a long-term forecast. It would just have very little value. We don't want to waste your time with something that has very little value. However, and there's a big however, we believe we can provide meaningful, just checking the time, insights 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 quite promising for PARC, particularly in the missile defense system area, for reasons we discussed. We believe this New World Order dynamic is also not a temporary thing. We 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, wars, you can talk about wars. When you have a war, you see it on TV every day, you know, what happens. It gets people's attention. Obviously, if you're in Europe, it even gets more of your attention because it's in your backyard. People remember, well, I don't know, they're probably not people so alive that were during World War II, but they probably heard about it. about what could happen to Europe, in other words, in the case of a war. Slide 33, how would our session impact the outlook for our military business? We believe not much because there's too much at stake for the country seeking to increase their defense budgets. You know, there's, again, that little drag, which is the supply chain. But, you know, if you're concerned about missiles coming your way, you probably prioritize your missile defense system over other stuff, maybe fixing roads or whatever other countries spend their money on. Commercial aircraft business outlook. This is a little more complicated, but let's go into it. Why don't we break it down by program? I think when you look at the key programs, it helps us understand. A320neo, obviously we're starting with that one. Airbus is 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 Boeing's perceived weakness in order to take as much single aisle share as possible and to establish an irreversibly dominant position in single aisle. As a result, we believe Airbus would at least could attempt to press their advantage even more aggressively if a recession did occur. This is kind of an important moment in time for a 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, Airbus, for them to break the duopoly permanently and take dominant shares, single aisle, single aisle is where it's at. So there's a very different kind of mindset between Boeing and Airbus from what I can tell. Airbus just seems to be really aggressive. There's a recession. My guess is they'll go even more aggressively. That's my guess. I don't know if I'm right. I'm just kind of thinking aloud with you folks. I'm not – nobody – Airbus is telling me stuff. I'm just reading what you can read, you know, on the – and the public information. Slide 34, let's talk about those COMAC programs. The RJ is small, probably not worth spending a lot of time, and the C-1919 has significant upside potential for PARC once the aircraft is certified. How would a recession impact those programs? Difficult to say, but a key consideration is the aircraft are intended to be sold in the China market, a market controlled by a centralized China government. Since the 919 is an important prestige program for the Chinese government, they may press the program forward even in a recession. So I'm going to think about 535. Let's talk about that global 7500 program. Technically a business jet, but we're including it in commercial just, I guess, for simplicity of the presentation. Clearly a very key program for Bombardier. And it's actually, we believe it's a mandatory success program from Bombardier, but good news is they have been successful so far, clearly placing a great emphasis on the program. How would a recession impact that program? Interesting to think about. Not completely clear, but it's possible that the success drivers for the program would stay in place even during a recession. In a recession, a typical buyer of a $40,000 Chevy may hesitate, but would a recession slow down the typical buyer of a $73 million airplane? I don't know, but it's a different kind of buyer with a different kind of mindset. Clearly the guy wants to buy that Chevy, not a nice Chevy, although actually there are no Chevys in the lot right now because of the I guess chip shortages and other supply chain issues. But in theory, if there was a Chevrolet on the lot, the guy could buy one for $40,000. He might hesitate. Based upon the above considerations, this is the punchline here. Although there are serious concerns about the economy, inflation, workforce shortages, and supply chain chaos, we believe the outlook for PARC 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, so major expansion. We're not going to go through the numbers except the second-to-last item, film and tape on qualifications in progress, but they have been delayed because of supply chain issues, staffing limitations. And just so you know, those lines are being run, operated for the qualification by R&D and engineering people. We do what we got to do, you know, not what we prefer to do, but we do what we need to do. Everybody does what they need to do at PARC. 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 front of our new building. Well, it's actually the front of our existing building where we expanded the offices. The second floor in the middle, that's the most beautiful part of our expansion. That's a conference room. And what we decided to do is dedicate it to Linda Burge. Linda died about a year and a half ago. She was a very special employee of ours. A lot of hearts were broken when she died. So we decided to call this room the Linda Burge Observation Deck. It oversees the airport, you know, property and the runway. It's a very beautiful room. And we had a little dedication. Her family came over. Very nice little event. So we just wanted you to know about that. Let's go on to slide 37. Another little bit of departure here. The James Webb Space Telescope, now about a million miles from Earth. And it's really, when you think about it, you know, this space telescope has a lot of our sigma struts incorporated in the structure of what's called a bus, I think. And so, you know, those little, not little, those struts were made in a little factory, I'm putting little in quotes, compared to a million miles in Kansas, and now they're a million, they're floating in space, orbiting a million miles from the Earth. The moon is only a quarter mile, a million miles from the Earth from perspective. And this MIRI instrument, I guess it has to be extremely cold in order for it to operate properly. So they have it, you know, in a real cold temperature. I just thought it was kind of a fun little fact there. Let's keep going since we're, you know, short on time, of course. Okay. Yeah, we are short on time. Parks people, always talk about parks people. So, yeah, this is our staffing crisis here or challenge. Maybe I shouldn't say crisis, but, you know, severe challenge. We currently have 105 people, but we just added seven people last week. So we were bumping along at 98, 99, 100 for a while there. Ideal people count for us would be 125, 128. Minimum is the properly operating functions, 115. So many other companies are throwing money at people. You hear about everybody offering money to people to hire them, lots of money. Of course, it's a problem for us. It makes it more difficult to recruit people. They bid up people when they are needed and short them. For you investor people out there, you know what that means. Throw them on the garbage sheet when they're not. Like commodities to be traded, like pork bellies. At 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 cruel and hurtful to them. It can destroy their sense of dignity, self-respect, humanity, and self-worth. It's clearly more difficult and challenging for PARC to recruit people in a world where others are throwing money at people to recruit them and where PARC's not willing to do that. But PARC, we stick to our principles, no matter how difficult or inconvenient, throwing money at people as if they were commodities. That's not for us. Our people, they're not commodities. Our people are precious. Our people are family. Slide 39, at PARC, our people earn everything they get. We don't do giveaways. We think our people are compensated properly, but they earn what they get, so they have some dignity. No giveaways, no free lunches. We respect and admire people too much to marginalize them, demoralize them, dehumanize them by giving them stuff they haven't earned. That's so demeaning to a person to do that, condescending, demeaning. What will happen if there's an economic downturn or recession? Will those companies throwing money at people, they're going to hold on to them, all the people they hire? What do you think? But parks. When we hire someone to park, our attitude is we hire them for life. It doesn't always work out. They may quit or maybe if they're not right for us, they won't stay. 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. Remember that pandemic? Sorry, economic crisis where sales were kind of fell out of the bed, you know, just went off a cliff, I guess you'd say. Remember the pandemic? uncertainty about whether the world would even survive. Remember that two years ago? And we really didn't know what was going to happen. There's so much uncertainty, so much fear. What do we do? We did not let go of any of our people then. Would we let go of any of our people if there's a recession? What do you think? Then let's keep going. Here's an interesting little one. Culture, each strategy for breakfast. That's from Peter Drucker. Maybe some of you know who Peter Drucker is. I can think of some of you folks out there listening who I'm sure know who he is. So how are we able to make our Q4 EBITDA number with such a severely reduced workforce? Was it magic? I don't think so. Our people work in very long hours, some cases 70-hour weeks, week in and week out. A dozen of our salaried people, including our VP and GM, worked the line during Q4, including the three-day President's Day weekend. That was right before the end of Q4, and we had a lot of production we had to get out to make our numbers. Nobody really asked our people to do it. They just did it. Understand how very fortunate and lucky we are to have the wonderful people we have. Understand why we love our people. That's a question. Sorry, slide 41, going to hustle here. People talk lots about strategies, sometimes develop at fancy Ivy League consulting firms. We've got nothing against fancy Ivy League consulting firms, but that's often where these strategies come from. But this is the key thing that so many people miss. So many Ivy Leaguers miss. With a dedicated, motivated, and inspired workforce, a company can move mountains. Without such a workforce, a company can move nothing, no matter how elegant their strategy might be. And don't get us wrong, we have a strategy too, but it's our wonderful people who make us powerful and whole. Update our customer flex program. We talk about this every quarter, so I won't read the numbers for you, except to say critical program per part. It would be very difficult for us to really Get done. We have to get done without that program. We love that program. Let's go on to slide 42. Closing thoughts. We're getting there. Will there be a recession? The excess in the economy and our society seems so extreme to us, and it's sustainable. Will people be willing to continue to pay highly elevated prices for almost everything when money supply is being tightened and the days of cheap and easy money are coming to an end? Can things continue that way forever? Does that make sense? Something to think about. We're not economists, of course, but we believe recession is likely under these circumstances. How do we feel about it? Well, we know it sounds harsh, but in a way we hope there will be a recession because to us that may be the only way some sense of balance, propriety, logic, order, and sanity can be restored to the economy and our society. What would we do differently in a recession? Probably not much. Slide 43, closing thoughts continue. Principles are not cheap. So we're circling back. Principles are not cheap. They only count when it's inconvenient to hold true to them. You know when somebody has principles, when they're holding true to them when it's not convenient. When it's convenient, it doesn't matter. It is inconvenient and costly for PARCC to honor our POs and our PO confirmations in a world where many others are not doing so. But at PARCC, we do what we say we're gonna do. At PARCC, our word is our bond. It doesn't matter how inconvenient it is, how costly it is. Our word is our bond. We don't go against our word. And I'm talking about pricing in a PO. I'm not talking about, you know, suppliers that are late. That's not their fault. You know, at least their supply chain is not supporting them. I'm talking about pricing in a confirmed PO. Is it convenient for PARC not to throw money at people in order to recruit them in a world where many others are doing just that? At PARC, our people are precious. Our people are not commodities to be bid up or sold short, depending on which way the wind is blowing. Others need 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 at PARC, honor and integrity are what matter most. At PARC, principles are not cheap. Slide 44, what's next for PARC? Really nothing new. We continue to press forward, continue to attack. We're not shy. We go after things aggressively. We continue to make money for our owners. That's something that all our people understand is important. We make money for our owners. We always do. That's our objective anyway. And we keep swinging for the fences. We don't play small ball at Park. We're always swinging for the fences. At Park, we're not like the others. We're not fooling around here. We're looking to make an impact. We look to go for greatness. At Park, we play for keeps. The last thing 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. They have storms in Kansas. You know, you've heard about that. Wizard of Oz. And it's only about half our workforce, but we still 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's a little above the folks, that's an actual TransCal structure, the day through 20 NEO. It was given to us as a gift from MRES. That copper stuff looking stuff, that's the actual lightning strike material. So you can kind of get a perspective on the size of the transcal and engine itself. So I think that covers it. How are we doing with time? Not so good, 50 minutes. So, operator, if there are any questions, Matt and I would happen to answer them.
spk01: Ladies and gentlemen, if you have a question or comment at this time, please press star then 1 on your telephone keypad. If your question has been answered or you wish to remove yourself from the queue, simply press the pound key. Again, if you have a question or comment at this time, please press star then one on your telephone keypad. We have a question or comment from the line of Brian Glenn from Locot Square Investments. Your line is open.
spk02: Hey, Brian and Matt. How are you doing, Brian? Good. Thanks for all the efforts and the walkthrough. I know there was this goes back to the quarter ended May, 2020. There was a small buyback. It was like 137,000 shares and the stock price is about the same. The outlook, um, from me as an outsider, it looks tremendously better and more certain, even if there is a ton of uncertainty back in May of 2020, we had no vaccine, no timing, um, air travel was shut down globally. And now it looks like, um, you're getting larger exposure on some existing programs, like the film adhesive for the 7500, the A320s ramping up. Those statements are out. You had your comments around China's COMAC and then the military spend. And the stock price is about the same. So if it was cheap enough to buy back then, what's changed in terms of any sort of repurchase, whether small or large now?
spk03: Okay, thanks, Brian. Yeah, 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 history is to, you know, use the return of capital of cash more and actually use special dividends more than buybacks. But thanks for the input, something to consider. I just want to comment. Yeah, I agree with you. The short-term forecast, we can't even give you one because it's such difficulty in the market right now. But I agree with you that the outlook, and it's hard to time the outlook because of all those short-term factors, let's call them temporary factors. But I believe you're right. The outlook is positive. So, okay. So thanks for the input. Something for us to think about. I'm not, you know, going to be an answer, of course, but we'll discuss it. Well, we'll discuss the next board meeting. So that's all I can tell you at this point.
spk02: Okay. Can you, yeah, thanks for that. I appreciate it. Can you remind me if the A321, the XLR that you mentioned, is that within that long-term agreement for MRAS or that's outside of it? I think you did mention it prior and I just don't recall.
spk03: It's within the LTA. So, yeah, that's a LEAP 1A engine. So that's all within the LTA.
spk02: Understood. And then I guess last one, if I can sneak it in. Any comments around the timing of actual workflow being done in the new facility? And it might have even happened.
spk03: The timing of work starting in the new operating facility? Yeah.
spk02: Yeah.
spk03: Go ahead. Sorry.
spk02: Yeah, yeah.
spk03: No, you're right. Okay. We're still going through the qualification. As I said, that's been delayed. You know, we had to actually choose between the qualification and production, and we chose production. We didn't want to disappoint our customers, so the qualification was delayed just because raw material shortages and staffing. I mean, as I said, the people that are actually running the equipment are 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-hard to get the 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 MRS and other customers as well. But I don't have a hard timing for you on that. It's kind of one of those things that's in flux based upon all the other supply chain issues that we're dealing with.
spk02: Okay, thanks. I appreciate that. Thanks for the effort and... Good luck with the 747 coming to an end. I know that's going to hit you personally.
spk03: Yeah, thank you very much. You'll have to try to get over that.
spk02: Yeah, thanks for all the hard work. Thank you.
spk01: Thank you. Again, ladies and gentlemen, if you have a question or comment at this time, please press star then 1 on your telephone keypad. I'm sure no additional questions in the queue at this time, sir.
spk03: Thank you very much, operator. 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, have a good day. And, you know, you always can reach Matt and me if you want to have any follow-up questions. You're happy to always take your questions. Have a great day. Thanks. Goodbye.
spk01: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.
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