This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk01: Hello, good afternoon. My name is Alicia and I'll be your conference operator today. At this time, I would like to welcome everyone to the Park Aerospace first quarter fiscal year 2025 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 star two. Thank you. At this time, I will turn the call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin.
spk02: Thank you, Alicia. This is Brian. Welcome to PARC's Fiscal 25 Q1 Investor Conference Call. Nice to have you all on board. With me, as usual, Matt Farabaugh, our CFO, also Mark Esquival, President and COO. We issued our published earnings release, first quarter earnings release, after the close. You want to take a look at that. In the earnings release, there are instructions as to how you can access the presentation we're about to go It's also in our post on our website if you want to go that route. The last investor call, the Q4 investor call, was only six weeks ago. So normally we have a three-month time frame in doing calls. So what we'll do is focus on mostly new and updated information in this investor call, try not to go over too many things we covered in our Q4 call. Of course, at the end of the presentation, we'll be happy to take any questions you might have. Let's go into slide two, forward-looking disclaimer. If you have any questions about the forward-looking disclaimer language, let us know. Slide three. So we have a little table of contents here. Q1 investor presentation. After that, supplementary financial information. As usual, we provide this to you, but we don't cover it. We'll review it during the call. But if you have any questions about it, let us know. We're featuring the James Webb Space Telescope here, as you know. This James Webb was constructed with Park's proprietary signal struts. And it's really quite an amazing thing. Just recently, I think maybe the last couple weeks, we discovered the most distant, oldest galaxy that so far has been discovered, 290 million years after the Big Bang, which is very recent after the Big Bang. The Big Bang supposedly was about 13.8 billion years ago. And the key point here is this is not supposed to happen. These galaxies aren't supposed to exist today. so early in the development of the universe. So the James Webb is, through the James Webb, really most of our views about the universe and its origin are just kind of being blown out of the water. Quite interesting. Let's go on to slide four, our quarterly results for fiscal 23, 24, and 25. Q1, so as you know from the news release, I guess, sales, $13 million in 1970s. Gross profit, a little over $4 million. Gross margin, 29.3%. And just EBITDA, $2.6 million. I just want to remind you, last quarter we went through a number of things that affect our earnings over the longer haul related to ramping up our business and what we call a juggernaut and setting up our new facility. And one of the things we mentioned, and we're not going to go through all those things again, But I just want to bring depreciation to your attention. The new factory depreciation is about $1.3 million per year. And that equates to about 2.3% of the gross margin. See, depreciation actually does affect gross margin because it's part of the cost of goods sold. It doesn't affect EBITDA, of course, by definition. Let's go on to slide five. Slide five, what did we say about Q1 during our Q4 investor call, which took place on May 30, about six weeks ago? We had a sales estimate of 15.75 to 16.25 million, and as I just said, 14 million of sales, so that seems a little strange, doesn't it? Adjusted EBITDA estimate, 3.25 to 3.75, and that was our estimate. We have EBITDA at 2.6 million, so what's going on here? Just to remind you, the Q1 sales estimate that we provided during our Q4 call was based upon fully booked sales in Q1, and the Q1 EBITDA estimate was based upon those fully booked sales. So obviously you know what I'm leading to. However, the language in bold, and this language is in our – we're just taking it from our Q4 call, so it's a little awkward. These are things we said during Q4. It may seem a little bit strange. But however – Our fiscal year 25 Q1 sales in Iwata will be impacted by then no known amounts, but storm damage to the company's facilities, which were reported in a May 22nd, 2024 company news release. Again, this is speaking on May 30th. And although as reported in the news release, and then unknown amount of Q1 sales will slip from Q1 into Q2 as a result of the storm damage, We do not expect or we did not expect to lose any sales or business as a result of storm damage, and we still don't expect to lose any. Okay, let's go on to slide six. What about that storm? Let's talk about the storm, the storm damage. Now we have more information about it. On Sunday, May 19, at approximately 8 p.m. local time, parks in New Kansas facilities were damaged by strong straight-line winds reportedly reaching 100 miles an hour. Not a tornado as far as we know. But straight-line winds could actually be more damaging in tornadoes in some cases. The very good news is none of our people were at the facilities at the time, and nobody was hurt. We were lucky with the timing of the storm from that perspective. That's probably the only night of the week, maybe Saturday, but every other night at 8 p.m. there will be a lot of people at the facility. And inside the facility there are shelters, storm shelters. But if people are outside, you know, going back and forth in their cars, cars at a time of storm like this, that could have been a very bad result. We're very lucky and fortunate that did not happen. Unfortunately, though, that was the good news with the timing. The storm damage occurred at the very beginning of the last two weeks of Q1. That's the bad news with the timing. As a result, production was seriously disrupted during those last two weeks of the quarter, and shipments, meaning sales, were significantly negatively impacted during those last two weeks of the quarter. Now we understand that big discrepancy between what we estimated and what actually happened for Q1. But Park's people did an incredible job recovering from the storm and storm damage. And thanks to our people, our facilities were fully operational with the employment of certain temporary measures by June 3, 24, and that's the first day of Park's fiscal year, 25Q2. And that's just two weeks after the storm occurred. So quite a remarkable job, I believe. and storm recovery by the park people. Slide seven, what was damaged by the storm? See, I keep getting questions about all this stuff, so maybe some of this is old hat for you, it's boring, but we haven't really provided this information, so I'm going through it all now because I've had lots and lots of questions about these different aspects of the storm. What was damaged? The roofs in all three buildings, we have three buildings on our campus were damaged and likely will need to be replaced. The roofs were very quickly temporarily repaired and the roofs are secure. Numerous specialty HVAC units were either damaged or destroyed and will need to be repaired. Repairs are complete or replaced. Depending on the replacements, new units are in order. Temporary temperature and humidity control has been in place. These HVAC units are not just for people comfort. We're required to maintain certain temperature and humidity controls. limitations within certain aspects of the plant, the labs, and other actually production areas of the plant. So let's see where we are here. Company cars in the parking lot were damaged. Yeah, they were damaged, but also they weren't where they were left. They were physically moved to different parts of the parking area. There was minor additional damage to the facilities like the R&D building. It's roll-up doors, garage doors damaged. What was not damaged by the storm? This is probably the more important question. The structures of the three buildings located at the campus, they were not damaged other than the roof damage, which we already mentioned. The production equipment, none of the production equipment was damaged. Obviously, good news. Production lab and R&D lab equipment not damaged by the storm. So let's go on to slide seven. By the way, I should tell you, these HVAC units, they're all on the roof. and some were officially ripped off the roof in the parking lot, obviously wrecked. You know, they fell off the top of the building in the parking lot when we arrived at the facility. Quite a storm. Slide eight, how long will it take to complete all the repairs? It could take up to six months. I'm not sure, but all production lab facilities, as we said, have been fully operational and functional since June 3, and they continue to be fully operational and functional. What about insurance? It's a question we keep getting asked. The company's property insurance policy contains a wind damage deductible provision of approximately $2.5 million. So for fire, it's much less, but for wind damage, the deductible is quite high. And we do that intentionally because we could have a much lower deductible, but it's going to cost us with our premium, annual premium. And so when we think about insurance for park anyway, we think about catastrophic loss. The smaller for park anyway loss of $2 million, $2.5 million. We have the cash. We'd rather insure that ourselves because if we don't, we buy insurance. We're betting against the bank. An insurance company is always going to be smarter than us and always win over time. So we don't want to play that game. The company submitted a claim against this policy. Any recovery the company received from the policy will be accounted for to time the recovery. Let's go on to slide nine and how we accounted for the storm. The company recognized a one-time charge, this is in our Q1 report, in our Q1, of approximately $1.1 million, predominantly to account for the write-down of the book value of the buildings which were damaged and the equipment which was either damaged or destroyed. This charge also included approximately $80,000 of people costs incurred during those two weeks on the storm, but many park people were working on the storm recovery and cleanup rather than the production and testing of products. In other words, they're normally making money stuff that we sell, they're working, but they're not producing anything, so that was part of their charge. And just so you know, if you know Park at all, I doubt you're shocked to hear this, our hourly people were fully paid during those two weeks. Some companies, the salary people, they get paid to send the hourly people home. They get screwed. We don't do that kind of stuff at Park. And the hourly people, they were mostly working on the storm recovery and cleanup. New and replacement equipment will be accounted for. That means capitalized at the time of their purchases and installations. Okay. And then let's go on to slide 10. Total misshipments in Q1, a doozy of a number, 2.5 million. What were the causes? Well, the first one is storm-related misshipments, 1.8 million. That's the big one, of course. And I think we estimated when we did our Q4 call, I don't remember this exactly, maybe 2 million, so something like that, 1.8 million. Supply chain and other issues, approximately $300,000. This requires a little explanation because we said we learned to manage our supply chain by carrying inventory and providing loan relief times. This is actually a case where one of our major suppliers is struggling a little bit to meet one of our customer specs. So it's not that there wasn't effective planning. These things have to get worked out over time, and they always do, ultimately do. International shipments, we talk about this quite a bit. Every quarter, we've got wars in the Middle East and Europe. About 400,000. Question, what portion of the supply chain and international shipment issues could have been ameliorated if our park people were not singularly focused on storm recovery? I mean, I don't know the answer to that question, but my guess is it's more than zero. And that was the focus. We had to get our factory back up and running, our customer city product. Bottom line is we're very delighted that none of our people were hurt by the storm. That was a good part of it. When the timing of the storm was unfortunate as it relates to our Q1, luck was not on our side in that regard. Let's go on to slide 11. Parks balance sheet cash and cash dividend history. I was once told by one of our key investors they recommended that we cover this every quarter. I thought it was a good recommendation, so we do that. We have zero long-term debt. We reported $74.4 million in cash and markup securities at the end of Q1. I always have to remind you, though, there's still $9.3 million of remaining tax transition installment payments payable from the end of Q1 through June of 2025. This relates to repatriation, I think. So a payment of $4.2 million was made in June 2024, but that's not reflected in Q1. June is in Q2. So it's a total of $9.3 million based upon the Q1 reported cash. But there's about, so we, let's see, in 9.3 million, we paid 4.2, about 5.1 million to go, and that's payable in June of next year. All right, whatever. Parks cash dividend, we paid 39 consecutive years of uninterrupted regular cash dividends without ever skipping a dividend or reducing dividend amount. In bold, Parks has paid $594 million, or $28,097.5 per share of A cash dividend since the beginning of fiscal 25. My comment is always that's a hell of a lot of money for a little company like Park. Probably being a big company, $594 million. A lot of cash, I would think. Not chump change, as they say. Let's go on to slide 12. Fiscal year 25, Q1 top five customers, something we – one of our regular features. Avio relates to the Vega launcher. That's a blade of materials. You're probably not surprised to see that. Kratos, obviously, relates to the Kratos fire jet, unmanned aircraft, structural materials, materials for the aircraft structures. Lifeport, that relates to Sikorsky. Those are materials for interiors. MRAS, Middle River, we're using a lot of different aircraft. We've got a feature for that, or we can feature for MRAS. We chose the Comac Air J91, materials for intercells and thrust reversers. Nordam, the Barbary Global 7500 business jet, That's materials for GE Passport 20 primary structures. It's an engine component, which are primary structures for that engine. So let's go on to slide 13. We'll spend a lot of time on this, our chart and work charts. The new ones in the middle, Q1, I guess the only thing I'll point out is commercial a little lower, and I think that's because as a ratio we lost, because of the storm, we lost more MRES business, more commercial business than the non-commercial. We'll cover that later on. Let's go on to slide 14. Park was niche military aerospace programs. This is always the latest project. I should mention the top five is Don's project. So let's see. What are we talking about here? The programs themselves, the Aster 30, blade of materials, not surprisingly, Boeing offspring, materials for aircraft structures, the McDonnell Douglas Harrier II materials for aircraft structures. And this Skyknight system, multi-target short-range air defense missile, this is interesting. These are bladed materials, not surprising, for a new program, and we're making our first shipment this month in a program, so that's good news. The pie chart itself, as you always say, radon, rocket nozzles, drones, those are niche markets for park, military, but even for us, aircraft structures, we consider to be a niche market as far as military is concerned. Let's go to slide 15. Now, we talked a lot about supply chain last quarter. Why are we doing it again? Because it's becoming more of an issue, we think, and it's becoming recognized as more of an issue. So we're going to go back over it again and add some additional information. Supply chain challenges, you just don't want to go away. Whenever we hear that they're behind us, we find that they're not behind us. Didn't we hear back in 21 that supply chain challenges would be all behind us in 22? I think we did. Didn't we hear in 22 challenges would be things that passed in 23? I think we heard that. There are recent statements by aerospace industry leaders, including GE Aerospace and Avalon, that supply chain issues will persist to the end of 25 or longer. That's just since our Q4 presentation earnings calls. This is really new stuff. Another new item, Safran is building a new turbine blade facility in order to increase turbine blade production since supply chain is just not making it. What are supply chain issues really all about? What's causing them? Why wouldn't they go away? Are they fundamentally workforce issues? Have the workforce issues been resolved? So you can have all the great factories and all the equipment and everything else. If you don't not only people but train people to operate this stuff, you're not going to be able to produce the products you need to produce. So there goes the supply, you know, which leads to the supply chain issues. Let's go to slide 16. We hear unemployment is not that bad, but is that the full story? Not really. 7.2 million able-bodied men are not working, left the workforce forever. Why is that happening? Plus, here's a new thing. There is new in this presentation, not new to the industry. The aerospace industry laid off millions of employees, many of whom were highly experienced at the beginning of the pandemic. With the benefit of hindsight, that was not so brilliant. As you know, Park laid off not one employee, but Park was apparently very alone in that regard. Many of the experienced employees laid off by the aerospace industry have not come back, probably never come back. Really a sad situation. Aerospace manufacturing is quirky and enigmatic. What do you mean by that? It needs to be learned over many years. It's not intuitive. You have the smartest guy in town or gal in town, You put them in aerospace manufacturing, they're not going to figure it out just intuitively. Just quirky stuff you have to learn over a long, long period of time. What is it like replacing employees who have 25 years of aerospace experience with employees of 25 days? That's not a rhetorical question. It's not such a good thing. It's a bear. It's very difficult because that's reality in some cases. Let's go on to slide 17. How is that working out? Not so well. I see the problem we see every day in the industry, and it's not pretty. I was just talking to, I guess he's the head of engineering, one of our customers who was meeting with an OEM, with his guys, and they were talking about some basic testing procedures for composite materials. Very, very, very basic, very basic. I'm not going to say what it was. And they looked at him like, what is that? And he was shocked. You don't know what that is? I mean, it wasn't insulting. It's just like, wow, these are probably smart people, but they just had no experience. People that left during the pandemic probably had 20 years of experience. So it was really kind of, I don't know what you call it, like revealing, you know, to have that discussion. What do ongoing supply chain challenges mean for the aerospace industry? These challenges are impacting program ramp-ups and new program introductions and as evidenced by the recent Airbus announcement, which we'll discuss below. What's an example of a defense program? How about Patriot missiles? Have you read this recently? That we, the U.S. government, these are foreign military sales, so the U.S. government has to approve them. We're reallocating them from countries that were signed up for Patriot missiles, supposed to get them. We're taking away their Patriot missiles to give to Ukraine. Now, our government said we're not including Taiwan and Israel. Okay, well, who are we including? Maybe Japan, maybe Korea, lots of European countries. Why are we doing that? Why don't we just produce more of these missile systems because everybody wants them? Well, you know, why are we not doing it? Because of supply chain restrictions and limitations. Of course, that would be the preference, not the risk. They give property to pay Paul. They give them to everybody who wants them. You know, these are all approved countries. You're not getting paid for missiles to enemies. But demand is there, but the industry is falling short, meaning demand, where is this going? Is there any solution in sight? Yeah, there might be. You know, I have some thoughts about it. I'm not going to go through them now, but there might be. What does this mean to PARC? At PARC, we have found ways to manage our supply chain challenges with better planning, strategically carrying more inventory, and providing suppliers more in the lead times. But these supply chain issues, they threw a major challenge for us. They're very consuming of our time and energy. And importantly, in some cases, like the two examples we just mentioned, the programs Park supplies into are being negatively impacted by supply chain constraints and issues unrelated to our supply chain. These are just supply chain issues that these OEMs have that don't relate to our specific supply chain, and they negatively impact these programs. Slide 18, let's change gears here. We don't spend a lot of time on the slide because we cover it every quarter. I think we should just to give you the perspective of GE Aerospace. We made a change. It used to be GE Aviation. GE Aerospace, jet engine programs, such an important part of parks business, so we covered every quarter. Just some basics, firm pricing LTA, some requirements contract from 19 to 29 with Middle River Air Structure Systems, MRAS, a sub of SG Engine Aerospace. We always explain this. What is this about? All these programs are GE aerospace programs. How did this happen? Well, when we got on these programs, MRAS was a sub of GE Aerospace, and then GE Aerospace, I don't know, three, four, five years ago, I don't remember, sold MRAS to SG Engineering, but they're still the GE programs. By the way, I think we mentioned this in the past, but under this LTA, our pricing goes up. January 1, 2025. So, redundant factory, you know, we built a redundant factory. That's in production. And we're sole source on composite materials for these programs. We're not going to go into the programs. We talk about every quarter. A nice picture of the legendary Boeing 747 engine itself. We love this picture because you get a perspective on the size of these cells because you see this This guy in the background, he looks pretty small, doesn't he? Let's go on to slide 19. We don't need to cover the first item. The second item, containment wrap for GE9X engines. That's something that could be an important program for PARC using our AFP materials. The third and fourth item relate to our fill-in-adhesive product forms. They're in qualification, and also they've been added to the LTA. Lifer program agreement requested by MRS and SDE. Agreement is in progress. What does a life of program agreement mean to PARC? Well, probably a lot. Although, if you ask my personal opinion is that we're in these programs, we're going to be in these programs whether we have an agreement or not. Although it is the intention of MRS and ST that we have a life of program agreement, they're the ones who requested it. And it's still in progress. I guess that's all I'll say about it right now. Let's go to slide 20. Update on GE Aerospace Generation Programs. The first one is the H320 aircraft family. That's the big kahuna, I guess. Airbus has this huge backlog. We're updating this number, 700, sorry, 7,000, 137. That's just a lot of airplanes, if you know aerospace, commercial aerospace. That's just so many airplanes. Airbus is maintaining, this is a key point here, that intended to achieve a rate of 75 NEO family aircraft deliveries per month in 26 years. And they reiterated that, doubled down on that intention during the recent annual meeting and their first quarter investor call. 75 per month, 26. Now let's go on to slide 21. And we don't have to go through this. Just a little history about the delivery rates. I guess the point of interest is in 23, there was finally exceeded 19, which is a pre-pandemic year. And then in the first six months of 24, Similar to the first six months of 23, a little bit more, but not significantly. Clearly, based upon this huge backlog, Airbus already would be at the rate of 75 per month, if not for supply chain constraints. Let's go on to slide 22. Here's the big news. Then on June 24, 2024, I mean, this is just a few weeks ago, right? Airbus surprisingly announced that it's pushing on its goal of achieving 75 A320 aircraft family that rate from 26 to 27, the 75 aircraft family delivery rate from 26 to 27. Now, not surprisingly, what did Airbus highlight? Supply chain issues and limitations. as the key reason for the push out. But what is surprising is Airbus highlighted engine availability related to both the Pratt and the CFM engines as the main supply chain culprit. Why is this surprising? Because that was the case, Airbus was saying that was the case, the engines were the limitation. I think maybe a couple years ago, you know, the engines were the limitation. And then maybe about a year ago, they said, wait, we're good with engines. Everything's good with engines. The new limitation, what was it? It was castings and forgings of materials, electronics, like maybe semiconductors, and electronics. I forgot one other thing. I don't remember. But it was not engines anymore, you know, not engines anymore. So, good, we're good with engines. That was wonderful. Then what happens? We're back to talking about engines as the main problem. Airbus further commented that engine availability had significantly degraded in recent weeks, in recent weeks, and that Airbus will end up with gliders. You know what that means? They're going to have these airplanes sitting on the ramp with no engines, gliders, to call them gliders. Airbus also commented, the engine shortage is a new situation that we're not expecting. So, wow, this must have really blindsided Airbus. Kind of shocking. This push out of the 75 A320 NEO per month target certainly is a setback and a disappointment, maybe a little embarrassment for Airbus. But a push out of the target will provide Airbus with more leeway and runway to achieve its new target, maybe a more realistic target. And we believe Airbus will be more committed than ever to to achieve this new target without additional delays or push-outs. It's just our opinion. I mean, I can't speak for Airbus. I think they're a little embarrassed by this and probably very upset about it. My guess is they're going to be very, very, very committed to not push it out and push out that 75 per month target any further. Let's go on to slide 23. What about the engines for the A320neo aircraft family? So, as you know, PARC is on the CFM Leap 1A aircraft. engine. We're not on the Pratt engine, Pratt PW1100G engine. The supply into that, yeah, second item, we recovered that. We have no content on the Pratt, on the HV20neo aircraft using the Pratt engines. Third bullet item, according to the July 24 edition, this is late breaking news, of Air Engine News, the CFM Leap 1A's market share of firm engine orders For A320neo family aircraft, it's 63.5% as of May 31. At the delivery rate of 75 A320 family aircraft per month, I mean, we believe, I have lots of confidence Airbus will get there. We just don't know when. That 63.5% LEAP 1A market share translates into 1,143 LEAP 1A engines per year. What's that work to park? Well, we have something called a juggernaut slide. You can look at that later on. Here's a doozy. There currently are, listen to this, 8,156 firm LEAP 1A engine orders. That's according to AeroEngine News. That's very current. So the CFMs, they're going to make all those engines, you know. There's no doubt about it. They're going to get more orders as well. But they're going to make all those engines. So what does that mean to park? I mean, I don't have to estimate going back to the juggernaut slide. Maybe a quarter billion dollars. So I don't know. Does it really matter so much whether it's 26, 27, what the numbers will be, 28? Those engines will be produced. And from our perspective, that's the key thing. That's the thing that we feel so Parker's so fortunate about, that we're so, so qualified on those engines. Those engines are ours. Those engines will be produced. So we can get really hung up on what quarter it is. And we just don't know. We've been pretty open about that. And we can't tell you something we don't know. We can guess a little bit. But to us, the key thing is that those engines will be produced and produced with park materials. Let's go on to slide 24. The A321 XLR, that's a variant of the A320 NEO aircraft family. Airbus expects that to enter service for the N24. And I just saw an article today that certification is expected in, quote, coming days, unquote. That sounds pretty soon. This is a potentially very important program for PARC. COMAC 919, another really important potential program for PARC. This is a LEAP engine, but a different kind of LEAP engine. They call it LEAP 1C, made by CFM. COMAC plans to achieve the production rate of 150 919 aircraft per year in 28. They've received over 1,500 orders for the 919 aircraft, according to COMAC. Comac reported expanding its 919 aircraft production lines within the yet this 330,000 square meter facility in Pudong, China, which is near Shanghai. So I guess one of the key executives at MRAS whom I work with quite closely just visited that facility a couple weeks ago, and I met with him afterwards. I'm very, very impressed. It's like what they do in China. I don't know if you have experience in China. They build a city to support a major program. That's what they do. That's what they're doing. And he was quite confident that they will get to this rate of 150 airplanes per year, which is 300 engines, of course, and maybe more. This guy's usually a little bit of a skeptic, you know, not a pint of sky type. So, yeah, as you see, when we get to the juggernaut, we're changing the number to 300 from 200. That's engines, obviously, based on 150 airplanes. So this is a really big, important potential program for PARCC. So one other item I want to mention to you, I just saw this today. It came after press time. Airbus just upgraded their 20-year forecast, now expecting 42,430 airplane deliveries over the next 20 years. Single aisle, 33,510. Widebody is 8,920. Maybe they're right, maybe not, but No matter how you slice it, that's a whole lot of airplanes, a lot of airplanes. Use CFM Drive and the Airbus A220 aircraft family and COMAC 919 aircraft buses. What that means is that both these programs use that CFM, the CFM LEAP engine, so it's really up to CFM to get their production rates up to support these two very exciting programs. Let's hope they do that. Let's go on to slide 25. Boeing 777X with the GE 9X engines. Boeing expects that to be certified next year. Here's something brand new, the second check item. Boeing just received TIA type inspection authorization for the 777X from the FAA. That's a big deal. And just conducted its first certification test flight for the 777X last Friday. That's breaking news. It's really encouraging because You know, some people are concerned that Boeing, you know, has a series of issues that could bog down the 777X. We sure hope it doesn't because it's such an important program, potential program for PARC. To me, you know, if I'm Boeing and I'm not, you know, I'm thinking I really want to do everything I can to get to focus on this program because this is their opportunity to be a leader for a long, long, long time. Even if they sort out the problems with MAX, they're still not a leader. They're following Airbus. This is a program with a leader. There's nothing like it in terms of payload and range capability. And those are two key criteria for airplane like this. Nothing like it, and nobody's even trying to develop anything like it. So Boeing has a chance to be a real leader for a long, long, long time with this aircraft. And it's a wonderful program for PARC if it goes forward. Let's go on to slide 26. Okay, we see this slide every quarter, what's new. Only $5 million of G aerospace gen engine program sales in Q1. And we had told you when we did our Q4 forecast that before the storm, our number was 6.3. Why was that? Because it was fully booked. So we had 6.3 booked. We only shipped 5 million. So 1.3 million that was booked did not get shipped because of the storm. We'll do forecasting for Q2, $6.25 to $6.75 million. And that's basically booked. So that doesn't mean it'll happen. I'm just telling you it's booked. We don't need any more sales to get to those numbers. We're doing something a little new here. We're giving you a forecast for the year. We haven't done this in quite a while. You know, Mark and I agonized over this over the weekend, trying to figure out what to tell you. But we wanted to give you something for the year. We went with $23 million, $26 million. When we do this, remember what we do in the forecast. We're not giving you a low number that we're going to be heroes. We don't do that. We're saying to you, this is what we think will happen. The best of our ability, this is what we think. A lot of issues, a lot of risks, a lot of uncertainties, but that's doing the best we can to tell you what we think will happen. Let's go on to slide 27. So we'll be talking about in terms of Q2. We already talked about Q1, so we're going to go through that. Q2, we're forecasting 15.9 into 16.4 million. We've got about 16.8 book, but remember, at the end of quarter, we always lose some at the end of quarter because it doesn't ship or, you know, international shipment issues, supply chain, that kind of stuff. And... EBITDA, they forecast a $3.3 million, a little low, but I just want you to know that $2.5 million of C2B fabric sales are in Q2, the sales, $2.5 million. Remember, that's where, for large OEMs, we buy this fabric and we sell to them pretty quickly at a small markup, so very low margins. Now, when we actually use that product, and make the material for them, then the margins are quite attractive. So this is another thing Mark and I kind of agonized over the weekend, and let's go on to slide 28. Again, we're doing something I haven't done recently is give you an annual forecast. Let's look at the sales history first because I think it's pretty interesting. If you start at $17,000, go to $20,000, it looks like almost $10 million per year, $31,000, $18,000, whatever, $40,000, $51,000, $60,000. like $10 million per year. An investor, which we talked to last week, asked me an interesting question. It's funny, nobody ever estimated it before. What do you think we're now after the pandemic? Very interesting question because I said, well, I don't know. It looks like we're growing $10 million per year. I don't know what would stop that. So we'd probably be at $90 to $100 million in 2024, I guess. If you just extrapolate, we never know. Of course, hypothetical. Can't go back and rewrite history. But then you can see in 21, the pandemic year, then 22, 23, 24, we're still not getting out of the pandemic malaise. The pandemic's over, but we screwed things up so badly with all the people we hired, all the people we fired, not parked, the industry fired, laid off, let go of. So we're really struggling to recover because of all these supply chain issues that we created. by maybe not responding, reacting to the pandemic in the best way. Now, it's not a criticism because at the time, the pandemic was so frightening, so scary that, you know, we can't really blame people for reacting the way they did. But with a bit of hindsight, I'm saying it was probably not the best reaction. So we actually were looking to provide you with, with a three-year forecast in this presentation. But with the push out of the Airbus target of 75 airplanes per month, and also supply chain issues being elevated, we chickened out on that and we decided that gives you a forecast for 25, 60 to 65 million, 13 to 15 million dollars EBITDA, And, again, we're taking some risk here because there's so much uncertainty. But, again, what we're doing is doing the best we can to tell you what we think will happen, not giving you a low number that we can beat and be heroes and wonderful and everything else. Important things at the bottom, supply chain limitations affecting the aerospace industry. Yeah, we just talked about that when we look at a top-line progression. Next one, ramping up costs for the juggernaut. That's not going to affect top line, but it affects bottom line. We ramp up the cost before the sales, and, obviously, that makes our – our company less profitable on a temporary basis. Let's go on to slide 29. Okay, GE Aerospace, Jennings and Programs, Revenue Outlook, the juggernaut. We've been talking about this for several quarters. What's the timing for the outlook? We're not sure, but a juggernaut is still coming. It can't be stopped, and we better be ready. So, you know, we just spent a lot of time talking about what quarters can hit, and we just don't know. But, you know, I will tell you one thing, in my opinion. Park is so, so, so, so fortunate to be so source qualified in these wonderful programs, these wonderful programs. So when will they go to the moon? We don't know. But these programs are very, these are the programs you want to be on. And we're so very fortunate and lucky to be on these programs. Maybe not in other programs that we won't mention, but you probably know what I'm talking about. Let's go on to slide 30. Here's the juggernaut. Just a couple of changes here. Well, a couple of things I want to highlight. First of all, A320neo, see, we're using that 1080 number. That means that's using 60% market share for leap engine, 75 airplanes per month. Just do the math. You can do it in your head. That's, what is it, 900 airplanes per year times two engines. That's 1.1800 times 0.6. That's meaning 60% market share. That's your 1080. Now, earlier in the presentation, we said, well, it's really not – 60% is 63.5%, and that translates to 11 to 43. But we're going to use 1080 just so we don't have to update and revise this page, this slide, every time we do a presentation because every month that market share percentage is going to change. Somebody made a comment that I was trying to be conservative. No, not really. It's just that we didn't want to go through this process of every quarter having to update, change the assumption in the slide. because every month the market share that we get from air engineers is going to be different. I noticed also the C919, we had 200 units, now 300 units. On the ARJ21, we didn't change the 72, but I just want to point out that we saw a recent report that COMAC delivered 35 airplanes per year in both 22 and 23. That's obviously, what, 70 engines, and that doesn't include spares, so We may move that number up at some point. We're not doing that now. OK. And then if we go on to slide 31, our park maintenance crew. Thank you, park maintenance crew, for leading this storm recovery effort and cleanup effort. Great guys. You can probably figure it out just looking at them. But I also say this is not totally representative because, as we mentioned earlier, it's really all the hourly people that worked on the storm recovery and cleanup. Okay, operator, that concludes the review of the presentation. If there are any questions, we'd be happy to take them.
spk01: All right, thank you. Now we'll be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation to indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please. I'm not seeing any questions. I'd like to turn the floor back over to Brian Shore for closing comments.
spk02: Okay. Thank you, operator, and thank all of you for listening to our Q1 investor call and going through the presentation with us. You all have a great day. If you have any follow-up questions, please give us a call. Thank you. Take care.
spk01: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Disclaimer