Park Aerospace Corp. · NYSE:PKE
Park Aerospace — Q1 FY2023 Earnings Presentation
58 slides from Park Aerospace's earnings presentation, Jul 7, 2022
Slide 1: FY2023 Q1 Investor Conference Call
FY2023 Q1 Investor Conference Call July 7, 2022
Slide 2: Forward Looking Disclaimer
Forward Looking Disclaimer This presentation contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give current expectations or forecasts of future events or our future financial or operatin
Slide 3: Table of Contents
Table of Contents FY2023 Q1 Investor Presentation…………………………………………………….Slide 1 Supplemental Financial Information……………………………………………..Appendix 1 070722 Slide 3
Slide 4: Quarterly Results for FY2021, FY2022 and FY2023 Q1
Quarterly Results for FY2021, FY2022 and FY2023 Q1 (In Thousands)* FY21 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY22 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY23 Q1 Sales $12,213 $9,250 $10,372 $14,441 $13,594 $13,618 $13,864 $12,502 $12,783 Gross Profit $3,674 $2,638 $2,553 $4,326 $5,472 $4,411 $3,836 $4,198 $4,092 Gross Ma
Slide 5: Quarterly Results: Supply Chain, Freight, Staffing
Quarterly Results for FY2021, FY2022 and FY2023 Q1 (In Thousands)* (Continued) The story continues in FY2023 Q1 (and FY2023 Q2!) Supply Chain…Supply Chain…Supply Chain!!! • Still a daily battle Freight…Freight…Freight!!! • Still a daily battle...(maybe a little light at the end of the tunnel..
Slide 6: Quarterly Results: Inflation
Quarterly Results for FY2021, FY2022 and FY2023 Q1 (In Thousands)* (Continued) Inflation…Inflation…Inflation!!! • Raw material costs • Freight costs Crude Oil Prices! • Utilities Crude Oil Prices! • Supplies • Pretty much EVERYTHING Historically high inflation may be with us for a while • Ma
Slide 7: Quarterly Results: Supply Chain Chaos
Quarterly Results for FY2021, FY2022 and FY2023 Q1 (In Thousands)* (Continued) The Supply Chain has become a free-for-all...order in the Supply Chain has broken down...chaos and panic pervade In many cases, even confirmed POs are not being honored But, at Park, we do not panic and we live with
Slide 8: Historical Fiscal Year Results
Historical Fiscal Year Results (In Thousands)* FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 Sales $31,837 $40,230 $51,116 $60,014 $46,276 $53,578 Gross Profit $8,299 $11,288 $16,184 $18,673 $13,191 $17,917 Gross Margin 26.7% 28.1% 31.7% 31.1% 28.5% 33.4% Adjusted EBITDA $1,055 $4,704** $10,248** $13,01
Slide 9: Park's Balance Sheet, Cash, Dividend History and Share Buy-back
Park’s Balance Sheet, Cash, Cash Dividend History and Recent Share Buy-back Authorization Park has zero long-term debt Park reported $107.3 Million of Cash and Marketable Securities as of end of FY2023 Q1 Park’s cash investment “philosophy” • Park’s cash is invested in highly secure and liquid
Slide 10: Balance Sheet, Cash, Dividend History (Continued)
Park’s Balance Sheet, Cash, Cash Dividend History and Recent Share Buy-back Authorization (Continued) Spending to go to complete Major Expansion: ~$1 Million • Spending to date: ~$18.75 Million • Spending in FY2023 Q1: ~$60 Thousand Total Transition Tax Installment Payments payable through CY202
Slide 11: Share Purchase Authorization
Park’s Balance Sheet, Cash, Cash Dividend History and Recent Share Buy-back Authorization (Continued) Share Purchase Authorization As announced on May 23, 2022, Park’s board of directors authorized Park’s purchase of up to 1,500,000 shares of the Company’s Common Stock on the open market and in
Slide 12: FY2023 Q1 Top Five Customers
FY2023 Q1 Top Five Customers (in Alphabetical Order) AAE Aerospace GKN Aerospace Bombardier Global 7500 Kratos Defense and Security Solutions Airbus A321XLR with LEAP 1-A Engines Middle River Aerostructure Systems (MRAS)* and its subcontractors Nordam Group Kratos XQ-58 Valkyrie Patriot Advanced Cap
Slide 13: Estimated Revenues by Aerospace Market Segment
Park’s Estimated Revenues by Aerospace Market Segment FY2020 FY2021 FY2020 Revenues: FY2021 Revenues: $60.0 Million $46.3 Million FY2022 FY2023 Q1 FY2022 Revenues: FY2023 Q1 Revenues: $53.6 Million $12.8 Million 070722 Slide 13
Slide 14: Park Loves Niche Military Aerospace Programs
Park Loves “Niche” Military Aerospace Programs Bell Boeing V-22 Osprey Northrop Grumman McDonnell Douglas E-8 JSTARS Park’s Estimated FY2023 Q1 KC-10 Extender Military Revenues by Market Segment Estimated FY2023 Q1 Military Revenues: $4.2 Million 30mm Mauser MK 30 070722 Slide 14
Slide 15: Military Markets – The New World Order
Military Markets – Trends and Considerations The New World Order The New World Order…a Sea Change in attitudes about the Defense Industry and Defense Spending based upon the War in Europe Almost overnight What a difference a war makes Finland and Sweden officially apply to join NATO U.S. 2
Slide 16: Military Markets – The New World Order (Continued)
Military Markets – Trends and Considerations The New World Order (Continued) U.S. 2023 Defense Budget proposal includes additional spending increases Senate and House both looking to push up spending from White House’s original proposal Lots of emphasis on Missile Defense Systems, such as the
Slide 17: Military Markets – The New World Order (Continued)
Military Markets – Trends and Considerations The New World Order (Continued) And don’t forget about Asia…not a happy place these days either… Taiwan recently contracted for upgrades and enhancements to its PAC-3 Missile Defense System infrastructure Japan utilizes the PAC-3 Missile Defense Sys
Slide 18: Military Markets – The New World Order (Continued)
Military Markets – Trends and Considerations The New World Order (Continued) On May 3, 2022, Aerojet Rocketdyne announced significant increases in PAC-3 Missile Defense System activity Park supports the PAC-3 Missile Defense System with specialty ablative composite materials Park has received
Slide 19: Commercial Aerospace Markets-Trends and Considerations
Commercial Aerospace Markets-Trends and Considerations Commercial Aviation continues to recover, mostly driven by continuing improvement in U.S. domestic and trans-Atlantic demand But even international Commercial Aviation is starting to recover Single-aisle aircraft continue to lead the recov
Slide 20: Commercial Aerospace Markets (Continued)
Commercial Aerospace Markets-Trends and Considerations (Continued) So, all of the signals seem to be quite positive for Commercial Aviation BUT, is there a limit to how much additional cost the market will be willing to absorb? Jet fuel is considered to be the largest piece of the operating co
Slide 21: Commercial Aerospace Markets (Continued)
Commercial Aerospace Markets-Trends and Considerations (Continued) But, are individual and business travelers going to continue to be willing to pay the greatly escalated ticket prices for ever and ever with no end in sight? • Does that defy logic? • Does that defy history? • Does that defy gravit
Slide 22: Commercial Aerospace Markets (Continued)
Commercial Aerospace Markets-Trends and Considerations (Continued) Something to think about while we are celebrating with exuberance (is it “irrational exuberance”?) If people start flying less, will airlines be less willing to order new airplanes or will they seek to push out or cancel existing
Slide 23: Commercial Aerospace Markets (Continued)
Commercial Aerospace Markets-Trends and Considerations (Continued) Other factors which could affect the Commercial Aircraft Industry: Generally, higher jet fuel prices provide airlines with extra motivation to more quickly replace less fuel-efficient legacy aircraft with more fuel-efficient mode
Slide 24: GE Aviation Jet Engine Programs
GE Aviation Jet Engine Programs Firm Pricing LTA (Requirements Contract) from 2019 Park Composite Materials are Sole through 2029 with Middle River Aerostructure Systems Source on primary structure component (MRAS), a subsidiary of ST Engineering Aerospace for Passport 20 Engines for Bombardier
Slide 25: GE Aviation Jet Engine Programs New Developments
GE Aviation Jet Engine Programs New Developments Park’s New Film Adhesive Product Park’s new Film Adhesive Product was developed under a joint development MOU between MRAS and Park The development of Park’s Film Adhesive Product has been a long process, but it is now complete Park’s new Film
Slide 26: GE Aviation Jet Engine Programs New Developments (Continued)
GE Aviation Jet Engine Programs New Developments (Continued) Park’s LSP Material is now in the process of being approved for use on the Bombardier Global 7500/8000 Program (with GE Passport 20 engines) • Also very good news for Park Fan Case Containment Wrap for GE9X Engines for Boeing 777X Airc
Slide 27: GE Aviation Jet Engine Programs New Developments (Continued)
GE Aviation Jet Engine Programs New Developments (Continued) BUT, Boeing recently announced it is pushing out the 777X entry into service until 2025 • Disappointing news...it is unclear how this delay will impact the Containment Wrap Program, but it obviously casts some doubt on the Program Some
Slide 28: Update on GE Aviation Jet Engine Programs
Update on GE Aviation Jet Engine Programs Airbus A319neo/A320neo/A321neo/A321LR/A321XLR (A320neo Family of Aircraft) with LEAP-1A Engines… In a May 27, 2021 news release, Airbus stated: “A320 Family: Airbus confirms an average A320 Family production rate of 45 aircraft per month in Q4 2021 and c
Slide 29: Update on GE Aviation Jet Engine Programs (Continued)
Update on GE Aviation Jet Engine Programs (Continued) It has been reported that current very high oil and jet fuel prices are motivating many legacy A320 operators to consider upgrading to A320neo Aircraft more quickly than originally planned Important Recent News…In a May 4, 2022 news release,
Slide 30: Update on GE Aviation Jet Engine Programs (Continued)
Update on GE Aviation Jet Engine Programs (Continued) In a recent speech at the Aviation Week Raw Materials and Manufacturers Supply Chain Conference, Olivier Dreier, Airbus SVP of Materials and Parts Procurement and Chairman of the Airbus Material Board, told the audience of Airbus suppliers, “We
Slide 31: Update on GE Aviation Jet Engine Programs (Continued)
Update on GE Aviation Jet Engine Programs (Continued) Then, in a June 24, 2022 speech made at the ILA Berlin Air Show, Airbus CEO Faury confirmed that the supply of engines is lagging behind A320neo Aircraft Family production, but stated he is confident that Airbus will achieve a smooth ramp-up to
Slide 32: Update on GE Aviation Jet Engine Programs (Continued)
Update on GE Aviation Jet Engine Programs (Continued) In a June 17, 2022 news release, Park announced that we intend to fully support Airbus’s planned A320neo Aircraft Family production and delivery rates of 65 Aircraft per month by the middle of 2023 and 75 Aircraft per month in 2025 • Why did we
Slide 33: Update on GE Aviation Jet Engine Programs (Continued)
Update on GE Aviation Jet Engine Programs (Continued) A321XLR News • June 15, 2022...First Test Flight of A321XLR equipped with LEAP-1A Engines • Certification and entry into service expected in early 2024 • A321XLR is currently positioned as only single-aisle aircraft with 5,000+ statute mile ran
Slide 34: Update on GE Aviation Jet Engine Programs (Continued)
Update on GE Aviation Jet Engine Programs (Continued) Comac C919 with LEAP-1C Engines…After a number of delays, certification (in China) and entry into service expected by the end of 2022 First Production Aircraft has taken first flight Comac C919 with CFM LEAP-1C Engines Bombardier Global 750
Slide 35: Update on GE Aviation Jet Engine Programs (Continued)
Update on GE Aviation Jet Engine Programs (Continued) Boeing 747-8…Boeing has announced it will terminate production of the Queen of the Skies in 2022… Last Boeing 747 expected to be delivered in October 2022 Sad Day for one of the best (maybe the best) Commercial Aircraft ever built Only 3
Slide 36: GE Aviation Programs Sales History and Forecast Estimates
GE Aviation Programs Sales History and Forecast Estimates GE Aviation Programs sales history: FY2020 Total: $28.9 Million FY2021 Q1: $4.1 Million FY2021 Q2: $2.9 Million FY2021 Q3: $1.8 Million FY2021 Q4: $4.4 Million FY2021 Total: $13.2 Million FY2022 Q1: $7.0 Million FY2022 Q2: $
Slide 37: Park's Financial Performance History and Forecast Estimates
Park’s Financial Performance History and Forecast Estimates Quarterly Sales and Adjusted EBITDA history: Sales Adjusted EBITDA FY2022 Q1 $13.6 Million $4.1 Million FY2022 Q2 $13.6 Million $3.2 Million FY2022 Q3 $13.9 Million $2.7 Million FY2022 Q4 $12.5 Million $3.1 Million FY2022 Total $53.6 Mill
Slide 38: Comments and Thoughts about Our Forecast and Outlook
Comments and Thoughts about Our Forecast and Outlook Forecasting is highly problematical and probably not very meaningful in the current environment of supply chain chaos and disorder Predicting the future in such an environment is somewhat of a guessing game Forecasting for Park and GE Aviati
Slide 39: Forecast and Outlook (Continued)
Comments and Thoughts about Our Forecast and Outlook (Continued) • How would a recession impact the outlook for Park’s military business? We believe not much because there is too much at stake for the countries seeking to increase their defense budgets and spending Commercial Aircraft business O
Slide 40: Forecast and Outlook (Continued)
Comments and Thoughts about Our Forecast and Outlook (Continued) • Comac C919 and ARJ21 Programs - although the relatively small ARJ21 program may have only limited future upside potential, we believe the C919 program has significant upside potential for Park once the aircraft is certified and deliv
Slide 41: Forecast and Outlook (Continued)
Comments and Thoughts about Our Forecast and Outlook (Continued) • Bombardier Global 7500/8000 Program (technically a business jet program) - this is clearly a very key program for the restructured Bombardier company…in our opinion, it is a mandatory success program for Bombardier…Bombardier is clea
Slide 42: Update on Major Expansion of Newton, Kansas Facilities
Update on Major Expansion of Newton, Kansas Facilities Total budget: approximately $19.75 Million Spending To date: approximately $18.75 Million To go: approximately $1.0 Million Expansion is complete Film Line and Tape Line trials are complete Film Line and Tape Line Qualifications ar
Slide 43: Update on James Webb Space Telescope
Update on James Webb Space Telescope 21 of Park’s proprietary SigmaStruts™ are incorporated into the structure of the JWST They were made here The JWST, along with Park’s SigmaStruts produced by Park’s People at our “little” plant in Newton, Kansas, Park’s Newton, KS are established at the Lag
Slide 44: Update on Major Potential Project Initiatives in New Plant
Update on Major Potential Project Initiatives in New Plant There is additional space in our new plant which is set aside for new project initiatives, including two potential project initiatives we are currently actively working on…both of these projects involve the purchase and installation of maj
Slide 45: Park is Qualified on Aero Design Labs ADRS Program
Park is Qualified on Aero Design Labs (ADL) ADRS Program Park’s materials are sole source qualified on ADL’s Drag-Reduction System (ADRS) Program for Boeing 737 Legacy Aircraft ADL’s ADRS Program is designed to make the Boeing 737 Aircraft more aerodynamically efficient, resulting in significant
Slide 46: Park is Qualified on Aero Design Labs ADRS Program (Continued)
Park is Qualified on Aero Design Labs ADRS Program (Continued) There are many thousands of Boeing 737 legacy aircraft in service around the world The ADL ADRS program is a potentially very significant program for Park Park will consider additional investment to support this program if necessar
Slide 47: Park Receives Aerojet Rocketdyne Distinguished Supplier Award
Park Receives Aerojet Rocketdyne Distinguished Supplier Award Park recently received Distinguished Supplier Award from Aerojet Rocketdyne, a Park long-term customer Award is given to less than 1% of Aerojet Rocketdyne’s suppliers Park is very honored to receive this award from such a special c
Slide 48: Park's People
Park’s People Park’s current People Count is 106 (recently bottomed out at 98)!!! Ideal People Count would be 125 to 128! Minimum People Count needed to properly operate and function is 115! Many other companies are throwing money at people in order to recruit them They bid up people when
Slide 49: Park's People (Continued)
Park’s People (Continued) At Park, our People earn everything they get We believe our Park People are compensated properly, but they earn what they get…every cent of it… No giveaways… “No free lunches” (Milton Friedman) We respect and admire our People too much to marginalize, demoralize and
Slide 50: Park's People (Continued)
Park’s People (Continued) Remember the panic and uncertainty about whether the world would even survive? Well, we did not let go of any of our People then…would we let go of any of our People if there is a recession? What do you think? “Culture eats strategy for breakfast” (Peter Drucker)
Slide 51: Park's People (Continued)
Park’s People (Continued) People talk lots about “strategies” (sometimes developed by fancy Ivy League consulting firms), but, 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
Slide 52: Closing Thoughts: Principles are not Cheap-Revisited
Closing Thoughts Principles are not Cheap-Revisited Principles are not cheap…Principles only count when it is “inconvenient” to hold true to them It is “inconvenient” and costly for Park to honor our POs and PO confirmations in a world where many others are not doing so • At Park, we do what we
Slide 53: Principles are not Cheap-Revisited (Continued)
Closing Thoughts Principles are not Cheap-Revisited (Continued) It was “inconvenient” for Park not to ask for or accept any PPP or government money (meaning taxpayer money) during the pandemic and economic crisis, while others, including some very large companies, took tens of millions of dollars
Slide 54: Principles are not Cheap-Revisited (Continued)
Closing Thoughts Principles are not Cheap-Revisited (Continued) Others need to make their own choices about what matters to them and what does not...and live with those choices…but, at Park, honor and integrity are what matter most…at Park, Principles are not cheap… At Park, we are not like the
Slide 55: Park Aerospace Corp. Board of Directors
Park Aerospace Corp. Board of Directors Park Board of Directors at May 18, 2022 Meeting in Newton, KS Left to Right: Carl Smith, Emily Groehl, Dale Blanchfield, Brian Shore, Brad Thress, Steve Warshaw and Yvonne Julian 070722 Slide 55
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Slide 57: Appendix 1 – Supplementary Financial Information
Appendix 1 Park Aerospace Corp. July 7, 2022 Investor Conference Call – Supplementary Financial Information The financial and other data contained herein (the “Supplementary Data”) is being provided pursuant to the requirements of Regulation G promulgated by the U.S. Securities and Exchange Commissi
Slide 58: Appendix 1 (Continued)
Appendix 1 Before special items, selling, general and administrative expenses for the 2023 fiscal year first quarter were $1.6 million, or 12.8% of sales, compared to $1.6 million, or 12.1% of sales, for the Continued 2022 fiscal year first quarter and $1.5 million, or 12.2% of sales, for the 2022 f