Park Aerospace Corp. · NYSE:PKE
Park Aerospace — Q1 FY2024 Earnings Presentation
47 slides from Park Aerospace's earnings presentation, Jul 6, 2023
Slide 1: Company Presentation
Company Presentation July 6, 2023 ***Park’s 70th Year in Business***
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: Our Business
Our Business Park Aerospace Corp. develops and manufactures Solution and Hot-Melt Advanced Composite Materials used to produce composite structures for global aerospace markets: Wide array of prepreg materials specifically designed for hand lay-up or automated fiber placement (AFP) manufacturing
Slide 4: Our Business (Continued)
Our Business (Continued) Park Aerospace also offers: Specialty Ablative materials for Rocket Motors and Nozzles Specially designed materials for Radome Applications (including RadarWave® materials) As a complement to our Advanced Composite Materials offering, Park Aerospace designs and fabri
Slide 5: Our History
Our History Park founded on March 31, 1954 by Jerry Shore and Tony Chiesa with ~ $50 Thousand Investment Company started in a small “factory” (garage?) in Woodside, Queens with 5 employees 1954 Results: Park’s Founders Sales: $124,206.59 Pretax Profit: $887.38 Taxes Paid: $226.21 First
Slide 6: Our History (Continued)
Our History (Continued) November 17, 1960 Park goes Public 1961 Park acquires New England Laminates Company (“Nelco”) in Stamford, CT for ~ $200 Thousand 1984 Park lists on NYSE 1985 Park commences regular Quarterly Cash Dividend Mid-1980’s Park had become global Electronics Business with other anci
Slide 7: Our History (Continued)
Our History (Continued) Jan 2007 Park commits to Aerospace as second major area of business focus Jan 17, 2008 Ground-breaking of Park’s New Aerospace Facility in an empty field in Newton, KS May 2009 Park’s Newton, KS Aerospace Facility opens February 28, 2014 (11:00 PM) Park makes first production
Slide 8: Our History (Continued)
Our History (Continued) December 2018 Park announces Major Expansion of Newton, KS Facility December 2018 Park sells its Electronics Business to AGC Inc. of Tokyo, Japan December 2018 Park’s transformation from an Electronics Company into an Aerospace Company is complete July 17, 2019 Park changes n
Slide 9: Major Expansion of Newton, KS Facilities
Major Expansion of Newton, KS Facilities December 2018…Park announced Major Expansion of Newton, KS Manufacturing and Development Facilities Redundant Plant for GE Aviation, MRAS and their Aircraft OEM Customers Park expects Redundant Plant will also be needed for Manufacturing Capacity Appr
Slide 10: Major Expansion (Continued)
Major Expansion (Continued) Expansion includes: New 60” Hot-Melt Film and Tape Manufacturing Lines New Mixing and Delivery Systems New R&D Lab Expanded Production Lab Additional Freezer and Storage Space Space to accommodate additional Hot-Melt Tape Line or Solution Treating Line Spa
Slide 11: Quarterly Results for FY2022, FY2023 and FY2024
Quarterly Results for FY2022, FY2023 and FY2024 (In Thousands)* FY22 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY23 Q1 FY23 Q2 FY23 Q3 FY23 Q4 FY24 Q1 Sales $13,594 $13,618 $13,864 $12,502 $12,783 $13,875 $13,867 $13,530 $15,551 Gross Profit $5,472 $4,411 $3,836 $4,198 $4,092 $4,086 $4,444 $3,851 $4,833 Gross Marg
Slide 12: Quarterly Results (Continued)
Quarterly Results for FY2022, FY2023 and FY2024 (In Thousands) (Continued) Outstanding Job by Park’s People to exceed (by a little) our FY2024 Q1 Sales estimate and to make our FY2024 Q1 EBITDA estimate under very difficult circumstances, especially considering significant challenges with: Suppl
Slide 13: Quarterly Results (Continued)
Quarterly Results for FY2022, FY2023 and FY2024 (In Thousands) (Continued) Factor which affected our margins in FY2024 Q1: Inflation...it may be leveling off for us to some extent, but inflation continues to be a challenge for us • Raw materials costs • Shipping and other supplies costs • Utilit
Slide 14: Quarterly Results (Continued)
Quarterly Results for FY2022, FY2023 and FY2024 (In Thousands) (Continued) • Some of the increased costs were passed through to our Customers in FY2024 Q1 in the form of selling price increases But not all...Why? The “lag effect”...we honor our commitments to our Customers in confirmed POs LTA
Slide 15: Historical Fiscal Year Results
Historical Fiscal Year Results (In Thousands)* FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 Sales $31,837 $40,230 $51,116 $60,014 $46,276 $53,578 $54,055 Gross Profit $8,299 $11,288 $16,184 $18,673 $13,191 $17,917 $16,473 Gross Margin 26.7% 28.1% 31.7% 31.1% 28.5% 33.4% 30.5% Adjusted EBITDA $1,
Slide 16: Park's Balance Sheet, Cash and Cash Dividend History
Park’s Balance Sheet, Cash and Cash Dividend History Park has zero long-term debt! Park reported $81.1 Million of Cash and Marketable Securities as of end of FY2024 Q1 Park’s Cash Dividend While others cut or cancelled their dividends, Park maintained its regular quarterly cash dividend thro
Slide 17: FY2024 Q1 Top Five Customers
FY2024 Q1 Top Five Customers (in Alphabetical Order) Avio S.p.A. Kratos Defense and Security Solutions Bombardier Global 8000 Middle River Aerostructure Systems (MRAS) and its subcontractors Meggitt PLC The Nordam Group Dynetics X-61A Gremlin Boeing EA-18 Growler Vega Launcher Airbus A321XLR 082423
Slide 18: Aerospace Market Segment
Park’s Estimated Revenues by Aerospace Market Segment FY2021 FY2022 FY2021 Revenues: FY2022 Revenues: $46.3 Million $53.6 Million FY2023 FY2024 Q1 FY2023 Revenues: FY2024 Q1 Revenues: $54.1 Million $15.6 Million 082423 Slide 18
Slide 19: Park Loves "Niche" Military Aerospace Programs
Park Loves “Niche” Military Aerospace Programs Lockheed Martin Long Range Anti-Ship Missile (LRASM) MQ-1 Predator MK-21A Park’s Estimated FY2024 Q1 Military Revenues by Market Segment Northrop Grumman E-8 JSTARS Estimated FY2024 Q1 Military Revenues: $6.3 Million Israeli Arrow 3 Missile Defense Syst
Slide 20: Aerospace Industry Trends and Considerations
Aerospace Industry Trends and Considerations A Brief Update Military Markets Military Markets continue to be very strong • Fueled by the ongoing War in Europe and major global tensions • Talk about “winning” the War? • Optimism abounds about Foreign Military Sales But what will happen when the
Slide 21: Aerospace Industry Trends (Continued)
Aerospace Industry Trends and Considerations A Brief Update (Continued) Commercial Aerospace Markets Optimism abounds Paris Air Show “vibes” were borderline euphoric • Almost giddy claims coming from the Show about the Commercial Aircraft industry being “back” and putting the horrors of the pa
Slide 22: Supply Chain
Aerospace Industry Trends and Considerations A Brief Update (Continued) ***SUPPLY CHAIN*** Main impediment to recovery and ramp back up for both Military and Commercial Aerospace industries Demand is certainly there, but when will the industry be able to produce the commercial aircraft and milit
Slide 23: Aerospace Industry Trends (Continued)
Aerospace Industry Trends and Considerations A Brief Update (Continued) According to Airbus, the three key Supply Chain issues are electronic components (semiconductors), engines and “raw materials” No issues for Airbus with raw materials from Park though And what is the Supply Chain crisis re
Slide 24: Aerospace Industry Trends (Continued)
Aerospace Industry Trends and Considerations A Brief Update (Continued) • According to Airbus, the aerospace industry used to be able to hire back 8 out of 10 employees which it let go, but now the industry has only been able to hire back 2 out of 10 employees who were let go during the pandemic W
Slide 25: GE Aviation Jet Engine Programs
GE Aviation Jet Engine Programs Firm Pricing LTA (Requirements Contract) from 2019 through 2029 with Middle River Aerostructure Systems (MRAS), a subsidiary of ST Engineering Aerospace (STE) Redundant Factory…Construction is complete and factory is in production! Sole Source for Composite Mate
Slide 26: GE Aviation Jet Engine Programs (Continued)
GE Aviation Jet Engine Programs (Continued) Park Composite Materials are Sole Source on primary structure component for Passport 20 Engines for Bombardier Global 7500/8000 (not included in MRAS LTA) Fan Case Containment Wrap for GE9X Engines for B777X Aircraft Produced with Park’s “AFP” Compos
Slide 27: Update on GE Aviation Jet Engine Programs
Update on GE Aviation Jet Engine Programs A320neo Aircraft Family with CFM LEAP-1A Engines (includes A319neo, A320neo, A321neo, A321LR and A321XLR Aircraft Variants) India’s Indigo Airlines placed a record 500 A320neo Family Aircraft order at the Paris Air Show • Assuming the 60% LEAP-1A A320neo
Slide 28: Update on GE Aviation Jet Engine Programs (Continued)
Update on GE Aviation Jet Engine Programs (Continued) It has been a challenging road for them According to reports, in 2023 YTD through May, Airbus delivered an average of only ~40 A320neo Family Aircraft per month, clearly less than desired The A320neo Aircraft Family offers two approved engi
Slide 29: Update on GE Aviation Jet Engine Programs (Continued)
Update on GE Aviation Jet Engine Programs (Continued) According to GE Aviation, improvements to the LEAP-1A engine designed to improve durability have already yielded very positive results • Will the Pratt 1100G durability issues lead to an increase in CFM’s A320neo Family Aircraft program market
Slide 30: Update on GE Aviation Jet Engine Programs (Continued)
Update on GE Aviation Jet Engine Programs (Continued) Comac C919 with CFM LEAP-1C Engines Comac plans to achieve production rate of 150 C919 Aircraft per year within five years Comac currently has over 1,200 orders for the C919 Aircraft China Eastern Airlines conducted first C919 passenger f
Slide 31: Update on GE Aviation Jet Engine Programs (Continued)
Update on GE Aviation Jet Engine Programs (Continued) Boeing 777X Aircraft with GE9X Engines Planned 2025 Entry into Service Boeing 777X undergoing Cold Weather Testing in Fairbanks, Alaska The Legendary Boeing 747 (thank goodness for spares) The Great 747, an Aircraft Like None Other 082423 S
Slide 32: GE Aviation Jet Engine Programs Sales History
GE Aviation Jet Engine Programs Sales History 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: $6.5 Million
Slide 33: Financial Outlook for Park and GE Programs
Financial Outlook for Park and GE Programs Because of ongoing significant challenges related to serious supply chain disorder, inflation concerns and staffing shortages (which seem to be a global phenomenon) and the significant uncertainty as to when these challenges will moderate and abate, provi
Slide 34: Financial Outlook for Park and GE Programs (Continued)
Financial Outlook for Park and GE Programs (Continued) And, in providing the GE Aviation Programs revenue outlook and the financial outlook for Park, we are assuming the following: • There is not a severe or prolonged economic downturn during the outlook timeframe • The global supply chain returns
Slide 35: GE Aviation Jet Engine Programs Revenue Outlook
GE Aviation Jet Engine Programs Revenue Outlook Engine Units per Year Revenue per Engine Annual Revenues per Program Assumptions¹ Unit Estimates² Program Estimates A320neo³ 10804 $30,500 $32,940K PP205 90 $49,000 $4,410K C9196 200 $26,500 $5,300K ARJ217 50 $29,500 $1,475K GE9X8 _______ _______ $6,50
Slide 36: Park Aerospace Corp. Financial Outlook
Park Aerospace Corp. Financial Outlook principally based upon growth estimates of Programs on which Park is Sole-source Qualified 6 Sales EBITDA FY23 Base Year $54.1M* $11.5M Estimated GE Programs Incremental Sales¹ $28.3M Estimated incremental sales for ADL ADRS Program, PAC-3 Missile System and Kr
Slide 37: Financial Outlook (Continued)
Park Aerospace Corp. Financial Outlook principally based upon growth estimates of Programs on which Park is Sole-source Qualified (Continued) 6 ¹ GE Program Outlook Sales of $50.6M minus FY23 GE Program sales of $22.3M equals $28.3M. ² Park is sole-source qualified on these three programs, but we ar
Slide 38: Financial Outlook (Continued)
Park Aerospace Corp. Financial Outlook principally based upon growth estimates of Programs on which Park is Sole-source Qualified (Continued) 6 6 The above outlook analysis is not a forecast as it only considers the estimated growth of programs on which Park is already sole source qualified, plus 25
Slide 39: Why are we Reviewing our Financial Outlook?
Why are we Reviewing our Financial Outlook? On February 9, 2023, we announced that Park’s Board of Directors approved a 25% increase in Park’s regular quarterly cash dividend from $0.10 per share to $0.125 per share Market response to announcement made sense to us In a March 6, 2023 news relea
Slide 40: Why are we Reviewing our Financial Outlook? (Continued)
Why are we Reviewing our Financial Outlook? (Continued) And what was the market response to our provision of our Financial Outlook? Not much, which surprised us…a lot Why was there such a muted reaction to our Financial Outlook? We are not sure… • Is the market “efficient”? • Is the market “br
Slide 41: Why are we Reviewing our Financial Outlook? (Continued)
Why are we Reviewing our Financial Outlook? (Continued) Purchases which occur in our FY2024 Q2 will be disclosed when we report that quarter • As we have stated in the past, we prefer the investing public to buy our Company’s stock, but, since that did not seem to happen in any meaningful way in r
Slide 42: Analysis of Park Cash and Cash Application
Analysis of Park Cash and Cash Application (in thousands)¹ Net Cash and Marketable Securities $81,000 as of May 28, 2023 Transition Tax Installment Payments remaining² $12,500 Solution Treater for ADL project3 6,000 Joint Development Project Capital Investment4 5,000 Additional Park stock buy-backs,
Slide 43: Aeroadhere FAE-350-1 Structural Film Adhesive Product
Park Recently Introduced Our New Aeroadhere™ FAE-350-1 Structural Film Adhesive Product On May 9, 2023, Park announced the introduction of Aeroadhere™ FAE-350-1, our new Structural Film Adhesive Product for use in bonding of aerospace primary and secondary structures Aeroadhere FAE-350-1 is a 35
Slide 44: Update on James Webb Space Telescope
Update on James Webb Space Telescope (More Cool Stuff!) Reminder: 21 of Park’s proprietary SigmaStruts™ are incorporated into the structure of the JWST The JWST (along with Park’s SigmaStruts produced in Newton, Kansas) is established at the Lagrange 2 (L2) Orbit Point located approximately One
Slide 45: The Park Family: The Secret to Our Success
The Park Family The Secret to Our Success The following is an excerpt from a recent message to the Park Family: “What is the key to our success in the future? I believe the secret to our success in the future lies in our Park Family Culture. As a Family, we look out for and take care of one anothe
Slide 46: The Park Family: The Secret to Our Success (Continued)
The Park Family The Secret to Our Success (Continued) In the Park Family, we go for Greatness…and the path to Greatness is arduous and difficult and hard Others may settle for mediocrity, but, at Park, we are not like the others… At Park, we play for keeps…and we are now in our 70th Year of pl
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