Park Aerospace Corp. · NYSE:PKE
Park Aerospace — Q2 FY2024 Earnings Presentation
47 slides from Park Aerospace's earnings presentation, Oct 5, 2023
Slide 1: FY2024 Q2 Investor Conference Call
FY2024 Q2 Investor Conference Call October 5, 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: Table of Contents
Table of Contents FY2024 Q2 Investor Presentation……………………………………...……………….Slide 1 Supplementary Financial Information……………………………………………..Appendix 1 Airbus A321XLR at the Paris Air Show 100523 Slide 3
Slide 4: Quarterly Results for FY2022, FY2023 and FY2024 (In Thousands)
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 FY24 Q2 Sales $13,594 $13,618 $13,864 $12,502 $12,783 $13,875 $13,867 $13,530 $15,551 $12,481 Gross Profit $5,472 $4,411 $3,836 $4,198 $4,092 $4,086 $4,444 $3,851 $
Slide 5: Quarterly Results for FY2022, FY2023 and FY2024 (Continued)
Quarterly Results for FY2022, FY2023 and FY2024 (In Thousands) (Continued) • Since all of the GE Aviation Jet Engine Programs which Park supplies into are ramping up and going strong, why the steep drop in GE Aviation Programs Sales in FY2024 Q2…what is going on here? • It is all about the MRAS* Inv
Slide 6: Quarterly Results for FY2022, FY2023 and FY2024 (Continued)
Quarterly Results for FY2022, FY2023 and FY2024 (In Thousands) (Continued) But, before we move on, I believe we must give a special shout-out to Park’s People for their outstanding job in delivering the margins achieved in FY2024 Q2 considering the $3.1 Million drop in revenues compared to FY2024
Slide 7: Historical Fiscal Year Results (In Thousands)
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 8: FY2024 Q2 Top Five Customers
FY2024 Q2 Top Five Customers (in Alphabetical Order) Aerospheres, Inc. Kratos Defense and Security Solutions Middle River Aerostructure Systems (MRAS) and its subcontractors LifePort Inc. Gulfstream G280 The Nordam Group Kratos Valkyrie XQ-58A UAS COMAC C919 Boeing 737-800 100523 Slide 8
Slide 9: Park's Estimated Revenues by 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 First 6 Months FY2023 Revenues: FY2024 First 6 Months Revenues: $54.1 Million $28.0 Million 100523 Slide 9
Slide 10: Park Loves "Niche" Military Aerospace Programs
Park Loves “Niche” Military Aerospace Programs Mk-125 Alenia Warhead C-27J Spartan Park’s Estimated FY2024 First 6 Months Military Revenues by Market Segment Sikorsky CH-53 Sea Stallion Mk-41 Vertical Launching System Estimated FY2024 First 6 Months Military Revenues: $11.8 Million 100523 Slide 10
Slide 11: Aerospace Industry Trends and Considerations: A Brief Update
Aerospace Industry Trends and Considerations A Brief Update The U.S. A&D industry has fully rebounded from the pandemic, according to the Aerospace Industry Association Military Markets Military Markets continue to be very strong • Fueled by the ongoing War in Europe and major global tensions
Slide 12: Aerospace Industry Trends and Considerations (Continued)
Aerospace Industry Trends and Considerations A Brief Update (Continued) Commercial Aerospace Markets Optimism abounds Paris Air Show “vibes” were borderline euphoric • Claims coming from the Show about the Commercial Aircraft industry being “back” and putting the horrors of the pandemic in the
Slide 13: 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 14: Aerospace Industry Trends and Considerations (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 15: Aerospace Industry Trends and Considerations (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 that 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 Wo
Slide 16: 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 17: 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 Boeing 777X Aircraft Produced with Park’s “AFP”
Slide 18: 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) Airbus has a huge backlog of A320neo Aircraft Family firm orders of 6,720 Airplanes as of July 31, 2023 (Source: September edition
Slide 19: Update on GE Aviation Jet Engine Programs (Continued)
Update on GE Aviation Jet Engine Programs (Continued) Not too bad…according to reports, in 2023 YTD through August, Airbus delivered an average of 43.5 A320neo Family Aircraft per month…and they delivered an average of 50 A320neo Family Aircraft per month over the last 4 months Clearly, based up
Slide 20: Update on GE Aviation Jet Engine Programs (Continued)
Update on GE Aviation Jet Engine Programs (Continued) • But that has all changed now In the last few months, the LEAP-1A has broken out as the clear market share winner for the A320neo Aircraft Family The CFM LEAP-1A market share of firm orders for the A320neo Aircraft Family has jumped to 66.0%
Slide 21: Update on GE Aviation Jet Engine Programs (Continued)
Update on GE Aviation Jet Engine Programs (Continued) At the delivery rate of 75 A320neo Family Aircraft per month, the 66.0% LEAP-1A market share translates into 1,188 LEAP-1A engines per year What is that worth to Park? There currently are 8,144 firm LEAP-1A engine orders (Source: September ed
Slide 22: Update on GE Aviation Jet Engine Programs (Continued)
Update on GE Aviation Jet Engine Programs (Continued) The inspection and repair work is expected to take up to 300 days per engine It is difficult to fully comprehend the full implications of the crisis and where it is going, but the story may be far from over Whenever it seems like the crisis
Slide 23: Update on GE Aviation Jet Engine Programs (Continued)
Update on GE Aviation Jet Engine Programs (Continued) MSN11080 (F-WWAB), the third LEAP-1A Powered Airbus A321XLR prototype, recently completed a 10-day certification flight-test campaign • Airbus expects entry into service of the A321XLR in the second quarter of 2024 • Boeing does not have a resp
Slide 24: Update on GE Aviation Jet Engine Programs (Continued)
Update on GE Aviation Jet Engine Programs (Continued) China Eastern Airlines recently announced an order of 100 additional C919 Aircraft to be delivered from 2024 to 2031 • This is the largest order to date for C919 Aircraft GallopAir of Brunei recently announced an order of 15 C919 Aircraft C
Slide 25: 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 Program is currently active for Park Potentially significant program for Park Boeing 777X undergoing Cold Weather Testing in Fairbanks, Alaska The Legendary Boeing 7
Slide 26: 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 27: FY2024 Q2 GE Aviation Sales Are All About the MRAS Inventory Burn-down
Park’s FY2024 Q2 GE Aviation Sales Are All About the MRAS Inventory Burn-down The sharp drop-off in FY2024 Q2 GE Aviation Programs Sales is all about MRAS’s burn-down of Park inventory carried by MRAS (and its subcontractors) The MRAS CY2023 build plan (their build plan, not ours!) translates in
Slide 28: MRAS Inventory Burn-down (Continued)
Park’s FY2024 Q2 GE Aviation Sales Are All About the MRAS Inventory Burn-down (Continued) So, why the inventory burn-down? Why the “surprise” about the “excess” Park inventory being carried by MRAS? MRAS is a wonderful customer, the relationship between MRAS and Park is very special and unusual
Slide 29: MRAS Inventory Burn-down (Continued)
Park’s FY2024 Q2 GE Aviation Sales Are All About the MRAS Inventory Burn-down (Continued) But, considering all of the wonderful things which have resulted from the relationship with MRAS and the many wonderful things still expected to come from the relationship, on balance, there is no question wh
Slide 30: MRAS Inventory Burn-down (Continued)
Park’s FY2024 Q2 GE Aviation Sales Are All About the MRAS Inventory Burn-down (Continued) One more consideration regarding inventory management… • As a general matter, it is very important to avoid over-correcting, as doing so can create additional volatility with increasing sine wave amplitudes i
Slide 31: MRAS Inventory Burn-down (Continued)
Park’s FY2024 Q2 GE Aviation Sales Are All About the MRAS Inventory Burn-down (Continued) In any event, what do we think about all of this? We think it is mostly short-term noise and static We think the freight train (the “Juggernaut”) is coming down the tracks at us at 100 miles per hour…and
Slide 32: Financial Outlook for Park and GE Programs: An Update
Financial Outlook for Park and GE Programs An Update Because of the uncertainty related to FY2024 Q3 and Q4 GE Aviation Programs Sales resulting from the inventory burn-down and inventory management challenges discussed above, we are not able to provide meaningful GE Aviation Programs and Park for
Slide 33: Financial Outlook for Park and GE Programs (Continued)
Financial Outlook for Park and GE Programs An Update (Continued) In providing these outlooks, we are assuming the following: • There is not a severe or prolonged economic downturn during the Outlook timeframe • The global supply chain returns to some level of normalcy • Inflation moderates and ret
Slide 34: Updated GE Aviation Jet Engine Programs Revenue Outlook
Updated GE Aviation Jet Engine Programs Revenue Outlook…the “Juggernaut” Engine Units per Year Revenue per Engine Annual Revenues per Program Assumptions¹ Unit Estimates² Program Estimates 4 A320neo³ 1188 $30,500 $36,235K 5 PP20 90 $49,000 $4,410K 6 C919 200 $26,500 $5,300K 7 ARJ21 55 $29,500 $1,625
Slide 35: Park Aerospace Corp. Financial Outlook: An Update
Park Aerospace Corp. Financial Outlook principally based upon growth estimates of Programs on which Park is Sole-source Qualified…An Update 6 Sales EBITDA FY23 Base Year $54.1M* $11.5M Estimated GE Programs Incremental Sales¹ $32.7M Estimated incremental sales for ADL ADRS, Kratos Valkyrie Unmanned
Slide 36: Park Aerospace Corp. Financial Outlook (Continued)
Park Aerospace Corp. Financial Outlook principally based upon growth estimates of Programs on which Park is Sole-source Qualified…An Update 6 (Continued) ¹ GE Programs Outlook Sales of $55.0M minus FY23 GE Programs Sales of $22.3M equals $32.7M. ² Park is sole-source qualified on these three program
Slide 37: Park Aerospace Corp. Financial Outlook (Continued)
Park Aerospace Corp. Financial Outlook principally based upon growth estimates of Programs on which Park is Sole-source Qualified…An Update 6 6 (Continued) The above financial outlook analysis is not a forecast as it only considers the estimated growth of programs on which Park is already sole sourc
Slide 38: Brief Update on Selected Programs
Brief Update on Selected Programs Aero Design Labs (ADL) ADRS (Aero Drag Reduction System) for Boeing 737NG Aircraft The ADRS was recently certified on the Boeing 737-800, the Boeing 737 variant with the most units in service According to ADL, the fuel burn reduction from their ADRS measured b
Slide 39: Brief Update on Selected Programs (Continued)
Brief Update on Selected Programs (Continued) It is believed by many that the Kratos Valkyrie UAS is ideally suited for the Replicator Program Park’s advanced composite materials are sole source qualified on the Valkyrie program Patriot PAC-3 Missile Defense System Demand continues to be ver
Slide 40: Analysis of Park Cash and Cash Application
Analysis of Park Cash and Cash Application (in thousands) Net Cash and Marketable Securities $74,200 as of August 27, 2023 Transition Tax Installment Payments remaining¹ $9,300 Solution Treater for ADL and other projects² 6,000 Additional Major Capital Projects ? Additional Park stock buy-backs, if
Slide 41: Park's Balance Sheet, Cash Dividend History and Recent Share Buy-back Activities
Park’s Balance Sheet, Cash Dividend History and Recent Share Buy-back Activities Park has zero long-term debt! Park’s Cash Dividend While others cut or cancelled their dividends, Park maintained its regular quarterly cash dividend throughout the pandemic and economic crisis Park has paid 38
Slide 42: Cash Dividend History and Share Buy-back Activities (Continued)
Park’s Balance Sheet, Cash Dividend History and Recent Share Buy-back Activities (Continued) • Under that Plan, Park purchased 221,099 shares of the Company’s Common Stock at an average price of $13.02 per share and at a total cost of $2,879,626.42 On August 11, 2023, Park implemented a Rule 10b5-
Slide 43: The Park Family: The Secret Continues
The Park Family The Secret Continues Update on Park’s Great Customer Flexibility Program Current Total Participation: 62%...Participation break-down: • 2 job categories: 43% • 3 job categories: 30% • 4 job categories: 20% • 5 job categories: 7% One of the “secrets” to our success… The Park F
Slide 44: The Park Family: The Secret Continues (Continued)
The Park Family The Secret Continues (Continued) As previously stated, we need to get ready for the Juggernaut…or we too will be overrun… Our Great Park People are committed to making money for our Owners every quarter, but we run our business for Park’s future...for the long-term… not for the n
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Slide 46: Appendix 1: Supplementary Financial Information
Appendix 1 Park Aerospace Corp. October 5, 2023 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 Commi
Slide 47: Appendix 1 Continued
Appendix 1 Selling, general and administrative expenses for the 2024 fiscal year second quarter were $1.9 million, or 14.8% of sales, compared to $1.7 million, or 12.5% of sales, for the 2023 fiscal year Continued second quarter and $1.9 million, or 12.4% of sales, for the 2024 fiscal year first qua