Park Aerospace Corp. · NYSE:PKE
Park Aerospace — Q3 FY2023 Earnings Presentation
58 slides from Park Aerospace's earnings presentation, Jan 5, 2023
Slide 1: FY2023 Q3 Investor Conference Call
FY2023 Q3 Investor Conference Call January 5, 2023
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 Q3 Investor Presentation……………………………………...……………….Slide 1 Supplementary Financial Information……………………………………………..Appendix 1 010523 Slide 3
Slide 4: Quarterly Results for FY2021, FY2022 and FY2023 Q1, Q2 and Q3
Quarterly Results for FY2021, FY2022 and FY2023 Q1, Q2 and Q3 (In Thousands)* FY21 Q1 FY21 Q2 FY21 Q3 FY21 Q4 FY22 Q1 FY22 Q2 FY22 Q3 FY22 Q4 FY23 Q1 FY23 Q2 FY23 Q3 Sales $12,213 $9,250 $10,372 $14,441 $13,594 $13,618 $13,864 $12,502 $12,783 $13,875 $13,867 Gross Profit $3,674 $2,638 $2,553 $4,326
Slide 5: Quarterly Results (Continued): Q3 Challenges
Quarterly Results for FY2021, FY2022 and FY2023 Q1, Q2 and Q3 (In Thousands)* (Continued) Outstanding job by Park’s People to exceed (by a little) our FY2023 Q3 Sales estimate and to make our Q3 EBITDA estimate, especially considering significant challenges with: Supply Chain disruptions and unr
Slide 6: Quarterly Results (Continued): Inflation and Margins
Quarterly Results for FY2021, FY2022 and FY2023 Q1, Q2 and Q3 (In Thousands)* (Continued) Significant Inflation...it has not gone away or abated yet...not for us anyway • Raw materials costs • Shipping and other supplies costs • Utilities costs • Freight in and out costs • People costs • You name
Slide 7: Quarterly Results (Continued): Product Mix and Bonus
Quarterly Results for FY2021, FY2022 and FY2023 Q1, Q2 and Q3 (In Thousands)* (Continued) Somewhat lower margin product mix in Q3 than expected • Why did we not fully anticipate this in our planning? Planning is “interesting” in this world of supply chain chaos “Everyone has a plan until they
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 $103.3 Million of Cash and Marketable Securities as of end of FY2023 Q3 Park’s cash investment “philosophy” • Park’s cash is invested in highly secure and liqui
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: ~$500 Thousand • Spending to date: ~$19.3 Million Total Transition Tax Installment Payments payable through CY2025: $12.6 Million • $8.4 Million paid
Slide 11: Share Purchase Authorization (Continued)
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 Q3 Top Five Customers
FY2023 Q3 Top Five Customers (in Alphabetical Order) AAE Aerospace Kratos Defense and Security Solutions Lockheed Martin Middle River Aerostructure Systems (MRAS)* Comac C919 with LEAP-1C Engines and its subcontractors MK125 Warhead Nordam Group for Standard Missile 2 Kratos XQ-58 Valkyrie Bombardie
Slide 13: Park's 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 First 9 Months FY2023 First 9 Months Revenues: FY2022 Revenues: $40.5 Million $53.6 Million 010523 Slide 13
Slide 14: Park Loves Niche Military Aerospace Programs
Park Loves “Niche” Military Aerospace Programs General Atomics MQ-1 Predator ASTER 30 Missile Boeing EA-18G Growler Park’s Estimated FY2023 First 9 Months Military Revenues by Market Segment Estimated FY2023 First 9 Months Military Revenues: $15.3 Million Boeing P-8 Poseidon 010523 Slide 14
Slide 15: Military Markets – Trends and Considerations: The New World Order
Military Markets – Trends and Considerations The New World Order The “New World Order”…the sea change The War in Europe grinds on • Many in the government seem to be willing and maybe even eager to continue to sponsor and fund the war with military hardware and equipment and other things And A
Slide 16: Military Markets – The New World Order (Continued)
Military Markets – Trends and Considerations The New World Order (Continued) Not surprisingly, there currently is much emphasis in many parts of world on aggressively expanding military budgets and spending The U.S. Omnibus spending bill, which included $858 Billion of Defense Spending, was sign
Slide 17: Military Markets – PAC-3 Missile Defense Support
Military Markets – Trends and Considerations The New World Order (Continued) • Park supports the PAC-3 Missile Defense System with specialty ablative composite materials Park ablative materials are sole source qualified on the program Japan, South Korea, Taiwan, Germany, Switzerland, Poland, the
Slide 18: Military Markets – Ablative Materials Forecast
Military Markets – Trends and Considerations The New World Order (Continued) As an update, Park is currently forecasting total FY2023 sales of ablative materials and RAYCARB C2®B product to be approximately $7.5 Million, although there is uncertainty to the forecast based on supply chain challenge
Slide 19: Commercial Aerospace Markets Trends and Considerations
Commercial Aerospace Markets Trends and Considerations The following slides relating to Commercial Aerospace Markets Trends and Considerations were originally contained in Park’s FY2023 Q2 Investor Presentation and are included here with minor changes for context and perspective We have discusse
Slide 20: Commercial Aerospace Markets – Watch and Caution Items
Commercial Aerospace Markets Trends and Considerations (Continued) But the following watch and caution items raise concerns about the sustainability of the Commercial Aviation industry’s recovery: The economy…will People continue to fly if the economy falters badly? • Maybe not as much Inflati
Slide 21: Commercial Aerospace Markets – Widebody Resurgence
Commercial Aerospace Markets Trends and Considerations (Continued) And, of course, even if the Commercial Aviation industry remains strong, the Commercial Aircraft industry still needs to deal with its own massive challenges related to: Supply Chain issues Labor and staffing issues Inflation
Slide 22: Commercial Aerospace Markets – B777X and Jet Fuel Prices
Commercial Aerospace Markets Trends and Considerations (Continued) Is this an opportunity for the B777X aircraft, the only aircraft in the mix which has close to the range and passenger capacity profiles of the 747-8 and A380? Also, got to ask…how much share will the A321XLR take from the smalle
Slide 23: 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 24: Update on GE Aviation Jet Engine Programs
Update on GE Aviation Jet Engine Programs Airbus A320neo Aircraft Family with CFM LEAP-1A Engines (includes A319neo, A320neo, A321neo, A321LR and A321XLR Aircraft variants)... We have discussed at length over the last several quarters: • Airbus’s public indications about its aggressive A320neo A
Slide 25: Update on GE Aviation Programs – Airbus Ramp Rates
Update on GE Aviation Jet Engine Programs (Continued) Airbus had indicated its intention to achieve A320neo Aircraft Family production rates of 65 aircraft per month by early 2024 (pushed back from mid-2023 as a result of Supply Chain limitations) and 75 aircraft per month by mid-2025 Airbus als
Slide 26: Update on GE Aviation Programs – Airbus Announcement
Update on GE Aviation Jet Engine Programs (Continued) Recent disappointing news from Airbus • Because of ongoing supply chain and other issues, Airbus withdrew its previously stated goal of delivering a total of 700 commercial aircraft in 2022 Airbus claims that target is not achievable, but it
Slide 27: Update on GE Aviation Programs – Supply Chain and LEAP-1A Orders
Update on GE Aviation Jet Engine Programs (Continued) Engine shortages had, until recently, been stated to be the main supply chain impediment to Airbus’ reaching its desired delivery rates According to the Airbus CEO, the number of A320neo “gliders” is in the single digits and “that is no longe
Slide 28: Update on GE Aviation Programs – A321XLR News
Update on GE Aviation Jet Engine Programs (Continued) A321XLR News • June 15, 2022...First Test Flight of A321XLR equipped with LEAP-1A Engines • All three A321XLR test aircraft are flying • Certification is expected in 2023 and entry into service expected in the second quarter of 2024 (pushed bac
Slide 29: Update on GE Aviation Programs – Comac C919
Update on GE Aviation Jet Engine Programs (Continued) Comac C919 with CFM LEAP-1C Engines… Big News…in a ceremony at the Beijing Central Airport attended by China President Xi Jinping, the Comac C919 received its Type Certificate from the Civil Aviation Administration of China (the CAAC)! Bigg
Slide 30: Update on GE Aviation Programs – Comac ARJ21
Update on GE Aviation Jet Engine Programs (Continued) Comac ARJ21 with GE Aviation CF34-10A Engines • Reports of “at least” 26 ARJ21 Aircraft delivered in 2022 • Reports of 97 ARJ21 Aircraft completed to date Comac ARJ21 with GE CF34-10A Engines 010523 Slide 30
Slide 31: Update on GE Aviation Programs – Bombardier Global 7500
Update on GE Aviation Jet Engine Programs (Continued) Bombardier Global 7500 with GE Aviation Passport 20 Engines... 39 Global 7500 Aircraft delivered in 2021 Bombardier delivered its 100th Global 7500 Aircraft in March 2022 Bombardier claims it is first business jet to break sound barrier
Slide 32: Update on GE Aviation Programs – GE9X Fan Case Wrap for 777X
Update on GE Aviation Jet Engine Programs (Continued) Fan Case Containment Wrap for GE Aviation GE9X Engines for Boeing 777X Aircraft The Boeing 777X Aircraft • B777-8 Variant range of over 10,000 statute miles! • B777-9 Variant typical 2-class seating capacity of 425 passengers • Since the canc
Slide 33: Update on GE Aviation Programs – 777X Flight Tests and Orders
Update on GE Aviation Jet Engine Programs (Continued) • On December 22, 2022, the flight test program resumed after it was temporarily put on hold in October 2022 based upon an engine issue which has now been resolved • As of the end of October 2022, there were 353 firm orders for the 777X Aircraft
Slide 34: Update on GE Aviation Programs – Boeing 747
Update on GE Aviation Jet Engine Programs (Continued) Boeing 747…the Queen of the Skies The last 747 (a 747-8) rolled out of Boeing’s Everett, Washington factory on December 6, 2022… The last 747 was unit number 1,574 It will be delivered to Atlas Air in early 2023 The first 747 was delive
Slide 35: 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 36: GE Aviation Programs Sales History and Forecast (Continued)
GE Aviation Programs Sales History and Forecast Estimates (Continued) What the heck is going on here…Part 2? Downstream Inventory and Production Management challenges and dislocations are causing serious misalignments between the aircraft program rates and Park’s material production rates • At s
Slide 37: Estimated Park Revenues per Program Engine Unit
GE Aviation Programs Sales History and Forecast Estimates (Continued) • The expected Park revenues per engine unit for those programs (based upon the Park material usage per engine unit for those programs) Starting in 2025, based upon the program engine unit material usage information provided to
Slide 38: Revenues per Engine Unit – Global 7500/8000 and GE9X
GE Aviation Programs Sales History and Forecast Estimates (Continued) Global 7500/8000 engine unit: $49.0 Thousand (assumes Park’s LSP material is qualified and in use on the program and Park’s film adhesive material is not in use on the program) For the programs on which Park’s LSP and film adh
Slide 39: 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 40: Comments and Thoughts about Our Forecast and Outlook
Comments and Thoughts about Our Forecast and Outlook The following slides relating to Comments and Thoughts about Our Forecast and Outlook were originally contained in Park’s FY2023 Q1 and Q2 Investor Presentations and are included here with minor changes for context and perspective Forecasting
Slide 41: Forecast and Outlook (Continued)
Comments and Thoughts about Our Forecast and Outlook (Continued) • We believe this New World Order dynamic is not a temporary phenomenon…we believe it is an emerging longer term and sustainable phenomenon • How would a recession impact the outlook for Park’s military business? We believe not much
Slide 42: Forecast and Outlook (Continued) – Comac and Bombardier
Comments and Thoughts about Our Forecast and Outlook (Continued) Note that Boeing plans no response to the A321XLR in this decade, leaving that “niche” all to Airbus • Comac C919 and ARJ21 Programs - although the smaller ARJ21 program may have less future upside potential for Park, we believe the
Slide 43: Forecast and Outlook (Continued) – Recession Impact
Comments and Thoughts about Our Forecast and Outlook (Continued) How would a recession impact this program? It is not completely clear, but it certainly is possible that the success drivers for the program would stay in place during a recession o In a recession, the typical buyer of a $40,000 Ch
Slide 44: 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 $19.3 Million Expansion is complete Film Line and Tape Line trials are complete Film Line and Tape Line Qualifications are in progress Expected to be complete
Slide 45: 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 46: Park is Qualified on Aero Design Labs ADRS Program
Park is Qualified on Aero Design Labs (ADL) ADRS Program (Brief Update) Reminder...Park’s materials are currently sole source qualified on the ADL Drag-Reduction System (ADRS) Program for Boeing 737NG Aircraft There are over 6 Thousand Boeing 737NG Aircraft in service around the world In May 2
Slide 47: Update on Potential AFP Manufacturing Project Initiative
Update on Potential Automated Fiber Placement (AFP) Manufacturing Project Initiative We originally discussed our potential Automated Fiber Placement (AFP) Manufacturing Project Initiative during our FY2023 Q2 Investor Call Update on our potential AFP Manufacturing Project The project is still
Slide 48: Potential AFP Manufacturing Project Initiative (Continued)
Update on Potential Automated Fiber Placement (AFP) Manufacturing Project Initiative (Continued) The following slides relating to our potential AFP Manufacturing Project Initiative were originally contained in Park’s FY2023 Q2 Investor Presentation and are included below with minor changes for con
Slide 49: AFP Manufacturing Project Initiative (Continued)
Update on Potential Automated Fiber Placement (AFP) Manufacturing Project Initiative (Continued) AFP manufacturing utilizes robotic technology and is a form of “additive” manufacturing technology (as compared to the subtractive manufacturing technology utilized by conventional hand-lay-up of compo
Slide 50: AFP Manufacturing Project – Benefits
Update on Potential Automated Fiber Placement (AFP) Manufacturing Project Initiative (Continued) Park is not interested in “automation” to replace our existing People But, since it is, and may continue to be indefinitely, difficult to properly staff our operations, AFP automation may be a useful
Slide 51: AFP Manufacturing Project – Disadvantages and Decision
Update on Potential Automated Fiber Placement (AFP) Manufacturing Project Initiative (Continued) The potential disadvantages of AFP manufacturing of composite structures compared to conventional hand-lay-up manufacturing include: • AFP manufacturing, like most automated processes, may not be well
Slide 52: The Park Family
The Park Family Update on Park’s Great Customer Flexibility Program Current Total Participation: 82%...Participation break-down: • 2 job categories: 44% • 3 job categories: 19% • 4 job categories: 22% • 5 job categories: 15% It would just not be possible to continue to get the job done under t
Slide 53: The Park Family (Continued)
The Park Family (Continued) • We did not sell out or compromise our sacred principles in order to recruit the additional people we need And, just so you know, other companies, mostly larger companies, continue to aggressively target our People for recruitment • When things go bad, and sooner or la
Slide 54: The Park Family (Continued)
The Park Family (Continued) Our People have been through a lot together over the last few years… Many challenges and hardships and much adversity to overcome The wonderful news is that, having endured and overcome the hardships, adversity and challenges together, our Park Family has come toget
Slide 55: The Park Family (Continued)
The Park Family (Continued) The Park Family 010523 Slide 55
Slide 56: 010523 Slide 56
010523 Slide 56
Slide 57: Appendix 1
Park Aerospace Corp. Appendix 1 January 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 58: Appendix 1 Continued
Appendix 1 Continued Before special items, earnings before income taxes for the 2023 fiscal year third quarter were $3.2 million, or 23.2% of sales, compared to $2.3 million, or 16.8% of sales, for the 2022 fiscal year third quarter and $2.6 million, or 18.6% of sales, for the 2023 fiscal year secon