Park Aerospace Corp (PKE) 2023 Q1 法說會逐字稿

Good morning. My name is Paul, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Park Aerospace Corp. First Quarter Fiscal Year '23 Earnings Release Conference Call and Investor Presentation. (Operator Instructions) At this time, I will turn the call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference.

Thank you, Paul. This is Brian. Welcome, everybody, to our first quarter conference call. With me, as always, as usual, Matt Farabaugh, our CFO. So this morning, we put out our earnings release, our first quarter earnings release. In an earnings release, there are instructions, try to access the webcast, get access to the presentation that we're about to go through, also the presentations on our website.

So the presentation, as you have probably noticed is quite long, but don't be alarmed. This is the (inaudible) we had. It's been less than 2 months since our Q4 conference call, less than 2 months. So not very much time has passed. And a lot of the stuff in the Q4 presentation was new information, new material, which still is very relevant. So we didn't want to just kind of eliminate that. So what we decided to do is this, we decided to carry over much of what was in the Q4 presentation to the Q1 presentation, but with some updates and additions, new items in other words. And what we'll do is focus during this call, focus on the updates of new items, and we'll be skipping over, at least skinning over a lot of the rest of it. So -- and also the Q4 call is still on our website, if you want to go back and listen to that, feel free, of course.

If there are things we skip over that you want to ask questions about it, please ask questions. It's not that we don't want to cover these things, but we're trying to be practical here. Because we're going to be jumping around a little bit, hopefully, we'll try to make it as cohesive as possible. But if it's a little bit (inaudible) that's a term, we apologize for that in advance. As usual, we've all spent a lot of time in these presentations with what we consider to be dry financial analysis. You want to do financial analysis, just let us know, we'll be happy to respond to your questions. But we try to make these presentations more interesting and informative.

I also want to give a little shout out to Donna DAmico-Annitto rather because she's like my partner in these presentations. I don't know how to do PowerPoint, I'm an old guy. So she does all the PowerPoint. And we end up working over 4th of July over Christmas, and I think you spoke to on vacation, but she worked pretty much over the 4th July holiday. So thank you, Donna. Matt and I, of course, will answer your questions at the end of -- going through the presentation. And even though we're trying to skip roll -- try to skip over some things and make it as concise as possible, it's still going to take probably 45 minutes, I would think. So I just want to warn you about that.

So let's just jump in. Let's go to Slide 2, forward-looking disclaimer if you have any questions. Slide 3 is our table of contents, begin with the investor presentation. There's an Appendix 1, supplemental financial information, which we attach to all of our presentations these days. Just let us know if you have any questions about that. Slide 4, unfortunately, we have to slow down a little bit for Slide 4, our quarterly results.

Look at the right-hand column with the yellow highlight. So that's Q1. You see our sales our gross profit, gross profit margin, 32%. We'd like to be better, but we're always happy when it's at least about 30%. And you can see our adjusted EBITDA and EBITDA margin. Our forecast philosophy, we try to remind you about this every time -- every call rather. Our Forecast philosophy, when we tell you what we think is going to happen, we give you a forecast in our presentation. What we're doing is we're telling what we think is going to happen. We could be wrong for telling you this is what we think is going to happen.

We don't play what we consider to be a game a low number, so we could beat it to look like a hero. I know a lot of other companies do that, but it's just not for us. So I just want you to know what we gave you a forecast, we're saying this is what we think is going to happen. So what did we tell you last quarter about Q1? Would we say during our Q4 investor call? We gave a sales estimate of $12.75 million to $13.25 million, of course. So we came in kind of at the [$12,783 million], came in within the range, but kind of the bottom end of the range, I would say. Adjusted EBITDA estimate $2.75 million to $3.25 million, and we came in within the range of $2.8 million EBITDA. I'm talking about kind of low end of the range. But nevertheless, we got in the range.

And I'd say outstanding job by Parks people to make the Q1 sales and adjustment EBITDA numbers. Well, I would just say that say you've really got it at the low end. Well, it's hard to appreciate the daily battles and the herculean effort involved. Remember, when we gave the forecast during last quarter -- during the fourth quarter conference call, we said at that point, it's kind of interesting. It's only about 2.5 weeks to go to the end of the quarter to the end of Q1 when we gave the Q1 forecast because in Q4, we had to do our boarding and everything. So we announced later after the -- maybe about over 2 months after the quarter ends. So -- and we said even in those circumstances, there's a lot, a lot of risk to the forecast we're giving you how would that be everything we're going to sell has been booked.

It wasn't that. Was the supply chain chaos that we're addressing. We didn't know what we get. We didn't know what we'd get. And we certainly didn't get what we wanted to get. So what happened is that a large majority of -- let me put it this way, a large amount, I shouldn't say a majority, a large amount will be produced and shipped in Q1 was produced and shipped in the last 2 weeks of Q1. So it's a daily battle with the supply chain. We got some raw materials in, okay, good. Whatever do, we got them to go ahead and produce the product, we have to test the product, we have to certify the product, we have to ship the product in order to get the -- to force the quarter over the finish line. This is what our people did. There are people working long, long, long hours, especially during those last couple of weeks, to get the job done to force the quarter over the finish line.

And I can assure you, our quarters end on a, a lot of quarters end a Sunday or financial period's end on Sundays, I can show you people working that weekend, shipping that weekend, the last weekend of the quarter. So Anyway, so yes, like I said, a significant portion of the Q1 sales and production the last 2 weeks, so just (inaudible) my notes here cover that already, and we talked about the weekend. So Park's people just brute-force the quarter over the finish line. We'll get back to this and what it means, what kind of people we have, but just want to make the point. That's why I'm saying an outstanding job, even though we just got to the bottom of the range, both the top and bottom line.

Let's go on to Slide 5. This is all pretty much what we had repeat of what we had in Q4. So freight, freight, freight, the information (inaudible) had a recent report that the Mike a little likely in the tunnel in terms of international freight shipping in general. But why? Why? Is that good news? Well, no, the report said, it's user demand destruction. So you tell me if it's good news. But maybe at least that there'll be some loosening up of the access to international freight, which has been a real issue for us every quarter.

Severe staffing shortages. Yes, they're certainly like going away. But what we're saying, we are dealing with this the right way, the Park way, which means we're focusing on a Park family culture, not taking shortcuts like throwing money at people. Total missed shipments, $1.25 million. Now we announced Q4, I think we're thinking about being a $1 million, $1.25 million in missed shipments because of all these reasons create mostly supply chain. Supply chain was a big kahuna. So anyway, that gives you a -- I think I'll give a little bit idea, a little perspective on the battles we're fighting daily battle, what we're saying, and that's -- I don't think we're being a little overly dramatic when we -- when you describe our experience as a daily battle.

Let's go to Slide 6. Yes, inflation, it's still there. The second checkmark, historically high, maybe was with us for a while. Maybe it's not so easy to break the pattern. Maybe we screwed the pooch as the astronauts used to say. Pretty good here. Maybe now it's not going to be so easy to get out of it. So not a list of excuses. We don't like excuses at Park. We don't go for that stuff. But we do think you want to know what kind of stuff we're dealing with on a day-to-day basis since you're investors in our companies. You want to know what we're doing every day.

Slide 7. Yes, supply chain has become a free fall. This continues having gone better, not as far as we know in any way, chaos and panic. And in many cases, even (inaudible) are not being honored. We talked about that a lot last time, so I won't go into it, but I just wanted to know that continues. Park on our integrity would matter most. Principles are not going cheap. Going to back to that later, Slide 8. So during our last -- this slide just comes right out of the last quarter presentation -- of Q4 presentation. And we highlight fiscal '20 and fiscal '22 because the point is look at the fiscal '22 top line compared to fiscal '20 top line, it's much lower. Nevertheless, the gross profit margin was higher and EBITDA number was higher, just not by a lot, but just a little tiny bit in -- sorry, in fiscal '22 compared to fiscal '20, even though the top line was much lower.

And I thought that was an outstanding job by Park's people. And on circumstances.

Slide 9. Let's keep moving here. So most of what we have here is a repeat of last quarter, but with some new items that I want to bring to your attention. So Park is long-term debt. Yes, we're on Slide 9, like I said, I told you that already. Reported cash, $107.3 million. That's gone down quite a bit. So what's going on there. We're spending money. Well, let's talk about that Park's investment philosophy. Our cash is invested in highly secure liquid securities, such as treasuries, governments, high-grade commercial paper and the average maturity is 23 months. I think that's not that long. But with interest rates going up so much, it makes a big impact.

So it's not the -- not a credit risk on the investments, but there's the interest rate risk that we're dealing with. Now our practice is to hold our investments into maturity, not to trade. We don't do that. But we could -- I'm not saying we won't do in the future, but our practice has been the hold to maturity. So we have mark-to-market reporting of cash. Now if you want to discuss this for -- you guys talk to Matt about I'm just trying to give you kind of a high-level understanding. Yes, it's important. So now we report our cash, it's not based upon the investment, the cost. It's based upon the market value of the investment at that time. So all these securities are high liquid and quoted like treasuries look every second of every day.

So it's easy to get that market value. But the market value has gone down, even though they're really short-term, 23 months because interest rates have moved up quite a bit. So that's we're reporting a lower number than $107.3 million. Now the amortized cost basis of our cash at the end of the quarter was $111.3 million. You could -- we report the number we required to report based upon GAAP requirements. But once you have this information, you decide what number you think is more significant. Now if we hold these securities to maturity, then it's likely that we'll get closer to that $111.3 million number rather than a lower number.

Now why is it not the right exactly that number because the way the cost basis works amortized cost basis works rather is that we take the investment at cost that we amortize or the discounted premium over the life of the security into maturity, and that's what we do on an ongoing basis. That's why it's not exactly what we originally paid for. Like I said, if you want more information about that, talk to Matt, I know lot of you guys are financial guys, you probably do run circles around me on this kind of stuff. But I just want you to understand that number. And I just want to warn you also we get to Q2, this discrepancy or difference delta, let's call it, probably will be greater because interest rates are moving and going up. They come down a little bit, but the trend for us, anyway, has been moving up.

So I just want you to be aware of that because it's something I think you should be aware of when you look at our cash numbers.

Slide 10. We don't have to go over the top part of it. We went over this previously. No change there. Cash dividend I just want to remind you that we paid $554 million or $27.05 per share in cash dividends in fiscal 2005. Slide 11. Here's something new with the top share purchase authorization. On May 23, the Board authorized -- we announced that the Board authorized our purchase of up to 1.5 million shares of the company's stock. Now we've been in the blackout since the authorization that blackout, I guess, ends tomorrow. So what happens now? Now it's interesting because even before we made this announcement, we just received a lot of input from investors shareholders, some of you about this kind of capital allocation question and we got very different opinions.

We had maybe 3 different categories. Some opinions were, well, don't do a buyback, don't even announce a buyback. And some, we had a couple of shareholders, I can remember, these are all significant shareholders that well, announce a buyback, but only kind of as a safety measure, don't buy at these levels, but let's say, in case the stock really goes down, there's a market event, and there's chaos and the stock goes down to 7% or 8%, then you have your lock and loaded. That was the second category of input.

The third was go ahead and announce buyback some implicated after the buyback was announced also announce a buyback and go ahead and buy at these levels more or less. So those are the 3 different kind of categories of input that we received. One thing I want to comment on is that there is one, I don't know, I guess, maybe an analyst that said we announced the buyback as a matter of appeasement and I wanted to address that because what does appeasement means, it means that we didn't believe it's a right thing to do, but we did it because we aren't cowards, we're chickens, and we thought we're under pressure, we're going to go and do something. We didn't think it was the right thing for Park. To me, that's what appeasement means.

And I have to tell you that I was surprised at that comment because if you know Park, we don't do that, we don't do that. We do what we think is best for the company. Now we appreciate the input we get from shareholders, and assess your statement. I mean, a lot of you know that some of the things we've implemented are based upon input from shareholders, really good ideas. Will we get an idea when it's a good idea, we'll implement it. We don't have any (inaudible) stuff. But at the end of the day, we'll do we think it's right for Park. I just want to make sure you can understand that. We don't do things for appeasement.

We see that a lot in corporate America these days, and we think it's very sad and very disappointing where CEOs have no backbone. They just do what they think they need to keep their jobs or something like that. But I'll tell you something. I'm not here to keep my job. I'm going to do what I think is the best for the company. Now what will we do? We'll see. I just wanted to give you a couple of things to think about the item at the bottom of the page. So maybe our money is going to finally be worth something and maybe it's now an important strategic asset.

The other thing is that we believe anyway, that the economy in the country are in a very troubling in dark place right now, very concerning. Will it get better? People think it will get better. And then my question is why? Why will it get better? What's going to make it get better? And I'm not sure the answer to that is very clear. I don't want to get into a discussion about why it happened in our opinion about that. So I just want to know that we're considering those 2 factors, -- but we'll see. We're not -- we know the announcement to make as to whether we're going to start buying stock at this low or not. We're going to think about that a little bit. We're going to watch what happens, watch what happens in the world.

And make sure that we do what we think is best for the company. Any input you have we appreciate, we welcome it at any time. But we'll do we think it's best for the company. And what does the company include? It includes the owners. We say special for the company, we mean including the owners, of course.

Let's go on to Slide 12. So we're not going to spend a lot of time on this, just to tell you some time here. We do this every quarter, as you know. I don't know if you probably wouldn't know this by memory, but these top 5, the same top 5 with last quarter. So some of the stuff doesn't rotate too much. Every quarter, we come up with a different picture, different programs at the top 5 customers are on. The Bombardier Global (inaudible) Nordam and the Passport 20 Engine for the Global 7500. The XLR that relates to MRAS is the Sikorsky relates to GKN. I think there was this announcement that Sikorsky got a $2.3 billion contract for Black Hawks. And Patriot Missile, I think you know by now, that's probably -- that's AAE and also Aerojet.

AAE, so its (inaudible) Aerojet and Kratos, I know what that Kratos obviously relates to the Valkyrie. I think there might be a T-38. I don't know this, but I'm just speculating, but I think this might be a demonstration of the loyal wingman concept with a manned aircraft next to the Valkyrie, I'm not sure, it's just speculation.

Let's go to Slide 13. Numbers to talk about here, except you might notice that Q1 is kind of looking like last fiscal year in terms of the pie breaks down. Military percentage may start to go up though based on somethings that we're going to be talking about in this presentation, we'll see. Slide 14 So this is Elena's job every quarter, come up with some nice pictures of some military programs. These aren't always the biggest programs, but they're interesting programs for us going to fund stuff that we'd like to share with you.

And at the same time, maybe we won't go into details on all these programs, except to say these are all programs are on and there's some kind of new events, recent events relating to these programs that caused us to want to highlight them, okay? And you see a little 22% of space, that would be private space. I think that's really what space is these days private space. I want we keep on, 15. So these are important slides, the trends and considerations for military and commercial, but they're all from the Q4 presentation with very little new year starting -- sorry, 15 rather new orders. We've talked about that extensively. The last check item, Finland and Sweden, officially apply well on June 29, and NATO approve their application, I guess, to join NATO. So that's a little bit of an update there.

Slide 16. Europe, kind of a big story, the second arrow item, but nothing new in the presentation here. 17, Asia. Don't forget about Asia, and we covered all this in the last quarter, except that the little bullet item related to South Korea. They recently announced they plan to purchase additional PAC-3 defense systems, is that a big surprise based upon what's going in the world, trouble world, trouble country, trouble global economy. And so not -- to me, not a big surprise anyway that the agents are thinking of that they better be careful with their defense systems, be careful meaning, making sure they're intact and may be upgraded.

The last item on 17 comes from the last quarter, but it's still worth looking into Lockheed CEO said they got demand signals for the PAC-3 from around the world. So especially when you see missiles in hospitals, et cetera. Again, I don't think it's a big surprise, but I just want to highlight that because, as you know, PAC-3 is an important program for us.

Slide 18. So we covered the first item, first arrow item last quarter. The second arrow item around that PAC-3 system. So the third arrow item, this is actually new to this -- to the presentation, and it's happening already. We hold some of these signals in the market, but now we're getting direct signals from our customers and OEMs regarding significant increases in ablative materials in this RAYCARB product, that's a C2B product that's sold by Park under our partner agreement with ArianeGroup. Remember that, we talked about that, I think last quarter, the prior quarter. That's a pretty exciting thing. This is support PAC-3 missile and other systems.

Now what I should tell you is that we talk about the ArianeGroup. Actually, let's talk about the checkout and your Park is forecasting. 23 sales with ablative materials and RAYCARB products well over $10 million. I don't know what we did this, it's really over $13 million. But the RAYCARB product, this is key. It's not being sold to just outside customers. It's being sold to our customers. And we're going -- the expectation is that we will convert that into pre-preg at some point. So it's kind of a double benefit. We get the benefit of selling the customer this RAYCARB C2B product, but we also get the benefit of ultimately converting that into pre-preg. So it's a double benefit.

When you take both those things in the account, it's probably over $13 million. And for perspective manner, I was just looking at this yesterday, normal range has been in the last few years, $5 million to $6 million, with 1 year that was higher. So this is quite a bit more and not surprising based on everything that's going on. Last item is that, okay, don't forget supply chain issues in terms of everything, including military.

Slide 19. So commercial trends and considerations. Again, all the stuff was covered during the -- or most of it was covered during the Q4 call. This thing about IATA predicts global air traffic levels were covered at pre-pandemic levels in 2023. I don't think that was included in the Q4 presentation. I think it's kind of a new thing, but it's not inconsistent with other things we've heard. We talked a lot about these pages about the significant increase in jet fuel costs and how airlines are passing those on to customers, and everybody is just very happy about how things are going.

And then on Slide 20, we say, but yes, is there a limit to how long this can go, how long customers are going to absorb these increased ticket prices for air travel, which the airlines have to charge not only the jet fuel costs going up significantly, lot of costs going up. But obviously, the big kahuna in terms their cost buy is a jet fuel, which is significantly higher. So yes, there's pent-up demand, we get it, and people of money. But I was just going to go on to Slide 21, sorry. Is this going to just go on forever? Does that make sense? Does it do by gravity? And what about your word which is becoming more and more of not just a possibility or probability. So looming possibility how looming likely a probability of recession. But now we're in a recession kind of mindset.

And now you're concerned about first of all inflation, all the buy spend a lot more money on gas, a lot more million on food. And now wait a minute, there's a recession. So maybe you start to hear about some of your (inaudible) their job. Do you really going to take the family to Cancun now. I don't know. So I'm going to think about it anyway. So why don't we go on to Slide 22. And I think the key thing is the last part of it. If the airlines slow down, they maybe push out some of the orders of airplanes. What will the OEMs do? What will Boeing Airbus do? And will they slow it down or will they do something else? And I think there might be a bifurcation there, and we'll get into that a little later on the presentation. Slide 23. Other factors which affect commercial, higher jet fuel prices is an incentive for the airlines to convert from legacy airplanes to newer and more modern, more fuel-efficient airplanes more earlier than they originally planned.

And the -- don't forget in the last, the bottom of our Slide 23, don't forget those supply chain issues because they're large and a looming and they're very much kind of a day-to-day thing that people -- phenomenon people have to deal with in the industry and the supply chain. Let's go to Slide 24. We don't have time. This slide, we include every presentation. So I don't think we're going to spend any time on it. If you have any questions about what's going on the dynamic, let us now.

The key thing is that these are all GE Aviation programs because MRAS was a sub -- originally was with sub GE Aviation. They're now sub of STE Engineering. But when started MRAS was a sub of GE Aviation. That's how these programs are GE Aviation type programs. Let's go on to Slide 25. So this is also from last quarter film adhesive. These are new developments regarding GE Aviation programs film adhesive. Good news for Park. Lightning Strike, that's also going to Slide 26. Good news for Park.

We talked last time about the Fan Case Containment Wrap, which we're excited about and look at the program was getting restarted after it was dormant for a while. And then we'll go to Slide 27. But then Boeing announced that they're pushing out the 777 entry into service -- 777X entry into service until 2025. I think it was a 2-year delay, obviously disappointing. And maybe you have some endowment program itself. Although some encouraging news, some customers, some airlines just to order 777X. So that's a good thing. And maybe the program will be okay and just be delayed a little bit.

Let's go on to Slide 28. All right. This is -- this relates to the A320neo family of aircraft. This is pretty complicated. And it's not so easy to kind of put this all into a little nice package for you. We try to give you some flavor, some perspective because it's obviously a real important program for Park. So we start on Slide 28. Most of the stuff was carried over, but there's some new things in the -- related to the A320neo family in the presentation.

So on Slide 28, this is when Airbus is putting on the markers saying, look, we have big plans for this program. These are the ramp -- this is the ramp rate. These are the target levels. We want to be at the rates want to be out in 2023, 2025. And go on to Slide 29. Important recent news. So this is now fast forwarding. This was in Q4 presentation. This is a fast forwarding a year later. It's now in May of 2022, where they really kind of doubling down and saying, yes, we're committed to doing these things. We're committed to these rates, 65, 75 we're committed to these things.

The year prior, they were kind of putting out what do you call it, a trial (inaudible) almost to see what kind of reaction we got. Now it's a little more trouble and you're saying, no, we're doing this. And let's go on to Slide 30. Top of the Slide 30, yes, this is not new, but it's interesting and it's kind of relevant to what's going on here at this suppliers conference one of the Airbus executives was kind of chastising the supply chain, saying, "We need you to follow the rate indications we're giving you and have faith and we need to challenge you not to second guess. " That was kind of strange, but nevertheless, maybe relevant considering what's going on.

Now in March of last year, GE Aviation said, "Don't worry, we're going to keep up the LEAP rates." We're good. And then -- that was important because prior to that, GE Aviation was publicly saying they're skeptical about Airbus' indicating ramp rates on the A320neo program, of course. But look at the bottom here, this is a big one. According to May 24 Reuters report, CFM is facing industrial delays of 6 to 8 weeks, oops, wait a minute, now it's unraveling is going apart. And 6 to 8 weeks, well, let's keep going. Let's see if that makes sense, just 6 to 8 weeks.

Let's go on to Slide 31. Now on June 24, this is a recent speech made by Airbus CEO Faury confirm that supplies engine that's lagging behind A320neo aircraft production. But stated he is confident Airbus will achieve as we would ramp up to its highest ever single aisle output rate. CEO Faury also implied that Airbus would continue to produce A320 aircraft and install the engine of the aircraft, delivering them when the engines are available. They also expressed some exasperation, I say but it's pretty obvious to me anyway, with a skepticism goes in the supply chain, we continue to question Airbus' ability to achieve their targeted rates. So let's keep going.

Now Airbus has only delivered 36 A320neo family aircraft per month in 2022 through May, but Airbus produced 44 per month in the second quarter. So what's going on there? Why is it -- what is the discrepancy about? And Airbus wants to deliver 600 this year. That's an average 50 per month, isn't it? Yes, 600 divided by 12. Now there was something that came out yesterday, and I try to follow the news item, I didn't have time to get in the presentation, but I'm going to read from it.

This is CEO of Faury's interview with Aviation Week on July 5, I'm going to read from it. So bear with me here, it's kind of interesting and may be important. Faur acknowledge of [your] problems. So your problems and the Airbus supply chain is making the planned ramp-up of 75 aircraft per month in 2025 and a target of delivering 720 commercial aircraft in '22, tough challenges. This is a quote from (inaudible) the first half of 2021 that the industry should be prepared for the ramp-up. Many were saying, we were stupid, as we said, is we're stupid. Money weighted, maybe the engine manufacturers as well, but then it was too late, you're behind the curve when the curve is steep and it's difficult to catch up that exactly where we are now.

So you can see my sense is, you get a little bit unhappy and maybe exasperated. We're saying, look, we warned you guys, maybe in the last year, you didn't pay attention to us, you don't listen to us to now look at the predictive that we're in. So Airbus is currently back to -- I'm really from the article again back to building gliders. Otherwise complete the aircraft what if engines to be delivered. And this is important, so probably explaining the discrepancy between production and deliveries. So let's see what else he said here.

"On the single aisle, it is a supply-constrained market, at least for the short-term." He said (inaudible) assembly lines, as Airbus has committed to doing this. I never -- nonetheless stressed that he is not prepared to drop their production targets. Is it time to give up "Of course, not" he says. Teams are working like crazy. Suppliers are ramping up, and we're shaking the engine manufacturers, shaking the engine manufacturers, have them recover. They tell us they'll recover. So we also points to 2018 crisis, when Airbus wasn't the same predicament. And they were able to deliver their target, but they had to build the gliders away from the engine to be hung.

So there's obvious frustration on the part of Airbus. He said (inaudible) before. They warned the industry, they warned the engine companies, pay attention to what we're doing. This guy at the supplier conference Airbus executive is lecturing the supply chain, pay attention we're doing and they didn't. And so now we're just predicament, but they're building gliders. So what does that mean? It's very important comment. And it kind of confirms what we're speculating about on Slide 31 here, which is that Airbus is not going to stop, it will cost a lot of money they're going to build lots of airplanes that don't have engines. Lots of airplanes. They'll keep building the A320neo because they want to keep moving.

This is my interpretation. They want to push forward, then we get bogged down. And then when the engines are made available, this is not just CFM so for Pratt in fairness in both GE CFM and Pratt that have formed high. When the engines are made available, the engines will be hung on the airplanes and the airplanes will be delivered. That's what they did before. That's what we're doing now in terms of this concept of gliders. That may explain the discrepancy that we saw why they're producing more airplanes that are shipping. Well, now we know the answer because it's from Faury himself he said what they're doing. Okay.

So I know, I had took a long time and we're running late. Slide 32. So there's a news release that we came out with, why did we do this saying that we're committed to supporting Airbus' ramp rate? And we want to take a stand because a lot of suppliers were not there kind of wavering and that kind of thing, we want to extend. And we glad we did. So the bottom of Slide 32, no real change there. Let's keep going.

Slide 33. The XLR news, the first test flight of an XLR equipped with LEAP-1A engines took place in June. That's really nice. Also, Boeing and the Boeing CEO has said they're not going to introduce, announce any new airplanes for at least a few years. What does that mean? That means that probably never -- probably never develop a response to the XLR. And even if they did, it's not going to be until 2030, which at that point, I'm not sure it's relevant or not.

So I think what Boeing is doing is basically seeing this space, this whole space that Airbus is a very important space. So question came from our -- one of investors looks to our interval, why don't Parks A320 drive revenues reconcile to A320 aircraft family deliveries. We talk about what's going on in the A320 big picture a lot, why don't our revenues reconcile? And the answer is that it's a good question. There are a lot of timing differences in the downstream supply chain, not our supply, the downstream supply chain and the inventory is a big deal. And to me, it seems like inventory sometimes not manage to well, a lot of overcorrections, overshooting, too much to little, too much to little, too much to a little.

So it's very hard to kind of align and reconcile on a short-term basis, what we're doing and what Airbus is doing, it doesn't work. However, this might be the most important thing in the presentation that's last thing in the bottom 33. At the end of the day, it doesn't really matter. The only thing which matters the Park in connection with the A320 programs how many A320neo aircraft equipped with those CFM LEAP-1A engines Airbus deliveries? That's it.

So the timing differences are going to be hard to figure out. But at the end of the day, that's all at better support. And it's an important thing to remember when you're thinking long-term, at least for me, it is. Slide 34, the COMAC919, first production aircraft is taken for flight. Bombardier Global 7500, new announcement. No, I would say it's exciting. Bombardier announced kind of a new derivative, let's call it, of the 7500, call 8,000. 8,000 nautical mile range, very fast airplane, uses the Passport 20 engine, 2025 entry into service and Park is on that program. That's nice.

Slide 35, the Boeing 747, we cover this every quarter. Boeing has announced that they're canceling the program, there's only 3 left to deliver. Slide 36. GE Aviation forecast -- GE Aviation programs forecast. So first of all, in Q1 came in at $6.4 million. I think we told you when we did our Q4 call that we'd be somewhere between $6 million and $6.5 million and so came in within the range. And for Q2, we're indicating $6 million to $6.5 million. Significant supply chain risks in that forecast.

Let's go on to Slide 37. So if you look at Q1, we already gave you the numbers for Q1. Q2, our forecast is sales, $13.5 million to $14 million; adjusted EBITDA, $3 million to $3.5 million. Again significant supply chain risk with any forecasting at this point.

Let's go on to 38. Now these are important slides, I think, for us, but these slides will come from Q4. So we're not going to go through them in detail. But I think there's really for me anyway important points that are being made here. I just want to highlight one thing. First arrow item second check to see what we're talking about. Forecasting is problematic even for the next quarter, forget about long-term forecasting. So that's not really possible for us under this very stressed environment, this chaotic environment with supply chain in particular.

But we think we can't provide meaningful insights into our company outlook. We broke it down by business -- sorry, by military aircraft first and then commercial aircraft in terms of outlook. I'm not going to go through these things. Please let us know if you have any questions. All these things are included in the Q4 presentation still apply -- well, let me just add one thing on Slide 39. There's something we did add here at the bottom about Airbus and what they're doing. So we say Airbus is trying to establish an [irreversibly] dominant position in single aisle, permanently end the duopoly. Take as much market share as possible, but permanently end the duopoly, and that seems to me what they're doing. And as -- at the bottom, Boeing has no response. The XLR niche is being left Airbus.

Slide 40. So we go through some of these programs, how the recession affect these programs. I'm not going to go back over that. Slide 41, same thing with the Global 7500, how would a recession affect that program. At the bottom 41, this is the important part of it. Based upon the above considerations or there are serious concerns about the economy, inflation, workforce shortages, supply chain chaos. We believe the outlook for Park is quite positive for the reason stated in the prior few slides.

Let's go on to Slide 42. We give you an update every quarter. I'm not going to go to these numbers, I think they kind of speak for themselves. Any questions about our expansion, let us know. Let's go on to Slide 43, James Webb. This is kind of a small program for Park. I mean, there were 21 Sigma Struts we provided for the James Webb. But it's -- it may be we're not supposed to be emotional business, but this one is a little emotional for us. It's kind of a big deal. So we do include it in our quarterly presentations, we may include it for next couple of quarters as well.

So 21 of our Sigma Struts are incorporated into the structure of the James Webb Space Telescope. And they were made here. So you see that arrow that's a little workstation or a little workstation where we made those Sigma Struts. Maybe look at 2 hours pointing down from there. That's where they are now 1 million miles from the earth which is L2 as for those Sigma Struts are now, 1 million miles from the earth.

to release the first full color images from the James Webb Space Telescope on July 12. And you've heard that some of the people seen these already. You got a very kind of emotional when they saw these images. So it would be very interesting to see what the first images look like. We're thrilled and honored to be playing a part on this incredible James Webb Space Telescope machine.

Let's go on to Slide 44,. This was covered actually in our Q3 presentation. An investor asked me, well, what happened with this because we didn't cover in the Q4 presentation? There wasn't much of an update. But now there is an update. If you look at the highlighted item, this is only thing we cover. We're working with a new potential JV partner on these initiatives. We're still -- they're still front burner, and we're actively working on these things, discussing them, but we decided that we want to work with the different partners. So we're working with that additional prospective partner on these projects, okay?

Let's go on to Slide 45. Okay, this is a new and exciting thing for Park. We haven't talked about this before, kind of new development. This company Aero Design Labs. So they have this program that they call the -- what is it Aero Design Labs Drag-Reduction System Program, ADRS and Park's materials are sole source qualified in that program. It's a [mod] for the 737 legacy aircraft, of which there are 1,000 and 1,000 are flying and operation around the world. This is not the max. These are legacy airplanes.

The ADRS program designed to make the 737 aircraft more aerodynamically. There should be more fuel efficient, resulting in significant fuel savings. As a result of the significant increases in jet fuel prices, the economics of installing these kits are even more compelling. ADL received the STC from the FAA for the 737-700 and is planning to receive the STC for the [800-900] by the year-end The STC is a big deal. I mean it's okay, you're good. The FAA approved it, they signed off.

Slide 46. So as we said, thousands of Boeing 737 legacy aircraft. And this is a potentially very significant program for Park. Park will consider -- actually is considering additional investment to support this program as necessary. Let's go on to Slide 47. So we received a nice little award from one of our favorite customers, OEMs Aerojet Rocketdyne. So we received a distinguished supplier award from Aerojet. It's given to less than 1% of their suppliers according to them. We're very honored about that. And yes, they are one of the major programs on which Park supports Aerojet. It's a PAC-3 missile program. And there's a little picture of the banner. It's actually on the wall in our factory right now. It's a customer service team, Dakota, Elena and Sara holding it up for us. Thank you, ladies.

Slide 48. Park's people. So we covered this during the last quarter, and most of these slides are just the same as we had in the last quarter. So we won't spend a lot of time with them, although very important. Headcount -- people count rather 106. So we're still not really at the level we want to be at. But why don't we just kind of fast forward, we talked many times about not throwing money at people, we do it differently at Park.

Slide 49, people earn what they get. So we talked about the fact we didn't lay anybody off during the pandemic and economic crisis. So let's go on to Slide 50. Peter Drucker here, who's helping us a cultural strategy for breakfast. So how were we able to make our Q1 sales and EBITDA numbers with such a severely reduced workforce. So it's a magic? I don't think so. Our people have been working very long hours. In some cases, 70-hour weeks, week in and week out. Nobody really asked our people to do it, they just do it. So there are plenty of others out there who let go many, many people and maybe thousands of people, and now they need for people to work extra hours for them.

And my comment is good luck with that. You just -- you let go 10 or 12 or maybe 100 of my pal. Now you want me to work hard for you? Why would I want to do that? Because you obviously don't care about me, so why should I care about you. So my comment would be good luck with that. Do you understand how very fortunate we are to have the wonderful people we have, understand why we love our people. As it turns out, loving our people is a good business. These are people are willing to do what's needed for our business to be successful at least for all part of this business. We're all part of it. We're not like dressing them. We don't do that. But they love us to be sincere. If not sincere, then it doesn't count.

Let's go on to Slide 51. I'd like this thing about our strategies and moving mountains with a dedicated, motivated, inspired workforce, the company can move mountains, including meeting our EBITDA and sales targets with a very severely reduced workforce. Without such a workforce, you can move nothing. Like I said, good luck trying to get your people to work extra hours and things like that. We just laid off after [pal] because obviously, you're telling them, you don't give a [deal] about them, so why should you get (inaudible) about you.

Let's keep going here. Customer Flex Program. We're just updating the numbers. It's a very critical program for Park. Without this, we would not be able to achieve what we achieved is a very important program for Park. And we recently increased the hourly premium that our employees receiving for Customer Flex Program participation.

Slide 52, closing up here. Sorry, we're taking it so long, I apologize. We try to skip over as much as we could, but it's hard to skip over everything. Our principles are not cheap. We covered this during Q4. So just a little review here. It could be the cost (inaudible) honor of POs and PO confirmations in a world where many others are not doing so. But at Park, we do we say we're going to do. Park, our word is a bond. Now what's kind of interesting here in terms of update is what kind of -- what we've been told by people about some of the things we commit to, we were told by the supplier who's not honoring their POs that we should not honor our POs either. We should honor POs to our customers. And they say, well, if you do that, you're going out of business.

That's very interesting because -- my comment is, you go out of business when you sell your soul. When you sell your soul, you have nothing left. And it's only a matter of time, your days are numbered. That's when you go out of business. So I don't want to really agree with that comment. I thought it's kind of interesting that people are encouraging us to not be honorable as well to. And it happens again, it is inconvenient for Park, not just for money people want to recruit them and a world where many others are doing just that. But at Park, our people are precious, our people not commodities to be bid up and sold short.

Like I said, loving our people's good business. But we've been told that we should just bid up people and to hire them, and then we don't need them just get rid of them. What's a big deal. They're expendable. That's not for us.

Let's go on to next Slide 53. The same concept here, there's a kind of a new angle on it. It was inconvenient for Park, not to ask or accept NAPP or government money, meaning taxpayer money, the government doesn't have any money. It will come through us, taxpayers. During the pandemic and economic crisis, while others many, many others, including large companies to tens of millions of dollars of government money meaning taxpayer money, meaning our money as incentives, incentives is not to let all more employees.

At Park, we earn our own money. We're not client to accept corporate wealth or government handouts. At Park, we made money and paid taxes every quarter throughout the pandemic. At Park, we kept over people. We do not need government money as incentive to keep our people or people with pressure. So yes, we were lectured by others that we should take the money. Look, it's millions of dollars, it's free money. What is the thing (inaudible) free lunch. We've got a little inflation we have now. Has that money all that free? Will the money people took free money people took really? I don't know about that. I think maybe (inaudible) is right no free lunch.

So the ultimate priority is that some of these people actually that took a lot of government money or the people trying to hire employees away. Let's go on to Slide 54. Here's our closing slide. Others need to make their own decisions, long choices about what matters and then what does not and live with those choices. But at Park, honor integrity of what matter most, and Park principles are not cheap. At Park, we're not like the others. At Park, we play for teach. At Park, we're not pulling around. We're looking to make an impact. We're not going for mediocrity.

At Park, we go for grades. So here, we have a picture of our ablative materials, special operations team. It's kind of -- it's an (inaudible) process. We can talk a lot about it. We got Kevin. He has -- these people are big into customer flex, [Ula]. These are long-term employees. Actually [Salthy] is new, doing well. [Sarea] lots of customers flex categories and Michelle is new as well. So these people did a lot of work and did a lot of work that is of course during the quarter, but there's a lot of this (inaudible) work for the ablative materials for missile programs during the quarter. So job well done by them.

And something we knew we haven't done before, Slide 55. There's our Board of Directors. We -- I hate this. But for 2 years, we had all meetings, I hated it. But finally, we got together in person. On May 18, we had in-person Board meeting at Park at the company, and we did a nice little picture. And I just want to comment, I apologize, we don't dress up for Board meetings. So except for [Brad] he has a nice jacket on and the rest of us we just kind of dressed very casually. Okay. Thank you very much for being patient listening. And operator, now if there are any questions, we'll be happy to take them.

(Operator Instructions) Our first question is from Nick with NR Management.

Brian, I wonder if you could comment on kind of new niche markets for Park potential. I'm thinking of SpaceX, Blue Origin electric aviation, are there any products that Park could make for those markets? And do you think your sales process would be different for those endeavors?

Thanks, Nick. Thanks for the question. So we haven't done a lot in terms of sales so far in these 2 markets like eVTOL electric aircraft and private space. We do have a product that we are targeting towards these eVTOL type -- I guess you call them aircraft. And we have been working toward these private space companies. I mentioned in the pie analysis, there's some from private space.

But I would say not the success that we would have liked to achieve so far. But still those 2 markets that you mentioned, Nick, are still markets that are really interested in targeting. And I think we have products that made may help us maybe very appropriate for those markets.

Yes.

Is that helpful or do you need more information?

Yes. Thank you. Thank you so much. Thank you.

Our next question is from Brian Glenn with Olcott Square Investment Partners.

Just two questions. I guess, the first, this goes back to, I think, it's Slide 17, it might be 18. You mentioned fiscal year 2023 sales for the ablative and RAYCARB. You guys were expecting $10 million. Is there any indication that you can provide with respect to what that figure would have looked like for fiscal year 2022 just so we can understand the trajectory a bit?

Yes. $5 million, $5 million to $5.5 million, something like that. And I think we said that, yes, we really should have said over $13 million. I think we're trying to be too conservative. This is a forecast. It's not all booked. So actually, the number we're looking after this year is over $13 million. But yes, last year was, I think, $5.5 million. I don't remember in front of me, but somewhere in the $5-ish million.

Understood. Okay. That's helpful. And then the second question, and I know you mentioned you've spoken with shareholders, and I've asked a few times as well regarding capital allocation, specifically share repurchases. And the only other thing I want to bring up, I know you guys are giving serious thought about the best way for the company to consider that, and there's a lot of assumptions that go into that.

But the only other thing I wanted to bring up is if there's the view that you guys have a multiyear period of earnings growth. And I know nothing is guaranteed, but if that's the view. And obviously, there's some calculus as to whether the stock is cheap relative to that growth or not. But I did want to bring up, you save a couple of bucks on the dividend for the shares you repurchase. And the other thing you do is you potentially cash out short-term shareholders.

So anyone who's has ownership in the company, and I know you appreciate ownership, but anyone who has a short time horizon is more likely to be a seller. So you effectively cleanse the capital structure a bit with respect to the ownership piece. And there's sort of a selection bias that exists whenever a company engages in share repurchases. Again, they have to be thoughtful and calculated, but you do end up kind of calling your investor base and you end up with, hopefully, a better crop of fellow shareholders and partners that have an appreciation that the business is worth more, that's why they didn't sell and also a better time horizon, which is more of a long-term. So there's kind of that selection bias, which I think, should be considered by the Board and might be appealing.

I agree, and I appreciate the input. You've got to input before appreciated. And I commented, we see -- it was kind of interesting. I don't know why but out of the [bloom] we received probably from maybe 6 to 8 different investors input, opinions about capital allocation. And that was interesting was some was before we even made the announcement. So I don't there's some anticipation or whatever, but we appreciate the input. And we give consideration to all the valid input.

Your input is valid. I can't tell you what direction we're going right now. I think at this point, we want to evaluate a little bit. As I mentioned, we are pretty concerned about the situation in our country and the economy and the country generally and where it's going. It's one of the factors and not the only factor. But the factors you're mentioning are obvious. We've received some analysis even from unsolicited, but appreciated from some shareholders.

I gave a little kind of number crunching about, well, if you buy stock just make sure at this level, it looks what happen. And we've done it ourselves. We have outside advisers and investment banks that do this work for us as well. But we always appreciate kind of input. And I don't disagree with anything you said. I think it's all valid.

At the end of the day, we have to make a decision based upon considering all the factors and like often is the case, Brian, with big boy and big grow world, all the indications aren't going in the same direction. You have to make judgments and you the best you can. And then you always, of course, correct, I hope, anyway. If you realize that, wait a minute, that wasn't the right decision. So I think that's the best I can do in answering your responding, except to just say again, I don't disagree with any you said.

Yes. I appreciate that. And yes, I totally understand. I guess the last thing, which is, I guess, is more of a question. But it looks like, again, I'm a passive shareholder, of course. It looks like outside of any significant M&A, and I know you guys know this much better than me, but it looks like all the growth opportunities that Park has explored or considered or some of the partnerships you're through the facility expansion. It seems like -- and correct me if I'm wrong, that they're relatively small in terms of the capital that they may require.

And I know you can't talk about what hasn't happened or what's being privately negotiated. But as I kind of glance across like a number of levers that you're pulling over the last 2 years, they're all pretty light on the capital investment side or the working capital related to that partnership. But I guess, correct me if I'm wrong, I guess that's the question is. Am I reading that right? Or some you're looking at do possibly have a larger capital commitment component?

I would say that's partially correct. Now if we talk about this thing in the slide and the presentation about these 2 projects, capital price you're right, I think it's $7 million, $8 million, something like that. However, we have ongoing discussions with others about projects that would consume much more capital, not talking M&A here, as you pointed out. But joint ventures, for instance, which would consume much more capital. And we've been kind of proactive in that regard. We're trying to use our balance sheet as an advantage.

We've talked -- spoken OEMs and even customers saying, maybe you like maybe we should talk we initiate discussions sometimes about this project or that project, something we could do together. And those -- some of those are -- would consume much more capital.

(Operator Instructions) There are no further questions at this time. I would like to turn the floor back over to Brian Shore for any closing comments.

Okay. Thank you, Paul, and thank you, everybody, for listening. Appreciate the questions. Appreciate your time. Matt and I are always available. Feel free to call so any time you want. And have a great summer, and we'll talk to you soon. You take care.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.