Park Aerospace - Q3 2024

Transcript

Operator (participant)

Good afternoon. My name is Camilla, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Park Aerospace Corp third quarter fiscal year 2024 earnings release conference call and investor presentation. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press Star, then the number 1 on your telephone keypad. If you would like to withdraw your question, please press Star, then the number 2. Thank you. At this time, I will turn today's call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference.

Brian Shore (Chairman and CEO)

Thank you, operator. This is Brian. Welcome, everybody, and I want to introduce Matt, of course. He's with us, our CFO, as usual, Matt Farabaugh. And also, we'd like to take this opportunity to wish you and your families a very happy New Year. All the best to you in 2024, it is, right? Yep. We just announced our Q3 earnings, I guess maybe about 45 minutes ago. So, you want to pick that up, and also in the earnings announcement, there's instructions as to how you would access the presentation that we're about to go through. You want to do that as well. The presentation is pretty long. Sorry about that. I really was thinking I was gonna... This one, I'm gonna make it shorter, and it ended up being longer.

It's hard for us, or at least for me, because it just seems like sometimes there are important things to cover. We don't do the sound bites. You know, we don't hire IR firms to do a little clever, you know, kind of slick things, and I don't know why you'd want that anyway, because I would think you'd want to hear from management. So, we're not as polished. It takes a little bit longer. It'd probably take about 45 minutes or so to go through the presentation, so just be advised. We might skim through some of the items that we've gone through previously. There are some items in this presentation, which were in the Q2 presentation as well, so that might help us a little bit.

Before we get started, I just really wanna give a shout-out to Donna, because these Q3 is a bear for us because it just, our holidays are kind of a mess. Not just the presentation, we're closing our financials, so Matt as well. But Donna, you know, helps me do all the PowerPoint stuff. I'm not even dangerous in PowerPoint. I can't do it at all. So every third quarter, you know, she's working on through holidays. Before we get started, note again, it's our 70th year in business. It'll be our 70th anniversary is March 31. So I guess, what is that? A couple of months off. It'll be 70 years if we make it that far. Why don't we get going?

Slide 2 is our forward-looking disclaimer language, so we're not going to go through it. Please call us if you have any questions or ask us, let us know if you have any questions. Slide 3, Table of Contents. First thing is the investor presentation. Appendix 1, supplementary financial info, which we're not going to go through either, but if you have any questions about it, please let us know. Let's go on to slide 4. Take a little bit longer. So Q3, let's go through it. Sales, $11 million. Why don't we compare things to Q2? $11 million, $6.39 million. So that's a, you know, fairly low number in terms of sales, even lower than Q2, which was off, and I think you probably have a good understanding of Q2, and we'll go through the explanation of Q3 as well.

Look at the margins. I highlighted, we highlighted the margins, both the gross margins and EBITDA margins. You can see the comparisons to Q2, which are not really favorable, but as I think we tell you a lot, we don't like them when we share gross margins below 30%. So they're certainly below 30% this quarter, and our EBITDA margins are not really that desirable for us anyway either. Observations and thoughts about our Q3. So what's going on here? Well, the MRAS inventory burn down, which we talked about at great length in our Q2 call, that continued through Q3, and we predicted when we did our Q2 call, we told you, we predicted that. Is that MRAS inventory burn down expected to continue into Q4? No, it's not.

It's over, and we'll get into that in the presentation, but it's, there's no more burn down. Well, we will discuss the MRAS inventory burn down in greater detail throughout the presentation. Let's go to slide five. Well, let's talk about the non-GA aviation sales we have. We talk a lot about GA aviation. Non-GA aviation sales were only $7.5 million in Q3, and that compared to $9.4 million in both Q1 and Q2, so that was off as well. So although there almost always will be some degree of quarter-to-quarter variability in our business, the trend is actually quite good for non-GA aviation sales, so we're feeling pretty encouraged about that. But what is the reason for, or are the reasons for the quarter-to-quarter variability?

There are numerous reasons, but for numerous reasons, the programs we're on will be active in one quarter and may not be inactive in another quarter, and we really have no control over that. There's very little we can do to control the timing of when programs were, that we are on, will be active or inactive, and it would really be a waste of our time to even try to do that. It would exercise in futility, as we say here. But at Park, the key thing is we focus our energy and efforts on getting on new programs, which we believe will be supportive of our long-term objectives, rather than attempting to try to control the timing of programs we're already on. So let's keep going. Slide six. But nevertheless, this quarter-to-quarter variability does come with less than optimal visibility, often.

It does require us at Park to be very agile and fast on our feet with our supply chain, with our inventory, and our production management activities. So were there any new obstacles to completing sales in Q3? Yeah, there were actually, and we'll get to that in a minute. But let's not talk about the bottom line. We talked about the top line? Why were the margins in Q3 lower than Q2? We already showed you the comparisons. Well, there's a few reasons. There's a less favorable sales mix in Q3 compared to Q2. Q2, the sales mix actually was quite good. Q3, not quite as good. But as I explained above, we have little to no control over which programs are active and which programs are inactive on a quarter-to-quarter basis.

That's kind of rolling the dice a little bit if you look at it short term. You know, will the higher margin programs be active in a quarter or less active? That we have almost no control over. Again, our objective is to get on more programs, you know, the ones that we think are good programs, the margin programs, the better margin programs, and the timing is up to, you know, the, the customer or God or something outside of our control. The second item was lower sales. We talked about in Q2, so that affects our bottom line in Q, Low sales in Q3 compared to Q2, that affects our bottom line, of course. And here's a big one.

Even though we fully anticipated that Q3 sales were going to be light compared to Q2, we intentionally ramped up our costs in Q3 to meet the reduction requirements of expected key program ramp-ups. So that was something we decided, that was intentional, and we'll talk about that numerical figures again throughout the presentation. So why don't we go on to slide seven? Yeah, we saw that freight train coming. That's an analogy we used in our Q2 presentation. The freight train coming, meaning the program ramp-ups. We wanted to make sure we were ready. Although ramping up our costs took some conviction and maybe some guts, a little bit anyway. You know, it's hard when you see, you know, there's not going to be good sales, good quarter sales-wise, to ramp up your costs.

It turns out, we don't know for sure, no guarantee, but we clearly were right with the benefit of hindsight to do what we did in ramping up our costs in Q3, and we'll explain that as we go through the presentation. It was a good move on our part, I would say, to do what we did. Other considerations related to Q3, how things are going with supply chain staffing, freight disruption. We talk about this a lot. You might be tired of hearing about it, but, you know, we're sometimes tired of dealing with it. Supply chain staffing challenges continue, but they seem to be improving to some extent, or maybe there's more that we have become more effective with dealing with them. Now, I just want to point out, we're not talking about supply chain issues for the whole industry.

We're talking about our supply chain. The whole industry, we'll talk about later on, because that's probably more of a factor for us anyway, in terms of the opportunities in the industry and how they're affected by supply chain constraints. International freight, well, that's a little bit of a different story. There's that war in the Middle East, which, you know, occurred after the end of Q2, I guess during the first part of Q3, which we didn't see coming, but it's causing serious disruption and challenges for international freight, disrupting... Sorry, slide eight, disrupting shipments to customers in the Middle East and Asia. Yeah, we got customers in Turkey and Israel, important customers, so you can only imagine what kind of chaos that is.

And then we also have customers in Asia, where there's not a war in Asia, not yet anyway, and hopefully, hopefully it'll stay that way. But nevertheless, you know, the sea freight goes through those through the middle of it. You know, through the. It's supposed to go through the Middle East. I guess now it's going through the, what is it? The Horn of Africa. It's a way out of the way, so that's not a lot of fun. Total missed shipments in Q3, about 560,000. I don't have it in front of me, but I think it was only about 220 in Q2. So in other words, Q2, we really getting much better, but we have a big setback in Q3, and that's almost all related to international freight disruptions.

So, there you go. Our margins, also our margins continue to be affected by inflation. I know inflation is supposed to be all gone, but we're not, I don't buy that. The cost and cost relates to operating our recently commissioned new plant in Newton, Kansas. This is all planned and expected, but obviously you don't, turn a plant on and you're at full capacity. It's not how it works. Let's go on to slide 9. Okay, this is our historical fiscal year results, and, for perspective, mostly. Let's talk about it a minute. Normally, we don't spend much time on this one. Look at the sales in, 2017, 2018, 2019, 2020. Like, it kept going up, like, $10 million, you know, $31 million, $40 million, $51 million, $60 million. Really nice. Then what happened was this little thing called a pandemic.

So, sales were really badly affected in 2021 and 2022, 2023 and 2024. If you look at our forecast on slide 36, 2024 is just gonna be our, our forecast is something like 2023, like $55 million top line, $11.5 million EBITDA. So we got, you know, three years where we just have been able to break out. The pandemic, the disease part is, you know, mostly over, but boy, did we screw up, you know, the global economy, supply chain, staffing. We have supposedly full employment, but, you know, so many people left the workforce. I don't know how that problem gets solved so easily.

You probably know better than I do, but, you know, at least from my perspective, it seems like a problem that may not get totally solved, so easily. But anyway, if you look at our top-line numbers, you can kind of see the pattern there. Now we're hoping, and we have reason to hope, that we're going to start to move that, you know, we're going to start to have that growth dynamic kick in again, starting in this fiscal year, you know, return to the growth dynamic. But let's go ahead and let's talk about... Let's go on to slide 10. Okay, quickly, in this one, we always cover our balance sheet, and dividend stuff. So we got 0 long-term debt, $74 million of cash we reported. But don't forget, we, there's 9 point, sorry.

Yeah, $9.3 million of remaining transition tax installment payments payable through June 25. That relates to repatriation tax. I think it was based upon the Trump's tax law, which was very good for Park, but nevertheless, we have some installment payments. So, you know, you can think about how you like, but we kind of think about that as almost like debt, like we owe that money. So when we think of our cash, we think, well, you know, we still got to give $9.3 million of this, these transition tax installment payments to the government. That's in addition to our regular tax payments, which we're not talking about. Dividend, yeah, you know about our dividend. We paid a lot of dividends.

Been for $830, eight years, $588 million since in 2005. And like I always like to say, that's a hell of a lot of money for a little company like Park. Go on to slide 11. This is just kind of a reminder, as you know, on May 23, 2022, 2022, the board authorized a buyback of 1.5 million shares. We've purchased about 221,000 shares so far, and it looks like we have about, what is it? 1,279,000 shares still available to be purchased under the authorization. We're not saying we're going to buy stock or not, but we just want to remind you that the authorization is out there, just so you remember that.

Let's go on to slide 12. Okay, every quarter, we tell you about our top five. This is a slide that Donna prepares. We do a little nice picture of, you know, one of the programs that these customers are on. AE Aerospace. So, they're a contractor for Aerojet, and the Aerojet relates to the PAC-3 missile. We talk about that a lot. Aerosphere is their contractor for Israeli aircraft, and that relates to the G280. So, that's a Gulfstream airplane, but Gulfstream has some contract with Israeli Aircraft, under which Israeli Aircraft produces the G280 airplane. Kratos, you know all about Kratos. We talk about almost, I think, every quarter, featuring this Mako unmanned tactical drone. Middle River, yeah, every quarter, of course, 747-8.

That's, I think, our favorite airplane. And then, NORDAM , that's the Global 7500. They make some components for the engines for this Global 7500 with our materials. Let's go on to the next slide, slide 13. Our pie charts. I always like these. I don't know if they are useful to you, but I kind of think they tell these, you know, have messages in them. And if you look at the first 9 months of this year, you say, "Yeah, commercial is a little bit off as compared to the prior two years, and that would be based upon what? That would be that burndown that's causing commercial to be a little bit light in the fiscal 2024 first 9-month pie chart.

Let's go on to slide 14. Excuse me. So Park loves niche military aerospace programs. This is Elena's project, every quarter to come up with some kind of fun, interesting, and cool examples of military programs we're on. The pie chart's interesting. Let's talk about that for a second. Rocket nozzles, drones, structures, those, and radomes. Those are niche markets for us, but even the structures we consider to be a niche market. Quickly, the SpaceX Falcon 9 launcher with Dragon spacecraft, materials and ablatives. The Northrop Grumman E-2D, that's parts and materials, and both the Black Hawk and the Lockheed F-35, two very different kind of aircraft, but those are multiple materials. And the MK56 vertical launch system, that's for the Navy, and those are ablative materials. Let's go on to slide 15.

So let's talk a little bit about trends in the aerospace industry. Commercial aerospace markets, domestic air travel, report that fully recovered. That's good news for single aisle like the A320neo aircraft. International travel is reported to be approaching pre-pandemic levels. Also, very good new, good news for long-haul wide-bodies like the Boeing 777X. I'm a little biased because I keep talking about programs we're on. Not surprisingly, demand for commercial aircraft is very high. Supply chain and labor shortage challenges continue to be the biggest headwind for the commercial aircraft industry, but there are recent reports of supply chain stabilization and improvement. But I tell you what, we're not going to believe events. We'll see about that. You know, it seems like it's inconsistent. You know, some places may be better, some places may be not better.

But notwithstanding these ongoing supply chain constraints, many now believe that 2024 will be the year the commercial aircraft industry breaks out and ramps up production in earnest. You know, at the beginning of every year, calendar year, there's always the prognosticators and the gurus and stuff that have their bike reports, but I've read a number of them recently. You know, aerospace, analyst types are saying that, you know, this year may be the year that, commercial aircraft industry really breaks out and kind of gets past the supply chain constraints. We'll see about that, but I think there might be some reason to be optimistic. Let's talk about that. Let's go to slide 16. The recent impressive ramp-up of A320neo family aircraft deliveries. Now, this is not prognostication. These are facts.

So we'll get to that in slide 21 and 22, regarding that delivery ramp-up, is supportive of that view. Now, should we use the A320neo family aircraft deliveries as a proxy for commercial aircraft industry? I don't know, but considering that that program is expected to be the largest commercial aircraft program in the history of the universe, you know, maybe we should consider using it as a proxy. Now, military markets proxy for the, for the industry, you know, breaking out, let's call it, the commercial aircraft industry. Military markets. So the global demand for military and defense hardware, including missile, missile defense systems such as the PAC-3 missile. Again, we kind of biased. We talk about the programs we're on, quite high and elevated by the wars, extreme, tensions in the globe. Let's go on to slide 17.

Also, high level of interest in unmanned and potentially autonomous systems, such as the Kratos Valkyrie, you know? And what's going on here, I'm not, I'm not an expert, but I'm just wondering, you know, you got missiles, missile defense, drones. You know, maybe this is to avoid boots on the ground so we could do our wars without, you know, getting people in the middle of them. I know that's kind of a cynical way to look at it, but you probably have a more enlightened opinion than I do. The markets for military and defense hardware are also affected, and in some cases, constrained by international, political, and budgetary factors. You know, we read about that stuff every day.

In some cases, supply chain and labor constraints continue to limit the ability of military defense OEMs to meet the demand, the market demand for the hardware. A little picture of the Valkyrie here, which is nice. And the last item on this slide, we're on slide 17. December 17, 2023, was the 120th anniversary of the Wright brothers' first powered flight. So happy anniversary, aerospace industry. Let's go on to slide 18. Okay, you're familiar with this slide if you've listened to our other presentations. We go through this every quarter, and this just kind of give you context because GE Aviation programs are really important, and we talk about them. This is just background. We're not going to go through the programs.

We have a firm pricing LTA through 2029 with Middle River Aerostructure Systems, a sub of ST Engineering Aerospace. What is that? I don't get that. Because all these programs are GE Aviation programs, so what's going on here? Well, what's going on here is when we got in these programs, Middle River, MRAS, which is old, Martin and Glenn Martin Company in Baltimore, you know, then Lockheed Martin. Anyway, they were part of GE Aviation. So when we got these programs, they were part of GE Aviation. I don't, I remember about four or five years ago, I'm not sure, I remember, GE Aviation sold MRAS to ST Engineering Aerospace, which is a large Singapore aerospace company, but we're still supplying it to those GE Aviation programs.

Actually, the redundant factory, that was an agreement we reached with GE Aviation to build that redundant factory. They wanted their redundancy because they're, you know, kind of betting the farm with us being sole sourced on these programs, you know? I won't go through the programs. If you have any questions about them, let me know. Let's go on to slide 19. The first two items, again, programs, we're not going to go through them. Just let us, let me know or let us know if you have any questions. Third bullet, arrow item, MRAS qual of three Park proprietary film adhesive formulation product forms in progress. That's new. That's interesting and pretty great for Park. Park, MRAS LTA through 2029, recently amended to include the three Park film adhesive product forms.

So for composite bond and metal bond, that's really great for PARC. Life-of-program agreement requested by MRAS. Yeah, and STE, they both said, "Yeah, 29 is nice, but we, we need a commitment for longer than that." So that agreement is in progress. What's that agreement worth to PARC? I don't know. You tell me. You might... What is that? Is it slide 38 that has the Let me see if that's the slide. No, 30... Yeah, 38 has the analysis of the revenues, annual revenues for the GE Aviation programs. Life-of-program, I don't know. You tell me. You know, 2045, 2050. These airplane programs are just starting, so we're so lucky, so fortunate. The programs are on. Our new programs are going to go a long, long, long, long time. Very lucky.

The 747, that program ended, so that's sad, but the other programs we're on now have a long way to run. Slide 20. Okay, we're gonna go through some of the programs. We'll try to skip through some of this or skim over it because we cover it every quarter. Let's cover the high points. First of all, A320neo, that's the big dog, that's the big one, and that includes this whole A320neo family. Huge backlog, huge, 6,753 airplanes. That's a backlog. That doesn't include the all the airplanes that have been shipped. Airbus continues to say they're gonna be at 75 per month production and deliveries in 2026. Are they gonna make it there? Let's go on to slide 21. Let's think about that.

So how's Airbus doing so far with their planned A320neo family aircraft production ramp up? Pretty well, actually. According to reports, 73 deliveries in 20-- in December. Well, that's a lot. An average of 57 per month in Q4 of 2023. That's a lot. And 563 total in 23, in 20... Sorry, calendar year 2023. That's a lot. That's an average of 47 per month in calendar year 2023. Let's get some perspective. What's the history? 2018, you can see how, what's going on here. They're ramping up, then the pandemic. Let's talk about-- what do we talk about per month? So 2018, 32 per month, 2019, 47 per month, and then, oops, then we got the pandemic, 2020, 36, 2021, 38, and 2022, 43. Airbus said they wanted to maintain 40 through the pandemic.

They almost got there, a little bit light in 2021, but did, they did keep some production going. Good for them. Now, let's take a look at something else. So it was 453 in 2023. 561 was their big year before, sorry, 2019, with 561 was their big year before the pandemic. So we just eked out in 2023, 561, which is a big year. So that kind of says, you know, things are getting past the pandemic, notwithstanding little supply chain stuff and everything else, that's holding things back. And the other thing you want to look at is that it wasn't level at, at 47 per month through calendar 2023. 73 in December, 57 in the last quarter.

I would say, yeah, during the year, things were moving up, and we'll have to see how things work out, as we go forward. I think there's actually a comment about that. Let's go on to, slide 22. So in 2023, calendar 2023, for the first time since the beginning of the pandemic, Airbus was able to return to those A320neo family aircraft production and delivery rates to those pre-pandemic rates, a very high, what do you call, italics, I guess. A very key milestone and accomplishment for Airbus. Good for them! Now, this is what I was thinking about. There could be monthly ups and downs. There will be monthly ups and downs, for A320neo aircraft family deliveries. But it's quite apparent, at least to me anyway, that ramp is real and not going away.

You know, I wouldn't be surprised if the first couple of months of the 2024, I don't know anybody, I don't have any information, I'm just speculating. It could be a little light, but that's how it often is, because they, they push a lot of airplanes out at the end of the year. Clearly, based upon the huge backlog, though, Airbus would be producing these aircraft at a rate of 75 per month already, if not for supply chain constraints. And by the way, just FYI, according to reports, Airbus booked 257 new orders in December of 2023. That's a lot of new orders, and booked an unheard of 1,693 new A320 family aircraft orders in 2023. That's, those are just incredible numbers. We're so fortunate to be on that program.

Just luck, really, I guess. Slide 23. What about those engines, though, for the A320neo? Boy, we lead a charmed life, I'll tell you. So remember that there are two approved engines for the A320neo, the LEAP-1A and the Pratt 1100G GTF engine, and we only supply into the LEAP-1A and not to Pratt. This is, you know, I was talking about lead a charmed life, because the LEAP-1A market share has been hovering about 60% for the last, you know, couple of years. Let's go on to slide 24. Then what happened? That all changed. LEAP-1A has broken out as a clear market share winner for, the A320. According to this, December 2023 edition of Aero Engine News, that's our Bible, for, you know, a huge amount of data in this monthly, publication.

CFM LEAP-1A market share firm orders for A320neo aircraft family, 65.6% as of October 31. Well, how the heck did that happen? You know, the thing is, there's just so much ballast in that market share with over 12,000 firm engine orders between the two engines. How you, you know, and you were 60%, how the heck do you get to 65.6% in just a couple of months? It's incredible. At the delivery rate of 75 A320neo family aircraft a month, that 65.6% market share translates into 1,181 LEAP-1A engines per year. What's that worth to Park? Well, we'll talk about it on slide 38. We'll get there. Slide 25. So there are also currently 8,150 firm LEAP-1A engine orders.

That's a lot of engines. What are those orders worth to Park? Well, you know, look at that slide 38, but, you know, you probably say about $250 million. Now, there's a couple things that that's going to be deliveries past 2029, so that assumes that we're still in the program after that. You know, my guess is we will be, and I also guess that, you know, the pricing might go up a little bit after, you know, after 2030. So, but just kind of round ballpark numbers. Now, if you want to talk about life of programs at 2045, 2050, you can do that math. I'm not even going to go there. So what happened?

Why did the market share of firm engine orders shift so abruptly and dramatically in favor of the LEAP-1A engine? So we talked about this last time. We won't dwell on it too much. This is all in the news. You can read about it yourself. Serious issues with the Pratt 1100G engine. These have been extensively reported, so we're not going to cover them here again. So why don't we just go on to slide 26? The top item is actually a new one, so we'll talk about that. FAA just published a new proposed rule on December 11, 2023, requiring inspection of additional Pratt 1100G parts, which could be affected by the powder metal issues. That's kind of new news. What are the full implications? Hard to say. Will lead to further market share gains for LEAP-1A.

I don't know. What do you think? Meanwhile, just meanwhile, CFM is planning for induced upgraded components for LEAP-1A engine. You see what's going on here? Pratt is really struggling. You know, you have to feel sorry for them with a really difficult problem. You know, on the other hand, LEAP is kind of making improvements to their engine to actually improve durability. Let's go on to slide 27, please. We're continuing here on the update. So this is still on that A320 family, the A320XLR variant, spoke to be entered service, second quarter of 2024. That's pretty much around the corner. That's really nice. That's exciting for Park. That's good news. So COMAC 919. Let's just skip down to the last couple items.

They recently made its first flight outside mainland China, and we got to put in a parenthesis, Hong Kong. So I don't, I'm not sure that's considered mainland China. I think it might be, but anyway, it's news. Because, you know, these COMAC airplanes are thought of as mostly for the Chinese domestic market. They recently unveiled a stretched and shortened variant of the airplane, at least plans to, you know, produce them. So that's really exciting. So COMAC's not sitting still. They're doing more development work with this aircraft type. Let's go on to 28, another COMAC, Chinese COMAC aircraft, which is a regional jet. And last check item, COMAC recently delivered its first 2 ARJ21 converted freighter aircraft, which is nice. And COMAC hailed this as a solid step forward for China's aerospace sector.

Any history buffs, you know, does that sound like anything to you? You ever hear of the Great Leap Forward? Do you think that's a coincidence? I don't know. I have no idea. Just when I read that, I thought, well, it kind of sounds like the Great Leap Forward. If you don't know about that, you might want to look it up. Let's go on to slide 29. The 777X aircraft, yeah, this is an exciting program for Park, and it's starting to actually happen. We expect to ship approximately $2 million of materials for this program in calendar 2024. Boeing said that it'll be certified in 2025. They're building ahead, of course. And you know, this is important.

With the cancellation of the 747, A380, this 777X occupies unique space in long-haul, high payload capacity, wide-body aircraft market, and likely to continue to do that for a long, long time. Why is that? Because nobody's planning anything to compete against it. It could be a significant program for Park. And then lastly, we always talk about the legendary Boeing 747. Thank goodness for spares. Let's go on to slide 30. So we have a GE Aviation jet engine program, sales history, and a forecast estimate. So, the sales history, you know, about... Look at on the right-hand column, you know, Q1, $6.2 million, Q2, $3.1 million, Q3, $4.15 million. So Q2 and Q3 were those burn down quarters. Q4, we got booked $7.5 million.

So, so much for the burn down, I would say. $7.5 million. Go look through the quarters. Is there any $7.5 million quarters? I don't. I think there were a couple, you know, before the pandemic, you know, that were at that level, maybe two quarters, but you have to go back a little further in history. So goodbye, MRAS inventory burn down. I would say that's relatively good news for Park, and we predicted this, but we'll get to that in a minute, I guess. Slide 31. Yeah. Slides, the sharp drop-offs in Q2 and Q3, GE Aviation jet engine program sales, it's all about that burn down. The, MRAS, calendar year 2023 bill plan, that's their bill plan, not ours, translated into about $23 million of Park GE Aviation program sales. We covered this last time.

So what happened? You know, why were our sales less than that, you know, in Q2 and Q3? Well, we already told you the answer. That's in highlight at the bottom, the burn down explains the whole thing. Let's go on to slide 32. So will this kind of disruptive inventory burn down happen again? Oh, I think so. It likely will. It's happened before. It'll happen again. There may be some, likely will be some degree of quarter-to-quarter volatility in our GE program sales because of inventory management challenges. Maybe somewhat of a rollercoaster ride from time to time.

So we talked about this at some length in Q2, just talked about the aerospace industry in general, how it has this propensity to, you know, have inventory management challenges, you know, and we can't do anything about that. You know, if we decide to be a supplier to that industry, we have to work with it. You know, we can complain about all we want, but it's a total waste of time. We're happy to ride the quarter-to-quarter GE program sales rollercoaster and face the challenges presented by it, because to us, the overridingly important consideration is the long-term outlook for the GE program sales, as explained on slide 38.

But the rollercoaster ride does this volatility does place additional pressure on us at Park to be agile, nimble, and fast on our feet with our supply chain, inventory, and production management activities. You know, we've got to be able to respond quickly. And that's kind of our calling card at Park. That's what we like to do. Slide 33. So we're still on the burn down. Sorry, it's such a big deal, and we spend a lot of time on it, but where are we going with the burn down? Well, in our Q2 presentation, we predicted that the burn down would likely be completed in Q3, as that the Park inventory carried by MRAS will be normalized by the end of Q3. Based upon our bookings for Q4, that prediction was obviously correct. So we guessed right on that one.

One more consideration regarding inventory management. As a general matter, it's very important to avoid overcorrecting and overshooting, as doing so can create additional volatility with increasing sine wave amplitude and inventory swings. Now, in our Q2 presentation, we indicated this was a concern of ours, and if our concern proved to be well-founded, it could result in a significant spike in demand in Q4 and into Q into fiscal 2025. We told you that in our Q2 call. Let's go to 34. That, based upon our GE Aviation program booking for Q4, that concern was obviously well-founded. Our decision to ramp up our costs in Q3 in order to be prepared for Q4 and spike in demand was obviously the right decision for Park. You know,...

Funny, I, I remember, a few months ago, Mark said to me that he just got nervous, and I said: "What do you mean?" He said, "Well, you know, we try to track the inventory, and it seemed like the inventory is burned down a lot, and these programs are ramping." And he said, "Boy, you know, he's concerned there's going to be this spike, and we could get, you know, we could get overrun." And he was right. And obviously, we decided not to get overrun by increasing, by staffing up and building our up our costs in Q3, so we could be ready for Q4. So what do we think about all this? I know it sounds a little bit, you know, kind of, smart alecky, but we think it's mostly just noise and static.

We think the freight train, the juggernaut, is coming down the tracks at us 100 miles per hour. It can't be stopped. So we'll talk about it on slide 38. We better be ready, or we will be overrun, just like Mark was saying to me. Slide 35. Just FYI, the 2024 MRAS build plan, theirs, not ours, translates into $28 million of 2024 Park GE Aviation jet engine program sales. That's ours, that build plan is a year old, so I think they'll probably update that build plan soon. Let's see what happens. Maybe it'll be higher, I don't know. Let's go on to slide 36. So now let's talk about Park as a whole. We have the history just for, you know, for perspective, and you can see, Q1, Q2, Q3.

and, you know, you see how weak Q2 and Q3 were because the burn down, and other factors we described at the beginning of the presentation. What are we looking for Q4? Well, about $15 million-$16 million, remember, $7.5 million for GE Aviation programs. That would be about $7.5-$8.5 for non-GE Aviation. Talking sales and EBITDA, $3.2 million-$4 million. That's just doing the math, really. A lot of variability in EBITDA based upon which programs are active, that kind of thing, and the timing of when additional costs get legged in. But that's our, you know, the best guess we can give you. And then we talk about the total for the year, and that's just kind of adding up, the first three quarters plus the forecast for Q4.

So nothing but just doing the math there. Looking at the Q, sorry, 24 total compared to 23 total, the top line's about like 23, and the bottom line forecast about like 23. So, 24, we're kind of stuck in the mud, as compared to 23, but looking for that breakout that we were talking about, going forward. Slide 37. Following these are updated. Okay, we won't spend a lot of time with the preamble, preliminaries here, because we went through this for the last two quarters. This is our outlook. Very important stuff, very critical stuff for both GE Aviation programs and Park generally. So we think that the outlook is actually more important and meaningful than the quarterly forecast we gave you, even though we did give you a quarterly forecast. What's the timing for the outlook?

People always ask that. We don't know. We said the freight train is coming, can't be stopped, better be ready. I mean, the Airbus CEO said they're going to be at 26 in 2026, so I don't know. I mean, it's not. I'm not in a position to second-guess him. Why would I do that? Let's go on to slide 30... What is it? 38? Yeah, 38. So here's the juggernaut. This is the GE Aviation jet engine program, driving the outlook. I'm not going to go through it because we went through it. No, there's hardly any meaningful, there's no meaningful change, just a little kind of fine-tuning, but from Q2. The main thing we covered in Q2, I think, went through this, these, each program in detail during our Q2 call.

So if you want, you can go back and listen to that. But the main thing we're trying to convey is that this is, these forecasts are not aggressive. These are conservative. We went through each item, each program. The revenue per unit, we know that information. We have that from our customer. So the only question is, what do we assume in terms of engine units? And we went through the explanation of that in Q2, and like I said, we think they're pretty conservative. Ends up at $55 million based upon the assumptions that are listed below, which we will not go over. But you know, you can read them. If you have any questions about them, let us know. Slide 39. This is the outlook for all of PART, not just GE Aviation.

Sorry, we're running long, but we're almost there. And this is identical to the slide that we provided to you in Q2, which is really important, so we wanted to provide again, although there's no change. You know, the math is all explained in the footnotes. If you have any questions about it, just let us know. But we're saying the outlook is about $115 million sales and $36 million-$37 million EBITDA. But this is an outlook, as we say, it's not a forecast, because this does not include anything other than the programs that we're sole source qualified on, and assumption of a small increase in, you know, our non-GE Aviation sales baseline, which is $32 million in fiscal 2023.

So, we assume that'll go up to $40 million over the outlook period, which we think is actually kind of a walk in the park. I hope that doesn't sound arrogant, but that's how we look at it. So let's go on to, so yeah, slide 40 is just the footnotes for us in explaining the math, how we did it. Pretty straightforward. Slide 41. So these are examples of programs that are not taken into account in the outlook. Like I said, not a forecast, an outlook. Some of these programs will hit, some probably won't. Some will, I think, we just can't tell you which ones. But I do want to highlight, we're not going to go through them all because they're really the same as we covered in our Q2 presentation, except there's a new one.

Major new manufacturing project discussed in the following slide. Let's go into this one. This is actually a big deal, you know? Just recently came up. Major new manufacturing project initiative for Park, requested by a highly motivated, long-term, large customer. We believe the project has a high degree of likelihood to proceed. Why is that? Because there's a motivated customer that wants it to proceed. It's extremely confidential, so I wanted to tell you about it. We wanted to tell you about it because it's a big deal, but we can't tell you anything about it, anything about any details. But just to give you perspective, in order to do this, we need to build a new or purchase a new factory to for the project. Size, 30,000-50,000, probably closer to 50,000 sq ft.

Capital, estimated $6million-$10 million, an estimate. Fairly large workforce. That's the hardest part for us, you know. I won't give you the number, but it's a lot of people. Now, we're looking seriously at automation to reduce the size of the workforce, but that would increase the capital spending on automation. Slide 43. Preliminary estimate of revenues for the project, $20 million-$30 million per year range. This is not. We're not talking speculation. I wish I could tell you more, but I can't. We're not talking speculation about the revenue opportunity. There's lots and lots and lots of detail behind that. And it's probably more than 10 years, probably life of program, you know, again, you know, whatever, 20 years, 25 years. So it's a, it's a big thing for Park.

High priority, potentially very important project for Park and our customer. Let's go on to slide 44. A little bit of a change of pace here. We haven't talked about the James Webb Space Telescope for a little while. Revelations for the ages. Reminder, 21 of Park's proprietary SIGMA STRUTS are incorporated into the James Webb structure. James Webb, along with our SIGMA STRUTS, are established at the Lagrange 2 orbit point, located about 1 million miles from Earth. It's pretty far away. I don't know. I had to look it up, but I think light travels at 186,000 miles per second. Maybe you could look that up. I think that's it. But if you do the math, that's about 5 seconds, 5 light seconds away. You know, your light year is about 5 light seconds away.

In other words, it would take about 5 seconds for the electromagnetic signals and stuff like that, radio signals, to come back from our James Webb to the Earth. The James Webb recently spotted... This is just amazing stuff. I, you know, I kind of get chills even thinking about it. Spotted the oldest black hole ever seen, an ancient black hole with a mass of 1.6 million suns from 13 billion years ago. The James Webb spotted up this black hole in the center of the infant galaxy, G, G. I hope this is not supposed to be a cute thing. These astronomers are sometimes clever. I hope that's not supposed to be Gen Z, you know? Maybe it is. Gal- It's Galaxy Gen, GN-z11. That's only 440 million years after the birth of the universe. But here's something in bold.

It's a big, big, big thing. Black holes this magnitude are not supposed to have existed until much, much later in the development of the universe. So what's that about? Is the universe really 13.7 billion years old, or is it much older than that? 13.7, I'm no scientist. I don't know anything about this stuff, but I think scientists measure the age of the universe by expansion and extrapolating back, you know, how many years it took to get started and... But, let's go on to the next one, slide 45. Are our theories about star and galaxy formation correct or fundamentally flawed? Are modern cosmological theories about the universe and its origins correct or fundamentally flawed? And there's nothing more important than this, you know, our universe, how to get started.

Data and images, sorry, you know, facts are facts from the James Webb are turning modern cosmological science upside down and inside out. We thought we understood so much about the universe and its origins, but the James Webb is telling us we know so very little. Our theories are just not holding up. It is just beyond words and description, what it means for us at Park to be a very small part of the James Webb and its revelations for the ages. Let's go on to the last slide. Just quickly, this is little photos from our Park family holiday party celebration. The thing I want to tell you about is, this is actually, this is not a, like a meeting hall or something. This is our factory. You know, this is a factory floor.

If, if we didn't have all these tables here, forklifts and stuff would be going through there. See that floor? This is the original factory. This is 15 years old. It's not a new factory. See that floor? We don't clean the floor up for parties. It's the most beautiful factory I've ever been in. It's very special. So if you're ever in town, you want to come take a look, just let us know. We'll be happy to show you around. Okay, that covers our presentation, operator. So if there are any questions, I'd be happy to take them.

Operator (participant)

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press Star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue, and you may press Star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. One moment, please, while we pull for questions. Thank you. Our first question comes from the line of Nick Ripostella with NR Management. Please proceed with your question.

Nick Ripostella (Independent Investment Management)

... Good evening, and Happy New Year, Brian, and to the whole team there. I know you can't get into specifics of this potential new program, but might you be able just to say something about the math behind it in terms of, you know, the kind of rate of return profile that something like that would have? Or, you know, can we just assume it would be similar to, you know, the existing profile? And,

Brian Shore (Chairman and CEO)

Mm.

Nick Ripostella (Independent Investment Management)

Yeah, do the best you can. You know, look, when you say, talk about the company and you use the word conservative, I trust you. I can take that to the bank, so you could be conservative. But the second question is, you know, obviously, Park has a very bright future, and as you've said in the past, you paid your dues. So concerning how much cash do you think the company really wants to keep on the balance sheet, you know, going forward? What do you think? What's your viewpoint on that?

Brian Shore (Chairman and CEO)

That's a tougher one. The first one, the margins are quite good, on this, the new project, quite good, and maybe better than our existing margins, you know. Certainly not worse, maybe better than our existing margins, so quite good. And by the way, Happy, Happy New Year, Nick. Thank you for your questions. So I, hopefully, that, you know, gives you a little perspective. We've-- there's a lot of information. This is not just kind of like, starting. We have lots of information, a lot of numbers that have been crunched, so we know a lot about this project. So when I say the margins look quite good, that's not just, you know, kind of off the top of my head stuff. How much cash do we want to keep?

Well, that's why I mentioned we got the $9.3 million, but we still got to pay the IRS for that, you know, repatriation and stuff. Well, I don't know. I mean, good question. It's something we think about, the board talks about all the time. It's really nice to have cash so that if we want to do this project, we say $6 million-$10 million, but let's say we spend more money in automation. Let's say it's more than that. You know, it's nice to have to, nice to be able to say, "Yes, we'll do it," rather than, "Okay, where do we get the money for it?" You know? And the customer that approached us, they know that, too.

We're a public company, so they know that if we both agree to do it, that we're not gonna come back to them and say, "Oh, sorry, we don't have the money," you know? So I don't know. That's a good question, Nick. I mean, I'm not really gonna say, "Oh, we got way too much more cash than we'd like to have." When we had $150 million or so, I would have said that, but at this point, yeah. I mean, it's really nice to have the cash we have, but I wouldn't say, "Oh, my God, we have so much excess cash." So, I don't know if that helps, but that's kind of an off the top of my head, off the cuff answer. It is something we talk about at the board level quite a bit, though.

Nick Ripostella (Independent Investment Management)

Okay, well, can I just ask another question?

Brian Shore (Chairman and CEO)

Sure.

Nick Ripostella (Independent Investment Management)

I know, just, you know, I mean, obviously, you know, with what's going on there, you know, you're gonna start generating cash, you know, hopefully in the next couple of years. So, but, you know, even after you pay the taxes and things like that, I mean, it's just, you know, it's obviously is nice. We like that you run the company very conservative like that, but, you know, with programs like this, you know, I'm just trying to feel it out a little bit, but I understand where you're coming from. Thank you.

Brian Shore (Chairman and CEO)

Yeah, yeah, good point. It's not a static number. We, you know, you're right, we expect to generate cash, so it's something that, you know, really, we have to evaluate on an, you know, ongoing basis, Nick, I think. It's just, it's nice to, you know, to have something so that when opportunities present themselves, we can go after them. You know, we never thought of, think of buying stock, buying back stock as our biggest priority, but we'll do that as well if the, you know, if the price is right and the opportunity presents itself. So it's nice to have cash available for that as well. You know, I, these companies, they go borrow money to buy back stock. It's like, okay, that's an interesting way of doing business, but it's not our way of doing business.

So, yeah, we plan to be around a long time. We're not playing for a couple of years and playing games with our, you know, what you call financial engineering stuff. But so... Okay. Does that help, or you any other question follow-up questions?

Nick Ripostella (Independent Investment Management)

Yes. Thank you so much,

Brian Shore (Chairman and CEO)

Okay.

Nick Ripostella (Independent Investment Management)

Best of luck for the rest of the year and next year.

Brian Shore (Chairman and CEO)

Thank you very much, Nick. Happy New Year to you and your family.

Nick Ripostella (Independent Investment Management)

Okay. Well, thanks.

Operator (participant)

Thank you. There are no further questions at this time, and I would like to turn the floor back over to Mr. Brian Shore for closing comments.

Brian Shore (Chairman and CEO)

Thank you, operator, and thank you, everybody, for listening in. It was really nice to be able to share, you know, what's going on at Park with you. Again, wish you and your family a Happy New Year. That comes from both Matt and me and Martina, Donna, all of us. And we'll be around. If you have any questions, feel free to give us a call. Happy to talk to you. So you have a good day, and we'll talk to you soon. Goodbye.

Operator (participant)

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