Park Aerospace Corp. (NYSE:PKE) Q2 2024 Earnings Call Transcript

Let’s go on to Slide 30. One more consideration regarding inventory management. As a general matter, we kind of touched on this already, is very important to avoid overcorrecting, as doing so kind of overshooting, can create additional volatility with increasing sine wave amplitudes and inventory swings like oscillations. So you probably know what that means. Sine waves that kind of go up and down, you’ve seen that. This is a concern of ours and others, we’re not the only ones, and I won’t mention who, but we’re not alone that’s concerned. If our concerns are well found then it could result in a significant spike in demand in our Q4 and into 2025. So that shouldn’t be a real surprise. We shall see. But in the meantime, we’re keeping our antenna up and our to the ground.

Let’s go on to Slide 31. This is kind of I think, kind of summing it up for us – for me anyway. In any event, what do we think about all this? What do we think about all of this? We think mostly short-term noise is static. Now we – like I said, we have to deal with – from a management perspective, the oscillations, the up and downs. But in terms of what matters to Park, in the long term, mostly short-term noise is static, we think the freight train, the “Juggernaut”, is coming down the tracks at us 100 miles per hour and it cannot be stopped. You got to look on Slide 34, we’re not fooling around here. We think we better be ready or we too will be overrun. That’s what we think about it. So let’s go on to Slide 32. Okay. Financial outlook.

How are we doing with time? Yes. Financial outlook for Park and GE Program is a little bit of an update. Okay. Because of uncertainty with Q3, because the burn down. In Q4, because they’ve just spiked. Very difficult for us to provide a meaningful forecast for Q3 and Q4. We’re not going to – what’s the point of guessing? We’re not going to – we’re just doing you a disservice. When will we be able to resume and provide a quarterly long-term forecast estimates? I’m not sure, we’ll definitely keep you posted. But we were able to provide the following updated revenue outlook for GE Aviation Programs and financial outlook for Park generally. And we believe the GE Aviation Programs and Park outlooks are much more meaningful and significant than quarterly forecast estimates because the quarters go up and down because who knows why, but the key thing to us is, what’s the long term outlook?

What are the long-term prospects? That’s more meaningful for us and that we have a better feel for as well. What’s the timing for the outlook? We have the outlook and one year to – what people say, what year is that? It’s like, we’re not sure what year it is. I mean, if the CEO of Airbus says that you’re going to be at 75 A320neos in 2026. What am I supposed to say? No, he’s wrong? I don’t know. But I mean – so we don’t know, why play the guessing game? I’m not sure. But as I said, and this is a key thing for Park, the freight train is coming, it can’t be stopped and we better be ready. And Slide 33. These are the assumptions we use. I won’t go through them. This is the same assumptions that we shared with you last quarter. Going to Slide 34.

I’m going to stop here, I know we’re running late. But this slide requires a little bit more discussion. See the $55 million number? Is that an aggressive number? Well, let’s go through it, let’s go through the math. A320neo, 1,188, remember, we talked about that number before. We’re just doing the math. 75 per month, 66% market share. We’re not assuming that market share is going to go up. It might. We’re not assuming that. And we know what the revenue per unit is. There’s $36 million per year from the A320neo. This is assuming 2025 to 2029, 2025, 2029 pricing. That’s for 20. That’s for the Global 7500, 8000 aircraft. 90 airplanes? That’s the low end of the build plan. We have low numbers and high numbers from the MRAS for the build plan. That’s the low end.