Daniel Baldini: Hi, good morning. Thanks for taking my question. I’m trying — this is sort of a broad question. I’m trying to understand what portion of the demand for your products has been destroyed by the pandemic and related economic chaos and what’s just been deferred? And for me, maybe the way to think about it is to go back basically three years ago, right before the pandemic started. And you went to the Needham conference. And in your presentation, you had a long term for what you call the long-term forecast estimate. And you had sales growing over the four year period to $94 million to $100 million for fiscal year ’24. Now if I look at — if I take your nine months numbers and add your estimate for the fourth quarter and then apply the breakdowns that just for the nine months, it seems to me that your commercial business is back to pre-pandemic levels and your military business is back to pre-pandemic levels.
But the business is off by I don’t know — if it’s maybe half or a little bit more than half of what it was. So if you say, if I were to argue that the demand has simply been postponed by, say three years, do you think that you could have $94 million to $100 million of revenue three years from now in fiscal year ’27? And if not, what’s sort of changed over this three year period about your sort of outlook for the potential?
Brian Shore: Okay. Well, thank you, Daniel. That’s a good question. As I’ve said, we’re not — we don’t feel comfortable providing a new long-term forecast because all the short-term uncertainty. As explained, we think the outlook is good for Park. But it’s a really good question, like how much has been deferred. You used the term destroy in your question. I’m not aware of any programs that were destroyed, but a lot deferred. And we’re not quite back to where we were. I think in the pre-pandemic year, our sales were $60 million. We’re not quite at that level yet. And…
Daniel Baldini: The differences accounted all for, as far as I estimate, this big drop-off in business.
Brian Shore: Yes, I agree. So for example, I mentioned that the A320neo program was producing at 63 airplanes per month before the pandemic. And the number I heard for calendar ’22 was only 41 per month. Now they’re up to 50, maybe a little bit more. They’re trying to claw their way back. but still quite a bit less than it was pre-pandemic. And that’s probably a good kind of metric for other programs, especially in the commercial area. Military is a little different because it adds a different kind of different drivers, different dynamics, I would say. So we just want to say we’re going to shift everything three years. I don’t think we’re quite prepared to do that because of so much uncertainty. But the concept it doesn’t make sense because I’m not aware of any programs that just went away and just died.
Well, I shouldn’t say that, the 747. That was probably a victim of the pandemic. And that was never a major program because it’s already pretty small. They were only doing about six airplanes per year, 24 engines. So I think I mentioned that was probably a little under $2 million per year for us. So that’s true. The 747 that went away and some people would argue maybe would have went on its way anyway, but who knows. But it’s probably a very few examples of that. Probably mostly things were deferred and not quite back to where they were. And the A320 program, like I said is a really good example of it that not anywhere close to back to where it was now. That’s not Airbus’ choice. They have lots and lots of orders. They like their production rates to be up to over 60% at this point but just a lot of — they’re struggling to get there.
And the big issue is supply chain, supply chain. Well, we talked about what happened the pandemic occurred, it was really Armageddon. I mean it was very frightening times because we didn’t know what’s going to happen. Not only it was bad what had happened in terms of the contraction in the industry, but I mean people are really talking about the world coming to an end. So what did companies do? They slashed and slashed and slashed, just to survive. And then they start coming back a lot more quickly than expected, and they’re just totally beyond the power curve and have not caught up yet. I think the Airbus guy, the CEO said, maybe by the beginning of 2024, the supply chain will be back in shape and have caught up. But I mean, I don’t want to be disrespectful, but he keeps pushing that date back because he’s said other predictions that supply chain would be back in kind of normal shape earlier than that.
So I’m rambling here a little bit. I think, Park, just one other comment, maybe part of our ability to get back those numbers are can be based upon these programs, getting back to where they’re supposed to get to. And then these are the things like these other opportunities like ADL, for example, the PAC-3 I mean I don’t know where that’s going, but it seems like everybody in their brother and sister launch PAC-3 missiles these days. So it’s hard to even quantify what the upside is there. I just read the stuff you could read about this country, that country, they’re all adding PAC-3 missiles. And AFP, that would be another example of a long-term strategic example of additional revenue, this joint venture that we’re talking about. Another example of significant upside revenue.
But I think when we gave those forecasts, Daniel, I think at that point we said, we’re not looking at kind of — we’re looking at our current business, our current business is growing organically rather than acquisitions and large joint ventures. So maybe I should take the potential joint venture out of the equation for this discussion.
Daniel Baldini: So let me follow up. Last quarter, you had a slide where you noted that assuming a 59.5% leap market share, and 75 per month build for the A320neo, that represented approximately $32.5 million per year of revenue to Park starting in 2025. And I’m just curious, if you can remember back three years ago when you were making your forecast for the business with the LEAP engine, did you imagine that it would grow to a larger number than $32.5 million? Or is $32.5 million sort of what you’ve been expecting all along?
Brian Shore: For the LEAP engine. I don’t remember exactly what we were thinking about when we did that long-term forecast. But I guess I would say that I’d be surprised that long-term forecast contemplated a rate of over 75 per month. That would be surprising. So the dynamic has changed. I mean we talked about this over the last few quarters. This is my opinion again, but not completely because Airbus has been pretty vocal about this. They’re on a mission. They’re in a mission, single aisle to do what, to make Boeing a second-tier supplier. They see an opportunity, they’re going forward. They’re trying to be aggressive as possible. They feel that Boeing has been weakened, so they want to take advantage of it. So they want to emerge from this whole thing where I don’t think they’re thinking of putting Boeing on a business where the single-aisle offering from Boeing, the MAX is really much less than the A320neo.
And we talked about the XLR. That was something that was not on the table. We treated that long term forecast three or four years ago. Boeing doesn’t have a response to the XLR. They said they’re not going to develop a new airplane in this decade. So I think that’s a new dynamic which partly was caused by the actions with the MAX and then the pandemic, which makes Airbus even more aggressive in their mindset than they were previously. So I’m just rambling here a little bit, if you don’t mind, but I doubt we’d be contemplating more than 75 per month, even three or four years ago. And just to complete the thing about what that’s worth. The reason that we gave you the revenue per engine is so you could figure it out. We provide you the market share that LEAP has as compared to Pratt.
And we tell you that the people at Airbus are still talking about per month by 2025. But you read the stuff, same stuff I do, is 2025 a realistic time frame? Some people would say maybe it’s not. Although Airbus is not back of off that but I guess I would just add one thing, which is that in my opinion, is Airbus will get there. And maybe people could argue maybe it won’t be 2025. But my opinion is they’ll get there. They’re highly motivated to get there, highly motivated.
