Good morning. My name is Doug, and I will be your conference operator today. At this time, I would like to welcome everyone to the Park Aerospace Corp. Third Quarter Fiscal Year '23 Earnings Release Conference Call and Investor Presentation [Operator Instructions]. At this time, I would like to turn today's call over to Mr.

Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference..

Thank you, operator. This is Brian. Welcome everybody to our third quarter conference call. Happy New Year. With me, as usual, as always, Matt Farabaugh, our CFO. So we announced our earnings this morning.

In the earnings announcement there also are instructions as how to access the presentation, either view our webcast or through our website, you want to have that up in front of you to make the call more meaningful of course. Just one note, I don't want you to freak out too much about the length of the presentation. I think it's like 55 slides.

But what we did is we incorporated a number of slides from the prior presentation, Q2 and even Q1 for context and perspective. So the third quarter presentation stands on its own. You have to go back and start, check in the second quarter or first quarter presentation to get the full picture.

But those items that we just -- that we carried over, pretty much intact. We'll probably skip over at least skim over. So it's a lot of slides, but I think we'll be able to move through it relatively quickly. And when I say that, it's probably 45 minutes, but it's not going to -- we're not going to go through every slide to cover that.

So of course, when we're done going to go through the presentation, Matt and I will be happy to answer your questions. And I think that's it. So why don't we get started. Here we go. So let's move on to Slide 2, our forward-looking disclaimer language. If you have any questions about that language, please let us know. Slide 3 is our table content.

The presentation that we're about to go through and then the supplementary financial information, that's Appendix 1. We're not going to go through that either during the presentation. But if you have questions about it, please let us know, of course. Slide 4, we will slowdown a little bit for Slide 4. This is the earnings results, at least high level.

If you look at the right-hand column, these are quarterly results, of course. And highlighted in yellow, we have Q3 sales, $13.867 million. Gross profit, easy number to remember, $4.444 million. Gross margin, 32%, which we like to be higher. But as we always said, we get real unhappy when it gets going below 30%.

If you look at Q2, it actually did go below 30%. And we have a couple of quarters where it's gone below 30%. Now you go back to the fiscal year '21 and that was the beginning of pandemic. So we know a number of quarters where the margins were lower. So adjusted EBITDA, $3.321 million, EBITDA percentage 29.3% [ph].

What do we say about Q2, during our sorry -- what did we say about Q3, the current quarter during our Q2 investor call, what did we say about it? We said our sales estimate was $13.25 million to $13.75 million. So we came in just a little tad above the top of the range there. And then our adjusted EBITDA estimate $3 million to $3.5 million.

The adjusted EBITDA, as I said is $3.321 million, so kind of in the middle of the range for EBITDA. I'll just remind you briefly about our forecast philosophy. We tend to kind of remind you almost every quarter our forecast philosophy, when we give you a forecast, we're saying to you, this is what we think will happen.

We don't play what we consider to be a game of giving you a low number that we can beat and then be heroes. That's not what we're doing. And our employees, they have the same targets. So these are real objectives for us. And they're not easy objectives.

These are again, we're telling you what we think will happen, assuming that we do what we normally do, is work very hard to make the numbers. So I just want to mention that to you. So when we make our numbers, the fact that we gave you a number that was in our forecast, the prior quarter that was low, so it was beat to call, I guess in Wall Street.

That's not something -- we think it's just kind of a waste of your time and our time to play that game. The other thing is that we have -- when people do that, I know most people do, to us they're not really being honest with you. They tell you this is what they think is going to happen. They don't really believe it. And that's not for us.

So we're not judging others. We're just telling you, reminding you of our philosophy. Let's go on to Slide 5.

An outstanding job by Park's people to exceed by just a little bit our Q3 sales estimate and to make our Q3 EBITDA estimate, especially considering significant challenges with supply chain disruptions, freight disruptions, unreliability, staffing shortages. It was not easy to make those numbers.

And total missed shipments in Q3, approximately $650,000. We're still struggling with these things. Those three checked items are the reason for the missed shipments in Q3 that hopefully will carry over to Q4. Factors which affected our margins in Q3.

So we're going to go into the next page, is a bunch of factors, a number of factors we'll be talking about. So far, we're talking about top line in terms of how much we -- the $650,000 we missed top line. Now let's talk about bottom line. Let's go on to Slide 6. Significant inflation. That's not going away or abated yet, not for us anyway.

Raw material costs, shipping supplies, other supplies, utilities, freight in, freight out, people costs, you name it, probably more expensive. Some of the increased costs were passed through to our customers in Q3 and form of selling price increases, but not all. Why is that? First item is the lag effect. And so we honor our commitments on our POs.

Some companies don't do that. Some of our suppliers surprisingly haven't done that. We're going to confirm PO and then we're going to go ahead and confirm that PO with our customer based upon the expectation of raw material costs.

And in the middle of the process, we are told that our cost is going up, even though there's a PO that we have from our supplier. So we get burned with that. But we don't do that. We live up to our commitment -- it's not even a discussion, it's not a great area. We make a commitment, we live up to it. So there's a lag effect.

So we need to wait until the next time we quote this customer in order to take into account the increased costs. And the other thing is, forget about our suppliers for a second, just the other costs are going up. They haven't gone up very quickly. And people talk about inflation moderating. We don't see that. Sometimes it's hard to keep up.

We anticipate a little inflation when we do our quoting, but sometimes it gets away from us. So we get behind the power curve. But we just -- we live up to our commitments. So that's a lag effect. We'll wait until the next time we quote in order to take into account the inflation factors.

And then the other factor is LTA pricing with certain customers like that big one MRAS which we talk about a lot of these presentations. We have long-term pricing, fixed pricing. It could be subject to fixed adjustments, but it's not often based upon inflation factors. So that's also an issue. And inflation is really a burden for us.

It's really becoming a burden for us. And our people, I think, are doing a pretty special job is finding ways to overcome that burden because there's a real burden. It's not just kind of a rounding error kind of burden. It's a real burden and it's something that we live with every day. And we continue to live with.

We are not sure when it's going to go away. Like I said, people say it's moderating. We don't see it in our little world. Let's go on to Slide 7. Still talking about margins, what happened -- not what happened on our margins, but things that impacted our margins, let's put it that way. Somewhat lower margin product mix in Q3 than expected.

So why did we not fully anticipate this in our planning? When we gave you a forecast for Q3 back when we did our Q2 announcement, why don't we anticipate the product mix? And my comment is, I think the same comment we gave you last time, planning is interesting in the world of supply chain chaos. So we have a nice plan. It's great.

But so we put the plan in the drawer, then the chaos happens because of supply chain disruptions and freight disruptions. Whatever we plan is nice, but it's not what we're able to do. We have to shuffle. We have to move things around. We have to scramble. We have to make things happen.

That's the Herculean effort that's involved to make our numbers, to make our quarters because if we just kind of went as planned, they would not work out too well. And then Mike Tyson, everyone who has -- everyone has a plan so they can punch them out.

I think it speaks to us, because we have a plan, but almost immediately after the plan is put in the drawer, the world changes on us and a lot. This is not normal. I mean, things always change a little bit, but changed on us a lot.

So it's very difficult to anticipate exactly what we're going to sell in any quarter and that's why it is difficult to anticipate the product mix exactly in terms of margins. What we plan is good, but we end up actually selling during the quarter may not be what we planned. And in fact, it has been up in what we planned.

Supply chain disruptions continue to cause significant efficiencies in our manufacturing operations. If you know people that run the manufacturing operations, one of the things they really like the best is to be building to plan the manufacturing operation with some kind of predictability.

And when you have to scramble and adjust and move things around, it makes the manufacturing operation very inefficient. Again, this is another thing that our people had overcome. They did an outstanding job in my opinion of overcoming it.

But at the end of the day, notwithstanding all the obstacles, challenges and difficulties our great Park people pulled together to get the job done to make our Q3 numbers. Each person, each Park person received a quarterly bonus, our Q3 quarterly bonus of $200, not in thousands.

They didn't get $200,000, they got $200 for his or her outstanding job under very challenging circumstances. Let's continue to Slide 8. Slide 8, we won't discuss very much, but this is a slide that we provide in our presentations for historical context and reference. Any questions about the annual -- historical annual results, let us know.

Let's go on to Slide 9, just to save a little time here. Park's balance sheet, cash, cash dividend history and recent share buyback authorization. We'll skip through some of this stuff. One of our key investors recommended we cover it to me. We cover this every quarter. I thought it was a good idea. So we're doing that. Some of the stuff is not that newsy.

It's kind of going over things we covered before. Let's see our reported cash was $103.3 million in Q3. What's our investment philosophy? We invest in highly secure liquid securities, such as treasuries, governments, high-grade commercial paper. We don't take any credit risk. We do take interest rate risk because look our average maturity is 21 months.

So interest rates spiking up, you don't have, because that means the value of the investment at least, temporarily ends up going down. Our practice, by the way, is to hold our investment to maturity, but the value of them on accrued basis is going to be depressed if interest rates are going up, which they happen, of course.

We report this is how reporting is done mark-to-market. So it's not the investment value, it's the market value of our securities and investments that are reported to you with that $103.3 million. Just so you know, in case I put it that way, the amortized cost basis of our cash and marketable securities as of the end of Q3 was $109.2 million.

I just want you to have that information and you figure out, you decide what you think is a more relevant number. If we hold these securities to maturity, which has been our practice, we'd probably get closer to about $109 million. When these securities mature, you got a 21-month average maturity, but the present value of $103.3 million.

The other reason I want you to know that is in case you're wondering, what happen to our cash, well, it's like the cash has been -- we're not spending the cash recklessly. The value of the cash for reporting purposes is affected by interest rates. Again, we don't take any credit risk. We just take interest rate risk.

So we have an average of 21 months, and that means we're exposed to interest rate fluctuations. Let's go on to Slide 10. Any more questions about that, please call Matt later and ask them because that's about as much as I can explain about how we report our cash. Slide 10.

We've got about maybe $13 million of spend on, especially the installment tax payments. So again we'd like to share that with you because if you're thinking about how much cash does Park really have, that's relevant. This is a liability we have.

It's on our books, but we still have to pay the IRS over the next three years or something like that, that $12.6 million. Cash dividends, every quarter we cover this. Let's go to the last check item. Park has paid $558 million now in cash dividends since the beginning of 2005.

And I'll give you my comment that I always give you, which is that that's a hell a lot of money for a small company like Park, $558 million cash dividend. Let's go on to Slide 11. Share repurchase authorization. This has been kind of a hot topic of late.

We announced in May 23, 2022 that our Board authorized a purchase of 1.5 million shares of companies -- of our Park stock, common stock. And did we purchase anything in Q3? No, we didn't purchase anything but not for not trying. So maybe the market was making us an offer that we couldn't refuse.

Well, we've been in blackout since middle of November, but during the Q3 period where we were not in the blackout, remember, stock went down to like, I don't know, $10.11 or something like that. It was trading in the tens for a little while than they have. At that point, we felt the market might be making us an offer we couldn't refuse.

I told you the last time, we don't think it's our job to buy stock. We think it's your job to buy stock, your job to decide whether you want to buy stock or not. We don't think it's really our principal job. Our principal job is what? Do everything within our power to enhance the fundamental value of the company. That's what we're working every day.

We're not market traders. So we're not too excited about buying 5,000 or 10,000 shares a day. It seems kind of like suddenly you waste your time in petty. But when the stock was tuned to that level, we felt maybe the market was making an offer we couldn't refuse. Worked through an [ph] amount of buyback. They're doing a great job.

If you ever know somebody who wants to do a buyback program I'd recommend them without reservation. And we were looking for blocks and big ones, but we didn't find anything. And we're told that the institutions are more really all buyers, not sellers. So we couldn't find anything.

And then if you remember, the stock started to move away from us up to $11, $12, $13, $14. At that point we backed out because we don't want to compete against actual outside buyers who are buying the stock. I just want you to know that I'm not saying the price here. We're not saying that the price goes down to $10.5 we will be back in the market.

That's for us to know, and you not to know this. That's -- we will discuss what we will do in the future. I just want to give you the facts as to what happened in the past, all right? So for your perspective.

Last item with interest rates rising, era of cheap and easy money coming to an end, we hope with Park's hard-earned money finally would be worth something, maybe we hope so. Let's go on item, Slide 12, rather. This is -- we cover this every quarter. Let's just go through it. AAE Aerospace. That's the MK125 warhead with a standard missile 2, SM 2.

That's a really nice program. I like being on that program. Let's see in the next Kratos Defense, well, you can see the Kratos Valkyrie. We're really very pleased being in that program. It's a really exciting program. We love working with Kratos also.

And I don't know if you saw it, but just recently announced that they did a new deal with Kratos with the navy for a couple of Valkyrie aircraft. So that's exciting for us anyway. Lockheed Martin, well, that's secret program. We're not allowed to talk about it. So we can't give you pictures or anything else. But they are in the top 5.

So we can tell you they were top 5 in Q3, and that's what we can tell you with that. And Middle River, yes, we know who they are, MRAS, we call them. And that's the like the Comac 919 with the LEAP-1C engines. And then Nordam, bottom right, the Bombardier Global 8000 with the Passport 20 engines.

Actually, MRAS is on that program as well as Nordam, but we're choosing to focus on Nordam this time for the Bombardier Global 8000. Let's keep going. Slide 13, our pie charts. I guess what I would high level of interest is if you look at fiscal '22 and fiscal '23 first nine months, boy, it sure looks the same, doesn't it, hardly any change at all.

I mean commercial is actually the exact same percentage. So it seems like the pie chart kind of break segmentation is stabilizing more or less at these levels, at least for now. Look at fiscal '21, that was that pandemic year, let's call it, and commercial was way, way off.

Remember, maybe you do remember, the airplanes being flown empty, remember that? Okay. Let's go on to Slide 14. Park loves niche military aerospace programs. This is a slide we always do. This is -- Donna does the presentation, he does a great job, and Donna works over the holidays and everything. It's really great duty by work by Donna.

Elena is the one who comes up with the programs for the Park niche military aerospace slide. So I want to give her some shot at it as well. What do we have here, the ASTER 30 missile, those are blades, the Predator Radome materials, the Growler Radome, structures materials and the Poseidon structured materials.

When you look at the pie chart, rocket nozzles, drones, Radomes, I would all consider those all to be niche markets for us. And we focus really on niche markets more than commoditized markets in commercial and military, especially military. Okay, so let's go on to Slide 15. Military markets.

So not every slide we have is happy slide, but that's not what we're doing here. We're just trying to tell you what we think. The new world order, the sea change, the war in Europe grinds on. Many of the governments seem to be willing and maybe even eager to continue to sponsor and fund the war with military hardware and equipment and other things.

And Asia is not a happy place either these days. There's now open talk about the possibility of nuclear war. You mean like the end of civilization on earth nuclear war. Is that the kind of the nuclear war we're talking about? Elon Musk wants to establish colonies on Mars to preserve human race in case we do not make it here on earth. You better hurry.

This is a joke and not for us anyway. The bottom line for us is that we hope, we sincerely hope the warring nations find a way to end their war and stop the killing soon. What a waste of life.

But even if they do, we believe the aggressive military buildups will likely continue for a while because there's so much ill will, fear and distrust in the world now. Let's go into Slide 16. Like I said, not every slide's a happy slide, but that's not our job. Our job is, I think, to tell you what we think.

Slide 16, not surprisingly, there's currently much emphasis in many parts of the world, on aggressively expanding military budgets and spending in the U.S. and foreign countries and also not surprisingly, missile defense systems, including the PAC-3 Patriot missile. One of the key areas of emphasis for increased defense spending.

That's probably in a shocker in the circumstances, the missile defense systems to be very important. And this is like the preeminent missile defense system, I think, for -- at least for a lot of initial systems, the PAC-3 I'm talking about. Remember, the Patriot missile that was in the first Gulf War back in the early '90s.

Well, this is obviously next-generation. There's multiple generations after it, but it's been around for a while, actually. On Slide 17, Park supports the PAC-3 missile defense system with specially ablative composite materials. And our ablative composite materials are sole-source qualified in that program.

Japan, South Korea, Taiwan, Germany, Switzerland, Poland, Netherlands, Romania are buying PAC-3 missile systems or upgrading systems. I think next quarter, we probably want to just give you a list of countries that are not buying the -- or not using the PAC-3 missile system. And during President Zelensky's visit to Washington, the U.S.

committed to providing PAC-3 missile systems to Ukraine. That's a big thing because they've been asking it for a long time. So that's like the big gohona [ph] finally. Ukraine gets the PAC-3 missile system.

So the last item on 17, Slide 17, we previously discussed we are getting a lot of indications about increased demands for ablative materials, and this RAYCARB C2B product to support the PAC-3 missile system and other missile systems. Let's go on to Slide 18.

So just the first item, the check item, just kind of -- we're just updating you, we gave you prior indications on this number. As an update, Park is currently forecasting total fiscal '23 sales of ablative materials and RAYCARB C2B product to be approximately $7.5 million.

So again, we're just doing that because we've given you indications in Q1 and Q2 when we want to update that indication. Serious supply chain and inventory management challenges continue to be potential significant strength in the pace of the global military build-ups. So why don't we continue? Let's go on to Slide 19.

So what I think we'll do here, just to save time, this is one of the examples of -- this is an example of what I was discussing during the introductory comments before starting the presentation. This section of this presentation was included in our Q2 presentation. So we'll just skim over it.

We're not going to take the time to go over in detail but I want you to have it. So that, like I said, you have one stop shopping. The Q3 presentation is holistic. You don't have to go looking around for prior presentations to figure out what we're talking about. Just on Slide 19, commercial aviation industry continues it's strong recovery.

Let's go to Slide 20 quickly. They're watch items at the top here. We talked about these before. They haven't gone away. So important watch items. And the big question now at the bottom of the slide is if the commercial aviation industry falters, what will the commercial aircraft industry do, how will they respond.

In our opinion, whether you're talking about Boeing or Airbus, the answer might be quite different. Let's go on to Slide 21. And the commercial aircraft industry is facing this kind of same kind of challenges everybody is facing at the top of the page. Interesting wrinkle is that international travel is recovering more quickly than people thought.

And that's good news for the wide bodies. Go on that top of Slide 22, and that includes the Boeing 777X aircraft, which we'll discuss in more detail later on in the presentation.

And silver lining, just to go over this quickly, again as jet fuel prices increase, that gives the airlines more incentive to switch off their older legacy gas-guzzling aircraft for the more modern fuel-efficient airplanes.

They'll do it earlier than they originally planned as they have math, they have their own formulas and stuff like that, every airline does. It's not that complicated. It's all numbers. But as the fuel price goes up, that's a big variable. That affects the equation, and that means, okay now we're going to switch out our older airplanes earlier.

So that's good news if you're supplying in to the new airplanes. Slide 23, GE Aviation, jet engine programs. We're not going to go over this in great detail. This slide, we include in every presentation with some minor modifications. Firm pricing LTA with a requirement contract from '19 to '29 with Middle River Aerostructure Systems.

We call them MRAS, a subsidiary of ST Engineering Aerospace, which is a Singapore company. So all these programs here are GE Aviation programs. You're probably wondering, well, what does it have to do with Middle River, ST Engineering. Well, GE Aviation sold Middle River, MRAS, ST Engineering a few years ago.

All these programs date back to when MRAS was owned by GE Aviation. That's the connection with GE Aviation even though GE Aviation doesn't own MRAS anymore, all these programs are GE Aviation programs as you'll see. We've done -- in fact we talked about that many times.

We've built, we've done the PAC-3 for GE Aviation and for MRAS to support these programs. Sole source for composite materials for engine nacelles and thrust reversers for multiple programs, A320, Neo family, 747, 2 Comac airplanes and Bombardier Global.

And then if you go to the bottom right corner of the page, we now start to talk about the 777X produced with our AFP composite materials. And I always like to say, a wonderful picture of the 747-8 engine nacelles and I love this picture because the person in the background there gives you the perspective on the scale and size of the structures.

Let's go on to Slide 24. So we have a lot of slides update on GE Aviation programs, and we'll try to move through them quickly, but they are important to Park. So we want to cover them a little bit. First, I'll start with the A320neo family of aircraft and then with the LEAP-1A engines. That includes 19, 20, 320, 321, 321LR, 321XLR.

The reason we say LEAP-1A engines is because A320neo program aircraft has two approved engines. One is the LEAP-1A engine produced by CFM, which is a JV between GE Aviation and Safran. That one is a CRDI engine. We're only on the CFM engine.

So if an airline buys a A320neo and they specify the CRDI engine, then that's not -- there's nothing in it for us. They specify the CFM engine, then there's a lot of it for us. So just want to understand, maybe I should have made them more clear in some of these presentations.

Anyway, let's focus on the A320neo, the aircraft part of it, discussed over many quarters that Airbus is aggressively trying to push up the rates and the supply chain has held Airbus back to a large extent. There's been some tension between Airbus and supply chain.

And why don't we just move on because we discussed that tension and that dynamic many times in the past. Slide 25. So this is important. Airbus had indicated its intention to achieve A320neo aircraft family production rates at 65 per month by early 2024.

And that was pushed back from mid-2023, which was the original target because of supply chain restrictions or limitations and 75 airplanes per month by mid-2025. Just so you know that's a lot, a lot of airplanes, no commercial program ever achieved those rates before.

I believe that the A320neo, that Airbus was producing 63 per month before the pandemic hit. So they are still trying to claw their way back up to even that level. This airplane will, I think indisputably be the biggest selling commercial aircraft ever.

Airbus also recently indicated its intention to achieve production and delivery rate of 50 neos per month by the end of 2022. Well, it looks like they did that, November, they got to 53. In December, preliminary report I saw yesterday, it was 58 in December. So that's a preliminary report.

Hopefully, that number will hold, but that's what I saw in the report. Is that rate sustainable? I don't know. I mean Airbus certainly is on a mission to make it sustainable and move it up from there. One thing which according to Airbus is quite clear, is the market in the A320 aircraft family backlog, they are there to support these aggressive rates.

Current backlog is 6,349 airplanes. That's a lot, a lot of airplanes, a lot of airplanes. And just to give you a perspective, at the 50 a month, what is that? 50 times 12, that's 600, right. Divide 6,349 by 600. That's over 10 years.

So you see the problem that Airbus has, you want to order a new A320neo now? Well, I guess they have to give you a delivery of like 2034 or something like that. That's terrible. They don't want that. This is one of the reasons that they are trying to push the radomes that the lead times aren't so long.

They obviously want to increase the backlog, but they don't want to keep increasing the lead times for these airplanes. Let's keep going. Slide 26. Okay, some recent disappointing news from Airbus. First of all, they said they wanted to ship 700 total commercial aircraft in 2022. Not going to make that -- didn't make it.

I saw a couple of reports yesterday, maybe 640, 672, but they indicated, I don't know, maybe about a month ago that they weren't going to make a 700, so that wasn't a surprise. Another recent announcement, which probably is more impactful to Park.

I'll just read from a quote, "Taking into account, this is Airbus, the fact that this complex environment will persist longer than previously expected, Airbus will be adjusting the speed of A320 family ramp-up to rate 65 for '23 and '24.

It's not completely clear at this time as to when Airbus expects to reach the rate of 65 deliveries per month." So they're saying that, remember, they said what was it, going to be early 2024. Yes, early 2024 -- now they're saying, well, maybe that's not going to work.

But they're not going to -- they haven't said what's the new target for reaching the 65 rate is, although they maintain that they want to be at 75 by the middle of decade 2025. So at this point anyway, they're not pushing that out, but they were putting a cloud over the 65 and when they're going to get to 65.

Now it's interesting that there's been recent news that the engine companies are more or less caught up because if you go on to Slide 27, the engine companies were the main culprit in terms of slowing down Airbus' ability to ramp these rates. And the Airbus CEO recently confirmed that the engine companies are basically caught up.

But there are lots of other supply chain constraints other than engines, forging, casting, you name it, it's a real challenge with the supply chain, real challenge. You know the story.

I mean, with the pandemic, lots of companies scaled back, laid off lots, lots of people, and now there's an aggressive attempt to ramp back up and everybody is just flat-footed people just reported. So I was wondering, people still not going back to work. There's lots and lots of job openings available, lots of people that aren't working.

So we won't go through that in any detail. I think you know that story. And a June 17, 2022 news release, we kind of staked out our ground, if you will. We said, look, we're going to support Airbus, don't matter what, no matter what the ramp rate is. And then as of the end of October 2022, there are some meaningful statistic data for you.

CFM had a 60.7% share. Remember, the CFM shares, the A320neo program with Pratt, 60.7% so way over half and that's firm orders. This is not just speculation of the firm orders. And let's see -- how many were there? There is yes, right here, 6,816 firm orders for LEAP-1A engines. So over 10,000 firm engine orders.

So there's a lot of bounce in that number. I mean it can move around a little bit month-to-month, but there's so many firm orders that are already in existence that, that share is probably not going to change so quickly. So the share obviously favors CFM, which is good for Park, as I explained.

So on Slide 37, we tell you what we believe approximately how much revenue we receive for LEAP-1A unit. So maybe you can do your own math and figure out what this LEAP-1A backlog might be worth to Park. And like I said, Airbus wants to take more orders.

That's like the whole world of it in terms of A320neos and I'm sure LEAP-1A and Pratt engines as well. Slide 28 the A321XLR, we discussed this probably several quarters now, pretty exciting program for Park, again, with the LEAP-1A engines. First test flight was in June with a Leap-1A engine, not a CRDI engine.

You look at their single-aisle aircraft, it's the only single-aisle aircraft, which with 5,000-plus statute mile range, we'll go back to that in a minute. It's kind of interesting. And the other item highlighted here, Airbus recently conducted an A321XLR, long-duration test flight at 13-plus hours.

That's a long, long, long time for a single-aisle airplane. That's kind of unheard of, actually. If you go on a 380 or 747, you might be up in the air for 12, 13 hours, but a single-aisle I don't think so. So and you know this, Boeing has said that they're not going to respond. They're not going to produce a new commercial aircraft this decade.

They're not going to introduce a new commercial aircraft this decade. So Boeing has ceded this whole niche, this market to Airbus which is a good thing for Park, of course, since we are on that program. Slide 29, let's go on to some other GE Aviation programs. Comac 919, we talked about the big news last quarter.

The bigger news is that Comac got their production certificate for the C919. Now the production certificate is a real big deal because that allows Comac to go into volume production in this aircraft. Production certificates are often more difficult to obtain than Type certificates. There's a lot more fanfare about Type certificates.

But there are a lot of airplanes that got Type certificates, never got production certificates and never heard of them and because they didn't go into production. So production certificates are, I guess, not as much fanfare often, but probably more significant. That's a big deal they got the production certificate.

And there are 686 firm orders for 919 at this point, all for the Chinese market, I suspect. They have LEAP-1C engines, CFM again. On Slide 30, we haven't really discussed the COMAC ARJ21 very much in the last few quarters. But we just saw a report recently that there were 26 ARJ21 aircraft delivered in '22. That's more than we expected.

So we thought we'd highlight it for you. I mean we're happy to be on the program. We're going to say, again, this is for the Chinese market. Slide 31, we discussed the Bombardier Global 7500 and 8000 in the prior quarter. So we probably won't spend a lot of time on this slide. Mach 0.94 Max cruise speed, that's pretty fast.

I think that they broke the sound barrier doing some in the test line, which is interesting. Slide 32, still with the GE Aviation area, we decided we'd provide a whole slide on the 2 slides on the fan case. We haven't done this in the past because the 777X program had been kind of dormant and maybe in limbo.

We weren't sure -- people weren't sure what was going. But it seems like it's going ahead. The fan case containment wrap for the GE9X engine for Boeing 777 aircraft, that's our end of the deal the fan case containment wrap. Let's talk about the aircraft, the 777-8 variant, over 10,000 statute miles.

Remember, I was saying that 5,000 statute mile range for the XLR is a big deal. This is not big league for wide bodies, 10,000 statute mile range. That's gone a long, long way. 425 seats depending on the -- how they set up the seat arrangements.

And since the 747 and A320 programs have been canceled, there's no other commercial aircraft, which is anything close to those range in passenger capacity capabilities. So this is going to be an important niche, could be an important aircraft for Boeing. Hope it works for them. I'm not aware.

I don't think anybody is aware that Airbus has been trying to develop an airplane to compete against this airplane either, the 777X. Passenger and freighter version certification expected in 2025. This picture was sent to me by a friend of mine from a company called Alaska Air Fuel in Fairbanks.

The airplane is on the ramp, at the Alaska Air Fuel ramp in Fairbanks. It was up there doing, just one a test aircraft doing cold weather testing in Fairbanks in the winter. And if you want to do a cold weather testing of an airplane, Fairbanks is a place to go because you can easily see minus 40, minus 50 degrees temperature.

So I really like that picture I put to share with you. Slide 33, I'm trying to move a little faster, I guess. So continuing with the 777X program, there was a little bit of interruption in the test program and it's has been resumed, 353 firm orders. And what do we do? We produced composite -- AFP composite materials for the GE9X fan case.

We have significant per engine content in this program. And we recently quoted materials for the program exceeding $1.2 million. Why am I sharing that with you? Not so much a number, just to say, yes, this looks like it's getting real now for Park. We haven't seen the POs yet.

I want to make that clear, but we did receive a quote request for -- and we did quote $1.2 million approximately for delivery in 2023. And remember, there's that design risk. We've talked about this in the past. The company that makes their fan case is trying to read us in their fan case, so our case wrap is not necessary.

So the fan case can pass the fan blade out test without a case wrap. Slide 34, 747 queen of the skies. The last 747 rolled out of Boeing Everett, Washington factory, December 6, 2022. It was unit 1,574. It will be delivered to Atlas Air in early 2023. First, 747, we delivered to Pan Am, January 22, 1970. This is the airplane that changed the world.

It's heartbreaking at least for me to see this program end. This picture was taken October 10, 2022, in Anchorage, obviously Atlas Air, 747-8 and they get the last one. So anyway, okay, I took that picture. Let's move on to Slide 35. Yes. So this is where it gets a little complicated. You kind of think what the heck is going on here.

If you look at the history on the left-hand side of the left-hand column with the numbers, see in fiscal '22 and fiscal '23, that's $6-plus million per quarter for GE Aviation program sales history and forecast estimates, so $6 million to $7 million per quarter. The prior year was the pandemic year. So the number is much lower.

But in '22 and first two quarters of '23, over $6 million a quarter. And then in Q3, just $5 million, the recent quarter, $5 million. And we actually estimate I think [indiscernible] quarters for three quarters when we did the Q2 presentation. So we're gaining a little bit above that but still well below the history. So I think what's going on here.

The programs are going -- aren't going down. The programs are going up. Let's go to the right side, GE Aviation program sales forecast estimate for Q4. So we're now, again, estimating $4.25 million to $4.75 million. And if you do the total, that's just adding up the year-to-date through Q3 with the estimate for Q4. That just the math.

But I want to mention to you that we have $5.8 million already booked for Q1 for fiscal '24 Q1, and we would expect to book more in 4Q book and ship more than that. So what the heck is going on here? And that could be a watch out sign, maybe a warning. So let's go on to the next slide.

What the heck is going on here Part 2? So downstream inventory, production management challenges, dislocations, causing serious misalignments between the aircraft program rates and the Park's material production rates.

At some point, maybe soon, those misalignments will be unsustainable and will reach a breaking point and the day of reckoning could lead to abrupt and even wrenching adjustments and realignments. It's just math.

If our production isn't matching what Airbus is doing and the other companies that are using these GE engines than something's got to give at some point. Remember, we're sole source these programs. On a day-to-day basis, downstream dislocations create major challenges for Park in managing our production and supply chain activities.

We're trying to get some visibility and we keep getting these kind of strange indications as we saw in Q2 -- sorry, Q3 and now Q4. But this is a big one for us anyway. Over the long term, only things are two things which matter to Park in connection with the GE Aviation programs we support are.

How many airplanes are delivered that have these engines on? The LEAP-1A, A320neo with LEAP-1A, 919, the ARJ21, the Global 7500/8000 on the 777X. The other thing that matters if you want to complete the equation is the top of Slide 37, the expected Park revenue per engine unit for those programs.

Based upon Park material usage for engine units for those programs, which usage is given to us by our customer. So starting in 2025, we're getting this information because we kind of got exacerbated trying to predict what's going to happen.

We're going to tell you -- we're telling you now what our estimated revenue per engine is, and you could decide how many units you want to assume in terms of doing the math.

Starting in 2025, based upon the program engine material usage information provided to us by the customer, the estimated Park revenues by program end unit is approximately as follows. So for A320 neo family, $30,500, for the ARJ21, $29,500, the 919, $26,500, the Global 7500/8000, $49,000.

Now there are assumptions contained in each of these items, which you need to look at. We're not predicting those things will happen. We're just doing the best we can to kind of guess as to what will happen based upon indications from our customer.

And this particularly relates to LSP and film adhesives, which programs we'll be using our LSP products that are not using them now and film adhesives that are not using them now. So we have to make a little some assumptions there. But we made the assumptions we think are reasonable, but they may or may not be correct.

I just want to make sure you understand that. The last item, GE9X fan case, it's significant. We're not going to give you a number yet. It's still kind of a new program. I think it's a little early to do that. And of course, there is a risk that the program -- that the fan cases we designed in the program doesn't continue. So okay, Slide 39.

Now let's talk about Park's financial performance, history and forecast estimates. Nothing to overshadow here, I don't think, but I just want to mention to you that we just kind of covered this.

You look at their sales numbers for fiscal '20 -- the quarter for fiscal '22 and '23, remember through Q2 that the GE Aviation program sales were $6 million plus each of those quarters, right? Then in fiscal -- in Q3, the current quarter only $5 million, but the total sales were still $13.9 million.

Somebody who's pretty smart figured it out what's going on here. Well, obviously, we're getting to those numbers by making up the lack of GE Aviation sales with non-GE Aviation sales. They look at the forecast for Q4, $13.5 million to $14 million we're estimating but we're only estimate of $4.5 million GE Aviation sales.

So again, I think you should be thinking about that. Well, it probably means that the non-GE Aviation sales are moving the right direction. EBITDA estimate $3 million to $3.5 million. And for fiscal '23, again, we're just trying to doing the math. We're taking year-to-date and added the estimate for Q4 and those are the numbers we come up with.

Let's go on to Slide 40. And this we're going to skip because we covered these comments and thoughts about our forecast and outlook during the last couple of quarters and there's not really not too much change to them.

We feel -- just to reiterate that to provide a long-term forecast under the circumstances, with the great uncertainty that we're dealing with wouldn't be that meaningful.

And if you want to skip, we can do that to Slide 43, the end of this section, we're saying that based upon all these considerations, although there are serious concerns about the economy inflation, workforce shortages, supply chain challenges, we believe the outlook for Park is quite positive.

So we don't think that we're in a position to provide a meaningful long-term forecast with numbers. But we are able to say, based upon this discussion, that we think the outlook for Park is quite positive. So let's go on to Slide 44. Just some quick updates here. The expansion is basically complete. The qualifications should be done in a few months.

And middle picture, we haven't -- and there's the top and bottom picture, we showed those before. The middle picture though is a passage way between the new plant and the old plant. We're looking at from the new plant, looking into the old plant.

And if you look at the top picture at the back you see that the passage right at the top of the picture, I don't know if you could see it. There's a sign in this picture, the best way picture on the right. And it basically says it's a fire door. And if there's a fire, that door will close automatically.

Why is that? Because terms redundant factory, so there's anything that goes -- happens to one factory. You want to make sure it's isolated, so it doesn't migrate it to the other factory. Why don't we go on Slide 45, James Webb? So we talk about this every quarter. No more revenue for Park.

I don't think we're going to get any more product up in the James Webb Space Telescope. It's 1 million miles from earth right now. But it does have our '21 SigmaStruts incorporated into structure. And those struts are critical. We have those that struts, telescope structure wouldn't work, it wouldn't happen -- just would collapse.

Couple of interesting items, the James Webb spotted concentric angular rings around a giant star showing the first reasonable evidence of light pushing dust around the right of it is an image of that. I've no idea what it means, but to me, it just seems very all inspiring.

And it James Webb uncovers dense cosmic knot in the early universe, again, that's way above my pay scale. But to me, it just seems so inspiring to hear are those kind of things about our comprehension, new comprehensive, new wind sites, let's put it that way into the universe. Slide 46, okay.

So we talked about this Aero Design Labs program over the last couple of quarters, the ADRS program. Park's materials are currently sole-source qualified on this program. There are over 6,000 Boeing 737 engine aircraft in service. This program is for the Boeing 737NG aircraft. In May 2022, the ADL received an STC for the 737-700.

In November, ADL entered into an MOU with Delta to do the testing and certification for its kits for the 737-800 and 900 variants. So that's all good. And based upon the forecast provided by the customer, Park expects to receive revenues of approximately $2 million in calendar year 2023 related to this program.

Actually, a good portion of it's already booked, I think. But why we're telling you that, only because we want you to know that this seems like it's real. It's happening. We're not the customer ADLs at the current low key. We're not going to provide additional information about the program, the expectations, the forecast, we're not going there.

But we wanted to at least cover this. And the part about Delta, that's public. That was in the news release, we're not disclosing anything that you probably don't already know. And we'll consider additional investment for this program if necessary. This could be a big thing for Park. So we're happy about that. Let's see what happens. Slide 47.

Okay, last quarter, we talked about AFP, updated Park on potential automated Fiber Placement, AFP manufacturing project initiative. We originally discussed this during our Q2 call, as I just said, let's do an update. Not much of an update project that's under series consideration and review. We haven't made a decision yet.

It's a front burner project for us. We're seeing a lot of high-level attention to focus. However, I just want to let you know, there's the potential AFP manufacturing project is competing for high-level Park management attention to focus with the potential major multi-front JV project with a large aerospace company.

This is something that's just been developing in the last over months, but it's got to become a fun version project as well. The potential JV project is ongoing serious consideration to review receiving a significant amount of attention.

So there's somewhat of a balancing act for little Park to manage both these important potential opportunities at the same time. Good problem to have, just wanted to know that. This should be a real word part of it. Let's go into 48. Now these slides are the same slides that were included in the prior presentation about the potential AFP project.

Through us, AFP is a very interesting potential strategic opportunity for Park. And in the slide, the next few slides, we go through the reasons why we think AFP is interesting, but we're not going to go back and review all the slides just to save some time. Obviously, you have any questions, let us know.

But Slides 48 to 51 were pretty much what was contained in the Q2 presentation with some minor changes. Let's go on to Slide 52. We're almost there. The Park family, updates on Park's great customer Flex program. We feature this every quarter, and we should because it's really important.

It would just not be possible to continue to get the job done under current very challenging circumstances without our customer Flex program, just not possible. Park's current people count, 112. Well, that's some progress.

It's still not we want to be, but our current people count of 112 was up from the people count of 99 reported in our Q2 investor presentation. The great news is all the progress we made has been made the right way, the Park way, the little picture of a few of the guys that won our 2022 holiday party paper airplanes throwing contest.

This is an annual event at Park. So congratulations to those guys, and we're [indiscernible] now. But I want to point out something. In Q3, we were kind of limping along at 98, 99, 100, 101, 102. It's only after Q3 that we really ramped up to this 112 number.

So everything that was done, everything got done, the 13.9 million that was shipped in Q3, we shipped a very, very stressed staff, a very short staff, maybe 100, 101, 102. I just want you to be aware of that. Slide 53, we do not sell out or compromise our sacred principles in order to recruit the additional people we need. That's really important.

And just so you know, other companies, multi larger companies continue to aggressively target our people for recruitment. Now a question. Will they feel bad if sooner or later, they know -- we all know they will, what will these larger companies do with the people they aggressively recruited. So yes, we don't know the answer to that question.

As soon as these people aren't needed, they'll be thrown out like yesterday's garbage on the garbage sheet, which is what happens every time in the past. That's why I'm saying that. I don't think that's an outrageous comment. That's exactly what happened every time in the past.

And you think that in the boardrooms of these companies that are hiring 1,000 people a time, throwing money, hiring bonuses, big money at these people, you think you're agonizing and hand wringing over, oh my god, what happens when the aircraft rates go down, what do we do with those people? It's not even being considered.

Why? Because we know what they're going to do. They're going to throw them on the garbage sheet like they always do, the people they hired. But the good news is that we continue -- Park continues to make progress recruiting and the training people in the right way, the Park way, notwithstanding what these other companies might do or not do.

When we hire someone, our attitude is we hire for life. We won't casually just so many people we hire, let's bring on 25 people. They're for life. Now it doesn't mean there are plenty of people Park is not right for them or vice versa. If that's the case, somebody doesn't have the right attitude for Park, they're not going to stay at Park.

I'm not talking about that. I'm talking about good people, the right attitudes, our attitude and we hire somebody. We think about it carefully, seriously. We're committed to them for life. We're not going to throw them in the garbage sheet as soon as our business is down. We didn't do that during the pandemic.

Our business where we had less than -- I think, we had $9 million of sales in quarter. We didn't do it then. So that's not our intention. Our attitude is not -- people are not commodities, are not pork bellies to be traded, bid up and bid down that's different. So that's when I say we do things the Park way.

That's what -- that's one example of what we're talking about. Let's go on to Slide 54. Our people have been through a lot together over the last few years and many challenges and hardships and diversity to overcome. I won't read you the list, you probably can figure it out yourself.

The wonderful news is that having endured and overcome the hardships adversity and challenge together, our Park family has overcome -- has come together more closely and tightly than ever before. With a dedicated, motivated and inspired workforce, a company can move mountains. Without such a workforce, a company to move nothing.

And our people are moving mountains. To have 100 people push out $13.9 million in the quarter, there's some mountains being moved. I'll tell you that. Park is very fortunate and has the wonderful people we have. The last slide, this is the Christmas party, and you can see some of these folks with the Christmas ugly sweaters.

This was -- this is probably most of the Park people. It's not all 112 of them, but we have a very nice Christmas party in which we take a picture of the Park family for you. So sorry that went on so long. We're just about an hour into the presentation. So operator, we're ready to take questions if there are any.

Thank you, everybody, for listening so far..

Thank you. [Operator Instructions] Our first question comes from the line of Nick Rispatella [ph] with NR Management. Please proceed with your question..

Hi. Thank you. First of all Happy New Year. And again, thank you for your very comprehensive presentation. I listen to so many conference calls and really Park has about the most comprehensive presentation. That's wonderful. First time in all my years, I've ever seen Vito Corleone mentioned in a presentation, by the way, I got a kick from that.

So my question is, -- and I know this might be a little difficult for you, but the language you have in the slide about the China program, Comac, significant upside potential. If there's any way you can quantify in your wildest dreams or just a range of what this might mean for Park a couple of years down the road. That's first. Secondly, it is China.

There's a lot of, let's say, tension. Do you see any risk politically for Park as a supplier in this program? And then finally, and this is kind of just a big picture question, Brian. How would you characterize Park's competitive position, your moat for lack of a better word? Thank you. .

Thank you, Nick, and Happy New Year to you. I appreciate the input. And just let me say, to the extent people are still listening, if there is anything you would like us to cover in presentations in the future, please let us know. This time is your time, it's not our time.

It's not our opportunity to hyper promote our company and tell you how smart we are. It's an attempt to communicate to you what we think might be meaningful in terms of understanding Park, our business and our objectives. So Nick, the 919 program, what's the upside potential? So right now, it's basically a kind of almost zero.

And the question is how many 919s Comac produces. The good news for Comac is they have a captive market, which is the Chinese market, and it's a controlled market and the Chinese government will dictate to some extent, my opinion anyway, what Chinese -- what airplanes the Chinese airlines are buying.

So we've seen some numbers coming out of Comac, and we're reluctant to pass those on. We're not sure what they mean, and in terms of forecast and the ramp rates and stuff like that. So we're reluctant to pass those on. We're not sure how much we can count on them. But I mean, starting at zero, I mean let's say, they got to 100 airplanes per year.

I'm just putting that number out there as compared to 75 airplanes per month, which is what the A320neo program is -- target is. That's still a lot of revenue for Park. And what we did this time is we actually decided we give you the revenue per program, so you kind of do your own math.

Obviously, I think you know this, there are two engines for C919, so you have to multiply that by two. The good news with the 919 is that engine, the LEAP-1C engine sorry, that program only uses a LEAP engine, only uses CFM engine. It's not a shared program with Pratt.

So all the C919 that are produced are going to be used in that LEAP engine, LEAP-1C engine with the Park materials. The risk -- it's a good point. I don't know how to quantify it. I would never say never. I guess the counterargument or consideration might be this that the 919 is a very important prestige program for the Chinese government.

And there's a lot of risk in changing. Once you get an aircraft going, there's a lot of risk, a lot of expense, a lot of hassle and change in courses midstream. So for them to decide they want to change engines or change suppliers and their cell structures, anything is possible.

But it's a lot of effort, a lot of risk, and it's a risk for their program, which they know the world is watching is my opinion again. And I don't think they want a hiccup. So I think they want a smooth introduction of this airplane into the market. They want the world to see how that's -- the world to be impressed with how it's going.

So I think they're going to be reluctant and they are smart to throw variables into the program that really aren't necessary for them that could cause some setbacks in the program that aren't necessary for them. They look at the big picture. There is some talk.

I think we discussed this maybe a couple of quarters ago that Comac or the Chinese government, I don't remember where it came from. It's kind of the same wants to have a Chinese alternative -- Chinese engine alternative to the LEAP-1C from 919 by 2025. And I would say I'm highly skeptical about that target. I don't think that's realistic.

And I haven't heard that coming out of China for a while. So I think maybe they -- again my opinion, maybe decided to kind of back off on that target. Ultimately, China wants to take whatever technology, airplane technology, electronics and have much Chinese content in this technology as possible. So we'll have to see what happens.

There's a risk -- and I don't know how to quantify, I guess, maybe the only other comment I would make about the risk is it's probably, in my opinion, a longer-term risk rather than a risk that would have an impact, let's say, through the end of this decade. And you're right, there are definitely are tensions.

I think just one other comment GE has a lot going on in China, a lot of inroads in China as much as their attentions. They are also symbiotic relationships where both parties are kind of dependent on each other as much as they may not want to work together. They kind of don't have any choice.

And they're being practical, and want their programs to succeed. Let's see. The last question was it -- how we're different, how unique from our competitors. So that's a good question, maybe good better question for our customers, ask for our customers. My perspective on it is probably many different kind of things.

At Park, we have a pretty extreme culture. And for me, if you really want to have culture, you need to be willing to live and die by it and not just going to talk about it in the board room somewhere. And for us, we try to do things consistent with our culture, not just talk about it.

One of the things that is kind of a calling card for Park, there's flexibility, responsiveness, urgency. The aerospace industry is kind of strange. It's well, yes, it's 9 months, 12 months, whatever lead time. And okay, I guess that what it is. We -- that's not for us. We don't want to kind of get ourselves range into the kind of mindset.

So I would just maybe list that one item as maybe distinguishing factor between Park and our competitors..

Okay, thank you. That's very helpful..

Thank you, Nick..

Our next question comes from the line of Brandon Dietz with Huffman Prairie. Please proceed with your question. .

Hey, Brian, Happy New Year. Thanks for taking the question. Yes. Just got a couple of questions. First, to start off, for the AFP initiative, you noted a potential major multi-front JV project with a large aerospace company.

Just curious what does multi-front mean?.

Multi-front means there are really two different major initiatives that relate to the JV discussions. And at this point, I think it's too early for us. It wouldn't be appropriate for us to discuss what they are. But both of them are significant initiatives and there are different types of things. This was raised by this company.

It came from their side, originally, two concepts. And I'm sorry, I wanted to put it out there because I want you to know that kind of in terms of transparency that we're juggling two major projects, AFP project as well as the multi-front JV project with this large aerospace company.

And I'm sorry to do that, please maybe we've raised curiosity up too much, but we're not really in a position to provide any more information about what company that is or what these JV opportunities relate to, but both of them are significant in their own right. I mean even if we only did one of them, which is possible.

They're not dependent on each other, it still would be significant..

Okay. No worries. It definitely piqued our curiosity and very encouraging to hear. My second question is more of a housekeeping and modeling question around the rate card C2B sales. I think in the past, you noted you expected like a pretty small amount in Q2 and Q3.

Based on your updated expectations, is it fair to assume the majority of what's expected for the fiscal year is going to accrue in Q4? And is it possible to quantify these amounts just for our modeling purposes?.

Let me just quickly check if I can find that information. Yes, so about half of that number is expected in Q4. That's correct. But half that $7.5 million number is expected in Q4. So that's a correct observation..

Okay. It's nice to see the increase in headcount. I know it has been a struggle over the past year or two. And you noted it was kind of a sudden increase after Q3.

Did anything change at Park in its hiring strategy, or was it just the labor market being a little more cooperative?.

We didn't change our strategy. We stuck to our principles, like I said. There was one event though, that took place in our little town in Newton. I mean it's about 30,000, which is there's another company that has been in Newton for a long time, not in aerospace that shocked everybody by closing its doors with maybe one week notice.

What surprised us about it is that this is one of the companies that was aggressively hiring people with hiring bonuses and big pay packages up until the announcement. So that was a good opportunity for us, and we've hired a number of people from that company, so local people, which is really good.

We rather our preference, especially for production people to hire people that are local rather than from Wichita. So that helped us a lot. We didn't changed our approach. We didn't change our standards or we didn't do any of that. It was just we had some people who were available, all of a sudden.

And look, I mean, I don't know what's going to happen to the economy, but it's possible we'll see more of this in the future..

Yes, definitely. You noted that even with those hires, you're not still where you want to be.

I mean, how should we think about like what is an optimal level of headcount for Park that you still need to get to?.

So that's a good question and something we're actively discussing and really, it's not a black one answer. It depends on how we structure the shifts. The norm will be a little different. But I think another half a dozen people approximately maybe up to kind of like 120, we get to a point where we feel pretty good.

Maybe you want to do some fine-tuning, but we're certainly lot closer to that number than we were when we were down at 99 because the requirement hasn't changed. It's not like we needed less people when we were at 99. So moving in the right direction anyway..

Yes. No, that's for sure. Maybe one last one, a quick one. I know there's limitations on the ADRS program in terms of what you can tell us, but really encouraging to see the $2 million forecasted for calendar year 2023.

Is that something you guys are already producing? Or is this still kind of tentative on when production will start for the -- to produce the kits for the program..

Some of that is booked, a good portion of it is booked. I think maybe about 40% of it. And we have orders to ship in our fourth quarter, our fourth quarter, meeting the next two months. So I think it's real.

And that's the reason we provide that number because we just -- $2 million kind of a round number, but we wanted to communicate or we want our investors that this is not just something we're talking about as a prospect anymore. It looks like it's really going to happen. It looks like it is happening..

Yes, it seems like it's going to be very pretty significant, so definitely encouraging to you guys are on the program. All right. Well, that's all my questions, Brian. Thanks for -- once again, thanks for taking them and Happy New Year..

Happy New Year to you. Thank you for your questions and thank you for your interest. .

Our next question can the line of Daniel Baldini with Oberon. Please proceed with your question..

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?.

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....

The differences accounted all for, as far as I estimate, this big drop-off in business..

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..

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?.

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..

Okay, and if you permit me one last related question. So as I've noted, your business jet business has fallen off quite substantially since the pandemic started.

What are your sort of opinions about the prospects for that recovering?.

So our business jet business is the biggest program that we have in the business jet segment is a Global 7500/8000, which is a good program to be on. And we have a lot of content on that program also per engine unit. That's kind of maybe the leading big, big, big business jet.

Right now, Gulfstream has kind of come up with an answer in terms of the range capabilities of size. My opinion about the business jet industry is this. And just an opinion and I just want to say that, people will disagree some people will anyway. My opinion is that a recession is coming this year.

And then the question is, how does it impact the business jet industry. My opinion again is that it will impact the industry differently in a different way, for the really big business jets as compared to a swan mid type business jet, why is that? The Global 7500/8000, I think it's $78 million per unit. So we're talking about a lot of money.

This is not the average regular wealthy guy. These are large corporations, [indiscernible] Elon Musk types. Recession, are they going to hesitate to buy a $78 million airplane? Probably not, in my opinion. So I think the Gulfstreams and the Bombardier and the Falcons will probably do better in a recession.

Now the smaller and midsized jet, that's a different market. That's a different buyer. Maybe it's a guy who has four or five car dealers and he wants to have a jet, maybe now not a $75 million jet. It might be $5 million to $10 million.

That guy probably doesn't have $500 million or $600 million in a bank and he's more vulnerable to recession, and that guy might be affected more in his terms of just buying attitudes about jets than the guy or the company who buys the $75 million airplane. So my feeling is that the larger aircraft, Gulfstream, Bombardier, Falcons will do better.

The smaller jets, maybe will be more affected by the recession. And I also would base that opinion upon past history. In the past, when receptions have occurred, economic downturns have occurred. The companies that made the smaller business jets were hurt badly.

And I'm not aware of any reason why that pattern or dynamic would be very different if there's another recession..

Okay, great. Well thanks very much for your time..

Sure, thank you for your questions and your interest..

There are no further questions in the queue. I'd like to hand the call back to Mr. Shore for closing remarks..

Thank you, operator, and thank you all for listening. We appreciate it very much. Have a happy New Year. All the best to you and your family in 2023. Feel free to give us a call any time if you have any follow-up questions. So thank you, and take care. Goodbye..

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