Earnings Transcript for PKE - Q4 Fiscal Year 2024

Operator: Good afternoon. My name is Paul, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Park Aerospace Corp. Fourth 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 speakers' remarks, there will a question-and-answer session. [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.

Brian Shore: Thank you, operator. Welcome all to our fiscal '24 Q4 investor conference call. I have with me Matt Farabaugh, our Senior Vice President and CFO. You probably noticed in the news release that announced Matt's retiring originally plan with the end of this month, but Matt has agreed to stay with us through I guess, would be sometime like mid-July through our Q1 10-Q filing. So, thank you for doing that, Matt. We -- I think, the earnings release crossed the wires may be about for 4

Operator: We'll now be conducting a question-and-answer session. [Operator Instructions] Our first question is from Nick Ripostella with NR Management. Please proceed with your question.

Nick Ripostella: And Brian, I'm glad that, as you said, no one got hurt from the storm, and thank God, it wasn't, any worse. I just have kind of a big picture question. Given the programs you're on and the future and the potential new opportunities. I'm just wondering, do you think Park will continue to be a debt free company? Or at some point, would you consider borrowing money? And the reason I ask this is, if the stock weren't reflecting the potential, possibly, you could be more aggressive in repurchasing shares. And I'm not saying today, but if the stock does not reflect the bright future, stays where it is or goes lower, would you consider being more aggressive and then maybe levering up?

Brian Shore: The stock price, I mean, I follow when we follow it. I mean, it's hard to figure out why it might be going up or down. I agree with your implications that it's certainly. So, the stock price, I don't know why it goes up or down a little bit, but I certainly agree with location. That doesn't reflect the value of the Company. And I guess my way of thinking about that is that, ultimately, you'll have to. And I think, ultimately, as the numbers pan out, the numbers we're talking about, that the world, the market will recognize the value of the Company. Until then, I guess, we'll just do the best we can to explain what we're doing, and some people will understand it. Maybe some people won't agree. I don't know. As far as going to debt, Nick, right now, we don't see a need to do that. We completed our expansion. As you know, we paid for it, and that itself will lead to that, the very significant uptick in revenues as we call the juggernaut. This other project we're talking about, so that could lead I think we talked about maybe $6 million to $10 million of capital, but what we didn't talk about is working capital. We're talking about capital equipment and the plant and that kind of thing. But the working capital could be a lot, could be, like, $15 million or something like that. So, that gives you a little additional perspective. Would we go into debt? I'm sure we felt that it was a legitimate reason to do it, and there's some opportunity that was important enough that requires to go into debt. So, generally speaking, we've not been a company that's had debt. It's not been our philosophy is to have cash. We've always had cash, and we feel good about that. And you certainly feel good about it when you go into, like, these what do you call it? Black swan things like the pandemic. But we're not so philosophically opposed to that that we wouldn't consider it if the circumstances we felt were compelling.

Operator: Our next question is from Chip Rewey with Rewey Investments. Please proceed with your question.

Chip Rewey: Can you talk a little bit more about the potential storm recovery aspect? You say you have extra staffing. How much of that can really be recovered potentially in your second quarter and third quarter and both from a revenue and a profit point? I imagine some of the profits are just burned because you have to hang on to your staff, which is understandable. And then secondly on that extra opportunity that you talked about with center opportunities. Is there any timeframe for when you expect that to be a bid or potentially awarded?

Brian Shore: We don't expect to lose any business and all the business that we're supposed to be, all the sales, let's put it that way, that we lost in Q1, will be in Q2, it won't go into Q3. The profit story is a little different. Let's say we just hypothetical, let's say we end up at $13.5 million in Q1 when we're thinking to be over $16 million. The bottom line will be a lot different than if we planned $13.5 million. It was kind of even across the quarter then we're running for towards $16 million and then the last two weeks everything goes down to zero. So, there's some amount of profit, which will not be recovered even though all sales won't we won't lose any sales. All sales that were lost in Q1 will be in Q2. I don't know if that answers your question, but and I don't I can't quantify that. I try to quantify the, well, maybe I did not. If I did not, I intended to. So let me do that now. We're thinking that sales-wise that we're probably going to be in the 13s when we were planning on 16. So, we're going to think of losing over $2 million of sales in Q1. All that will be translated into Q2. The profit stuff is much more difficult for us to estimate at this point. Even though we're at the end of the quarter, it's still a very dynamic situation. As far as the new project is concerned, It's not a matter of award. It's not like we're competing for it. I just want you to understand that. But the customer's needs are for that project to be up and running by '26. So that's kind of a time frame that you might consider. Not it's from their end, not from our end. That's not a lot of time actually because a lot to be done to get there.

Chip Rewey: And just following up on that, if you're not competing for it, is it business that you think you can get or that you hope to be awarded? And if they want deliveries in '26 like when would you need to start out with any capital, later this year or early next year? And on the storm insurance, was there on the storm, was there any insurance of any kind, either for capital or business interruption?

Brian Shore: Yes. We have insurance. The wind damage insurance, which is it comes under wind damage, our deductible is quite high. And it's we did that intentionally because, when you think of insurance, we have cash, a good balance sheet. We think of the cash drop across. We don't want to bet against the banks. We set our deductible's pretty high in the theory that if we set them lower, obviously, the premium will be much higher, and, ultimately, insurance companies get a win because they always win. So, there's a pretty high deductible, but we still expect to have some insurance recovery. And there is business interruption insurance that's included, but we don't have amounts at this point because it's very difficult for us to quantify the loss, not only in terms of this interruption, but the repair in the facility. The roof itself is intact right now and it's secure, but still eventually need to be replaced. So, on that the question about that project, it's a customer that we're very close to, and I'm not at liberty to describe which one. They're talking to us exclusively a great length about how this would be done. Their timing is '26. That's what, from their perspective, that's what they need. I got to be careful. It's a very confidential project, so I don't want to say too much about it because I want to give it away. But yes, I mean, it's good question. I would think that next year, we would need to start ramping up the capital in order to meet that requirement by maybe the beginning of next year. It still may not happen, but I think there's a high likely it'll happen because the customer is very motivated, and they're not talking anyone else about this.

Operator: There are no further questions at this time. I'd like to hand the floor back over to Mr. Brian Shore.

Brian Shore: Thank you. This is Brian Shore, of course. Thank you very much for listening in. Have a good afternoon. And if you have any follow-up questions, please feel free to call us. We'd be happy to try to help you with them. Have a good afternoon, and we'll talk to you soon. Thank you.

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