Park Aerospace Corp
NYSE:PKE
Earnings Call Analysis
Q3-2024 Analysis
Park Aerospace Corp
The company experienced significant disruptions in international freight, particularly affecting shipments to the Middle East and Asia due to geopolitical events. This resulted in an increase in missed shipments, from approximately $220,000 in the second quarter to $560,000 in the third quarter.
A historical perspective shows consistent revenue growth up to 2020, followed by a pandemic-induced dip. However, the company projects a recovery with forecasts hinting at brighter prospects for fiscal year 2024.
The company boasts a strong balance sheet with $74 million in cash and no long-term debt, although it still has $9.3 million in installment payments for repatriation tax due through June 2025. The board authorized a share buyback program for 1.5 million shares, emphasizing the return of value to shareholders.
The company's slice of revenue pie for the first nine months shows a penchant for military aerospace programs, hinting at a niche focus that caters to specialized market segments.
Recovery signs are visible in the commercial aerospace markets, with domestic air travel fully recovered and international travel nearing pre-pandemic levels. Supply chain and labor shortage issues remain, but there's cautious optimism for substantial production ramp-ups by 2024. The military aerospace sector remains robust, driven by global defense demands, albeit supply limitations exist due to political and logistical constraints.
The company highlighted its long-term agreement through 2029 with Middle River Aerostructure Systems for its proprietary film adhesive product forms, showing commitment to strategic partnerships and long-standing contracts.
The A320neo program is a major aspect of the business, with a vast backlog and increasing delivery rates signalling a strong market presence. Airbus has managed to return to pre-pandemic production rates, which is viewed as a significant milestone. While there may be fluctuations, the production ramp-up appears sustainable and indicative of a robust order book.
In the A320neo aircraft family, the LEAP-1A engines, for which the company supplies components, have gained a substantial market share of 65.6% as of October 2021. This places the company in a strong position as it benefits from the success and growth of these engines. The company also anticipates deliveries beyond 2029, with the current engine orders potentially contributing around $0.25 billion to its revenue.
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Good afternoon. My name is Camilla and I'll be your conference operator today. At this time, I would like to welcome everyone to the Park Aerospace Corp. Third Quarter Fiscal Year 2024 Earnings Release Conference Call and Investor Presentation. [Operator Instructions] At this time, I will turn today's call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference.
Thank you, Operator. This is Brian. Welcome, everybody, and I want to introduce Matt of course. He's with us, our CFO, as usual, Matt Farabaugh. And also, we'd like to take this opportunity to wish you and your families a very happy New Year. All the best to you in 2024 it is, right? Yes. We just announced our Q3 earnings, I guess, maybe about 45 minutes ago. So you want to pick that up. And also in the earnings announcement, there's instructions as to how you would access the presentation that we're about to go through. You want to do that as well. The presentation is pretty long. Sorry about that. I really was thinking I was going to -- this one I'm going to make it shorter it ended up being longer. It's hard for us or really for me because it just seems like sometimes there are important things to cover. We don't do the sound bites. We don't hire IR firms to do little clever kind of slick things. And I don't know why you'd want that anyway because I would think you'd want to hear from management. So we're not as polished. It takes a little bit longer. It probably takes about 45 minutes or so to go through the presentation. So just be advised. We might skim through some of the items that we've gone through previously, there are some items in this presentation, which were in the Q2 presentation as well. So that might help us a little bit.Before we get started, I just really want to give a shout out to Donna because these -- Q3 is a bear for us because it just -- our holidays are kind of a mess. We -- not just the presentation, we're closing our financials. So Matt as well. But Donna helps me do all the PowerPoint stuff. I don't -- I'm not even dangerous in PowerPoint. I can't do it at all. So every third quarter, she's working on through holidays. Before we get started, note again, it's our 70th year in business, and it will be our 70th anniversary is March 31. So I guess what is that a couple of months off. It will be 70 years if we make it that far. Why don't we get going?Slide 2 is our forward-looking disclaimer language. So we're not going to go through it. Please go all see if you have any questions or ask -- lets us know if you have any questions.Slide 3, Table of Contents. First thing is the investor presentation. Appendix-1, supplementary financial info, which we're not going to go through either. But if you have any questions about it, please let us know.Let's go on to Slide 4, take a little bit longer. So Q3 let's go through it; sales, $11 million. When we compare things to Q2, $11.639 million. So that's a fairly low number in terms of sales even lower than Q2, which was off. And I think you probably have a good understanding in Q2, and we'll go through the explanation of Q3 as well. And look at the margins, I highlighted, we highlighted the margins, both the gross margins and EBITDA margins. So you can see the comparisons to Q2, which are not really favorable, but as I think we tell you a lot, we don't like it when we see gross margins below 30%. So they're certainly below 30% this quarter. And our EBITDA margins are not really that desirable for us anyway, either.Our observations and thoughts about our Q3. So what's going on here? Well, the MRAS inventory burn down, which we talked about at great length in our Q2 call that continued through Q3. And we predicted when we did our Q2 call, we told you, we predicted that. Is that MRAS inventory burn down expected to continue into Q4? No, it's not. It's over, and we'll get into that in the presentation. But there's no more burn down. We will discuss the adverse inventory burn down in greater detail in the -- throughout the presentation.Let's go to Slide 5. Well, let's talk about the non-GE Aviation sales. We have -- we talked a lot about GE Aviation. Non-GE Aviation sales were only $7.5 million in Q3, and that compared to $9.4 million in both Q1 and Q2. So that was off as well. So although there were almost always will be some degree of quarter-to-quarter variability in our business. The trend is actually quite good for non-GE Aviation sales, so we feel pretty encouraged about that.But what is the reason for -- or are the reasons for the quarter-to-quarter variability. There are numerous reasons, but for numerous reasons, the programs we're on, will be active in 1 quarter and may be inactive in another quarter. And we really have no control over that. There's very little we can do to control the timing of when programs that we are on, will be active or inactive. And it would really be a waste of our time to even try to do that; an exercise in futility as we say here. But at Park, the key thing is we focus our energy and efforts on getting on new programs, which we believe will be supportive of our long-term objectives rather than attempting to try to control the timing of programs already on.So let's keep going. Slide 6. But nevertheless, this quarter-to-quarter variability does come with less than optimal visibility often. And it does require us in part to be very agile and fast on our feet, whether it's supply chain, whether inventory and our production management activities. So were there any new obstacles to completing sales in Q3. Yes, there were actually, and we'll get to that in a minute. But let's not talk about the bottom line. We'll talk about the top line. Why were the margins in Q3 lower than Q2? And we already showed you the comparisons. Well, there's a few reasons there's a less favorable sales mix in Q3 compared to Q2. Q2, the sales mix actually was quite good. Q3 not quite as good. But as a explained at above, we have little to no control over which programs are active and which programs are inactive on a quarter-to-quarter basis. That's kind of rolling the dice a little bit if you look at it short term. With the higher-margin programs, be active in a quarter or less active that we have almost no control over. Again, our objective is to get on more programs. The ones that we think are good programs, the margin -- better margin programs and the timing is up to the customer, God or something outside of our control.The second item was lower sales, we talked about in Q2. So that affects our bottom line in -- low sales in Q3 compared to Q2. That affects our bottom line, of course. And here is a big one. Even though we fully anticipated that Q3 sales were going to be light compared to Q2, we intentionally ramped up our costs in Q3 to meet the reduction requirements of expected key program ramp-up. So that was something we decided. That was intentional. And we'll talk about that number additional again, throughout the presentation.So why don't we go on to Slide 7. Yes, we saw that freight train coming. That's an analogy we use in our Q2 presentation. The freight train coming, meaning the program ramp-ups, we want to make sure we were ready. Although ramping up our costs took some conviction and maybe some guts; a little bit anyway. It's hard when you see it's not going to be a good sale, good quarter sales-wise to ramp up the costs. It turns out, we don’t know for sure, no guarantee, but we clearly were right, with the benefit of hindsight, to do what we did in ramping our costs in Q3, and we'll explain that as we go through the presentation. So it was a good move on our part, I would say, to do what we did.Other considerations related to Q3, how are things going on with supply chain staffing, freight disruption? We talked about this a lot. You might be tired of hearing about it, but we're sometimes tired of dealing with it. Supply chain staffing challenges continue, but they seem to be improving to some extent or maybe there's more that we have become more effective with dealing with them. Now I just want to point out, we're not talking about supply chain issues for the whole industry. We're talking about our supply chain. The whole industry we'll talk about later on. That's probably more of a factor for us anyway in terms of the opportunities in the industry and how they're affected by supply chain constraints.International freight, well, that's a little bit of a different story. There's that war in the Middle East, which occurred after the end of our -- after the end of Q2, I guess, during the first part of Q3, which we didn't see coming, but it's causing serious disruption and challenges for international freight disrupting -- sorry, Slide 8 -- disrupting shipments to customers in the Middle East and Asia. Yes, we've got customers in Turkey and Israel, important customers. So you can only imagine what kind of chaos that is. And then we also have customers in Asia where there's not a war in Asia, not yet anyway, and hopefully it will stay that way. But nevertheless, the sea freight goes through those -- through the middle -- it is hard to go through the Mid East. I guess now it's going through the -- what is it, the Horns of Africa. It's way out of the way. So that's not a lot of fun. Total missed shipments in Q3 about $560,000. I don't have it in front of me, but I think it was only about $220,000 in Q2. So in other words, Q2 will be really getting much better, but we have a big setback in Q3, and that's almost all related to international freight disruptions. So there you go.Our margins also margins continue to be affected by inflation I know inflation is supposed to be all gone, but we're not -- I don't buy that. And the costs related to operating our recently commissioned new plant in Newton, Kansas. This is all planned and expected, but obviously, you don't turn a plant on and you're at full capacity; it's not how it works.Let's go on to Slide 9, okay? This is our historical fiscal year results. And for perspective, mostly, let's talk about it and I normally don't spend much time on this one. Look at the sales in '17, '18, '19, '20, like it kept going up by $10 million, $31 million, $40 million $51 million, $60 million, really nice. And then what happened is this little thing called the pandemic. So sales were really badly affected in '21 and '22, '23 and '24, if you look at our forecast on Slide 36, '24 is going to be -- our forecast is to be something like '23, like $55 million top line, $11.5 million EBITDA. So we got 3 years where we just have been able to break out the pandemic the disease part is mostly over. But boy, did we screw up the global economy, the supply chain, staffing, we have supposedly full employment, but so many people left the work force. I don't know how that problem gets off so easily. You probably know better than I do. But at least just from my perspective, it seems like a problem that may not get totally solved so easily.But anyway, if you look at our top line numbers, you can kind of see the pattern there. Now we're hoping and we have reason to hope that we're going to start to move that -- we're going to start to have that growth dynamic kick in again starting in this fiscal year, return to the growth dynamic.But let's go ahead and let's talk about -- let's go on to Slide 10. Okay, quickly on this one, we always cover our balance sheet and dividend stuff. So we got 0 long-term debt, $74 million of cash we reported. But don't forget, we -- there's -- sorry, yes, $9.3 million of remaining transition tax installment payments payable through June '25. That relates to repatriation tax. I think it was based on the Trump's tax law, which was very good for Park, but nevertheless, we have some installment payments. So you could think about it how you like, but we kind of think about that as almost like debt, like we owe that money. So when we think of our cash, we think, well, we still got to give $9.3 million of these transition taxes installment payments to the government. That's in addition to our regular tax payments, which we're not talking about.Dividend, yes you know about our dividend, we paid a lot of dividends been for 8 years, $588 million since 2005. And like I always like to say, that's a hell a lot of money for a little company like Park.Going to Slide 11. This is just kind of a reminder. As you know, on May 23, 2022, the Board authorized a buyback of 1.5 million shares. We purchased about 221,000 shares so far. And it looks like we have about -- was it 1,279,000 shares still available to be purchased under authorization. We're not saying we're always going to buy stock or not, but we just want to remind you that the authorization is out there. Just you remember that.Let's go on to Slide 12. Okay, every quarter, we tell you about our top 5. This is a slide that Donna prepared as we do a nice picture of one of the programs that these customers are on AAE Aerospace. So they're a contractor for Aerojet and the Aerojet related to PAC-3 missile. We talk of it a lot. Aerospheres is the contractor for [indiscernible] Israeli aircraft, and that relates to the G280. So that's a Gulfstream airplane, but Gulfstream has some contract with Israeli aircraft under which Israeli aircraft produces the G280 airplane. Kratos you know all about Kratos, we talk about almost I think every quarter featuring this Mako unmanned tactical drone. Middle River, yes, every quarter, of course, 747-8, that's, I think, our favorite airplane. And then Nordam that's the Global 7500. They make some components for the engines for the Global 7500 with our materials.Let's go on to the next slide, Slide 13. My pie chart, I always like these. I don't know if they are useful to you, but I kind of think they tell these -- had messages in them. And if you look at the first 9 months of this year, you say you had commercial a little bit off as compared to the prior 2 years, and that would be based upon what? That would be that burn down. That's causing commercial to be a little bit light in the fiscal 2024 first 9-month pie chart.Let's go on to Slide 14. So Park loves niche military aerospace programs. This is the latest project every quarter. They'll come up with some kind of fun, interesting and cool examples of military programs to run. The pie chart is interesting. Let's talk about that for a second. Rocket nozzles, drones, structures, those -- sorry, and radomes, those are niche markets for us, but even the structures we consider to be a niche market. Quickly, the SpaceX Falcon 9 Launcher with Dragon Spacecraft materials and ablatives. The Northrop Grumman E-2D that's parts and materials and both the Black Hawk and the Lockheed G5, 2 very different kind of aircraft, but those are multiple materials and the Mk-56 Vertical Launching System, that's for the Navy, and those are ablative materials.Let's go on to Slide 15. So let's talk a little bit about trends in the aerospace industry. Commercial aerospace markets, domestic air travel for -- they are fully recovered. That's good news for single aisle like the A320neo aircraft. International travel is reported to be approaching prepandemic levels. Also very good news for long-haul widebodies like the Boeing 777X. See I'm a little biased because I keep talking about programs we're on. Not surprisingly, demand for commercial aircraft is very high. Supply chain and labor shortage challenges continue to be the biggest headwind for the commercial aircraft industry. But there are recent reports of supply chain stabilization and improvement. But I'll tell you what we're not complete [ events ]. We'll see about that. It seems like it's inconsistent. Some places may be better, some places, maybe not better. But notwithstanding these ongoing supply chain constraints, many now believe that 2024 will be the year, the commercial aircraft industry breaks out and ramps up production in earnest. Beginning every year, calendar year there is always the prognosticators and the gruesome stuff that have [ reports ]. But I've heard a number of them recently, aerospace analyst types that are saying that this year, maybe the year that commercial aircraft really breaks out and kind of gets past the supply chain constraints. We'll see about that. But I think there might be some reason to be optimistic. So let's talk about that.Let's go to Slide 16. The recent impressive ramp-up of A320neo family aircraft deliveries. Now this is not prognostication. These are facts. We'll get to that at Slide 21 and 22 regarding that delivery ramp-up is supportive of that view. Now sure would use the A320neo family aircraft deliveries as a proxy for the commercial aircraft industry. I don't know, but considering that, that program is expected to be the largest commercial aircraft program in the history of the universe, maybe we should, consider using it as a proxy.Now military markets, proxy for the industry, breaking out, let's call it, the commercial aircraft industry military markets. So the global demand for military and defense hardware, including missile defense systems, such as a PAC-3 missile. Again, we kind of biased. We talk about the programs we're on. Quite high and elevated by the wars -- attention in the globe.Let's go to Slide 17. Also a high level of interest in unmanned or potential autonomous systems, such as the Kratos Valkyrie. And what's going on here -- I'm not the expert, but I'm just wondering, you got missiles, missile defense drones, maybe this is to avoid boots on the ground, so we could do our war without getting people in the middle of them. I know it's kind of a cynical way to look at it, but you probably have a more enlightened opinion than I do. The markets for military and defense hardware are also affected in some cases, constrained by international political and budgetary factors. We read about that stuff every day. And in some cases, supply chain and labor constraints continue to limit the ability of military defense OEMs to meet the demand, the market demand for the hardware. A little picture of the Valkyrie here, which is nice.And the last item on this slide, we're on Slide 17. December 17, 2023, and was the 120th anniversary of the Wright brothers' first powered flight. So happy anniversary aerospace industry.Let's go on to Slide 18. I'll tell you, you're familiar with this slide if you've listened to our other presentations. We -- this is -- we go through this every quarter. And this just kind of give you context these GE Aviation programs are really important and we talk about them. This is just background. We're not going to go through the programs. We have a firm pricing LTA through 2029 with Middle River Aerostructure Systems, a sub of ST Engineering Aerospace. So what is that? I don't get that. All these programs are GE Aviation programs, so what's going on here. Well, what's going on here is when we got on these programs, Middle River MRAS, which is old Martin -- Glenn Martin Company in Baltimore, and then Lockheed Martin. Anyway, they were part of GE Aviation, so when we got these programs they were part of GE Aviation. I don't remember but 4 or 5 years ago, I'm not sure, I remember Ge Aviation sold MRAS to ST Engineering Aerospace, which is a large Singapore aerospace company, but we're still supplying it to those GE Aviation programs. And actually, the Redundant Factory, that was an agreement we reached with GE Aviation to build that Redundant Factory. They wanted their redundancy because they're kind of betting the farm with us being sole-sourced on these programs. So I won't go through the programs. If you have any questions about them, let me know.Let's go on to Slide 19 on the first 2 items, again, programs we are not going to go through them. Just let me know or let us know if you have any questions. Third bold arrow item, MRAS Qual 3 Park Proprietary Film Adhesive Formulation Product Forms in progress. That's new. That's interesting and pretty great for Park, Park MRAS LTA through 2029 recently amended to include the 3 Park Film Adhesive Film Product Forms. So for composite bond and metal bond, that's really great for Park. Life of program agreement requested by the MRAS and NSD, they both said, yes, '29 is nice, but we need a commitment for longer than that. So the agreement is in progress. What's that agreement worth to Park? I don't know, you tell me. You might -- what is that is Slide 38 that has the -- let me see if that's slide -- yes 38 has the analysis of the revenues -- annual revenues for the GE Aviation programs. Life of program, I don't know you tell me 2045, 2050, of these airplane programs they're starting. So we're so lucky, so fortunate. The programs are on, they are new programs are going to go a long, long, long, long time; very lucky. The 747 that program ended. So that's sad, but the other programs we are on now have a long way to run.Slide 20. Okay, we're going to go through some of the programs. So try to skip through some that's skim over, I guess we cover it every quarter, so let's cover the high points. First of all, A320neo, that's a big dog, that's the big one. That includes this whole A320neo family, huge backlog, huge, 6,753 airplanes. That's backlog. That doesn't include all the airplanes that have been shipped.Airbus continues to say they're going to be at 75 per month production and deliveries in 2026. If they are going to make it there. Let's go on to Slide 21. Let's think about that. So how is Airbus doing so far with their planned A320neo family aircraft production ramp-up? Pretty well actually. According to reports 73 deliveries in December. Well, that's a lot. An average of 57 per month in Q4 of '23. That's a lot and 563 total in -- sorry, calendar year '23. That's a lot. That's an average of 47 per month in calendar year '23. Let's get some perspective, what's the history, '18, you see what's going on here, they're ramping up during the pandemic. Let's talk about -- when we talk about per month so '18, 32 per month; '19, 47 per month. And then oops, then we got the pandemic; '20, 36; '21, 38; and '22, 43. An everybody said they wanted to maintain 40 through the pandemic. The almost got there a little bit light in 2021, but they did keep some production going; good for them. Now let's take a look at something else. So it was 563 in '23. 561 was the big year before -- sorry, '19 with 561 was their big year before the pandemic. So we just eked out in '23 561, which was the big year. So that kind of says things are getting past the pandemic. Notwithstanding world supply chain stuff and everything else that's holding things back. And the other thing you want to look at is that it was at level at 47 per month through calendar '23. 73 in December, 57 in the last quarters, I would say, yes, during the year, things were moving up. And we'll have to see how things work out as we go forward. I think there's actually a comment about that.Let's go on to Slide 22. So for the first -- in '23, calendar '23 for the first time since the beginning of the pandemic, Airbus was able to return to those A320neo family aircraft production and delivery rates to those pre-pandemic rates, in what you call italics, I guess, a very key milestone and accomplishment for Airbus; good for them. Now this is what I was thinking about. There could be monthly ups and downs. There will be month -- monthly ups and downs for A320neo aircraft family deliveries. But it's quite apparent, at least to me anyway, that ramp is real, and not going away. I wouldn't be surprised in the first couple of months of the '24. I don't know. I don't [indiscernible] information. I'm just speculating, it could be a little light, but that's how it often is, these days they push a lot of their airplanes out at the end of the year. Clearly, based upon the huge backlog, Airbus would be producing these aircraft at a rate of 75 per month already, if not for supply chain constraints. And by the way, just FYI, according to Forbes Airbus booked 257 new orders in December of '23. That's a lot of new orders and booked an unheard of 1,693 new A320 family aircraft orders in '23 that's -- those are just incredible numbers. We're so fortunate to be on that program. Just luck really, I guess.Slide 23. What about those engines, though, for the A320neo. Boy, we really live a charmed life, I'll tell you. So remember that there are 2 approved engines for the A320neo, the LEAP-1A and the Pratt 1100G GTF engine. And we are only supply into the LEAP-1A, and not the Pratt. This is -- I was talking about leading a charmed life. Because the LEAP-1A market share has been hovering about 60% over the last couple of years. Just going to Slide 24, then what happened. That all changes, LEAP-1A has broken out as a clear market share winner for A320 according to this December '23 edition of Aero Engine News, that's our bible for a huge amount of data in this monthly publication. CFM LEAP-1A market share firm orders, A320neo aircraft family 65.6% as of October 31. Well, how the heck did that happen? The thing is there's just so much ballast in that market share with over 12,000 firm engine orders between the 2 engines. And you were 60%, how the heck do you get to 65.6% in just a couple of months. It's incredible at the delivery rate of 75 A320neo-family aircraft per month, that 65.6% market share translates into 1,181 LEAP-1A as per year.What is that worth to Park? We'll talk about that on Slide 38. We'll get there. Slide 25. So there are also currently 8,150 firm LEAP-1A engine orders. That's a lot of engines. What are those orders worth to Park? Well, looking at Slide 38, but you probably say about $0.25 billion now. There's a couple of things that, that's going to be deliveries past 2029, so that assumes that we're still on the program after that. My guess is we will be, and I also guess that the pricing might go up a little bit after 2030. So -- but just kind of round ballpark numbers. Now if you want to talk about life of programs through 2045, 2050, you could do that math. I'm not even going to go there. So what happened? Why did the market share of firm engine orders shift so abruptly and dramatically in favor of the LEAP-1A engine? So we talked about this last time we went, well, on it too much. This is all in the news you read about yourself, serious issues with the Pratt 1100G engine. These have been extensively reported, so we're not going to cover them here again.So why don't we just go on to Slide 26. The top item is actually a new one, so we'll talk about that. FA just published a new proposed rule in December 11, '23, requiring the inspection of additional Pratt 1100G parts, which could be affected by the powder metal issue. That's kind of new news. What are the full implications? It's hard to say. Will it lead to further market share gains for LEAP-1A? I don't know, what do you think? Meanwhile, just meanwhile CFM is planning to introduce upgraded components for LEAP-1A engine. You see what's going on here. Pratt is really struggling. You have to feel sorry for them with a really difficult problem. And then on the other hand, LEAP is kind of making improvements to their engine to actually improve their ability.Let's go on to Slide 27, please. We're continuing here on the update. So just still on that A320 family, the A320 XLR variant. Soon to be enter into service second quarter of 2024, that's pretty much around the corner. That's really nice. That's exciting for Park. That's good news. So Comac 919, let's just skip down to the last couple of items they recently made. The first flight outside Mainland China, and then we've got to put in parenthesis, Hong Kong. So I don't [indiscernible] not sure there to consider Mainland China, I think it might be, but anyway, it's news. Because these Comac airplanes they are thought of as mostly for the Chinese domestic market. They recently unveiled a stretched and shortened variant of the airplane, at least plans to produce them. So that's really exciting. So Comac is not sitting still. They're doing more development work with this aircraft type.Let's go on to 28, another Comac; Chinese Comac aircraft, which is a regional jet. And last check item, Comac recently delivered its first 2 ARJ21 converted freighter aircraft, which is nice. And Comac hailed this as a solid step forward for China's aerospace sector. Any history buffs? Does that sound like anything to you? You ever hear of The Great Leap Forward? Do you think that's a coincidence? I don't know, I have no idea. Just -- when I read that, I thought, well, it kind of sounds like The Great Leap Forward. If you don't want to know about that, you might want to look it up.Let's go on to Slide 29. So the 777X aircraft. This is an exciting program for Park. And it's starting to actually happen. We expect to ship approximately $2 million of materials for this program. In calendar '24 Boeing said that it will be certified in '25, they're building ahead, of course. And this is important with the cancellation of the 747, A380, this 777X occupies a unique space in long-haul, high-payload capacity wide-body aircraft market. Likely to continue to do that for a long, long time. Why is that? Because nobody is planning anything to compete against it. Could be a significant program for Park. And then last, we always talk about the legendary Boeing 747, thank goodness for spares.Let's go on to Slide 30. So we have GE Aviation jet engine program sales history and a forecast estimate. So the sales history about look at on the right-hand column, Q1, $6.2 million; in Q2, $3.1 million; Q3, $4.15 million. So Q2 and Q3 were those burn-down quarters. Q4, we got booked $7.5 million, so, so much for the burn down, I would say, $10.5 million. Go look through the quarter, just any $7.5 million quarters -- I don't -- I think there were a couple before the pandemic that were at that level, maybe 2 quarters, but you have to go back a little further in history. So goodbye MRAS inventory burn down. I would say that's relatively good news for Park.And then we predicted this, but we'll get to that in a minute. I guess, Slide 31. The sharp drop-off in Q2 and Q3, GE Aviation jet engine program sales. It's all about that burn down. The MRAS calendar year '23 build plan, that's their build plan not ours, translate into about $23 million of Park GE Aviation program sales. We covered this last time. So what happened, why were our sales less than that in Q3 -- Q2 and Q3. Well, we already told you the answer. That's in -- and highlighted the bottom, the burn down, explains the whole thing.Let's go on to Slide 32. So with this kind of disruptive inventory burn down happen again, I think so, it likely will, it's happened before, it'll happen again. There may be some likely will be some degree of quarter-to-quarter volatility in our GE program sales because of inventory management challenges, maybe somewhat of a rollercoaster ride in time to time. So we talked about this at some length in Q2, just talked about the aerospace industry in general, how it has this propensity to have inventory management challenges and we can't do anything about that. We decided to be a supplier to that industry. We have to work with it. We could complain about it all we want, but it's a total waste of time. We're happy to ride the quarter-to-quarter to GE program sales rollercoaster and face the challenge presented by it because to us, the overridingly important consideration is the long-term outlook for the GE program sales, as explained on Slide 38.What the rollercoaster ride does -- this volatility does place additional pressure on us at Park to be agile, nimble and fast on our feet with our supply chain inventory and production management activities. We've got to be able to respond quickly. And that's kind of our calling card at Park. That's what we'd like to do.Slide 33. So we're still in the burn down sorry, it's such a big deal and we spend a lot of time on it, but where are we going with the burn down? Well, in our Q2 presentation, we predicted that the burn down was likely be completed in Q3 as that the Park inventory carried by MRAS be normalized by in the end of Q3. Based upon our bookings for Q4, that prediction was obviously correct. So we guessed right on that one.One more consideration regarding inventory management. As a general matter, it's very important to avoid overcorrecting and overshooting as doing so can create additional volatility with increasing the sine wave amplitude in inventory swings. Now in our Q2 presentation, we indicated this was a concern of ours. And if our concern proved to be well founded it could result in a significant spike in demand in Q4 and into fiscal '25. We told you that in our Q2 call.Top -- let's go to 34. That -- based upon our GE Aviation program bookings for Q4, that concern was obviously well founded. Our decision to ramp up our costs in Q3 in order to be prepared for Q4 and spike in demand is obviously the right decision for Park. Bonnie, I remember a few months ago, Mark said to me that he's gotten nervous and I said, "what do you mean?" He said, "Well, we try to track the inventory and it seemed like the inventory has burned down a lot, and these programs are ramping." And he said, boy, he's concerned it was going to be the spike and we could get overrun. And he was right. And obviously, we decided not to get overrun by increasing, by staffing up and building our upper costs in Q3, so it could be ready for Q4. So what do we think about all this? I know it sounds a little bit kind of smart-alecky, but we think it's mostly just noise and static. We think the freight train, the juggernaut, has come down the track at us at 100 miles per hour. It can't be stopped.So we'll talk about it on Slide 38. We better be ready or we will be overrun, just like Mark was saying to me. Slide 35 -- just FYI, the 24 MRAS build plan, theirs not ours, translates into $28 million of '24 Park GE Aviation jet engine program sales. That build plan is a year old. So I think they'll probably update that build plan soon. Let's see when it happens. Maybe it will be higher, I don't know.So let's go on to Slide 36. So now let's talk about Park as a whole. We have the history just for perspective, and you could see Q1, Q2, Q3. And you see how weak Q2 and Q3 were because the burn down and other factors we described at the beginning of the presentation. What are we looking for Q4, well, about $15 million to $16 million, numbers, $7.5 million for GE Aviation program. So that would be about $7.5 million to $8.5 million for non-GE Aviation talking sales and EBITDA of $3.2 million to $4 million. That's just doing the math really. A lot of variability in EBITDA based upon, which programs are active, that kind of thing and the timing of when additional costs get legged in or that's the best guess we can give you. And then we talk about the total for the year, and that's just kind of adding up the first 3 quarters plus the forecast for Q4. So nothing but just doing the math here.Looking at the -- sorry, '24 total compared to '23 total the top line is about like '23 and the bottom line forecast about like '23. So '24 we're kind of stuck in the mud as compared to '23, but looking for that breakout that we're talking about going forward.Slide 37 following us are updated, okay, we won't spend a lot of time with a preamble preliminary here because we went through this for the last 2 quarters. This is our outlook, very important stuff, very critical stuff for both GE Aviation programs and Park generally. So we think that the outlook is actually more important and meaningful than the quarterly forecast we gave you, even though we did give you a quarterly forecast. What's the timing for the outlook? People always ask that. We don't know. We said the freight train is coming, can't be stopped. Better be ready. I mean the Airbus CEO always said they're going to be a 26 in 2026. So I don't know. I mean I'm not in a position to second guess him. Why would I do that?Let's go on to Slide 30, what is it 38. Yes, 38. So here is the juggernaut. This is GE Aviation jet engine program's revenue outlook. I'm not going to go through it because we went through it. There's hardly any meaningful -- there's no meaningful change. Just a little kind of fine-tuning from Q2. The main thing we covered in Q2, I think, went through each program in detail during our Q2 call. So if you want, you can go back and listen to that. But the main thing we're trying to convey is that this is -- these forecasts are not aggressive. These are conservative. We went through each item, each program. The revenue per unit, we know that information. We have that from our customer. So the only question is what do we assume in terms of engine units, and we went through the explanation of that in Q2. And like I said, we think they're pretty conservative ends up with $55 million based upon the assumptions that are listed below which we will not go over, but you can read them, and if you have any questions about them, let us know.Slide 39. This is the outlook for all of Park, not just GE Aviation. Sorry, we're running long, but we're almost there. And this is identical to the slide that we provided to you in Q2. It's just really important. So we wanted to provide again, although there's no change. And the math is all explained in the footnotes. So if you have any questions about it, just let us know, but we're saying the outlook is about $150 million in sales and $36 million or $37 million EBITDA. But this is an outlook. As we say, it's not a forecast because this does not include anything other than the programs that were sole-source qualified on and assumption of a small increase in our non-GE Aviation sales baseline, which is $32 million in fiscal '23. So we assume that will go up to $40 million over the outlook period, which we think is actually kind of a walk in the park. I hope that doesn't sound arrogant, but that's how we look at it.So let's go on to the slide. So Slide 40 is just a footnote for -- in explaining the math that we did it, pretty straightforward. Slide 41. So these are examples of programs that are not taken into account in the outlook. Like I said, not a forecast; an outlook. Some of these programs will hit, some probably won't. But some will, I think, and we just can't tell you which ones. But I do want to highlight -- we're not going to go through all of them because they're really the same as we covered in our Q2 presentation, except there's a new one, major new manufacturing project assessed in the following slide. So let's go into this one.This is actually a big deal just recently came up, a major new manufacturing project initiative for Park requested by a highly motivated long-term large customer. We believe the project has a high degree of likelihood to proceed. Why is that? Because there's a motivated customer that wants it to proceed. It's extremely confidential. So I wanted to tell you about it, we wanted to tell you about it because it's a big deal, but we can't tell you anything about it, anything of any details. But just to give you a perspective, in order to do this, we need to build a new -- or purchase a new factory for the project size 30,000, 50,000, probably close to 50,000 square feet, capital estimated $6 million to $10 million, estimate. For the large workforce, that's the hardest part for us. I won't give you the number, but it's a lot of people. Now we're looking seriously at automation to reduce the size to the workforce, but that would increase the capital spending in automation.Slide 43, preliminary estimate of revenues for the project, $20 million to $30 million per year range. This is not -- we're not talking speculation. I wish I could tell you more about it. I can't. We're not talking speculation about the revenue opportunity. There's lots and lots and lots of detail behind that. And it's probably more than 10 years probably life of program, again, whatever, 20 years, 25 years. So it's a big thing for Park. A high priority, potentially very important project for Park and our customer.Let's go on to Slide 44, a little bit of a change of pace here. We haven't talked about the update with James Webb space to cope for a little while. Revelations for the ages. Reminder here, 21 of Park's proprietary SigmaStruts are incorporated into the James Webb's structure. James Webb, along with our Sigma struts are established at the Lagrange 2 orbit point located about 1 million miles from Earth; it's pretty far away. I don't know, I'd look it up, but I think light travels at 186,000 miles per second. Maybe you could look that up. I think that's it. But if you do the math, that's about 5 seconds -- 5 light seconds away, not your light years but 5 light seconds away. In other words, it would take about 5 seconds for the electromagnetic signals and stuff like that, radio signals to come back from James Webb to the Earth. The James Webb recently spotted -- this is just amazing stuff. I kind of get chills even thinking about it. It's probably the oldest black hole ever seen, we mentioned a black hole with a mass of 1.6 million suns from 13 billion years ago. The James Webb [indiscernible] this black hole in the center of the infant galaxy -- I hope this is not supposed be a cute thing. These astronomers, they are sometimes clever. I hope that's not supposed to be Gen Z. Maybe it is Galaxy GN-z11. That's only 440 million years after the birth of the universe. But here's something in bold. It's a big, big, big thing. Black holes this magnitude is not supposed to have existed until much, much later, the development of the universe. So what's that about? Is the universe really 13.7 billion years old? Or is it much older than that; 13.7 I am no scientist. I don't know anything about this stuff, but I think scientists measure the age of universe by expansion and extrapolating back how many years it took to get started.But let's go on to the next one, Slide 45. Are theories about star and galaxy formation correct or fundamentally flawed? Are modern cosmological theories about the universe and its origins correct or fundamentally flawed? And there is nothing more important than this, the universe, how did it get started? Data and images, sorry facts are facts from the James Webb are turning modern cosmological science upside down and inside out. We thought we understood so much about the universe and its origins, but the James Webb is telling us, we know so very little. Our theories are just not holding up. It is just beyond words and description, what it means for us in part to be a very small part of the James Webb and its revelations for the ages.Let's go on to the last slide. Just quickly, just these little photos from our Park family holiday party celebration. The thing I want to tell you about is, this is actually -- this is not like a meeting hall or something. This is our factory -- it's a factory floor. We didn't have all these tables here, forklifts were stopped going through there. See that floor. This is the original factory. This is 15 years old, it's not a new factory. See that floor, we don't clean the floor out for parties. It's the most beautiful factory I've ever been in. It's very special. So if you are ever in town, you want to come take a look, just let us know, be happy to show you around.Okay. That covers our presentation, Operator. So if there are any questions, we'd be happy to take them.
[Operator Instructions] Our first question comes from the line of Nick Ripostella with NR Management.
I know you can't get into specifics of this potential new program. But might you be able just to say something about the math behind it in terms of the kind of rate of return profile that something like that would have? Or can we just assume that it would be similar to the existing profile? And yes, do the best you can. Look, when you say you talk about the company and you use the word conservative, I trust you. I can take that to the bank. So you could be conservative. But the second question is obviously, Park has a very bright future. And as you've said in the past, you paid your dues. So concerning how much cash do you think the company really wants to keep on the balance sheet going forward? What do you think -- what's your viewpoint on that?
That's a tougher one. The first one, yes, the margins are quite good on this new project, quite good. And maybe better than our existing margins, it's really not worse, maybe better than our existing margins. So quite good. And by the way, happy New Year, Nick. Thank you for your questions. So hopefully, that gives you a little perspective. We -- there's a lot of information. This is not just kind of like starting. We have lots of information, a lot of numbers that have been crunched. So we know a lot about this project. So when I say the margins look quite good, that's not just kind of worked up my head stuff. How much cash do we want to keep? Well, that's why I mentioned we got the $9.3 million that we still got to pay the IRS for that [indiscernible] stuff. Well, I don't know. I mean, good question. It's something we think about the Board talks about all the time. It's really nice to have cash so that if we want to do this project. We said it's $6 million to $10 million, but let's say we spend more money in automation, let's say it's more than that. It's nice to have to -- it's nice to be able to say, yes, we'll do it rather than, okay, where do we get the money for it. And the customer that approached us, they know that, too. We're a public company. So they know that if we both agree to do it, that we're not going to come back and say, "Sorry, we don't have the money." So I don't know, that's a good question, Nick. I mean I'm not really going to say, oh, we got way too much -- more cash than we'd like to have. When we had $150 million or so, I would have said that. But at this point, yes, I mean, it's really nice to have the cash we have, but I wouldn't say, "Oh my God, we have so much excess cash." I don't know if that helps, but that's kind of an off top of my head off a tough answer. And it's something we talk about at the Board level quite a bit though.
Can I just ask another question?
Sure.
No. Just -- I mean, obviously, with what's going on there, you're going to start generating cash hopefully in the next couple of years. So even after you pay the taxes and things like that, I mean it's just -- obviously, it is nice. We like that you run the company very conservative like that, but with programs like this, I'm just trying to feel it out a little bit, but I understand where you're coming from.
Yes, good point. It's not a static number. You're right. We expect to generate cash. So it's something that really we have to evaluate on an ongoing basis, Nick, I think. It's just -- it's nice to have something so that when opportunities present themselves, we can go after them. We never thought of -- think of buying stock, buying back stock as our biggest priority, but we'll do that as well if the price is right and the opportunity presents itself. So it's nice to have cash available for that as well. Companies, they go borrow money to buy back stock is like, okay, that's an interesting way of doing business, but it's not our way of doing business. So we plan to be around a long time. We're not planning for a couple of years and playing games with our, what we call, financial engineering stuff. But so okay. Does that help? Are there any other question follow-up questions, Nick?
Thank you so much. Best of luck for the rest of the year and next year.
Thank you very much, Nick. Happy New Year to you and your family.
Thank you. There are no further questions at this time. And I would like to turn the floor back over to Mr. Brian Shore for closing comments.
Thank you, operator, and thank you, everybody, for listening in. It was really nice to be able to share what's going on in Park with you. I'll again, wish you and your family a happy New Year. That comes from both Matt and me and Martina, Donna and all of us. And we'll be around if you have any questions, feel free to give us a call. Happy to talk to you. So you have a good day, and we'll talk to you soon. Goodbye.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.