Good morning. My name is Howard, and I will be your conference operator today. I would like to welcome everyone to Park Aerospace Corp. Fourth Quarter Fiscal Year '22 Earnings Release Conference Call and Investor Presentation. Thank you. I will now turn today's call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference.

Thank you, operator. Hello everyone. This is Brian. Good morning and welcome to our Q4 investor conference call. We're glad to have you with us. This morning we announced our earnings, and you may want to refer to the earnings release for details and instructions to access the presentation through the webcast on our website. As always, we provide a disclaimer that we can't cover everything today, although we have a lot to discuss. We won't dive deep into numbers, but we will highlight some areas we think might be of interest to you and offer some perspective. We're going to skim over certain parts of the lengthy presentation, as not all of it will be covered due to time constraints. It could still take about 45 minutes to get through, and I wanted to make you aware of that. Matt and I will address any questions you have once we're finished with the presentation. So, let's get started with Slide 2, which contains our forward-looking disclaimer. If you have questions regarding it, feel free to reach out to us. Slide 3 is the table of contents, and Slide 1 is the presentation overview. In Appendix 1, you will find our supplemental financial information as usual. Now, on to Slide 4, where we'll spend a bit more time. Here are our Q4 results, which you may already know from the earnings release. The top line has decreased from prior quarters, but we are pleased that the gross margin is back over 30%. We're not happy with last quarter's gross margin falling below 30%. The adjusted EBITDA margin is also where we want it to be; ideally better, but at least above 20%, unlike the previous quarter. Our adjusted EBITDA stands at $3 million, which we are satisfied with. In our Q3 conference call, we mentioned sales estimates of $12.75 million to $13.25 million. We did not meet the top end, finishing under this estimate at $12.5 million. Our adjusted EBITDA was expected to be $3 million to $3.5 million, and we met that range. I should remind you that when we provide forecasts, we're not calling them guidance or estimates. We share what we believe will happen without the intention to underestimate to appear favorable later, which we find to be disingenuous. While we fell short on our top line, the bottom line was where we wanted it to be, demonstrating an outstanding job by Park's team in achieving the EBITDA numbers despite challenges. Moving on to Slide 5, we'll discuss the ongoing situation at Park in Q4, Q1, and beyond. Supply chain issues have become a persistent challenge, with expectations last year that it would resolve, which it has not. Our freight costs and staffing shortages are ongoing concerns. In Q4, we incurred approximately $1 million in missed shipments primarily due to supply chain issues. Let's move to Slide 6. The situation regarding inflation continues to affect us, including raw material costs, freight charges, and utilities. Everyone is aware of rising prices at grocery stores and gas stations, but it's essential to remember that the term 'transitory' is used in discussions around inflation. We're sharing this information not as excuses, but to provide context about the challenges we face at Park. Slide 7 continues the discussion on supply chain issues, which have escalated into significant chaos. There's a breakdown in expected fulfillment of orders and pricing agreements that were once reliable. Suppliers are struggling to meet delivery commitments, and in some cases, pricing in confirmed purchase orders are not being honored, putting us in a difficult position. At Park, we remain calm amidst this turmoil and are committed to handling the challenges as they arise. We hold ourselves accountable for honoring our commitments and ensuring we don't go back on agreed prices due to unforeseen cost increases. Let’s see Slide 8, where we present an annual look at Park’s fiscal history, comparing fiscal years 2020 and 2022. Although the top line is down for fiscal year 2022 compared to 2020, gross margins are better in 2022 even with various challenges including COVID-related disruptions. Our adjusted EBITDA has remained consistent, showing the effectiveness of our team in difficult circumstances. If you want to express gratitude to our employees for their hard work, please do so; they are the ones responsible for these achievements. Moving to Slide 9, we regularly present findings from our investors, the bottom point on this slide reflects that with rising interest rates the era of cheap borrowed money is drawing to a close, which we hope will assist us as we face competition for mergers and acquisitions. On Slide 10, we recognize that since fiscal year 2005, we have returned a substantial $554 million or $27.05 per share in cash dividends, which is significant for a company of our size. Slide 11 presents our top five customers in Q4. Notably, we supply materials to Boeing among others, some of which are tied to notable programs like the PAC-3. Let’s continue to Slide 12 where we compare fiscal years 2020 and 2022, highlighting product lines and the military segment's resilience despite various setbacks. Moving to Slide 13, we feature ongoing military aerospace projects demonstrating our involvement in niche programs. Now, with Slide 14, we will discuss military market trends which have shifted due to global events, particularly the war in Europe, leading to increased defense spending. Government expenditure on missile defense systems has also significantly risen, noted in our discussions about the 2023 defense budget. On Slide 15, we focus on Europe’s invigorated defense budgets, which may drive further growth in missile systems and other military expenditures in response to geopolitical concerns. Slide 16 continues this discussion, with Lockheed Marting reporting increased global demand for their missile defense systems as governments react to current conflicts. We can clearly see a trend toward rising defense spending in North America, Europe, and parts of Asia, although supply chain constraints may temporarily hinder this growth. Slide 17 transitions into the commercial domain, assessing recovery in the aviation sector driven by domestic and transatlantic travel. Airlines are reporting strong passenger demand, and projections suggest a hopeful recovery of pre-COVID aircraft levels soon. Slide 18 details how rising jet fuel prices motivate airlines to replace older aircraft with more fuel-efficient models, which leads to different purchasing behaviors based on economics. In addressing concerns from consumers over increased ticket prices, we acknowledge the potential impact of a recession on airline demand, which brings us to Slide 19. We recognize pent-up demand for air travel as restrictions ease, yet question the sustainability of travelers’ willingness to pay higher prices. Moving on to Slide 20, we analyze possible impacts on aircraft manufacturers should consumer behavior shift. We'll also examine market trends on Slide 21 regarding our LTA agreements with Middle River Aerostructure Systems which remain healthy despite current challenges. Transitioning to Slide 22, we highlight new product developments in collaboration with GE Aviation, particularly the film heater product under joint development that is nearing completion. Further, our materials have been approved for multiple high-profile aircraft programs, such as the Global 7500. Slide 24 revisits the importance of the A320neo family, with Airbus setting ambitious targets for increased production rates. Slide 25 emphasizes Airbus's ongoing efforts to maintain their delivery goals while navigating supply chain challenges. Continuing to monitor these trends as resumed production rates will impact us in the years ahead. Slide 27 outlines our participation in the A320 family programs and anticipated revenue generation for Park in the upcoming years. Slide 30 brings us to our sales forecasts for Q1, which are not what we would love to see, attributing some limitations to supply chain issues. We hope to clarify the uncertainties surrounding our financial outlook on Slide 32, breaking down our projections into military and commercial sectors. Despite invites a degree of caution, we are optimistic about opportunities particularly in defense as nations focus on bolstering military capacities. Moving to Slide 34, we discuss the significance of factors influencing the status of the Global 7500 program and support it will receive. Finally, as we prepare to close, we reflect on our principles and commitment to our workforce despite challenging external conditions. We prioritize integrity in our recruitment and talent management strategies, adapting to the ever-changing economic landscape while maintaining our values. Thank you for your attention, and we welcome any questions you may have at this time.

We have a question or comment from Brian Glenn from Olcott Square Investment.

I know there was a small buyback back in the quarter ended May 2020, around 137,000 shares, and the stock price has remained about the same. From my perspective, the outlook appears significantly better and more certain, despite considerable uncertainty. In May 2020, we lacked a vaccine and had no clear timeline, and air travel was globally suspended. Now, it seems you're gaining more exposure in some existing programs, such as the film adhesive for the 7500 and the ramp-up of the A320. Those details have been shared, along with your comments regarding China's Comac and military spending. Given that the stock price is roughly the same, I'm curious why there hasn't been any repurchase, whether small or large, considering it was considered a good buy back then.

That's a very good point. Currently, we are in a blackout period, but it is something we need to think about. We haven't been very aggressive with buybacks; historically, we prefer to use our capital return to fund special dividends rather than buybacks. I appreciate your input and will keep it in mind. The short-term forecast is challenging, and we can't provide any guidance due to the current market difficulties. I agree that while it’s hard to predict the outlook because of various temporary factors, it does appear to be positive. Thanks for your input; it's something we will consider and discuss at the next board meeting. That's all I can share at this moment.

Okay. Can you remind me of the A321, the SLR that you mentioned? Is that part of the long-term agreement for MRAS or is it separate? I think you mentioned it before, but I just don't remember.

It's within the LTA. So yes, that's a LEAP-1A engine. So that's all within the LTA.

Understood. And then I guess, last 1 if I can sneak it in. Any comments around the timing of actual workflow being done in the new facility and it might have even happened?

The timing of work starting at the operating facility is confirmed. Please go ahead, sorry.

Yes, yes.

We're still going through the qualification. And as I said, that's been delayed. We've had to actually choose between the qualification and production, and we chose production. We don't want to disappoint our customers. So the qualification was delayed just because of raw material shortages and staffing. As I said, the people that are actually running the equipment are people from R&D and engineering, which is not what we want. We want operators to be over there. So at this point, we're not being pressed hard at qualification complete, which is good. So it could take a little while longer. But once we get the qualification complete, then we'll start producing in that factory for MRAS and other customers as well. But I don't have a hard timing for you on that. And it's kind of 1 of those things that's in flux based upon all the other supply chain issues that we're dealing with.

I'm showing no additional questions in the queue at this time.

Thank you very much, operator. Thanks, everybody, for listening, hanging in there. I apologize these calls keep getting longer and longer. We do our best to rush through them. So anyway, so have a good day. And you always can reach Matt and me if you want to have any follow-up questions, we're happy to always take your questions. Have a great day. Thanks. Goodbye.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.