Good morning. My name is Michelle, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Park Aerospace Corp. 1st Quarter Fiscal Year 2022 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 be a question and answer session. Thank you. 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. Welcome all to our Q1 investor conference call. I have with me, of course, as usual, Matt Tharborough, our CFO.
So, Park, we announced our to our earnings early this morning. You want to go check that earnings release, because in that earnings release, there are instructions as to how to access the presentation that we're going to go through now. And in order to make this call more meaningful, you really want to have the presentation in front of you. The presentation is also available on our website if you want to do it that way. So what's interesting about this call is that it was actually less than 2 months ago, there was accounts before.
So There's not a lot of new stuff, but there are some new things. We'll give you some updates. And we'll try to make it interesting by not having everything Hussein, some of the slides are actually almost identical to the Q4 slides, but we felt we kind of had to include them for perspective. Some of you may be totally on top and remember every line of our Q4 presentation, but I suspect most of us aren't on top of it. So Some of the slides we're going to at least quickly go through just for the perspective.
And like I said, maybe we'll skim through those, but I believe they're there for perspective. The presentation could take about 45 minutes for Matt and I to go through. So I just want to warn you, partly because we're including a number of slides from Q4 just for that perspective and context. Then of course, after Matt and I go through Station will answer questions for you. Okay.
So why don't we get moving. Slide 2 is our forward looking disclaimer. If you have any questions about it, just let us know. To Slide 3. We have set the New Year table of contents.
So the first thing, Slide 1 is the presentation. Appendix 1 is supplemental financial information, which to something we've included in our presentations for several quarters now. Appendix 2 and Appendix 3 are new, environmental and community considerations, to Diversity in the Workforce. These statements, Park statements are actually posted on our website. I think maybe early June, we put them up there, but because We suspect that a lot of people aren't aware of every last thing when it goes on our website, probably don't check it every day.
We just wanted to attach these two statements as appendices to this presentation, just so we bring it to your attention, so you're aware of it. We don't You're aware of them. We don't intend to go over them during this call, but we wanted to put it out there so you can see them. And like anything else, if you have any questions or Mitch, please let us know. Okay, let's go to Slide 4.
This is going to take a little bit more time to go through. So, why don't we start with Q1, to the numbers. Sales $13,594,000 And let's just compare that to Q4 for a second, because this is an important perspective. Q4 was $14,441,000 But remember, we covered this. Q4 included $3,500,000 of that essential component.
We keep talking about that for missile programs. So basically that's Pastore. We had a relationship with a supplier overseas. We buy this product and we sell it to the some of the customers And we charge a markup, but there's no production involved and very low margins involved. So really, if you want to get apples to apples, you might want Attract about $3,500,000 from the $14,400,000 So that's approximately $11,000,000 compared to the for Q4 Compared to the $13,000,000 $5,94,000 depends on how you want to look at it, but just offering that for perspective, gross profit $5,000,000 for Q1 $5,000,000 for $7,200,000 and gross margin 40.3%, which to us is something I don't remember seeing that maybe ever over 40% gross margin.
That's quite good. We normally don't like it when our gross margins go below 30. So above $40,000,000 is quite good. The adjusted EBITDA of $4,100,000 I don't $4,104,000 I don't remember how long ago it was that we had EBITDA above $4,000,000 in the quarter. It's It's been a while anyway.
You can look at the historical quarters, you don't see anything getting close to it. And 30% to 30.2%, adjusted EBITDA margin also Quite good. And look at the history, you're not going to see anything like that. So let's see, what did we say about Q1 during our May 13, to the May 13 2021 Q4 investor call. When we say about it, we said our sales estimate It was 13.3% to 13.8%.
So our sales came in right in the range, which is good. That's what we want. And I'll explain what I mean by what we want in a second. Adjusted EBITDA estimate was $3,600,000 to $4,100,000 So we came into the top end of the range, but let's Say, we're still within a range by yes, we're just at the top end of the range. Now remember our forecast philosophy, I'll remind you of this just about every quarter is We don't play this what we consider to be a game where we give you numbers that we know we can beat so we can be heroes.
We think that's kind of silly. It's insulting to you. And plus it violates one of our principles, which is we always tell the truth. And as we know, we could be wrong, we can make Thanks. But if we believe something, we're going to tell you.
We're not going to tell you we believe X, we're going to tell you X minus 3% or something like that, so we can be heroes. We know a lot of companies do that and probably almost all of them do it, but that's not for us. So we just want you to understand that. So we give you an estimate, a prediction, this This is what we think is going to happen. We could be wrong, but that's what we think is going to happen.
We're not shading it to look like heroes. Certain factors which affected our Q4 and Q1 to sales and margins in Q4 sorry. Laurie mentioned that there was a $3,500,000 of sales of the essential component. For missile programs, very low margin, just a markup. And Q1 actually was the other side of the coin, the other side of the equation, about approximately $1,000,000 of sales of materials for those missile programs.
Those are very high margins. So you see the flip there. Eventually, all those The essential components will be used and produced into pre preg and sold at good margins and reached that to expectation. To Q1 other factors, favorable product mix in some respects and also cost factors, which were favorable for to Q1. So, but that's only part of the story.
First of all, there were no real unusual items or nothing special or unusual that pushed up the bottom line for Q1. Like we just said, good mix. We had those sales of the we call it a blade of materials or materials for missile to our programs. And just want you to highlight, we'll get back to this later, that there was a very steep GE ramp With no extra people. So it's easy to say, oh, it's a good mix and stuff like that, but somebody had to make it happen And that's our people making it happen.
Also with relatively low waste, you increase your production by significant amounts actually compared to Q3, Q3 compared to Q1, 4 times GE program sales, 4 times, 4 times. That's a very, very steep ramp and our people handle it And handle it really well. So, Kim Wen, we won't see those kind of gross margins and EBITDA margins for at least the next couple of quarters, but it does give us some perspective on what's possible. Now cost side, we need to hire people. We haven't As you'll see from the presentation, we haven't been successful at that, but we still plan to hire people.
T and E will increase as one example of cost increasing because with the pandemic, We were willing to travel and nobody was willing to see us and we go to call customer, well, we're not there, we're all home. So hard to visit a customer when they're not there. But we're hoping that will cover. So there's going to be some increase in costs as we go forward, which is what we want, a good thing. Let's go on to Slide This is just historical perspective.
Look at those gross margins, nothing close to 40% And EBITDA margin is nothing close to 30%, even during those so called good years like fiscal 2020. So enough on that one, let's keep moving. To Slide 6. Okay, Matt is going to take over on Slide 6. So go ahead, Matt.
Please help us out with Slide 6.
Sure. On the cash investment yields, I'll just let you know at the end of the Quarter, our cash and marketable securities were approximately $117,000,000 very similar to the fiscal 2021 year end cash and marketable securities. Park invests in highly liquid, high rated U. S. Treasuries, agencies and corporate bonds.
For Q1, our portfolio Yielded 0.35 percent, so rates very low. This is reflecting the decreasing rates on investments Our longer term investments maturing and as they get reinvested. So far this calendar year Until just recently, treasuries as long as 3 years have been yielding less than that 0.35%. For comparisons. At January 1, 2020, treasury yields for 1 year all the way through the 3 year treasuries were all between 1 point 5% and 1.6%.
Highly rated corporate bonds are a little bit better, but not much. Just to give you some perspective, last calendar year, our investments earned last calendar year, That is our investments earned on average 1.76%. For the trailing 12 months that just ended, they earned 0.91% steep drop off. And for the Q1, this 1st fiscal quarter, Our investments earned 0.35 percent as I mentioned before. That's how fast rates have Dropped off a 1 year treasury right now will yield less than a 10th of a percent.
Net investment income will remain very low Until we see a recovery in short term interest rates. So moving on to tax rate, Our effective tax rate for the Q1 was 30%, 30.0%. This was higher than normal as we broke down some deferred tax assets in Singapore that we feel are not going to be realized. Assuming nothing unusual comes up during the year, the rate going forward, the effective The tax rate going forward through the fiscal year should be closer to 27% for each quarter. Of course, the change in Federal corporate tax rates could change all of that.
There's been a lot of talk about potentially bumping up the federal tax rate. Moving to depreciation. Depreciation will climb through the remaining quarters of the year as we bring online our expansion. For the full fiscal 2022 year depreciation will be similar to last year's. Last year's depreciation was roughly $1,200,000 but it will start low and grow throughout the year throughout the quarters of the year.
Next year's depreciation, all of our expansion assets are all online. After running, the depreciation will increase So much significantly as we have a full year of depreciation on all of those expansion assets. That's it for me, Brian, unless there's anything else I can add.
Okay. No, that's great. Okay. Thanks, Matt. All right, good deal.
Let's go on to Slide 7, so we'll keep moving here. So this is just a slide that we've included before this information. Actually, one of our shareholders said they missed it Last quarter, so we decided we'll just put it back in. So I think you know the story, 0 long term debt, at Matchwood Metair, he covered $117,000,000 in cash. And then we have dividend history, $546,000,000 paid since fiscal 2,005 and we'll keep going.
So, and you can ask any questions about the dividend history, let us know, but when we just keep moving, so we don't get too bogged down, got a lot to cover. Slide 8, this is a Slide has become kind of, I guess, standard for our presentations, the top five customers in alphabetical order. So and we have nice pictures associated with most of the customers. First is A, aerospace that relates to picture Turn top right, the NASA OREO program. Those are ablative materials we supply into that program.
Next one is GKN Aerospace. Look at top left, the Boeing 787. To GKN is a contractor and we supply to many programs through GKN, but we chose the 787 for this presentation, Carol's for structural components is what Park supplies. Kratos, they're Pretty common top 5 customer these days and we usually provide a picture of one of their drones, the VQM SSAT. And I think we've mentioned this before, but we believe we're the main supplier of composite materials for their drone programs, for the structures for their drone programs.
And on the bottom right, actually something a little surprising. This is for NORDAM. These are radome materials for the weather to our radome that are used for the 737 and 737 MAX. For Nordheim, we also supply Nordheim through for multiple programs, so we thought we'd select the 737 MAX For a change of pace. A little bit of a Boeing orientation here.
Middle River at MenRas, we got plenty of coverage about them, so we don't need a picture for them for Slide 8. Let's go on to Slide 9. Kind of interesting, I think, that looks like the these are the pie charts, which I think are interesting parts, to Estimated Revenues by Aerospace Market segment. But what's interesting is Q1 of Fiscal 2022 is starting to look like fiscal 2020. Obviously, fiscal 2021 was big difference With commercial being way down and military being up, but now it looks like we're kind of returning more to the pattern of fiscal 2020.
Okay. Let's move on to Slide 10. Park Love's niche military aerospace program. This is another standard slide that we have and we're Using the last few presentations, this is a project as well as the top five for Don and Elena. They always select the interesting programs to to talk to you about these programs aren't necessarily big or small.
They're just programs we think would be of interest. Let's just go through it. Raytheon MK-six guided missile, that's a newer program for us. We to supply of lated materials into that program. Lockheed, C5 Galaxy, pretty, aircraft that's been around for quite a while And we supply materials for various structural components, the Boeing Apache helicopter and materials for secondary primary structures.
To the Textron System Shadow, which is a drone obviously, materials for aircraft structures, been on this program for a while with multiple variants. And here's something interesting, Airbus C295 Materials for Interiors. We consider radomes, rocket nozzles and drones to be kind of niche areas for Parq in the military part of our business. Why don't we keep going to Slide 11. This is just a teaser for you.
Like I said, we're going to try to make this a little interesting. Launch is planned for the James Webb Space Telescope, November 2021 and going where no man or woman has gone before, that's I think from Star Trek. This is a program that we feel really, really pleased and privileged to be on. We'll probably do more of a detailed discussion of the James Webb maybe when We announced Q2 since the launch is going to be in November 2021, but we thought we'd provide this as a little bit of a teaser for you. So why don't we just keep going?
A lot to cover, like I said, Slide 12, the update on our major expansion Of our Newton, Kansas facility, a total budget $19,000,000 spending to date $16,500,000 spending to go, we can do the math $2,500,000 The expansion is basically Complete some BRYPT and BRAB still coming in, but the expansion is basically complete. Managed Factor trial is expected to begin later on this month. Qualification run is expected to begin in September of this year. Just one little caveat there. We've discussed over the last couple of quarters, but we continue to be challenged with our supply chain raw materials and we continue to fight the battle every day.
So we're going to have to see if we feel we have enough raw materials to actually do the qualifications starting and trials starting in these dates, Because what we don't want to do is start qualifications and trials and then not be able to produce for production, that would not be a good choice. So Well, let's see what happens. At this point, though, this is our plan. And last item, I think important, we push forward with our major expansion Many others are slashing their capital spending. Good thing we did, good thing we did because we'd be in a world of hurt right now if we didn't do this.
Remember, we'll cover this later. This was originally supposed to be a redundant facility for the GE programs. But if we hadn't done this expansion, Especially based upon the indications that Airbus is giving about the A320neo program, we've been a world of hurt right No, because you don't do an expansion, you're going to qualify in 6 months. That doesn't happen. So it'd be very good we did this and very good we stuck to our guns.
It didn't Walter and Flinch and went ahead and completed this expansion. Some pictures and the bottom right picture is Donna with the door open kind of welcoming us in, saying, come on in, the expansion is complete. That's their front entrance. So Good. Let's go on to Slide 13.
Slide 13 is really just going to review slides, so cover it Quickly, like I said, we're including the slides for perspective, maybe some of you don't remember everything we covered in Q4. This relates to single aisle in particular higher jet fuel prices and environmental concerns provide extra motivation for airlines to move quickly to replace less fuel efficient legacy single aisle aircraft, more fuel efficient modern single aisle aircraft such as the A320 Neo family. Look at those crude prices, they go up and up and up. I know they're down a little bit in the last day or 2, but they go up and up and up. And that means motivation, motivation, motivation for these airlines to replace There are less fuel efficient airplanes with more fuel efficient airplanes.
Remember at the beginning of the pandemic, we said, oh boy, these crude prices are low, there's not much motivation. Motivation is very big right now. China doing quite well with domestic aviation. They had a little bit of a setback with COVID outbreak and lockdown in Guangdong province, but they're still At the level they were at pre COVID, they were actually even more than that. Now we're kind of back to that level.
So it's still very positive for single aisle. Domestic translates to single aisle, international translates to wide body. U. S. Domestic aviation recovered to Approximately 84% of pre COVID levels, that's based on the report I read recently.
Full recovery expected in 2022. I haven't heard that some airlines are saying they They expect full recovery by the end of this year, very positive for single aisle sales. And although it is a way to go, European domestic aviation is already to recover positive that's also a positive sign for single aisle sales. You probably read this United just did a huge single aisle order. That's all good news and good indications.
That was not only for the A320neo, that was for the MAX as well. Single aisle aircraft place To be in commercial aviation, at least for now, that's our opinion. Let's go on to Slide 14. We're continuing the same theme. These are 2 new items So let's look at these.
U. S. And European Union resolved their 17 year long trade dispute involving subsidies of Boeing and Airbus. Okay. We all read about that, I think.
But this is kind of interesting. I feel a little strange. According to the U. S. Trade Representative, We are finally coming together against a common threat.
And she mentioned China. I thought that was an interesting comment from her. And then the next one, Boeing recently stated is in no hurry to develop a new Single aisle aircraft dubbed 5X to compete against the Airbus A321XLR, that was So both those were a little surprising to me. So we'll circle back on both those points throughout the presentation, if that's okay. To Slide 15.
We go through this slide pretty much every quarter. Remember, we have this is GE Aviation Generation Programs. Remember, we have the firm to Pricing LTA. It's a requirements contract from 2019 to 2021 with Middle River Aerostructure Systems, that's MRAS, A sub of ST Engineering Aerospace. Let me just remind you that MRAS was a sub of GE Aviation And that's why all the programs run through MRAS are GE Aviation programs.
A couple of years ago, GE Aviation sold MRAS to ST Engineering Aerospace, which is a major aerospace company based in Singapore. Our redundant factory construction really should say basically complete, not nearing completion. So that's on us. We missed that one. But remember that that was our deal.
Once we entered into that LTA, we agreed, okay, we're going to go ahead and build a redundant factory and we're to people of our words. So we went and did that. But as I just said, it's pretty darn good we did it because we'd be in a world of hurt right now if we hadn't done that, Not for redundancy, but for capacity. We're sole source on for composite materials, for engine nacelles and thrust reversers from multiple MRAS programs. The first, let's see, 1, 2, 3, those are 5 are A320neo family.
Then there's a Boeing 747, the COMAC 919, the COMAC ARJ21, which is a regional jet and a Bombardier Global 7,500. You can see some of these programs we are sole source for lightning strike material as well. Top right, par composite materials are also sole source The primary structure components for Passport 20 engine for the Global 7,500, but that's not part of the MRS LTA. To picture the legendary Boeing 747, a edgy nacelles. I love this picture because it gives you perspectives as to how huge these things are.
Everything you see here is made with Park Materials in terms of the nacelles, also their stuff inside, thrust reversers and the infrastructure, which you can't see. Let's go on to Slide 16. Let's do a little bit of update on the GE Aviation to the program. Some of this is just review and some of them that's new. Let's start with the A320, Neo family of aircraft.
That's the To the Kahuna for Park anyway. So the first couple of items we covered during our last Q4 call, currently at a rate of 40 going to 43 by Q3 and 45 by the end of the year. And that was confirmed by to the Airbus CEO during a investor call on April 29. He also mentioned a steep ramp in 2022 and 2023 for the Single aisle airplanes, meaning the A320 family. Then this is new April sorry, May 27, 2001 news release from Airbus.
This is just quoting from news release. So this is an easy one, just direct quote. A320 family: Airbus confirms an average A320 family production of 45 Aircraft per month by Q4 2021. Okay, that's consistent with the prior items and calls on suppliers, that means us to prepare for the future by securing Affirmative 64 per month, going from to 64 per month by Q2 of 2020 In anticipation of continuing recovery, Airbre Zolle also asking suppliers, meaning us, to enable a scenario rate of 70, 70 by Q1 2024. Longer term, Airbus is investigating to opportunities for rates as high as 75 to 2025.
Let me just explain what 75 means. That 75 We represent 20 percent sorry, 21% higher than the peak of our long term forecast that we're using. That's very significant if it pans out both in units and in dollars. And let me go to the next item because it kind of is important that you understand how we get to to that 21% number. Next item on Slide 17, continuing as of the end of May 2021, CFM, meaning the LEAP-1A engine, at 60% it's actually I think about 60.4% share of firm orders for the A320 Neo family of aircraft.
That's the source of that is aero engine news. So A320neo, 2 engines are on the A320neo, to LEAP-1A and our Pride engine. So this is saying that in terms of firm orders, this is not forecasting, this is not speculation, this is not some smart guy who thinks We know what's going to happen. This is 60% of firm orders. So when we do the math, we use 60%.
That may not pan out, That's what we use. I just want you to understand that. So we say that 75% in the prior page translates to a 21% increase over the top of our forecast where it peaks, that's based upon assuming a 60% share for the LEAP-1A engine. Okay. Let's keep going on Slide 17.
Another little interesting thing, on May 21, 2020 1, CFM and IndiGo, IndiGo's Large centerline announced that IndiGo has selected the LEAP-1A to provide the power an additional 310, wow, to thank you for joining Neil, family of aircraft representing CFM's largest order ever on our units. Now what's interesting here also a little side note As India has had some trouble with COVID, as you probably know, recently. So it's been a setback for its commercial to domestic aviation industry, but these people are smart, they're thinking ahead. So they're going ahead and ordering these airplanes with these engines, which obviously is good for park. And last item on 17, Airbus recently announced it is resuming work on a new assembly line in Toulouse for A321neo aircraft.
Airbus announced assembly this new assembly line is scheduled to be operational by the end of 2022. Why is that significant? So So some people look back at the last item on 2016 and say, oh yes, Airbus, they're all talk, they don't really mean it. But maybe this is Airbus Saying they're not all talk and maybe they're putting their money where their mouth is. I tend to listen to everybody.
I'm not I think they're smart people that we're talking about. Just an example, last year, they were saying we're not going to go below 40 and lots of these smart analysts and Commentators, oh, it's not going to happen. They're going to go above 40. So we didn't know what's going to happen. We certainly paid attention to Airbus when they said We're not going below 40 and they never went below 40.
So we'll see what happens. You never know, but I just wanted to give that perspective. There's a nice picture of the A320neo to ASR HB 21, Neil, with the LEAP-1A engine, Slide 17. Let's go to Slide 18. Let's talk about this XLR, 321 XLR.
So some of this we covered, some of it is new. 1st test aircraft nearing final assembly, 1st flight expected Sure. Certification entering your service, that's 2023. That's like tomorrow in the Commercial aviation timeframe, like talk about dog years, 2 years is nothing. And they've been saying this, they're not backing down.
So that's pretty important. Is this going to be a game changer? A lot of people say, yes, it might be, because The concept is that this airplane could replace wide bodies on many missions with much lower costs. So here's a key question. Is this single aisle, 5,000 plus statue mile range, 225 plus seating capacity market being ceded to the Airbus A321XLR by Boeing.
Boeing said they're not in any hurry Come over the competitor. I know what that means. I'm just telling you what Boeing has said. But either way, this is I think will be a pretty my Feeling that this could be a big airplane for Airbus and for Park and we'll see what Boeing does. And we'll just have to see.
I'm just telling you what Boeing said. I don't have any insight track into Boeing. I'm not an insight guy at Boeing. I'm just telling what they said. So I'm a little surprised about that, like I commented previously, Nevertheless, that's what Dave said.
Let's go on to Slide 19. Continuing with the updated GE Aviation Jet Engine programs, to 9/19. This is the Comac airplane that's designed to compete against the MAX and the A320. It's a single aisle. Poemak continues to maintain the intent to certify and begin deliveries of this aircraft before the end of this year.
So we'll see what happens. I think originally it will be for the Chinese market, but they intend, COMAC, Chinese, they want to be world players in commercial aviation. So As compared to the regional jet, which is really kind of a China airplane, they want this to be an airplane not just For China, the 9/19. They want this to be an airplane for the world, meaning you'll have to get it served by the FAA and EASA, that kind of thing. But I think it will begin with a Chinese certification delivery into China.
This airplane could be a pretty big opportunity for Park once it gets going. But here's a couple of questions. How will the recent peace treaty between Boeing and Airbus And to deal with their common thread to affect COMAC and the 9/19 program. I don't know. I mean, it's a good question.
I sense it will not affect to domestic sales, Chinese domestic sales, but we'll see what's going to happen here. It's kind of, I think, strange development And I think it was strange that the U. S. Trade Representative was so blunt about the intentions about this piece trading. Then the other thing is COMAC recently reiterated plans to to complete the development of domestic engine alternative to LEAP-1C engine for the C919 by 2025.
So what I would say about this is that in my opinion, it's much more difficult to certify an engine than an airplane. Terrifying an engine is a big, big deal. Engines are very complex and a lot going on with engine. So we'll see if that happens, maybe it will, maybe it won't. To Slide 20.
So going on with the updates on the Global 7,500 and the RJ21, we've been saying these Program is in a ramp mode for the last couple of quarters. That's based on the forecast we've been given. But now the nice thing is we're seeing it In the order patterns with the Passport 20 for the Global 7,500, even beginning with the ARJ21. We're actually starting to see it on the order patterns, nice pictures of these airplanes. So that's good news.
So let's go on to Slide 21. And last but definitely not least, the Boeing 747-8, Boeing announced that it will terminate production of the Queen of the Skies in 2022, long lived the Queen. To me, this is a very, very special airplane and we got pictures of legendary Boeing 747 Queen of the Skies in real life. Real life means that these pictures were all taken at Anchorage Airport and all taken by me, from the cockpit of an airplane, my airplane, the Top pictures I was taxiing behind these airplanes. By the way, you don't taxi too closely behind the 747.
And just in case you ever heard that Experience or have that option, don't do that. And the other one is just the middle picture is the airplane landing right in front of me as I was, let's call it, holding short of the runway. Slide 22, this is oral review And I wanted to include the slide, basically kind of gives I'd like the pictures Donna picked out for this slide, to give some perspective on just how bad things were with commercial aerospace last year. I'm not going to go through each item, But it's just that everything we heard about commercial aerospace was negative, but I'll cover the last item. Aviation analysts and commentators predicted Full recovery would not come for many years or may never come end of day scenario.
We'll use that term again in the presentation. Let's go on to 23 continued. This is all review, but at Park, we didn't completely buy the doom and gloom news. We didn't buy at the end of days were at hand. We made our deal with MRAS to maintain minimum baseline critical mass production.
We discussed this many times, we won't go into the details, but I'll just say critically important to Park and MRAS. If this didn't happen, we would be in a world of hurt. MRAS would be in a world of hurt. And guess who else will be in the world will hurt MRAS's customers, because if we allowed our production to go to levels where we couldn't recover, then there'd be big problems, Not just for us, but for MRAS and the customers. And I don't know what we would do about that.
And then the last item, Even though layoffs are widespread and pervasive, we didn't lay anybody off. Very happy about that decision. And it also was Very important part. So we laid off people. We'd be in a real world of hurt right now.
You'll see later on. We're having trouble hiring people, but if we laid off people, We've been in a real world of hurt right now. So good thing we didn't do that. Slide 24, continuing with this year review. We've spoken to Lynn during all four calls in 2021 about the significant divergence from a mismatch between this minimum baseline critical mass and the then current end market requirements for these GE programs.
We talked about inventory destocking. We said can't the stock destock below 0. We to use negative numbers for inventory. I don't think GAAP allows that. And divergence was mathematical unsustainable, just pure math.
And unless there was some dramatic step down, day of reckoning was going to come and well, it came. Destocking has ended at least for the programs we're on. Let's go to Slide 20 5 here, I'm trying to hustle through. So the first item, we covered this before. A second item, interesting perspective, I think.
We alluded to this right at the beginning. In Q3 of last year, GE program sales, dollars 1,800,000 Q1 of this year, dollars 7,000,000 that's about a 4 times increase in 2 quarters. That's a big deal. That's not just Talking about forecasting. This actually happened, folks.
So we talked about these phone numbers ramping up. Well, that did happen. That's not just forecasting or somebody's opinion. This is just facts. Let's go on to Slide 26.
So Slide 26, We're continuing, same theme. So we talked about this. We received an updated long term forecast from MRAS. And if you look at the long term forecast, basically very similar total numbers through the 20 29 calendar year as the pre COVID forecast. Now, we have an opinion about this though, it may not fully capture the upside.
Why? To the steep ramp up of the HP-twenty Neo4 aircraft family production discussed by Airbus in their May to the 27 news release we referred to on Slide 16 and then significant potential XLR sales opportunities, especially in light of Boeing's recent statement about not being in a hurry to develop an aircraft to compete against the XLR I was mentioning on Slide 14. These 2 may be together, maybe this significant Indication by Airbus of significant upside may be related to the XLR and their optimism about the XLR. I think in Prior quarters, I mentioned that it didn't seem like our long term forecast that we received from MRAS is fully capturing the XLR opportunity. So Point is that there is significant upside.
I already mentioned that when you talk about 75 that represents 75 per month, That represents a 20 volume percent increase over the peak of our of the forecast we've received from MRAS for the A320, Neil. An important question though, keep coming back to this, how will commercial Base manufacturing supply chain respond to the C brand. This is more of a short term consideration, meaning eventually you will catch up, but nevertheless a very important There's a lot of talk about the supply chain struggling and we see it as well. Slide 27, How is Park responding to this to the GE Aviation Program's ramp up? All about our people.
Park's Current people count 105, like what the heck is going on here. People still getting paid not to work. So how do we do that? How do we do that with GE programs going up by 4 times since Q3? And by the way, Q3, if we look at the presentation for Q3, there was 107 at that time, I'm down to 105 now for Q3.
We said, we announced Q3, we plan to add 15, 20 people. What happened? So we didn't get done, very difficult to hire people right now. Again, it's very, very important we don't lay anybody off. And We've been on time and relatively low wage with an incredibly steep ramp that we had to handle with Less people, not more people, less people.
So parts people are stepping up, getting the job done. That's what part People do. They're not parts of people aren't big in excuses and wanting to just get the job done. Thank goodness for our customer flexibility program. We talk about this every quarter.
Can't emphasize enough how important this is. Ramping down, ramping up gives us this flexibility that is Very significant. It's just a godsend. Without this program, I think it would be very difficult for us to get the job done. It's a big deal.
Slide 28, let's Thank goodness we did not lay anybody off in case we already covered this, even in the darkest days of Commercial Aircraft, Aerospace Industries, Armageddon, Deep, you know what right now, if we let people off, we only have 105 to let people off. I don't I think we'd be Point where we couldn't even get it done. Thank goodness for Park's great people. Without them, we would not be able to get a job done. Can't say that enough.
Park is fortunate and blessed to have the great people it has, can't say that enough. And just so you know, every Park person, including Matt and Brian, Receive a $2.50 bonus for their dedication and outstanding work doing during fiscal Q1. So let's go on to Slide 29, a little bit busier here. GE Aviation Program sales history and forecast estimates, to the top of the page, which is history of Q1 $7,000,000 I think we already alluded to that. And during our Q4 call, we predicted $6,500,000 to $7,000,000 So we came in just at the top of that range of our prediction.
Now let's look at the forecast. So Q2 for GE programs are forecasting $6,000,000 to $6,250,000 The previous forecast we gave you during Q4 was 6.5% to 7%. So we brought those numbers down and we'll talk about that in a second. Q3 and Q4, those are new. We hadn't given you forecast Q3 in Q4.
Previously, the Q sorry, the fiscal 22 total, that's unchanged $26,000,000 to $28,000,000 that's what it was before. So Short term, let's talk about what happened in Q2 while bringing numbers down. Short term, it's always difficult to nail because of inventory practices, Which can move things from quarter to quarter. So and also I mentioned before that Amyris uses A company that manage inventories. So there's multiple layers.
You have Amyris as this company and it's difficult sometimes for us to see through. We get inconsistent information, not that anybody's Giving us information that they don't believe is correct or misleading us, it's just that it's complicated. So we do the best we can. We work at it real hard, But all we can do is kind of guess a little bit. Ultimately, what matters, the only thing that matters long term is nothing to do with this.
It's how many to A320neos that Airbus produces and sells, how many COMAC 919s that COMAC produces in sales, how many Global 7500s to Bombardier Producers and Sales. That's what matters long term. Now there will be movements for quarter to quarter, but long term, that's what matters. And we stay a lot of attention to the inputs we From the OEMs, which are not we get it directly, just public statements. So but as I said, we're not changing to forecast for the year.
And just so you know, we believe there are some upside potentials based on some of the indications that we're getting from or hearing from some of the OEMs. Last item, supply chain risk forecast, where you mentioned that, I'll mention it again and probably mention it every quarter now. It's something that's a battle, daily battle we have to manage. So far, we're okay, but razor kind of thin okay. Let's go to Slide 30.
This is now Park's financial Performance History and Forecast Estimates, a little more involved here. So the top of the page is history just for perspective. You already know the history, so we don't spend a lot of time on that. Certain factors which affected Q4 and Q1, We already talked about that. That's the $3,500,000 of essential components for the missile programs in Q4, $1,000,000 of sales of missile program materials in Q1, but we haven't spoken about is in Q2 approximately $1,000,000 of Essential Components sales, all the sales that have been very low margin.
So just wanted you to be aware of that for Q2. Now for Q2, what we did, we gave you a forecast for Q2 and we announced Q4 and we brought Q2 down. The top line was 14 to 15% to 13% to 14% to quarter. The EBITDA forecast previously was 3.3% to 4%, now 3% to 3.7%. Basically, what we did was brought Q2 down, the company Q2 down, the revenues or sales by the reduction in the GE forecast for Q2.
We just kind of passed that reduction through. So not a lot of brilliant math going on there, pretty straightforward. Let's see, we have not changed the forecast for the fiscal year though At this point, we have no reason to do that. Let's see, what else we want to talk about here. So what are the risks?
We talked about this a little bit, but we probably want to talk about it again. International shipments and transport, that's a risk for Q2. These are shipments, parts shipments to customers that are overseas. International shipments have become more and more challenging. So we might be ready to ship something, but if The shipping company is not ready to do it.
It's not a sale until we ship. We have costs that are elevating or Escalating, I should say, some costs are covered. We pass them through. Some costs are locked in. We have long term agreements with suppliers and some may not be.
There's a supply chain risks, we talk about that with respect to GE and also with respect to Park. And then Nurse Koss, we talked about this earlier. We're hiring people. We have T and E that will probably go up. So we just want you to keep those things in mind.
Q1 was a little unusual and in respect that we weren't able to hire people and the T and E was still pretty low because we weren't able to travel very much to see customers. We're also concerned about risks to the economy, inflation, concerns about our the economy and our country. We need to keep our heads about us. As we say, we didn't buy the end of day scenario last year with the pandemic, but we don't necessarily buy the happy days are here again scenario either. Was it Greenspan, irrational jubridge or something like that?
I think that's what he said. We're concerned about that And we're just really paying attention carefully and watching carefully. And the most important thing for Park, we didn't lose our head last year, let's not lose our head this Sure. Let's not get caught up in the irrational exuberance stuff, because we think there are some risks and concerns about to the economy and maybe to our country generally. A long term forecast, a few of you have asked us when are we going to reissue long term forecast?
Obviously not now, maybe Q2, but probably I'd say more likely Q3. And here's the thing, As we just went through, there's still a lot of risk, a lot of uncertainties. We don't want to give you a forecast. It just puts numbers out there. Obviously, no forecast is a guarantee, but we want to have Some reasonable confidence that, yes, these numbers look right.
They're reasonable numbers. Until we get there, it doesn't make sense, just give quick numbers out for you, which kind of doing a disservice to you and it's insulting to you to give you numbers that we don't really believe in. Not that they're guaranteed, but numbers that we feel are reasonable. So we'll see, That's our feeling about the long term forecast. Slide 31, update on acquisitions, other strategic investment activities.
Sorry, I know it's going really long, but we'll try to hustle through here. Banker led auctions, we're still trying. We did one. We're Participated in one recently and we got to 2nd round and we backed out. It's the reason it's often not what we want.
These are aerospace companies, but that's not enough. It has to be something that makes more sense for Park. And also we're competing against this cheap and easy money, which makes it even more difficult. We're not going to overpay just because there's a lot of cheap and easy money out there. What do they say?
We've got to give our heads about us and not get caught up in the mob mentality or hysteria. So what we're doing is strategic targeting of aerospace industry market segments And product lines. We think this makes much more sense and we've done a lot of work on it. We've identified segments. We've reached out to probably about 10 different companies.
This is more difficult. Why? Because when we go into an auction, guess what? The company is for sale. We start contacting companies that in a target market Normally not for sale, so we have to open the discussion up and take some time and be patient.
JV is still working on them And potential strategic investments in key aerospace and aircraft programs. That's something that we are pursuing on a number Programs, you've reached out to OEMs and we'll see what happens, but we think that's an interesting opportunity for Park. And in some cases, I think they even reached out to us. Okay, why don't we keep moving here. Leading at strange times, these are our final slides.
So again, I apologize for the very long to the presentation. Strange days have found us. I think that's from the doors. People getting paid not to work, Free money being forced, fed into the system. In the old days, people believed work was something honored and valued.
You gave a person self respect, self alliance, dignity, but now maybe not. Free money Used to be that you worked hard, you sacrificed, you were frugal with your money. And one day, this is not just a person, a company, you'd be able to use that hard earned money Because it had some real value, it did something important for the company. But now it's just use the cheap and easy money. If it doesn't work out, it doesn't really matter because So that was really your money anyway.
So it's kind of sad actually and why bother to work hard and sacrifice because why do that? Why don't just happen to the cheap and easy money? It's kind of tragic in our opinion, But you know, so sorry, continuing, the world seems upside down and backwards to us. What was supposed to matter doesn't. What was not supposed to matter does.
But at the end of the day, Park, we're not philosophers and politicians. We work for a living. We keep pressing forward. We do not stop. We do not back down.
We do not relent. We just don't do those things. It is not in our nature. As I said at Park, we work for a living, not philosophers or politicians. And Park, we make money for owners.
Those are 2 old fashioned concepts that we still believe in. Let's go on to Slide 33. Our family, our Park family sticks together. We take care of each other. We honor the one we lost, who we will not forget ever.
Park is a strange and unusual company filled with wonderful and special people. We are very fortunate when it comes to our people. At Park, we're not like the others. We play for keys. We're not fooling around, we're looking to make an impact.
To the we always end our presentations with a picture of one of our crews or teams. This is our Q1 production lab team, to the top row, Bailey, April, she's actually QE now. Aaron, Leo, who's known Leo for a while, Great guys. She's a 2nd shift supervisor, Halie, Patricia, front row Nancy, she's 1st shift supervisor, Taylor, Scott didn't make the photo op. And if you know anything about our business, you're probably saying, well, where is everybody?
No, sorry, this is it. This is our lab crew, production lab crew for our Q1. This is all we had. And we've charged the people since Q1. So you'd say, my God, how did we get stuff done?
Production lab work for our kind of business is quite complicated, quite involved. And as part of the production process, just like manufacturing, it's critical. We can't ship product to customers until they've been tested. And sometimes the test is very complicated involving multiple steps, involving multiple days for sure. But these folks are all multiple job category approvals under the customer flex program and they all stepped up.
As I said, if it's not tested, It's not shipped and we shipped. We shipped everything. A great job for these great dedicated pork people. Thank you very much to these people. And that concludes our presentation.
Thank you. And operator, hopefully some people somebody is still listening who's ready to take questions now.
We have a question from Brad Hathaway with Fairview. Your line is open.
Hi. Congrats on another very good quarter. I appreciate that you're not giving specific long term guidance. I was curious in your commentary on the kind of 21% increase in Airbus versus the versus your kind of prior long term forecast. And I'm just curious kind of if you look, I guess, kind of business line by business line, I mean, how do you think Yes.
Just directionally, most of what you're seeing compares to kind of what you previously thought in that forecast.
Do you mean like by segment, Brad? Is that what you're referring to?
Yes. Maybe commercial, military, business, to have you in the queue.
Okay. Got it. So commercial is very dependent on commercial and actually business aircraft, Very dependent on these GE Aviation programs. There are definitely other programs we're on for commercial and business, but those are the big dogs. The thing that probably drives commercial at this point and more than anything else is the A320neo program, although the other programs are significant And moving up.
It's really hard for us to figure out what to make these Airbus statements in the news release. There are some skeptics that say, well, doesn't what does airports have to lose? They just want to get the supply chain ramped up If it doesn't materialize, well, that's the problem with supply chain. I'm not in that camp exactly. I think that we should listen to what they're saying and we'll see what happens.
But that difference is a multimillion dollar difference between How our A320 tops out in the forecast we have from MRAS. Our forecast for MRAS is based upon units. I think I explained that So we have the units we know per year, we know what the content is per unit. So it's easy to do the math and figure out what the revenues are. It's many 1,000,000 of dollars Difference.
So I would just say that I just need a little perspective. The rest, we're just going to really want to wait and see. I think It's kind of weird situation because some people happy days are here again and some people still have got a little doom and gloom. And I think we're kind of in the middle And we're not sure what to believe and where things are going. We see some real risks, but then we see the upside as well.
Brad, it's just hard at this point for us to make a quantitative judgment that could Translate into numbers in terms of top line. And like I said, we think you'd be doing you a disservice by just kind of throwing stuff out there. Military, that's interesting. It's just something that we keep working on, working on, working on every quarter. We give you some new pictures and new military programs, maybe not new that quarter, but new to the presentation.
And we feel real encouraged about military. I think It's a real good opportunity for us, especially in the niche areas, where a lot of others just don't want to bother, it's too much trouble, it's not worth it. Those are where the good margins are for us anyway. So we're encouraged about military. That third segment, Business Aircraft, It is largely going to be driven by that Bombardier Global 7,500, but there are other programs, other Business Aircraft programs that we're on that don't relate to GA vision.
But that's let's go with the big dog in This is aircraft, if you want to separate into those 3 segments.
Got it, Chris. That's helpful. So, okay, so I guess it's kind of waiting to see whether these kind of 75 in 2025 from Airbus is a real number. Okay. Sorry, go ahead.
Sorry?
I thought you were
going to say it, Brian.
Apologies. Yes, I think we'll right.
We'll wait just to follow-up what you're saying. We'll wait to see what other comments come out from Airbus and we'll just be watching what happens in the market. When you get Indigo, ordering loads of airplanes with these LEAP engines, that's a plus, right? So we got to watch and pay
And what do you think about the long term potential for the COMAC 919? How big a program could that potentially be for you?
My opinion is that it won't be the size of Day for 'twenty, but it could be significant That's significant potential. So we have a lot of content on those engines and it has significant potential. Let's see what happens. We hope that they are successful in getting the airplane certified and production lead for China. We hope they're successful in certifying Rest of the world, we're not sure what to make of the piece to read between Boeing and Airbus now that affects their Comex.
So kind of a lot of things going on that are hard to judge. But In terms of even the forecast we have from MRAS, significant opportunity with the 9/19 to park.
Great. And then finally, I guess, on the M and A front. So it sounds like you participated in a deal. I mean, I was curious about the strategic investments in the aerospace and aircraft programs. Can you give a little more color on what that actually means?
What we're doing in other words, Brad?
What we're trying to do? Yes. What potential things you might do when you talk about these strategic investments As opposed to like a good picture.
Okay. So just for perspective, we did actually participate in the auction maybe I think about a month or 2 ago. We got into, I guess, the 2nd round, But then we decided to back out because we had a kind of a, I don't know, gut check or whatever you call it, come to Jesus internal meeting and We determined this is really a stretch. It's aerospace, yes, but it's so far removed from anything Park does. The synergy was just not there.
And we say, okay, it's aerospace, but other than that, I mean, there's no way in which 101 equals 2 that we could Sorry, equal, more than 2 that we could figure out. What we have done, we decided to do, I think about 6 months ago, we decided to to target a specific aspect of aerospace materials that's closely related to composite materials. These are other materials that are used to produce Composite Structures for aircraft, we thought made a lot of sense. It has a lot of more synergy technically with what we're doing now. Also Polymer Chemistry based, I don't want to go too far because it's still something we want to keep a little confidential.
So we We did. It was kind of typical thing. We did the survey. We came up with the usual suspects of 40, 50 companies and we started narrowing it down. I think we've reached out to about maybe 8 or 10 of them.
And not surprisingly, well, some said, okay, well, let's talk and let's talk some more And some will not for sale, maybe they thought about it came back to us. There are 2 categories. 1 are independent companies, that's a little different owned by maybe an individual and the other would be a sub or division of a very large company, very kind of different approaches to M and A, at least a very large company, you contact a business development guy, okay, we'll get back here, let's look into it with an individual owner, Got to be much more delicate and careful and respectful, I would say, of the individual and The personal investment of the company, that kind of thing. And we're doing both. So it's harder because It's not like we contacted any of them.
They say, Oh, Greg, you called because you're just about to put it up for sale. That would have been unrealistic. So it could take a little more work, but if we're successful, it'll be a lot better for Park, I believe, than just participating in something that's auctioned, which Often is in aerospace, but other than that, it doesn't really connect to parts business very well.
Okay, great. Thank you very much. Appreciate all the color.
Sure. Nice talking to you.
Our next question comes from Christopher Hillary with Rubix. Your line is open.
Hi, it's good to speak to you all.
Hi, Chris.
It's great to see The strong profitability embedded in your outlook. I wanted to ask as you look out maybe a little bit farther without giving guidance per se, Are there aspects or are there other ways in which the business has developed where you anticipate either greater efficiencies as you, for example, Expand your capacity with the latest production technology or are there areas where you see maybe the margins being a little bit more challenged because we've gone through this whole supply chain disruption, the need to maybe carry higher inventories. I'm curious if there's any developments in how you're thinking about your
So Efficiencies, I know with expansion for instance, I don't know about that. I don't think we're Expecting anything significant in terms of manufacturing efficiencies. I think our I think are already pretty efficient actually. I know that's a little bit of a dangerous thing to say because you always want to look for opportunities to do better. But I think we have a pretty lean, pretty low cost structure.
I think it's an appropriate cost structure, but it's also pretty lean pretty low cost structure for manufacturing. And Costs, that's a concern we pass on when we get raw material increases, we often pass them on. In some cases, we have long term agreements, which require the supplier not to give us increases, some things we can pass on, some things you can't pass on like applies as an example where we just have to deal with it, labor costs, utilities. No, we hear a lot of talk and news about inflation and we certainly see it. I mean, just the airline cost to travel much more than it was 6 months ago.
So some of these other costs are Going up and to some extent, they'll be contained and some extent may not be, but it's something we have to watch for. In terms of maintaining more inventory, we'd like to maintain more inventory, but we're not able to because To these big components that I said, we're having some concerns about supply. They have the same forecast we have. So if we say, we want to order more, they're just saying, we're not going to give you more. We're not going to give you more than in your forecast.
We'd like to be able to maintain a cushion inventory, but it's pretty hairy, I guess, I would say. And it's a battle every day to manage the inventories. If we could increase our inventories, we would. I don't believe that would Increase our cost structure very much and it will affect our balance sheet, but I'm not sure how it would increase our cost structure very much in itself just by increasing our inventories.
Okay. And then maybe one more. Given that you're a domestic manufacturer, Particularly as it relates to military business, does the desire to have more domestic production and onshoring Come into play in any way with your existing portfolio of products or maybe how you're thinking about M and A opportunities?
Yes, I wouldn't I'm not sure about the M and A part of it, but I believe the fact that we are 1 of 2 to domestic manufacturers and composite materials for aerospace. It does help us in that regard And it gives us more opportunities to develop additional military business. So we'll have to see how that plays out a little bit. You're certainly going to talk about it, but to the extent it's a factor at all, it would be a plus.
Great. Thank you for your time today.
Sure, Chris. Thank you for your input.
There are no further questions. I'd like to turn the call back over to Brian Shore for any closing remarks.
Thank you, operator, and thank you all for hanging in. This It's probably a record in terms of long story we've ever done. As I said, it began a little difficult, because we felt we needed to include some of the slides from Q4 for perspective and maybe getting to the presentation, you just took longer. But anyway, thanks again for listening. We really appreciate it.
Call us anytime. You can reach out to Matt or me anytime you want. And otherwise, have a great summer and we'll talk to you soon. Have a good day.
This does conclude the program. You may now disconnect.