Park Aerospace Corp.
Q3 2021 Earnings Call Transcript

Published: 7 Jan 2021

[Operator:]

Good morning. My name is Katherine, 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 '21 Earnings Release Conference Call and Investor Presentation. All lines have been on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. At this time, I'd like to turn the call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference.

[Brian Shore:]

Thank you, Katherine and this is Brian. Welcome everybody. I have with the Matt Farabaugh, our CFO. Happy New Year to all. So first thing is that we announced our earnings this morning. You probably know that. You want to take a look at the earnings release because there are instructions as to how to access the presentation we're about to go through. And I highly recommend you do that because it will make the discussion much more meaningful to be able to go through the presentation with us.

[Operator:]

We have a question from Brad Hathaway with Far View. Your line is open.

[Brad Hathaway:]

Quick question on the M&A. I'd love just to get a little more color, if you could about, why you passed on some of the things you passed on in the last year? Why they just weren't right for Park just understand more of some of your thought process, how you evaluate opportunities to decide they're not a good fit.

[Brian Shore:]

Well, I'll talk about two of them, and there are different reasons. So one was we thought would -- would look really interesting at the beginning because seen very nichy. But as we dug into it more, we realized we just covered that the market was very closed, very little opportunity to grow the business. And it seemed to -- it definitely would require some investment, maybe I want to be not only on time, but it maybe was reflected a little bit, which we didn't mind. We were happy to put some money and invested in. But the thing that really got us hung up with the upside. We just didn't see it there. The market was pretty close. Another case, small bids is, interesting business. And we're concerned that the customer concentration was very, very high. And also, the expectations of the owner where we felt quite high, and that's the owners right. They can decide whatever they want to aside regarding valuation. But that ends up being a big disconnect, and that's why the discussions were ended. These were not auctions. They weren't part of processes. They're both one-on-ones. There are a couple of things we continue to look at but those are kind of examples. But in both cases, the reason we didn't continue. The reasons were different.

[Brad Hathaway:]

Understood. Great. And so you mentioned looking forward into calendar '21, there's suggestion there will be more businesses on the block, but also valuation expectations will be higher. I mean, the combination of those two things make you more or less optimistic about binding potential deal in 2021?

[Brian Shore:]

Yes. It's an excellent question because I think its yes and no. We're optimistic, obviously, because there's going to be more activity that's a good thing. The conservative valuations and we talked about the herd mentality. Now if everybody is getting on that's kind of on a mindset that things are going to be going very well in the future, not just with aerospace, let's say, the economy generally. Then maybe there's some of that irrational exuberance that creeps into people thinking. We certainly felt we saw that in the past or valuation that didn't really make sense for us. So we'll have to see. We intend to be active. We have the cash. We intend to be active. But for Park, we always want to keep our head on straight and not get caught up in the mob mentality or herd mentality where everybody else is doing it. So, we don't see the value, but everybody else seems to. So, we need to get on board. We must be missing something. We're very reluctant to kind of buy into that thought process.

[Operator:]

We have a question from Brian Glenn with Olcott Square Investment.

[Brian Glenn:]

Hi, Brian, thanks again for the very transparent walk-through as always and Happy New Year.

[Brian Shore:]

Happy New Year, Brian.

[Brian Glenn:]

So you mentioned adjustments on the fly early in the presentation. Just want to see if you could take a minute or two or three to talk about company culture as a competitive advantage. So specifically, two things that kind of came to mind when I think about it, our some of the niche programs that you guys focus on. I know they have volume fluctuations month-to-month or quarter-to-quarter? And then the second thing is what you guys are doing now and over the past few years, which is earning a spot or wedging onto some of these programs that are still in development? And I know the aerospace industry might be -- I don't know what the norm is six to eight weeks for turnarounds on prototype stuff. I know that's overly generalized. And maybe it goes back to your electronic heritage but my understanding is you guys just work on a different pace in terms of doing things like that and turning it around to a customer, whether it's a commercialized product or development?

[Brian Shore:]

So that's a big question, our culture. Yes, well, so I guess we could say a lot of things about culture. We're a small company. We're not bureaucratic. There's a lot of passion among our people, a lot of dedication, commitment, and we move quickly. We're not at the politics. We're not into who's right, who's wrong or we wouldn't have like clicks within the Company. The whole company is really no company, meaning, all the people company are focused toward the same objective, which is better things for Park. So, we do have the ability to move pretty quickly. People get leaned up and focused and get to work in different directions pretty quickly. We'll make an adjustment, fine. We're moving in that direction. So, I think it's pretty good in terms of flexibility and agility based upon our culture. We also could be relentless. I'm not sure about these six to eight weeks for our aerospace, aerospace qualification cycles hat could be quite a bit longer. But they vary, some are much longer, some can be shorter depending upon the situation. When I mentioned this allocation 10, which is a small program, but it doesn't matter, we love it. When people, competitors are saying, they're not interested, it's too difficult, too small, too much trouble. Boy sign us up, we're there. And to me, it's amazing how some of our larger company competitors will walk away from a program. They'll be on a program for a while, they say, don't want to support it anymore. What do you mean you don't want to support it anymore? We take on a program or a customer, it's like an employee, we're -- we don't believe the worse. We're married for life. We don't walk away from customers. We don't walk away from programs. We just don't do it. We've had issues where maybe one of our components. We can't source anymore, so we have to qualify or get another component. But we don't just walk away from programs and say, well, we don't want to do it anymore. We've got bigger fish to fry or something like that. We don't have bigger fish to fry. For us, we want every customer to feel like they're the most important customer we have.

[Operator:]

And I'm showing no further questions on the call. I'd like to turn it back to Mr. Brian Shore for any closing remarks.

[Brian Shore:]

Thank you, operator, and thank you, everybody, for hanging in. I think we actually went over an hour. This probably breaks a record. So thanks for bearing with us. Happy New Year to all of you, and please give us a call anytime you like, always happy to talk to our investors. Thank you and have a good day. Goodbye.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.