Park Aerospace (PKE) Q4 2025 Earnings Transcript

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DATE

Thursday, May 15, 2025, at 5 p.m. ET

CALL PARTICIPANTS

Chairman and Chief Executive Officer — Brian Shore

President and Chief Operating Officer — Mark Esquivel

SUMMARY

The company reported that quarterly sales reached $16.94 million, with $4.4 million attributed to C2B fabric sales. Management announced a planned major manufacturing expansion with an estimated capital budget of $35 million (plus or minus $5 million) and indicated this is being driven by long-term demand expectations for both defense and commercial aerospace markets. Cash and cash equivalents stood at $68.8 million at quarter-end, with anticipated outlays for expansion, stock buybacks, and an advance to ArianeGroup out of France, which will reduce cash to $21.5 million, assuming all planned expenditures are made. A new agreement was signed to advance 4.59 million euros to Ariane for manufacturing capacity expansion, with $1.5 million already paid in the first installment. The company noted “significant new business opportunities in both hot-melt and solution composite materials, defense, and missile programs are drivers” supporting the expansion initiative.

The majority of required testing for the C2B recall remains in customers’ hands and is scheduled for completion by the end of May, with all completed tests so far compliant to specification.

Park Aerospace indicated it is engaged in “active discussions” with two Asian conglomerates about a potential joint venture for aerospace pre-preg production, with the company contributing only intellectual property.

A recently certified lightning strike protection material will generate approximately $500,000 in annual sales once fully ramped.

Management confirmed no guidance is provided below internal expectations, stating, “we do not do guidance…if we believe the quarter will be X, we are supposed to tell you X minus 10%…we do not do that.”

All historical GE program sales were reconciled to include previously omitted sales items, resulting in a restated incremental non-GE sales figure that is “blown out the window,” with new totals withheld pending further updates.

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TAKEAWAYS

Revenue: $16.94 million, with $4.4 million from C2B fabric sales and $420,000 from C2B material-based laminates.

Gross Margin: 29.3% gross margin, which was positively influenced by strong production performance and came despite the inclusion of low-markup C2B fabric.

Adjusted EBITDA: Adjusted EBITDA was within the previously estimated forecast range of $3.3 million to $3.9 million.

Inventory Position: Finished goods inventory rebounded by $1 million compared to Q3.

C2B Fabric Demand: $7.5 million in C2B fabric sales for the year, described as significantly impacting the P&L.

Production Outpaced Sales: Production exceeded sales (excluding rate card fabric) by $1.4 million, adding an estimated $350,000 or more to bottom-line results.

Advanced Payment to ArianeGroup: Park and Ariane entered into an agreement where Park will advance Ariane 4.56 million euros in total in three annual installments against future purchases by Park of C2B fabric. The first installment of 1.376 million euros was paid in FY2026's first quarter.

Manufacturing Expansion: Planned capital investment of $35 million plus or minus $5 million for a new facility, citing capacity needs for long-term aerospace and defense program support.

Cash Reduction Forecast: Post-expansion, buybacks, and advances, estimated cash position will be approximately $21.5 million, with no debt reported.

Tariff Impact: No material impact from tariff-related costs was experienced; mitigation achieved through inventory and adjusted pricing.

MRAS LTA Price Increase: 6.5% weighted average price increase effective January 1, included three new film adhesive formulations, and further price adjustments are tied to input costs.

Share Repurchases: $9.3 million spent to date under the 2022 authorization, with an additional $2.17 million repurchased in Q1 FY2025.

Dividend History: Over $600 million in dividends paid in the last 20 years.

OEM Hypersonics Agreement: Participation in phase two of a hypersonic missile program license continues, with progress reported and further updates expected within six months.

Guidance for Next Quarter: Management expects EBITDA of $2.5 million to $3 million for Q1 FY2026. It also expects $1.2 million in forecasted C2B sales while forecasting tempered margins in Q1 FY2026.

INDUSTRY GLOSSARY

C2B Fabric: A specialized composite fabric distributed by Park Aerospace Corp. for advanced missile and defense applications.

MRAS LTA (Middle River Aerostructure Systems Long-Term Agreement): A contract between Park and MRAS/Singapore Technologies Engineering for aerospace composite materials supply.

Juggernaut: Company-specific terminology for the expected large multi-year demand surge from GE jet engine composite materials programs.

LEAP 1A Engine: A high-bypass turbofan aircraft engine produced by CFM International, referenced as a key growth driver for Park's composites business.

Full Conference Call Transcript

Slide three, the James Webb Space Telescope. It seems like we are featuring this every quarter. There is so much news as you probably know. The James Webb Space Telescope was built with our Sigma Strut, which is our proprietary strut technology. And, so what is the news this time? We got a little bit of a picture of the James Webb in the L2 range orbit, which is about a million miles from Earth. I believe it is pretty far away. Ninety-seven oh, sorry. Ninety-nine point seven, that is a pretty high percentage, you know, pretty good odds. Chance of alien life. This is no joke.

A Milky Way planet, that is in our, you know, our galaxy, I guess we call it. K2-18. That is the name of the planet. I am sure you have heard plenty about that. It is only 124 light years away from Earth. That is just right around the corner, you know, it is in our own galaxy. Thank you, James Webb. So what James Webb apparently did was to detect certain kinds of gases which are only produced by biological processes. So it is quite incredible. You know what is also kind of strange? Do you hear about us on the news every night? You know, like, all day long, all night long, life on another planet?

90.7% certainty. I do not hear anything about it. You know? I mean, I do not know what they cover in the news, but you would think this should be, like, 24/7 news, but it seems not to be. Anyway, table of contents, our investor presentation, we are about to go through that. Then we have supplementary financial info at the back end. Appendix One. We do not go through that during the presentation, but certainly let us know if you have any questions about it. Okay? Let us go on to slide four. Quarterly results for twenty-three, twenty-four, and twenty-five. Thousands.

Let us go right into the right-hand, right over to the right-hand column, Q4, which is the quarter we just announced. Sales, $16,939. Important to mention that, of four we will get to that later again, but $4.4 million of those sales were C2B fabric. And then we have a gross margin of 29.3% which considering we will go back to this. But the C2B fabric, you know, we sold that. It sold it only for a small markup considering that. Actually, I was surprised at how high our gross margin is. As you know, we do not like it when your gross margin is under 30%.

But under circumstances, and also the startup cost that will go through out surprised as myself as how high it was I suspect the main reason was the fact that production was very strong, you know, and it exceeded sales, which was our plan. We will talk about that in a second. What do we say about Q4 during our Q3 investor call? Sales estimate, $15.5 million to $16.3 million in a sweet came a little bit ahead of that range. Adjusted EBITDA estimate $3.3 million and $3.9 million. So we came in within the EBITDA range. Gotta stop and cover something, which we discovered every quarter, and I figured, okay. Fine. I have overdone it.

But what we had a couple of comments after our Q3 investor call up to the effect that, well, we should pad our forecast numbers. So we gotta go back and remind you that we do not do that. You know, we do not do guidance. We do not like that. It is kind of a strange game that in other words, if we believe the quarter will be X, we are supposed to tell you X minus 10% so that when we come out with X, we will be heroes, so we beat our numbers. And it is to us, it seems very strange. Other people, they do what they want.

I know most everybody else does, but we do not do that. Now, we give you a forecast. What we are telling you is this is what we think is going to happen. Not what is going to happen minus 10%. We do not do that. We just want you to be aware of that, and we do not feel like changing it. We also feel it would be a little bit strange for us if we are telling you what we tell you that it is going to be X minus 10% that is not really honest, is it? You know, when we have a, you know, thing about integrity. I am not saying other people do not.

I am just saying that is for us. So when people say, oh, why do not you pad your numbers? Understand, we are not going to do that. So when we tell you, give you a forecast, we are saying this is what we think will happen, and we will be wrong sometimes. And sometimes we clearly are. But the time we tell you that, we are saying this is what we think is going to happen. So we just want to remind you that we discuss it at a recorder. We have not in a while, but maybe we need to remind you again. Slide five. Considerations for Q4. So let us get right to it. Production versus sales.

Remember, in Q3, we explained that our two C's Q3 sales value of production before that. That is not inventory value. That is a sales value. $1.2 million less than our sales at Park production, SPP absorbs a significant amount of cost to produce inventory. As a result, if we are just reviewing Q3 for perspective here, the Q3 production shortfall in quotes had a significant impact on our Q3 EBITDA. The Q3 production shortfall was on us. We said that during our Q3 call. In other words, we just missed a number. We had a production target. We did not get it. That is on us. We missed our target.

But we also said we tended to reverse that in Q4. Well, we did reverse it, and that is on us as well. So know, we take the responsibility for missing a target in Q3, our people should get the credit, I think, for hitting the target, our target in Q4 and doing a very great job with that actually. So in Q4, production exceeded our sales, adjusted for rate card fabric, which is not something to produce anyway. As you know, at $1.4 million, that was our target. Now it is really helpful. That drops a lot of dollars to the bottom line. Probably $350,000 or more to the bottom line of the quarter.

Just as if we had a big drag in Q3, there is a big plus in Q4, which is what we wanted. On to slide six, the excess reduction in Q4 had a significant positive impact on our Q4 EBITDA. And this is important. The excess production also allowed us to build back our finished goods inventory to more acceptable levels by about a million dollars compared to, Q3. Way too low at the beginning of Q3, you know. It is where selling off our selling from our inventory rather than production. Now we built back our inventory to finish goods to levels we think are more acceptable. Air and Ground, just reviewing here.

As you know, we entered into this business partner agreement with them in 2022 under which they appointed us as their exclusive North American distributor for the Raycorp C2P fabric. Used to produce a blade of composite materials for advanced missile program systems. Now we already covered this, but we sold $4.4 million of C2B fabric in Q4. That is actually $500,000 more than we predicted in our Q3 investor presentation, and that being more than that. And believe it or not, $7.5 million in all of 2025, that is a lot. That is a whole lot. They really merge our P and L. As we have previously explained, we sell C2B fabric to our defense customers.

For a small markup. They are buying a lot of the stuff. They are stockpiling it, obviously, you know. Because it does not take a rocket scientist. That, you know, to understand that even though this is rocket science, I what we are doing. So let us slide seven. Park sold. So this is the flip side. $420,000. It is not, you know, $4.4 million, but $420,000 of laying materials manufactured with C2B Fabric in Q4, $2 million in 2025. So that is really good because when we look at it incrementally, that contributes a significant amount to the bottom line, probably over $300,000. That helps the bottom line a lot as well.

That way, you said some C2B material sales as we previously explained, our margins producing, selling, and plated materials manufacturer with C2B fabric are significant and bold. Requall, Requall by one of Park's customers of C2B fabric. So I gotta stop for a second. You read those. You do it at your own risk because we have no responsibility for those branch. You know, there is an automated computer AI. I do not know what but there are so many mistakes in those transcripts. Sometimes, I will go read a transcript, I do not know what the hell I am saying. I cannot what am I talking about here? I cannot understand. There are so many mistakes in those things.

So we do not take any responsibility for it. So the transcript was put for Q2. Q3, or rather call, talked about a recall of C of C2B to the real bad thing. There is no recall. I went we went back. There is no reference any result recall, no recall, both in the presentation as well as her comments. But then it was picked up by articles who then talked about a recall of this product based upon the transcript was incorrect. So I just want to warn you. If you read those transcripts, you do it at your own risk because we take no responsibility for them. Now what is the status of recall?

A lot of people may ask me that. That is a hard question. So I am asking we will get ask Mark to help us figure that one out. So, Mark, can you tell us what the status of the recall is?

Mark Esquivel: Yeah. Hello, everybody. The status is the specification has not been updated with that means is it is still in the works. Where the testing is not in Park's hands. It is in our customer's hands just so that is clear. But we are being told they should be completed this month at the end of May. I say that with a little bit of caution because these things have slid in the past. So I just want to throw that out there, but we are looking to get an update at the end of the month. I can tell you there is some good news.

All the testing that has been completed, which is the majority of it, is compliant to the specification. And so we are, you know, we are hoping that, you know, the very few tests that need to be done by the end of the month will fall in that same population. So, essentially, we are, you know, we are anxiously awaiting just like everybody else to get the results. And you know, we are really hoping that they meet the target at the end of the month. But like I said, it is really out of our hands. It is in our customers' hands. But we continue to communicate.

We continue to check on the status and we will do that again as we get toward as we get towards the end of the month which is in two weeks. And, you know, hopefully, next time we talk, next time we have a call, we will have an update for you all.

Brian Shore: Okay. Thanks. Yeah. So we are being transparent. We are just we can do is tell you what we are told by our customer, I think in our last call, we said March, but that is what we are being told. Obviously, that did not happen. So we will see what happens here. And then the next item this is a repeat item for last few quarters, just reminding you that we are ramping up this new factory even though we do not need to capacity we are ramping up to get the factory ready for the juggernaut, as we call it, and that is costing us to hold it. That is burdening our P and L.

Total shipments during the quarter, $175,000. Mostly, surprise, surprise, international shipment issues. Well, that is actually improved. That is not great, but I think we had a couple quarters, it was over a million bucks so I guess that is moving in the right direction, at least in that quarter. Slide eight. Impact of tariffs and tariff-related costs and Q4. Seven. Future impacts, we will get back to that later on the presentation. When we talk about some updates. Okay. Let us go on to slide nine. Top five customers. This is kind of a tradition for us in alphabetical order. Donna is the one who does the slide. Yeah.

You probably get some of the people in the audience could probably cover this better than I because the Air Jet Rocketdyne, that is the papery missile. The Middle River, I guess, we are using the A321 XLR commercial aircraft. Kratos, obviously, the fire jet. There is nothing for Textech to Confidential, Nordam, the Bombardier Global 7500. The aerial target aircraft, you know, it is unmanned. They try to get men and women to fly the target aircraft, but did not get any volunteers. Okay. That is my attempt to humor. Let us go on to slide ten. I will not I promise I will not tell you more of that.

So slide ten, we are just this is our sorry. Our estimated revenues by aerospace market segment. And you could see that we talked about this all, but twenty-one was a little different because of pandemic. But twenty-two, twenty-three, twenty-four, twenty-five? The pie chart looks, you know, pretty similar. Let us go on to slide eleven. This is a lane is a project. Parkland has niche military aerospace programs. And as we always comment, raid owns, rock and dolls, and drones are niche markets for us. But for us, even aerospace structures are niche because that is kind of that is our focus. And this does not mean small.

It means something special where we have something special to bring to the table, which means normally that the margins would be nice attractive for us. We do not need to cover each one of these things, and we are going to be a little bit less open about what our participation is in these programs, except a comment on the Falcon Sky Knight. That is a UAE program. So that has been in the news recently, UAE. So I thought you have been interested in that. And then we see two references to the Sentinel GBSD. That is, you know, the you know, the tactical ground-based slash for you to defend. And this is a replacement of the Minuteman.

Program from the sixties. We have on the top right, the warhead, a reentry vehicle for the warhead and then the missile itself, missile system itself. And these are installed in silos around the country. Hundreds of them is what is intended. And, yeah, I think you know what these warheads carry, so you can look it up if you want. But it is not very happy kind of thing to talk about. So let us go on. Having said that, let me bring the audience down a little bit. Let us go on to slide twelve. It is called, Med Mutually Assured Deterrent or something like that. Right? Remember that from the sixties? Anybody remember that? Slide twelve.

GEO space. This slide, we share with you every quarter just kind of for background. For pricing LTA from nineteen to twenty-nine with Middle River Airstructure Systems, which is a sub engineer aerospace. We explain this every time Resundant factory, that is a reduction. You know that. You look at these programs. We are not going to go through them. But they what the common theme is, they are all related GE aerospace programs. So what is the connection there? I think you know that. When we got these programs, Middle River, air structure systems, MRAS, was a sub of GE aerospace. Now it is a sub of SD Engineering, which is a Singapore company.

Let us go on the slide. Thirteen. Top of the slide, also sole source or private structure component for the Passport twenty engine. That is through the GE aerospace LTA, not the Amherst LTA. Fan case containment wrap for the G9X for triple seven x aircraft. That is produced with the with produced with our AFB materials and other composite materials. And this is intended to be included in life the MRS life of program agreement, not the LTA. This actually occurred after the LTA was entered into. Let us see. Park MRAS LTA. We cover this. Provide this 6.5% weighted average price increase January one.

And, also, it was amended to include three art film and use of formulation products recently. LIFO program requested by MRAS and SDE, so we are still working on that. I think the last time we spoke, I told you, actually, the ball is in our court. We are getting pricing to the extent we could, long-term pricing from our supplier so we could provide pricing to life of program pricing with MRS and STE. We have done that. So the ball is kind of back in their court. This is some we are happy either way. We are happy to stay with the LTA, the current LTA or go to LIFO program.

This is something requested by MRAS and STE, but we are happy to do the life or program as well. Either way, we are happy. Fourteen slide fourteen. Okay. If we are talking about some of the programs, age group twenty, Neil, family, that is the big dog, as we say. Airbus has a huge backlog for the H320 neo. We have 7,256. That is a lot of airplanes I am telling you. And then we have a little bit of history of their 820 deliveries year over year. You can see that it is gone back up to about fifty per month and twenty-four, a little over six hundred.

But what is holding it back is the supply chain issues that you know about. Talk about almost every time. The bottom item, they are targeting delivery rate of seventy-five A320 airbuses. Family air group one to twenty-seven. Why they are not there now? Well, it is because of supply chain issues. They have over seven thousand orders. They would be happy to be at seventy-five per month or nine hundred per year now. But say you have not been able to get there yet or targeting twenty-two thousand twenty-seven. They have not been able to get there of your supply chain. The limitation. Slide fifteen with the improved engines, right here twenty, you know about this.

We got the Pride Engine, the CFM. Leak one a engine. We are on the CFM leak one a, not the Pratt. According to the Aero Engine News, first quarter Aero Engine News, the leap one eighty market share, affirm engine orders. These are thousands and thousands of orders, ladies and gentlemen. 65.2%. That is a nice market share. And when we get to the jar notes, slide at the end, we use a 60% market share because we are being conservative. But it keeps me going up a little bit to see why. Maybe it will move back down. I do not know. It moves quarter, month to month.

But at that delivery at the delivery rate, seventy-five airplanes per month, 65.2% leap one a marketeer translates into 1,174 engines per year, a leap one a engines per year. If you look at the juggernaut, we are only assuming 1,080. So it is a lot more than the juggernaut. As of March thirty-one twenty-five, this is again aero engineering stuff. There were 8,196 lead per firm. Firm, LEAP one a engine orders. That is as of a couple months ago. Now, of course, Airbus and CFM, they want to sell more airplanes and more air more engines. This is just what is on order firm order now.

Now so these engines will be delivered, I think, what is that worth to park? It is worth about a quarter billion dollars to park. And that is not it. I mean, they are they like I said, I am sure Airbus wants to sell more airplanes, and Airbus and see if I am wanting to sell more engines. Let us go on to slide sixteen. This is a variant of the A321 X sorry. A321 neo family, the A321 X o r. It is off of the races, so this airplane has been delivered. It is in operations. They are operating in on new routes, which are never been used by a single aisle.

This is a single aisle and I guess I should have said that. And the key thing here is that it has a range and payload capability of a wide body, so this airplane has been used on what we previously a wide body route, like a maybe a seven eight seven route. But much less expensive to operate. So this is why CNN, I am not do not normally spend a lot of time with CNN, but this time, I liked them. It is a 320 X o r is changing air map of the world.

And what that means is that these single aisles are operating on routes that used to be the exclusive purview of wide body airplanes, which are much more sensitive to operate. That is a big, big deal. Boeing has no response and unplanned. So that is an important program for parts. Slide seventeen. Let us switch over to China, the Chinese COMAC, the Chinese aircraft company. C919. That is a single aisle that they developed to compete against it. A320 and 737. They are just ramping up now. They are targeting thirty deliveries twenty-five. They are not going to get to nine hundred, but we will see how far they go.

They plan to increase the production capacity of fifty airplanes this year. Plano achieved a production rate of a hundred fifty aircraft by twenty-eight. Reported to have over a thousand orders for these airplanes. COMAC aiming for EASUS certification twenty-five. That is significant because, see, we also that is like the European FAA, European Aviation Service Certification Agency. Because there is this belief and theory that these Chinese airplanes were going to be China only airplanes that we just operate in a Chinese market. That is literally not what Comac is thinking, you know. So the fact that they are saying they are going to get the ASHA certification is a big deal. Not certification outside of China.

Trade conflicts, people ask about trade conflicts. Well, k. Comac produced at 919 without US suppliers? The answer is absolutely not. Absolutely not. Absolutely not. And if US suppliers were cut off on the program, in my opinion, I am not the only one has its opinion, though. That program would die forever immediately. It is such an important prestige program for the Chinese. They are not going to let that happen. It is a good thing, you know, that there is trade where it is, you know, what do you call it? A mutual interest dependency or we need each other. So the Chinese will not does that happen.

So they are going to eat, take it to you, and source these key components from a US supplier. That is my opinion anyway. Slide eighteen, staying with the Chinese COMBEC nine zero nine, that is the regional jet. It is a little smaller jet. And look what they are doing. They have it delivered to Lau Airlines and Vietjet, Laos in Vietnam. So they are not Chinese. So what is going on there? In other words, again, everybody would saying, oh, these are Chinese only airplanes. I do not think COMAC believes they are. Triple seven x with the G9X engine, test flight certification program, quarterly progressing well.

C triple seven x test program, a mass more than 1,300 flights. That is a lot, you know, on three hundred flight hours. They are targeting twenty-six for Boeing is for certification for its delivery. Let us knock on wood in that. Let us hope that happens. They reportedly have 521 open orders. That is of about last week. But did you hear that Boeing, they hired this new hire powered sales guy? And that guy, he just got an order for thirty airplanes from Qatar yesterday, I think, Qatar. I pronounced both ways. Did you hear about that? The new high powered sales guy? So they have to add that thirty to the 521. Slide nineteen.

GEO space program sale history. So you are familiar with these numbers. It is fiscal twenty before the pandemic. We popped at it. Twenty-nine million, we are kind of clawing. We are trying to claw all the way back. Twenty-five, twenty-four point seven million. Not quite there yet. The Q1 forecast, $5.2 to $5.6, that is not that is a little that is kind of a little bit anemic, I would not read too much into it quarter to quarter. There are a lot of issues laying in inventory. Management and things like that to move the numbers up and down that are not really indicative of long-term trends.

The forecast for twenty-six, we are going to stay with this twenty-eight to thirty-two million. That is what we gave you last quarter. Although, you could see we are starting out slow in Q1. That forecast is based upon the information provided by our customer. And actually, a customer provided us three scenarios, low, middle, high. That is a low scenario. I do not know. Maybe we will have to adjust it down, you know, later on if we continue with this. Like, Q2 looks, you know, similar to Q1. We will have to see just like I said, we are getting off to a little bit of a slow start. But we are staying with the forecast for now.

Okay. Slide twenty. Now we are talking about parks, so financial performance history, forecast estimates. The history, you know, the history, so we will not spend all the time on that. Already talked about the quarter. We already talked about the fiscal year. Why do not we just go right to the forecast our forecast for Q1? Fifty to sixty million sales, two and a half to three million of EBITDA. That is our forecast for Q1 for Park. We already talked about how in the historical sales, how much C2B content was in historical sales, for last year and last quarter.

But if you look at the last footnote on the slide, we are also talking of $1.2 million C2B fabric sales expected in Q1. So, of course, that affects our bottom line, holds our bottom line back a little bit. Let us go on to slide twenty-one. Historical. So now we are looking at historical results with a fiscal year. Emphasis. And we you already pretty much covered most of this. Sixty-two million I know. This is a good slide to look at to get perspective. About our using our new factory. Because if you look at twenty-five, our sales were sixty-two million, but about seven and a half million were C2B. That is not produced.

So that means equivalent to about fifty-five million. And go back to fiscal twenty, sixty million, but the new factory did not exist at that time. So all that sixty million was produced and sold with their existing factory. You see what is going on here? We used a new factory. We are bringing the factory in line, which is ramping it up for the juggernaut but it is holding our P and L down. There is a lot of extra cost involved with bringing a new factory online. Just a good illustration of that, I think. Let us see what else we got here. Warranty, supply chain limitations. Yeah. Again, look at the top line.

You know, sales, thirty-one million, forty million, fifty-one, sixty million, really moving the right direction. Then look what happened. We got all caught up with a pandemic. And we are just trying to call our way back now. Ramped you up, of course, for the juggernaut. We talked about that. And then we talked also about how much of our statistical twenty-five sales were C2B fabric. Let us go on to the next one, slide twenty-two, some general updates. New agreement with Arian. So we talked about our existing agreement. The first check item, we already covered that. So we do not have to cover that again. Next check item, then we entered into a new agreement just recently.

And on this agreement, Park will advance is advancing Darien four million five hundred eighty-seven thousand euro. Why are we doing that? Those funds will be used by Arian to help finance purchase and installation of new manufacturer equipment for Arian's production of C2B fabric. That amount is to be paid to Arian in three installments, the first of which was paid in Q1. That is equivalent to about $1.5 million. So again, when we get to our Q1 balance sheet, you looking for that, the $1.5 million expenditure. To be you know, to be reflected in our cash.

The purpose of the new agreement new agreement is to provide the additional C2B fabric and manufacturing capacity necessary to support the rapidly increasing demand for C2B in Europe and North America. Slide twenty-three more general updates. This is a kind of a nice one. Maybe not a huge deal, but our line strike protection material was certified on the pass four twenty engine. For the Global 7500 business jet. Worth about $500,000 per year. They will kick in later this year. Very pleased about that.

Usually, we are checking for so long I never would say this to anybody, but in my own mind, my little private moments, I was probably just giving up on, you know, whether it is ever going to happen at all. So that was very surprisingly good news, you know, with some called me and said, you know, this got through by. I said, what? That must be a mistake. It was not. Parts of blade of composite materials, sole source qualified. We talked about this before. That is next generation iron dome. And then Park entered into an agreement with a major OEM license technologies for hypersonic missile program.

We understand we are the only licensee Phase two manufacturing trial, testing, and license technology continues. We mentioned the same thing last quarter, so appreciate it, Mark, if you can give us an update and how the trials are going.

Mark Esquivel: Sorry about that. I was on mute. Did not want to have any background noise. So the trials on this are going really well. Again, we licensed the product. So the, you know, the formulation work was done ahead. So what the phase two is, we are building laminates. We are making material, and we have a partner for that as well. Because this will require investment once we get to the, point that we have industrialized the project or the product. So we are building panels now. We are making material.

I think we are getting to the place where we are going to start testing the materials because it takes a little bit of time to figure out these processes. Know this is an Oxbox product. It is not a standard epoxy, which, you know, is the majority of our business. So it is taking a little bit of time to figure out how to process these materials. It is a lot different than what we are used to. So feel like we are making really, really good progress with it.

And, you know, the next steps, you know, maybe in a few months, maybe about six months, we will have a better update to, you know, where we are at. Once we kind of butt in up processes and get some of the test data and you know, potentially, you know, have a product where we could, you know, release a data sheet, meaning that you know, we can go to the public with it. In the meantime, we are talking to a few customers, a few OEMs, you know, a select few partners just to, you know, kind of figure out what their needs are with this product.

And, you know, that helps us develop our test matrix and helps us decide, you know, what kind of panels we need to build. So but, again, we are being very selective who we are talking to because we do not want to know, go out to the market when we are still trying to work out the details of the product, you know, the fine-tuning of it. So like I said, maybe about six months, we will have you know, a better update, and give you guys a sense of where we are at with this project. So but it is we are definitely making progress with it.

Brian Shore: K. Thanks, Mark. When we go into slide twenty-four, we covered this last quarter expecting about a $5 million per year from the new LTA, which is aerospace, which is different than the MRSA LTA. So we are in discussion with two Asian large and industrial conglomerate, Asian manufacturing joint venture. This would be a joint venture to do what we do in Asia, produce our pre-prep for aerospace. They approached us. Both these companies were in active discussions with them. We are not intending to contribute any cash, so it would just be our IP. We will see how it goes. Maybe it will happen, maybe not, but I thought at least we mentioned it to you.

Current MRSA supply core scorecard rather. Hundred. That is what we need. We need that hundred. That is very unusual. I think we discussed it before, but that is kind of our mindset. That is our philosophy is we do not we are not looking for ninety-nines. We are not looking for ninety-nine point nines. We are looking for hundreds. That is all if it is less than a hundred, we are unhappy. And we will be talking to the customer about, okay, what happened? How do we fix it? I am not kidding. Ninety-nine point nine, we are going to talk to the customer. I have been told, you know, a lot of most suppliers, we have with eighties.

Terrace, you know, back to you more. Call the hard ones get a little more. Tariffs, international trade conflicts, expected impact on March sorry, on parks on March. We said in Q4, there was no impact, but let us talk about what we think going forward about tariffs.

Mark Esquivel: Okay. Tariffs, I guess, just like everybody else, we are all learning and trying to sort this out. We feel like we did a pretty good job being ahead of it when we saw it coming. I think it was, like, early March. We started updating our order confirmation our quotes. You know, putting a note on their telling customers that, you know, if any tariffs come our way, going to pass them along to them. And, to date, we have been pretty fortunate. We have not seen too many letters come from suppliers. We have got a few. But there has been no impact, you know, to our business. Essentially, I think there has been one, maybe two.

We had a path along to a customer. The rest, we were able to mitigate the tariffs with inventory on hand. Obviously, when you carry inventory, you do not have to pay a tariff because you know, you have it there. So we are able to know, get those orders processed and shipped out without buying new material. And then so the next step was, well, you know, now we have to update our cost if we have you know, tariffs, which is, again, it is only a few materials right now. So our quotes are reflected of that moving forward. So the customers will be paying, you know, the new price you know, when they place orders.

So, essentially, you know, we are just like everybody else. We are trying to figure this out. But, again, we I think we have done a good job getting ahead of it. And there has been no impact to the business. But, again, you know, there is more to come. You know, there thing is still pretty dynamic. We are not sure how it is all going to shake out. So, you know, we will probably have to give you, you know, maybe another update on the next call as well to see if that has changed.

But, you know, again, we feel like, we are in pretty good shape with this, and, you know, we continue to talk to our suppliers and, we do not see anything else coming our way. But I cannot say that, you know, with a hundred percent confidence, but we feel pretty good about where we are at today with this. So I think that is the update. Okay. Thanks.

Brian Shore: Okay. Thank you. Move on to slide twenty-five. So we covered this last quarter. We said we have a new emphasis on defense markets and programs. Why is that? Well, are there any new commercial aircraft that we are even aware of? The triple seven x were on that. The 919 two nine will never get on that. I am not going to go into that now, but that will not happen. But we see significant opportunities in the military defense markets. Especially related to missile programs, what is our focus of late as in hypersonics, how is that emphasis working out for par. Well, actually, remarks the presentation. Slide twenty-six, recent questions from investor.

We love questions, you know, often we think, well, three or four other people probably taken or maybe it is thirty or forty other people the same question. They just do not want to ask you. Will a C2B fabric manufacturer manufacturing equipment fund and part by part advance to a ring group. You are located at their own facility or parts facility. That will be at their own facility who will own and operate the a new with an area in well. Next question, park the park MSLCA provided for a 6.5% weighted average price increase. Does the LTA provide for any further price increases for twenty-nine? No.

Except for price increase related increases in certain in cost of certain raw materials, bark uses, produce products from rest. What about the life of program agreement? Well, with the life of program agreement, a little bit different, you could still argue different price adjustments to the life of program agreement if we enter into it. Maybe we will, maybe we will not. Like I said, we are happy either way. We are happy with life of program. We are happy with the current LTA. You mentioned that Park is a true blue American company. Not to Park's knowledge, only one of Park's competitors is an American company. Who is that? We believe HEXL is an American public company.

We are not aware of other of other HEXL is a much larger company, but slow competitor. We are not aware of other competitors that are owned by US owned. Let us go on to slide twenty-seven, part share buyback. So know, history, we spent let me just kind of go through this quickly so we do not get too bogged down. But this May twenty-three two thousand twenty-two authorization, we spent $9,296,000 on it. We spent some real dollars on this thing now. Alright. And then in Q1, it is not reflected in our Q4 report in Q1. We spent another we spent $2.1 million or $2,165,000 just in Q1 alone.

We will see that again in our Q1 report when we talk about our Q1 cash. So and then just so you know, that $2,165,000 including the total $9,296,000. K? So we continue to buyback stock. Well, let us revisit that. Park's incredible cash dividend history. Yep. And we cover this every quarter, I think. Or you can set years over $600 million since in the last one year is $29.47 per share. It is quite incredible for a little company like Park. Here, the founders started their company in fifty-four with, I think, forty thousand bucks. That they had left over for war duty.

So that is a company that has paid over $600 million in cash dividends in the last twenty years. Go on to slide twenty-nine. Okay. Here is a big one. That is yep. I would say it is a real big one. New manufacturing expansion of parts manufacturing. Major new expansion rather of parts manufacturing facilities. Park is planning a major new expansion of our manufacturing facilities. Planned expansion will include a plant in it could be at our Newton, Kansas, slope campus or elsewhere. We have our road warriors out there now looking at other locations, Kansas services remote.

That would be a very difficult decision to make because the economics of Kansas be better, but there are other maybe non-quantifiable factors which would make remote better. So we are going to have to figure that out, working on it now. Will it be challenged to recruit additional employees? Oh, yeah. It will be challenged. That is one of the reasons we are looking at promoting as well because we think, well, maybe we have two locations that might be easier to staff up to the extent we need. The plan expansion will include the following new manufacturing lines, solution treating, hot melt film, hot melt tape, a hypersonic materials manufacturing line, and support equipment market.

Just talking about that, let us go on the slide. Thirty. A preliminary estimate capital for the estimated capital budget for the new manufacturing plant equipment, $35 million plus or minus. $5 million. So we are talking about some very, very big numbers here for Park. Very big numbers. Why are we doing this? Our long-term business forecast requires it. That is why significant new business opportunities both hot melt and solution composite materials, defense, and missile programs or drivers. Remember a few slides ago where you are asking, how is that working out for us? Working out for us pretty well. So our focus is paying off big time. Are we doing it again?

We have the flexibility to in a position to take advantage of new opportunities as they arise. But we are not in a position to take advantage of the opportunities when we rise not gonna we will not bet get the opportunities. How to flexibly provide one hundred to one hundred to one hundred support and service to for the GE programs. Very important for us. We do not want ninety-nine point nine. We need a hundred, a hundred, a hundred. And we are feeling a little tight, actually. Even on the GE program. So that is one of the drivers of this decision. To do this major expansion as well.

We are thinking planning for the long term, we are thinking planning for our future. When you think about capacity, you gotta think five years out, you know. Takes three years to build a plant, and you gotta do trials, get qualifications. Five years at least. Five years, probably better to use ten years. So we think that far out, we think, yeah, we need to do something here. It is very important. It is a great opportunity, but we do not want to miss. Go on to slide thirty-one, interesting stuff. Others may do things differently. They may wait until the opportunities ensure an offer and risking risk missing out on them as a result.

As you know, Park at Park, we are not like the others. So, yeah, we are in control of our destiny. We have grown cash due this with. We can do things for our future. I was talking to a business guy in our industry, Mark, you know, knows him well. And he was really upset because he was saying that his company is not investing in the future and they have lost a lot of major opportunities based on these opportunities arose, it was too late. They not made the investment. They lost them. So we are not that kind of company. We are control over destiny. We have our own cash. And we are taking advantage of it.

And nobody can stop us from doing it. Doing the right thing for our company and our future. Not sharing a long-term business forecast. We are not going to give you the sales number at this time. We will get back to that. We have a lot of internal work done on this, so it is not we do not have. We are just not sharing it. A lot of different scenarios. But suffice it to say for now, we are putting our money where our mouth is by making this major investment in our future. What about the ROI? Very significant. Very significant. Using your own cash. ROI, very significant. Cash flow, very significant. Very significant.

You know, I think back and I am sorry that call is going on a little bit long here, but actually have a lot to cover. Over the last five, six, seven years, we received from bankers, you know, M and A opportunities. I know it was aerospace, like, it was so superficial. Oh, aerospace, that means it is right for park. Of course not. You know? Just means the aerospace does not mean it is right for park. But, you know, we saw businesses where they were sold for a hundred twenty, hundred thirty, hundred million dollars. The sales were twenty million bucks. So it is really good we did not go there.

Because now we can we are talking about some real ROIs here. I do not know what the ROIs would have been for something investments like that. These are some real ROIs, very significant. This major new investment changer, I think, about a cash, maybe. You know, maybe we will get to that in a couple of slides, buybacks, JVs, where he said those JVs told the JV partners, well, we are not contributing cash. We will contribute our IP, but not our cash. What about the high-level conceptual financial outlook included in our recent quarterly investor presentation. What happens to that? We will take a look at that. So let us go on to slide thirty-two.

So you see, when you look at this slide, this is the reason we felt we need to talk to you about this now. These are two slides in our prior presentation. This is one of them. You see where it says major new expansion project thirty-five million in the prior presentations? That was seven point five million growth. A treater. So we felt, well, that certainly would not we should not we could not present that slide to you again. That would be so wrong. So other option was to delete the slide, but we if we did that, that would alarm investors and cause angst that we do not want to do that either.

So here is this new slide. And this is one of the reasons we felt because of things we covered our prior presentations, we really needed to tell you about this now, this major event now. Well, look at our cash. We had sixty-eight point eight at the end of the quarter. So the five point one, you know about that. That is a payment to make the IRS in June. Buyback in their first quarter, $2.2 million. So advanced payments to Arian, five million, about one and a half million are ready for quarter, and then we have thirty-five million for this major expansion, give or take five million. That is a lot.

It is forty-seven million, and we got six to eight million. Just doing some simple high-level math here, that says after we spend all this money, we are at twenty-one and a half million dollars left. So that is good. We have no debt, but it is not like we have two hundred million dollars left anymore. And the other thing I want to mention is that cash flow. So we will build it be building back that number. Know, especially after this expansion is done and we start to utilize it properly. The cash flow will be quite significant as will the ROI. So we will start to build back the number. Let us go on to slide thirty-three.

Alright. So this is something that we cover or recorder. We are not going to go into great details. We call this financial outlook for gR space jet engine programs. It is a juggernaut. What is the timing for the juggernaut? We do not know. Not sure, but it cannot be stopped. Better be ready. We know it is coming. Let us go on to slide three four. This slide is almost the same as the prior slides related to the numbers for the Juggernaut. We just added something for consistency.

Miscellaneous g programs, two million seven hundred fifty so we did was we wanted to make this slide consistent with the prior slide, which had the GE sales history because GE sales history includes all GE program sales. This juggernaut slide did not did not include some of the GE program GE, sorry, GE aerospace, LTA sales. So we are now including in this last item miscellaneous GE programs. These are under the GE aerospace LTA, not the MRS LTA. It is a little confusing, but we just wanted to make it apples to apples. So the numbers kind of reconcile with the historical sales.

We can go on to the next slide and just look at footnote nine because footnote nine describes a new item, multiple part composite materials products applied to the G90, Gen X, and G9X engine programs under the park. Park LTA with GE aerospace. Again, not MRAS GE aerospace. Let us go on to the next slide here. And this one, slide three, you see this something we presented in the last few quarters. This is again a reason why we felt we needed to talk to you about this major expansion. Usually, we have big question marks here now, you know, we have non-GE programs, incremental sales. Question marks.

If you look at the footnote, that number was $15 million in the prior quarterly investor presentations. That number is blown out the window. Blown out the window. We are not going to talk about the number is, but that number is gone. So we could not provide the same slide to you. We would just be wrong to provide a slide which talks about $15 million incremental sale. I am not giving the number now. We want you to know that something is very different here and obviously the total would be very different as well. Right there. But it is a simple math, you know, let us round g programs up to sixty million.

The non-GE programs have been maybe around thirty million, give or take us ninety million. And fifteen million incremental is a hundred and five million. Well, number does not work anymore. And we are not giving you a new number, but we are telling you that it does not work anymore. And that ties into why we are communicating to you about this major expansion initiative. And, actually, that is the end of the presentation. We are not going to go through the appendix. So thank you everybody for listening. Operator, Mark and I would be happy to take questions now if there are any.

Operator: Thank you. We will now be conducting a question and answer. Seems like there are no questions at this time. I would just like to remind everyone if you would like to ask a question. First question comes from Nick. You there, Nick? Nick, you may proceed with your questions. Your line may be muted. If you could please just unmute your line so that we can hear your questions.

Nick Ripostella: Hi. Good afternoon. Can you hear me?

Brian Shore: We can hear you.

Nick Ripostella: Oh, great. Congratulations on a decent quarter, and it is pretty exciting what you are suggesting there. With this new expansion. So I just have a couple of general questions. With regard to tariffs, I know it is hard, but, in the big picture, just your best guess at how it might play out. You know, in terms of the you know, airlines and Airbus for example. So if you can comment on how you think it I know it is hard to answer, but, there is just so much difference opinions on how you know. Sure. It might work out. And there is a lot of you know, tough talk going around. But, know, you are your best guy.

Secondly, but are go ahead. Sorry. You repeat your question?

Nick Ripostella: That is the first question. The second question is if you could just there has been a lot of talk and a lot of sell-side research on supply chain still and engine components, do you think that those issues have mostly resolved themselves at this point? I mean, GE has been pretty positive, and but so just your further thoughts on that. And you know, and then do you think you know, what would be your biggest worry in terms of you know, delaying the drug or not at this point? I know that is also a difficult question.

But as, you know, Airbus know, when they reported recently, I think we had an email back, but they are not backing down. So there is optimism there. So, anyway, those are my questions. Thank you so much.

Brian Shore: Thanks, Nick. Okay. I will try to we will try to get in reverse order. You were I think the last question is what is the biggest obstacles jargony one occurring. So I do not know. I mean, I think it is more really a question of when and, you know, if that is my opinion. I do not see the juggernaut not happening. I do not see the scenario under which it does not happen. But there you could argue, and obviously people do, about when it will happen. Airbus says that if we are talking about day for twenty, they have their input. Other people want to be skeptical. And you know what?

I will personally, I will say, I kind of got tired of listening to it because it just so much noise and noise and noise. Like, who cares? And we just have for our happen. And every expert has an opinion. I get these email services, you know, with all these aviation experts I do not know who pays them because, I mean, I do not know what their pain is worth, but my payment much? On the supply chain stuff, yeah, you probably heard that Airbus is building gliders. Again, I think it is seventeen gliders. I am not sure. I think that is a number. That they are producing here.

Gliders mean that they are producing airplanes and no engines. And things. So, you know, whom you know, who rather that did all the engines for the A320. Now what I am told is there are a little bit of, you know, bright news is that in the first half, four engines have been going to the to the to the to the just to supporting existing airplanes with spares and that kind of thing, and that is not supposed to happen. In this that is not supposed to go away in the second half. So that way, the engines that are being produced will be going to do airplanes, not to spare. That is what I am told anyway.

But, you know, it is like it is not really wonderful news to hear that Airbus has built seventeen gliders a eighteen gliders, because they just cannot cut the engines. So, it is sold. The supply chains with the engine company is still obviously an issue. And I just hope they figure out a way to know, get their act together. And not just for Airbus, but for, obviously, obviously, for Comac and Boeing as well. So I do not know if that is a good answer, but, you know, that is the best answer I can provide.

I will have to see I think we will have to get direct together at some point, but I do not know when. That is a similar answer to the answer to the first question. Supply chain. Yeah. You are asking now not our specific supply chain issues. Sorry. Your the tariff issues tariff issue talking about how tariffs. I think that is your question. We will get to you this week generally. And again, like you kind of intimated and replied, everybody has an opinion. You turn up a to news on. About how tariffs will affect the world over the next, you know, whatever years. And I do not I do not or maybe months. Weeks.

I do not have a I mean, I have nothing that I could add to all that. These are so much someone so many opinions out there. As you know, the GE Aviation programs that we are on, except for the triple seven x, relate to airplanes that are made by foreign companies, Canadian, European, and China, Chinese. So there are some tariff questions that you know, could and should be asked about how the tariffs will affect the sales of airplanes. But and buy of the equipment into those airplanes. But I do not I do not know.

My it is I guess for whatever my the two cents opinion is, I would say that my I feel like these things will be sorted out at some point because there is the economic global economic need is such that it will be necessary to sort these problems out one way or another. But I could be wrong. Just my opinion. Or do you want to add anything about tariffs?

Mark Esquivel: No. I mean, everybody we talked to. I know he is asking, you know, the airlines and the aircraft companies, but think we are all looking for answers. I think you know, there is really you know, no you know, yeah. I do not think anybody wants to stick their neck down and say this is what is going to happen. So think we are all just kind of sitting back and just waiting for this all to, you know, kind of vet itself out. And hopefully, know, sooner rather than later. That is all I really got on.

Brian Shore: Okay. So you see, Nick, our combined, you know, input is, you know, not so much more brilliant than this year. News program these days. But.

Nick Ripostella: Oh, okay. Can you still hear me?

Brian Shore: Yes.

Nick Ripostella: Yeah. One other thing. So and you used the word type. With regard to a little tight with regard to your current manufacturing footprint. And so is it safe for me to think that you have a high level of confidence of what you are doing in terms of the major expansion even before the juggernaut has really come to play. You know? We are not at you know, might be a year, might be a year, and it might be two years before they get to seventy-five a month. But it is certainly not inhibiting park in any way. You are going to go forward with your investments because you see the opportunity right now.

Is that safe to say?

Brian Shore: Yeah. It is exactly right. We are okay now. We are not we are having trouble keeping up now, but we have to plan for the future. And when you are talking about factoring capacity, especially in aerospace for our kind of business, you gotta think five years. So you gotta think, well, how much capacity manufacturing capacity will need in two thousand thirty-one? No. Two thousand twenty-six, twenty-seven, twenty-eight, does not matter. Because we need to be ready for two thousand thirty-one. And if we do not get ready for two thousand thirty-one now, we will be in trouble, and we will miss out on things, and we could end up being too tight. And disappointing customers.

And that is just not our way of doing business. You know? Right. Right. But all while you are thinking forward, as a shareholder, I it is reasonable to assume you will have higher sales you know, in the next couple of years in any case, you know, absent some kind of you know, I do not know, calamity we cannot think of. You know? The company will be growing while planning for four or five years. Does that reasonable too soon?

Brian Shore: The question think the answer is yes. Okay. But the question is this. You take, you know, the capacity we think we need. Two thousand thirty-three thirty-one. Okay. So we are building towards that number. Is there a straight line between where we are now to that point, or is it kind of a squiggly line in know? And we do not know. But, you know, next when we look at it, it does not really matter because we have to think five years out capacity wise. And if we feel we do not have enough, then we feel we definitely do not have enough.

Need to deal with it so that we get to that point, we will be where we want to be. Not only to be able to handle the programs we know about, but what about new programs, new opportunities that come her way? Like I said, our friend is so upset with this company because they did not invest for the future. So when the programs came around, they lost some. No. We do not want to be in that position. We want to be in a position where the new opportunities, whatever they may be, we can take advantage of them if we want to. But we feel the right part.

Nick Ripostella: Alright. Well, my suggestion is those folks in Washington that care about American manufacturing, they ought to be talking to the guys at Park, you know, because you are thinking of the future. With American jobs, and, yeah, it is a beautiful thing.

Brian Shore: Well, thank you very much for saying that. You know, I doubt anybody from will be calling me anytime soon, but I unless they no.

Nick Ripostella: But you are exactly what they are you are exactly what they are trying to make a point of, you know.

Brian Shore: That is true.

Mark Esquivel: I agree.

Nick Ripostella: Okay. Well, thank you so much for answering the questions, and have a good evening.

Brian Shore: Thank you very much, Nick. We appreciate your questions. Really helpful.

Nick Ripostella: Alright. Thank you.

Operator: At this time, there are no further questions in the queue. I would like to hand the call over to Mr. Shore for closing remarks. Thank you, sir.

Brian Shore: Thank you very much, operator. Thank you everybody for listening. Thank you. For hanging in there at the extent you are still on or actually a little over an hour. Have a good day. Have any follow-up questions, feel free to give us a call. Thank you. Goodbye.

Operator: Thank you. Ladies and gentlemen, that does conclude today's conference. Thank you very much for joining us. You may now disconnect your line.