PKE - Earnings call transcript Q2 2025

Thank you, operator. Hello. This is Brian. Welcome to our fiscal '25 second quarter investor conference call. Nice to have you on board. With us today are Matt Farabaugh, our CFO; and also Mark Esquivel, President and CEO.

Well, we announced our earnings through a news release right after the market close.

If you don't have that, you want to get access to that because in the earnings release, there's also instructions as to how you can access the presentation that we're about to go through. The presentation is also on our website.

You want to have that up or the -- in order for the discussion to be more meaningful. After we're done as the operator told you already, after we're done, we'll go through the presentation, we'll be happy to answer your questions.

So why don't we go and get started.

When we go to Slide 2, our forward-looking disclaimer info.

Let's know if you have any questions about the forward booking disclaimer language.

Slide 3, our table of contents, beginning on Slide 1, we have our investor presentation. Then we also have supplementary financial information attaches appendix. One at the end of the presentation. We don't intend to discuss that at this time, but if you have any questions about the supplemental financial information, let us know. Clearly a picture, the clearest picture of mercury ever taken in a digital picture in my opinion. Thank you, James Webb Space Telescope, obviously, taken by James Webb.

Space telescope, and has been, as you know, our proprietary Sigma structure and corporate into the structure of the James Webb Space Telescope.

So that telescope has a special place in our hearts.

Let's go on to Slide 4 on the quarterly results. When we focus just on the right-hand column, Q2, $16,709,000 sales, $4 million of 77,000 of gross profit, [ $3,204,000 ] of EBITDA. Quickly, what did we say about our Q2 during our Q1 investor call. We said the sales estimate sorry, $15.9 million to $16.4 million.

So we came in just a little tail above that. Adjusted EBITDA estimate, we could get [ $383.3 ] million, so we came in right within that range.

Let's keep moving here. Slide 5, please, continuing with quarterly results, to offer some considerations for Q2. There was approximately $2.2 million of [ ArianeGroup rate card product [ CGP engine card ] sales during Q2 under parks business partnership with ArianeGroup. We talked this often. This is the fabric that we purchased from ArianeGroup for ablative programs for missile programs, and we then sell it to the OEM customers, turn around pretty quickly within a couple of weeks. Quite low margins, it's really a markup, but always say the when we actually produce their product and make a bad materials that margins are quite good. But by comparison, there was only $750,000 point of material sales during Q2.

So you see a little bit of an imbalance there. One more emphasis on the low-margin are of the equation, less emphasis on the higher margin. Eventually, it all comes through, of course. There were significant ongoing expenses in Q2 like really to bringing Park's new production facility, fully online about this, including expenses for depreciation.

Let's just stop there with the asterisk. $1,260 -- sorry, $1,260,000 per year depreciation expense related to the new production facility. This obviously does not affect EBITDA by definition, but it's important, but it does affect gross profit and gross margin, approximately 2% impact on gross margin just from the depreciation.

And if you look at the gross margin in Q2, what was it, I think, 28.5%. Was that the number? Let me quickly make sure I'm telling you the right story at [ 20.5% ]. We always say like another 30 just depreciation alone would bring in above 30%, but it's not just depreciation -- results of this other stuff and also included in the EBITDA or effect EBITDA facilities, maintenance, utilities, insurance, other overhead expenses and expenses related to additional park people, all related to the new facility.

Additional expenses, I thought this is an action or a problem. These are planned expenses. I just want you to understand that required to bring the new facility fully online in order to meet the need of the coming Juggernaut, which is carried later on in the presentation.

So it's all part of the plan. But nevertheless, these items are going to hold down our P&L or our margin until that facility ramped up. And right now, it's very underutilized, but we're doing it intentionally because we need to get going with that facility.

So we can meet the needs of the Juggernaut get note behind the power curve.

Slide 6, total shipments in Q2, $600,000. That's not a great number. By international expansion, supply chain, customers on whole or this latest issue. Yes, so the aerospace industry is not really a happy place right now, a little more difficult challenging for us. We got wars as well that are a factor, especially when you talk about international shipments. There was no impact, though, on Q2 the sales and earnings from store damage, except for the $64,000, sorry, like the dyslexic thing there, $46,000 of expenses reported as a special item in our Q2 earnings release.

So other than the $46,000, no impact from a storm damage on Q2 rig sales. Oil production lines are fully operational throughout fiscal Q2.

And that's quite remarkable because remember, the storm happened in the last 2 weeks of Q1.

So for the all lines to be fully operational throughout Q2 as quite remarkable, really, a miracle, quite achievement by our people. I must say, let's go on to Slide 7, top 5, we do this every quarter. Top 5 customers alphabetically. Aerojet Rocketdyne, these are usual [ effects ] in these names. They're involved in the factory missile system, Aero 00 a rep for IAI, Israeli Aerospace Industries, which is a very important customer of ours, and they produced the G280 for Gulfstream.

GKN, that relates to the Boeing.

So that actually is not plant's [ 1X1 ] engine that is used an airplane. Kratos Defense, we talk every quarter the top 5, I think. And we just select one of their aircraft this time it's a BQM-177A. Quite interesting, your plan to look up on the Internet. Middle River Aerostructure Systems, yes, they're kind of usual suspect and MRAS we chose the Bombardier Global 8000 represent them.

Let's go on to Slide 8, estimated revenues by Aerospace market segment, the pie chart. What's interesting to me is, look at '22, '23, '24 and '25 year-to-date, in part chart, really very, very similar. But the big difference is '21 and that was depends on the [ Tier 1 ] when particularly our commercial aerospace was very much I don't know how you say it, I mean, in jeopardy, almost looks like it might not make it.

Let's go on to Slide 9. This is the slide that Alaina does for us. Alaina is the Head of Customer Service every quarter. She comes up with interesting cool programs to miss a little slide. The pie chart, this is for the first 6 months, rate on rocket nozzle, drones, those we consider to be niche markets and military, but for us, even Chris starts his niche. Per programs clearly David Clark, not a huge customer, but we love that customer, they make the helmets for the Air Force. And we supply materials.

We also do kitting for them, which is nice. And then we got the Mk30 Canisters for Raytheon ESS system. That's ablative the MK125 warhead for the SM-2, SM-6, was there hypersonic missiles, I think. And that's actually not ablatives. In this case, it's one part of the structure. We can't say anything more about it.

On the MK41 Vertical Launch System that's actually parts that we produce with our materials. It seems like Alaina was fully focused on the missiles this quarter.

So she must have on a lot of drains on missiles, I guess.

So let's go on to -- thank you, let's go to Slide 10. GE Aerospace Jet Engine Programs, another slide, we give you every quarter.

You have to understand some complain about we overthink things too much. There are new investors that dial in every quarter.

We have to be fair to them, too. We try to strike a balance here yes, we include this slide every quarter, firm pricing LTA requirements contract from 1929 with MRAS, which is a [ subinvest ] engineering aerospace, a large Singapore aerospace company. We built a redundant factory for GE actually in MRAS, that's in production and all that.

So what's going on here with sole source quality for composite materials for the cells for [indiscernible].

On these programs, you know they're all GE engine programs.

So why is that? The reason is that when we entered into the LTA originally, MRAS was a sub-GE aerospace.

So we've got all these aerospace programs at that point. And then subsequent to that, [ JSOL ] MRAS to ST Engineering, but we continue on these programs.

So let's go on to -- and I'm not going to go through the programs. Do you have any questions about it, let us know, please.

Slide 11, continuing with GE Aerospace, MRAS/Park LTA provides for an approximate 6.5% weighted average price increase effective January 1, '25 of the products covered by the LTA. I've been asked about just a lot lie, and I said, well, every like you don't want to say, but now we're saying kind of investor presentation where it's appropriate.

Park Composite Materials, don't forget we cover that one we cover that every time.

Let's go to the last one, Fan Case Containment Wrap for GE9X engines for the Boeing 777X aircraft. That's produced with parks, AFP and other composite materials. Park recently received a PO for approximately $6.5 million for this program.

So this program is ramping our customer receive large order for case rack units. We're clearly not going to talk to numbers, but this slowed to us in terms of PO when there's more coming or expect a lot more.

So this program is now are just kind of development. It's really to ramp up. Park materials with for expect to be included in our program.

So they're not in the LTA because this came after the LTA, but the expectation is just the , the GE9X program into the life of program agreement, which I'll discuss in a second.

Slide 12.

So just trying to watch time. MRAS/Park LTA was meant to include 3 from these Park or composite bind, metal bond. This is really outstanding because this is one of the reasons to develop through a joint development agreement with MRAS GE and a lot of time and effort went to this, but it's outstanding is as soon as the development is done, then we go right into qualification.

So that's really a very wonderful and special risk qualification of 2 proprietary film adhesive product forms in progress. Why not 3, because -- so this is the process. We go through a qualification with MRAS and then MRAS needs to go through a certification process with their customers on selective programs.

So the first program that MRAS intends to get a certified on does not use metal bonds.

So that's why we're not qualified metal bond at this point. I'll come later, right? Life of program agreement requested by MRS and STE, agreement it's under negotiation and a market of team of, I guess, 3 park people to MRAS a couple of weeks ago. We spent a couple of days. They spent a couple of days working on the agreement with MRAS.

So it's under negotiation.

So we finally made some progress on it.

But just keep in mind, this is what they want, they requested a day being MRAS and STE. We're happy to do it. They are the ones we requested for a good reason.

Okay.

Let's go on to 13, Slide 13. Continuing with -- this is a little different up then GE Aerospace programs now A320neo aircraft family includes all these variants [indiscernible] off. Airbus has a huge and underlying use backlog of A320neo aircraft for more than of 7,253 so it's on many airplanes. -- unbelievable number of airplanes. Airbus has been -- had been maintaining that intent to achieve a rate of 75 A320neo aircraft deliveries per month in '26.

Let's go to Slide 14.

So this is just a little history here about the deliveries over the prior years of day A320neo aircraft.

You can see that kind of peak to '19 and that's what happened in pandemic, the numbers fell off. '23 they got back to the pre-pandemic 571 compared to 561. And year-to-date through September, about 396, not about 396 deliveries compared to last year, year-to-date. 391 don't annualize that, that don't work because aircraft industry for some funny reason that a lot of deliveries happened in last quarter. But it's basically saying we're kind of tracking last year, which is a little disappointing. We were hoping that we would be able to show a little bit of improvement from last year. Last year, it was 48 airplanes per month, as you can see.

Let's go on to Slide 15. Then on June '24, '24 Airbus announce is pushing out its goal of achieving the 75 aircraft family monthly delivery rate from '26 to '27, not surprisingly, Airbus highlighted supply chain issues globally, supply chain issues, they so a little over again, especially engine availability issues as a key reason for the pushout.

It's funny about this, do you remember what is it a year or 2 ago, we're all clear with engines. It's not just Airbus at the engine company, they're a little over an issue, everything is great.

Now we're back in the super engines. I don't know what to make of that, but now engines are front center in terms of what the main supply chain issues roll out. Supposedly maybe castings and forging for the engines, but it's engines. That's the problem.

Clearly, based upon the huge backlog, Airbus would already be at 75 per month rate. Why is that? How many -- what do we say, how many airplanes are in order to -- I got to go back, sorry. What was that number -- no, sorry [indiscernible] [ 7,263 ] so let's say they're at 50 now, which maybe you do not, but let's say there are 50 now. That's 600 per year. Well, how many years is that with 77,000 orders? Well, the problem is there, Airbus wants to sell more airplanes.

So you order an airplane, your delivery is what, 13 years down the road. That's not for a conduce selling airplanes.

So one of the reasons Airbus wants to push it up to 75, 75 quite 900 per year that's still not you enter an airplane and you get it next year, but it brings the lead time down a lot, which will allow us to sell more airplanes, which is what they want to do. They want to sell a lot more airplanes.

So anyway, will everybody's achieve its goal of 75 deliveries per month? We certainly believe they will, we'll achieve it in '27? We believe they will. We're not sure it really matters very much whether that goal is achieved on '27 or maybe '28. Can you think for Park is that we need to be ready? And the key thing is they will get to that rate, all these orders will be filled. They'll take more orders, and we just need to be ready. And we -- not sure what the timing of the ramp will be. I don't think anybody's sure, we just need to be ready number one. Number two, those sales will be there and they're incredible sales for Park. 16 approved engines for the A320 aircraft.

There's still approved engines in A320neo is the CFM LEAP-1A. That's the engine pro we're on. Then there's a Pratt [ Whitney ] PW1100G GTF engine, not in that program, just on [indiscernible] CFM program. We spoke lots and lots about the durability issues, especially for the credit engine, we'll cover that here.

So let's see, according to the September '24, addition to new CFM LEAP-1A's market share, aforementioned orders is 64.4%. That's a nice market share. I don't remember, but I think last quarter it was maybe 62%. It's been around that 62%, 63%, 64% range moved up last quarter, but may not be sustainable, I don't know, but at least it's well over 60%.

At the delivery rate 75 A320 aircraft per month at 64.4% LEAP-1A market share translates into 1,159 [ engines ] per year. What's that worth of the Park? Well, it just go Slide 34, it will give you an idea of what is what the Park is here.

So currently, this is just one of these huge numbers. 8,238 LEAP firm, firm LEAP-1A engine orders. That's a lot of engines.

One of those firm owners work to Park. Well, I mean, go to Slide 34, it tells you what we get our engine.

I think it's about $0.25 billion. And that assumes that we're going to continue to Slide after 29 which -- whether we have a lifetime we're not, and we're quite confident we will. And it does not assume that take into account, there will be price increases during that time frame. But you think about conceptually $0.25 billion, does it really matter to us whether it's '27 '28, '29 just a lot of revenues of Park. And those engines are going to be sold. Those engines are going to be produced and sold. Those are our engines that are program.

So I think people selling the stock at [ $13 ], I'm not sure what they're thinking.

Let's go on to Slide 17. Airbus, okay, here's one of the variants A321XLR. Airbus to open additional XLR production line in July, the A321XLR paired by LEAP-1A engine received its asset type certification in July, and that's really nice news. That's good. And the asset is the -- equivalent [ GFA ].

The first A320XLR delivery scheduled flight is on month to Iberia and according to Airbus [indiscernible] for this program, an important program for Park.

Let's go on Slide 18.

Okay.

Now let's go to Comac, Comac 919. That's the single-aisle airplane at Comac developed to compete against the 737 and A320 and that has another kind of LEAP engines a LEAP-1C. I don't know, maybe C stands for Comac. It's a variation of the same engine. That's in the electric funnel.

Comac place to achieve a production rate of [ 159 million ] aircraft a year between -- I think that's credible. They are investing huge amounts of money in production lines.

I think we can now -- assembly lines report to have over 1,500 orders for 919 aircraft, 919 is now flying for Air China, China Eastern and China Southern, all Chinese airlines. Comac clearly has designs on getting out -- it's all these airplanes outside of China, though. They've delivered 9 so far, and they've logged over 10,000 flight hours. This is an important program for Park. We'll see what happens, but we believe and our customer believes a very important program with lots of upside opportunity.

Let's talk about go to Slide 19, rather, 777X aircraft with GE9X engines. In August 19, Boeing grounded the 777X test flight fleet after detecting engine attachment issue, a fleet remains grounded while Boeing continues to evaluate. These engines, they achieved a record 134,400 pounds of thrust. That's why those engines test are pretty important. They're certified for 110,000 pounds. With a perspective, the LEAP-1A engine for the A320 about 32,000 pounds.

So big, big, big engines and lots of power.

October 11, 2024 Boeing an ounce is pushing out its first delivery target to '26 or '25 because of development challenges of flight test pause in the work stoppage. Boeing says they are absorbing according to data, Boeing had 481 orders for these airplanes.

So a little bit of a setback, but I mean, the thing is it's very -- this is a clean sheet airplane.

So it's not top will have problems like the engine attachment problem. It's very, very important that this happened that is detected during the development and certification phase not after this airplane flying to a 38,000 feet with 400 people on it.

So this is a really important program for Park. We just -- the best wishes for Boeing. Obviously, they're not having a bad time now, but we hope that Boeing finds to move ahead and make things better.

Let's go on to Slide 20. We can quickly cover this. Pretty much everything here is provided for history for context, in the bottom right here, fiscal '25 Q2, $7.1 million [indiscernible] change of program sales trend forecast estimates. $7.1 million in Q2.

I think our estimate was a little lower than that, but kind of in the range. And our forecast for Q3 is $6.25 million to $7 million, that's our forecast to agree.

For the year, $23 million to $26 million. We provided that forecast last quarter.

We are sticking with it in.

Okay.

Let's go on to Slide 21, Park's financial performance history and forecast estimates.

So again, most of it is provided. Most of the data here is provided for our history and context. Fiscal '25 Q2, you already had that the number, $16.7 million, $3.2 million EBITDA.

Our forecast for Q3, $13.5 million to $14.2 million in sales, $3 million to $3.3 million EBITDA. Note the footnote subject to supply chain risk and limitations. We'll set that even further in the next slide.

So let's go on Slide 22. This slide is exactly a slide presented to you last quarter. Everything is historical than the forecast estimates. We're not changing the ForEx estimates -- sorry, forecast estimates for the year. pretty big ranges, $60 million, $65 million sales, $13 million to $15 million EBITDA, and this is what we provided last quarter.

So I'm not changing it.

But look at the important thing, supply chain limitations affecting aerospace industry.

So I want to stop for a second. The aerospace industry is not really in happy place right now, not so much fun.

For perspective, the European shows the big ones person [ bowl ] every year. Last year was Paris, lots of exuberance, maybe irrational exuberance would depend on hindsight about all the orders are taken, all the engines -- that the airlines and engines being sold. Everybody is very excited about that. I wonder order wonderful.

Okay. That's nice.

Then we fast forward to Farnborough this year. Very different toll, different mood, kind of glom because everything that is coming out of Farnborough, supply chain, supply chain, supply chain, supply chain, supply chain. The problem has been -- one comment, I guess, was a little sarcastic was who cares how of the engines, I saw how many airplanes you can -- wonder you can take if you can't make it, what difference to make? Obviously, that's bit sarcastic, but that was the recent mood. What's interesting, I guess, you look at it that way.

As we go through these kind of funny deja vu a little over again, how many times have we heard last 3, 4 quarters. Supply chain issues almost over about solved, everything is going to be fine. And then we're back in the suit. Why is that? I don't know maybe it's a psychological thing. My guess is they never were solved. It was just a wishful thing, wishful thinking is contagious. One personsays it, okay, fine. But supply chain issues are clearly not resolved. They have not gone away and they have an impact upon the industry.

So just keep that in mind with these forecasts that we have all the risks that you put in the 10-K, but supply chain issues a key risk for these forecasts.

So -- and of course, we also are ramping up the cost for Juggernaut, and that's not just a temporary thing that's holding back or not top line but our bottom line.

Let's go on to Slide 23. Try to hustle here a little bit, if you can. General park updates, I guess we're just covering a lot in this presentation, so it may be taking a little bit longer.

Solution to your project, we plan to poach and install an additional solution treated. Why are we doing that? We'll take approximately 3 years of design and specify the equipment installed to conduct controlled trials, qualify the equipment for production with customers 3 years.

So we're quite concerned. We look at the opportunities that we have. We look at the programs we're on and the opportunities we have, we're concerned that we're going to run our capacity.

So we need to move now because it's a 3-year time frame. We can't wait for years. We do that. We're -- use the term, screwed, I think. The budget for the project is about $7.5 million. This is something we decided to do and we're going to have in the product. This will be placed in a new factory. Remember, we told you that there was a big area set aside for new line. Well, this is where the lounge to go.

Another item, these items are all related. They're just updates. Major OEM suppliers, as partner -- partner and coach with them the purchase of an additional manufacturing line to support critical -- programs. This equipment is essential to these programs, so it's needed this OEM is quite a bit larger in part because they want to be partners, 50-50, $7.5 million each, and we're now negotiating agreement, but we plan to do this. It has to be done.

Just a lot is essential for the military programs.

So we're talking a little bit about money as well because we want to get to that later on in terms of cash '24, '24. We recently qualified an essential high-profile missile defense program. Parkers potentially sorry, this program is potentially larger for us in the factory missile program. Initial revenue is expected for Park next year and program is expected to ramp from the next -- and we probably need to make a $1 million total investment just towards this program. This is an important accomplishment for Park -- that way. I can't -- we can't talk -- give you more details about the program, but you have heard about that for sure.

So the next item Park recently entered into agreement with a major OEM license technology for hypersonic missile programs. We understand that Park is the only licensee for this technology. We're currently conducting manufacturing trials, a significant potential opportunity for Park underlying significant. Park, we need to make investment of approximately $3 million. I just want to stop here because -- these are not certainties. And that's not the standard for us sharing thing with you. I would want to know about important opportunities for Park. But if you just want to wait for these things to be locked, that's different, but I don't think that's really what I want to hear.

So my point is that this may happen, may not happen. A shareholder complained about, well, we talked about some of the program a couple of years, didn't it go, didn't happen. Well, yes, we talked about it because it's important, and it seems serious. That wasn't a guarantee it's going to happen.

So just keep that in mind right.

Please, Slide 25.

New LTA, GE aerospace is -- these progress for calendar year is '25 to '30, under which you use 2 additional products or Park and incremental revenue from that is $3 million. This is not part of the JV, by the way, this is separate incremental revenue. This is not the [ MS ] LTA, this is the aerospace LTA, separate LTA. Potential JV with major adhesive company related to adhesives for the aerospace industry, those discussions and negotiations in progress. We've got numerous in-person meetings. I believe there's 1 next week actually in our facility. And a significant capital investment may be necessarily to support the JV, we'll see.

Another potential JV with a major Asian industrial conglomerate related to manufacture, marketing sale of certain parts [ more deposit ] material products in Asia.

So these discussions and negotiations and progress is surely we have a team over in Asia right now, and we've had a number of meetings already. This could involve significant capital contribution part. This OEM is quite aggressive. We're trying to slow it down a little bit. They definitely want to do this.

So it's -- I think, maybe a good possibility that actually happens on Slide 26.

Totally different topic, but still an update. MRAS Supplier Scorecard was just maybe I'm trying to cover too many things in this one presentation, sorry. MRAS Supplier Scorecard. Park scores, you can see these scores.

The first item was actually a mistake, it really should have been 100. What these scores mean? What is their significance? We're told that MRAS has over 700 suppliers. But these typical MRAS supplier scores. No, I don't think so. We're told that most suppliers would be happy to get 80. I've been told that numerous times and why them don't get 80s. Are these scores achieved by other suppliers ever, I don't think so.

So a similar theme is Park MRAS best supplier over 700. That's what I'm told. How does that happen? It's a board room thing or a boiler room thing? This is such a special situation for Park. And I'm not sure whether it's fully appreciated how special it achieve an accomplishment. This is now a special it is for Park to have this kind of relationship with a company like this.

So see, it's our strategy, customers to love us in order that strategy to implement, that's more of the boiler room thing. That's really a culture thing. It depends on Park having very decade employees. That's how we achieve these scores. That's how we become their best supplier and what we're told anyway, their best supplier.

So yes, I mean, example, I'm sorry to take the time, but just a little example. John Moon, I mean, we were told you as a house, but we would never know that. This issue does not leave the plant. If something has to be shipped. It doesn't matter what time. He's not going anywhere. -- he's not going anywhere until that truck is left the dock. And that kind of dedication. And if you want your customers to love you, you need to have people like that. The rest of the strategy is nice, but in order to implement it, you have people that are very dedicated.

So let's go on to Slide 27. Questions about -- this is now a different topic. We got recent questions from investors.

Okay.

So I'll hold a new section here that we have not previously. I just know if you want us to continue this, but we thought it would be interesting to include some of the questions that we've received from investors with questions about our Film Adhesive product line, we call it Aeroadhere. What advantages does Aeroadhere have over competing products?

Well, aero industry is a little strange. It looks for equivalency more than better. In other words, better is not really such a good thing. When we developed Film Adhesive, remember, we did that with a joint development project with GE and MRAS. With a lot of tweaking, a lot of fine-tuning for their needs. But generally speaking, we want equivalency because if it's not equivalent, if it's better, then the customer is going to have much more difficulty incorporating into their programs.

Why would a customer then buy it from Park? If it just equivalent because a park more than a product itself, they're buying, how are we selling you, we're selling park. We're selling park, the flexibility, responsiveness, urgent.

So people say, well, what is the expression, a customer says, "John, please say, how high. " We don't do that. We say how high before they say job. But I'm not kidding. We say how high before they say, [ jump ], that's what we're selling. Do we anticipate [ Federal ] here, sorry, tongue twister.

Margins will be higher or lower than Park's average margin. This is a question from investors. Higher, and we're quite sure of that. Several years out, what sort of range of revenues are we targeting for aero here. Well, we're not sure. The strategy though, is it really a revenue strategy is to broaden the product line we offer to customers which manufacture aerospace, a lot of structures. That's why we love adhesive [ sums ] because customers require our product to make component structure to aerospace, at least we know, composite material to make composite structures. But they also use adhesives in the production of these composite structures.

Just for reference, we're asking about revenues. The A320 program is the first program that MRAS intends to get our [ files certified ] on and that's $3 million per year. That's on the 1G program ramps to airplanes per month.

So let's -- and obviously, that's not it. We've got lots of other opportunities on, not just with MRAS but other companies as well.

Slide 28 more questions. What about that a major new manufacturing initiative recessed in our Q2? Sorry, Q4 investor presentation last year. What the status is morphed into a large project? Why wasn't discussed during our Q1 investor presentation? With a customer which initiated a project, and a project to be an aerospace composite structures manufacturing technology, JV, a potentially larger, quite a bit larger projects. This is a JV like with [ New Power ] 2 companies -- own it, I guess. What about our strategy? What is it? Somebody actually asked that we have a strategy? Yes, we have strategy. We call it the egg strategy, certainly not going to take the time to go into it now, but let us know if you want to discuss our strategy probably take 5 minutes in an upcoming presentation. It's a straightforward strategy. It's not like an elegant strategy, it's very straightforward.

So nothing we tell you it's going to surprise you, but we have to go over which you should like.

Slide 29. Different topic, our buyback authorization we announced on May 23, '22. That Park's Board authorized purchase of 1.5 million shares. Under this automation, we purchased a little 551,729 shares at an average price of $12.94 total cost of $7.1 million.

So we're spending some real money on this. In highlights, though recent buyback activity to the authorization since July 26, '24 the significance of July 26, [ at the black ], the Q1 blackout ended was lifted. We purchased [ 331,080 ] stock, average price of $1,288 total cost of $4.251 million, like I said, we're spending some real money on this now.

Why do we do that? How we do that? It's what the price was stupid, ridiculous -- we -- it's not really our preference to buy stock, and we'd rather use our cash to take inside all the opportunities we have. But when the stock prices, we feel stupid, ridiculous. We don't think we have too much of a choice we buy more -- I don't know, we'll have to see maybe.

So let's keep going. That's our buyback program.

Slide 30. Credible cash dividend history, 39 consecutive years of dividends. We've paid $596 million or $29.10 per share since fiscal '25.

So a little bit of a thing here that we're developing a concept anyway.

So we have a regular dividend payable on November 5, that's done height. That's some paid on, November 5 2024.

So sorry, that's a typo, I just noticed that. And we'll have paid $598.6 million at that point. And then it looks like there's another typo, the next regular dividend is planned to be declared by Park's Board about January 9, 2025, sorry about this and paying about February 4, '25. And that's what within the fiscal year.

Somebody is not going to get paid this week for these mistakes. Unfortunately, I think that's somebody's mistake because on going to make mistakes.

So sorry about that.

But the concept is, during this fiscal year, you can look at the highlighted language, but by the end of fiscal year, rather, $601.1 million and dividends is '25 and also $29.35 per share since '25.

Do the math, '05, '25, that's 21 years.

So if you want to do the math. To buy $601.1 million -- sorry, that's 21 years, sorry, 21 years to divide $601.1 million by 21, that's $28.6 million per year.

Just FYI, you're going to divide to $29.35 by 21, that's $1.40 per share, per year of dividends paid since -- on the average pace since '25 at the beginning of '25.

Let's go on to Slide 31, our balance sheet.

We have no long-term debt, so [ $72 million ] of cash. We just talked about that.

We have 1 more transition taxes form of payment of $5.1 million in June '25. Thinking about our cash.

So some known or likely cash expenditures of $5.1 million. That's not like that's known that tax payment in June.

You have to pay that. Share buyback in fiscal [ '20 ] in fiscal '25 Q3 in the current quarter. That $2.4 million, that's already been spent.

So that's a known item.

Solution Treater project, $7.5 million, and that's an estimate, contribution to the OEM partnership, approximately about $5 million that's what we're talking about.

So that gives us a round number of $20 million, so $72 million, minus $20 million to $52 million.

So if we go to Slide 32. When we think about $52 million, well, that doesn't include a lot of other things that we've already discussed a lot of items, which we won't iterate here are these items that are listed as we already discussed in this presentation for the most part.

And some of these things will happen, some won't.

We also have likely have additional divestitures and new plant when you actually started production, reminder how much time you spent with the trials and qualification. We started production and realize other things that might be needed.

So there might be some additional investments required in the plant, quite estimates.

So what do we think about our cash? We think that we don't have unlimited cash. And we think we need to [indiscernible] let's go on to Slide 33, the Juggernaut. We've covered this in the last 3 quarters, so we'll try to rush through it. Financial outlook for [indiscernible] Aerospace Jet Engine programs and for Park to Juggernaut.

So what's the timing, we're not sure. But it's coming in, it can't be stopped. We better be ready.

Going on to Slide 34. The only change here, unfortunately, is a GE9X program.

So we moved up that number. That's based on specific inputs we have from our customer. We've heard higher rates, but that's based upon specific input, rate which we have from our customer. And as we said, we're not going to provide any more detailed information because it relates not as to -- it's more up to Boeing and GE disclose how many airplanes you plan to make per year, not for us to do that.

So why don't we go on to the next slide 35. Park Aerospace Corp. High-level Conceptual Financial Outlook. We started with a baseline year of 'til '24. The estimated GE programs incremental sales next math, taking the number from the prior slides, attracting the '24 sales.

I think that was $21 million, incremental sales, $37.6 million. Estimated sorry -- non-GE programs sales of $15 million.

So we tried to do something a little different here in the past. We're breaking it down between power sole-source qualified on. But [indiscernible] that we expect to get on and other sales we expected to rate. We just put it in 1 bucket, $15 million.

As indicated in the footnote, we believe that's a serve number based on opportunities that we're working on. The total here, you could see $108.6 million. The contribution, EBITDA contribution from the incremental sales is $19.7 million. That's based on a contribution rate, I believe, of 37.5%. The additional $4 million I discussed that before, that relates to our base year, which is quite inefficient because we're operating well below efficiency of the new plant. And for many reasons we discussed in the past, which we won't go over here.

Slide 36, the footnote to the slide we just read, we'll walkthrough those. And that concludes the presentation. Thanks for listening.

Operator, we're happy to take questions at this time.

Brian Shore	executive
Nick Ripostella	analyst

Park Aerospace (PKE) 15 Oct 242025 Q2 Earnings call transcript

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Park Aerospace (PKE) 15 Oct 242025 Q2 Earnings call transcript