Full Transcript: Park Aerospace Q2 2027 Earnings Call

Park Aerospace (NYSE:PKE) held its second-quarter earnings conference call on Thursday. Below is the complete transcript from the call.

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Summary

Park Aerospace Corp. reported Q2 fiscal 2027 sales of $20.8 million with a gross margin of 34.3% and adjusted EBITDA of $5.3 million, outperforming guidance on EBITDA.

The company emphasized its strategic focus on growing missile systems and GE Aerospace jet engine programs, highlighting significant production ramp-ups planned for the A320neo and 777X programs.

Future guidance indicates Q3 sales between $21 and $22.5 million and adjusted EBITDA of $5 to $5.8 million, with continued emphasis on missile systems and aerospace programs.

Operational highlights include the partnership with ArianeGroup for manufacturing C2B fabric in the U.S., supporting the PAC-3 MSE missile program, and plans for a new manufacturing plant in Tulsa to expand production capacity.

Management reiterated their commitment to realistic forecasting, not padding estimates, and highlighted the company's strong cash position with $114.75 million in cash and marketable securities, despite plans for significant capital investments.

Full Transcript

OPERATOR (Cleo)

Good afternoon, my name is Cleo and I will be your conference operator today. At this time I would like to welcome everyone to the Park Aerospace Corp. second quarter fiscal year 2027 earnings release conference call and investor presentation. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad.

If you would like to withdraw your question, press star two. Thank you. At this time I will turn the call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference.

Brian Shore, Chairman & CEO

Thank you, operator. This is Brian. Welcome all to Park Aerospace's fiscal '27 second quarter investor call. I have with me as usual Mark Esquivel, our President and COO. We just, I guess right after the close, published our second quarter earnings release, and in the earnings release you'll find instructions as to how to access the presentation we're about to go through, either through a link, and there's also the website. And you want to pull it up in order to make this presentation discussion more meaningful.

It's kind of a common theme for the last couple quarters. We have a lot of new investors. I think last call we had about 170 people who participated in the call, and we have a lot of new investors, we have a lot of the veteran investors. We have to find a balance between the old and the new and we'll do the best we can to maybe find a middle ground or compromise. Obviously the legacy investors probably don't want to hear the same material being covered every time, but some of the new investors may find it more interesting and useful.

So we'll do the best we can with that, and after we're done with the presentation we'll be happy to answer your questions. So why don't we get started? Let's proceed onto slide 2, forward-looking disclaimer information. Let us know if you have any questions about the forward-looking disclaimer information. Slide three, our table of contents. First of all, slide one. Sorry. The first item in the table of contents is the investor presentation which we're about to get to.

There also is supplementary financial information attached as Appendix 1 to the presentation. We're not going to go through that information, but let us know if you have any questions about it. As usual, we feature the James Webb Space Telescope in our table of contents. James Webb Space Telescope recently identified a mysterious new class of cosmic object called black hole stars. They look like gigantic stars which shine up to 100 billion times brighter.

So that sounds like a lot to me. Thank you. James Webb Space Telescope and Park. James Webb was produced with 18 Park proprietary Sigma Struts, as you probably all know. Let's go on to slide four. So we go from the sublime to the mundane. Here, here. Quarterly results. So let's just go through the right-hand column. Second quarter. Our current. The quarter we're just announcing sales of 20 million 791. Gross profit, 7 million 135. Gross margin, 34.3%.

We like that. We like our gross margins to be in the 30s. Adjusted EBITDA, 5 million 285. Adjusted margin, 25.4%. What do we say about our Q2? During our Q1 investor call we said our sales estimate was 19 and a half to 21 million. So we came in within the range. Maybe kind of toward the upper end, but within the range. Adjusted EBITDA estimate, we said 4.3–5.1 million. So we came in a little bit above the range with our EBITDA number. Significance of our forecast estimates.

We remind you of this fairly often when we give these estimates. We're telling you what we think will happen. Sometimes we're wrong, sometimes we're not. But we're telling you what we think. Mark and I usually spend a lot of time going through this, come up with the ranges for you. We don't pad the numbers. I know a lot of other people do that. We don't give you a number, then subtract 10% from it so when we announce the number, we can beat it. That's just not what we do.

We understand that pretty much everybody else does that, but we're not like everybody else, as you probably know. That's actually a Kinks song, if you want to check that out. Pretty good one. Slide 5. Quarterly results. We're continuing here. So we're mixing things up a little bit. I maybe should have explained at the beginning. We're changing the sequence of things and we're changing the content a little bit just to try to make it a little more interesting for you.

I don't know if it will be successful, but that's the objective here. So what we're doing with this slide here, slide 5 at the top, is we're talking about some key product groups that we'll circle back to. In many cases, C2B fabric. We cover that a lot. 1.5 million of sales of bladed materials produced with C2B fabric. 1.8 million. Often we discuss those two numbers because if they're really out of sync, out of alignment, they could distort the quarterly P&L. But those numbers are fairly close, so we're not going to get into that. But just for information, we thought you'd like to know. Missile system programs, so $5.5–$5.7 million. Obviously we emphasize missile systems a lot, so we thought you'd be interested in that number. Advanced composite materials for GE Aerospace jet engine programs, 8.3 million. We'll circle back on that. We cover every quarter, and here's something a little interesting with what we provide for you.

Our second quarter sales value of production we call SVP was 21.1 million. That's not inventory value, that's actually sales value. And that's a modern-day record, we think, post sale of our electronics business. And that's a really good thing. And we got to give a lot of credit to our factory people, our floor people, for producing and getting out the door that much product. That's actually a pretty nice accomplishment under maybe not ideal circumstances, but when are there ideal circumstances?

So we wanted to acknowledge our production people in terms of how much product was produced during the quarter. One other thing we never cover in these investor calls is EPS. We don't get into that. But we just wanted to mention something to you. It'll be discussed in more detail with our 10-Q, which I think will be filed on Tuesday. Monday's a holiday, so you can look forward to it there. But you might have noticed already, and I just want to get ahead of this a little bit, that our tax rate for Q2 was quite low.

It was 18.6%. That's not a normal tax rate. There are significant benefits from stock option exercises which took place in Q2. There were a lot of stock option exercises in Q2, significant benefit. Our normal tax rate without that benefit of stock option exercise benefit, if you will, for the tax rate, would be probably around 26 and a half, something like that. And just so you know, if we had that more, say, quote unquote normal tax provision or tax rate, rather, of 26.5%, probably looking at 19 cents rather than 21 cents.

Like I said, we're reluctant to get into EPS stuff. We don't normally cover that. But I thought it's such a, you know, significant difference in a tax rate that you probably would be interested to know, have that information. If you want more information about that you really should call and talk to Gus and Chris. But like I said, when we publish our 10-Q, there'd be a little bit more information about that particular item. Okay, let's not get too hung up on that.

So let's go to slide 6. Our top five customers for Q2 in alphabetical order. Let's see. Let's tie the customers to the pictures. Easy one is Kratos. The BQM-177A. That's a target unmanned aircraft that obviously ties to Kratos Defense & Security. Airbus A320neo with LEAP 1A engines. That ties to Middle River Aerostructure Systems. We call it MRAS. And let's see, the Patriot—we talk about that a lot. PAC-3 MSE defensive missile system. That's two for the price of one.

That ties to Lockheed Martin Aeronautics and L3Harris Missile Systems. That's nice and efficient. The bottom right, Bombardier Global 8000 business aircraft. And that ties to the Northern Composites Group. Okay, let's go on to slide seven. Our pie charts. Nothing too remarkable here. Pretty consistent. So let's not spend too much time on slide seven. Just we can keep moving. Let's go on to—of course if you have questions, let us know later—but we're going to move to slide 8.

This is a little more interesting. Park loves niche military aerospace programs. This is a slide we give you every quarter. This is Elena's project. She always does a real nice job. So the pie chart is interesting. Just look at the missile system percentage. It is growing. This is just one quarter, so we'll see what happens quarter to quarter. These things change, of course. But we've been talking a lot about missile systems, and missile systems as parts of the pie chart is growing.

We won't go through a description of the photos, individual programs, except we always say that we don't provide photos of programs that we're not somehow involved with. But we used to give you more information. Right now we just—at this point we don't feel we can do that. It's just too sensitive. We just don't know where the line is as to what we can say. We can't. So we don't want to push the envelope too much. Let's go on to slide nine. Okay. GE Aerospace jet engine programs. Like I said, we're changing things up in terms of sequence a little bit. Try to make it a little more interesting. And this slide's a little different than it was in the past. Park's advanced composite materials and sole-source qualified in multiple engine cowl and thrust reverser components of the following GE Aerospace and CFM engine programs. So quickly, there's Boeing 747-8 with the GEnx-2B engine. Those are for spares.

That program is canceled. LEAP-1A engine for the A320 family, that's the big kahuna. LEAP-1C, that's for the COMAC 919. That's Chinese single-aisle. CF34-10A, that's for the COMAC 909, that's a Chinese regional jet. And the A320, we already talked about that. Bombardier Global 8000 aircraft with the Passport 20 engines. So what's going on here? Park has an LTA requirements contract again to '29 for the above programs with MRAS, a sub of ST Engineering, Singapore.

Now what's going on here? These look like they're all GE programs. You got to read the little footnote. Footnote: MRAS was formerly a sub GE Aerospace. So that's the connection. When we got on all these programs, MRAS was part of GE Aerospace. And then I think in maybe 2018 or '19, GE Aerospace sold MRAS to ST Engineering, which is a large Singapore aerospace company. Park is also exclusive supplier AFP composite materials for the fan case for the GE9X engine for the Boeing 777 aircraft.

Let's go on to slide 10. Update on GE Aerospace jet engine programs, starting out with the big kahuna, the A320neo aircraft family. We're not going to read the variants for you, but you can see them for yourself. So as of August, Airbus had delivered 4,741 of these airplanes and they have a backlog of firm orders, 7,571. That's just a huge, huge, huge, huge program. Probably the biggest ever for commercial aircraft. So we're fortunate to be on that program.

And here's the history of the ramp up. You can see what's going on. They were ramping up the program until they hit the skids with 2020. That's the pandemic year, and then clawed their way back. 2025, 607 airplanes were delivered, and 2026 year to date. Want to analyze this number? That's not a good idea. You can do it if you want. That's not how it works because these aircraft companies, they make the years, if you will, in the last couple of months.

But what's significant is that that number is quite a bit larger than the same period from '25, which was 333 deliveries and year-to-date August '25. So that's good. It means that GE—ramp up, ramp up—GE and Aerospace—sorry, I'm a little tired—GE Aerospace and Airbus are ramping up this program, which is good news. Slide 11. Okay, what are we doing here? Airbus is targeting A320 aircraft family delivery rate of 70 to 75 per month by the end of ’27. Remember the prior page, I think—what did we say ’25 was, like 51 per month? So we still have a way to go here, and stabilizing to a rate of 27 thereafter. Approved engines. This is important. These are two approved engines for the A320neo aircraft family. One is the CFM LEAP 1A engine. That's the program we're on. We're on the A320neo aircraft family with the LEAP 1A engine—CFM—and we're not on the A320neo aircraft family program with the Pratt engine.

So we covered that in the first and second bundle item. Here's some interesting info. Third bullet item. The CFM LEAP won a market share of firm engine orders for the A320neo family of aircraft, with 66.9% as of June 30. So the CFM LEAP 1A market share continues to grow very nicely. And in prior quarters, we explained why that is. You know what's going on. We're not going to go into it here, but if you have any questions about that, let us know. The key thing is that the LEAP 1A market share—that's the program we're on—continues to grow.

I think when we started these presentations, it was maybe less than 60%, I don't remember, but it's grown quite a bit and continues to grow. And there's huge, huge backlog. So there's a lot of ballast, if you will, in that market share. You know, it's not easy to change the market share so much month to month or quarter to quarter. But nevertheless, that's what's happening. At that delivery rate of 75 A320neo family aircraft per month, and that's 66.9% market share, that translates into 1,204 LEAP engines per year, which is a lot of damn engines, pardon my French.

Let's go on to Slide 12. So, still with the same program, as of June 30 there were 8,546 firm LEAP 1A engine orders. And, you know, that's a heck of a lot of engine orders. I think if you go to Slide—what is it?—Slide 16, you could kind of figure out what that's worth. You can do your own math because on Slide 16 it tells you what a revenue per unit is. Let me just say it's a big number, and that's not it. That's just the firm engine order. That doesn't mean that's it.

Obviously you're going to take more orders as time goes on. So let's continue on Slide 12. A new, a different program: the COMAC 919, that's the Chinese aircraft with a LEAP engine. It's a LEAP 1C engine. Therefore they have over 1,200 orders. And you can see the deliveries—they're trying to ramp up. They haven't been doing, you know, the—I'm sure they're not achieving the rates that they want. Their deliveries are expected to ramp to 59 and 28 and 93 by authority.

Those are airplanes, not engines. But, by the way, this is the single-aisle, the Chinese single-aisle airplane that's designed to compete against the 737 and the A320. Let's go on to Slide 13, the 777X with the GE9X engines. This is a very delayed program but still a very important program for Park Aerospace. The test programs amassed over 1,700 flights—that's a lot—over 1,400 flight hours—that's a lot. Reportedly, they have over 670 open orders for the aircraft.

And Boeing anticipates a certification, entry to service and first delivery next year. This has been pushed back a lot, a lot of delays. But, you know, just my opinion is I have some optimism that this will happen next year, which would be really important for Park—important program for Park Aerospace. So, a nice picture of the 777X undergoing cold-weather testing at Fairbanks. Friend of mine took that picture. Let's go on to Slide 14. So, GE engine program sales history and forecast estimates.

We don't go through all the history. You don't need to do that. But what you might look at is—look at fiscal ’20, that was like the year before the pandemic—just about $29 million. It took up to fiscal ’26—if you look at the right-hand side of the slide, kind of halfway down ’26—to go back to $29 million numbers. So, you know, we really had a setback with the pandemic, and it took us a while to even get back to the pre-pandemic numbers for these jet engine program sales.

In fiscal second quarter, $8.3 million of sales. And our forecast for Q3—this is a GE engine program sales forecast—8, 8.5 million. For fiscal ’27, the whole year, we brought that number down from 32, and 35 was a little higher. That number was based upon the input we have from our customers, called a bill plan. And we haven't gotten a revised bill plan. But, you know, we're a little skeptical as to whether we'll achieve that bill plan because we have the first two quarters in the books, we got a forecast of Q3, and we're trying to be a little more conservative in terms of where we're going to go with the fiscal year.

We'll see what happens. All right, let's go on to Slide 15. So the GE program's outlook—we call our juggernaut Park commercial aircraft juggernaut. This is our first juggernaut member: GE Aerospace jet engine programs. What's the timing for the commercial aircraft juggernaut? For a long time, for years, we were saying, when's it going to happen? When's it going to happen? We don't know. We'll see. But we're no longer saying that. We're saying that commercial aircraft juggernaut is here because the programs are clearly ramping up.

Commercial aircraft juggernaut drivers—what are they? They're the A320neo aircraft family production as it ramps up to the 75-airplane-per-month rate; the expected certification, entry into service of the 777X; and COMAC's planned ramp-up of the C919 aircraft; those GE Aerospace programs, the Global 8000 and the C909. Those programs are pretty much at rate, so that's good. But they probably are not going to be key drivers in terms of the ramp-up of current rates, the current revenues, rather, to that aircraft juggernaut kind of revenue level.

So let's continue. Here's a slide—what is it? Slide 16 we're on. Yep. Continuing with the juggernaut. So here is kind of how we lay out the juggernaut. We get to that 62,340,000 number. There are a couple of changes here, though, in the assumptions. And Slide 17 has footnotes in terms of how we computed, how we arrived at assumptions and how we did the math. But we actually increased A320neo to this 1,200 units because we decided we really should look at the current market share.

We're holding off using, like, 60% market share, but we thought that really doesn't make any sense anymore. And we brought down the number for the C919 just because they seem to be struggling to get to that level now. Remember, these are engines, so you’ve got to multiply the airplanes by two. So 200 engines means 100 airplanes. And we do the math and we get to 62.3 or 4 million—like $62.3 million. And that compares to about, what, $30 million last year or something like that.

So it's still a long way to go in terms of the ramp-up. Slide 17, rather—these are the footnotes I referred to. We're not going to go through these. Any questions, let us know. Slide 18. Okay, we're changing gears, and we probably have to pick up the pace a little bit. Missile systems. Now, the good news about missile systems is that, really, even though there's so much going on for us in missile systems—it's like, you know, a frenetic pace for us to keep up with—but there's not a lot of new developments that are being reported in the presentation as compared to Q1.

So a lot of this is just review. That's our new juggernaut. Next big thing. Missile systems—Park missile systems niche, we call it. We specialize in design and manufacture of advanced composite ablative materials used to produce solid rocket motor structures for critical missile systems, including the PAC-3 MSE Patriot missile system, which we talk about a lot. We also design and manufacture advanced composite materials used to produce other missile systems components.

Depletion of the depleted—we covered this last time. It's well understood, widely known, that the missile system stockpiles have been badly depleted by all these horrible wars that we've been involved with the last couple years. Running empty. Replenishing the depleted stockpiles. So there clearly is a highly urgent need to replenish the depleted stockpiles. But is that it? Does it end there? Maybe not. Let's go on to Slide 19. Okay, here we go. Quadrupling the production of the exquisite class of weapon systems. Quadrupling—that's quite a concept for, you know, for our aerospace industry. Usually doesn't move that quickly, in our experience. On March 6th, beginning of the year 2026, President Trump met at the White House with seven top defense contractors. At the meeting, these contractors reportedly agreed to quadruple production of the exquisite class of weapon systems as rapidly as possible.

That's really quite something. Kind of shocking. And the PAC-3 missile system, of course, is head of the class of exquisite class of weapon systems, plus other things that other programs focus on. Let's talk about PAC-3. The PAC-3 MSE Patriot missile system. Park is source-qualified—advanced composite ablative materials for solid rocket motors for the PAC-3 MSE missile systems program. The PAC-3 missile system interceptors have been extensively and very effectively used by U.S. allies in the Middle East, including all these countries. And why are they using them? Because the bad people are shooting missiles at them. So they've been using the Patriot missile systems to intercept and destroy the incoming missiles—ballistic missiles that are being shot at their countries, launched to other countries, and in particular civilian population centers. Let's go on to Slide—the PAC-3 MSE missile system. It's an extremely effective missile defense system.

Very high rates of successful intercepts and destruction of incoming ballistic missiles and other threats. But the stockpiles of those PAC-3 MSE missile systems have reportedly been badly depleted by all these horrible wars. I don't think we're talking out of school. We're not talking about anything confidential, no way information here—just as it's been widely reported that the system stockpiles have been depleted by these horrible wars. And the thing is that the Patriot missiles—they don't do any good if it's not available, as wonderful as they are.

According to reports, there were dozens of people killed recently in Ukraine by Russian ballistic missiles incoming, which Ukraine was not able to intercept and shoot down because of a serious shortage—that's their terminology—of Patriot missile interceptors. It's just heartbreaking. I mean, you know, these are people that died. It's not funny. It's heartbreaking. Heartbreaking. On January 6, 2026—this is now kind of following on what are we—kind of, what are we doing about it?

What's our government trying to do about it?—Lockheed announced it reached a seven-year agreement with the Department of Defense to increase the PAC-3 MSE interceptor production capacity from 600 per year to 2,000. Well, that's, you know, quite an assignment—600 to 2,000. Let's go on to Slide 21. More activity by the government. January 13th, like a week later, the Department of Defense announced it's investing a billion dollars in L3Harris’ solid rocket motor business to boost solid rocket motor production for the PAC-3 MSE and other missile systems.

It's all public stuff. We're not talking out of school here. ArianeGroup of France—let's talk about them for a while. ArianeGroup is a joint venture between Airbus and Safran. ArianeGroup is an icon and legendary missile launch system development and manufacturing company with very deep legacy technology. ArianeGroup’s rocket and missile system programs include Ariane 6 heavy-lift launcher used by the European Space Agency; the M51 submarine-launched ballistic nuclear deterrent missiles.

This is a very special company. Our relationship with them and its predecessors goes back to the early 2000s. We're very proud and fortunate to be their partner. Like I said, they're a very special company. Very special people. Wonderful people, actually. We just want to go on the record to make sure everybody knows how We feel about this wonderful company, how privileged we feel we are to be connected with them, and how privileged our country should feel to be connected with Ariane. So let's go on to slide 22. Ariane produces a proprietary fabric called Racarb C2B which is used to produce ablative composite materials for advanced solid rocket missile programs. And we're sole-source qualified on a solid rocket motor for the PAC-3 MSE missile program for specialty ablative materials produced with ArianeGroup's proprietary C2B fabric.

So we're qualified with our prepreg material, but it's also qualified with Ariane's C2B fabric. Park Aerospace entered into a business partner agreement—that's what they call it—with Ariane in 2022, under which Ariane appointed Park Aerospace as its exclusive North American distributor of their C2B fabric. I think informally we were doing that for a long time, but they wanted to formalize it. That came from them, not us. On 3-27-25, we entered into what they call the new agreement with Ariane, under which Park Aerospace agreed to advance Ariane €4,587,000 against payments for future purchases by Park Aerospace of C2B fabric.

We paid the first installment in our fiscal year 26 Q1. We'll pay the second installment in our fiscal 27 Q1. Let's go on to slide 23. Our third installment is basically being paid now. And we actually accelerated that. It was supposed to be April next year. It's now, I think, next month. And that was in exchange for Ariane increasing the allocation and pulling in the allocation—should accelerate the allocation. And also in exchange for at least our asking if they could even do more.

We have a wonderful relationship with these people and it's worked very, very well. What's the purpose of this €4,587,000 advance payment? To fund, 50-50 with Ariane, the construction of additional C2B fabric manufacturing capacity in France. This additional French manufacturing capacity is expected to come online in ’28. Approximately half of it is for us and half of it is for them because they need it for their own programs. So we went 50-50 on this additional capacity.

We're 50-50 on the output. But unfortunately, this additional French manufacturing capacity is not adequate to support the ramp-up of the PAC-3 MSE program—not completely anyway—to that 2,000 interceptor per year rate. So now what do we do? Let's go on to slide 24. I'll try to pick up the pace a little bit here. Sorry, taking too long. On July 18th—this was all covered at our last Q1 investor call; this all just, you know, happened right at that point—July 18, Park Aerospace and Ariane entered into a term sheet agreement relating to the construction and establishment—this is big—by Ariane of a US-based C2B fabric manufacturing plant with expected capacity more than adequate to fully support the needs of the PAC-3 MSE missile program at that 2,000 interceptor per year rate. The term sheet agreement provides a definitive agreement also will need to be entered into before the end of the year. But what's the significance of the signing of the term sheet? I mean, before the definitive agreement is signed? Based on the term sheet signed by Ariane and Park Aerospace last July, Ariane is proceeding with the construction and establishment of a US-based C2B fabric manufacturing plant.

That's really important. Let's go on to slide 25, and as provided in the term sheet, 100% of the output of that US plant will be allocated to Park Aerospace, which we'll use to support the PAC-3 and other missile programs. That's really important because the capacity in France—we share that with Ariane. This capacity is all for us and our programs. Also under the terms of the term sheet, Park Aerospace has committed to invest $25 million in ArianeGroup's US-based manufacturing plant.

Now, it's not an equity or debt kind of investment. The $25 million investment will be made by Park Aerospace in the form of advance payments to be fully applied against future purchases by Park Aerospace of C2B fabric. The $25 million advance payments are expected to be made by Park Aerospace in ’26 and ’27, expected to be applied by Park Aerospace against future C2B fabric purchases beginning in 2030. So why do we do that? It's kind of a strange thing to do, you think?

Why did Park Aerospace enter the term sheet agreement with Ariane and why did we make the commitment to the $25 million advance payment commitment? Because it was necessary to provide Ariane with a green light to proceed with the construction of the US-based C2B fabric manufacturing plant. And we at Park Aerospace believe it is urgent that ArianeGroup builds its US plant as soon as possible. So let's go on to slide—what is it—26 here. Yeah, slide 26, top.

Although we're not at liberty to disclose specific C2B fabric manufacturing capacity expected from Ariane's US plant when the plant is completed and online, its manufacturing capacity, together with the C2B fabric allocation from Ariane's European operations, will be more than adequate to support the needs of the PAC-3 MSE program at the 2,000 interceptors per year rate and numerous other critical missile programs. So what's the timing of the Ariane US C2B fabric manufacturing plant in the US?

According to Ariane, their US plant was originally expected to take four years—that's a long time—to be completed and online. But Ariane recently agreed with Park Aerospace to accelerate the timeline for the completion and bringing online of their US plant by six months in exchange for Park Aerospace's agreement to accelerate the $25 million advance payment schedule. It's very good news because we want to get that plant up and running as soon as possible.

As a result of this recent agreement, Park Aerospace is now expected to make advance payments of $20 million this year and $5 million next year. That's all to be applied against future purchases by Park Aerospace of C2B fabric. Now, this is all obviously dependent on us entering into that definitive agreement, which is expected to happen before the end of the calendar year. So let's go on to slide 27. Okay, so just for the record, I want to cover this.

Even though we are in business to make money for our shareholders—thank you very much—it would be obvious it's not all dollars and cents for us. It's more to it for us. As we already alluded to, every time a PAC-3 missile is launched and successfully intercepts and destroys an incoming ballistic missile, it is likely that there are people who are alive and walking around on the earth who would not be. You know, lives are being saved. This is reality.

This is not, you know, a theory. It's not, you know, some interesting paper or some kind of video game. That matters a lot to us, okay? It matters a lot to us. So that motivates us a lot. We don't like seeing people getting killed when they shouldn't be getting killed. But let's talk dollars and cents for a minute anyway. Under the terms of the term sheet, Park Aerospace is expected to purchase a significant amount of C2B fabric from Ariane during the period of 2032–36.

So why is it a good thing? Well, it's a good thing because Park Aerospace will also be expected to sell all that fabric to its prearranged customers under prearranged arrangements with the customers and with our distributors. But in addition to that, Park Aerospace will be expected to manufacture and sell ablative materials produced from that C2B fabric for those customers. So what kind of ROI do those sales of fabric and materials represent for Park Aerospace?

Well, we're not going to disclose that specifically, but let's just leave it at this: it's a very, very good business deal for Park Aerospace and you should be happy about it, you know, from a business perspective. Very good. Let's go on to slide 28. Okay, changing gears here, talking about a new plant. And again, this has all been covered pretty much. Not too much news here. July 17th we entered into this lease agreement for land—the 18 acres—at Tulsa International Airport.

That's where our new site will be. There's also going to be land for space for additional plant indeed in the future. Plant size, 150,000 square feet approximately. The capital budget, $65 million. Cash outflow: $10 million in ’27, $45 million ’28, $10 million ’29. You probably noticed that this got pushed out a little bit I think last quarter, which has $25 million in fiscal ’27. It's taking a little longer to work through all the incentive agreements with Tulsa and Oklahoma, and they're wonderful people.

That's not—they're not a problem. It's just longer than we expected. But the good news is, if you look at the last arrow item, is that facility is still expected to be complete in ’28 and production shipment is supposed to commence in fiscal ’29. So that's not pushed back—fiscal ’29, I should say. Page—sorry, slide 29—continuing here. Plant designed to produce our full product line. Second arrow item—this is important—approximately double Park Aerospace's current hot-melt prepreg and film adhesive manufacturing capacity that's used to support GE Aerospace programs and other commercial aircraft programs.

But here's the key thing: by staffing up our existing hot-melt manufacturing lines in Newton, Kansas—our Newton facility—we'll be able to support the ramp-up of the GE Aerospace programs and any other commercial aircraft programs and hot-melt programs we support. So we'll be able to do that—and people are asking about that: how are we going to bridge the gap until our new plant's online? We can do that with our plant in Newton by staffing up our lines.

But the additional hot-melt manufacturing capacity provided by our new Tulsa plant will be necessary to more properly and sustainably support those GE Aerospace programs and other commercial aircraft programs. So we'll be able to get through the transition with our current plant. But it's really good our new plant's coming online soon. And it's the same—really almost the same exact story—with the solution treating, on slide 30, manufacturing capacity.

We're tripling our solution treating manufacturing capacity with the new plant that's used to support, among other things, missile system programs. The solution treating manufacturing capacity—same story: by staffing up the existing solution treating lines in our Newton, Kansas facility, we'll be able to support the PAC-3 program at the 2,000 interceptors per year production rate. Because that, according to what our customers are indicating—we're not giving you the specifics—we're supposed to be at that rate well before our new plant's online.

But we can handle it. But the key but is the additional solution treating manufacturing capacity provided by our new Tulsa plant will still be necessary to more properly and sustainably support the PAC-3 program and other critical missile programs in the future. Why are we building the plant? Pretty obvious. Because of our commercial aircraft juggernaut and missile systems juggernaut. They require it. And also to enable, facilitate, protect, and promote Park Aerospace's growth and development as a company for the future.

Okay, so slide 31. Here's where we're kind of mixing things up. Again, these slides are somewhere embedded in the middle of the prior presentation. Park Aerospace's financial performance—history and forecast estimates. We'll go through history—we already did that. But Q2—so we already talked about Q2: 20.8 million sales, 5.3 million EBITDA. Our forecast estimates for Q3: 21 to 22.5 million of sales, 5 to 5.8 million of EBITDA. Let's go to 32. We show you this slide every quarter except the new thing is we're including the first six months, year-to-date, in the right-hand column. We'll continue that. You know, like next quarter will be the first nine months. Just for information. So when we continue, let's go to slide 33. Recent public offering—you know about this? There's no news about this. It was already complete when we did our first quarter investor call. It was a $50 million at-the-market public offering—ATM, I guess they call it—and we sold 1,812,000 shares for proceeds of $49,996,000.

Average share price of $27.58 per share. And that at-the-market offering is complete—was actually complete, I think, in June. Let's go to slide 34, our last slide, thankfully. I guess Park's balance sheet, cash and cash dividend history, saving the best for last. Park Aerospace has zero long-term debt. That's really important to us. I'm not saying we'll never have debt, but debt's kind of against our religion. I hear these sometimes, watch financial news. Oh, the small companies with all the debt, they're struggling. It's the Big Seven or whatever they call it, doing so great.

Well, I don't know about that, but you know, we're not big believers in debt either. Park reported $114.75 million in cash and marketable securities as of the end of second quarter. That's a lot of money. But remember, as we previously discussed, we plan to invest $65 million on our major new Tulsa manufacturing plant, and $25 million to ArianeGroup in the form of advance payments. Now, $25 million eventually comes back to us, but that could take four or five years. So you add 25 and 65, you know, you get some real numbers there. I just want to mention something we have mentioned before, which maybe is obvious to you, but the $65 million, those are the capital assets.

That's the equipment and the factory and everything else. That's not the working capital, that's not the startup costs which are, you know, going to be significant. That's over time. That's not just, you know, day one. But just keep that in mind. So when you look at it that way, $114.75 million is a lot of cash, but maybe it's not all that much. Actually, Park has paid 41 consecutive years of uninterrupted quarterly cash dividends. That's a nice thing for us.

And saving maybe the very best for last, Park Aerospace has paid $616.4 million, or $30.10 per share, in cash dividends since the beginning of fiscal year 2005. Always like to juxtapose that with the picture of the Park founders back in the 1950s. The plant in Flushing, New York. Actually not our first plant or second plant. These two guys, the founders, started the company with, you know, basically nothing. I think a little money left over from war duty.

So I guess you could say Park has come a long way from those early days. But, you know, I'm not going to spend a lot of time on this. But I still think it's important for all of us at Park to remember where we come from, you know, and because those beginning days were so important for us and really set an example for what we want to be—the way we want to deal with things, deal with problems, deal with obstacles, deal with hurdles, roadblocks that come up every day today.

So. Okay, I think that ends our presentation. Yeah, it does. Operator, I'd be happy to answer questions to the extent there are any.

OPERATOR (Cleo)

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we poll for questions.

Our first question comes from Jim Ricchiuti with Needham & Company. Please proceed with your question.

Jim Ricchiuti, Analyst at Needham & Company

Thank you. Good afternoon. First off, just if my numbers are right, it looks like you had very strong growth in missile systems both sequential and year over year. So, you know, are these levels sustainable or are we going to—should we anticipate, you know, continued variability until we really see this missile ramp underway?

Brian Shore, Chairman & CEO

It's you. We're breaking up a little bit, but how you doing? You know, if you look at slide—slide 32. Good question. I think it is sustainable, you know, and the reason—you want to look at slide 32, look at the sales, you know, from ’17, ’18, ’19, ’20, we're growing pretty, pretty aggressively, you know, $10 million a year, more or less. Then we hit ’21—official ’20, the pandemic. And that really kind of slowed us down for several years. It took us through, you know, to ’25 to really get back to the levels of ’20. But I think we're back on that trajectory and I think it's pretty aggressive, probably more aggressive than it was before. It's going to be our challenge to keep up with the growth both in the missile programs as well as the GE programs. I think we talked about the juggernaut of $62 million for the GE programs—last year was maybe, what, $30–$31 million, something like that.

So there's a long way to go there and certainly a long way to go with the missile programs as well.

Jim Ricchiuti, Analyst at Needham & Company

Brian, hopefully you could hear me clearly. I wanted to also go back to the commentary regarding your full-year sales with the GE program. I mean, you have stronger Q2, I think, versus expectations and you're trimming the full year. It sounds like you're being conservative, but again, this is based on build plans that you get. So I'm just trying to understand that a little better and reconcile that.

Brian Shore, Chairman & CEO

Yeah, unfortunately, Jim, you're breaking up quite a bit. But I think you're asking about the GE programs, the forecast. Let me see if I can actually pull it up for you. It was on—the history. If I can't find it quickly, I won't bog it down too much. Slide 14.

Jim Ricchiuti, Analyst at Needham & Company

Okay, thank you for that. Okay, thank you.

Brian Shore, Chairman & CEO

So you're asking if the growth is sustainable, whether we’re being conservative. I don't know that the forecast for fiscal ’27—$32 to $35 million—I don't think that's… we're trying to be conservative there. I do know there's a lot—what we can tell you, you know, Mark and I could tell you—is there's a lot of energy toward ramping up these programs, especially the A320neo program. And then if the 777X gets certified next year, that program will have a lot of growth as well pretty quickly, I think.

Like I said, we have fiscal ’26—that was the last full fiscal year—$29 million. And the juggernaut, $62 million. So long way to go with the GE programs.

Jim Ricchiuti, Analyst at Needham & Company

Good, thanks. Apologies for the—back in the queue.

Brian Shore, Chairman & CEO

Was there something else, Jim? We're having trouble hearing you.

Jim Ricchiuti, Analyst at Needham & Company

Yeah, no, I'm sorry about the connection. I'll jump back in the—thank you.

Brian Shore, Chairman & CEO

Okay, thank you, Jim.

OPERATOR (Cleo)

Your next question comes from Trevor Walsh with Citizens. Please proceed with your question.

Trevor Walsh, Analyst at Citizens

Great. Hey Brian and team, thanks for taking the questions. Maybe just to revisit that last question, just to clarify. So, yeah, we saw you took the full-year GE number down and I understand a lot of moving pieces, but your Q3 number looked kind of right on with what we were expecting, so it seems like it's maybe a little bit more uncertainty with Q4. Is that a fair statement? And then beyond that, are there any specific programs that are kind of creating that uncertainty, or is it more just kind of broad-based of just kind of what you're seeing, you know, within the group as a whole for GE?

Brian Shore, Chairman & CEO

Okay, I think we're misunderstanding. No—just do the math. Look at Q1, Q2 and Q3 and then, you know, it would be a big jump in Q4 to get that number. The forecast that we provide was based on what's called a build plan. And they're probably just ramping it up a little more slowly than they originally planned. But I think it would be a mistake to read anything other than, you know, a pretty aggressive ramp up from this information. We're just trying to be more realistic with Q4.

There's nothing holding back Q4, but, you know, we're thinking, well, maybe Q4 will be similar to Q3 and Q2—that range anyway. And we could be wrong. But we're just trying to be realistic—not trying to be conservative—realistic. But again, I want to emphasize, I think it would be a mistake to interpret this information in some kind of negative way that things are not going well. The programs aren't ramping up as quickly as possible. The key thing—I think the key challenge—it's not us, it would be our customers.

It's their ability to keep up with the program ramps. You know, it's a challenge. These are manufacturing companies. So it's a challenge for a manufacturing company to ramp up so quickly. But I would also say—I don't want to beat this to death too much—that we're clearly out of that pandemic mode where everything was just kind of going sideways for so long and we just weren't seeing any growth at all. The growth is aggressive.

Trevor Walsh, Analyst at Citizens

Okay, fair enough. That makes sense, Brian, appreciate the color. Maybe switching gears to missile systems a little bit—I appreciate the color around how the Newton facility can just generally support in this interim period before Tulsa gets up and running, both kind of the full extent of the GE ramp and then as well as the PAC-3 2000 rate as well. But obviously there was just a big announcement with the Navy and Raytheon around SM-6, which I know you guys have some content on—PAC-3 is not the only game in town.

So is it fair to say that as these other missile programs ramp up as well, that the Newton facility can also support those as well? Or do you kind of get to a point where you have to make some decisions about what lines are doing? And just maybe talk more broadly—I know there's sensitivities around it—but just how comfortable you feel, given the pace of the ramp, that Newton can kind of get us through to when Tulsa is up and running.

Brian Shore, Chairman & CEO

Yeah, you know, we probably overemphasize the PAC-3 program. We do that because there's so much visibility about it, so much known about it. We have companies publicly talking about the rates, you know, which is a little different than some of the other missile programs. And since we're sole source on the materials for the solid rocket motors, it's easy to kind of key into the discussion about the PAC-3. But, you know, as I was going through just now, I was thinking, yeah, we're really emphasizing PAC-3, maybe to the detriment of a lot of other programs that we're working on.

PAC-3 is clearly the largest program that we have now, but there are many, many other missile programs that we're working on. You know, Mark and I were just talking about that, and it's a lot to keep up with at this point. The answer is we plan to be able to handle everything with the Newton plant, but that will be by stretching, by staffing up the solution trio line quite aggressively. But we plan to be able to get there with the PAC-3 as well as the other missile programs.

I think we'll all be very relieved when the new capacity in Tulsa comes online because we'll be stressed to get to that point.

Trevor Walsh, Analyst at Citizens

Got it. Great. Super helpful. Maybe one more for me and then I'll hop back in the queue. Good to hear that Ariane is able to kind of pull forward their timetable around the buildout for their facility. It seemed like it just took some additional infusing of funding and commitment from you to do that. If things got really kind of dire from just everything requiring C2B, is there a scenario where that can be pulled forward even more with additional funding, whether it's from you or some other kind of third party to help move that along, or is that kind of is what it is at this point?

Brian Shore, Chairman & CEO

That's a funny question because, you know, people keep asking that. I think the answer is not about money. That's all it is. And what we did—we pulled forward our advance payments. We didn't increase our advance payments; we pulled them forward, we accelerated them in order to help them get their plant up and running more quickly. So is there an opportunity for us—for Ariane—to squeeze that timeframe, let's say four years, three and a half years, less than three and a half years?

I don't know. I think it would be a challenge. That would be difficult. I'm not saying it's not possible and, you know, maybe a couple months here or there, but significantly, my guess is probably not. It's not a matter of money either. That's not the issue. So the reason I'm kind of laughing is because people have offered that, you know, what would it take—and it's not money.

Trevor Walsh, Analyst at Citizens

Yep, got it. Okay, perfect. Thanks, Brian. Appreciate the questions.

Brian Shore, Chairman & CEO

Thank you, thank you.

OPERATOR (Cleo)

Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question. Thank you. Your next question comes from Fabio Wolfinger with Switzerland. Please proceed with your question.

Fabio Wolfinger, Analyst

Good afternoon and thanks for your presentation. Hello, good afternoon and thanks for your presentation. I'm calling from Zurich. As you told, you lowered your full-year sales forecast for some of the programs. For any shipments that have been delayed, have customers confirmed new delivery dates? Are you still assuming those sales will return? And looking into fiscal year 2028, do your latest customer schedules support faster sales growth than this year, or should investors lower their growth expectations for that year as well?

I'm asking especially about the difference between confirmed orders and expected demand. Could you give a rough breakdown of the reduction and tell us when you expect any delayed sales to be recovered?

Brian Shore, Chairman & CEO

I'm not sure I know what you're referring to in terms of reduction and delays. We haven't provided a forecast for this fiscal year or next fiscal year. But I'm not sure I understand what you're getting at in terms of these delays or reductions you're referring to. I'm sorry, maybe you can clarify.

Fabio Wolfinger, Analyst

No, I will listen. I thought about some programs accounting for reduction, approximately, for this—engine programs.

Brian Shore, Chairman & CEO

Right, the engine programs. So I don't know what to say about it. The engine programs. If you're talking about the fact that we broke down the full-year forecast and that's what you're referring to—yeah, I know. I think now I understand for the GE programs. I thought you were referring to a forecast for all Park Aerospace. We brought that down a couple million. Yeah. Yeah, like I said, I think the original forecast we provided was based upon the build plan we received from our customer, and we weren't aggressive with it.

We didn't round up or anything like that. And we're just saying now, based upon the fact we have two quarters in the books and we have a forecast for Q3, that we want to bring the number down a little bit to be realistic. But the—you know—the ramp, in our opinion, is going to happen. Whether it moves a couple of quarters here or there I think is not relevant. We start talking about the GE Aerospace juggernaut—I think our main point was we don't know exactly what the timeframe is.

But the key thing is it'll get there and we better be ready for it. So I think the second question about this—I think we're really over-reading or overly focused on the fact that we brought that number down a little bit. I don't think it really means anything in terms of long term, big picture. Those programs are still there and they're still ramping. I think it's not a function like—we talked about the COMAC program, the 919—so maybe that's what you're referring to.

That program's a little delayed, but I don't think we had really big expectations for that this year at all. So it's not a function of the programs themselves. It's a function of how quickly our customers can ramp up their production and we can meet their requirements. Park Aerospace is not the problem, but I don't think it's the end market either. I don't think it's the programs or how many airplanes the OEMs are able to sell. It's just a function of how quickly the industry could ramp up.

And that's really been a story for several years now as you're trying to emerge from the pandemic. You know, because you probably know this, but Airbus had this target of 75 airplanes a month years ago—years ago—and they really were struggling to get even up to 50, maybe past 50. It wasn't that the market wasn't there. Look at the backlog—there's so many airplanes sold. So it's a function of the industry ramping up production. Not Park Aerospace only, but the whole industry ramping up production to get to those rates.

But I think I would say that maybe we're overthinking this annual forecast because clearly the vibes—when looking at it that way—we're getting is that there's an aggressive ramp-up going on. And if we talk to our customer, they're talking about very aggressively ramping up. I guess I would say maybe we're wrong—maybe we're being too conservative. Maybe the original build plan will end up coming true. We don't get revised build plans every year from them, so we haven't gone back to them and said, what do you think about the build plan?

We're just trying to, you know, be a little bit more realistic based upon Q1, Q2, and Q3. But I think we don't want to overthink that or read too much into it—let me put it that way. That's my opinion anyway. The GE Aerospace juggernaut, as we call it, I think is very much intact and very exciting for Park Aerospace.

Fabio Wolfinger, Analyst

Okay. Thank you very much.

Brian Shore, Chairman & CEO

Yeah, thank you. I'm sorry I didn't understand your question at the beginning.

Fabio Wolfinger, Analyst

No worries. What about the aerospace outlook since July? That's what I'm asking. Thank you.

OPERATOR (Cleo)

Okay. Thank you. Thank you. This now concludes our question and answer session. I would like to turn the floor back over to Brian Schorr for closing comments.

Brian Schorr

Okay. This is Brian again. Thank you all for listening in, and thank you for the questions. It's been very nice talking to you. Please give us a call if you have any follow-up questions. Happy to help you with that. Take care. Have a good day. Bye.

OPERATOR (Cleo)

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines and have a wonderful day.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.