Park Aerospace Corp.

Good afternoon. My name is Matt, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Park Aerospace Corp second quarter fiscal year 2025 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'd like to ask a question during this time, please press star 1 on your telephone keypad. If you'd like to withdraw your question, please press star 2. This time I'd like to turn the conference over to Mr. Brian Shore, Chairman and Chief Executive Officer. Thank you. You may begin.

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 Tharabar, our CFO, and also Mark Esquivel, President and CEO. Well, we announced our earnings through news release right after the market closed last 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 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 again. We'll be happy to answer questions. So why don't we go ahead and get started. Why don't we go to slide two, our forward-looking disclaimer info. Let us know if you have any questions about the forward-looking disclaimer language. Slide three, our table of contents. Beginning of slide one, we have our investor presentation. Then we also have supplementary financial information attached as 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 supplementary financial information, let us know. Here we have a picture, the clearest picture of mercury ever taken. Quite a beautiful picture, in my opinion. Thank you, James Webb's base telescope, obviously taken by the James Webb. Space Telescope, and as many of you know, our proprietary Sigma struts are incorporated 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 four, the quarterly results. When we focus just on the right-hand column, Q2, 16,709,000 sales, 4,757,000 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, 15.9 to 16.4 million. So we came in just a little tad above that. Adjusted EBITDA estimate, we gave you 3 to 3.3 million. So we came in right within that range there. Let's keep moving here. Slide five, please. Continuing with quarterly results, some considerations for Q2. There was approximately $2.2 million of Arian Group Raycarb C2PNG product sales during Q2 under Park's business partnership with Arian Group. We talk about this often. This is the fabric that we purchase from Airing Group for ablative programs, for missile programs, and we then sell it to the OEM customers. It's turned around pretty quickly within a couple of weeks. Quite low margins. It's really a markup, but we always say, well, don't worry. There's one we actually produce. the product and make the ablated materials, that's where the margins are quite good. But by comparison, there was only 750,000 of ablated material sales during Q2, so you see a little bit of an imbalance there. Much more emphasis on the low-margin part of the equation, less emphasis on the higher margin. Eventually, it all comes through, of course. There were significant ongoing expenses in Q2 related to bringing Park's new production facility fully online, you know all about this, including expenses for depreciation. Let's just stop there with the asterisk, $1,260, sorry, $1,260,000 per year of 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 the gross margin just from the depreciation, 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 28.5, we always say we don't like it under 30. Just the depreciation alone would bring it up above 30. But it's not just depreciation. There's all this other stuff. And this other stuff is also included in the EBITDA or affects the EBITDA facilities, maintenance, utilities, insurance, other overhead expenses and expenses related to additional park people, all related to the new facility. These additional expenses, it's not just an accident 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 needs of the coming juggernaut and coach, which is described 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 and our margins until that facility is ramped up. 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 and not get behind the power curve. Slide six, total misshipments in Q2, 600,000. That's not a great number. It was an international shipment issue, supply chain, customers on hold, other mislayness issues. Yeah, so the aerospace industry, not really a happy place right now. A little more difficult, a little more challenging for us. We've 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 the storm damage, except for the $64,000. Sorry, I got that 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 the storm damage on Q2 earnings or sales. All production lines were fully operational and functional throughout fiscal Q2. And that's quite remarkable because, remember, the storm happened in the last two weeks of Q1. So for all lines to be fully operational throughout Q2 was – Quite remarkable. Really a miracle. Quite an achievement by our people, I must say. Let's go on to slide seven. Top five. We do this every quarter. Top five customers alphabetically. AirJet, Rocketdyne. These are the kind of usual suspects. You're probably bored hearing these names. They're involved with the factory missile system. Aerospheres. They're a... 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 787. That actually is not the airplane. It's the G20. Gen X-1B engine that used to use an airplane. Kratos, you know, we talk about every quarter they're in the top five, I think, and we just select one of their aircraft. This time it's a BQM-177A, quite an interesting airplane if you want to look it up on the Internet. Middle River Air Structures, yep, they're kind of a usual suspect. And MRAS, we chose the Bombardier Global 8000 to represent them. Let's go on to slide eight, estimated revenues by aerospace market segment, the pie charts. What's interesting to me is look at 22, 23, 24, 25 year-to-date. The pie charts are really very, very similar, but the big difference is 21, and that was the pandemic year when particularly commercial aerospace was very much, I don't know how you say it, in jeopardy. It almost looked like it might not make it. Let's go on to slide nine. This is the slide that Elena does for us. Elena is the head of customer service every quarter. She comes up with really interesting, cool programs to put in this little slide. The pie chart. This is for the first six months. Radomes, rocket nozzles, drones, those we consider to be niche markets in military, but for us even aircraft structures is niche. Programs quickly, 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've got the MK-30 canisters for Raytheon ESS aircraft. system, that's ablatives. The MK-125 warhead for the SM-2, SM-6, those are hypersonic missiles, I think. And that's actually not ablatives in this case. It's part of the structure. We can't say anything more about it. The MK-41 vertical launch system, that's actually parts that we produce with our materials. It seems like Elena was really focused on the missiles this quarter, so she must have You can come up with a lot of dreams of missiles, I guess. So let's go on to nice elections. Thank you, Lana. Let's go on to slide 10. G, aerospace, jet engine programs. Another slide we give you every quarter. You have to understand, some of you complain about we go over things too much. There are new investors that dial in, you know, every quarter. We have to be fair to them, too. So we try to strike a balance here, you know. So, yes, we include this slide every quarter. Firm pricing LTA. It's a requirements contract from 1929 with MRAS, which is a sub of SD Engineering Aerospace, a large Singapore aerospace company. We built a redundant factory. for GE, actually, and MRAS. That's in production. You know that. So what's going on here? We're sole source qualified for the composite materials for the cells, thrust reversers. Are these programs? Well, you notice they're all GE engine programs. Why is that? The reason is that when we entered into the LTA originally, MRAS was a sub of GE Aerospace, so we got all these GE Aerospace programs at that point, and then subsequent to that, GE sold MRAS to ST Engineering, but we continue on these programs. So let's go on to, and I'm not gonna go through the programs. If you have any questions about them, 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, 2025 for the products covered by the LTA. I've been asked about this a lot, a lot, a lot, and I said, well, I really don't want to say, but now we're saying, you know, kind of in a... investor presentation where it's appropriate. PARC composite materials. Don't forget, we don't have to cover that one. We cover that every time. Let's go to the last one. Fancase containment wrap for Gen X engines for the Boeing 777 aircraft. That's produced with PARC's AFP and other composite materials. PARC recently received appeal for approximately $6.5 million in for materials for this program. So this program is ramping. Our customer received a large order for K-trap units. We're clearly not going to talk about numbers, but this will flow down to us in terms of a PO. There's more coming, I suspect, a lot more. So this program is no longer just kind of development. It's really starting to ramp now. Park materials for this program are expected to be included in the life of the program. So they're not in the LTA because this came after the LTA, but the expectation is that we'll just put the Gen X, the G9X program into the Lifer program agreement, which we'll discuss in a second. Slide 12, so I'm just trying to watch the time. MRAS Park LTA was amended to include three film adhesive product forms for composite bond, metal bond. This is really outstanding because these film adhesive formulations are developed through a joint development agreement with MRAS NGE. And a lot of time and effort went into this, but it's outstanding because as soon as the development's done, then we go right into qualification. So that's really a very wonderful and special MRES qualification of two proprietary film adhesive product forms in progress. Why not three? Because so this is the process. We go through a qualification with MRES, and then MRES needs to go through a certification process process with their customers on selective programs. So the first program that MRAS intends to get us certified on does not use metal bonds. So that's why we're not qualifying metal bonds at this point. That will come later, right? Life of program agreement requested by MRAS and SDE, agreement that's under negotiation, and a team of, I guess, three park people at MRAS a couple weeks ago. We spent a couple days. They spent a couple days negotiating. working on the agreement with MRAS, so it's under negotiation. So we finally made some good progress on it. But just keep in mind, this is what they want. They requested it, they being MRAS and SDE. We're happy to do it, but they're the ones who requested it, and for good reason. Okay, let's go on to 13, slide 13. This is a little different. Up in GE Aerospace Programs now. 8 through 20 NEO aircraft family includes all these variants. I won't read them off. Airbus has a huge and underlying huge backlog of A320neo aircraft. Firmware is 7,253. That's just so many airplanes, unbelievable number of airplanes. Airbus had been maintaining that intent to achieve a rate of 75 A320neo family aircraft delivered per month in 26. It's going to 14. So this is just a little history here about the deliveries over the prior years of A320neo aircraft. You can see that kind of peaked in 19, and that's what happened, the pandemic, the numbers fell off. In 2023, they got back to the pre-pandemic rate of 571 compared to 561. Year-to-date through September, about 396 deliveries compared to last year. Year-to-date, 391. Don't annualize that. That doesn't work because aircraft industry, for some funny reason, a lot of deliveries happened in the 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, you know, 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, Airbus announces pushing out its goal of achieving the 75 aircraft family monthly delivery rate from 26 to 27. Not surprisingly, Airbus highlighted supply chain issues. Oh, boy. Supply chain issues, deja vu all over again, especially engine availability issues as a key reason for the pushout. You know, what's funny about this, do you remember, what is it, a year or two ago, we were all clear with engines. You know, it was not just Airbus said it. The engine company said it. Air engines blew over an issue. Everything's great. Now we're back in the soup with engines. I don't know what to make of that. But, you know, now engines are front and center in terms of what the main supply chain issues are all about. You know, supposedly maybe castings and forging for the engines, but it's engines. That's the problem. Clearly, based upon their huge backlog, Airbus would already be at that 75 per month rate. Why is that? How many airplanes are on order? 6,000? I've got to go back. What was that number? No, sorry. $6,000, $7,200, $7,253, okay. So let's say they're at $50 now, which maybe they're not, but let's say they're at $50 now. That's $600 per year. Well, how many years is that with over 7,000 orders? Well, the problem is Airbus wants to sell more airplanes. So, you know, you order an airplane, your delivery is, what, 13 years down the road? That's not very conducive selling airplanes. So one of the reasons Airbus wants to push it up to 75, 75 equates to 900 per year. That's still not you order an airplane and you get it next year, but it brings the lead time down a lot, which will allow Airbus to sell more airplanes, which is what they want to do. They want to sell a lot more airplanes. So anyway, will Airbus achieve its goal of 75 deliveries per month? We certainly believe they will. Will they achieve it in 27? We believe they will. but we're not sure it really matters very much whether that goal is achieved at 27 or maybe 28. Key thing for PARCC, 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, you know, we're 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 PARC. Sixteen approved engines for the A320 aircraft. There's two approved engines for the A320neo. There's the CFM LEAF 1A. That's the engine program we're on. Then there's a Pratt, Pratt & Whitney, a PW1100G GTF engine. Not in that program, just on the CFM program. We spoke lots and lots about the durability issues, especially for the Pratt engine. We'll cover that here. So let's see. According to the September 24 edition of Air Engine News, CFM LEAP 1A's market share of firm engine orders is 64.4%. That's a nice market share. I don't remember, but I think the last quarter was maybe 62. It's been around that 62, 63, 64 range. Moved up last quarter, but that may not be sustainable. I don't know, but at least it's well over 60. At the delivery rate of 75 H320neo aircraft per month, that's 64.4%. LEAP 1A market share translates into 1,159, just do the math, LEAP 1A engines per year. What's that worth to park? Well, just go to slide 34. It'll give you an idea of what it's worth to park each year. This is just one of these huge numbers. 8,238 firm LEAP 1A engine orders. That's a lot, a lot of engines. What are those firm orders worth to park? Well, I mean, go to slide 34. It tells you what we get per engine. I think it's about a quarter billion dollars. And that assumes that we're going to continue to supply after 29, which whether we have a life form or not, we're quite confident we will. And it does not assume, doesn't take into account, there will be price increases during that time frame. But you think about it conceptually, a quarter of a billion dollars, does it really matter to us whether it's $27, $28, $29? It's just a lot of revenue for the park. And those engines are going to be sold. Those engines are going to be produced and sold. Those are our engines. That's our program. So, you know, I think of people selling a stock of $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 opened an additional XLR production line in July. The A321XLR powered by a LEAP 1A engine received its YASA type certification in July. That's really nice news. That's good. And the YASA is the European equivalent of the FAA. The first A321XLR delivery is scheduled for the latest month to Iberia. And according to Airbus, there's over 500 orders for this program. Important program for PARC. Let's keep going. Slide 18. Okay, now let's go to COMAC, COMAC 919. That's the single-aisle airplane that COMAC developed to compete against the 737 and A320. That has another kind of LEAP engine. This is called LEAP 1C. I don't know, maybe C stands for COMAC. But it's a variation of the same engine that's in the A320neo. COMAC plans to achieve a production rate of 150, 919 aircraft per year per 28th. I think that's credible. They're investing huge amounts of money in production lines. I think they now have three final assembly lines. They 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, you know, assaulting these airplanes outside of China, though. They've delivered nine so far. and they've logged over 10,000 flight hours. This is an important program for PARC. We'll see what happens, but we believe and our customer believes it's a very important program with lots of upside opportunity. Let's go to slide 19, rather. 777X aircraft with G9X engines. In August 19, Boeing grounded the 777X test flight fleet after detecting engine attachment issues. The fleet remains grounded while Boeing continues to evaluate the problem. These engines, they achieved a record 134,400 pounds of thrust. That's why those engine attachments are pretty important. They're certified for 110,000 pounds. From the perspective, the LEAP-1A engine for the A320, about 32,000 pounds. So big, big, big engine, lots of power. October 11th, 2024, Boeing announces pushing out its first delivery target to 26 from 25 because of development challenges, flight test pause, and the work stoppage. Boeing says they – sorry, not Boeing. According to data, Boeing has 481 orders for these airplanes. A little bit of setback, but, I mean, the thing is it's very – this is a clean sheet airplane, so it's not surprising that they'll have problems like the engine attachment problem. It's very, very important that this happen, that this is detected during the development and certification phase, not after this airplane is flying in the air at 38,000 feet with 400 people on it. So this is a real important program for PARC. We just – the best wishes for Boeing. Obviously, they're not having a bad time now. but we hope that Boeing finds a way to, you know, 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 25Q2, $7.1 million of sales. This is, I should read the title. GE Aerospace Change and Program Sales History and 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 six and a quarter to $7 million. That's our forecast for Q3. For the year, $23 to $26 million. Now, we provide that forecast last quarter. We're just sticking with it for the year. Okay, let's go on to slide 21, parks financial performance history and forecast estimates. So, again, most of it is provided, most of the data here is provided for history context. Fiscal 25Q2, you already have that as a number, 16.7. $3.2 million EBITDA. Our forecast for Q3, 13.5 to 14.25 million of sales, $3 to $3.3 million EBITDA. Note the footnote subject to supply chain risks and limitations. We'll discuss that even further in the next slide. So let's go on to slide 22. This slide is exactly the same slide we presented to you last quarter. Everything's historical other than the forecast estimates. We're not changing the forecast 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 importance of supply chain limitations affecting the aerospace industry. So I want to stop for a second. Yeah, the aerospace industry is not really a happy place right now. Not so much fun. You know, for perspective, the European air show is the big one. It's Paris and the Farnborough alternate every year. Last year was at Paris, lots of exuberance, maybe irrational exuberance, depending on hindsight, about all the orders that are taken, all the airplanes and engines being sold. Everybody's very excited about that. Wonderful, wonderful, wonderful. Okay, that's nice. Then we fast forward to Farnborough this year, very different tone, very different mood, kind of glum, because everything that is coming out of Farnborough, supply chain, supply chain, supply chain, supply chain, supply chain, The problem has been solved. You know, one comment I guess was a little sarcastic was, who cares how many engines, sorry, how many airplanes you can, orders you can take, If you can't make it, what difference does it make? Now, obviously, that's being sarcastic, but that was the recent mood. What's interesting, I guess, and we'll look at it that way, is we go through these kind of fun of deja vu all over again. How many times have we heard in the last three or four years, supply chain issues almost over, about solved, about solved, everything's going to be fine, and then we're back in the soup. 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 thinking. wishful thinking is contagious. One person says it and the other person says it, okay, fine. But supply chain issues are clearly not resolved, 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 we put in the 10K, but supply chain issues are a key risk for these forecasts. And, of course, we also are ramping up the cost for Juggernaut, and that's not just a temporary thing. That's holding back our top line but our bottom line. Let's go on to slide 23. Try to hustle here a little bit if we can. Oh, general park updates. I guess we're just covering a lot in this presentation, so it may be taking a little bit longer. Solution Treater Project, we plan to purchase and install an additional solution treater. Why are we doing that? We'll take approximately three years to design and specify the equipment, install it, conduct control trials, qualify the equipment. for production with customers, three years. So we're quite concerned. When we look at the opportunities we have, we look at the programs we're on and the opportunities we have, we're concerned that we're going to run out of capacity. So we need to move now because it's a three-year time frame. We can't wait three years. We do that. We're, what's the term, screwed, I think. The budget for the project is about $70 million. This is something we decided to do and we're going to have the project. This will be placed in a new factory. Remember we told you that there was a big area set aside for a new line? Well, this is where that line is going to go. Another item, these items are all unrelated. They're just updates. Major OEM suppliers ask the partner and coach with them the purchase of an additional manufacturing line to support critical defense programs. This equipment is essential to these programs, so it's needed. This OEM is quite a bit larger than PARC, but they want us to be partners, 50-50, $5 million each. And we're now negotiating the agreement, but we plan to do this. It has to be done. This additional line is essential for these 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 our cash. 24, slide 24. We recently qualified an essential high-profile missile defense program. This program is potentially larger for us than a PAC-3 missile program. Initial revenue is expected for PARC next year and program is expected to ramp up. there, and we probably need to make a $1 million in capital investment just toward this program. This is an important accomplishment for PARC, let's put it that way. We can't give more details about the program, but you would have heard of it, that's for sure. So the next item, PARC recently entered into a license agreement with a major OEM to license technology used for hypersonic missile programs. We understand that PARC is the only licensee of this technology. We're currently conducting manufacturing trials. Significant potential opportunity for PARC online. Significant. PARC, we need to make a capital 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 things with you. I think you would want to know about important opportunities for PARC. 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 you want to hear. So my point is that this may happen, it may not happen. A shareholder complained, you know, about, well, we talked about similar program a couple years ago. It didn't happen. Well, yeah, we talked about it because it was important and it seemed serious. That wasn't a guarantee it's going to happen. So just keep that in mind, all right? Please, slide 25. New LTA with GE Aerospace is a decent separate item of progress for county years 25 to 30, under which GE is awarding two additional products for parks. And the incremental revenue from that is $3 million. This is not part of the juggernaut, by the way. This is separate incremental revenue. This is not the MRS LTA. This is a GE Aerospace LTA, separate LTA. Potential JV with major adhesive company related to adhesives for the aerospace industry. Those discussions and negotiations are in progress. We've had numerous in-person meetings. I believe there's one next week, actually, in our facility. And a significant capital investment may be necessary to support the JV. We'll see. Another potential JV was a major Asian industrial complex. So these discussions and negotiations in progress, as they sure are, because we have a team over in Asia right now, and we've had a number of meetings already. This could involve significant capital contributions from the park. This OEM is quite aggressive. We're trying to slow it down a little bit. They definitely want to do this, so I think maybe a good possibility that actually happens. Slide 26, totally different topic but still in updates. MRAS supplier score card. Part scores, you can see the scores. The first item was actually a mistake. It really should have been 100. What do these scores mean? What is their significance? We're told that MRAS has over 700 suppliers. Are these typical MRAS supplier scores? No, I don't think so. We're told that most suppliers, to be happy, get 80s. I've been told that numerous times, and a lot of them don't get 80s. Are these scores achieved by other suppliers ever? I don't think so. So similar theme is Park, MRS's best supplier, over 700. That's what I'm told. How does that happen? Is it a boardroom thing or a boiler room thing? This is such a special situation for Park, you know, and I'm not sure whether it's fully appreciated how special an achievement, accomplishment this is and how special it is for Park to have this kind of relationship with a company like this. See, it's our strategy for customers to love us. Well, in order for that strategy to be implemented, that's more of the boiler room thing. That's really a culture thing. It depends on PARC having very dedicated 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, yeah, I mean, example, I'm sorry to take the time, but just one little example. You know, John Moon, I mean, we were told he has a house, but we would never know that because he never leaves 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 has left the dock, you know. And that kind of dedication, if you want your customers to love you, you need to have people like that. The rest of strategy is nice, but in order to implement it, you need to 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 a whole new section here that we haven't had previously. Let us know if you want us to continue with this, but we thought it would be interesting to include some of the questions that we received from investors. Questions about our full adhesive product line. We call it Arrow Adhere. What advantages does Arrow Adhere have over competing products? Well, arrow 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 Adhesives, remember we did that with a joint development project with GE and MRS 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 it into their programs. Why would a customer then buy it from Park if it's just equivalent? Because it's a Park more than a product itself. How are we selling it? We're selling Park. We're selling the fact, flexibility, responsiveness, urgency. So people say, well, what is the expression? Oh, a customer says jump and you say, oh, hi. We don't do that. We say, oh, hi, jump. before they say jump. And I'm not kidding. We say how high before they say jump. That's what we're selling. Do we anticipate that Arrow Adheres, sorry, tongue twister, margins will be higher or lower than Park's average margin? This is a question from a investor. Higher, and we're quite sure of that. Several years out, what sort of range of revenues are we targeting for Arrow Adheres? Well, we're not sure. The strategy, though, isn't really a revenue strategy. It's to broaden the product line we offer to customers which manufacture aerospace composite structures. That's why we love Adhesa so much because customers buy our product and make composite structures for aerospace. Obviously, they need to buy composite materials to make composite structures, but they also use adhesives in their production of these composite structures. Just for reference, though, since we're asking about revenues, the A320 program is the first program that MRAS intends to get our film adhesives certified on. And that's $3 million per year once the program ramps to 75 airplanes per month. And obviously that's not it. We've got lots and lots of other opportunities we're working on, not just with MRAS but other companies as well. Slide 28, more questions. What about that? A major new manufacturing project initiative discussed in our Q4 investor presentation last year. What's the status? It has morphed into a larger product project. Why wasn't it discussed during our Q1 investor presentation? Well, the customer which initiated the project now wants the project to be an aerospace composite structures manufacturing technology, JV. a potentially larger, quite a bit larger project. This is JV, like with NewCo, where, you know, two companies own it, I guess. What about our strategy? What is it? Somebody actually asked if we have a strategy. Yes, we have a strategy. We call it the egg strategy. We're certainly not going to take the time to go into it now, but let us know if you want us to discuss our strategy next. Probably take five 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 is going to surprise you, but we have to go over it with you if you'd like. Slide 29. Different topic, our buyback authorization. We announced on May 23, 22, that PARC's board authorized the purchase of 1.5 million shares. Under this authorization, we purchased a total of 551,729 shares, an average price of total 94, total cost of $7.1 million, so we're spending some real money on this. Now, it highlights, though, recent buyback activity under the authorization program. Since July 26, 24, the significance of July 26, that's after the Q1 blackout ended, was lifted. We purchased 331,180 shares of Comstock, average price of $12.88, total cost of $4.251 million. Like I said, we're spending some real money on this now. Why do we do that? Why do we do that? Because we thought the price was stupid, ridiculous. It's not really our preference to buy stock. We'd rather use our cash to take advantage of all the opportunities we have. But when the stock price is, we feel stupid or ridiculous. We don't think we have too much of a choice. Will 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 1st. It's not right. It should be 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, oh, there's another typo. The next regular dividend is planned to be declared. by Parks Board about January 9, 2000. That's supposed to be 25. Sorry about this. And paid about February 4, 25. And that's within the fiscal year. Somebody's not going to get paid this week for these mistakes. Unfortunately, I think that's somebody's me because I'm the one who made the mistakes. So sorry about that. But the concept is during the fiscal year, if you look at the highlighted language, we'll have paid by the end of the fiscal year, rather, $601.1 million in 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, divide 601.1 by 20. Sorry, that's 21 years. 21 years, yeah. Sorry. 21 years, so divide 601.1 by 21. That's $28.6 million per year. Just FYI, you're going to divide the 29.35 by 21. That's $1.40. per share per year of dividends paid since, on the average, paid since fiscal 25, the beginning of 25. Let's go on to slide 31, our balance sheet. We have no long-term debt, $72 million of cash. We just talked about that. We have one more transition taxes, full payment of $5.1 million in June of 25. Thinking about our cash, so some known or likely cash expenditures of $5.1 million. That's not likely. That's known. That tax payment in June, we have to pay that. Sure buyback in fiscal 25Q3 in our current quarter, that's $2.4 million. That's already been spent, so that's a known item. Solution Trader Project, $7.5 million, that's an estimate. Contributions to the OAM Partnership, well, $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 is $52 million. So 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. These items that are listed, we've already discussed in this presentation for the most part. And some of these things will happen, some won't. We also likely have additional expenditures in new plant when you actually start a production No matter how much time you spend with the trials and qualification, we start in production, you realize some other things that might be needed. So there might be some additional investment that's required in the plant, equipment investments. So what do we think about our cash? We think that we don't have unlimited cash. We think we need to be real careful how we spend it. Let's go on to slide 33, the juggernaut. We've covered this the last three quarters, so we'll try to rush through it. Financial outlook for GE Aerospace Jet Engine programs and for PARC, the juggernaut. So what's the timing? We're not sure, but it's coming. It can't be stopped. We better be ready. Going to slide 34, the only change here, fortunately, is the GE 9X 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 on specific rate inputs we have from our customer. And as we said, we're not going to provide any more detailed information because it really is not our business. It's more up to Boeing and GE to disclose how many airplanes they 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 start with a baseline year of fiscal 24. The estimated GE programs incremental sales, that's just math, you know, taking the number from the prior slide, subtracting the 24 sales, I think that was 21 million. Incremental sales, 37.6 million. Estimated non-GE programs incremental sales, 15 million. So we decided to do something a little differently here. In the past, we were breaking it down between programs we were sole source qualified on and other programs that we expect to get on and other sales we expect to generate. We just put it in one bucket, $15 million. As indicated in the footnote, we believe that's a conservative number based on all the opportunities we're working on. The total here you can 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, we 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. over here. Slide 36, just a footnote to the slide we just read, so we won't go through those. And that concludes the presentation. Thanks for listening. Operator, we're happy to take questions at this time.

Great. Thank you so much. At this time, we'll be conducting a question and answer session. If you'd 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 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start keys. One moment, please. We'll pull for questions. We're going to start one if you'd like to ask a question. First question here is from Nick from NR Management. Please go ahead.

Good afternoon, Brian. First, I just want to say on share repurchase, I'm very appreciative of how judicious you are in repurchase. I come across so many smaller companies that they overpay for their stock, sometimes double where it's currently trading, and then put that in their press release that return cash to shareholders. which actually they destroyed value. So you've been very wise, and I'm appreciative of that. So a couple of quarters ago, I think you were talking a little bit about automation potentially in a new facility. So I've been reading a lot and watching a lot about the use of robots and other automation in factory settings. So can you just give me your perspective? Do you feel at any point you'd be disadvantaged disadvantaged by not having automation in the facilities or just I'd like to understand your perspective on that. And kudos to the workforce there. It just goes to show you some places have a great culture and don't need a union. You know, you've built a great organization in that regard.

Thank you. Thank you very much for those comments, Nick. Appreciate it. As far as automation is concerned, if you visited our facility, you would see that we're operating these lines that run continuously with usually a staff of about four people. So you don't look at it like an assembly line where you think, oh, boy, a lot of these procedures and processes could be automated to reduce costs, maybe improve efficiency. One of the areas – so that doesn't mean we're not interested, but I think that the opportunities for a park-type operation are maybe not quite as much the bank for the buck-wise as other kind of operations would be. But, you know, we talked also about automation with respect to that project, that manufacturing project that's now morphed into a potential technology JV, and that's an area where automation – front and center, I think. So that project still has to be initiated. Like I said, it morphs, so it's a larger, different kind of project. But that project would involve quite a bit of automation, I believe. Okay, thank you.

Can I ask one more? Sure. I know this is a difficult thing to say, but where would you be disappointed in terms of air buses, say, ramp up deliveries next calendar year, where would you be disappointed if it didn't reach whatever the number is? 52, you know, 54, 50, where would it disappoint you?

I'm sure I understand your question. You're talking about in terms of our annual sales or? No, the delivery. Oh, A320 per month to me? Monthly rate? Yeah, correct. Okay. Yeah, well, we're disappointed already, so maybe that's a hard question to answer. The supply chain has clearly become more of a problem. a known issue, probably zero long. My guess is that this year maybe we'll get to 50, last year 48. I've seen all kinds of different forecasts. I mean, obviously we'd like them to be 75, so maybe that's not a proper answer. It would be nice if next year they're at 55. I don't know if that helps, but if they're not, you know, we're already disappointed. So we're probably disappointed with any number that's under 75. But the key thing is for us to hang in there and be ready for the ramp, because as far as we're concerned, there's no question they'll get to 75. Just with all the orders they have, it just doesn't make any sense they wouldn't get to 75. So the key thing for us is to make sure we're ready for that, and that's really important. That means we need to ramp up the new facility, and that's why we're doing that now, but we're also kind of suffering through the additional cost burden of of ramping up facilities that are still operating at a very low rate.

Okay, thank you. Yes, and as you've said before, this is a long-term proposition. And, you know, I really loved your comment about the stock price, you know, stupid, and certainly got pretty stupid at one point. So I appreciate it. Thank you so much, Brian.

Thank you, Nick. Very nice to hear from you.

Once again, if you'd like to ask a question, it is star one on your telephone keypad. If no further questions, I'd like to turn the floor back to Mr. Schor for any closing comments.

Okay, well, thank you, operator. I just want to say I'm sorry that it took so long. I think what we did was we tried to cover too much during this presentation. I think everything we covered was meaningful and information that many of you probably want to know about, but nevertheless, maybe we put up more than we could choose, so I apologize for that. In any event, thank you very much for listening. We hope you have a very good day. We'll talk to you soon. Goodbye.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.