Park Aerospace Corp.

Good afternoon, my name is Alicia and I'll be your conference operator today. At this time, I would like to welcome everyone to PARCC Aerospace Corps third quarter fiscal year 25 earnings release conference call and investor presentation. All lines have been placed on mute to prevent any background noise. After these speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then number one on your telephone keypad If you would like to withdraw your question, press R2. Thank you. At this time, I'd like to turn today's call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference.

Thank you, Alicia. This is Brian. Welcome all to PARCC's Third Quarter Investor Conference Call. With me, Mark Escoville, our President and COO. Right after the close, we published our third quarter earnings press release. You want to get a hold of that because in that news release, there are instructions as to how to access the presentation that we're about to go through. Without access to the presentation, this call will be less meaningful. And the presentation, you can link to it via webcast. That's how you say it. It's also on our website. And as the operator already said, you know, after we're done, we're going through the presentation. Mark and I, you have to take questions. Just want to give you a warning, the presentation, not short, probably take 45 minutes or so to go through. So having said that, why don't we just go ahead and get started. We're going to go to slide two, our forward-looking disclaimer info. If you have any questions about it, please let us know. Slide three, this is our table of contents. First item is our Q3 investor presentation. And we also have supplementary financial information in Appendix 1 at the back. We don't go over that normally during our investor calls, but if you have any questions about the supplementary financial info, please let us know. In the photo here, we have the missing link. Thank you, James Webb, Space Telescope. So I'm not sure I understand very well, but I'll do the best I can. This little box on the left, there's kind of an enlargement of that little box kind of in the middle of the image here. And that's, I guess, apparently a really, really old galaxy, only about 1 billion years after the universe began, which is, I think, about 13.8 billion years ago. And the problem for all our scientists is that this is way too hot and too bright for a galaxy that old, and nobody understands it. So once again, James Webb is challenging all the wisdom and knowledge that we supposedly had and saying – I'm sorry, you're wrong. I mean, we don't really care what James Webb is speaking. We don't really care what your opinion is, what your beliefs are. These are the facts of the deal. It's really quite exciting. As I think some of you know, our proprietary Sigma struts are used in the structure of the James Webb. They're important parts of the James Webb Space Telescope structure. This is supposedly the missing link. I don't know what that means between... primordial galaxies and modern galaxies. I think you've got to put modern in quotes because modern's not like 10 years old or something like that, but we'll see. Interesting and it's really so exciting and thrilling for us to be part of it. I would say this is probably like one of the top five things that PARCC has done since we started. Not as old as some of the even modern galaxies, but 1954, okay. When we go down to earth or come back down to earth and go to slide four and talk about our quarterly results, if you look at the right-hand column here, sorry, sales of $14,408,000, growth margin 26.6%. And if you know us, you know that is kind of a miserable growth margin. We don't really like growth margins below 30%, so obviously we're not very thrilled with that one. Adjusted EBITDA, 2,114,000. So what did we say about our Q3 during our Q2 investor call on October 15? What did we forecast, let's say? Sales estimate, 13.5 to 14.25. So it looks like we came a little bit above the range for sales, but adjusted EBITDA, 3 to 3.3 million. We're way below that number. So something isn't right. Something doesn't make any sense. Let's talk about that. Let's go on to slide five. Top of slide five, Q3 considerations. So why is Q3 EBITDA considerably below the forecast range when the Q3 sales exceeded the top of the range? In other words, normally you would say, yeah, Q3, the sales were top of the range. EBITDA should be top of the range as well. So let's get into that. And unfortunately, it takes several slides to give you a proper understanding. So let's get into it. Okay, first check item. fiscal 2523 sales were 14.4 million, as we just said, which exceeds the forecast range by about 150,000. But, and it's a big, big, big but, our Q3 sales value of production, we call it SVP, was only $13.2 million or $1.2 million less than U3 sales. Normally, we don't talk about SVP unless it's something significant. And I just want you to understand, SVP is not inventory value. That's the value of the product when it's sold. And it's good to think that way because when you're trying to compare production to sales, then you have apples to apples. So that's why we use SVP rather than just the inventory value of the inventory that's that's produced when we do production. At Park, SVP has a significant positive impact on the bottom line. As a result, its production or SVP shortfall has a significant negative impact on Q3 or Q3 EBITDA. And probably by about $300,000, actually, in terms of EBITDA, production absorbs a significant amount of cost into their produced inventory. So what happened? Why the production... SVP shortfall in Q3. So there's several things to consider here. So one, bringing up the new manufacturing lines and new factory. So we're going through the anticipated challenging process of optimizing new lines as we operate them and ramp them up in a production environment. It's a lot different Running something in a production environment is good. That's where you really learn. That's where you optimize, get the bugs out, as compared to doing trials or any qualifications where you know you can take the time, whatever you want to do, to do it. Production is a very different world. Going to slide six, ultimately we expect a new line. This is important to run 25% to 50% or maybe even more faster than the existing lines. That depends on the product type. Also, it depends on when you're talking film or tape. But think about it conceptually. It's a lot faster. But we must go through the expected learning curves in order to achieve those results. But ultimately, that will deliver a lot of oomph to the bottom line to be able to run a product so much faster. The new lines are designed with better controls also. This is another factor. Better controls than the existing lines, capable of producing tighter tolerance, meaning better quality product. We actually do not need to run, okay, this is a key thing, need to run new lines at all to support current production levels. We're ramping up to prepare for the coming juggernaut. We talk about the juggernaut a lot. That's coming toward the end of the presentation. On slide 26, when we get to that, you'll see very clearly why we don't need to be running the new lines to support the production levels. That's not the point. Ramping up a little too early, though, will cost our P&O in the short term. And it's hard to say. You're always doing the best you can to judge, one to ramp, one to ramp, and try to make little minor adjustments. But ramping up too late and not being prepared to support the major programs as they ramp up, that juggernaut, well, we all know how that would end, and it's not a pretty picture, not a pretty thing to contemplate. You get behind, and, you know, you're kind of screwed. So you want to err on the side of being early rather than being late, and you just continue to make the adjustments as you need to. But the bottom line is, including the impact on the bottom line, the bottom line is, We better be ready for the coming juggernaut. That's the most important thing for us. Slide seven, ramping up the new lines is now part of our, is ramping up the new lines now is part of our plan to be ready. But for the time being, the new lines run less efficiently until we get on the other side of the learning curves with the new lines and no business ramps up. You know, this is not ramped up. Like I said, we don't even need to use the new lines. So obviously a lot of extra costs doing that. Next item, Will Park is very fortunate. to have a special and dedicated workforce, great people, many of our production people are relatively new to PARCC and they're still at the front end and steep end of the learning curve. So this is another factor. As the new people are being trained and going through the learning process, our productivity that's measured as production units or dollars per work hour is temporarily reduced, okay? So that's going to affect our, let's see, the temporary reduction of productivity negatively impacts profitability. So it increases our input cost for unit production, you understand? It takes more time to produce a unit, so that's going to affect our bottom line. And in addition to that, this reduced productivity also negatively impacted our Q3 production levels, which contributed to the shortfall that we talked about, which had a big impact on our bottom line. How much are we talking about in terms of the – the productivity or lessen and reduce productivity impact on our profitability. We're not really saying, but it's meaningful. Keep going. Bottom of slide seven. People got 134 compared to 124. At the end of Q2, what's going on there? Let's go on to slide eight. Obviously, the increase in people count at least temporarily places additional pressure on our property. We don't need the extra people. We're ramping up for the juggernaut. And actually, since employee turnover is way down, we've been able to – and this is something we didn't see coming. We've been able to ramp up our workforce more quickly than anticipated. That's a two-edged sword, you know. But our people, Sadie, Nancy, others, are doing a really good job of hiring the right people. That's a key thing. We've always been able to hire people, always, you know, the last couple of years. but it's pointing the right people. Park's a pretty unusual, quirky company. And I would say nine out of 10 human beings are not really suitable for Park. So we've got to find that one out of 10 human being. And that's also fairly significant. Those 10 extra people probably cost our P&L $150,000 in just that quarter, just approximately. So that's another big part of the equation. And that was not something we expected to happen. Because, you know, we've been talking for quarter after quarter. You know, we're trying to ramp up, trying to ramp up, and it feels like it's frustrating. You know, you make a little progress, and then you lose the progress. Let's keep going. Complex and – this is a tough one. We've been kind of holding this back. We haven't wanted to talk about it because it's a really sensitive situation. But, you know, my feeling, our feeling is that, you know, you're investing your hard-earned dollars or your clients' hard-earned dollars, and you have a right to know some of this stuff. So – We have to use some judgment, but we're electing this one to tell you something that's, you know, pretty important. Sensitive situation regarding Aering Group's Raycarb C2B NG fabric. Remember that Park entered into a business partner arrangement with Aering Group in January of 22, three years ago, under which Aering Group performed Park as its exclusive North American distributor of its proprietary C2B fabric. This fabric is used by Park. to produce ablated materials for missiles and rockets. One of PARC's key customers that produces the rockets and missiles of the ablated materials, this is the ablated materials key customer, which we produce with the C2B fabric, is going through a recall of the fabric, not PARC materials of the fabric. We will not discuss why that is. Like I said, all things very sensitive. But this customer and other customers continue to buy and stockpile significant amounts of C2B fabric of PARC. Our C2B fabric, not materials, sales are expected to be approximately almost $7 million, $6.9 million in fiscal 25, $2.5 million next year or more, and actually $3.9 million just in our Q4. So these... OEMs, they're obviously committed because it's at their risk. I mean, this is their inventory. They keep buying and buying and buying, stockpiling this product. But meanwhile, one of the key OEMs is saying, well, you know, we're requalifying the C2B fabric. And here's the thing. Let's go to the top of slide nine. However, until this requal is complete, we, parks, are not able to produce the ablated materials using C2B fabric for this customer. Now, it's going to have to happen. you know, first of all, the program is so critical. It has to happen. But secondly, they're buying, you know, millions and millions of dollars of this fabric, so it has to happen. But until they get done with the recall, we can't produce the materials for them. As a result, PARC had no sale to this customer of a blade of materials produced with C2B fabric during Q3. Remember that we sell C2B fabric online. So just to be clear, we're saying we didn't sell any materials that were produced with the fabric. We still sell the fabric, two very different things. Remember that Park sells the C2B fabric to our customers for a small markup. So we sell the fabric to our customers, a stockpile rule of fabric, small margins. But the margins we're producing and selling ablated materials using C2 fabric are significant. Let me just tell you what we're talking about here. We expected, and we didn't know this was going to happen, so we're beyond our control. We have no control over the, you know, the requalification. We're the good guy in between, you know, trying to help be helpful, but we can't control how quickly this requal is done. But just to give you perspective, in Q3, we expected to sell $400,000 of materials made with C2B fabric. $400,000, not that big a deal. Really? Really? Over $300,000 would have dropped to the bottom line, okay? So now you get a perspective on how this works. When we sell the fabric, the margins are very little because we get a little markup. When we use that fabric to make materials, now it's the customer who owns the fabric for the customer. The margins are, you know, let's use the term huge, I would say, okay? So that should give you a perspective. Until the recall is complete, we'll have to live with this P&L double whammy, selling the fabric with a small markup, but not being able to sell a very high margin of play in materials, produce the fabric. So at this point, the recall is expected to be complete in March, but we put recall expected in quotes because it's not something we have control over. Now, there is motivation because there's pent-up demand for producing these rocket and missile systems, and they can't do that with fabric. They need the material from us. So let me just see if I have a note here. No, it's okay. So if that does occur, that the recall is done in March, we expect sales to this customer, this customer alone of bladed materials, materials using the fabric to be about $2.5 million or more, more than $26. The contribution from those sales, well, you know, I just explained what that would be. There's a pent-up demand, so as soon as the recall is complete, we'll be off to the races, and the limit will not be the market. The limit will be how much, you know, product, how many systems the customer is able to produce. Let's go on to slide 10. We've been holding back talking about that because it's very sensitive, but we felt, you know, you should really know what's going on here because, like I said, you're investing your hard-earned dollars or your clients' hard-earned dollars. You're told to know these things, I think, at least to some extent, to the extent we can. share them with you. Flight 10. So here's a question. Why didn't we expect these things to happen in Q3? Why didn't we take these things into consideration in our Q3 EBITDA forecast we gave you? Well, we actually did expect to produce and ship that $400,000 of land materials. That's not really on us. That's just because the recall didn't happen. So I think we reasonably expected that to happen in Q3. It didn't happen. And we got the P&L double win, but we sold $400,000 of C2 fabric in Q3, and that doesn't help us very much at all bottom line-wise. And then also, as we stated, we ramped up our headcount more quickly than expected just because our history has been difficult. We're struggling to ramp up our headcount. Our people are doing a much better job of hiring, firing, sorry, finding the right people, the right people for PARC, which is like a little bit of a needle in a haystack, I think, where Most people are not cut out for PARC, you know, which is how it is. But as far as the production shortfall we talked about and reduced productivity we talked about, you know, that's on us. We should have expected those things when we gave you the forecast, and we just missed the mark. You know, of course, we did our best, but we missed the mark. We do not hit our production and productivity targets. That's on us. We're accountable for it. As a result, our PARC people will not receive a bonus for 2.3%. It's just to understand, it's not like we're punishing anybody. But at PARC, we have this attitude. We're all in this together. We're all in this together. So if we're not making our numbers, we don't get bonuses. That's just how it is. Now, before you feel too barely for our people, let's go to the top of the slide. Eleven, however, there's a sense of optimism at PARC about the coming year and the future. And at PARC, family members will receive Goodwill bonuses for the new year. This is not for the court. This is Goodwill bonuses. But you will not pay for them. So let's go on to the next item. There were significant ongoing expenses in Q3 related to operating our new factory, including expenses for depreciation in the footnote below. That's an annual amount of about $1,000,000, sorry, $1,260,000 goes into gross profit, gross margin, not EBITDA, of course. And the rest is EBITDA, facilities, maintenance, utilities, insurance, overhead expenses, people expenses. um but those things were taken into account when we gave you our forecast for q3 before you knew about them so um that's that story miss shipments in q3 actually a little bit better you know the production was shortfall was significant but you know if you have been with us recently in the last few quarters i think it's been like five or six hundred thousand dollars in the shipments i don't know if it's a trend but you know we'll take a little bit better Useless suspects, international shipment issues, supply chain issues, customers on hold issues. That means, you know, customers aren't paying their bills. Sorry, you're not going to get shipped. And other miscellaneous issues. Yeah, we kind of have a funny attitude about getting paid for what we do. Slide 12. This is just, you know, something we do every quarter for you. Maybe it's probably fun because it's always the same group of, you know, five top customers. Just quickly... The COMAC 909, that is now what the ARJ21 refill jet is now called 901. 909, rather, that's the MRAS. That relates to MRAS. Over here, the Gulfstream G280, that's Aerospheres, which is a distributor for Israeli, not aircraft, Israeli aerospace, you can call it now, which makes the G280 business jet under contract with Gulfstream. Then bottom left, you know, we talk about this a lot, the PAK-3 Patriot missile. That's Aerojet. And then Kratos, of course, Kratos is Kratos. We know a little about Kratos, one of our very special customers in the Valkyrie there. And the 737-800, that relates to Nordam. That's the weather master radome that's used on the 737 line, including, I think, the MAX as well. Okay, let's keep going. Let's get to moving up there. Slide 13. Our pie charts. I don't know about you, I really always liked the pie charts. And if you look at them, you can see 22, 23, and 24, and 25 are pretty similar in terms of the breakdown. 21, very different. That was the pandemic year. And commercial aircraft was, you know, was a mess then, of course. Remember, airplanes were being flown with like two people on them. Most of them were not being flown at all. Okay, why don't we keep going, slide 14. So Park loves niche military space programs. So these are all missile programs, you know, and this is Elena's project. Elena, why don't we just focus on missiles this quarter? And, you know, the interesting thing is there are a lot of other programs that we didn't select. I mean, there are a lot of missile programs that we're active on. But these are some really nice ones that she selected. I won't go through each one of them except I'll point out the bottom left, SpaceX. Really, I love that company. I'm just talking personally. So I'm really thrilled to be on that program. And the bottom right, a little history thing there, Lockheed Sunnyvale. In 1962, we produced what was called multi-layer circuit boards. We developed multi-layer. We're the first in the world, I believe. In 1962, for Lockheed Sunnyvale, they said they wanted to reduce weight on the circuit boards. These are for ICBMs, you know, back in the old days. And what we did was develop what's called a multilayer circuit board. So we go way back with Lockheed Sunnyvale. A lot of history there. Let's go on to slide 15. Okay, you're used to this slide, so we won't spend a lot of time on it. We have the firm pricing LTA program. 1929 with Middle River, a sub of SD Engineering Aerospace. So the obvious question is, who are they? What is this about? Because all these programs are GE Aerospace programs. Well, as most of you know by now, when we got on these programs, Middle River was a sub of GE Aerospace, and GE Aerospace sold Middle River to SD Engineering about five years ago, but we were already on those programs. Redundant Factory, we told... MRES and GE at the time that, okay, once we sign this LTA, which is our sole source on these programs, we'll build a redundant factory for you. And we did, a $20 million factory. And the reason is we're sole source in these programs, so GE was wanted to have the security of a redundant factory because they all have all their eggs in our basket. So we did that. And the factory has been in production for a couple of years. We already talked about that. I won't go through all these programs, but these are really all wonderful programs. We just love being on these programs. It's all great to be on these programs. Any questions, let us know. Let's go on to slide 16. Let's skip to the second item. The fan case, containment wrap, the Gen X, sorry, not Gen X, GE9X engines for the 777X aircraft. Gen X is like on the 787 and also the 747. GE9X for the 777X produced with our AFB and other composite materials. And as I think you know from last time, we recently received a PO of $6.5 million in for this program. So that means the program is really starting to try to get more and go into production, having their difficulties. We'll get back to that later. Next item, the LTA provided for a 6.5% weighted average price increase Effective January 1, so we're benefiting from that just, you know, last couple weeks. The MRS LTA was amended, you know, I guess, I don't know, about a year or so ago to include film adhesive products that we developed under our joint development project with GE. And those products are all undergoing qualification now. LIFA program, we talked about that last couple of quarters. Still working on it. We had another meeting. another negotiation session. The ball's in our court, actually, because right now we're waiting for some of our suppliers to give us pricing. I mean, it's our supplier's court, I guess. Before we're able to recommence our discussions, we need our pricing from our suppliers so we can provide the proper pricing to MRAS and SDE for the LIFO program agreement. Slide 17. Let's talk about updates on the jet engine programs. We always start with the big kahuna, the A320neo aircraft family with all these variants. Airbus has a huge backlog of 7,221 airplanes. That's just a lot of airplanes for any kind of commercial aircraft program, any program, any program. Airbus, as you know, is targeting a delivery rate of 75 airplanes per month by 2027. And then let's talk, let's go to 18, a little more information, let's see how they're doing. Go through 18 through 24, you know, how many aircraft deliveries, how many they're delivering per year, per month. 24, the Airbus finished with a bang there, 602, an average of 50 per month, quite impressive. And really impressive, 92 airplanes delivered in December. And that doesn't mean they're at the rate of 92 because these airplane companies have this kind of thing where they kind of make their year in the last couple of months. But anyway, that's a real big number. And clearly based on this backlog, they're already producing 75 per month, you know, if not, why not? Because supply chain constraints. Aren't we kind of tired of listening and hearing about supply chain constraints? I am anyway. 19, slide 19. So will Airbus achieve that goal of 75 airplanes per month? You ask us, you ask me, yep, I think they will. Will they achieve it in 27? Well, after a very strong finish in 24, which we just explained, at a January 9, 2005 briefing, just, what, a week or so ago, Airbus' commercial aircraft CEO emphatically reiterated Airbus' plan to achieve that 75-per-month reduction goal in 27. So I hear a little bit of maybe comic relief. Are we waiting for Godot? You know, waiting for Godot, it's a play by Samuel Beckett, some Irish existentialist guy. I saw the play, hated it, you know, it's terrible. Sorry, Sam, but I think he's not alive anymore, so you're probably not going to get too mad at me for saying that. But the concept is Godot, I think it's supposed to be God. I'm not so good at this stuff, but I get, you know, take it from, you know, talk to somebody smarter than me. I think the concept of Godot was God, and the people are just sitting in the play waiting around for God. God never shows up, you know. So I think that's the theme of it. Like I said, if you want to really get it, talk to somebody smarter than me. But I think that's the idea. Are we waiting for Godot? I mean, waiting for these things to ramp up and sitting on our rear end doing nothing? We better not be. We better be ready for the juggernaut, the 75-per-month juggernaut. That's what we're doing. You know, it's a funny thing in aerospace. You get on one of the programs you're so thrilled about, and it's some of these defense programs, missile programs, so thrilled about, sole sores. And it's kind of a two-edged sword. Because once you get on the program sole sores, you can't do anything. So wait. for the OEM to, you know, to ramp up. We can't tell Airbus to make more airplanes, Boeing make more airplanes, Comac make more airplanes, some of these defense contractors. So that's a two-edged sword. But, you know, the thing for us is, you know, we talked earlier about we can't judge it exactly, so we just need to make sure we're ready. If we're not ready, we're screwed. You know, if we're ready a little earlier, you know, okay, it hurts our P&L temporarily, but not be ready, that's not something even, you know, worthy of discussion. Let's go into slide 20. We know all about this, approved engines for Day 320 aircraft family. We've got two of them. One is a CFM Leap 1A. The other one is a Pride engine. And just a little, I don't know, this is maybe out of sequence, but recently, December 6, 24, GE announced that the FAA and EASA, that's the European version of FAA, have certified CFM's new That's high-pressure turbine durability kit for the Leap 1A engine. That's a really big deal because durability has been the issue for both these engines, the Pratt engine and the CFN. The Pratt is having, you know, like, I don't want to be unfair, but really big problems with durability, serious problems. And it's a real problem for airlines. Airlines don't want airplanes that have to sit on the ground because of durability issues. You know, that doesn't work for airlines. So this is really a great thing because, you know, I think Pratt's trying to get there, but but GE is making some really nice progress on durability, you know, kind of maybe putting some distance between them and their competitor. But we supply only into the CFM LEAF-1A part of the A320 program. We don't supply anything into the A320 program using the crowd engines. According to the Aeroengineers, the CFM LEAF-1A market share of firm orders for the A320 NEO family of aircraft with 63.9% as of November 30. But LEAP has had the biggest market share for a long, long, long time. We track it every month. It kind of goes between 60 and 65. That's a nice market share. At that delivery rate of 75 airplanes per month, that market share of 63.9 translates into 1,150 LEAP engines per year. What's that worth to park? That's worth a lot of, you know, that's a lot of clams or whatever you call it to park. Slide 21, let's continue. Same theme here. As of November 30, okay, there was your new stuff. There were 8,148 firm LEAP 1A engine orders. It's hard to, if you're not familiar, you don't know, but that's just unheard of. That's so many engine orders. But what are those firm engine orders worth to park? Well, a hell of a lot. If you look at slide 37, we'll do that later on, it gives you a feel for what our revenue is per unit. And it's just a lot. And obviously, it's just a huge amount. And obviously, you know, Airbus wants to sell more airplanes and CFM wants to sell more engines. This is how many firm orders they have now. They're not done yet, you know, so. Let's go on to the next item, the A321XLR. This is still talking A320 family. It's a new variant. We're just beginning right now. First delivery was in October. Very nice. First commercial flight in November of last year. First commercial transatlantic flight on November 14. And then according to the Airbus, it is over 550 firm orders. This is a really exciting program for Parks and Beyond. Remember the whole theory about this airplane, much better. It's a single aisle, but it has really good range and much better payload, more people, more baggage, you know, so it could compete with the twin aisle, the wide bodies. At least that's the theory anyway. So pretty exciting program, I would think. And, you know, Boeing has not at this point, they haven't announced that they're going to, do anything to compete against that XLR. So the XLR has that space to itself for as long as, I guess, they'll be there on their own. Slide 22. We're doing time. We're not doing too well. The Comac 919. So let's talk about Comac. We've been involved with the A320. This has a different kind of LEAF engine, a LEAF 1C engine. A Chinese company planned to deliver a 54. 919 is 25, 84 and 26, 110 and 27, and 126 and 28. So they're planning to ramp up. They plan to achieve a rate of 150 airplanes. These are not engines. These are airplanes by 28. They report to have over 1,000 orders for these airplanes. This is a very important program for parks that we stop and emphasize. The 919 is now flying with three different Chinese airlines. It's really flying in China mostly at this point. And a lot of people thought, oh, it's going to be a China-only aircraft. No, don't tell COMAC that. They reportedly have delivered 16. So they're starting, but they're getting there. And here's a big one. They're aiming, they say, to have EASA certification, that's European certification, 2025. What happened to those? Well, it's a China-only airplane. Don't tell COMAC that because they're not thinking that. So this is going to be, you know, I think a very exciting program. I'm going to put it that way. reigning for Southeast Asia Flight 226, you know, outside of just China. Let's go on to slide 23. 777X with the 9X engines. So, you know this, in August, the FAA temporarily grounded the 777X after they had some engine attachment defects were discovered. September 6, 2024, one of the 777X test fleet aircraft reportedly returned to the skies And I've seen several articles about that, but it's funny, I haven't seen much confirmation of it. So if you hear anything about it, please let me know, because I'm still trying to, we're still trying to figure out what's going on there. The Bowman's current certification and first delivery target for the 777X is 26, and as of 24, they have a little over five, September 24, a little over 500 orders. This is a real important program for parks. That's why we highlight it. And we haven't talked about this very much, but we'll just, quickly say the global 7,500, 8,000 with a passport 28G engines, they just announced their 200th delivery of that airplane. Going on to slide 24, again, something you're familiar with. So what do we do here? This is GE Aerospace Jet Engine Program sales history and forecast estimates. Let's just go ahead and to the bottom right. A lot of time with the history. We're just running out of time here. So First of all, Q3, we should talk about that, 6.9 million of sales on GE programs. And we have a forecast for Q4 of only 5 to 5.5 CCT. That's a little bit of a weak quarter. Q1 was 5 million, but remember that was because of the storm damage. Q2 and Q3, about 7 million. So looking for not a great quarter in Q4. And it's pretty much booked, so we pretty much know what's going to happen, we think. For the year 24, fiscal 25, 24 to 24 and a half million, that compares to about 21 million for 24 and what, 22.3 million, 23. So moving in the right direction. We're even giving you a forecast for fiscal 26. That's approximately 30 million, 28 to 32. It's a preliminary forecast. But I want you to know that this is based on an input from our customers. And these are the low numbers. We get a low, a middle, and a high. Those are the low numbers we're getting from our customer. We'll see what happens. We'll keep you posted. Let's go on to 25. Okay, we've got to slow down here a little bit. So parks, financial performance, history, forecast, estimates. Now this we're talking about all apart. So you already know fiscal 2523. We already talked about that. Q4 forecast 15.5 to 16.3 million sales, 3.3 to 3.9 million EBITDA. And if you just do the math, you know, we had the first three quarters, fiscal 25 of the year, about 60.5 to 61.5 million, 11.5 to 12.2 million for the year. But we'll talk about the year in the next slide. So the EBITDA numbers for Q4 looking really good. What's going on there? Well, remember that $400,000 of C2B ablated materials, materials that we're looking to sell in Q3? Now we have that scheduled for Q4. Let's knock on wood about that one. But remember how much contribution? It's significant. Our production plan. Now, remember we underproduced? We had a production shortfall in Q3. So we actually burned down inventory. That's how we got our sales. This is, sorry, I should say finished goods inventory. finished goods at the end of Q2 were $1.7 million. At the end of Q3, about $700,000. So we burned down about $700,000 in finished goods inventory. So in Q4, we're looking to build back that inventory and then some. Because, you know, remember, production is really good for P&L, bottom line. And I think we'll do better this quarter in terms of hitting our production target because we're I think we're trying to get ahead on production, let me put it that way, and I think we're doing pretty well. I think we'll be okay with productions. That'll help our P&O run, heard it. I just, you know, yes, but inventory, inventory went up a lot in Q3 as compared to Q2. But that was because of in transit, a C2B inventory, a lot of it that ended up being part of our balance sheet at the end of Q3. But the finished goods inventory actually went down quite a bit. And I also want to tell you something just because, okay, you should hear it. We have planned for Q4, it says right here, 3.9 million dollars sales of CQB fabric, which is a lot. But a little over a million, about 1.1 million of that is at risk because it requires French government approval and And that has a significant impact for bottom line. That's actually a higher margin than most of our C2B fabric sales. So that may not happen. And here's another example where we're just a good guy trying to help out, but it's a French government and some big OEM. They're trying to make this happen. They say it's going to happen. And the French government approval in Q4 doesn't, it doesn't, we won't get the sale. And that sale will slip into Q1. I just wanted you to be aware of that. Okay, so let's go on to slide 26. Sorry we're taking so long here, but it seems like there's always a lot to cover. Slide 26 is also one we have to slow down on a little bit. Because let's look at the annual numbers. I think there's interesting perspective here. Let's look at the important things. So supply chain limitations affecting the aerospace industry. Look at the top line. You can see that. You know, we got 60 million in fiscal 20 before the pandemic. And we're, you know, 46. You can see next, 21, 22, 23, 24. They're really struggling to get reborn after the pandemic, so the aerospace industry is ramping up costs for the jargon. So that's really more of a bottom line factor. We look at fiscal 25 that we already talked about. And also fiscal 25 includes 6.9 million of C2P fabric sales, which of course are lower margins. So that's going to explain to some extent why the margin numbers aren't what the EBITDA numbers aren't what you expect. I mean, if you look at, compared to fiscal 20, the top line is going to be about the same, and 25 is 20, maybe a little higher, but the bottom line is lower. Well, if you consider the $6.9 million of C2B fabric sales, that we had almost none of those in 20, that itself would explain the shortfall. Let's see, one other thing I want to bring to your attention. So, yeah, when we, I think at Q1, we gave you a forecast for the year. I think it was 60, 65 million top line, which we plan to make more or less. We also set 13 to 15 bottom line, EBITDA, and we're not going to make that. Now, at that point, when we announced Q1 and gave you the forecast for the year, We expected lots of sales of C2B materials, and that's been a real disappointment. And that's kind of why, partly why we wanted to tell you about what's going on with the recoil. It's all about their recoil, you know. And they're stockpiling, like I said, the OEM stockpiling lots and lots of the C2B fabric. But until the recoil is done, we're not able to produce it. And that really held back our bottom line in the current fiscal year. And we didn't see this coming when we gave you that forecast in, I guess, when we announced Q1 in July. So that explains to say, well, you know, we should have known that our ramping up costs were a juggernaut. We did. But we didn't know that we're going to miss the mark so much with the C2B materials and You know, we want to take the responsibility for everything we can take responsibility for. But that's not on us. I mean, that's not on us. That didn't happen. We're the good guy, you know, trying to help out. But those are two big behemoths that have to figure out how to get this re-fall done. And they'll get it done. They have to get it done. There's a lot of motivation. But until it happens, you know, we're not able to produce those materials. And I already gave you a feel for what the margins are in those materials. That alone would explain the shortfall in terms of what we forecasted at $13 to $15 million when we gave you the forecast for the fiscal year when we announced Q1 back in July. Sorry to slow down, but a lot to cover there. General park updates, slide 727. Most of the stuff, just updates that we talked about last time. And to some extent, we include this because The updates, because if we don't, people say, what happened? Does that mean that that's no longer an active thing? So we want to try to avoid that. Solution Trader Project, still a front burner gold project. Next one, that major OEM supplier has parked a partner with them on the purchase of an existing manufacturing line. That's a $5 million investment, $5 million each. Well, we're going to tell you now that OEM is Earring Group. So we thought you should know that. And we'll also tell you that we're expecting $75 million of sales through 2024 under the contract that we're negotiating with these people. So those are the updates. Let's go on to slide 28. So we talked about this last time. Essential, large, high-profile, large and emphasized. missile defense program update. We're sole source qualified in this high-profile program. Remember we talked about being sole source qualified and what that means? Missile revenue is expected this year and ramp up from there. What's the program? Have you heard of the Next Generation Iron Dome? Let's go on to the next item. PARCC recently entered into a license agreement within OEM to license technology for hypersonic missiles. Not much of an update. We're just in phase two of the manufacturing trial. So far, the results are good. Let's keep going with the updates in slide 29. That agreement with GE Aerospace, this is not the MRAS agreement we're talking about. This is GE Aerospace. We talked about it last time. Now the only update is the agreement is complete, executed. We talked last time and we're still in the works. We can skip over the next item, not really much of an update. And the last item, the supplier scorecard for MRAS, 100, 100, 100. And what does that mean? It's hard, I think, for most people to appreciate what that really means, how significant it is, because it's just not, heard of, at least from what people tell me. So let's not dwell on that too much. We're running out of time here. Let's go on to slide 30. New emphasis. This is an important thing. We have to slow down on this one, too. Park new emphasis on military defense markets. Why this new emphasis? Well, how many new commercial aircraft programs are on the works? You've got the 777X, fortunately, in that program. CUMAC 929, we can't talk about it, but for reasons that we're pretty sure we'll never get in that program. What else? Don't know of anything else. Maybe Boeing will come up with another airplane, but that's still uncertain. But there are significant opportunities materializing, which have materialized for us in the military defense markets. particularly related to new major missile programs, which are focused on ablative materials and also materials for hypersonics. Currently engaged in several high-profile and essential missile programs, ablatives and hypersonics. Some of these programs are quite large. Let's go on to slide 31. Unfortunately, these programs are highly sensitive and confidential programs in which we're not able to provide specific information at this time. I feel very sorry about that, but these are, like I said, quite sensitive programs. We'll provide more information when we're able to. For now, let's just say there are several high-profile programs on which PARCC is engaged, including three missile and hypersonic programs on which PARCC's material undergoing serious evaluation Each of these programs has the potential to generate $10 million or more in annual revenues for PARC. So this is not just casual stuff I would take. I remember also PARC is a true blue American company, and I'm saying that because we're talking about military instruments. Let's go on to slide 32. Recent questions from investors. Well, what about that 10-case containment wrap for the 9X engines? We used to talk about it. The redesign risk where the fan cage could be designed out, why are we not talking about that anymore? We could be wrong, but we believe that ship has sailed and the program will proceed with the current fan cage design. We also had a question, by the way, about our strategy. And I don't know what to do about that, but we want to go over it with you. But the problem is we're already running really late. And it probably takes at least five minutes to do even a very snapshot presentation of our strategy. So I'm not sure how to handle that. We'll try to figure it out later. Slide 33, our buyback, really not too much of an update here. We haven't bought any stock. since we did the Q3 investor call. And why is that? Because after the Q2 investor call, this is the Q3 investor call, Q2 investor call, which was in October, the stock seemed to recover, seemed to get to better levels, and we wanted to back off a little bit and let somebody else buy stock, not just us. I'm kind of only joking about that. But one thing you should know is that during Q3, we did actually buy, what is it, 180,000 approximately of shares during Q3 at a total cost of $2,363,000. And that pretty much would explain the change in cash from Q2 to Q3. There are obviously a lot of factors up and down. But that will explain the change in cash on its own. So, like I said, no additional shares have been purchased under the authorization since October 10, which I think is more or less when we announced Q2. And we'll see what happens. Are we going to buy more? We really don't want to because we use our cash. You know, if the stock goes down to those stupid levels, and it's been testing those stupid levels in the last few days, we'll feel like we may feel we don't have a choice. Slide 34, incredible cash dividend history. We can skip over this just to save time. Let's do the last one. When the regular cash dividend declared on December 9, last hour item, is paid on February 4, 2025, and we'll pay it. Then we'll have paid $601.1 million in cash dividends since fiscal 2005. So it will be over $600 million at that point. Like I always say, that's a hell of a lot of money for a small company like Park. Going to slide 35, our balance sheet and cash. So we've got no long-term debt, $70 million in cash at the end of Q3. And remember, we've got to pay $5.1 million. one more payment of the transition taxes to all the payments in June. So we do a little math here. How do we think about our cash? We start with when we look at these three numbers, $5.1 million, that's for sure. Solution treater, probably, very likely. Contribution OEM partnership, probably, very likely. And there are other things that we're probably going to be spending money on, other projects and opportunities. But these are highly likely. So we take that 17.6, we take our numbers, 7 million, and we say, yeah, we probably are looking at 52.4 million that we really have. And that's why I was saying we really don't want to buy more stock because we want to, you know, keep that money for opportunities. But if the stock goes down to stupid levels, we'll feel, we may feel, I should say, may feel compelled to go in and buy some more stock. 36, we can go through this really quickly. These are the same slides that we've shared with you for the last few quarters. Why are we doing it? Because if we don't, somebody's going to say, what happened here? Are you no longer on board with this juggernaut of financial outlook? And we are. So 36, you're familiar with slide 36. 37, the only change on slide 37 is this, as I said, the ARJ21, the Comac Result Jet, now called the C909. And then on slide 38, I just want to highlight on slide 38 and 39, you know, some questions about the $15 million number estimated non-G programs incremental sales. We think that number is conservative, especially considering you know, the opportunities that we're seeing on these missile and defense programs right now. And the only thing that we're highlighting on slide, sorry, the footnotes on slide 39 is just that, that $15 million number is conservative. So, again, I apologize for taking so long to go through the presentation. The operator would be happy to take questions at this time if there are any.

Thank you. We'll now conduct a question and answer session. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your questions. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question comes from the line of Nick Rapostella with NR Management. Please proceed with your question.

Good afternoon, Brian. And I just want to say thanks again for the transparency on the issues in the quarter. It's appreciated. And as always, I'm very happy with the way you treat share repurchase. And the language about buying it when it gets stupid is... Right on the mark. I think the shareholder base is sufficiently patient now and understand what the upside is. We may not get to those prices any time soon. Just a quick question. I may have asked you this before. There were slides in past conference calls where there was park content on SpaceX product and obviously there's Blue Origin. Is that something that Park can still have content in. I'm just interested in that. The second question is, and I may have asked this before as well, do you think in any way Comac product and what you supply could be affected by hostilities between China, etc.? Or are they pretty much, they need your stuff And so that's it. Thank you so much.

Thank you, Nick. Happy New Year, by the way. Yeah, in the slide, it talks about the we love niche military programs. I think we do refer to SpaceX program. To me, I really love that company. The other one was at Blue Origin. Was that the other one you were asking about? Sorry. Yes. Mark, do you want to chime in on Blue Origin? I think we have some involved, but maybe not that much.

Yeah, we've done some work with them, Brian. We do a little bit of structure for them in our parts operation. It's really niche. It's a lot of volume. We've built some minor structure for them. We did a project many years ago. We were looking at technology with composites, but they went ahead and went with a metal strut instead.

Metal, yeah.

Yeah, we did do design and build a couple struts, but we were not down selected on the program. So we have connections there, and we continue to talk with them and still looking for other opportunities.

Okay, thanks. You know, to me, I love SpaceX. I just love that company. You know, they're very different than typical aerospace company. I would put Kratos in that category as well in a positive way, a different and positive way. So the more we can do with those those people in particular the you know happier. I think at least I will be Comac It's an obvious question and a good one. We'll have to see what happens. I Would be quite shocked they didn't happen quickly because the the 919 is a real prestige program for the Chinese and I'm not an expert in the culture, but I that's really important to them, you know, prestige, you know, make sure that they're respected and lose face. Um, and for them to change gears with materials for the nine one nine program, would be so risky and could put the program back years, you know. So we'll have to see what happens. I don't know. But I'd be skeptical about anything that happens soon. The Chinese, as you know, they talk about developing their own engine. And I'm not so sure that's really an issue with the, you know, trade tensions. That might be more of an issue with CFM. In my opinion, CFM better make sure they get enough engines to the, because if they don't, they're just going to give the Chinese more motivation to develop an engine more quickly. So that's just my opinion. I could be wrong, but, you know, that's my perspective. You know, we're always nervous and concerned, but I wouldn't say that would be, at least for me, my top ten concerns that, you know, we lose the Comac business because of trade tensions between the U.S. and China. We'll have to see how that works, you know. A lot of it could go different ways than people are thinking also. We'll have to see how that works. But I don't know what else to say about it except, I guess, maybe for perspective, not one of my top ten concerns right now anyway. Any other questions, Nick, or does that help you out a little bit?

No. Okay. Thank you so much.

Okay. Thank you, Nick.

All right, I'm seeing no other questions. I'd like to turn the floor back over to Brian for any closing remarks.

Thank you very much, Operator, and thank you all for listening and having the patience to hang in there for all hour. And I'd like to take this opportunity from everybody at PARC, all the PARC people, to wish you the very best in 2025, a very happy new year to you and your families. Thank you and goodbye.

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