Park Aerospace Corp.

Good afternoon. My name is Paul, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Park Aerospace Corp. First Quarter Fiscal Year 2026 Earnings Release Conference Call and Investor Presentation. All lines will be 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. Thank you. At this time, I will turn the call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference.

Thank you, Operator. This is Brian. Welcome all to the Park Aerospace Corp. Fiscal 26 Q1 Investor Conference Call. I have with me Mark Esquival, President and COO. We announced our first quarter earnings right after the close. If you look at the news release, you'll see there's link information as to how to access the presentation that we're about to go through. The presentation also can be found on our website. You want to take a look at that in order to make this call more meaningful. Just a little quick comment before we get started. It's only been two months since our Q4 presentation. And as a result, some items are just carried over from the Q4 presentation for context and cohesiveness. But we may just skip over some of those items, or at least skim over some of the items that we just covered two months ago, just for purposes of keeping the presentation moving and brevity. If we do skip over something that you want to discuss in more detail, though, please just ask us questions about it at the end. And we'll try to highlight also what's new, even if there's a slide that has a lot of old stuff, maybe we'll just pick out one item that might be new. And you'll, when we get there, you'll probably realize, but there are important new items toward the end of the presentation. When we're done, Mark and I will be happy to answer any questions you might have. So when we proceed, when we go into slide two, that's our forward-looking disclaimer language. We're not going to go through it or read it for you, but if you have any questions about it, please let us know. Slide three, our table of contents. Slide one starts our Q1 investor presentation. And then there also is an appendix one at the back of the presentation, supplementary financial information. We're not going to review that during the call, but if you have any questions about it, please let us know. As has become our kind of pattern of late, we feature something about the James Webb Space Telescope in our table of contents slide. As you probably know, James Webb Space Telescope was produced with 18 of our park proprietary Sigma struts. We're very pleased and delighted about that. What do we have here? We have a bullet cluster with dark matter. The dark matter is in blue. This is enhanced because the dark matter, you can't see it. It's invisible. Just on the right-hand side, let's explain that. Dark matter is an invisible and hypothetical, kind of strange hypothetical form of matter. This is way beyond my, you know, pay scale to understand what that even means, which does not interact with light or other electromagnetic radiation elements. So you can't really see it. That's why there's pictures enhanced with the blue. Dark matter is a mystery of the universe which cannot be explained by Einstein's general relativity or anything else known to mankind. It's just incredible what James Webb has discovered so far. It's just amazing, you know, thinking about all the things that we thought we knew, we thought we understood about the universe. But maybe we don't. You know, some people say the universe is unfathomable and maybe they're right. Anyway, it's such a privilege and honor for us to be associated with the James Webb. Okay, let's change gears and go to more mundane things. Slide four is your quarterly results. You go to the right-hand column, Q1, which we just reported. Sales, $15.4 million in gross profit, $4,718,000 gross margin, 30.6%. We're happy about that. Not where we want to be. We like to be higher, but it's just nice to be over 30%. And we'll explain how we got there. There's maybe three different factors that kind of affected our ability to get our gross margins up above 30%. Just at EBITDA, just a little tiny less than $3 million. And our EBITDA margin, 19.2%. What did we say about Q1? Our Q1 during our Q4 investor call, we had to set our sales estimate. Estimate is 15 to 16 million, so we came in kind of in the middle of that range. Adjusted EBITDA estimate, 2.5 to 3, so we came in, I guess, pretty much at the top of that range. Last quarter, we talked about what these estimates mean, what they don't mean, and I don't want to go into it again unless you want me to. But basically, these are not guidance where we give you a number, where we plan, you know, kind of set ourselves up to beat the numbers. When we give you these estimates, we're saying to you, this is what we think is going to happen. Okay, let's go on to slide five, so don't belabor that too much. And what I'd like to do, if you don't mind, is let's go to slide six. We'll jump around here a little bit. The second bullet item on slide six, there's significant ongoing expenses related to operating a new manufacturing facility. And that's why we're pleased to have our margins over 30%, because this is a drag. This factory is underutilized, and there's significant costs that's going through our P&L that drags down our margins, including our gross margins. So that's one factor. I said there were three. Let's go back to slide five. Arian Group, we discussed this many times, our business partner agreement, under which we are the exclusive distributor for our Raycarb C2B fabric that's used for ablative composite materials for advanced missile systems. So actually the other two factors aren't positive, they're just lack of negatives. A couple of quarters ago we had, actually last quarter we had $4.4 million sales of fabric during that quarter, and that really brings our margin down a lot because we sell the fabric. at a small markup. Ultimately, when we turn the fabric into a composite material, that's where the margins really are powerful. Last quarter in Q1, we had $1.1 million sales of the fabric and $480,000 in materials made with the fabric. And that's kind of more of a normal ratio. So it isn't really a big drag on our, that wasn't really much of a drag on our Q1 earnings and then we'll get back to the recall in a second when we skip over to slide six again production versus sales this is another factor that had negatively affected our margins a couple quarters ago where our production was much lower than our sales we call it svp but in q1 they were relatively nicely matched which is what we want you know we want our production and sales to be relatively nicely matched. So it's not really a factor. So it's not that these two things were positive. It's just a lack of negatives in terms of the impact on Q1. And that's how we're able to, I guess, get our margins above the 30% number. But let's go back to slide five. Sorry about that. I'm probably making a little dizzy here. Requal of Mark maybe could help us with that. One of Park's key customers is C2B Fabric. We've talked about this quite a bit in the last couple of quarters. What's your status at Recall, Mort?

The Recall, I think last time I said it would be soon, on the last call two months ago, but it's still not done. But last week I did reach out to my contacts at the customer, and they said it's imminent, which is better than it'll be a few weeks out. I think, you know, if I look at it, there's no guarantees, but I would say the approval will happen in the next couple weeks. And really the reality is it must happen. You know, we're a single source position on the program. I think as Brian will talk later in the presentation, this program is going to grow significantly. All indications are it's going to grow significantly just based on all the information from the customer and the information held in the public. So, like I said, Brian will cover that in the later slides.