Park Aerospace exceeds Q2 sales expectations with $16.4 million, guided by increased defense demand and C2B fabric sales despite margin pressures.

OPERATOR - (00:02:21)

Good afternoon, my name is Vaughn and I will be your conference operator for today. At this time I would like to welcome everyone to the Park Aerospace Corp. Second quarter fiscal year 2026 earnings release, conference call and investor presentation. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press Star then number one on your telephone keypad. If you would like to withdraw your question, press star then number two. Thank you. @ this time I will turn today's call over to Mr. Brian Schorr, Chairman and Chief Executive Officer. Mr. Schorr, you may begin your conference.

Brian Schorr - Chairman and Chief Executive Officer - (00:03:11)

Thank you very much. Operator. This is Brian. Welcome everybody to the Park Aerospace Fiscal 26 Second Quarter Investor Conference call. I have with me as usual Mark Esquivel, our president and COO. We announced our earnings right after the close. In the earnings release there are instructions as to how you can access the presentation. We're about to go through there via link and you also can link information in the news release and also our website. You want to pick that up because we're going to go through it. It'll be a lot more meaningful. Listen to if you have the. Listen to us if you have the presentation in front of you. So we have quite a few new investors. Last quarter they've come on board and out of consideration for them, I think we should go through some of the legacy items more carefully. I think in the past legacy items we just kind of skim over on the assumption that most people have already familiar with them. Veteran investors, just please be patient with. Another item I want to cover with you is that on Tuesday I had some unplanned oral surgery and I'm not really feeling that great. So hope you can bear with me. And if I need Mark to take over, I'm sure he'll be very willing and able to do that. Questions at the end, after we're done with the presentation, we'll take questions and please do ask them. We love questions. Actually sometimes linked to questions are more meaningful than a presentation. We go through a presentation, we don't know whether you're liking it, not liking it, interested, disinterested, foot half asleep. But the questions are always more helpful because then we know what people are really interested in, what they're thinking about. So why don't we go ahead and get started with the presentation. Slide 2 is our forward looking disclaimer language. We're not going to go through that, but if you have Any questions about it, please let us know. Slide three, table of contents. Starting on slide one is our Q2 investor presentation, which we're about to go through now. And appendix one, we have supplementary financial information or we're not going to go through that. If you have any during the call, but if you have any questions about it, please let us know. It's become our practice now, or pattern, I guess, to feature the James Webb Space Telescope in our table of contents. So what we're talking about here, James Webb Space Telescope has discovered cosmic dust which shouldn't exist outside its galaxy, but shouldn't exist in quotes because I think we're developing a common theme here. There's so much that we believed about the universe and its origin which just isn't true. Sorry, folks, not true. James Webb saying, well, you could believe whatever you want, but this is what's really going on. So here's another one of those. Thank you, James Webb Space Telescope. The James Webb Space Telescope was produced with 18 PARC proprietary Sigma struts. Let's go on to slide 4. Kind of more nitty gritty stuff here. So quarterly results. Let's look at the right hand column of second quarter that we just announced. Sales 16 million 381. Gross profit 5 million 116. Gross margin 31.2. So we're happy about gross margins over 30. Or maybe we should say we're unhappy when they're not over 30 and it's good that they're over 30 because there are a couple things we'll talk about in a second that drag down our margins. Adjusted EBITDA 3,401,000 and adjusted EBITDA margin, 20.8%. What do we say about Q Q2? During our Q1 call on July 15, we said our sales estimate was 15 to 16 million. So we came a little bit above that EBITDA estimate, 3 million 3.4. So we came in kind of the top of the range of the EBITDA estimate. I just want to remind you, especially for some of our new investors, that this is not guidance. We don't do guidance when we give an estimate. We're saying to you, this is what we think is going to happen. Now, we could be wrong, but this is what we think. There's a. I don't know, let's call it practice. We have different terms for it, but let's call it practice where everybody does it almost. Where let's say it's going to be a hundred, they think it's going to be 100, they go out with 90, you know, that's their guidance. So then when they come out, when they come back with 100 to come out 100, then they're heroes. And I don't know, we think that's not worthy of our time. So when we give you an estimate, we're saying this is what we think is going to happen. We're not giving you a number which we plan to beat. Okay, let's go on to slide 5. Q2 considerations. We always talk. Well, always the last few quarters. But Arian Group, it has impact on a lot of things, including the quarter. So we entered into this business partner agreement with Arian Group. It's a very large aerospace company in France. Great company. And they're a JV between Airbus and Safran, I believe. And in January 22nd, we've actually been working with for 20 years, they appointed us exclusive distributor of their raicarb C2B fabric. That fabric is used to produce ablative composite materials for exams, missile systems programs. Now, we sold 1.65. Sorry. Million dollars of that fabric in Q2. As we previously explained, we sell that fabric to our defense industry customers for a small markup. What's going on here is the defense industry customers are stockpiling the C2B. We're the exclusive distributor, though. So they buy it, we buy it from. We're a distributor, not a rep. We buy it from Arion and then we resell it or sell it, I should say, to the oem. But it's kind of a strange thing because we keep the C2B fabric in our plant because the OEM eventually asks us to produce prepreg with it. So even though we sell to them and they own the product, it's kept on our plant. The markup is small. So we have a significant amount of C2B fabric sales that's going to push down our margins. And we sold 415,000 of ablative materials manufactured with C2B fabric in Q2. Now, the margins on the blade of materials that we produce those fabric. Very, very good. Very good. So that's the offset. Offset. But it's still the ratio of sales of fabric to ablative materials manufactured with the C2B fabric are still imbalanced. Right? So more fabric than materials. Pre-fabric, let's call it. What's the reason? I already said because the OEMs are stockpiling this product. A more normal kind of ratio would be 40, 60. So 40% would be the materials and 60% would be the fabric. That's no, that's not always going to be exactly it, but just to give you a sense, so you see that the ratio is much more than 40, 60 here and that's going to. That's going to drive down our margins. So let's talk about it. Let's go on to slide 6 rather. Oh, we're still on the topic of C2B fabric requalification by one of Park's key customers at C2B fabric. This was kind of just been a big deal for the last few quarters. And Mark, we always give Mark the hard stuff to talk about. Can you help us? What's going on with that requalification?

Mark Esquivel - President and Chief Operating Officer - (00:10:14)

Yeah, so we actually do have an update this time. I think the last couple calls we said we're waiting for approval. So now we do have approval. We don't have full approval. We have approval at about 90% of the specification. Not to get too technical, there's, you know, there's a requirement within the spec that has a lower and an upper range. They were somewhere in the middle. They moved down closer to the commercial specification, as we call it, which gets us back into production at, you know, 90 plus percent of everything we have. So what we're doing now is they're currently testing that last 10%, which will probably take another nine to 12 months. So, you know, we'll continue to talk about, you know, when we get that approval. But as far as the program's concerned, we're back in business. We're back running, you know, and we're back to, I would say, you know, normal, normal, typical rates that we were running, you know, prior to, you know, this, I won't say issue coming up, but this recall coming up. So, and we actually expect to see, you know, some upside, you know, in the coming quarters, you know, and Brian will talk about some of that news as well. But I guess the story here, the message here is we're pretty much back in business with running at our normal levels.

Brian Schorr - Chairman and Chief Executive Officer - (00:11:25)

Okay, thanks, Mark. Good news. Let's keep moving here. Production versus sales. You bring this up because this has been an issue in prior quarters in terms of impact on the bottom line. But in our Q2, our sales value, production, we call it SEP, that's not inventory value, that's a value of production at sales price. It was well matched with our sales and that's a good thing. That means that's really no meaningful, no impact on bottom line. When our sales exceed our production, that is by a significant amount, that is a negative impact on the bottom line. But no impact in Q2. And then last thing we'll talk about in terms of bottom line impact. Significant ongoing expenses. This is something we had in our presentation for several quarters now. It's not going away anytime soon. Operating our new manufacturing facility in Q2, includes all these other expenses. And this is significant. So that's why I the gross margin being over 31%. I think that's actually not bad because there's two factors that hold it down. One is the expenses related to new plant. The other is the, let's call excess C2B fabric compared to the C2B material sales total miss shipments. A little bit of surprise here. 510,000. That number's way up. But you know, last few quarters we keep talking about international shipment issues. That's not the issue this time. This time it's something different. It's customer certification, testing delays. It's a little bit of a new story here. It happens. Sometimes it just happens. It's nothing we can do about it. It's not our fault or anything like that. But sometimes it just delays. Insurance and certification and engineering work and testing delays. So that had a meaningful impact upon our shipments in Q2. So let's go on to slide 7. Impact of tariffs and tariffs related costs. You know what I should say net impact. I was saying that to Mark earlier. It should say net impact of tariff and tariff related costs because we have tariffs at just that. The net impact takes into account the pass through so very minimal in Q2. Hardly anything. But that's the net impact. That's not the total tariff. That's a net impact because of the fact that we pass the tariff costs on and then the future impacts. I think we'll get back to that later and Mark will help talk through that later on the presentation. Why don't we go on to slide 8. So this is a slide we do every quarter. As you know, some of you veterans are probably tired of it. Top five. And it's kind of usual suspects also it's like all right, GCAN Kratos, MRAS Tech Tech and Nordam Tech Tech is not. Well, you know, has. Is kind of a little bit new name for us. But the rest are usual suspects. The Global 7500 that refers to Nordam. The H321XLR, that's an, that's an Mrs. Program. Kratos obviously is Kratos. And the 787 Dreamliner, that's actually GKN, that's for the gen X1V engine. So it's a G engine, but it's not part of the MREs LTA, which we'll go into that later. Let's go on slide nine. So here we have our estimated revenues by aerospace market segments. We call them our pie charts. I don't know about you, but I like to use. I think they tell a bit of a story. Fiscal 21, that was the pandemic year where the commercial aircraft was. Remember airplanes, pictures of like 737s with, like two people on them, and they were, you know, basically everything parked, not flown at all. And then after that, the pie charts seem to be fairly stable. What will be interesting is to see what will happen in the future because the commercial is going to be accelerating because the programs are on as those programs ramp up. But military will be accelerating a lot. Business probably could go down as a percentage. We'll see about that. Let's go on to slide 10. Park loves niche military aerospace program. So we have a little pie chart here. Radomes, missile systems, unmanned aircraft. All niche markets for us. Some markets, but even aircraft structures are niche markets for us. So we actually changed. We used to call it rocket nozzles. I think we changed the missile systems because the missile systems we supply into more than just the rocket nozzles. Other aspects of missiles that we supply into. I think we used to call unmanned aircraft drones, but I think the more politically correct term is unmanned unmanned aircraft. But there's no change in there. You know what? And other than nice pictures and you can see what the programs are, we really are not going to talk about these programs anymore. It's just not really appropriate for us to say very much about the programs. Except understand, please, any picture we show you, that means it's a program we're on, not a program we like or a cool picture or something. Okay, you got it. Let's go on to slide 11. GE Aerospace jet engine programs. Again, the slide every quarter. But for the benefit of some of our new investors, let me try to explain quickly. So we have a firm LTA requirements contract from 19 to 29 with MRAS, Middle River Aerostructure Systems, a sub of ST Engineering Aerospace. You see, we're sole source for composite materials for all these programs, but they're all GE programs. So what's going on here? If you look at all the check diamonds below, they're all GE engine programs. And what's going on here is that even we got on these programs with GE Aviation even before 2019, when MREs was owned by GE Aviation. Now GE Aerospace, we got on these programs even before that. There were predecessor LTA's before this 19 to 29 LTA. And then I think about five years ago GE sold Mrest St Engineering, which is a large Singapore aerospace company. So that's the explanation there I've done in factory. You know about that. You know when I guess around 2019 GE said to us, look, you know park, we're going to put, we're going to give you this 10 year agreement for Solar Source and all this stuff, all these great programs, wonderful programs but you know, we really are concerned about redundancy so would you please build another factory? And we said yes, we checked that box. That's been done. I'm not going to go through the individual program maybe except again, you know, to talk about the first five are really all eight through 20 Neo family aircraft programs. All right, do you have any questions about the specific programs? You let us know. So let's go on to slide 12 just to get moving along here. Item, the first Item on slide 12, we're just continuing here. This is, I don't know, a little bit of a nuance here because this program was mentioned in the prior slide, but this is a different component and this also is part of our GE Aerospace lta, not necessarily the, not the Mrs. Lta. So I'm probably getting only technical, not necessary fan case this time. We should talk about for a second. This is for the G9X engine for the 777X airplane. This is produced with our AFP material and other composite materials. Automated Fiber placement. That's what AFP stands for. It's a robotic way method for producing composite structures. And this is planned to be included in the LIFER program. Mrs. LIFER PROGRAM Agreement. Next item. We had a 6.5% weighted average price increase in our Mrs. LTA effective January 1st. That was, it was already built in the LTA, you know, a long time ago. And next item, the LTA was PARC Mrs. LTA was amended to include three proprietary film adhesive formulation products and those are now undergoing qualification. Then life or program agreement requested by Mrs. And ste. So we're still negotiating this I guess and I think there's a meeting that's being planned for next month. We'll see what happens. As I said to you many times, we're okay either way. This is requested by STE and mres. It's something they want. They want the stability of long term supply. But we're okay either way. If we do it, that's fine, if not, we'll be fine as well. And it's still under negotiation. I don't want to give you the wrong impression. It's not like we've been actively negotiating. It's like we talk about it and three months go by and so I think now we're planning to have some get together in December, sorry, November, to hopefully get through this. We'll see. We'll keep you posted. Item page 13 rather slide 13. So let's talk about an update on some of these GEA aerospace programs. HB20neo family, that's a wonderful, wonderful program that park is on. Solstor qualified. And let's talk about the program. Airbus has a huge backlog of these airplanes, over 7,000 of them. That's a lot of airplanes. A lot of airplanes. And let's just talk about the. Well, we can take a look at the aircraft, the A320neo family aircraft deliveries we're not going to go through each year. But you can see what's going on here. With the amount of orders that Airbus has, we'll get to in a second, they would be a much higher rate than this. They'd be at 75 per month. What's holding them back is issues with supply chain. So this year, year to date, an average of 44. But don't get fooled by that because they usually kind of make their year in the last three months. And if you look at September, you can see what's going on here. They're already, the Airbus is already ramping up to 59 were delivered in 50, 90 through 20 Neo family aircraft delivered in September. Let's keep going. Slide 14. Just continuing here. Importantly, the engine supply bottleneck. Remember I said that when the big issue is supply chain restrictions, that's what's preventing Airbus from ramping up to their target of 75. We'll get to a minute 75 per month. CFM, they have another engine. Let's just talk about CFM. The Leap 1A engine reportedly improving that. It's getting better. And I think that's a deliberate focus by GE and scfm, which is a very good thing because that's probably the most significant restriction to Airbus's ability to ramp up to that 75. They'd be up there now based upon how many orders they have. So that's, that's very good news. Actually, as we already alluded to, Airbus is targeting a delivery rate of 75 a 320neo family per month. And you could see that, you know, they're still at, you know, 50 to 55. So they still have a way to go. Quite a way to go. Two engines approved for the A320neo aircraft. We're on the CFM Leap One A engine. We're not on that. We have nothing to no content on the Pratt Whitney GTF engine. And so I guess that covers the second bullet item we supply into the A320 family aircraft using the Leap One A engine. According to the second quarter 2025 edition of Aero Engine News, which is kind of like a bible for us Anyway, the CFM Leap 1A's market share with, you know, compared to the Pratt market share firm engine orders of a 320 Neo family was 64.7. And those are firm orders. That's not, you know, speculation or hopes and dreams. Those are firm orders. So you can see that, you know, that the CFM has the larger market share of the engines for the A320neo aircraft. At the delivery rate of 75 A320neo family aircraft per month, that 64.7% market share translates into 1,165 Leap engines per year. That's a real lot of engines and, you know, lots of I live or park at that point. Slide 15. As of June 30th, 25th, a few months ago, there were a little over 8,000 firm Leap One A engine orders. These are not airplanes. These are Leap One A engine orders where we're sole source qualified over 8,000. If you want to look at Slide 29, you get a feel for what our revenue per unit is, do them, you know, get your pocket calculator out and do the math. You can see what that's worth to us. Those are just the firm orders that are in the books now. So this is a big deal for Parc, the Airbus A321XLR, and this is a variant. We're still talking a 320 family. Okay. We're not off to a different aircraft. This is part of the A320 family. This is recently introduced, supposedly changing the air map of the world. Why is that? Because the payload and range capability of this aircraft are very unusual for a single aisle. So it allows a single aisle to compete against wide bodies, but obviously at much lower cost. So that's why it's changing your map of the world. Qantas, you know, very involved in the program. Airlines, Iberia Airlines. The reason I highlight this, because a lot of airlines are buying this airplane. Why am I highlighting this? They call it a game changer. But what's really, I think, very impressive to me is that they say, they claim they've had almost no AOGs. That's aircraft on grounds. After almost a year, that's really a big deal because normally for the first year or two there's all kind of bugs you have to get out of a new airplane, a new design and the airplane sits in the ground a lot and it's kind of, you just expect it and it's not good because you know when the airplane sitting on the ground, the airlines aren't making any money and you kind of expect that if you get, you know, an airplane that's been recently certified and delivered. But here you go, they're saying almost no AOGs. I've never heard of anything like that. That's quite impressive. Boeing has no response to this aircraft. Let's go on to slide 16. So still on A320 here folks. Airbus plans to open a new A320 aircraft family final assembly lines fals in the US and China this month, in the next couple weeks. So these two new fals in combination with existing fals in Germany and France will provide Airbus with a manufacturing capability to achieve a 75 agency 20 NEO aircraft per month delivery goal in 2017. So you know, this is nice because Airbuses, they're putting your money more of their mouth this year. These fals are, they're a big deal. So that's good news. And then breaking news. October 7th, this is the day of my oral surgery, I think. Yeah. So two big things happened on October 7th. That's just two days ago. The A320 aircraft family became the world's most delivered commercial jet ever. Of course that means that it beat out the 737. Not, not just a Max, this is the 737 family versus the A320 family going back to the beginning. So that's pretty big news I guess. A COMAC919, that's a Chinese made aircraft again with a leap engine. This is different variation of it. This leap one C engine comac is targeting. Oh, this airplane is designed to compete single is designed to compete against 737 A320. They're targeting 39. 19 aircraft delivers in 25. But recent and confirmed reports saying they're probably forced short of this target. I can't tell you, I'm very surprised. I probably would have, you know, to be just totally candid about it. I would be more surprised if they met the target. I'm not going to go into why, but I'm not surprised or really disappointed. Malaysian Airlines AirAsia has confirmed its advanced talks to purchase these airplanes. Why is that important? Why am I focusing on that? Because there are a lot of airlines that are minus the this airplane. But the reason I'm focusing on is this is a non Chinese airline. This airplane is certified by the Chinese FAA I think called CAAC or something like that. So the thought was originally these COMAC airplanes would be China only airplanes. Well that's not what Colmac wants. They're selling the airplane outside of China for operations outside of China which will require certification by the FAA and you know, the European Aviation Authority. So that's why I highlighted this AirAsia thing. Let's go on to slide 17. They plan to achieve a production rate of 200 airplanes by 2029 and COMAC claims to have over 1000 orders for this airplane. This airplane does not have two engine options. It's all leap in terms of the engine that's certified for the airplane. COMAC C909 again COMAC, the Chinese company, this is a regional jet. This airplane was introduced a while ago. It's already pretty close to that rate, you know but what's interesting here, they delivered it, same kind of topic really. Lao Airlines, Vietjet Air Cambodia signed up. Again what's the theme here? Non Chinese airlines. So originally they're thinking the COMAC airplanes are going to be China only but that's obviously not what COMAC wants. 777x Boeing 777x we have slowed down a little bit talk but this one, this is an important program for PARC test program has amassed over 1500 out flights and nearly 4100 flight hours. That's a lot. That's good. This picture was taken by a friend of mine a couple of years ago when the 777X was doing cold weather testing in Fairbanks. Good place to go for cold weather testing. So let's talk. Let's go on slide 18. Sorry. Boeing reportedly has 565 open orders for the airplane. Boeing had previously announced that the airplane program was on track for certification late 25 and entry into service in 26. But the Boeing CEO recently stated the certification program is falling behind schedule. The co further stated the aircraft and the engine, the Gen X engines, the United X engines are really performing quite well and that the potential delay in certification was being caused by increasingly deliberate FAA scrutiny. You get the sense there's some tension there between Boeing and the faa? I do. Anyway, a key gating item for is the receipt of the what's called the Type Inspection Authorization from the faa because as the CEO explains, you know, they can fly. These airplanes need to have five airplanes that are used for the certification program. But those flights don't really count towards certification until they get to tia. There's a lot of boxes that we checked for an airplane to be certified so they can go fly the airplane, which is good. They can learn a lot more about the airplane, but they can't check those boxes until they get that TIA from the faa. Boeing hasn't announced any new targets for the certification and eis, but speculation is that they'd be pushed into next year or 26. Let's go on to slide 19. So let's talk about big picture. GE Aerospace jet engine program sales history and forecast estimates. The top is the sales history. Won't go through all the history except this site in Q2 7.5 million and I think we had forecasted in our Q1 presentation 6.7 to 7.2 a little higher. I wouldn't read anything into it. You know the numbers move around a little bit, but a little higher than we forecast. GE Aerospace program sales forecast, sales forecast estimates. Again not going guidance estimates Q3. We're estimating 7.5 to 8 million and total for the year. Got to slow down here a little bit. 27.5 to 29 million. Now in a prior presentation we indicated that we're looking at 28 to 32 million for the year for fiscal 26. But as we explained to you, that was based upon information called a bill plan from our customer. Wasn't our forecast was their forecast. Now we have now the current forecast 27 and a half to 29. That's now parts forecast based upon what? Based upon the backlog for Q3 and Q4. Q3 is already booked. Q4 is partially booked and what we expect, you know, based on lots of experience to the additional bookings for Q4. So now this is our number 27.5 to 29 million. Let's go on to slide 20. Parks Financial Performance history and forecast estimates estimate singular. So we just have the history up top. You already saw this. Just for perspective and context, down below are Q3 26 Q3 financial forecast estimates now plural. Oh sales of 16.5 to 17.5 million. Adjusted EBITDA 3.7 to 4.1 million. That's our estimate for Q3. If you have any questions about that, just let us know. So let's go on to slide 21. This is just history and we've showed you the slides for the last several Quarters, we think it's interesting. Just you can see what's going on here. Historically, you go from 17 to 20. Like every year we increased by about 10 million. Then we got stalled out. So we're kind of at fiscal 25. We're pretty much where we were in fiscal 20. And obviously that's because of the pandemic. You know, the pandemic really had a very big impact on commercial aerospace. It wasn't the pandemic so much, it's how we responded to it, how the industry responded to it, especially with respect to supply chain issues that sell back commercial aerospace. So just one other thing. We're not giving you a forecast for fiscal 26 this time, but we believe that the number will be over 70 million for fiscal 26. We'll just give you that number. Not giving EBITDA, not giving details. I think what's going on here, though, is the industry is getting religious. And it's not just an opinion. This is based upon lots of input we received different kind of attitude on the part of the OEMs in terms of ramping up to meet demand and also working with suppliers and supply chain in a much more productive and, you know, in a more, I don't know, more collaborative way. Sorry, coming up. Trying to come up with that word, collaborative way. So it's not just a little thing. It's a big thing. And it's very palpable in the industry. We'll see what happens. But to us, it seems like there's something really going on here. And we're not alone in that opinion. We're not alone in that opinion. So let's see what happens. But, you know, just so you know, we're probably looking at about a little over 70 million for fiscal 25. Let's go on to slide 22. Okay. General park updates agreements with Arion. Okay, we got to slow down with Arian again. We entertained that business partner agreement in January 22, under which Arian appointed us as exclusive North American distributor. We already covered that. Okay. But then on 3-27-25, just early this year, PARC and Arion entered. They're a great partner. They're a wonderful partner. We love them. Entered into a new agreement under which PARC will advance approximately €4,587,000 (about 5 million USD) against future purchases by park of C2B Fabric. These funds will be used by Arian to help finance the purchase of additional installation of new manufacturing equipment for Arian's production of the C2B fabric. In France and that should be paid to Arian in three installments, the first of which is already paid about 1,376,000 Euro. That's about $1.5 million. So that would affect our cash only report in Q1. Let's talk. Let's move to Slide 23 rather. So the purpose of this new agreement Is provide additional C2B fabric manufacturing capacity to support the rapidly increasing demand for C2B fabric in Europe and North America. Just so you know, one of the big programs that uses C2B fabric is the Patriot missile program. Ariane Group recently asked a partner to partner again with him on a study related to the potential significant increase of C2B fabric manufacturing capacity, presumably in the US. The study expected to cost about €700,000. We split it 5050 so that's probably about $410,000 for PARC and we'll record that. But our Q3 is a special item. Just want you to be aware of that. We'll get back to this later on the presentation study. Just continuing with general updates. Our lighting strike protection material certified on the Passport 20 engine used on a Bombardier Global 75008000 business jet. That's revenues about approximately 500,000 per year expected on our LSP material. We're very happy about this. Our LSP is already qualified approved in use on the A320 and the 919 but we have not just we're getting it approved now on the S420 engine and also still to get approved on what's called the 10A engine for the 909. So and we expect that these revenues will start to kick in fairly soon, let's say in the next couple of months. Slide 24 still an update. This is just something we covered already. We entered into an LTA which is aerospace and for calendar 25 to 30 parked and then another update parks discussion with two Asian industrial conglomerates relating to Asian manufacturing to infectious continue. We've been talking about this for a while. John Jamison's in Asia now working on this project along with one of other guys. So we'll see what happens. Seems interesting, but we'll see what happens. Okay, mark your turn. Tariff, international trade issues. What's the expected impact of tariffs going forward, you think?

Mark Esquivel - President and Chief Operating Officer - (00:37:19)

I don't think much impact. I know this quarter alone we had about $1,700 which you know, we don't like to take on any additional cost but that was mostly, you know, non material items. So going forward again as I mentioned before we got ahead of this pretty early, you know, we're put controls in place to manage it. We're passing the cost along to our customers, whether it's through, you know, contracts or, you know, stuff like our POS or stuff like that, or order confirmation. So I don't expect, you know, to see much. I mean, it's obviously a dynamic situation. You know, I don't think all the tariffs are completely locked in. It's been a little quiet in the news lately. But where we're at today and what we've seen so far, it's very minimal impact to our business.

Brian Schorr - Chairman and Chief Executive Officer - (00:38:06)

Okay, thanks, Mark. So let's keep going here. Current MRAs, supplier scorecard, our scores. What happened? We don't have all hundreds here. One out of all our hundreds. Does MRAS still love us? Yeah, I think they do. I think I mentioned to you in prior quarters that we're told that most suppliers would be happy to get 80s and Mrs. Finds it a little bit humorous that we ask, well, what happened and what are we doing? What do we need to do to fix this? This was, let's call it, technical issue in terms of how we record something. So we take it seriously. We're a hundred company. We're not a 99.87 country. So company rather. So we take it seriously. And like I said, Mrs. I think finds it a little amusing that we spent so much time talking about why we're not on it, why we didn't get 100 on one of these three scores. Let's go on to slide 25. So making customers love us, this is still in our general updates, is central to what we call Parks strategy. How do we make our customers love us? With our calling cards of flexibility, urgency and responsiveness. By asking, how high? Before customers say jump. And we're not kidding about this. We'll go to customers say, what else can we do? What else can we do? What else can we do? Before they even ask us for anything? Making customers love us is a boiler room thing, not a boardroom thing. And the board's on board with a strategy. You know, we've certainly reviewed it with the board, but the strategy happens on the factory floor, not in the boardroom. That's where the rubber hits the road. It's up to all our people to make a strategy work. It's a boiler room thing. So first, for this strategy to work, all of our people need to be bought into it and feel passionate about it. Making customers love us is the secret to our success. You know, it's A hidden plain sight secret. You know, sometimes the most brilliant ideas are the most obvious ones with a benefit of hindsight and everybody well why did I think of that? I don't know. Why didn't you think of it? So the secret is kind of hidden plain sight, but it's secret to our success. Slide 26 Buyback authorization We don't have spend a lot of time on this. Let's just go down to the last two check items. We did not purchase any shares in fiscal in our second quarter and we've not purchased any shares so far in our third quarter date. I don't think we'll be. My feeling, my opinion is you probably won't be purchasing too many shares in the near future, but we'll see about that. Slide 27 Again, this is just going to review Parks balance sheet cash and incredible cash dividend history Long term debt. We don't have any. We had reported 61.6 million of cash and marketable securities at the end of Q2. But we also made that final transition tax installment payment of 4.9 million in Q2 in Q1 recorded cash and into Q1 of $65.6 million. So you take that $4.9 million, subtract it from 65.6, it gets you to that $61.6 million number more or less. It explains the difference. 40 consecutive years of interrupted uninterrupted regular cash dividends and we've now paid over $606 million or thrown in $9.60 per share in cash dividends for since the beginning of fiscal 2005. This park founders. The reason we placed a picture of our park founders here is because we started out with basically nothing or two guys that started the company I think in 1954 with about 40,000 bucks that they had saved from war duty. And here we are paying over $600 million of cash dividends in the last 20 years or so. Let's go on to slide 28. Okay, we can kind of skim through this because these three slides are exactly how the same slide that we showed you last quarter. I think the quarter before that financial outlooks, 4G aerospace gen engine programs. The juggernaut. We call it a juggernaut. It's a timing we're not sure we're going to talk about. Yeah, the 919 is you know, a little slow ramping up and the 777X is having a little more difficulty getting certified. So we don't know. We don't really spend a lot of time worrying about that. But the thing is that we say it's a juggernaut, it's coming, they can't be stopped. And the key thing for us is we better be ready. We go to slide 29. There's no change anything here. All the numbers are exactly the same. Like I said relate to a previous slide. We feel that GE and CFM have kind of gotten a religion that they're really focused on ramping up production and working closely and collaboratively with the supply chain. Slide 30 is just footnotes related to the prior slides. We won't go through those Any questions? Any of this list know? Okay, let's go into slide 31. War and Peace Parks New Juggernaut and Peace for the question War these slides came from or originated in last quarter, although there's some updates to them. The first thing I want to cover again though is we're not providing any inside information on any of these programs. All this information in these slides is based upon publicly reported news and reports. We don't give away inside information. Especially with Senate Defense programs Unprecedented Demand for Missile Systems Missile systems stockpiles have been seriously depleted by the wars in Europe and Mideast. There's an urgent need to replenish the depleted missile system stockpiles. According to Wall Street Journal reporting, the Pentagon is pushing defense OEMs to double or even quadruple missile system production on a breakneck schedule. Quotes Partly in preparation for a potential conflict with China. The list of Pentagon targeted missile systems include the PAC3 missile system, the LRASM and the SM6. The Patriot missile system is a particular priority. I think you should know the PARC is on all those programs. Participates in all those programs, all three of them. Review and update of the PAC3 Patriot missile system the reason we spend more time talking about this is a lot of public visibility and information about it. Some of the other programs we're on could be quite significant, but we're not able even mention what they are. The largest deployment of Pact Free Patriot missile systems in history occurred in response to Iran's ballistic missile strikes on our air base in Qatar. Going on to slide 32. What happened here in anticipation of this? I guess we knew what was going to happen. We moved Patriot missile systems to Qatar from South Korea and Japan, knowing what was coming and we called the shell game. Moving the systems from one place to another. That's not sustainable. The Department of War wants to very significantly increase Patriot missile stockpiles in Asia to protect bases and allies in the Pacific region. So this is not working out very well at all, is it? We take missile systems out of South Korea and Japan because we have this issue with Iran and then we depleted their systems. When the Department of War wants to significantly increase the Patriot missile stockpiles in Asia. See the problem? So just public stuff. Israeli supply of Patriot missile systems seriously depleted. Ukraine supply of Patriot missile systems seriously depleted. Other countries have been waiting for Patriot missile Systems for years. September 3, 2025, Lockheed's Missile and fire control division received its biggest contract in history, a 9.8 billion award from the US army for 1,970 Patriot missiles. According to the Wall Street Journal, the Department of War wants suppliers to ramp up to produce approximately 2,000 Patriot missiles per year, which is almost four times the current production rate. Didn't we say something about quadruple in the prior slide? We did four times the production rate. So we're talking about. Well, we'll get to it. I'm going to wait. We'll get to it in a second. Because I thought you said park is sole source qualified. We'll get to that in a second. Let's go on to slide 33. Patriot Missile Systems are planned to be incorporated into the Golden Dome as apparent from the reporting that the U.S. plans to do much more than just replenish these depleted systems. So, next arrow item. PARC supports the Patriot missile system with specially bladed materials produced with Aryans C2B fabric. And park is sole source qualified for specially bladed materials on this program. So I was going to say at the bottom of slide three too, this 2,000 missiles per year, that represents very significant revenue in the Park. We're sole source qualified. Now that program park, Back to Slide 33. Sorry to bounce around on you here. Park has recently asked to increase our expected output of specialty bladed materials for the program by significant orders of magnitude. We can't really say how much, but significant orders of magnitude. Hopefully that gives you some kind of feel for what's going on here. And we will fully support this request partly with the additional manufacturing capacity provided by our major facilities expansion, which we'll discuss. Remember that park recently entered into this new agreement going back to Ariane with Arian for the purpose of increasing C2B fabric manufacturing capacity. Let's go on to slide 34. But will that additional manufacturing capacity be enough considering what's going on with the Patriot missile? No, I don't think so. As discussed above, PARC is partnering with Arian Group in a study related to potentially significantly increasing C2B fabric manufacturing capacity, presumably in the US. This is a big deal. Let me just say this. Once our partnership, when a study is done, that's not the end of the partnership. I don't think. Anyway, that's not what we're talking about. I'm not going to say anything more about it, but let me just say it's a big deal. We covered the Arrow 3 and 4 missile systems last time. So we just kind of covered. Again, not too much here. Last item, updated parts, involvement. Remember, we were second source qualified in the Arrow three. We weren't really expecting orders. We got them. We already got them. RO4 were sole source qualified on the RO4 which is expected to go into production I think relatively soon. Let's go on to slide 35. This is really probably the most important slide of this whole warrant piece section of the presentation. The above missile programs are just a small representation of the critical missile programs PARC is supporting or planning to support. There are too many programs to iterate here and many, probably most, are too confidential and sensitive to mention for national security or other reasons. But you know, this is highlighted or bold, whatever and italics. But please understand that certain of these programs represent very significant revenue for PARCC over long periods of time. We're disappointed we're not able to discuss these programs with you, but we can't. Let's go on to slide 36. Major expansion. So just going to be a quick update here. I know we're running late with time, but got a lot to cover here and like I said, we got new investors so we couldn't just skim through things too much. A major new expansion. We talked about this in the. Of our manufacturing facility. Talked about this in the last two quarter presentations I believe so. We're planning a major new expansion of our manufacturing facilities. It could be at Newton or elsewhere. The plant expansion will include manufacture following lines of lution, treating hot melt film, hot melt tape, hypersonic materials manufacturing. The current estimated capital budget for new manufacturing plant equipment, 40 to 45 million. That's gone up. I forget what we said last quarter. Maybe 30, 35 to 40. Why did it go up? Well, we need another line. That extra $5 million is for another line because the requirements keep going up and up and up. It's quite incredible actually. So New Manufacturing Slide 37 Just Continuing New manufacturing. Major new manufacturing. Major new expansion of parks manufacturing facilities. Why are we doing this? Our juggernauts require it. We have a juggernaut for GE Aerospace. You have a juggernaut for defense and missile programs. A long term business forecast Requires it. And the second bullet item under that check item is that our long term forecast has increased since we talked to you on July 15th. And also have manufacturing capacity needed for park to be parked our coin cards again. Flexibility, responsiveness, urgency. We don't run a business a mill. Meaning that okay, we campaign and you want something well, we can fit you in maybe a year from December. We don't run our business that way. Urgency, responsiveness, flexibility. So it'd be really stupid for park to abandon those things because those are things that got us where we are today, all those opportunities. So it's important we have the manufacturing capacity in order to be parc. For park to be parc. The secret to our success. That's part of our theory or our thinking with respect to the expansion. And last item in bold. This is not a close call. Not even close to a close call. I mean a need for. What we're talking about is need for a major expansion of our manufacturing facilities. Let's go on to slide 38. We're just continuing on the expansion. We're not sharing a long term business forecast this time. But opportunities for park are significant. Timing is now. We must take advantage of the opportunities now. We must not hesitate or we will squander once in a lifetime opportunities we have sacrificed so much over many years to develop. So this is kind of interesting. There was a board meeting last week and Mark was discussing with the board some of these missile programs and he used the term once in a lifetime opportunities. And the board was really got thought, well, let's come to Mark. This must be really big. You know, Mark is not a guy who's given to hyperbole. You know, he's usually a skeptical guy, which is good. You know, you want your president to be skeptical of things. That was his quote, once a lifetime. And the board thought, wow, this must be a big thing then. Our objective is to have our expansion plan in place by the end of the calendar year and to be moving into implementing the implementation phase by our plan by then. Slide 39. How are we doing at PARCC? Let's change gears for a little bit. I'm sorry it's going to take us so long, but like I said, we're trying to cover a lot of things here. So what are PARCC's objectives? This is important. How do we measure success? I think there's a lot of misunderstood about this. So let's talk about it. We measure success. Our objectives are getting qualified and sole source qualified whenever possible on chosen special aerospace programs. These are programs we want to be on. These are the special programs, the wonderful programs. That's our success. Once we get qualified on our chosen special programs, our objectives have been achieved. We're done. And once we're qualified in those chosen programs, all in italics, all we need to do is support those programs with what? Extreme urgency, flexibility, responsiveness. That's it. Other than that, it's up to the program OEMs to determine decide how quickly their programs will ramp. That is not something over which we have control. It's not even our concern. We're on the program. We achieved our objective. Our objectives have been achieved. Some guy wrote something about, you know, we're shifting blame or mitigation plans, and it's just kind of a total mis understanding of how a park and our objectives and how we operate. Once we got in these programs, sole source qualified, our objectives have been realized. Let's talk about it. How have we done with our objectives? If you ask me, we have been incredibly successful. We have gotten on wonderful aerospace programs. There are special programs you want to be on, most of which we can't mention. You know, you know, some of them already. A320W. Wow. Patriot Wow. A lot of them we can't mention. Slide 40 and we were nobodies when we came into the aerospace industry. We came from nowhere. You know, we welcomed into the industry with open arms with the entrenched competitors. I don't think so. They didn't want us. I mean, they were polite and respectful, but they clearly didn't want. They did not welcome us. We achieved what we achieved against great odds, incredible success by getting on these programs that are the envy of the industry. From nowhere. Nothing went into an industry where there's aerospace, a lot of entrenchment. You know, people get on programs, they get very complacent sometimes. That's not us. We don't do that. Are we lucky? If you ask me, we earned everything we got. Are we an overnight success? I don't think so. There's been a long and difficult road with much sacrifice along the way, but it's a road we chose. Let's go on to slide 41. I think that's our last slide. Only almost there, folks. Very fortunately for all of us, PARC had the courage and conviction this should be in bold. Because it's important to stay the course with our principles and our simple but elegant X strategy in the face of sometimes unrelenting doubts, negativity and skepticism. Very fortunate of all of us, meaning, you know, investors too. Very fortunate that we Stood our ground and our knees didn't buckle. And we did what we thought was right under, you know, quite a bit of pressure. Because if we didn't do that, we wouldn't be where we are now. We wouldn't be looking at these once in a lifetime opportunities. Wouldn't be. And we'd all be. We'd all lose out, you know, all lose out. So how are we doing at parc? We believe PARC has done a remarkable job of positioning our company to capitalize on. Thank you, Mark. Once in a lifetime opportunities we are now facing. These are unprecedented times for parcc. Okay, operator, so we're done with our presentation and we have to take any questions at this time.

OPERATOR - (00:56:04)

Thank you, Mr. Shore. We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line has been placed in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. I see we have a question coming from Nick Ripostella of NR Management. Your line is now live. Please proceed with your question.

Nick Ripostella - (00:56:40)

Hey, good afternoon. Once again, nice presentation. Nice quarter and just a couple of easy questions. Been thinking about PARC and all the exciting things going on. How do you feel about the need for additional sales personnel? Or are you feel that everything you have there is adequate? You've got so much going on. I'm just wondering, are you covered in that area sufficiently? And the second thing is, I know you say you're not prepared at this time to share the long term forecast. So do you think like sometime next calendar year you can kind of give people a longer term view of where this company could be in three to five years? You know, there's so many things that are blossoming. You know, you truly are a growth company, but. And then the third thing is, and I know this is not your primary function, obviously, but you must be on the radars of firms out here to pick up research coverage. You know, there's so much research out there now by niche firms and you have such a great story. I was just wondering if anything's happening in that regard. Thank you so much.

Brian Schorr - Chairman and Chief Executive Officer - (00:58:00)

Thanks, Dick. Thanks for questions. So let's take them in order additional salespeople. You know, I think, Mark, you can chime in. We've learned a lot over the last 20 years and I think our view on salespeople is a little bit skeptical. I think we prefer to have additional technical people, engineering people, in terms of getting more business. You're right, Nick, We certainly have our hands full of what we have already. But we're always interested in new opportunities. New opportunities. They're coming pretty fast and furious. But they're not coming because of salespeople. They're coming because, you know, it's a small industry, particularly defense side, and we have close ties with a lot of the OEMs and the military as well. So the word gets out pretty quickly. The important thing is we have engineering people to support those activities rather than salespeople that go get those. The business. And I'm not sure that really works anyway. I don't think that. I don't know, Mark, you chime in. The typical OEMs really are that interest rate and you know, the guy bringing donuts and a slick salesman. They're more interested in what you can do, how you can help us. And that's going to be more of an engineering discussion or it could be a supply chain discussion. Okay. How can you support us in terms of providing a product to us? But, you know, I don't know. I'm a little skeptical about whether additional salespeople we want to talk about at this point. Why don't we. Mark, why don't you chime in? I'll take the other two questions, but why don't you chime in if you have anything you want to add to that? My answer on that question. Yeah, Brian, I think you're correct.

Mark Esquivel - President and Chief Operating Officer - (00:59:42)

I mean, we work really close with the technical and engineering folks and kind of goes back to our strategy too. They have priorities and they need to get projects done. And, you know, we work directly with them, you know, and help them develop, you know, new programs and products. And that really helps us get business more so than the traditional. Like you said, Brian, going to the supply chain, people bringing donuts, it's a little different, you know, in our industry. It's more technical, more engineering driven. And if you're satisfying, you know, those groups, you know, that's how the business usually comes.

Brian Schorr - Chairman and Chief Executive Officer - (01:00:11)

Comes our way. Yeah. Good. Thank you. I think a lot of times you come, it comes to us rather than we, we go into it, you know, but you know that it's a real kind of small close to an industry and people know where to find us. Long term forecast. I understand, I understand why you're asking that. I think what we'll try to do in Q3 is provide some information. A little bit like a little reluctant because I Think the number is going to be shocking to our investors. Shocking, yeah. Okay, well, let's see, we can, let's see, we can do. To give you more perspective, quantitative perspective when we announce Q3. Okay. Would that be all right? And we'll work on that. I'm not saying we'll give you a hard like three, four year forecast, but there's something that, you know, you could sink your teeth into a little bit more and the research, you know, we're here. I mean, they know where to find us. We'd be happy to be contacted, covered, like you said, Nick, not really our principal focus, but we'd be happy to be covered. And you know, if anybody's interested, happy to talk to them. I think we are seeing a lot more visibility in the last few months or so. So we'll see what happens. I don't believe there's anything imminent where somebody's about to pick us up right now, but we're very open to picking, to being covered. So hopefully those.

Nick Ripostella - (01:01:47)

When the revenue doubles from here, then, then they'll come around. You know, that's, that's the way it happens a lot.

Brian Schorr - Chairman and Chief Executive Officer - (01:01:53)

But maybe. Yeah, maybe you're right. Any other questions you have, Nick, or is that corporate?

Nick Ripostella - (01:01:59)

No, thank you so much. And you know, it's, it's glad to see that all the hard work, you know, the stock has caught lightning in a bottle after the last last quarter. And it's good, it's nice. It's a nice thing to see hard work appreciated and reflected in the value. You know, it must make all the employees and everybody feel good and the investors, obviously. But, so thank you.

Brian Schorr - Chairman and Chief Executive Officer - (01:02:22)

It's a good thing. Thank you very much for input, Nick. Operator, do we have any other questions?

OPERATOR - (01:02:35)

Currently there are no further questions at this time. Oh, I actually see one just popping in by Chris Showers, a private investor. Chris, your line will be unmuted. Please proceed with your question.

Chris Showers - Private Investor - (01:02:50)

Thank you, Brian. Just, I guess, two questions. You mentioned the C2B material being a 60, 40 lower to higher margin mix. When the Patriot missile production ramps up, will that be constant, or can you achieve a higher mix with the Higher revenue converted material?

Brian Schorr - Chairman and Chief Executive Officer - (01:03:13)

So I'll answer that. So what's going on here? Is their stockpiling. Stockpiling. Stockpiling. And that's why there's. The ratio is not really balanced. At the end of the day, though, there will be a certain amount of C2B fabric that's required to make the C2B material. So at the end of the day, it all has to kind of even out, you know, right now the OEMs are stockpiling. Why? Because they're nervous. They want as much as they can get because they see where the, you know, where the future is going and they're not stopping, you know, they're going to keep stockpiling I think. But eventually, you know, their plan is not to just have that stuff sitting in our factory, of course, it's for us to produce the material that's used to make the rocket materials for the, the rock nozzle structures for the Patriot missile system.

Chris Showers - Private Investor - (01:04:05)

Okay.

Brian Schorr - Chairman and Chief Executive Officer - (01:04:05)

And is there timing on that where you think that might pick up this calendar year? Yeah, I think as Mark alluded to, you know, we had this issue with the require and that was slowing down a lot, you know, our ability to produce the materials, the C2B materials. The recall is pretty much complete now. So we think that's going to things up quite a bit even in the next quarter, I mean, even this quarter, I think. So we'll see. You know, in aerospace, and probably most industries, the demand is there, but the supply chain can't turn everything on a dime. We can, but there's a lot of other steps along the way in the supply chain in order to be able to ramp up. Like with a 320, you know, we could support 75 airplanes a month at this point if they needed it. But an Airbus would like to be a 75 airplanes for a month. I'm quite sure of that. What's holding them back as the supply chain. The supply chain is not able to turn on a dime.

Chris Showers - Private Investor - (01:05:10)

Okay, thank you.

Brian Schorr - Chairman and Chief Executive Officer - (01:05:13)

Was there another question, Chris? No.

Chris Showers - Private Investor - (01:05:16)

Oh, good.

Brian Schorr - Chairman and Chief Executive Officer - (01:05:17)

Okay, operator, anything else? Right now.

OPERATOR - (01:05:24)

There are no further questions at this time. I would like to turn the floor back over to Mr. Schorr for any closing comments.

Brian Schorr - Chairman and Chief Executive Officer - (01:05:31)

Okay, well, Brian again here. Thank you very much for listening in. Sorry the call went so long. If you have any other questions, want to call us anytime, we're happy to talk to you. Have a great day. Thank you, goodbye.

OPERATOR - (01:05:47)

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