PARK AEROSPACE CORP Q3 FY2025 earnings call

• Brian Shore began the call, emphasizing the need to access the presentation. - Discussed Q3 results, noting that while sales were above the forecast range, adjusted EBITDA was lower. - Addressed issues such as ramping up new manufacturing lines with associated learning curves, a new workforce with reduced productivity, and the impact of a customer requalifying C2B fabric. - Stated that Park employees won't receive Q3 bonuses but will get goodwill bonuses for the New Year. - Highlighted various aerospace programs including those with GE Aerospace, the Comac 919, Boeing 777X, and military/defense programs. - Provided details on financial performance history and forecasts for GE programs and Park as a whole. - Offered updates on projects like the Solution Treater, partnerships with original equipment manufacturers, and missile defense programs.

In the third quarter, sales amounted to $14,408,000. The gross margin was 26.6%. Adjusted EBITDA stood at $2,414,000. Q3 sales exceeded the forecast range of $13.5 million to $14.5 million by approximately $150,000, but adjusted EBITDA was far below the forecast range of $3 million to $3.3 million. The Q3 sales value of production (SVP) was $13.2 million, which was $1.2 million less than Q3 sales. C2B fabric non-material sales were projected to be around $6.9 million in fiscal '25, with $2.5 million or more expected next year and $3.9 million in Q4. Sales of ablative materials produced using C2B fabric were expected to be $400,000 in Q3 but didn't materialize due to a customer requalifying the fabric.

• For Q4, the forecast for GE program sales is between $5 million and $5.60 million. - The fiscal '25 forecast for GE program sales is $24 to $24.5 million, compared to around $21 million in '24 and $22.3 million in '23. - There's a preliminary forecast for fiscal '26 GE program sales of approximately $30 million, ranging from $28 million to $32 million. - Park's fiscal '25 top-line is expected to be roughly the same as in '20, possibly a bit higher, while the bottom-line is slightly lower. - The Q4 Park sales forecast is $15.5 million to $16.3 million, with EBITDA between $3.3 million and $3.9 million. - The preliminary fiscal '26 Park top-line forecast is approximately $30 million, ranging from $28 million to $32 million.

• Ramping up new lines too early is costing the P&L in the short term. - The new workforce's reduced productivity is temporarily affecting profitability. - A customer requalifying C2B fabric led to Park having no sales of ablative materials produced with it in Q3, resulting in a P&L double whammy. - Uncertainty exists regarding the French government approval for $1.1 million of C2B fabric sales, which could be pushed into Q1.

Q: There were inquiries about the Fan Case Containment Wrap for the 9X engines, Park's strategy, Park's content on SpaceX and Blue Origin, and the impact of U.S.-China hostilities on Comac product.

A: Regarding the Fan Case Containment Wrap, it's believed the program will proceed with the current Fan Case design using the containment wrap. On strategy, it was noted that going into detail about the strategy would take too much time. With respect to SpaceX and Blue Origin, Park has done some work with Blue Origin on strut technology but wasn't selected for the program, and continues to engage with them. Regarding Comac, it's uncertain what will happen, but it's unlikely anything will change quickly as the 919 is a prestigious program for China and changing materials could set the program back years.