PKE Earnings

Operator: Good afternoon. My name is Cleo, and I will be your conference operator today. At this time, I would like to welcome everyone to the Park Aerospace Corp Second Quarter Fiscal Year 27 Earnings Release Conference Call and Investor Presentation. All lines have been placed on mute to prevent any background noise. After the 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 the number 1 on your telephone keypad, If you would like to withdraw your question, press star 2. Thank you. At this time, I will turn the call over to Mister Brian E. Shore, chairman and Chief Executive Officer. Mr. Shore, you may begin your conference. Brian E. Shore: Thank you, operator. This is Brian. Welcome all to Park Aerospace's fiscal 2020 7 second quarter investor call. I have with me as usual Mark Esquivel, our president and COO. We just, I guess, right after the close, published our second quarter earnings release. And in the earnings release, you will find instructions as how to access the presentation. Presentation we are about to go through either through a link, there is also a tool on the website. So. And you want to pull it up in order to make this the presentation discussion more meaningful. it is kind of a common theme for the last couple of quarters. We have a lot of new investors I think last call, had about 170 people who participated in the call. And we have a lot of new investors. We have a lot of the veteran investors. We have to find a balance between the old and the new, and we will do the best we can to maybe find a middle ground or compromise. Obviously, the legacy investors probably do not want to hear the same material being covered every time, but some of the new investors may find more interesting and useful. So we will do the best we can with that. And after we are done with the presentation, we will be happy to answer questions. So when we get started, let's proceed on to slide 2. Forward looking disclaimer information. Let us know if you have any questions about the forward looking disclaimer information. Slide 3, our table of contents. First of all, slide 1. Sorry. The first item in the table of contents is the investor presentation which we are about to get to. And there are also a supplementary financial information attached as appendix 1 to the to the presentation. We are not going to go through that information, but let us know if you have any questions about it. As usual, we feature the James Webb Space Telescope. In our table of contents. James Webb Space Telescope recently identified a mysterious new class of cosmic object called black hole stars. They look like gigantic stars which shine up to a 100 billion times brighter. So that sounds like a lot to me. Thank you, James Webb, space telescope, and Mark James Webb was produced with Mark with 18 Mark proprietary SigmaStruts as you probably all know. Let's go on to slide 4. So we go from the sublime to the mundane here. Here are the second quarter results. So let's just go through the right hand column, second quarter, the quarter we are just announcing. Sales of 20 million Gross profit, $7 million. Gross margin, 34.3%. We like that. We like our gross margin to be into the 30s. Adjusted EBITDA, $5 million 85 adjusted EBITDA margin 25.4%, What do we say about our Q2 during our Q1 investor call? We said our sales estimate was 19.5 million to 21 million So we came in within the range maybe kind of toward the upper end, but within the range. Adjusted EBITDA estimate, we said 4.3, 5.1 million. So we came in a little bit above the range our EBITDA number. Significance of our forecast estimates, remind you this fairly often. When we give these estimates, we are telling you what we think will happen. Sometimes we are wrong, sometimes we are not, but we are telling you what we think. Mark and I usually spend a lot of time going through this. And come up with the ranges for you. We do not pad the numbers. I know a lot of other people do that. We do not give you numbers, and so subtract 10% from it. So when we announce the number, we could beat it. that is just not what we do. We understand that pretty much everybody else does that, but we are not like everybody else. As you probably know. that is actually a kink song if you want to check that out. Pretty good 1. Slide 5 Quarterly results. We are continuing here. So we are mixing things up a little bit. I maybe should have explained at the beginning. We are trying. We are changing the sequence of things. And we are changing the content a little bit just to try to make a little more interesting for you. I do not if we will be successful, but that is the objective here. So what we are doing with our. This slide here, slide 5 at the top, is we are talking about some key product groups that we will circle back to in many cases C2B fabric, we cover that a lot, 1.5 million of sales. Ablative materials produced with C2B fabric, 1.8 million. Often, we describe. We discuss those 2 numbers because if they are really out of sync, out of alignment, they could distort quarterly P&L, but those numbers are fairly close so we are not going to go into that. But just for information, we would always like to know, missile system programs, so 5.5. Sorry, $5.7 million. Obviously, we emphasize missile systems a lot, so we thought you would be interested in that number. Advanced composite materials for GE Aerospace Jet Engine Programs $83 million We will circle back on that. We cover that every quarter. And here's something a little interesting with what we provide for you. Our second quarter sales value of production, we called SVP, was 21.1 million. that is not inventory value. that is actually sales value. And that is a modern day record, you think. Post sale of our electronics business. And really a good thing, and that. And we give a lot of credit to our factory people, our floor people for producing and getting out the door that much product. that is actually pretty nice accomplishment under maybe not ideal circumstances, but when are there ideal circumstances? So we wanted to acknowledge our production people. In terms of how much product was produced during the quarter. 1 other thing we never cover in these investor calls is EPS. We do not get into that, but we just wanted to mention to you. It will be discussed in more detail our 10-Q, which I think will be filed on Tuesday. Monday is a holiday. So you can look forward to it there. But you might have noticed already, and I just want to get ahead of this a little bit. That our tax rate for our Q2 was quite low. it is 18.6%. that is not a normal tax rate. There are significant benefits from stock option exercises which took place in Q2. There are lot of stock option exercises in Q2, significant benefit. Our normal tax rate without that benefit of stock option exercise benefit, if you will, for the tax rate would be probably around 26 and a half, something like that. And just so you know, if we had that more at least quote unquote normal tax provision or tax rate rather of 26.5%. Probably looking at $0.19 rather than $0.21. Like I said, we are reluctant to get into EPS stuff. We rarely cover that, but I thought it is such a, you know, significant difference in the tax rate that you would probably be interested to know. How that information. If you want more information about that, you really should call and talk to Gus and Christopher. But like I said, when we do our. When we publish our 10-Q, there would be a little bit more information about that. Particular item. Okay. Let's not get too hung up on that. So let's go on to slide 6. Our top 5 customers for Q2 in alphabetical order. Let's see. Let's tie the customers to the pictures. Easy 1 is Kratos. The b q m 177. that is target unmanned aircraft that obviously ties to Kratos. Defense and security. Airbus h 23, Neo, which LEAP-1A engines that ties to the middle of our aerostructure systems, called MRAS. Let's see, the Patriot, we talk about that a lot, PAC-3 MSC, Defense and Missile System, that is a 2 for 2 for the price. 1, that ties to L3Harris Aerospace and L3Harris missile systems. that is nice and efficient. The bottom right, Bombardier Global 8 thousand business aircraft, and that ties to Nordam Group. K? Let's go on to slide 7. Or pie charts. Nothing too remarkable here. You know, pretty consistent, so let's not get. Let's not spend too much time on slide 7. Just keep moving. Let's go on to. Of course, you have questions, let us know later, but we are gonna move to slide 8. This is a little more interesting. Park's niche military aerospace program, this is slide we give you quarter. This is a slide, which She was such a really nice job. So the pie chart is interesting. Just look at the missile system percentages. It is growing. This is just 1 quarter. We will see what happens quarter to quarter. These things change, of course. But we have been talking a lot about missile systems, and missile systems is. Portion of pie chart is growing. We will not go through a description of the photos, individual programs, except we always say that we do not provide photos programs that we are not somehow involved with. But we used to give you more information. Right now, we just. At this point, we do not feel we could do that. it is just these. it is just too sensitive. We just do not know where the line is as what we can say. We cannot, so we do not want to push the envelope too much. Let's go on to slide 9. GE Aerospace jet engine programs. Like I said, we are we are changing things up terms of sequence a little bit, try to make it a little more interesting. And this slide's a little different than it was in the past. Mark advanced composite materials sole source qualified a multiple engine nacelle and thrust reverser components of the following GE or risk based and CFM engine programs. So quickly, there is a Boeing 747-8 with a GEnx-2B engine filter for spares. That program is canceled. LEAP-1A engine for the a 23 dealer or family. That should be a kahuna. LEAP-1C, that is for the, COMAC C919. that is Chinese single aisle. CF34-10A, that is for the COMAC C909. that is a Chinese regional jet. And the Para 24, we already talked about that Bombardier Global 8 thousand aircraft. With the Passport 20 engines. So what is going on here? Mark has an LTA requirements contract agenda 2029 with the above program to MRAS. A sub of ST Engineering Singapore. Now what is going on here? These look like they are all GE programs. You gotta read the little footnote. MRAS is formally a sub of GE Aerospace. So that is the connection. When we got on all these programs, MRAS was part of GE Aerospace, and then think in maybe 2018 or 2019, GE Aerospace sold MRAS to ST Engineering, which is large Singapore or aerospace company. Mark is also exclusive supplier, AFP composite materials for the fan case for the g 9 x engine for the Boeing 777X aircraft. Let's go on slide 10. Update on GE Aerospace and Energy programs. We are starting out with the Big Kahuna. The h 23 NEO aircraft family. We are not going to read the variants for you, but you can see them for yourself. So as of August, Airbus had delivered 4.74 thousand of these airplanes, and they have a backlog of firm orders. So 5. 7.57 thousand. that is just a huge program. Probably the biggest ever for commercial aircraft. So we are fortunate to be on that program. And here is the history of the ramp up. You can see what is going on. There were ramping up the program until they hit the skids with 2020. that is the pandemic year. And then clawing their way back. 2025, 607 airplanes were delivered. And 2026 year to date, you wanna annualize the number. That. that is not a good idea. Do not. You can do it if you want. that is not how it works because these aircraft companies say, make the years, if you will, in the last couple of months. But what is significant is that number is quite a bit larger than the same period from 2025, which was 333 deliveries in your date of August 25. So that is good. It means that GE is in a in a ramp up or it is a ramp up. GE and aerospace are a mole. Tired. GE and Air. GE Aerospace and Airbus are ramping up this program. Which is a good news. Slide 11. Okay. What are we doing here? Airbus is targeting a 23 aircraft family delivery rate of 70 to 75 per month. By the end of 27. Remember the prior page, I think, we say 25 was, like, 51 per month, so we still have a way to go here. And stabilizing to rate of 27 thereafter. Approved engines. This is important. These are 2 approved engines for the h 20 aircraft. The old aircraft family. 1 is the CFM LEAP-1A engine. that is a program we are on. We are on the a 23 NEO aircraft family with the LEAP-1A engine. CFM, and we are not on the a 23 air. Deals. Aircraft family program with the Pratt engine. So we covered that in the first and second bulletin item. Here's some interesting info. Third bulletin item. The CFM LEAP-1A market share of firm engine orders for the A320neo family of aircraft with 66.9% as of June 30. So the CFM LEAP-1A market share continues to grow very nicely. And the prior quarters, explained why that is what is going on. We are not gonna go into it here. But if you have any questions about that, let us know. The key thing is that the LEAP-1A market share, that is the program we are on, continues to grow. I think when we started these presentations, was maybe less than 60%, I do not remember, but it is grown it is grown quite a bit. And it continues to grow. And there is huge, huge backlogs so there is a lot of ballast, if you will, in that market share. it is not easy to change the market share much month to month or quarter to quarter, but nevertheless, that is what is happening. At that delivery rate of 75, 83 20 Neo, family aircraft per month and at 66.9% mark share, that translates into 1.2 thousand LEAP engines per year, which is a lot of damages pardon my French. Let's go on to slide 12. So still with the same program as of June 30. There were 8.55 thousand firm LEAP-1A engine orders. And, you know, that is a heck of a lot of engine orders. I think if you go to slide what is it, Slide 16, you could kinda figure out what that is worth. You can do your own math. Here's on slide 16, it tells you what a revenue per unit is. it is me just say it is a big number. And that is not it. that is just a firm engine order. That does not mean that is it. Obviously, it could take more orders as time goes on. So let's go let's continue on slide 12, a new. A different program, the COMAC C919, that is the Chinese aircraft with a LEAP engine. it is a LEAP-1C engine. They reportedly have over 1.2 thousand orders. And you can see their deliveries. They are trying to ramp up They have not been doing the, you know, the-- I am sure they are not achieving the rates they want. Their deliveries are expected to ramp to 59 and 28 and 93 by. Sorry. Those are airplanes, not engines, by the way. So. And this is the single aisle, the Chinese single aisle airplane. it is to compete against 78 for 20. Let's go on to slide 13. The 777X with the GE9X engines, this is a very delayed program, but still a very important program for Mark. The test programs have amassed over 1.7 thousand flights, that is a lot. Over 4 hundred flight hours. that is a lot. Poorly, they have over 670 open orders for the aircraft, and Boeing anticipates a certification entry to service and first delivery next year. This has been pushed back a lot, you know, a lot of delays, but, you know, just my opinion is I have some optimism that this will happen next year, which should be really important for Mark, important program for Mark. So let's. Nick picture of the triple 7 x undergoing cold weather testing at Fairbanks. A friend of mine took that picture. Let's go on the slide 14. So g engine program sales and forecast estimates. We do not go through all the history. We do not need to do that. But what you might look at is look at fiscal 2020. That was like, the year before the pandemic, just about 29 million. It took up to fiscal 2020 6 if you look at the, you know, right hand side of the of the slide kind of halfway down, 2026 to get back to $29 million number. So, you know, we really had a setback with the pandemic. And it took us a while to even get back to the pre pandemic. Numbers for these jet engine and program sales. In fiscal second quarter, 8.3 million of sales, and our forecast for Q3, this is GE engine program sales forecast, 8 to $8.5 million For fiscal 2020 7, the whole year, brought that number down to 32 million to 35 million It was a little higher That number was based upon the info we have from our customers called the bill plan. And we have not got a revised bill plan, but, you know, we are a little skeptical as to whether we will achieve that bill plan because we have for first 2 quarters of the books, we got a forecast of Q3 and we are trying to be a little more conservative in terms of where we are going to go with the year. We will see what happens. Alright. Let's go on to slide 15. So the GE program's outlook, we call our Juggernaut parks, commercial air care Juggernaut This is our first Juggernaut, remember GE Aerospace Engineering Programs. what is the timing for the commercial aircraft juggernaut for a long time, for years. We are saying, when's it gonna happen? When's it gonna happen? We do not know. We will see. But we are no longer saying that. We are saying that commercial aircraft's showing, you know, it is here because the program clearly ramping up. Commercial aircraft juggernaut drivers, what are they? They are the a 23 deal aircraft family production as it ramps up to the 75 airplane per month. The expected certification and entry to service of the 777X and plan a ramp up to C919 aircraft. Those 2 g aerospace programs, the global 8 thousand and the C909, those programs are pretty much at rates. that is good, but they are probably not gonna be key drivers in terms of the ramp up of current rates the current revenues rather to that aircraft juggernaut. Kind of revenue level. So let's continue Here's a slide. Was it slide 16 we are on? Yep. Continue with the Juggernaut. So here is kind of how we lay out the Juggernaut. We get to that 62.3 million number. There are a couple of changes here though in the assumptions and Slide 17 has a footnotes in terms of how we computed, how we arrived at assumptions, how we did the math. But we actually increased A320neo to this 1.2 thousand units because we decided we really should look at the current market share. We are holding off using, like, 60% market share, but we thought that does not really make any sense anymore. And we brought down the number for the c 9 just because they seem to be struggling to get that level. Now remember, these are engines. Gotta multiply the airplanes by 2. So 200 engines means a 100 airplanes. So and we do the math, and we get to 62.3 or 4 million. Like, $62.3 million. And that compares to about, what, $30 million last year, so much that. So, it is still a long way to go in terms of the ramp up. 17. Slide 17 rather. These are the footnotes I referred We are not going to go through these. Any questions, let us know. Slide 18. Okay. We are changing gears and probably have to pick up the pace a little bit. Missile systems. Now the good news about missile systems is they are really. Even though so much going on for us with missile systems, it is like you know, frenetic pace for us to keep up with. But there is not a lot of new developments that are being reported in the presentation as to Q1. So a lot of this is just review. that is our new juggernaut. Next big thing, missile systems park missile systems, niche we call it. We specialize in this design and manufacture advanced composite, ablative materials used to produce solid rocket motor structures. Critical missile systems including the PAC-3 MSC Patriot missile system, which we talk about a lot. We also design and design and manufacture advanced composite material to produce other missile systems components. Depletion of the depleted, we covered this last time. it is a well understood, widely known that the missile system stockpiles have been bailed in depleted by all these horrible wars that we have been involved with last couple years, running empty, replenish. Replenishing the depleted stockpiles. So there clearly is a high or highly urgent need to replenish depleted stockpiles. But is that it? Does it end there? Maybe not. Let's go on to slide 19 Okay. Here we go. Quadrupling the production of the exquisite class of weapon systems. Quadrupling that is quite a concept for, you know, for our the aerospace industry. Usually, it does not move that quickly in our experience. On March 6, beginning of the year, 2006, President Trump met with the White House with 7 top defense contractors. At the meeting, these contracts were reported and agreed to quadruple production at the exquisite class of weapon systems as rapidly as possible. that is really quite something, kinda shocking. And the PAC-3 missile system of course is head of the class of the exquisite class of weapon systems plus other things that other programs spark us on. Let's talk about PAC 3. The PAC 3 ms Pager missile system. Parker source was qualified for advanced composite ablative materials. For solid rocket motors for the PAC-3 MSC missile system program. The PACS 3 missile system interceptors have been extensively and very effectively used by US allies in The Middle East, including all these countries. And why are they using them? Because they the bad people are shooting missiles at them. So they have been using the PAC-3 missile systems to intercept and destroy the incoming missiles, the ballistic missiles that are being shot. Their countries, launch order countries, in particular, civilian population centers. Let's go on to slide 20, the factory MSC missile system. it is an extremely effective missile defense system. Very high rates of successful intercepts and destruction of incoming ballistic missiles. And other threats But the stockpiles of those PAC-3 MSC missile systems have reportedly been badly depleted by all these horrible wars. I do not think we are talking out of school. We are not talking about anything confidential on the website information Just it is been widely reported that these the system stockpiles have been depleted by these horrible wars. And the thing is that the Patriot missiles, they do not do any good if it is not available. Wonderful as they are. According to reports, there were dozens of people killed recently in the Ukraine by Russian ballistic missiles, incoming which Ukraine was not able to intercept and shoot down because of a serious shortage. that is their terminology of Patriot missile interceptors. it is just heartbreaking. I mean, you know, these are people that died. it is not funny. it is it is heartbreaking. On January 6, 2026, this is now kinda falling on. What we kinda. What are we doing about it? what is our government trying to do about it? Lockheed announced it reached a 7 year agreement with the Department of the Army, increased the PAC-3 MSE intercept production capacity from 600 per year to 2,000. Well, that is quite an assignment, 600 to 2,000. Let's go on to slide 21. More activity by the government January 13, like a week later, the Department of the Army announced it is investing $1 billion in L3Harris. L3Harris solid rocket motor business to boost solid rocket motor production for the PAC-3 MSE and other missile systems. This is all public stuff. We are not talking out of school here. ArianeGroup of France, let's talk with them for a while. ArianeGroup is a joint venture between Airbus and Safran. ArianeGroup is an iconic legendary missile launch system development and manufacturing company. With very deep legacy technology. Ariane's rocket and missile system programs include Ariane 6 heavy lift launcher used for the European by the European Space Agency, the M51 submarine launch ballistic nuclear different missiles. it is a very special company. Our relationship with them and its predecessors go back to the early 2000s. We are very proud and fortunate to be, their partner Like I said, they are a very special company, very special people, wonderful people actually. We just wanna go on the record to make our. Make sure everybody knows how we feel about this wonderful company, how privileged we feel we are to be connected them, and how privileged our country should feel to be connected with ArianeGroup. So let's go on to slide 22. They produce. ArianeGroup produced a proprietary fabric called Raycarb C2B, which is used to produce ablative composite materials for advanced solid rocket missile programs. And we are sole source qualified on the solid rocket motor for the PAC-3 MSE missile program. For specialty ablative materials produced with ArianeGroup's proprietary C2B fabric. So we are qualified with our prepreg material, but it is also qualified with ArianeGroup's C2B fabric. Mark entered into a business partner agreement. that is what they call it. Or with. ArianeGroup calls you with ArianeGroup in 2022. Under which Erin appointed Mark as its exclusive north American distributor of their C2B fabric I think, informally, we were doing that for a long time, but they wanted to formalize it. That was. That came from not us. On March 27, 2024, we then. We entered into what they call a new agreement. with ArianeGroup under which Park agreed to advance ArianeGroup million €587 thousand against payments future purchase by Park of C2B fabric. We paid the first installment in our fiscal year 26 Q1 get a second installment. Our fiscal 2020 7 Q1. Let's go on to slide 23. Our third installment is actually being paid now. And we actually accelerated that. It was supposed to be April next year it is now think, next month. And that was in exchange for ArianeGroup increasing the allocation and pulling in the allocation you know, accelerating the allocation. And then and then also exchange for at least our asking if they could even do more. We have a wonderful with these people and that is worked very, very well. what is the purpose of this €4.59 million advanced payment? To fund $50.50 with area in the construction of additional C2B fabric manufacturing capacity in France. This additional French manufacturing capacity is expected to come online 28. Approximately half of it is for us and half of it is for them because they need it for their own programs in Europe. We went $50.50 on the on the. On this additional capacity. 50 on the output. But, unfortunately, this additional French capacity, manufacturing capacity, not be adequate to support the ramp up of the PAC-3 MSC program, not completely in any way to that 2,000 interceptor per year rate. But now what do we do? Let's go on to slide 24. Try to pick up the pace a little bit here. Sorry. I am taking too long. On July 18, this is all covered at our last, our Q1 investor call. This all just, you know, happened right at that point. July 18, Mark and ArianeGroup entered into a term sheet agreement late in to construction establishment. This is big by ArianeGroup of a U.S.-based C2B fabric manufacturing plant was expected capacity more than adequate to fully support the needs of the PAC-3 MSC missile program at that 2,000 interceptor per year rate. The term sheet agreement provides a definitive agreement. Also, will need to be entered into before the end of the year. But what is the significance of the signing of the term sheet? I mean, before the definitive agreement is signed based on the term sheet signed by ArianeGroup and Mark last July, ArianeGroup is proceeding with the construction and establishment of our US based c 2 b fabric manufacturing plan. that is really important. Let's go on to slide 25. And let's provide the term sheet A 100% of the output of that US plant, The US plant will be allocated to Park, which it will use to support the PAC 3 and other missile programs. that is really important because the capacity in France, we share that with ArianeGroup. This capacity is all for us in our programs. Also, under the terms of the term sheet, Parkers committed to invest 25 million in ArianeGroup's U.S.-based manufacturing plant. Now, it is not equity or debt kind of investment. The 25 million investment will made by Park in the form of advanced payments to be fully applied against future purchase by Mark of C2B fabric. 25 million advance payments are expected to be made by Mark in 2026 and 2027 expected to be applied by Mark against future c 2 b fabric purchased the beginning in 2030. So why do we do that? it is kind of a strange thing to do. You are gonna think, why did Mark enter into the surety agreement with ArianeGroup? Why do we make the commitment $25 million advance payment commitments? Because it was necessary to provide ArianeGroup with a green light to proceed with the construction of a US based C2B fabric manufacturing plant. And we at Mark believe it is urgent at Mark, that ArianeGroup rather builds its US plant as soon as possible. Let's go on to slide, what is it, 26 here. Yep. Slide 26. Top. Although not at Liberty's flow, it is a specific C2B Fabric Manufacturing Capacity Expected From ArianeGroup's U.S. plant. When the plant is completed online, its manufacturing capacity together with the C2B fabric allocation from ArianeGroup's European operations will be more than adequate support the needs of the PAC-3 MSC program at the 2,000 interceptors per year rate. And numerous other critical missile programs. So what is the timing of the ArianeGroup U.S. C2B Fabric Manufacturing Plant In The US. According to the area, their plant was. Their US was originally expected to take 4 years. that is a long time to complete. To be completed online. But ArianeGroup recently agreed with Mark to accelerate the timeline for the completion and bring online of the U.S. plant by 6 months in exchange for a Park's agreement to accelerate $25 million advancement payment schedule. it is very good news because wanna get that plant up and running as soon as possible. As a result of this recent agreement, Mark is now expected to make advanced pain of 20 million this year and 20. And 5 million next year. All to be applied against future purchase by Park of C2B fabric. Now this is all option dependent on us entering into that definitive agreement, which is expected to happen before the end of the. Before the end of calendar year. So let's go on to slide 27. Okay. So for. Just for the record, wanna cover this. Even though we are in business to make money for our shareholders, thank you very much. which should be obvious. Is not all dollars and cents for us. there is more to it for us. As we already alluded to, every time a factory missile is launched and successfully intercepts destroys an incoming ballistic missile, it is likely that there are people who are alive and walking around on the earth or others would not be, you know, lives are being saved. This is reality. This is not, you know, theory. it is not a you know, some interesting paper or some kind of video game. That matters lot to us. Okay. It matters a lot to us. So that motivates us a lot. We do not like seeing people getting killed when they should be getting killed. But let's talk dollars and cents for a minute anyway. Under the terms of the term sheet, park is expected to purchase a significant amount of C2B fabric from ArianeGroup, during the period of 2030 to 2036. So why is it good. Why is it a good thing? Well, it is also. it is a good thing for Park to be also be expected to sell all that fabric to which prearranged customers under prearranged arrangements with the customers with our distributors' markup. But in addition to that, Mark will be expected to manufacture and sell ablative materials produced for that C2B fabric for those customers. So what kind of ROI to those sales of fabric and ablatives represent? Well, we are not gonna disclose that specifically, but let's just leave it this. it is a very, very good business deal for Mark, and you should be happy about it, you know from a business perspective. Very good. Let's go on to slide 28. Okay, changing gears here, talking about a new plant. And, again, this has all been covered pretty much. Not too much news here. July 17, we entered into this agree. Lease agreement. For land at 18 acres at Tulsa International Airport. that is where our new site will be. there is also gonna be land for space for additional plant. Indeed, in the future, plant size, 150 thousand square feet approximately. The budget, outflow. Sorry. The capital budget, 65 million cash outflow, 10 million in 2027, 45 million in 2028. 10 million and 29. You probably noticed that this got pushed out a little bit. I think last quarter, we said 25 million in fiscal 2020 7. It takes a little longer to work through all the incentive agreements with Tulsa and Oklahoma and it is. And we are not. They are they are wonderful people, that is not. They are not a problem, it is longer than we expected. But the good news is you look the last arrow item and say, facility is still expected to be completed in 2028, and production shipment is supposed to commence in 2029. So that is not pushed back. Fiscal 20 ninth, I should say, 2020. Page. Sorry. Slide 2029 continuing here. Plant designed to produce our full product line. Second arrow item expected to. This is important, approximately double parts current hot mill prepreg and film use of manufacturing capacity that is used as for GE Aerospace programs and other commercial aircraft programs. But here's the key thing, by staffing up our existing hot manufacturing lines in Newton, Kansas and in our Newton facility, will be able to support the ramp up of GE Aerospace programs and the other commercial aircraft programs and hot melt programs we support. So be able to do that and people are asking about that. How are gonna bridge the gap until our new plant's online? We can do that with our plan to do. By staffing up our alliance. But the additional hot melt manufacturing capacity provided by our new Tulsa plant will be necessary to provide more properly and sustainably support those GE aerospace programs and other commercial aircraft programs. So we will be able to get through the transition with our current plan, but it is really good our new plans coming online soon And it is the same really almost exact story with the solution treating. On slide 30, manufacturing capacity. We are tripling our solution treating manufacturing capacity with a new plant that is used to support, among other things, missile system programs, the solution treating manufacturing capacity. And same story by staffing up the existing solution treating lines in a Newton, Kansas facility, we will be able to support the PAC-3 program at the 2,000 interceptors per year reduction rate because that according to what our, you know, our customers are indicating or not giving the specifics, we are supposed to be that rate well before our new plants online. We can handle it, but to keep others the additional solution for the manufacturer capacity provided by our new Tulsa plant still be necessary to more properly and sustainably support the PAC-3 program and other critical missile programs in the future. While we are building a plant, Pretty obvious just because of our commercial aircraft juggernaut and missile systems, they require it. And also to enable, facilitate and promote parks growth and development company for the future. Okay. So slide 31, here's where we are kind of mixing things up again. These slides are somewhere embedded in the middle of the prior presentation. Park's financial performance history and forecast estimates will not go through history. We just. We already did that. But q 2, so we already talked about Q2 20 point. 28 million. 20.8 million rather sales, 5.3 million EBITDA, adjusted EBITDA, Our forecast estimates for Q3, 2021 to 22 and a half million of sales, a 5 to 5.8 million of EBITDA. Let's go into 32. We show you the slide every quarter except the new things. We are including the first 6 months, year-to-date, the right hand column. We will continue that. You know, like, next quarter will be the first 9 months. Just for information. So when we continue, let's go on to slide 33. Recent public offering, you know about this. there is no news about this. It was already complete when we did our first quarter investor call. It was a $50 million at-the-market public offering. ATM, I guess they call it. And we sold million 812 thousand shares at an average worth of proceeds of 50 million. Average share price of $27.5827.58 per share. And that at the market offering is complete. It was actually complete, I think, in June. Let's go on to slide 34. Our last slide, thankfully, I guess, Mark's balance sheet, cash and cash dividend history, saving the best for last. Mark has zero long term debt. that is really important to us. I am not saying we will never have debt, but debt's kind of against our religion. I heard these. Sometimes watch financial news. All the small companies with all the debt, they are struggling. it is the big 7 or what they call it doing so great. Well, I do not know about that, but, you know, we are not big believers in debt either. Mark reported a 115 million cash and more securities as of the end of second quarter. it is a lot of money, I agree. But remember, as we previously discussed, we plan to invest 65 million on our major new Tulsa manufacturing plant and 25 million in ArianeGroup's U.S. plant in the form of advanced payments. Now 25 million eventually comes back to us, but that is gonna take, you know, 4 or 5 years. So you had 25 and 65, you know, you get some, know, real numbers there. I just wanna mention something we mentioned before, which maybe is obvious to But the 65 million so those were the capital assets, actually equipment and the factory and everything else. that is not the working capital. And that is not the startup cost which are, you know, gonna be significant. that is over time. that is not just, you know, day 1, but just keep that in mind. So when you look at it that way, a $114.07 5 million is a lot of cash but maybe it is not all that much actually. Mark has paid 41 consecutive years of uninterrupted quarterly cash dividends. that is a nice thing for us and saving the. Maybe the very best for last Parker's paid 616 million or $30.10 per share in cash dividend since the beginning of fiscal year. 2005. Always like to juxtapose that last comment to the picture of the Mark founders back in the 1.95 thousands. In a plant in 2019. A plant in Flushing, New York, actually. Not a first plant or second plant. These 2 guys, the founder of Stars company with, you know, basically nothing. I think a little money left over from the war duty So I guess you could say Mark has come a long way from those early days. But, you know, do not wanna spend a lot of time on this, but I still think it is important for all of us at Mark to remember where we come from, you know, that. Or. And because those beginning days were so important for us and really set an example for what kind of. What we wanna be. The way we wanna deal with things, deal with problems, deal with obstacles, deal with hurdles. Roadblocks that come up every day today. So, okay, that. I think that ends our presentation. Yeah. It does. Operator, I would be happy to answer questions to the extent there are any Thank you. Operator: We will now be conducting a question-and-answer session. If you would like to ask a question, please press You may press star 2 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 key. 1 moment while we poll for questions. Our first question comes from Jim Ricchiuti with Needham & Company. Please proceed with your question. Jim Ricchiuti: Thank you. Good afternoon. First off, just if my numbers are right, it looks like you had very strong growth in missile systems, sequential and year over year. So you know, are these levels sustainable, or are we going to. Should we anticipate, you know, continued variability until we really see this missile ramp underway in earnest. Brian E. Shore: it is you. We are breaking up a little bit, but how are you doing? You know, if you look at slide that is fine. Slide 3 2, a good question. Think it is sustainable. You know? And the reason that you wanna look at slide 32, look at the sales, you know, we are. From 17, 2018, 2019, 2020, we are, you know, growing pretty aggressively, you know, $10 million a year more or less. Then we hit 2021, fiscal 2020 1, the pandemic and that really kind of slowed us down for several years. It took us through, you know, to 2025 to really get back to the, you know, levels of 2020. But I think we are back on that trajectory I think it is pretty aggressive, probably more aggressive than it was before. It should be our challenge to keep up with the growth both in the missile programs as well as the GE programs. Think we talked about the Juggernaut of 62 million for the GE programs What last year was maybe what, $3.03 billion something like that? So there is a long way to go there and certainly a long way to go with the missile programs as well. Jim Ricchiuti: Brian, hopefully, you could hear me clearly a bit. I wanted to also go back to the commentary on regarding your full year sales to with the GE programs. I mean, you have stronger Q2, I think, versus expectations. And that you are trimming the full year. It sounds like you are being conservative, but again, this is based on bill plans that you get. So I am just trying to understand that a little better and reconcile that Yeah. Brian E. Shore: Unfortunately, Jim, you are breaking up quite a bit. But you are. I think you are asking about the GE programs forecast. Me see if I can actually pull it up for you. it is. It was on so the history. If I do not find it quickly, I will not Slide 14. Too much. Okay. Thank you for that. that is slide 14. K. Thank you. So you are asking if the growth is sustainable, whether it be in conservative. I do not know that the forecast for fiscal 2027, $32 million to $35 million. I do not think that is. We are trying to be conservative there. I do know there is a lot, like, what we can tell you Mark and I could tell you is there is a lot of energy toward ramping up these programs. Especially the a 22 needle program. And then if the triple 7 x gets certified next year, that program will have a lot of growth as well. Pretty quickly, I think. Got it. Well, I am gonna say, you we have fiscal 2020 6. Yeah. With that. Was that the last fiscal. Full fiscal year was 29 million and the juggernaut is 62 So long way to go with the GE programs. Good. Thanks. Apologies for the back in the queue. Was there something else, Jim? I. We are having trouble hearing you. Jim Ricchiuti: Yeah. No. I am sorry about the connection. I will jump back in the queue. Thank you. Brian E. Shore: Okay. Thank you, Jim. Operator: Your next question comes from Trevor Walsh with Citizens. Please proceed with your question. Trevor Walsh: Great. Hey, Brian and team. Thanks for taking the questions. Maybe just to revisit that last question just to clarify. So, yeah, we saw you took the full year GE number down and I understand a lot of moving pieces. But are you seeing. You are you are Q3 number look kind of right on with what we were expecting, so it seems like it is maybe a little bit more uncertainty with Q4. Is there any. Is that a fair statement? And then beyond that, are there any specific programs that are kind of creating that uncertainty, or is it more just kind of broad based of just kind of what you are seeing, within the group as a whole for you? Brian E. Shore: Okay. I think we are misunderstanding this. No. Just do the math. Look at Q1, Q2, and Q3. And then, you know, the. It would be a big jump in Q4 to get that number. The forecast that we provide was based on what is called a bill plan. And they are probably just ramping it up a little more slowly than they than they originally planned. But I think it would be a mistake to read anything other than you know, a pretty aggressive ramp up from this information. Just wanna be more realistic with Q4. there is nothing holding back Q4, but, you know, we are thinking, well, maybe Q4 will be somewhere to Q3 and Q2 in that range anyway. And we could be wrong, but we are just trying to be realistic. Not trying to be conservative, realistic. But, again, I wanna emphasize I think it would be a mistake to interpret this information in some kind of negative way that things are not going well, the programs are not ramping up as quickly as possible. The key thing with, I think, the key challenge it is not us, it would be our customers, is the. Their ability to keep up with the program ramps you know, it is a challenge. it is a challenge. These are manufacturing companies so it is a challenge for a manufacturing company to ramp up so quickly. But I would also say just. Do not want to beat this horse to death too much that we are clearly out of that pandemic mode where everything was just kinda going sideways for so long, and we just were not seeing any growth at all. The growth is aggressive. Trevor Walsh: Yep. Okay. Fair enough. That makes sense, Brian. Appreciate the color. Maybe switching gears to, to missile systems a little bit. I appreciate the color around how the Newton facility can just generally support in this interim period before Tulsa gets up and running. Both kind of the full extent of the GE ramp and then as well as the PAC-3 2,000 rate, as well. But, obviously, there was just a big announcement, with the Navy and Raytheon around SM-6. Which I know you guys have, have some content on. Pat 3 is not the only game in town. So is it fair to say that as these other missile programs ramp up as well that you can the Newton facility can also support those as well? Or do you kind of get to a point where you have to make some decisions about kind of what lines are doing and just maybe talk more broadly. I know there is sensitivities around it, but just how you. How comfortable you feel given the pace of the ramp that. How Newton can kind of get us through to when Tulsa's up and running. Brian E. Shore: Yeah. You know, we probably overemphasize the factory program. it is just we do that there is so much visibility about it. there is so much knowing about it. We have companies publicly talking about the rates, you know, which is a little different than some of missile program. So. And since we are sole source on the on the materials for the solid rocket motors, it is easy to kind of key into the, you discussion about the PAC 3. But, you know, as I was going through it just now, I was thinking, yeah, we are really emphasizing PAX 3 to the to the. Maybe to the detriment of a lot of other programs that we are working on. Factory is clearly the largest program that we have now. But there are many, many other missile programs that we are working on. You know, Mark and I were just talking about that. And it is a lot to keep up with. At this point, the answer is we plan to be able to handle everything with the Newton plant, but that will be by stretching. By staffing up the solution tree alliance quite aggressively. And. But we plan to be able to get there with the PACS 3 as well, you know, the programs. I think we will all be very relieved when the new capacity and Tulsa comes online because we will be stressed to get to that point. Trevor Walsh: Got it. Great. Super helpful. Maybe 1 more for me, and then hop back in the queue. Good to hear that, Brian is able to kind of pull forward their timetable around the build out for their facility. What. I mean, it seemed like it just took some additional infusing of funding and commitment from you to do that. If things got really kind of dire from just everything requiring CQB, could there. Is there a scenario where that can be pulled forward even more? With additional funding, whether it is from you or some other kind of third party? To help-- Yeah. Again, move that along, or is that kind of what it is at this point? Brian E. Shore: that is a funny question because, you know, people keep asking that. I think the answer is no about money, that is all it is. And what we do, we pull forward the. Our advanced payments. We increase our advanced payments. We pulled them forward. We accelerated them to order to help them get their plan up and running more quickly. So is there an opportunity for us to. For our area to squeeze that time frame, let's say, 4 years, 3.5 years, less than 3 and half years, I do not know. I think it would be a challenge. It would be difficult. I am not saying it is not possible. And, you know, maybe a couple months here or there, but significantly, I. My guess is probably not. it is not a matter of money either, and that is not the issue. So the reason I am kinda laughing is because the people who offered that, you know, what we will take. And it is not money. Trevor Walsh: Yep. Got it. Okay. Perfect. Thanks, Brian. Appreciate the questions. Thank you. Operator: As a reminder, if you would like to ask. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. Your next question comes from Fabio Wulffinger with Switzerland. Please proceed with your question. Analyst: Good afternoon, and thanks. For your presentation. Hello. Good afternoon, and thanks for your presentation. I am calling from Zurich. As you told, your lowered. Your full year sales forecast for some of the programs. For any shipments that have been delayed, have customers confirmed new delivery dates or are you still assuming those sales will return And looking into fiscal year 28 to your latest customer, support faster sales growth than this year? Or should investment lower their growth expectations for that year as well? I am asking especially about the difference between confirmed orders and expected demand. Could you give a rough breakdown of the reduction and tell us when you expect any delayed sales to be recovered? Brian E. Shore: I am not sure I know what you are referring to in terms of, reduction in delays. We have not provided a forecast for this fiscal year or next fiscal year, but I am not sure I understand what you are getting at in terms of these delays or reductions you are referring to. I am sorry. Maybe you can clarify or. Analyst: Yeah. No. I was listening about and I thought about some programs accounting for reduction approximately for this engine programs. Right? Brian E. Shore: The engine programs? So I do not know what to say about it, the engine programs. If you are talking about the fact that we broke down the full year forecast, maybe that is what you are referring to. Yeah. I know. I think now I understand for the GE programs. I thought you are referring to a forecast for Park. We have reported that down, but there is a couple million. Yeah. Yeah. Like I said, I think the original forecast we provided was based upon the build plan we received from our customer. And we were not aggressive with it. We did not round up or anything like that. And we are just saying now based upon the fact we have 2 quarters in the books, and we have a forecast for Q3 that we want to bring the number down a little bit to be realistic. But the, you know, the ramp in our opinion is gonna happen. Whether it, you know, moves a couple quarters here or there, I think is not relevant. And no, we started talking about the GE Aerospace juggernaut. I think our main point was we do not know exactly what the time frame is, but the key thing is it will get there and we better be ready for it. So I think the second question about this, I think we are really over reading or overly focused on the fact that we brought that number down a little bit. I do not think it really means anything until the long term big picture. Those programs are still there and they are still ramping The. I think it is not a function of the-- We talked about the program, the 919. So maybe that is what you are referring to. That program's a little delayed, but I do not think we had really big expectations for that this year at all. So it is not a function of the programs themselves. it is a function of how quickly our customers can ramp up their production. We can meet their requirements, it is not. The park is not the problem. But I do not think it is the end market either. I do not think it is the programs or how many airplanes they are the OEMs are able to sell. They are just a function of how quickly the industry could ramp up. And that is really been the story for several years now as you are trying to emerge from the pandemic, you know, because I. You probably know this, but Airbus had their target of 75 airplanes a month for years ago years ago. And they really were struggling to get you know, even up to 50, maybe past 50. It was not that the market was not there. Look at the back backlog. You got. there is so many airplanes sold. So it is a function of the industry ramping up production, not in the park only, but the whole industry ramping up production to get those rates But I think I would say that maybe we are overthinking this annual forecast because clearly, the, I do not know, the vibe, if you look at it that way, we are getting is that there is an aggressive ramp up going on. And if we talk to our customer, they are talking about very aggressively ramping up. I guess I would say, maybe we are wrong. Maybe we are being too conservative. Maybe the original bill plan will end up coming true. We have not. We do not get revised bill plans every year from them, so you have not gone back say, what do you think about the bill plan? We are just trying to, you know, Be a little bit more realistic based upon Q1, Q2, and Q3. But I think if we are we do not wanna overthink that or read too much into Let me put it that way. that is my opinion anyway. The GE aerospace juggernaut, as we call it, I think is very much intact. And very exciting for Mark. Analyst: Okay. Thank you very much. Brian E. Shore: Yeah. Thank you. I am sorry I did not understand your question at the beginning. Analyst: It was just I was checking out the What about the year or space outlook since July? that is that is what I am asking. Brian E. Shore: Yes. Got it. Thank you. Okay. Thank you. Thank you. Operator: This now concludes our question and answer session. I would like to turn the floor back over to Brian E. Shore for closing comments. Brian E. Shore: Okay. This is Brian again. Thank you all for listening in, and thank you for the questions. it is been very nice talking to you. Please give us a call if you have any follow-up questions. Happy to help you with that. Take care. Have a good day. Bye. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines, have a wonderful day.