Operator Good afternoon. My name is Paul, and I'll be your conference operator today.

At this time, I would like to welcome everyone to the Park Aerospace Corp. First Quarter Fiscal Year 2027 Earnings Release Conference Call and Investor Presentation.

At this time, I will turn today's call over to Mr. Brian Shore, Chairman and Chief Executive Officer.

Mr. Shore, you may begin your conference.

Brian Shore Thank you very much, operator. Welcome all to -- this is Brian.

Of course. Welcome all to Park Aerospace's fiscal year '27 First Quarter Investor Call.

I have with me, as usual, Mark Esquivel, our President and COO. So we published our Q1 earnings release just after the close.

You want to -- if you haven't seen that, you want to take a look at that because in the earnings release, there are instructions as to how you can access the investor presentation that we're about to go through. There's a link and also you can access that on our website.

So a couple of preliminary comments here. It's only been 7 weeks since our Q4 investor call.

It's also been summer. So I had a feeling that this Q1 call would be kind of a quiet call with just a little updates and we move on.

But actually it didn't work out that way. There are a lot of developments that we do -- we should go through with you, especially starting in the Missile Systems and then the new plant sections at the end.

So what we'll probably try to do is go through the beginning portion of the front end, let's say, of the presentation a little more quickly, so we can get to the back end, if you will, more quickly again, and spend a little more time because that requires much more discussion, I think. Unfortunately, we -- well, it's fortunate, but in this sense, it's unfortunate.

We have a lot of new investors at Park. And I apologize for -- we're going to go through like the front end, if you will, of the presentation a little more quickly just to have time for the back end.

But -- and for the rhetor investors, probably not a problem. A lot of the stuff is we go every quarter.

But for new investors, if there's anything you want to talk to us about, went over to quickly, sorry. Please give us a call, and we'll be happy to go through those items in more detail with you.

And I guess the only thing list thing I'll say is that we're happy to answer questions, of course, after we're done with the presentation. So why don't we get into it?

Slide 2 is our forward-looking disclaimer language. Let us know if you have any questions about that.

Slide 3, our table of contents. Slide 1, we start with our investor presentation and Appendix 1 supplementary financial information.

We don't intend to go through that during the call, but if you have any questions about any of the supplementary financial info, please let us know. We've been featuring the James Webb Space Telescope for a while now in our table of contents.

So we're not going to break the pattern here. The James Webb shattered our time line of the universe, talking about some big stuff here not just what we did for the quarter by spotting impossible infinite Galaxies containing all stars and heavy elements, which should not be there.

It seems to be kind of a common theme with James Webb. We keep saying, yes, that's not going to be that way.

And all we believe or most of them just not really true. James Webb, which produced 18 proprietary Park SigmaStrut.

Let's go on to Slide 4, our quarterly results. Let's just go through this quickly.

Q1 the right-hand side, right-hand column, sales, $18,312,000; gross profit, $6,376,000; gross margin, 34.8%. As we often say, we don't like it when it's below 30 like it was in Q4.

So a little happier above 30%. Adjusted EBITDA, $4,576,000 and adjusted EBITDA margin, 25%.

What did we say about our Q1 during our Q4 investor call we gave you the kind of forecast estimate for Q1. We said sales estimate $17.7 million to $18.4 million.

So we came in within the range, maybe kind of toward the top end, but still within adjusted EBITDA estimate $4.1 million to $4.6 million. And again, we came in within the range, maybe at the high end of the range, but still within I thought we didn't cover this anymore more, but maybe we do.

What is the significance of our forecast estimate. So we've mentioned this many times is that we're not doing the guidance thing where we give you a number to beat, we don't do that.

When we give you these numbers, we're telling you this is what we think is going to happen. Now sometimes are wrong, sometimes it's off, sometimes a little high, sometimes a little low, but we're not playing any game here.

We're not giving you a number, we think minus 10%, so we could beat it and be heroes and make the analysts happy on that stuff. I know everybody -- I should, but a lot of other companies do that.

We just don't. We were wondering based upon the reaction to our Q4 call, whether everybody is listening to that, we think it's kind of strange that investors would invest in our company or the buyers sell stock totally disregarding what management has been saying consistently for years now, but that's -- everybody has the freedom to do what they want.

Let's go on to Slide 5. Quarterly results, not too many comments about Q1 here, considerations.

I guess the main consideration is we're back to talk about ArianeGroup. Now we'll talk about ArianeGroup in much more detail when we get into the Missile Systems section of the presentation.

Just for now, the reason we bring it up, it has an impact upon the quarterly bottom line. So we entered into this business partner agreement with ArianeGroup in January '22, under which they appointed us as their exclusive distributor for what they call Raycarb C2B fabric in the U.S.

or actually North America, sorry. So here's the thing.

We had 0 C2B fabric sales in Q1. That's actually a good thing for or not, because as we explained, we sell the fabric to our defense industry customers for a relatively small markup.

Now the -- I don't know, not the trick, but the key thing is that when we buy C2B fabric for a customer, we'll sell to the customer, but almost always be stored in our plant, we stockpile what stored for that customer in our plant. At some point, they're going to say to us, we want you to prepreg.

We want you to take this fabric and make it into a prepreg. So we had $1.9 million of ablative material sales.

That's a prepreg sales using the C2B fabric, and that's very good margin. So that's -- whether we sell -- to the extent we sell fabric or the extent we sell prepreg maybe a fabric that can affect our margins.

That's why we bring it up most quarters. Let's go on to Slide 6, okay.

This is something we do every quarter. This is done as a little specialty, the top 5 customers, an alphabetical order.

Let's see if we can figure out who's doing what. Aerospace, that's the patriot missile on the top right-hand side of the page.

GKN, I think that's the Boeing 787. Let's see Kratos is obviously the Valkyrie tactical and aircraft.

Now Middle River could be the Global 8000 or the A320XLR. But I think what we are doing here is NODE relates to the Global 8000 and then MRAS relates to the Airbus A321 XLR.

Okay. Let's keep going.

Slide 7, these are the pie charts, which we like sharing with you every quarter. Nothing too remarkable about Q1.

It seems to be more or less kind of aligned with the history there. We break it down -- sorry, obviously, between military, commercial and business aircraft.

Let's go on to Slide 8. Now this is a latest slide, the Park Plus and niche military aerospace programs.

And we don't talk anymore about the specific programs. They're just a little too sensitive, except to say that any time every program that we show you is a program we're involved with.

We're not just showing you general defense programs. We're involved with all these programs.

The pie chart -- the Missile Systems, a little bit less than we would normally expect. But why is that?

Because there were no C2B fabric sales in Q1, and that would be in that Missile Systems part of the pie chart. So pie charts, you got to look at them more long term.

You look at them quarter-over-quarter, it's hard to figure out what to extrapolate from the short-term quarterly pie charts. Let's go on to Slide 9.

Okay. GE Aerospace jet engine programs for some of you new folks, we cover this every quarter because it's a very significant portion of our business.

We have a firm pricing LTA from 19 to 29 with Middle River Aerostructure Systems, which is a sub of ST Engineering Aerospace, a Singapore company. The key thing we need to explain to you every quarter is that if you look at these programs, they're all GE Aerospace or CFM, which is a JV with GE Aerospace programs.

So why is that? What does that do with MRAS or ST Engineering?

What it has to do with is that when we got on these programs, MRAS was owned by GE Aerospace. I think maybe '19, I'm not sure exactly when GE sold MRAS to ST Engineering, but we're already on all these GE Aerospace programs at the time.

We built a redundant factory in Newton for GE. They asked us to do that to support their programs.

And these are some of the GE programs that were on through MRAS. And we won't go through them.

If you have any questions about them, let us know, but these are some of the key programs that we're on. Again, this is for GE Aerospace, it's engine.

So this would be for engine cells and thrust reverse components, composite components. Let's go on to Slide 10, still GE Aerospace.

So additional program that's not listed on the prior page is the fan case containment wrap for the GE9X engines for the 777X airplane. That's an important program for Park.

Also, the LTA was amended to include film adhesive products, which are now in qualification. And as we've told you many quarters now, the MRAS NSE did request a life of program agreement with us.

And we haven't made a lot of progress late. It's finding the way with us, but MRAS has had some other priorities.

So when they have a little more bandwidth, I guess we'll continue with the discussions of the Life of program agreement. Let's go on to Slide 11.

Let's talk about the GE Aerospace programs. The Big Kahuna is always going to be the A320neo aircraft family, including all these variants, which I won't read off to you.

And then look at the numbers, it's a huge, huge, huge program. They've already delivered 4,470.

These are new airplanes. This is not A320.

These are A320neo airplanes. And they have a backlog, Airbus of 7,483.

That's just a lot, a lot, a lot of airplanes for this program. The delivery history for A320neo family, I'm not going to go through the numbers with you, except let's look at June in the first 6 months, 271 deliveries.

Last year, this time, 232. So we're doing a little bit better this year.

Airbus is trying to ramp up. We'll get to that in a second.

What we don't do is take June and multiply it by 2 that wouldn't work because they back-end load the deliveries. I mean if you look at the 232 and you multiply that by 2, it's not going to give you 607.

You see what I mean for '25. So the key consideration is that Airbus is way ahead of where they were last year at this time with A320neo deliveries.

Let's go on to Slide 12. Okay.

Here's a punchline at the top. Airbus is targeting the A320 aircraft family delivery rate, 70 to 75 airplanes per month by the end of '27 and then stabilize in '27 thereafter.

Just if you have any experience with commercial aircraft, that's a huge, huge, huge, huge number. Those numbers are unheard of really 75 airplanes per month.

Approved engines, we've got to talk about that. These are 2 approved engines for the A320 aircraft family.

One is the engine we're on, which is the CFM LEAP-1A that's the CFM engine. There's another approved engine, which is the Pratt 1100G that's a GTF engine.

We're only on the CFM LEAP-1A engine for the A320 aircraft family. And that's covered, I guess, in the next -- second little bullet item there.

And then the third bullet item, okay, according to Aero Engine News, which is the viable, the CFM LEAP-1A market share of firm engine orders for the A320neo family of aircraft was 66.2%. That's a big number.

I think numbers keep going up and up and up. That's a huge market share.

So it's creeping up here. I guess that's one way to describe it.

At the delivery rate of 75 airplanes per month, okay, 75 per month, that 66.2% market share translates into 1,192 LEAP-1A engines per year. That's just a whole lot of engines, a whole lot of engines that Park supplies into.

And we'll remember that number a little later on in the presentation when we get to that juggernaut slide. I'll try to remember anyway.

Let's go on to Slide 13. Okay.

Still talking about those engines. The Pratt engine, the competitor engine has struggled with serious reliability issues.

and reliability has been a positive selling point for the LEAP-1A. According to Airbus, there's now a serious shortage.

So we've got reliability issues, shortage issues, the Pratt engine. Meanwhile, CFM has ramped up production of the LEAP engine.

So -- and just full disclosure. We've also read some things that there's some complaints every now and then about CFM and how great a job they're doing with supplying engines as well, just to be fair about it.

But could these factors lead to an even greater LEAP-1A market share? Maybe.

It seems like it's already having an impact because those numbers have been moving up. The market share numbers have been moving up.

As of March 31, '26, Okay, these are some huge numbers, 8,472 firm LEAP-1A engine orders. That's -- those are firm orders.

That's just a huge amount of revenue for Park. If you look in -- I think in what he called the juggernaut slide, it kind of tells you what our revenue per unit is.

You can do your own math if you have a pocket calculator. So the A320 aircraft family program could end up being the world's largest commercial aircraft program ever.

That's probably a given. And then the A320neo aircraft program could also end up being Park's largest nondefense program ever, all right?

So let's keep going here. What's next?

Slide 14. Now this is the Chinese airplane, COMAC 919.

That's a single-aisle competitor, of the A320 and 737. That is another version of a LEAP engine made by CFM-1C.

I wonder if C stands for COMAC and A might stand for Airbus. I don't know.

COMAC is increasing manufacturing capacity to achieve production rates of 150. You can see their target rates here.

I won't go through them in detail. They reportedly have over 1,200 orders for the 919 aircraft and they reportedly delivered only 2 in '23, '14, '24, 18 and '25.

So they've got a long, long way to go to ramp up. It 1,200 orders there.

And they say that we heard the lack of availability of the engines has been reported to be limiting COMAC's ability to ramp up. My sense is -- I shouldn't speak for LEAP or CFM.

My sense is they're giving a little more priority to Boeing and Airbus and COMAC, but I can be wrong about that. I'm just telling you what I'm kind of sensing.

Let's go on to Slide 15. The other big program, big aerospace program is the 777X with those GE9X engines.

This airplane has been very, very, very delayed. But I feel that it's going well now that it's on track.

It's doing well in terms of certification. They have amassed lots of flights and lots of flight hours in the test program.

They have over 650 open orders for this airplane. This is a much bigger airplane.

You're not going to get like the same number that you see for the A320, for instance. That's a lot of very nice orders.

The certification test program has moved into Phase 4B of the FAA type certification testing program. That's an important milestone just approved recently.

So that's good. So I think they're progressing well.

Boeing anticipates certification of the aircraft in early to mid-'27 and entering into service, first delivery in mid-'27. So that's very good news.

This picture is very interesting. This was at Fairbanks a few years ago, a friend of mine, I know friends up in Fairbanks, took this picture.

It was up there for cold weather testing. If you go to Fairbanks in the winter, that's a good bet if you look at it to get cold weather testing done, often 40, 50 below.

Let's go -- let's go on to Slide 16. So here are some numbers.

GE Aerospace engine program sales history and forecast estimates, okay. We won't go through all the numbers.

That's probably not necessary. Maybe you just noticed that fiscal '20, just shy of $29 million, $28.9 million, it took all the way to '26 to get back to that number, $29.2 million.

We saw obviously, we're going through the pandemic. Look what happened in '21, my God, it just dropped like dropped off a cliff or something like that -- so our program sales forecast estimates -- Q1 -- sorry, was $7.1 million and Q2, we're estimating $7.5 million to $8.5 million and total for the year, total $34 million, $38 million.

Now you could say, be smart, well, if you add Q1 and Q2 and you multiply that by 2, you're not going to get $34 million to $38 million. The $34 million to $38 million, that comes from our customer.

That's what we're told. We actually are here for quite a little bit to be a little conservative.

And it looks like a stretch, but I just want to mention, last year, this time, we're in the same position where we're looking at -- we had a forecast for the year and then Q1 and Q2, it was much less than half the total. And we ended up making a number anyway.

So we'll see what happens. We don't know what's going to happen.

I'm just telling you where we get the number from. We'll see.

A lot of variables in this world. Let's go on to Slide 17.

Okay. Now we're talking about Park itself.

Park's financial performance history and forecast estimates. So we already know what Q1 was.

We talked about that at the bottom of the first box, $18.3 million sales, $14.6 million EBITDA, adjusted EBITDA. Our estimate for Q2, $19.5 million to $21 million of sales of $4.3 million to $5.1 million of EBITDA.

And then if you look at the footnotes, I just want to highlight something, something that Rich described on Slide 2. We always include that in this slide, but we also see including supply chain, international freight risk.

The reason we're highlighting that is we're a little concerned about some of these things short term and whether -- and to what extent they will impact Q2. So we're just going to flag that for you.

Right now, we're saying, as I told you, this is what we think is going to happen, but we also want to let you know that a little concerned about supply international freight risk. I also want to say just my opinion that Park, we focus very intensely on the quarters.

It's very important to us. We work very hard in our quarters.

But I think the understanding of Park, it's really about the quarters that probably misses the point. And the point is probably to me anyway, more of the big picture.

The quarters are always going to be quirky, sometimes be high, sometimes be low because all kind of factors that might just affect that quarter that don't necessarily have big picture impact. And just my opinion, you investors, you figure it out for yourself, that's my opinion.

Slide 18. You know what, we're not going to go through this.

This is the same slide that we presented last quarter. So if you have any questions about it, just let us know.

Slide 19. Okay, changing gears a little bit.

We talk about this every quarter, our buyback authorization activity. So under our buyback, we purchased 718,000 shares of our common stock, average price of $12.94.

So I just want to flag those numbers for you because we'll circle back on them. Probably not surprised to hear we didn't buy any stock in Q1 or sQ2.

But let's go on to Slide 20 because we juxtaposed buybacks and public offering for a reason. So we have -- we did a recent public offering at ATM at-the-market offering for $50 million of Park's common stock.

And during the Q4, we sold 94,000 -- approximately 943,000 shares of common stock for total proceeds of about $22.8 million or $24.21 per share. That's before commissions.

No sales in Q1, but we go on to Q2, which we're in now, let's go on to -- sorry, Slide 21. okay, in Q2, just in June, Park sold about 170,000 shares of common stock total proceeds, again, before commissions of $27,174,000, average price at $31.24 per share.

I just want to tell you that you should know that we're very disciplined about -- we were very disciplined about this offering. We -- a lot of the buying was done blocks, and we turned them down a lot.

People offer us to buy blocks at X dollars or Y dollars and cents. We just say no, so many times.

Really we're trying to protect the existing shareholders. And I think actually, maybe we could pat ourselves on the back a little bit.

I think we did a pretty good job for you with the ATM. Here's the next thing probably is the big -- this is the total, not broken down by quarter.

So we sold a total of 1,812,601 shares for total proceeds before commissions, just under $50 million, $49,996,000 at $27.58 per share and the ATM offering is complete. But that $27.58 per share, I want to go back and let's look at that, yes, back to Slide 19, the buyback, $90 -- sorry, $12.94, we bought the stock for $12.94.

We sold it for $27.58. So I think that's probably a pretty good deal for you, I would say, what's the expression?

What is it? Like you buy cheap and sell dear or something like that.

Okay. Let's go on to Slide 22.

Park's balance sheet, cash, incredible cash dividend history. We have 0 long-term debt.

We reported $89.4 million in cash and marketable securities at the end of Q1. But you also should know that our cash and marketable securities were estimated to be approximately $114 million at the end of June 2026.

Obviously, the big jump is because of the ATM activity in June. So that's a lot of cash, no doubt.

But remember, hold on, we're going to go into some more detail later in the presentation. We plan to invest $65 million in a new plant, also $25 million in areas C2B fabric plant in the form of advanced payments, and we'll discuss both those things later.

But you had $65 million, $25 million. I don't know, maybe get your calculator out.

I think that's about $90 million. What to say $65 million here, $25 million there before you know you have some real money.

Do you review that, no. I can't -- I don't know where that comes from, but it's -- I don't know from a movie or something like that.

So let's keep going. Park has paid 41 consecutive years of uninterrupted regular cash dividends.

That's a good deal. On Slide 23, here we go, we paid $613 -- the numbers are so big, I can't believe myself.

So $613.7 million, $27.975 per share in cash dividends since beginning of 2005. Now when we declared another dividend, when that $12.5 per share cash dividend is paid on August 3, we will have paid over $30 per share in cash dividends since the beginning of 2005.

Well, I think that's pretty incredible. I do say so myself.

And there's a nice picture of our founders in Flushing, New York. This is not an original plant actually.

Original plant was in Woodside. It wasn't a plant it was a garage.

This is a real plant, I think about 89,000 square feet back in the 1950s. The reason we like to show you this slide when we're talking about paying $613 million of dividends is this was -- this company started with nothing, nothing back in 1954.

2 guys that had some money left over from their war duty start with nothing. So I like to think about that sometimes.

Let's go on to Slide 24, changing gears a little bit. Financial outlook for GE Aerospace engine program, the commercial aircraft juggernaut.

So here's the first juggernaut commercial aircraft. What's the timing for the commercial aircraft juggernaut.

We used to say the juggernaut is coming, it can't be stopped and we better be ready. Remember that every quarter.

Now we're saying, well, the juggernaut is here, at least it's beginning now in that sense. The drivers is a juggernaut, that A320 aggressive ramp-up, A320neo program, that's clearly a big one.

Remember, 51 airplanes in '25, they're going to 75. Well, that sounds like about 50% increase.

That's pretty huge. Expected certification and entry into service of the 777X and COMAC's planned ramp-up.

Those are the 3 big drivers of the commercial aircraft juggernaut. Let's go on to Slide 25, some numbers here.

Let's talk about the A320 here. Remember we mentioned this, that assumption in the first line, second column, 1,080.

Well, that's based on 75 airplanes per month, but also placed upon a 60% market share for the LEAP-1A. But we told you in the prior slide, it's over 66%, which translates to 1,192.

We're not using that number, using 1,080. I just want you to be aware of that, maybe a little conservative.

Now just you know, the Passport 20 and the C909, those programs are really at rate already. So you see they're not the drivers of the juggernaut.

It's the A320, the C919 and the GE9X program that are drivers of the commercial aircraft. Juggernaut, let's go on to Slide 25.

We certainly won't cover this. These are just footnotes, which explain how we computed the numbers on the prior slide.

Slide 27. Okay.

It's half hour into the presentation, and now we're getting into the new stuff, the important stuff. We everything -- I shouldn't say it that way, but important new stuff, Missile Systems, Park's new, juggernaut and the next big thing for Park.

So some of this is just going over some things we covered last quarter for review and some of it is new. Park's Missile Systems niche, -- we specialize in design and manufacture advanced composite ablative materials used to produce solid rocket motor structures and heat shields for critical missile systems, including the PAC-3 Patriot missile system.

Now let me stop there because there was some breaking news this morning announced by Lockheed of something called the PAC-3 ASC. I just want you to understand, we'll talk about that a little later, but everything we talk about in this presentation when I say PAC-3 refers to the PAC-3 MSC.

That's the program we're on now. ASC is something new, and I don't want you to confuse those 2.

Maybe we'll go back and talk about that later at the end of the section regarding missiles. But this just happened this morning, so I didn't have to rewrite the presentation.

Sorry about that. But whenever it says in this presentation, PAC-3, what it means is PAC-3 MSC, not the PAC-3 ASC, okay?

So let's go -- let's keep going. Depletion of the depleted, we covered this last time, very bad depletion of missile systems based on the war in Europe, Ukraine and last year's 12-day war.

And now the war in Iran, it's a pretty dire situation, I think. Slide 28, much reporting about how badly the stockpiles of critical missile systems have been depleted, and we're not going to ago into that now.

If you want to, you can look it up yourself. But running an empty, it's a question.

maybe not empty, but it's certainly concerning how badly the stockpiles have been depleted. Replenishing the depleted stockpiles, yes, clearly, a highly urgent need to replenish depleted missile system stockpiles.

But is that it? Is that all we want to do?

I don't think so or maybe not talking about quadrupling the production of exquisite class of weapon systems. So just getting back to where we started from, no, getting back to where we started from times 4 is, I think, what we're really talking about here.

It's really incredible, unprecedented you come up with your adjectives, I don't know. Slide 29.

We reviewed this before in March of this year. President Trump met with the White House and 7 of the top defense contractors, including Lockheed Martin L3, why do we mention them because they're the big defense contractors on the PAC-3 MSE.

And they need to quadruple their exquisite class of weapon systems as soon as possible. Clearly, the PAC-3 MSE missile system is a key member of the exquisite class of weapon systems.

So in our experience -- our experience rather is that the defense industry has entered into hypersonic mode, hypersonic or frenetics, something like that, you come up with your adjectives. In all years, we have never seen anything like this, particularly for ablative materials or solid rocket missile systems.

The quoting activity, especially for those ablative materials for solid rocket missile systems, hypernetic, hypersonic and frenetic maybe, the PAC-3 Patriot missile system. Again, this relates to the PAC-3 MSE.

We didn't even specify that because there wasn't a PAC-3 ASC. There actually was a PAC-3 CRI, but I don't think they make that anymore.

It was a prior iteration of the PAC-3 MSE, which is the most advanced version of the Patriot missile system family. So these are big things.

Park is sole source qualified for advanced composite materials for solid rocket motors for the PAC-3 MSE missile system program. Slide 30, So stockpiles of these PAC-3 missile system interceptors -- we already covered this just generally, but let's -- it relates to the PAC-3 as well, very badly depleted by the wars and -- but now more depleted by the current war area.

The PAC-3 missile system interceptors have been extensively and very effectively used by U.S. allies in the region, meaning the Middle East region, including Saudi Arabia, UAE, Kuwait, Qatar, Bahrain, Israel, and that's to defend against incoming ballistic missiles and other threats.

The PAC-3 MSE missile system is an extremely effective missile defense system, very high success rate, very high success -- sorry, I should read ahead, very high rates of successful intercept and destruction of incoming ballistic missile threats. But this is the kicker, Patriot missiles do no good if they're not available.

Let's go on to Slide 31. Did you read -- see the report or read it?

-- on July 5, just a couple of weeks ago, dozens of people were killed in Ukraine by Russian ballistic missiles, which Ukraine was not able to intercept and shoot down because of a serious shortage that's in quotes from them of patriot missile interceptors. It makes me want to cry that all these people are dying.

It's not a joke. As previously reported on just continuing here on January 6 of this year, Lockheed announced it reached a 7-year agreement with the Department of War to increase the factory.

This time I actually referred to MSC. MSC, most advanced version of the Pac missile system interceptor production capacity from 600 per year, 2,000.

That's just unheard of 600 to 2,000. That's incredible.

What about us? Actually, our rate is a little higher.

We're not going to tell you what it is, but it's a little higher even than that. January, so in January 2000, a lot of happening in January, I guess, 2026.

The Department of War also announced it is investing $1 billion in L3Harris, solid rocket motor business, formerly Aerojet, now called L3Harris Missile Systems. We're doing solid rocket motor production for the PAC-3 and other missile systems.

You see the focus here, the focus, the focus. Let's talk about Aireongroup.

That's -- we discussed Aireongroup of France. They're a joint venture between Airbus and Safran and they're a significant company.

Going to Slide 32. Our relationship with the Aireongroup and its predecessors goes back to the early 2000s.

We're very proud to be their partner. And just you know, we're not being presumptuous -- we use the term partner.

That's what they call us. That's their term.

So I just want you to understand that. We're not usually a presumptuous company.

Aireongroup produces a proprietary fabric called Raycarb C2B, which is used to produce ablative composite materials for advanced solid rocket missile programs. Here's a big one.

Park sole source qualified on a solid rocket motor for the PAC-3 MSE missile program for specialty ablative materials produced with Aireongroup's proprietary C2B fabric. Park entered into a business partner agreement, that's what they call it, with Aireon in January '22, under which Aireon appointed Park as their exclusive distributor for C2B in North America.

And last year, in March of '25, we entered into what they call a new agreement with Aireon under which Park agreed to advance Aireon EUR 4,587,000 against future payments -- sorry, against payments for future purchase of Park the C2B fabric. So when we buy C2B fabric in the future rather than sending a check, we apply the advance.

I understand how that works. You can read the installments.

It's not necessary for you to read them for you. On Slide 32 at the top of 33, we have one more installment to go, which is next April, I guess, something like that, it's Q1 of '28.

What's the purpose of that advance at EUR 4,587,000 advance to fund 50-50 with ARA, the construction of additional C2B fabric manufacturing capacity in France. This additional French manufacturing capacity expected to come online '28 -- and approximately half of that is for us and half is for them, it kind of makes sense went 50-50 on the project.

This additional manufacturing capacity will not even be close to adequate to support the ramp-up of the PAC-3 MSC missile program. So now what do we do?

Now what? Okay.

Let's go on to Slide 34. So continuing the Missile Systems.

July 18, well, that's pretty recent. That was looking at the calendar 2 days ago.

Aireon and Park entered into a term sheet agreement relating to the construction and establishment by Aireon of a U.S.-based C2B fabric manufacturing plant with expected C2B fabric manufacturing capacity adequate to fully support the needs and the ramp-up of the PAC-3 MSC missile program. Well, that's really good news, isn't it?

Park, we've been negotiating the terms of this agreement for several months. We haven't really talked about it because it wasn't really appropriate, but this is not something we just did last 2 days ago.

The term sheet agreement provides that a definitive agreement consistent with the term sheet terms and provisions will be entered into before the end of the year. Okay.

So what's a big deal about the term sheet then if it says that we're going to enter into a definitive agreement at the end of the year? Well, what's the key significance of the signing by Park and Aireon of the term sheet agreement?

There is. Based on the signing of the term sheet agreement by Aireon and Park, Aireon will now, not later on, now proceed with the construction and establishment of a U.S.-based C2B fabric manufacturing plant, very, very important.

Let's go on to Slide 35. And as provided in the term sheet agreement, here we go, 100% -- 100% of the output of Aireon Group's U.S.-based C2B fabric manufacturing plant will be allocated to Park.

That's for us. Also on July 9, all recent stuff, it was a week or 2 ago, we entered into a letter of agreement with a large defense contractor.

This is a contractor that we work with on the PAC-3 MSE missile program. Letter of agreement ties into it relates to the term sheet agreement.

There's only so much we can discuss about this, but it's a little complicated. It's all tied together.

all ties together. And let me just -- I guess we'll leave it at that.

Under the terms of the term sheet agreement and coordination with this defense contractor customer, we've committed -- Park is committed to invest $25 million in Aireon's U.S.-based C2B fabric manufacturing plant. And that's not an equity investment, the $25 million will be made by Park in the form of advanced payments to be fully applied against future purchases of C2B fabric.

The $25 million in advanced payments are expected to be made by Park in '26 and '27 are expected to be applied by Park against future C2B fabric purchases beginning in '30. So we're still working out the detail, but the full application of $25 million, I don't know, could take $32 million, $33 million, we'll see.

In other words, when the advance is fully utilized, fully applied the purchase of C2B in the future. Let's go on to 36.

Why the heck are we doing this? $25 million, that's a lot of money.

Why are we making a $25 million advance payment commitment? Because it's necessary in order for Aireon to proceed with the construction of the U.S.-based C2B manufacturing plant, and we believe it is highly urgent that Aireon builds its U.S.-based manufacturing plant as soon as possible.

As explained above, Aireon's U.S. plant is necessary to support the ramp-up of the PAC-3 missile program.

So let's keep going. Why are we doing this?

Just you know, it's not all dollars and cents for Park. Almost every time a factory missile, MSC, MSE missiles launched and successfully intercepts, destroys an incoming ballistic missile.

Remember, the success rate is very high. It's likely that there are people who are live and walking around the earth who otherwise would be body parts scattered around.

That's a harsh way to describe it, but the reality is a lot more harsh. That's for sure.

We're not fooling around here. Let's go on to Slide 37.

But let's talk about dollars and cents for a minute, shareholders who are interested in that, I guess. On the terms of the term sheet agreement, there is a minimum required purchase.

This is very key of C2B fabric from 30 to 36. We're not going to go into what that number is.

This is not a forecast. It's a minimum required purchase under the term sheet.

What does that minimum amount translate into revenues for Park during that 30 to 36 period? Well, -- remember how we do this, we buy the fabric from Aireon.

We sell it to our customer, then we store it for them. We never deliver it to our customer.

They keep it in our plant because ultimately, 100% of the time, they're going to ask us to prepreg it. So when we look at the revenues, we have to look at the revenues from selling them the fabric and then also some selling in the prepreg.

And we're not going to give you a number, but it's hundreds of million dollars. So you think about that $25 million investment and we get -- it comes back to us.

Now just cost of money, right? Cost of money, I don't know.

You could figure it out better than I can. What's the cost of money if we make the investment over the next couple of years, you don't get it fully paid back, let's say, 32, 33.

There's a cost of money. I don't know what that is, but you could figure it out.

ROI is the best you'll ever see. So let's go back and talk about -- we're kind of done with this section, the PAC-3 ASC, was just announced by Lockheed.

If you read carefully between the lines, it looks like the PAC-3 MSC is being used for a lot of things. It's overkill.

It's very expensive overkill for cruise missiles and drones and that kind of thing, it's overkill, not necessarily. The PAC-3 MSC is really designed for incoming long-range ballistic missiles, very effective.

It can be used to shoot on other things, but not really very cost effective. If you read between the lines, it looks like the ASC is designed to fill that gap.

Now we've already spoken to our customer about this. And this is important.

Everything I'm telling you about relates to the PAC-3 MSE. The PAC-3 ASC is gravy for Park.

It doesn't eat into anything we're talking about with the MSC. It's gravy for Park.

Now obviously, we're very interested and we were expressed sure we're delighted to support that program. We'll see what happens.

But I want you to understand, that's not a negative for Park. It's a potential big positive for Park.

Okay. Let's go on to Slide 36, totally different topic here.

Park's major new manufacturing plant on July 17. It's also pretty recent news here.

Park entered into a long-term lease agreement for -- to lease 18 acres of land at the Tulsa, Oklahoma International Airport. So a new manufacturing plant, we've been talking about for a while.

We said we're looking at -- we haven't made a site selection decision yet. Well, we have.

It's going to be the Tulsa International Airport. That will be the site of Park's major new manufacturing plant.

The site will also provide space for an additional plant location in the future if and when needed. This is important.

So the existing -- the immediate plant, let's put it that way, probably needs about maybe 9, 10 acres. So there's another maybe 9 acres or so that will be available for another plant at some point in the future, which is important for us.

It's a beautiful location at Tulsa International Airport. Maybe you'll visit it someday.

Maybe we'll have a shareholder meeting here someday. Park's a new plant size, about 150,000 square feet.

The budget, $65 million outflow. This is a guess because sometimes the outflow will straddle the end of the fiscal year.

So just a guess, but approximately $25 million in '27, $35 million in '28 and $5 million in '29. Let's go on to Slide 39, please.

Time line for the new plant, complete the facility about in fiscal '28, 2 years, production and shipment to customers commence in fiscal '29. Our new plant is designed to basically do what we do now, support complete composite materials product line.

Including specialty ablative materials, et cetera, et cetera, et cetera. What else, that's a key question because this is not just a deal we're doing now.

That's part of it. We're also looking at this as a major development opportunity for Park.

So what else is an important question. We'll see about that.

Our new plan is expected to approximately double Park's current hot melt break and film adhesive manufacturing capacity, principally used for the commercial aircraft programs like the GE Aviation, GE Aerospace programs or approximately double the capacity. And then our new plant is expected to approximately triple our current solution treating manufacturing capacity.

And what's that used for? Well, it's used for a lot of things, but among other things, to support the Missile Systems program.

So we're going to be tripling our solution treating capacity with the new plant. I mean, tripling over compared to the -- our current capacity in Newton, Kansas.

Let's go on to Slide 40. Why are you building our new manufacturing plant?

Well, pretty obvious. Our juggernaut requires also to enable, facilitate Inspire Fire Park's growth and development as a company in the future.

So why do we choose Oklahoma? Probably a good question to ask.

Could have been other places. Well, we were very interested to understand -- so let me back up.

The second largest industry in Oklahoma. You know what the first is oil and gas is second largest aerospace, A&D rather.

But we wanted to understand what do we mean by that? What's the culture of A&D in Oklahoma?

Is it like big commercial aircraft companies, maybe more like what we have in Wichita? Or is it something else?

And so we're very pleased that we kind of -- by spending a lot of time here doing due diligence. We think the A&D culture in Oklahoma is more -- a lot of start-ups, more about -- I wrote some notes down here, so I'm reading from them.

Normally, I don't write notes. innovation, creativity, imagination, risk taking, more of a progressive kind of mindset, space and defense activity, start-ups.

We think that's very good for us. We think that will inspire us to be more creative and more innovative in our own thinking and our own development as a company.

So that's our thought behind Oklahoma. We're really excited about it actually.

We've come a long way since we started a company in a little garage in Woodside Queens back in '54. And again, the garage is not like what you call like a euphemism.

I mean it was really a garage. I mean, with cars and stuff.

I don't know, maybe 2,000 square feet, something like that. But in my opinion, we're just getting started.

Okay, operator, we're done with the presentation. And to the extent there are any questions or any questions, we'll be happy to -- Mark and I will be happy to answer them.

James Ricchiuti I'm wondering if you can tell us if there's any Raycarb C2B fabric sales that you're embedding in that fiscal Q2 outlook just because it does have an impact on margin. Brian Shore Yes.

But it's -- we didn't mention it because it's more balanced between the fabric and the fruit break, at least that's what we're expecting. We also mentioned a little concern about international freight, and so that could have an effect on it.

It's not significant. If we expected something that would have a significant impact on the bottom line, we would have brought that up.

James Ricchiuti Got it. And also, I'm wondering if we look at the revenue split, commercial aircraft, military in Q1, should we assume a similar type of profile in terms of the Q2?

And I know you'll be looking probably on a multi-quarter period. Brian Shore Yes, that's hard for us to say.

It's probably about the same. I think we would say longer term that the military portion of the pie chart will start to become more prominent.

And I think we'd also say, certainly, when you get into that breakdown of military, that second pie chart that the Missile Systems portion of the pie chart will grow as well. James Ricchiuti Okay.

And one final quick one, if I could. Just maybe this -- I apologize if this was in some of the materials you provided or maybe in the Q.

Did you have a second 10% customer in the quarter? Brian Shore I'm sorry.

What was the question? James Ricchiuti Sorry, was there a second 10% customer in the quarter besides...

Brian Shore Well, we don't disclose -- we only disclosed that for the year-end. We don't disclose 10% customers by quarter.

So you have to look at our 10-K for the 10% customers for the year-end, but that's -- sorry, we don't do that. You're probably testing that MRAS is going to be MRS's 10% as a good guess, but we don't actually confirm that.

Operator Our next question is from Trevor Walsh with Citizens. Trevor Walsh So maybe just also piggybacking on the margin question.

So I think last quarter, you had mentioned that the C2B more direct sales, not the prefreg kind of caused some of the margin pressure in Q4. Obviously, a nice recovery here in Q1.

Was it really just that dynamic of the C2B sales? Or was there something else in the quarter that helped kind of gross margins pop up back to that 50...

Brian Shore Okay. Thanks for the question.

So I think you know how it works. I mean every quarter there's going to be lots of factors go up and down, but we're highlighting the big one here.

And so I think that would be one of the more significant factors when you compare the gross margins in Q4 and Q1. In Q4, there was -- I don't remember the number, but quite significant C2B sales fabric sales, I should say, in Q4, and that really pushed the gross margin down quite a bit.

And unfortunately, the problem is that these things, they're kind of out of sync, so that's why we keep bringing it up because if you look at things long term, it's all fine because, like I said, all 100% of the C2B fabric that we purchase ends up being produced in the prefreg. But the timing is out of sync, so it can really skew our margins on a quarter-to-quarter basis.

Trevor Walsh Got it. Okay.

That's helpful. And that was kind of leading to my follow-up.

I guess, is it purely kind of customer-driven then in terms of when you -- whether you're -- in a given quarter, whether you're going to sell x amount of C2B versus prepreg, and it's not necessarily you choosing to do one or the other. It's more just what customer demand and kind of timing is dictating and it's more of that type.

And then a follow-up to that is how might that be changed or affected when you open up the new facility, both the Aireon specific facility and your new facility in Oklahoma? Brian Shore The answer to the first question is we don't decide anything.

Customers decide everything in terms of timing of the fabric purchases in terms of the timing of the prepreg purchases. The question about the Oklahoma plant, though was -- I'm not sure we followed that one.

What was that question again? Trevor Walsh Just does the dynamic of the timing change at all with either the new facility for CTB in the U.S.

or if that really doesn't necessarily kind of move that dynamic in terms of like just again, the timing of the fabrics specifically, the sales? Brian Shore I don't know if it's going to change anytime soon, except maybe one way we might think about it is as these programs ramp, the numbers get larger and larger.

And I think it might be more likely that they kind of are more aligned as the programs ramp and get larger and larger. But we don't know.

I mean it's -- like I said to answer your first question, it's never a decision. It's always the customer's decision as to when they want to buy the fabric, when they want to buy the prepreg.

And that's what we do here. We do what the customers ask us to do.

We don't tell customers what they should do. They tell us what we should do.

that's a little bit, I think -- I know that sounds really strange, but that's probably a unique thing about Park, which is, yes, we try to be responsive and flexible and do everything we can to help our customers and not tell them what to do, they tell us what to do. I know that sounds strange, but I think maybe some of our competitors don't really think that way all the time.

Trevor Walsh Got it. No, I think it makes sense.

Maybe just one quick one as a final, Brian, if I can. Of the kind of the outline that you gave around the commercial-oriented juggernaut, the GE programs, obviously, A320 and LEAP is -- for that portion, at least is the biggest contributor.

But is there anything kind of in the next I don't know, 2, 3 quarters that you think are -- could be more of a surprise to that kind of your calculus there from the other programs, whether it's COMAC or some of the Boeing. Is there anything that you think -- whether it's to the more negative or positive, but just something that could be -- maybe move that needle that's not necessarily, again, A320 specific?

Brian Shore So the -- as we said, we believe the Global 7500 and 8000 program and the COMAC 909 program are really at rate already. So we don't expect much from them.

I don't think we're going to see huge upside from the 919 program in the next few quarters because that's the issue is not that COMAC doesn't have the orders, it's they have to find a way to ramp up, and that means they have to deal with supply chain issues and their own manufacturing ramp-up as well. So we talked about the fact that maybe they don't have enough engines, and it's hard to make airplanes without engines, obviously something sarcastic.

And the Boeing program, yes, the next few quarters, I don't know, maybe 3 or 4 quarters out. The Boeing has already made a lot of these airplanes that are sitting there in paint field in Washington.

Some of engines and some don't. So -- but they already built a lot of airplanes in anticipation of the certification and entry into service.

But once they get to that point next year or early next year, I think we could expect to see that program accelerate more. It's been a little bit sold out actually waiting for the program to get -- waiting for the aircraft to get certified.

But the A320 is going to be the big, I think. I mean it's when you compare the A320 programs, it's -- A320 is a big driver.

It's very dynamic and a lot of pressure from Airbus to ramp that program up as aggressively as possible. And they're struggling, of course, we talked about this many times with supply chain issues as well.

So Airbus, I mean. Nick Ripostella First of all, Brian, it's -- thank you for clarifying the -- with respect to that announcement on the missile program today.

I was wondering about that. So.

Brian Shore Yes. Nick, I think the time was good because I think if the announcement came out tomorrow, we have all these people asking about it, well, we really can't talk about it.

So I'm glad we're able to talk about it today. So go ahead.

Sorry, go ahead. Nick Ripostella And the second, I just wanted to say it's wonderful that we have great research coverage now after all these years and I had a chance to look at that report from Citizens.

It's very thorough. And quite a feather in the cap, the Needham guy.

That guy is great. I have followed him for many, many years.

So this is good news. The only other question I have is, I mean, you put out such a thorough presentation all the time.

There really isn't much to ask. But just on Juggernaut 2, Andrew has been working on missiles that are competitive reportedly with the Patriot.

And I was just wondering, do you know anything about those? And do those use materials?

I guess another way of asking it, and I may have referenced this the last time, are there missile programs that like don't need the materials that you -- the type that you would supply? Or is that just a foolish question?

That's about it. Brian Shore No, I don't think it's foolish.

Good question. First of all, we love Anduril.

We like to do as much with them as possible, but there are many other kind of materials other than C2B that are used in other programs. And the issue is C to be availability and the Patriot factory MSCs can have priority.

So other customers may not want to get in line and back of line. So they are looking at other kind of materials, and we're happy to work with those as well, happy to work with those, and we do.

And -- but we'd love to do more business with Anduril and we're working with them. So I don't know if that helps to answer your question, but...

Nick Ripostella Okay. So you are working with them right now?

Brian Shore Well, yes, yes, we are. saying we'd like to do more, but yes, we're definitely working with them.

Christopher Hillary I wanted to ask on your longer-term EBITDA margins. Could you give any commentary with all this new business coming online?

Do you feel like these are accretive or dilutive to your long-run EBITDA margins? Brian Shore The new business?

Well, the new business would definitely be a positive. Now we're going to have some more cost to deal with as we bring up the plant.

The timing is going to be the cost will proceed the revenues. But the new business, the margins are quite good, quite special, I would think.

Christopher Hillary And then one other question I wanted to ask is it does seem like there's an awful lot of new business activity. And while you're expanding substantially, are there other capacity expansions or certain capabilities that you are exploring adding to your current expansion plans?

Brian Shore So the immediate expansion plan relates to expanding what we're doing now. But of course, we want to take the opportunity to make sure we're taking advantage of any kind of enhancement that would be appropriate for Park to consider.

And then we also mentioned that the -- this was a specification actually, we were dealing with a few different locations, the finalists, if you will. We were looking for 20 acres, approximately 18 because we wanted to -- we knew that we only need about half of that for the immediate expansion plan.

We wanted to have additional acreage to place another location, another plant on our campus without having to go across town or something like that for other opportunities that we're working on, that we are working on now and also in the future. Operator There are no further questions at this time.

I'd like to hand the floor back over to Brian Shore for any closing comments. Brian Shore Okay.

Well, thank you, everybody, for tuning in. And sorry, the call went as long as it did, but it's always nice to talk to you.

If you have any follow-up questions, feel free to give us a call. Otherwise, please enjoy the rest of the summer, and we'll talk to you soon.

Thanks. Bye.

Operator This concludes today's conference. You may disconnect your lines at this time.

Thank you for your participation.