Park Aerospace Corp. (PKE) Earnings

Management highlights

- Capital Deployment & Shareholder Returns * Completed the $50 million at-the-market public offering, selling 1,812,601 total shares at an average price of $27.58 per share, for total pre-commission proceeds of just under $50 million. This followed prior share buybacks at an average price of $12.94 per share, which management frames as a value-accretive transaction for existing shareholders. * The company holds $89.4 million in cash and marketable securities with zero long-term debt, and has paid uninterrupted regular cash dividends for 41 consecutive years, with over $30 per share in cumulative dividends paid since 2005. * No new shares were sold in Q1 FY27, and 170,000 shares were sold in June 2026 (Q2 FY27) for $27.174 million in pre-commission proceeds at an average price of $31.24 per share. - Commercial Aircraft Juggernaut Update * The commercial aircraft growth driver (dubbed the "juggernaut") is now underway, led by Airbus's planned ramp-up of the A320 NEO program. Airbus targets a production rate of 70–75 A320 family aircraft per month by the end of 2027, up from 51 per month in 2025. The CFM LEAP 1A engine (supported by Park Aerospace) holds a 66.2% market share of firm A320 NEO orders, a figure that has been steadily increasing, translating to ~1,192 LEAP 1A engines per year at the full 75 aircraft per month production rate. * The 777X program with the GE9X engine has reached an important certification milestone (Phase 4B FAA testing), and Boeing expects certification and entry into service in mid-2027, with 650+ open orders for the aircraft. * The Comac C919 program holds over 1,200 orders but is still in the early stages of ramping up production, with engine supply availability currently limiting production growth. * Management forecasts full year FY27 GE Aerospace program sales of $34–38 million, with Q2 FY27 estimated sales of $7.5–8.25 million. - Missile Systems (New Growth Juggernaut) Update * Park Aerospace is the sole-source qualified supplier of advanced composite ablated materials for the PAC-3 MSE Patriot missile system. Global missile stockpiles have been heavily depleted by multiple ongoing conflicts, and the U.S. Department of Defense has directed a quadrupling of PAC-3 MSE production, from 600 to 2,000 interceptors per year. * Park has an exclusive North American distribution partnership with Ariane Group for their proprietary Raycarb C2B fabric used in these missile materials. A 50-50 funded expansion of Ariane's French C2B capacity will come online in 2028, but this will not be enough to support full PAC-3 MSE ramp-up. * New milestone: Park and Ariane recently signed a term sheet for a new U.S.-based C2B manufacturing plant, with 100% of the plant's output allocated exclusively to Park Aerospace. Park has committed $25 million in advance payments (applied against future fabric purchases starting in 2030) to fund the plant, with a definitive agreement expected by the end of 2026. The minimum 7-year purchase requirement for C2B from the U.S. plant translates to hundreds of millions of dollars in future revenue for Park. * The newly announced PAC-3 ASC missile program, designed to lower-cost defense against smaller threats like drones and cruise missiles, is viewed as incremental "gravy" for Park, and management expects to support the program if selected. - New Tulsa Manufacturing Plant * Park has selected Tulsa, Oklahoma as the site for its new 150,000 square foot manufacturing plant, on an 18-acre plot (with 9 acres reserved for future expansion). The total project budget is $65 million, with spending expected of ~$25 million in FY27, ~$35 million in FY28, and $5 million in FY29. * The plant will double Park's current hot melt prepreg and film adhesive capacity (for commercial aircraft programs) and triple its solution-treating capacity (for missile programs). Production is scheduled to commence in FY29. Management selected Oklahoma for its progressive aerospace and defense innovation culture, which is expected to support future growth.

Guidance

- Q2 FY27 guidance: total company sales of $19.5–21.0 million, adjusted EBITDA of $4.3–5.1 million; GE Aerospace program sales guidance for Q2 is $7.5–8.25 million. - Full year FY27 guidance: total GE Aerospace program sales of $34–38 million, with the forecast pulled directly from customer input and adjusted slightly downward for conservatism, similar to prior year forecasting that ultimately met full year targets. - C2B U.S. plant: The definitive agreement for the new Ariane U.S. C2B plant is expected to be finalized by the end of 2026, with the plant coming online to support PAC-3 MSE ramp-up, and advance payments of $25 million to be made in FY26 and FY27. - New Tulsa plant: Facility completion is targeted for FY28, with production and customer shipments commencing in FY29. - Long term: Management expects the military missile segment proportion of total revenue to grow over time, as the PAC-3 MSE production ramp progresses.

Segment performance

Overall Q1 FY27 results: total sales of $18.312 million, gross profit of $6.376 million, gross margin of 34.8%, and adjusted EBITDA of $4.576 million (25% EBITDA margin). The results came in at the high end of the previously guided range for both sales ($17.7–18.4 million) and adjusted EBITDA ($4.1–4.6 million). - GE Aerospace Engine Programs: Q1 sales of $7.1 million, which aligns with the full year forecast for this segment of $34–38 million. This segment represents the company's largest commercial aircraft business, supporting programs including the A320 NEO LEAP 1A, Comac C919 LEAP 1C, and GE9X for the 777X. - Commercial Aircraft: Aligned with historical long-term revenue contribution proportions. The commercial segment is driven primarily by the A320 NEO ramp-up, with expected accelerating growth as Airbus increases production rates. - Military / Missile Systems: Q1 revenue contribution was slightly lower than typical long-term averages, due to the absence of Raycarb C2B fabric bulk sales in the quarter. $1.9 million in Q1 revenue came from pre-printed ablated material for missile programs (produced with C2B fabric, which carries high margins). Management expects the military and specifically missile systems portion of total revenue to grow meaningfully over the medium term.

Risks & headwinds

- Quarterly revenue and margin results can be heavily skewed by the timing of customer requests for bulk C2B fabric sales versus pre-preg sales. Bulk fabric sales carry low margins, while pre-preg sales made from the fabric carry high margins, and timing mismatch between these two can distort quarterly results even though the long-term margin profile is stable. Management emphasizes that quarter-to-quarter volatility should not be extrapolated to long-term performance. - Airbus and Boeing commercial aircraft programs face ongoing supply chain challenges that could delay production ramp-up plans, which would in turn delay expected revenue growth for Park's commercial aerospace segment. - The Comac C919 production ramp is currently constrained by engine supply availability, which limits near-term growth from this program. - Costs for the new Tulsa plant and the C2B U.S. plant advance payments will occur well in advance of the associated revenue growth from these capacity expansions. - Commercial aircraft production forecasts rely on customer guidance, and actual deliveries may differ from planned ramp-up schedules.

Analyst Q&A

• Q: James Grischutti (Needham) asks if any Raycarb C2B fabric sales are included in the Q2 FY27 outlook, and if the Q2 revenue split between commercial and military will be similar to Q1. /

  A: Management states no significant C2B fabric sales are expected in Q2 that would impact margins, and the revenue split is expected to be broadly similar to Q1. Management confirms that over the longer term, the military segment, and specifically the missile systems sub-segment, will become a larger proportion of total revenue. Management declined to disclose quarterly 10%+ customers, noting this disclosure is only provided annually in the 10-K filing.

• Q: Nick Ripostella (NR Management) asks whether the timing of C2B fabric vs prepreg sales is purely customer-driven, and if the new C2B and Tulsa plants will change this dynamic. /

  A: Management confirms the timing of purchases is fully dictated by customer demand, not company decisions. As production volumes ramp up over time, it is more likely that fabric and prepreg sales will become more aligned quarter-to-quarter, reducing margin volatility, but the customer-driven dynamic will not fundamentally change.

• Q: Nick Ripostella (NR Management) asks what non-A320 programs could move the needle on commercial revenue over the next 2-3 quarters. /

  A: Management states the Global 7500/8000 and existing Comac programs are already at steady production rates, so no major upside is expected from them in the near term. The 777X program will likely start accelerating around 3-4 quarters from now, after it receives certification in early 2027. The A320 NEO ramp will remain the primary driver of commercial growth for the foreseeable future.

• Q: Christopher Hillary (Rubo Capital) asks if new missile and commercial growth is accretive to long-term EBITDA margins, and whether the Tulsa site reserves space for future expansion. /

  A: Management confirms all new business has attractive margins and will be accretive to long-term margins, though upfront costs for the new plants will precede revenue growth. The 18-acre Tulsa site was intentionally selected to have ~9 acres of reserved space for additional future plant capacity to support upcoming new opportunities the company is currently pursuing.