PARK AEROSPACE CORP Q4 FY2026 earnings call

Core Q4 Financial Results

• Q4 FY26 sales came in at $24.2 million, within the guided 23.5-24.5 million range, and adjusted EBITDA of $5.17 million fell within the 4.75-5.25 million guided range, meeting management forecasts. Management emphasized they provide unbiased guidance without low-balling to "beat" estimates.
• The 28.7% gross margin (below management's 30% target) is explained by the high volume of low-margin C2B fabric distribution in the quarter; higher-margin ablative material production from this stockpiled fabric will be recognized in future quarters.

Commercial Aerospace Program Updates

• The A320neo program, the largest commercial program Park supplies, is ramping up: Airbus targets 75 aircraft per month by the end of 2027. CFM LEAP-1A engine market share for the A320neo has risen to 66.2% (up from historical 60-61%) due to Pratt & Whitney GTF engine reliability issues and shortages, creating additional upside for Park.
• The 777X program has completed over 1,500 test flights and 4,400 test hours, with 652 open orders; FAA certification and first delivery are targeted for 2027. Park's proprietary Parkvile adhesive products for the program are undergoing qualification, and a Life-of-Program agreement is under active negotiation.
• COMAC C919 production is targeting 150 aircraft per year by 2027, with over 1,200 total orders. CFM LEAP-1C engine shortages have slowed ramp to date, but recent diplomatic progress may increase engine allocations to the program.

Defense/Missile Segment Strategic Update

• Global missile stockpiles have been severely depleted by multiple recent conflicts, creating an urgent need for replenishment. The U.S. government has called for quadrupling production of "exquisite class" weapon systems including the PAC-3 Patriot missile system, marking a permanent sea change for the defense industry.
• Park is the sole source qualified supplier of C2B-based advanced ablative materials for the PAC-3 program, and Lockheed has indicated PAC-3 MSE production will ramp to close to 2,000 interceptors per year (up from 500), creating massive demand growth.
• Park is the exclusive North American distributor of ArianeGroup's proprietary RAYCARB C2B fabric. Park has agreed to a $5 million advance to fund additional C2B manufacturing capacity in France, which will be online by 2028. This additional capacity will not be enough to meet projected demand, so Park is in active negotiations to build additional C2B manufacturing capacity in the U.S., requiring a significant Park investment.

Capital Structure and Capital Allocation

• Park repurchased 718,000 shares at an average price of $12.94 per share for total consideration of $9.29 million, when management believed the share price was unreasonably low.
• Park completed an at-the-market (ATM) offering that sold 943,000 shares in Q4 at $24.21 per share for net proceeds of $22.8 million, to fund capacity expansion and preserve liquidity for new opportunities.
• Park has no long-term debt, and ended the quarter with $89.4 million in cash and marketable securities. Management has noted that planned capacity expansion (both Park's own plant and the U.S. C2B plant with Ariane) will require more capital than current cash balances.
• Park has paid dividends for 41 consecutive years, with cumulative dividends of over $30 per share since 2005.

New Manufacturing Plant Update

• Park is planning a major new U.S. manufacturing plant to support growth from both the commercial aircraft and missile systems juggernauts. The original plan for 120,000 square feet is being expanded to accommodate additional solution treating capacity (required for missile production), and the company is targeting a 20-acre site to allow for future expansion. The project will cost more than the original $50 million capital budget.
• The plant will support all of Park's product lines, including ablative materials for missile systems, film adhesives, and lightning strike protection materials.

Overall Q4 FY26 total revenue was $24.2 million, with gross profit of $6.93 million (gross margin 28.7%), and adjusted EBITDA of $5.17 million (EBITDA margin 21.4%).

1. ArianeGroup C2B Fabric Distribution: $7.1 million in C2B fabric sales (29.3% of total Q4 revenue) at low markup. This was paired with $1.3 million in high-margin ablative materials manufactured from C2B fabric sold to defense customers.
2. GE Aerospace Jet Engine Programs: $8.1 million in Q4 FY26 revenue, contributing 33.5% of total Q4 revenue. Full fiscal year 26 revenue from this segment was $29.3 million, returning to pre-pandemic 2020 levels.
3. Military / Missile Systems: Military aerospace revenue contribution has grown steadily through FY26, with missile systems (led by the PAC-3 Patriot program) becoming the largest and fastest growing segment, driven by urgent global stockpile replenishment.
4. Commercial Aerospace: Commercial aerospace revenue has recovered from pandemic lows, with growth tied to the ramp-up of major aircraft programs including the A320neo family, 777X, and COMAC C919.

• Q1 FY27 total sales guidance is 17.7 million to 18.4 million, with adjusted EBITDA guidance of 4.1 million to 4.6 million.
• Full year FY27 GE Aerospace program sales guidance is 34 million to 38 million, which is a conservative estimate based on customer build plans.
• Management confirmed that the long-expected commercial aircraft ramp-up (previously referred to as the "coming commercial juggernaut") is now underway, and the missile systems ramp-up is growing even faster than expected, creating multi-year growth for the company.

• Industry-wide supply chain and shipping delays have reemerged as a major issue as aerospace and defense programs ramp up after the pandemic. $715,000 in planned shipments were missed in Q4 FY26, with approximately $1.3 million in missed shipments expected in Q1 FY27, as the industry struggles to keep up with accelerated demand.
• Current additional C2B fabric capacity being built in France will not be enough to meet projected demand from the quadrupling of missile production, creating near-term supply constraints for the high-growth missile segment.
• C2B fabric imported from France is currently subject to U.S. tariffs, creating potential cost pressure even though tariff impact has been minimal to date.
• While there is significant demand growth, the scale of the required capital investment to meet that demand means Park will need to raise additional capital beyond current cash on hand and existing ATM capacity.
• While C2B is currently the leading ablative fabric for solid rocket motors, there is always the risk that competing alternatives may be developed, though any new qualification is expected to take years.

Q: Are there any existing alternative materials to C2B fabric for missile programs, and is competition a material risk? / A: There are limited stockpiles of two comparable materials, but those materials are no longer in production and will be rapidly depleted now that production is quadrupling. While there are efforts to develop new competing materials, Park is actively involved in any new product development efforts and does not view this as an immediate threat to its position. C2B is broadly recognized as the highest performance ablative fabric currently available for solid rocket motors.

Q: Is Park planning to raise additional capital beyond the $22.8 million already raised via the ATM offering? / A: The $50 million ATM authorization still has remaining capacity, and management will continue to use it in a disciplined way, only selling shares at prices that are fair to existing shareholders. Additional capital is needed to fund the planned capacity expansion, but management will act carefully to protect existing shareholder value. The company has already executed a successful buy low, sell high strategy with its earlier share repurchase and ATM offering.

Q: Is Park currently working with or pursuing work with commercial space companies like SpaceX or Blue Origin? / A: Park does a small amount of work with Blue Origin, primarily in parts rather than large structural material programs. SpaceX focuses heavily on reusable rocket systems, while Park's core strength is in solid rocket motors which are typically single-use for defense applications, so there is limited existing work with SpaceX to date. Management would be open to future opportunities with commercial space firms if they align with Park's capabilities.

Q: How will automation be used in the new manufacturing plant? / A: Management plans to use automation intelligently where it adds value, but will not adopt automation just for the sake of appearing advanced. Automation works well for high-volume standardized production, but Park's business requires flexibility and rapid change to meet shifting customer demand, which is better supported by a skilled workforce. The plant will use automation where it fits the company's operating model.