Park Aerospace Corp. (NYSE:PKE) Q2 2025 Earnings Call Transcript

Park Aerospace Corp. (NYSE:PKE) Q2 2025 Earnings Call Transcript October 16, 2024

Operator: Good afternoon. My name is Matt, and I will be your conference operator today. At this time, I’d like to welcome everyone to the Park Aerospace Corp. Second Quarter Fiscal Year 2025 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. [Operator Instructions] At this time, I’d like to turn the conference over to Mr. Brian Shore, Chairman and Chief Executive Officer. Thank you. You may begin.

Brian Shore: Thank you, operator. Hello. This is Brian. Welcome to our fiscal ‘25 second quarter investor conference call. Nice to have you on-board. With us today are Matt Farabaugh, our CFO; and also Mark Esquivel, President and COO (ph). Well, we announced our earnings through news release right after the market close. If you don’t have that, you want to get access to that because in the earnings release, there’s also instructions as to how you can access the presentation that we’re about to go through. The presentation is also on our website. You want to have that up or the – in order for the discussion to be more meaningful. After we’re done, as the operator told you already, after we’re done, we will go through the presentation.

We’ll be happy to answer questions. So why don’t we go and get started? Why don’t we go to Slide 2, our forward-looking disclaimer info. Let’s know if you have any questions about the forward-looking disclaimer language. Slide 3, our table of contents, beginning in Slide 1, we have our investor presentation. Then we also have supplementary financial information attached as appendix one at the end of the presentation. We don’t intend to discuss that at this time, but if you have any questions about the supplementary financial information, let us know. Here we have a picture, the clearest picture of Mercury Ever Taken. What a beautiful picture in my opinion. Thank you, James Webb Space Telescope, obviously taken by James Webb Space Telescope.

And as many as you know, our proprietary Sigma Struts are incorporated into the structure of the James Webb Space Telescope. So that telescope has a special place in our hearts. Let’s go on to Slide 4, the quarterly results. When we focus just on the right-hand column of Q2, $16,709,000 sales, $4 million of $757,000 of gross profit, $3,204,000 of EBITDA. Quickly, what did we say about our Q2 during our Q1 investor call? We said the sales estimate $15.9 million to $16.4 million, so we came in just a little tail above that. Adjusted EBITDA estimate, we gave you $3 million to $3.3 million, so we came in right within that range. Let’s keep moving here, Slide 5, please. Continuing with quarterly results, for some considerations for Q2. There was approximately $2.2 million of ArianeGroup RAYCARB, C2B NG product.

Sales during Q2 under Park’s business partnership with ArianeGroup. We talked about this often. This is the fabric that we purchased from ArianeGroup for ablative programs, for missile programs, and we then sell it to the OEM customers, turnaround pretty quickly within a couple of weeks. Quite low margins, it’s really a markup, but we always say, well, don’t worry, these one when we actually produce the product and make the ablative materials, that’s where the margins are quite good. But by comparison, there was only $750,000 of ablative material sales during Q2. So you see the little bit of an imbalance there, much more emphasis on the low margin part of the equation, less emphasis on the higher margin. Eventually, it all comes through, of course.

There were significant ongoing expenses in Q2 related to bringing Park’s new production facility fully online, you know all about this, including expenses for depreciation. Let’s just talk there with the asterisk, $1,260 — sorry, $1,260,000 per year of depreciation expense related to the new production facility. And this obviously does not affect EBITDA by definition, what it’s important, what it does affect gross profit and gross margin, approximately 2% impact on the gross margin just from the depreciation. And if you look at the gross margin in Q2, what was it, I think, 28.5%, was that the number? Let me quickly make sure I’m telling you the right story, at 28.5%. We always say, we don’t like it under 30. Just the depreciation alone would bring in above 30.

But it’s not just depreciation – results of this other stuff. There’s other stuff is also included in the EBITDA or effects EBITDA facilities, maintenance, utilities, insurance, other overhead expenses and expenses related to additional Park people, all related to the new facility. Additional expenses. I thought this was an accident or a problem. These are planned expenses. I just want you to understand that required to bring the new facility fully online in order to meet the needs of the coming Juggernaut, which is, I’ll describe later on in the presentation. So it’s all part of the plan, but nevertheless, these items are going to hold down our P&L and our margins until that facility has ramped up. And right now, it’s very underutilized, but we’re doing it intentionally because we need to get going with that facility, so we can meet the needs of the Juggernaut and not get behind the power curve.

Slide 6, total missed shipments in Q2, $600,000, that’s not a great number. Caused by international shipment issues, supply chain, customers on-hold, other miscellaneous issues. Yes. So, the aerospace industry, not really a happy place right now, a little more difficult, a little more challenging for us. We got wars as well that, are a factor, especially when you talk about international shipments. There was no impact though on Q2, the sales and our earnings from the storm damage except for the $64,000, sorry, I got that, like, dyslexic thing there. $46,000 of expenses reported as a special item in our Q2 earnings release. So other than the $46,000, no impact from the storm damage on Q2 earnings or sales. All production lines were fully operational and functional throughout fiscal Q2 and that’s quite remarkable, because remember, the storm happened in the last two weeks of Q1.

So for the – all lines to be fully operational throughout Q2 was quite remarkable, really a miracle, quite an achievement by our people, I must say. Let’s go on to Slide 7. Top five, we do this every quarter. Top five customers alphabetically. Aerojet Rocketdyne, these are the kind of usual suspects. You’re probably wondering, hearing these names. They’re involved in the PAC-3 missile system, Aerospheres, they’re a rep for IAI, Israeli Aerospace Industries, which is a very important customer of ours, and they produced the G280 for Gulfstream. GKN, that relates to the Boeing 787, that actually is not an airplane. It’s the GEnx-1B engine that is used to – use on airplane. Kratos, as you know, we talk every quarter the top five, I think.

And we just select one of their aircraft this time, it’s a BQM-177A. Quite interesting airplane, is when you look up on the Internet. Middle River Aerostructure Jet, they’re kind of usual suspect. And MRAS we chose the Bombardier Global 8000 represent them. Let’s go on to Slide 8, estimated revenues by Aerospace Market segment, the pie charts. What’s interesting to me is, look at ’22, ’23, ’24 and ’25 year-to-date, the pie chart, really very, very similar. But the big difference is ’21 and that was it depends on the tier 1, — particularly our commercial aerospace was very much — I don’t know how you say it, I mean, in jeopardy, almost looks like it might not make it. Let’s go on to Slide 9. This is the slide that Alaina does for us. Alaina is the Head of Customer Service every quarter.

She comes up with really interesting cool programs to put in this a little slide. The pie chart, this is for the first six months, radomes, rocket nozzles, drones, those we consider to be niche markets in military. But for us, even aircraft structures is niche. Well, our current program quickly, David Clark, not a huge customer, but we love that customer. They make the helmets for the Air Force and we supply materials. We also do kitting for them, which is nice. And then we got the Mk30 Canisters for Raytheon ESS system, that’s ablatives. The MK125 Warhead for the SM-2, SM-6, those are just hypersonic missiles, I think. And that’s actually not ablatives. In this case, it’s one part of the structure. We can’t say anything more about it. The MK41 Vertical Launch System that’s — actually parts that we produce with our materials.

It seems like Alaina was fully focused on the missiles this quarter. So she must have been in time a lot of dreams of missiles, I guess. So let’s go on to – but nice selections. Thank you, Alaina. Let’s go on to Slide 10. GE Aerospace Jet Engine Programs, another slide, we give you every quarter. You have to understand — some of you complained about we overthink things too much. There are new investors that dial-in every quarter. We have to be fair to them, too. We try to strike a balance here. So yes, we include this slide every quarter. Our firm pricing LTA, it’s requirements contract from ‘19 to ‘29 with MRAS, which is a sub of ST Engineering Aerospace, a large Singapore aerospace company. We built a redundant factory for GE actually in MRAS, that’s in production and know all that.

So what’s going on here? With sole source quality for composite materials engine nacelles and thrust reversers. On these programs, well, it’s all GE engine programs. Why is that? The reason is that when we entered into the LTA originally, MRAS was a sub GE Aerospace. So we’ve got all these GE Aerospace programs at that point. And then subsequent to that, GE sold MRAS to ST Engineering, but we continue on these programs. So let’s go on to — and I’m not going to go through the programs. Do you have any questions about it, let us know, please. Slide 11, continuing with GE Aerospace, MRAS/Park LTA provides for an approximate 6.5% weighted average price increase effective January 1, ’25 for the products covered by the LTA. I’ve been asked about this a lot, lot, lot, and I said, well, I would like you I don’t want to say, but now we’re saying kind of investor presentation where it’s appropriate.

Park Composite Materials, don’t forget, we don’t cover that one. We cover that every time. Let’s go to the last one, Fan Case Containment Wrap for GE9X engines for the Boeing 777X aircraft. That’s produced with Park’s AFP and other composite materials. Park recently received a PO for approximately $6.5 million for material for this program. So this program is ramping. Our customer received a large order for case wrapped units. We’re clearly not going to talk to numbers, but this slowed down to us in terms of PO when there’s more coming. I suspect a lot more. So this program is no longer, just kind of development. It’s really starting to ramp now. Park materials for this program is expected to be included in Life of Program. So they’re not in the LTA because this came after the LTA, but the expectation is, we’ll just put the, the GE9X program into the Life of Program agreement, which I’ll discuss in a second.

Slide 12. So just trying to watch time. MRAS/Park LTA was amended to include Three Film Adhesive product forms for composite bond, metal bond. This is really outstanding because this film adhesive formulations to develop through a joint development agreement with MRAS and GE and a lot of time and effort went into this, but it’s outstanding because as soon as the development is done, then we go right into qualification. So that’s really a very wonderful and special MRAS qualification of two proprietary film adhesive product forms in progress. Why not three? Because — so this is the process. We go through a qualification with MRAS and then MRAS needs to go through a certification process with their customers on selective programs. So the first program that MRAS intends to get a certified on — does not use metal bonds.

So that’s why we’re not qualified metal bond at this point. I’ll come later, right? Life of program agreement requested by MRAS and STE agreement, it’s under negotiation and Mark lead a team of, I guess, three Park people to MRAS, a couple of weeks ago. We spent a couple of days. They spent a couple of days working on the agreement with MRAS, so it’s under negotiation. So we finally made some good progress on it. But just keep in mind, this is what they want, they requested a day being MRAS and STE. We’re happy to do it. They are the ones requested it for a good reason. Okay. Let’s go on to 13, Slide 13. Continuing with the additional, well, different update in GE Aerospace programs now. A320neo Aircraft Family includes all these variants. I won’t read them off.

Airbus has a huge and underlying use backlog of A320neo aircraft firm order of 7,253, that’s so many airplanes, unbelievable number of airplanes. Airbus has been — had been maintaining that intent to achieve a rate of 75 A320neo family aircraft deliveries per month in ’26. Let’s go onto Slide 14. So this is just a little history here about the deliveries over the prior years of A320neo aircraft. You can see that kind of peak to ’19 and that’s what happened in pandemic, the numbers fell off. ’23 they got back to the pre-pandemic rate of 571 compared to 561. And year-to-date through September, about 396, and not about 396 deliveries compared to last year, year-to-date 391 don’t annualize that, that don’t work because aircraft industry for some funny reason that a lot of deliveries happened in last quarter.

But it’s basically saying, we’re kind of tracking last year, which is a little disappointing. We were hoping that we would be able to show a little bit of improvement from last year. Last year, it was 48 airplanes per month, as you can see. Let’s go on to Slide 15. Then on June ’24, ’24 Airbus announced it is pushing out its goal of achieving the 75 aircraft family monthly delivery rate from ’26 to ’27, not surprisingly, Airbus highlighted supply chain issues globally, supply chain issues, they should all over again, especially, engine availability issues as a key reason for the pushout. What’s funny about this? Do you remember, what is it a year or two ago, we’re all clear with engines. It’s not just Airbus said or the engine company said it, the engine is no longer an issue.

Everything is great. Now we’re back into the soup with engines. I don’t know what to make of that, but now engines are front center in terms of what the main supply chain issues roll out. Supposedly maybe castings and forging for the engines, but it’s engines, that’s the problem. Clearly, based upon the huge backlog, Airbus would already be at 75 per month rate. Why is that? How many year — what do we say, how many airplanes are in order? 6,000 something, I got to go back, sorry. What was that number — no, sorry, 6,000, 7,200, 7,253, okay. So let’s say, they’re at 50 now, which maybe we do not, but let’s say they’re at 50 now, that’s 600 per year. Well, how many years is that with 7,000 orders? Well, the problem is there, Airbus wants to sell more airplanes.

So you order an airplane, your delivery is what, 13 years down the road, that’s not for a conducive selling airplanes. So one of the reasons Airbus wants to push it up to 75, 75 puts it 900 per year that’s still not you enter an airplane and you get it next year, but it brings the lead time down a lot, which will allow Airbus to sell more airplanes, which is what they want to do. They want to sell a lot more airplanes. So anyway, will Airbus achieve its goal of 75 deliveries per month? We certainly believe they will. We’ll achieve it in ’27? Now we believe they will, we’re not sure it really matters very much whether that goal is achieved on ’27 or maybe ’28. Can you think for Park is that we need to be ready? And the key thing is, they will get to that rate, all these orders will be filled.

They’ll take more orders, and we just need to be ready. And we — not sure what the timing of the ramp will be. I don’t think anybody’s sure, we just need to be ready, number one. Number two, those sales will be there and they’re incredible sales for Park. 16 approved engines for the A320 aircraft. There’s still approved engines for A320neo is the CFM LEAP-1A. That’s the engine program we’re on. Then there’s a Pratt, Pratt & Whitney PW1100G GTF engine, not in that program, just on the CFM program. We spoke lots and lots about the durability issues, especially for the Pratt engine, we’ll cover that here. So, let’s see, according to the September ’24 edition of Aero Engine news CFM LEAP-1A’s market share of firm engine orders is 64.4%, that’s a nice market share.

I don’t remember, but I think last quarter it was maybe 62%. It’s been around that 62%, 63%, 64% range moved up last quarter, but that may not be sustainable, I don’t know, but at least it’s well over 60%. At the delivery rate of 75, A320neo aircraft per month at 64.4% LEAP-1A market share translates into 1,159 just do the math, LEAP-1A engines per year. What’s that worth of the Park? Well, I’ll just go to Slide 34, it gives you an idea of what is worth to Park each year? Currently, this is just one of these huge numbers. 8,238 LEAP firm, firm LEAP-1A engine orders. That’s a lot, a lot of engines. One of those firm owners worth to Park? Well, I mean, go to Slide 34, it tells you what we get per engine. I think it’s about $0.25 billion. And that assumes that we’re going to continue to Slide after 29 which — whether we have a life firm or not, and we’re quite confident we will.

And it does not assume, don’t take into account, there will be price increases during that time frame. But you think about it conceptually $0.25 billion, does it really matter to us, whether it’s ’27 ’28, ’29 just a lot of revenues of Park. And those engines are going to be sold. Those engines are going to be produced and sold. Those are our engines, that’s our program. So I think people selling the stock at $13, I’m not sure what they’re thinking. Let’s go on to Slide 17. Airbus, okay, here’s one of the variants A321XLR. Airbus to open additional XLR production line in July, the A321XLR powered by LEAP-1A engine received it’s the EASA type certification in July, and that’s really nice news, that’s good. And the EASA is the European equivalent of FAA.

The first A321XLR delivery scheduled for later this month to Iberia, and according to Airbus it has 500 orders for this program, an important program for Park. Let’s go on Slide 18. Okay. Now let’s go to Comac, Comac 919. That’s the single-aisle airplane that Comac developed to compete against the 737 and A320. And that has another kind of LEAP engines, this is called LEAP-1C. I don’t know, maybe C stands for Comac. It’s a variation of the same engine. That’s in the — that’s a funny deal. Comac plans to achieve a production rate of 150, 919 aircraft per year by ’28. I think that’s credible. They are investing huge amounts of money in production lines. I think they’ve now three final assembly lines. I report to have over 1,500 orders for 919 aircraft, 919 is now flying for Air China, China Eastern and China Southern, all Chinese airlines.

Comac clearly has designs on getting out — it’s all these airplanes outside of China, though. They’ve delivered nine so far, and they’ve logged over 10,000 flight hours. This is an important program for Park. We’ll see what happens, but we believe and our customer believes a very important program with lots of upside opportunity. Let’s talk about — let’s go to Slide 19, rather, 777X aircraft with GE9X engines. In August 19, Boeing grounded their 777X test flight fleet after detecting engine attachment issue, their fleet remains grounded while Boeing continues to evaluate the problem. These engines, they achieved a record 134,400 pounds of thrust. That’s why those engines tests are pretty important. They’re certified for 110,000 pounds. Put in perspective, the LEAP-1A engine for the A320 about 32,000 pounds.

So big, big, big engines, lots of power. On October 11, 2024 Boeing announced that its pushing out its first delivery target to ’26 from ’25 because of development challenges, flight-test pause and the work stoppage. Boeing says they — sorry, not Boeing, and according to data, Boeing had 481 orders for these airplanes. So a little bit of a setback, but I mean, the thing is, it’s very — this is a clean sheet airplane. So it’s not surprising that it will have problems like the engine attachment problem. It’s very, very important that this happened that is detected during the development and certification phase not after this airplane flying in the air at 38,000 feet with 400 people on it. So this is a really important program for Park. We just — we’ve the best wishes for Boeing.

Obviously, they’re not — they’re having a bad time now, but we hope that Boeing finds a way to move ahead and make things better. Let’s go on to Slide 20. We can quickly cover this. Pretty much everything here is provided for history for context, in the bottom right here, fiscal ’25 Q2, $7.1 million of sales, This is — I should read the title, GE aerospace jet engine programs sales history and forecast estimates, $7.1 million in Q2. I think our estimate was a little lower than that, but kind of in the range. And our forecast for Q3 is $6.25 million to $7 million, that’s our forecast for Q3. For the year, $23 million to $26 million. We provided that forecast last quarter. We are sticking with it for the year. Okay. Let’s go on to Slide 21, Park’s financial performance history and forecast estimates.

So again, most of it is provided. Most of the data here is provided for our history and context. Fiscal ’25 Q2, you already had that the number, $16.7 million, $3.2 million EBITDA. Our forecast for Q3, $13.5 million to $14.25 million in sales, $3 million to $3.3 million EBITDA. Note the footnote subject to supply chain risk and limitations. We’ll assess that even further in the next slide. So let’s go on to Slide 22. This slide is exactly the same slide we presented to you last quarter. Everything is historical other than the forecast estimates. We’re not changing the forecast estimates — sorry, forecast estimates for the year. Pretty big ranges, $60 million to $65 million sales, $13 million to $15 million EBITDA, and this is what we provided last quarter.

So I’m not changing it. But look at the important thing, supply chain limitations affecting aerospace industry. So I want to stop for a second. The aerospace industry is not really in happy place right now, not so much fun. For perspective, the European air show, there’s the big one is in Paris and Farnborough alternate every year. Last year was at Paris, lots of exuberance, maybe irrational exuberance would depend on hindsight about all the orders are taken, all the engines — all the airlines and engines being sold. Everybody was very excited about that. Wonderful, wonderful, wonderful. Okay. That’s nice. Then we fast forward to Farnborough this year. Very different tone, very different mood, kind of glum because everything that is coming out of Farnborough, supply chain, supply chain, supply chain, supply chain, supply chain.

The problem has been solved. One comment, I guess, was a little sarcastic was, who cares how many engines — sorry, how many airplanes you can — orders you can take, if you can’t make it, what difference does to make? Obviously, that’s being sarcastic, but that was the recent mood. What’s interesting, I guess, if we look at it that way. As we go through these kind of fun at Deja vu a little over again, how many times have we heard last three, four years. Supply chain issues almost over about solved, everything is going to be fine. And then we’re back in the suit. Why is that? I don’t know maybe it’s a psychological thing. My guess is they never were solved. It was just a wishful thing, and wishful thinking is contagious. One person says it, another person says it, okay fine.

But supply chain issues are clearly not resolved. They have not gone away and they have an impact upon the industry. So just keep that in mind with these forecasts that we have all the risks that we – you put in the 10-K, but supply chain issues are a key risk for these forecasts. So — and of course, we also are like ramping up the cost for Juggernaut, and that’s not just a temporary thing that’s holding back or not top line but our bottom line. Let’s go on to Slide 23. Try to hustle here a little bit, if you can. General Park updates, I guess we’re just covering a lot in this presentation, so it may be taking a little bit longer. Solution Treater Project, we plan to purchase and install an additional solution treater. Why are we doing that?

Well it will take approximately three years to design and specify the equipment, install it, conduct internal trials, qualify the equipment for production with customers three years. So we’re quite concerned. We look at the opportunities that we have. We look at the programs we’re on and the opportunities we have, we’re concerned that we’re going to run our capacity. So we need to move now because it’s a three-year time frame. We can’t wait for years. We do that. We’re — what’s the term, screwed, I think. The budget for the project is about $7.5 million. This is something we decided to do and we’re going ahead with the project. This will be placed in a new factory. Remember, we told you that there was a big area set aside for new line. Well, this is where that line is going to go.

Another item, these items are all related. They’re just updates. Major OEM suppliers, ask partner, Park’s to partner and quotes with them the purchase of an additional manufacturing line to support critical defense programs. This equipment is essential to these programs, so it’s needed this OEM is quite a larger — a bit larger in part because they want to be partners, 50-50, say $5 million each, and we’re now negotiating the agreement, but we plan to do this. It has to be done. This additional line is essential for these military programs. So we’re talking a little bit about money as well because we want to get to that later on in terms of our cash. 24. Slide 24. We recently qualified an essential high profile missile defense program. Program is potentially — sorry, this program is potentially larger for us in the PAC-3 missile program.

Initial revenues expected for Park next year and program is expected to ramp quickly from there. And we probably need to make a $1 million in capital investment to support this program. This is an important accomplishment for Park, let’s put it that way. I can’t — we can’t talk — give you more details about the program, but you would have heard about, that’s for sure. So the next item Park recently entered into license agreement with a major OEM to license technology for hypersonic missile programs. We understand that Park is the only licensee, licensee of this technology. We’re currently conducting manufacturing trials, a significant potential opportunity for Park underlying significant. Park will need to make capital investment of approximately $3 million.

I just want to stop here because — these are not certainties. And that’s not the standard for us sharing thing with you. I think you would want to know about and important opportunities for Park. But if you just want to wait for these things to be locked, that’s different, but I don’t think that’s really what I want to hear. So my point is that this may happen, may not happen. A shareholder complained about, well, we talked about some other programs a couple of years, didn’t it go, didn’t happen. Well, yeah, we talked about it because it’s important, and it seems serious. That wasn’t a guarantee it’s going to happen. So just keep that in mind, right, please. Slide 25. New LTA with GE aerospace is, these are separate items in progress for calendar years ’25 to ’30, under which GE is awarding two additional products to Park, and incremental revenue from that is $3 million.

This is not part of the Juggernaut, by the way, this is separate incremental revenue. This is not the MRAS LTA, this is the GE aerospace LTA, separate LTA. Potential JV with major adhesives company related to adhesives for the aerospace industry, those discussions and negotiations in progress. We’ve got numerous in-person meetings. I believe there’s one next week actually in our facility. And a significant capital investment may be necessarily to support the JV, we’ll see. Another potential JV with a major Asian industrial conglomerate related to the manufacture, marketing and sale of certain of Park’s commercial composite materials products in Asia. So these discussions and negotiations in progress issuer. We have a team over in Asia right now, and we’ve had a number of meetings already.

This could involve significant capital contribution part. This OEM is quite aggressive. We’re trying to slow it down a little bit. They definitely want to do this. So it’s — I think, it’s maybe a good possibility that actually happens. Slide 26, totally different topic, but still an update. MRAS supplier scorecard, maybe I try not to cover too many things in this one presentation, sorry. MRAS Supplier Scorecard. Park’s scores, you can see these scores. The first item was actually a mistake, it really should have been 100. What these scores mean? What is their significance? We’re told that MRAS has over 700 suppliers. But these typical MRAS supplier scores. No, I don’t think so. We’re told that most suppliers would be happy to get 80s. I’ve been told that numerous times and why them don’t get 80s.

Are these scores achieved by other suppliers ever, I don’t think so. So a similar theme is Park MRAS best supplier over 700, that’s what I’m told. How does that happen? It’s a boardroom thing or a boil room thing? This is such a special situation for Park. And I’m not sure whether it’s fully appreciated, how special it and achievement accomplishment this is. And how special it is for Park to have this kind of relationship with a company like this. See, it’s our strategy for customers to love us, in order to that strategy to implement it, that’s more of the boil room thing, that’s really a culture thing. It depends on Park having very dedicated employees, that’s how we achieve these scores, that’s how we become their best supplier and what we’re told anyway, their best supplier.

So, yeah, I mean, example, I’m sorry to take the time, but just a little example. John Moon, I mean, we were told he has a house, but we would never know that because he never leaves the planet. If something has to be shipped. It doesn’t matter what time. He’s not going anywhere. He’s not going anywhere until that truck is left the dock and that kind of dedication. And if you want it, your customers to love you, you need to have people like that. The rest of the strategy is nice, but in order to implement it, you need to have people that are very dedicated. So let’s go on to Slide 27. Questions about — this is now a different topic. We got recent questions from investors, okay. So I’ll hold a new section here that we have not previously. I just know if you want us to continue this, but we thought it would be interesting to include some of the questions that we’ve received from investors with questions about our film adhesive product line, we call it Aeroadhere.

What advantages does Aeroadhere have over competing products? Well, aero industry is a little strange. It looks for equivalency more than better. In other words, better is not really such a good thing. When we developed film adhesive, remember, we did that with a joint development project with GE and MRAS. With a lot of tweaking, a lot of fine-tuning for their needs. But generally speaking, we want equivalency because if it’s not equivalent, if it’s better, then the customer is going to have much more difficulty incorporating it into their programs. Why would a customer then buy it from Park, if it’s just equivalent? Because a Park more than a product itself, they’re buying, how are we selling you, we’re selling to Park. We’re selling the flexibility, responsiveness, urgency.

So people say, well, what is the expression, a customer says, John, please say, how high. We don’t do that. We say how high before they say job. But I’m not kidding. We say how high before they say, jump, that’s what we’re selling. Do we anticipate that Aeroadhere’s, sorry, a tongue twister. Margins will be higher or lower than Park’s average margin. This is a question from investors. Higher, and we’re quite sure of that. Several years out, what sort of range of revenues are we targeting for Aeroadhere. Well, we’re not sure. The strategy though, is it really a revenue strategy is to broaden the product line we offer to customers which manufacture aerospace composite structures. That’s why we love adhesives so much because customers require our product to make composite structure to aerospace.

Obviously, they need to buy composite materials to make composite structures, but they also use adhesives in their production of these composite structures. Just for reference though since you’re asking about revenues. The A320 program is the first program that MRAS intends to get our film adhesives certified on and that’s $3 million per year at this once the program ramps to 75 airplanes per month. So let’s — and obviously, that’s not it. We’ve got lots of, lots of other opportunities we’re working on, not just with MRAS but other companies as well. Slide 28, more questions. What about that a major new manufacturing project initiative we discussed in our Q2, sorry, Q4 investor presentation last year. What the status? It’s morphed into a larger project?

Why wasn’t it discussed during our Q1 investor presentation? Well, the customer which initiated the project, now wants the project to be an aerospace composite structures manufacturing technology JV, a potentially larger – a quite a bit larger project. This is a JV like with NewCo or two companies own it, I guess. What about our strategy? What is it? Somebody actually asked do we have a strategy? Yes, we have strategy. We call it the egg strategy. We certainly not going to take the time to go into it now, but let us know if you want to discuss our strategy probably take 5 minutes in an upcoming presentation. It’s a straightforward strategy. It’s not like an elegant strategy, it’s very straightforward. So, nothing, we tell you it’s going to surprise you, but we have to go over if you’d like.

Slide 29, different topic, our buyback authorization we announced on May 23, 22 that Park’s Board authorized purchase of 1.5 million shares. Under this authorization, we purchased a total of 551,729 shares at an average price of $12.94, total cost of $7.1 million. So we’re spending some real money on this. In highlights, though recent buyback activity under the authorization since July 26, ’24, the significance of July 26, that’s after the blackout — the Q1 blackout ended was lifted. We purchased 331,180 shares of common stock, average price of $12.88 total cost of $4.251 million, like I said, we’re spending some real money on this now. Why do we do that? Why do we do that? Because we thought the price was stupid, ridiculous. We — it’s not really our preference to buy stock.

We’d rather use our cash to take advantage of all the opportunities we have. But when the stock price is — we feel stupid and ridiculous, we don’t think we have too much of a choice. Will we buy more? I don’t know, we’ll have to see maybe. So let’s keep going, that’s our buyback program. Slide 30. Incredible cash dividend history, 39 consecutive years of dividends. We’ve paid $596 million or $29.10 per share since fiscal ’25. So a little bit of a thing here that we’re developing a concept anyway. So we have a regular dividend payable on November 5. It’s not right. That should be paid on November 5, 2024. So, sorry, that’s a typo, I just noticed that. And we’ll have paid $598.6 million at that point. And then it looks like there’s another typo.

The next regular dividend is planned to be declared by Park’s Board about January 9, that’s obviously ’25. Sorry about this, and paid about February 4, ’25, and that’s within the fiscal year. Somebody is not going to get paid this week for these mistakes. Unfortunately, I think that’s somebody’s me because I’m the one who made the mistakes, so sorry about that. But the concept is during this fiscal year, if you look at the highlighted language, we’ll have paid by the end of this fiscal year, rather, $601.1 million in dividends since ’25 and also $29.35 per share since ’25. Do the math, ’05 to ’25, that’s 21 years. So if you want to do the math, divide $601.1 million by 21 — sorry, that’s 21 years — 21 years, yeah. Sorry. 21 years, so divide $601.1 million by 21, that’s $28.6 million per year, just FYI.

If you want to divide to $29.35 by 21, that’s $1.40 per share per year of dividends paid since — on the average paid since fiscal ’25, the beginning of ’25. Let’s go on to Slide 31, our balance sheet. We have no long-term debt, $72 million of cash. We just talked about that. We have one more transition tax installment payment of $5.1 million in June of ’25. Thinking about our cash, so some known or likely cash expenditures of $5.1 million, that’s not likely, that’s known, that tax payment in June. We have to pay that. Share buyback in fiscal ’25, Q3 in our current quarter, that $2.4 million, that’s already been spent, so that’s a known item. Solution Treater project, $7.5 million, that’s an estimate. contribution to the OEM partnership approximately — well, $5 million, that’s what we’re talking about.

So that gives us a round number of $20 million, so $72 million minus $20 million, so $52 million. So if we go to Slide 32. When we think about $52 million, well, that doesn’t include a lot of other things that we’ve already discussed. A lot of items, which we won’t iterate here are these items that are listed and we’ve already discussed in this presentation for the most part. And some of these things will happen, some won’t. We also have – likely, have additional expenditures in new plant when you actually start in production, no matter how much time you spend with the trials and qualification, we start in production, you realize some other things that might be needed. So there might be some additional investment that’s required in the plant equipment investments.

So what do we think about our cash? We think that we don’t have a limited cash, and we think we need to be careful how we spend it. Let’s go on to Slide 33, the Juggernaut, we’ve covered this in the last three quarters, so we’ll try to rush through it. Financial outlook for GE Aerospace jet engine programs and for Park, the Juggernaut. So what’s the timing? We’re not sure, but it’s coming, can’t be stopped. you better be ready. Going to Slide 34. The only change here, fortunately is the GE9X program. So we moved up that number. That’s based on specific inputs we have from our customer. We’ve heard higher rates, but that’s based upon specific inputs, rate inputs we have from our customer. And as we said, we’re not going to provide any more detailed information because it really is not our business to — it’s more up to Boeing and GE to disclose how many airplanes they plan to make per year, not for us to do that.

So why don’t we go on to the next Slide, 35, Park Aerospace Corp high level conceptual financial outlook. We start with a baseline year of fiscal ’24. The estimated GE programs incremental sales — that’s just math, taking the number from the prior slide, subtracting the ’24 sales, I think that was $21 million, incremental sales, $37.6 million. Estimated — sorry, non-GE programs, incremental sales $15 million. So we tried to do something a little differently here. In the past, we’re breaking it down between programs we’re sole-source qualified on another program that we expect to get on another sales we expect to generate. We just put it in one big bucket, $15 million. As indicated in the footnote, we believe that’s a conservative number based upon all the opportunities that we’re working on.

The total here, you can see $108.6 million. The contribution, EBITDA contribution from the incremental sales is $19.7 million. That’s based upon a contribution rate, I believe, of 37.5%. The additional $4 million, we discussed that before, that relates to our base year, which is quite inefficient because we’re operating well below efficiency of the new plant. And for many reasons we discussed in the past, which we won’t go over here. Slide 36, just a footnote to the slide we just read, so we won’t go through those. And that concludes the presentation. Thanks for listening. Operator, we’re happy to take questions at this time.

Q&A Session

Operator: Great. Thank you so much. At this time, we will be conducting a question-and-answer session. [Operator Instructions] First question here is from Nick Ripostella from NR Management. Please go ahead.

Nick Ripostella: Good afternoon, Brian. First, I just want to say on share repurchase, I’m very appreciative of how judicious you are in repurchase. I come across so many smaller companies that they overpay for their stock, sometimes double where it’s currently trading and then put that in their press release that return cash to shareholders, which actually they destroyed value. So you’ve been very wise, and I’m appreciative of that. So a couple of quarters ago, I think you were talking a little bit about automation potentially in a new facility. So I’ve been reading a lot and watching a lot about the use of robots and other automation factory setting. So can you just give me your perspective, do you feel at any adding point you’d be disadvantaged by not having automation in the facilities or just I’d like to understand your perspective on that.

And kudos to the workforce there. It just goes to show you some places have a great culture and don’t need a union. You’ve built a great organization in that regard. Thank you.

Brian Shore: Thank you very much for those comments, Nick. I appreciate it. As far as automation is concerned, if you visited our facility, you would see that we’re operating these lines that run continuously with usually a staff of about four people. So you don’t look at it like an assembly line where you think, a lot of these procedures and processes could be automated, reduce cost, maybe improve efficiency. One of the areas — so that doesn’t mean we’re not interested, but I think that the opportunities for a Park type operation are maybe not quite as much to bank for the buck wise as other kind of operations would be. But we talked also about automation with respect to that project, that manufacturing project that’s now morphed into a potential technology JV.

And that’s an area where automation would be front and center, I think. So that project still has to be initiated, like I said, at morph. So it’s a larger different kind of project, but that project would involve quite a bit of automation, I believe.

Nick Ripostella: Okay. Thank you. Can I ask one more?

Brian Shore: Sure.

Nick Ripostella: Just — I know this is a difficult thing to say, but where would you be disappointed in terms of Airbus’ say ramp-up of deliveries next calendar year? Where would you be disappointed if it didn’t reach whatever the number is? 52, 54, 50, where would it disappoint you?

Brian Shore: I’m not sure I understand your question. You’re talking about in terms of our annual sales or… [Multiple Speakers]

Nick Ripostella: No, the deliveries that the outlined (ph) deliveries.

Brian Shore: Per month, you mean, monthly rate?

Nick Ripostella: Yeah. Correct.

Brian Shore: Okay. Yeah. Well, we’re disappointed already. So maybe that’s a hard question to answer. The supply chain has clearly become more of a known issue, probably zero along. My guess is that this year, maybe we’ll get to 50, last year 48. I’ve seen all kind of different forecasts. I mean, obviously, we’d like to be 75, so maybe that’s not a proper answer. It would be nice if next year, they’re at 55. I don’t know if that helps. But if they’re not, we’re already disappointed. So we’re probably disappointed with any number that’s under 75. But the key thing is for us to hang in there and be ready for the ramp because as far as we’re concerned, there’s no question they’ll get to 75, just with all the orders they have, it just doesn’t make any sense, they wouldn’t get to 75.

So the key thing for us is to make sure we’re ready for that, and that’s really important. That means we need to ramp up the new facility. That’s why we’re doing that now, but we’re also kind of suffering through the additional cost burden of ramping up a facility that is still operating at a very low rate.

Nick Ripostella: Okay. Thank you. Yes. And as you’ve said before, this is a long-term proposition. And I really loved your comment about the stock price stupid and certainly got pretty stupid at one point. So, I appreciate it. Thank you so much, Brian.

A – Brian Shore: Thank you, Nick. Very nice to hear from you.

Operator: [Operator Instructions]. With no further questions, I’d like to turn the floor back to Mr. Shore for any closing comments.

Brian Shore: Okay. Well, thank you, operator. I just want to say I’m sorry that it took so long. I think what we did was we tried to cover too much during this presentation. I think everything we covered was meaningful and information that many of you probably want to know about, but nevertheless, maybe we put up more than we can choose. So I apologize for that. In any event, thank you very much for listening. We hope you have a very good day. We’ll talk to you soon. Good-bye.

Operator: This concludes the teleconference. You may disconnect your lines at this time. Thank you again for your participation.