Image source: The Motley Fool.
CALL PARTICIPANTS
Chairman & Chief Executive Officer — Brian Shore
President & Chief Operating Officer — Mark Esquivel
Need a quote from a Motley Fool analyst? Email [email protected]
TAKEAWAYS
Sales — $16,003,810 in sales for fiscal Q2 2026, slightly above Park Aerospace (PKE 0.97%)‘s previous estimate of $15 million to $16 million.
Gross profit — $5,001,160 in gross profit for fiscal Q2 2026, with a gross margin of 31.2%, despite pressures from low-margin C2B fabric sales and ongoing new plant expenses.
Adjusted EBITDA — Adjusted EBITDA was $3,401,000, at the top end of Park Aerospace’s prior estimate of $3 million to $3.4 million, resulting in an adjusted EBITDA margin of 20.8%.
C2B fabric sales impact — $1.65 million in C2B fabric sold at a small markup weighed on gross margin; $415,000 in ablative materials manufactured with C2B fabric, which command much higher margins, partially offset this effect.
Production vs. sales — Sales closely matched production value during the quarter, resulting in no impact on the bottom line from inventory imbalances.
Customer requalification of C2B fabric — Requalification resumed normal production on 90% of specifications; the remaining 10% is under test, a process estimated to take another nine to twelve months.
Missed shipments — $510,000 attributed to customer certification, and testing delays.
Tariffs — Net tariff impact was minimal at $1,700, with costs passed through, and future exposure is expected to remain limited under current arrangements, as discussed on the fiscal Q2 2026 earnings call.
MRAS LTA price increase — 6.5% weighted average price hike became effective January 1 for the MRAS LTA as stipulated in the long-term agreement.
GE Aerospace sales forecast update — Park Aerospace now forecasts $27.5 million to $29 million in GE Aerospace program sales for fiscal 2026, down from a previous estimate of $28 million to $32 million, with current figures based on updated backlog and booking data.
Q3 outlook — Park Aerospace estimates sales of $16.5 million to $17.5 million for fiscal Q3 2026 and adjusted EBITDA of $3.7 million to $4.1 million.
Expansion capital budget increase — Estimated capital expenditure for new manufacturing facilities rose to $40 million to $45 million due to added line requirements.
Cash and balance sheet — $61.6 million in cash and marketable securities reported at quarter-end after a $4.9 million transition tax payment.
No share repurchases — No shares were bought back during the quarter or to date in fiscal Q3 under the current buyback authorization.
SUMMARY
Management disclosed that customer-driven stockpiling of C2B fabric continues to distort product mix, temporarily compressing margins but likely supporting future high-margin material sales as demand converts. Strategic clarity was provided around the critical role of Park Aerospace’s proprietary materials in missile defense and aerospace programs, including the company’s sole-source position on the Patriot missile system’s ablative materials. Park Aerospace signaled intent to further expand U.S. manufacturing capacity for C2B fabric, highlighting both existing and planned investments via partnerships and new plant expenditures. Unlike the previous year, management emphasized that industry OEMs are increasingly collaborating with suppliers and ramping up production to meet robust underlying demand. Long-term sales targets for fiscal 2026 were not formally issued, but management stated that total sales should exceed $70 million, driven by growth in both defense and commercial aerospace programs.
Mark Esquivel stated, “We have approval at about 90% of the specification,” regarding C2B customer requalification, with the remainder expected to take up to twelve more months to resolve.
CEO Shore asserted, “That represents very significant revenue with Park. We’re sole source qualified in that program,” citing sole-source qualification and sharply rising production requirements.
Management described the company’s operational approach as centered on flexibility, urgency, and responsiveness, emphasizing these as Park Aerospace’s core value drivers for customer relationships.
Park Aerospace’s expansion timetable was clarified, with objectives to have plans finalized and implementation underway by year-end to address surging defense and aerospace demand.
INDUSTRY GLOSSARY
C2B fabric: A specialized ablative composite material distributed exclusively by Park Aerospace in North America, primarily for missile defense applications such as the Patriot missile program.
MRAS LTA: Long-term agreement with Middle River Aerostructure Systems (MRAS), under which Park Aerospace is the sole-source provider of composite materials for a range of GE Aerospace jet engine programs.
AOG: Aircraft on Ground; an operational situation where an aircraft is grounded due to technical or maintenance issues, relevant for customer experience and supply chain urgency.
FAL: Final Assembly Line; a manufacturing line where the major components of an aircraft are brought together for assembly and delivery.
Full Conference Call Transcript
Brian Shore: Thank you very much, operator. This is Brian. Welcome everybody to the Park Aerospace Fiscal 2026 Second Quarter Investor Conference Call. I have with me as usual Mark Esquivel, our President and COO. We announced our earnings right after the close. In the earnings release, there are instructions as to how you can access the presentation we’re about to go through. Either via link, and you also can link information in the news release and also on our website. You want to pick that up because we’re gonna go through it. It’ll be a lot more meaningful to listen to us if you have the presentation in front of you. So we have quite a few new investors.
Last quarter, they’ve come on board. And out of consideration for them, I think we should go through some of the legacy items more carefully. I think in the past, legacy items, we just kind of skim over on the assumption that most people already know, are familiar with them. Veteran investors, just please be patient with that. Another item I want to cover with you is that on Tuesday, I had some unplanned oral surgery, and I’m not really feeling that great. So hope you can bear with me. And if I need Mark to take over, I’m sure he’ll be very willing and able to do that.
Questions at the end after we’re done with the presentation, we’ll take questions. And please do ask them. We love questions. Actually, sometimes linked to questions are more meaningful in the presentation. We go through a presentation. We don’t know whether you’re liking it, not liking it, interested, or half asleep. You know, the questions are always more helpful because we then know what people are really interested in, what they’re thinking about. So why don’t we go ahead and get started with the presentation? Slide two is our forward-looking disclaimer language. We’re not gonna go through that. But if you have any questions about it, please let us know. Slide three, table of contents.
Starting on slide one is our Q2 investor presentation, we’re about to go through now. In appendix one, we have supplementary financial information. We’re not gonna go through that during the call, but if you have any questions about it, please let us know. It’s become our practice now or pattern, I guess, to feature James the James Webb Space Telescope in our table of contents. So what we’re talking about here, James Webb Space Telescope discovered cosmic dust which shouldn’t exist outside its galaxy. You know, but shouldn’t exist in quotes. Because I think we’re developing a common theme here. There’s so much that we believed about the universe and its origin, which just isn’t true. Sorry, folks.
Not true. James Webb saying, well, you could believe whatever you want, but these are what’s really going on. So here’s another one of those. Thank you, James Webb Space Telescope. The James Webb Space Telescope was produced with 18 prior Park proprietary Sigma stretch. Let’s go on slide four. Kind of more nitty-gritty stuff here. So quarterly results, let’s look at the right-hand column of the second quarter that we just announced. Sales, $16,003,810. Gross profit, $5,001,160. Gross margin, 31.2%. So we’re happy about gross margins over 30 or maybe I should say we’re unhappy when they’re not over 30.
And it’s good that they’re over 30 because there are a couple of things we’ll talk about in a second that drag down our margins. Adjusted EBITDA, $3,401,000. And adjusted EBITDA margin, 20.8%. What do we say about Q2 during our Q1 call on July 15? Set our sales estimate was $15 to $16 million, so we came a little bit above that. EBITDA estimate, $3 million to $3.4 million. So we came in kind of the top of the range of the EBITDA. I just want to remind you, especially for some of our new investors that we don’t this is not guidance. We don’t do guidance.
We give an estimate we’re saying to you, this is what we think is gonna happen. Now we could be wrong, but this is what we think. There’s I don’t know. Let’s call it practice. We have different terms for it, but let’s call it practice where everybody does it almost where, you know, let’s say it’s gonna be a hundred, they think it’s gonna be a 100. They go out with 90, you know, that’s their guidance. So then when they come out when they come back with a 100, they come out with a 100, then they’re heroes. And I don’t know. We think that’s not worthy of our time.
When we give you an estimate, we’re saying this is what we think is gonna happen. We’re not giving you a number which we plan to beat. Okay? Let’s go on to slide five. Q2 considerations. We always talk, well, always in the last few quarters, Erinn Group is as impact on a lot of things, including the quarter. So we entered into this business partner agreement with Aaron Group. It’s a very large aerospace company in France. Great company and they’re a JV between Airbus and Safran, I believe. And in January 22, we were we’ve been actually working for twenty years. They appointed us exclusive distributor of their Raycarb c two b fabric.
That fabric is used to produce ablative composite materials for XHANCE missile systems programs. Now, sold $1.65 million of that fabric in Q2. As we previously explained, we saw that fabric to our defense industry customers for a small markup. What’s going on here is the defense industry customers are stockpiling the c two b. We’re the exclusive distributor though, so they buy it from us. We buy it from we’re distributor, not a rep. We buy from area. And then we sell it or sell it, I should say, to the OEM.
But it’s of a strange thing because we keep the c two b fabric in our plant because the OEM eventually will ask us to produce prefabric with it. So even though we sell to them and it’s their product, it’s kept on the plan. The markup is small, so we have a significant amount of c two b fabric sales that’s gonna push down our margins. And we sold $415,000 with blade materials manufactured with c two b fabric in Q2. Now the margins on the later materials that we produce those fabric, very, very good. Very good. So that’s the offset.
But it’s still the ratio of sales of fabric to ablative materials manufactured with the CTB fabric are still at a balance. Right? So more fabric than materials, prefrac, let’s call it, What’s the reason? I already said it because the OEMs are stockpiling this product. A more normal kind of ratio would be forty sixty. So 40% would be the materials, and 60% would be the fabric. That’s not always gonna be exactly it, but just to give you a sense, So you see that the ratio is much more than forty sixty here, and that’s gonna drive down our margins. So let’s talk about let’s go on to Slide six rather.
See More
