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PARK AEROSPACE CORP (PKE)·Q1 2026 Earnings Summary

Executive Summary

  • Q1 FY2026 net sales were $15.4M, gross margin 30.6%, net earnings $2.08M, and EPS $0.10; revenue rose versus prior-year Q1 ($13.97M) but fell sequentially from Q4 ($16.94M). Adjusted EBITDA was $2.963M; management highlighted EBITDA margin at 19.2% and the quarter coming in near the top of the estimated range .
  • Mix and execution improved: fabric-sales mix normalized, production aligned with sales, and tariff impacts were minimal—supporting >30% gross margin despite underutilization costs from the new factory .
  • Management “estimates” Q2 FY2026 sales at $15–$16M and EBITDA at $3.0–$3.4M; GE Aerospace jet-engine program Q2 sales estimated at $6.7–$7.2M, with FY2026 GE program forecast maintained at $28–$32M .
  • Strategic catalysts: accelerating missile-defense demand (Patriot/Arrow) with a proposed blanket PO for up to $40M of C2B fabric and a major new plant expansion (preliminary budget $35M ±$5M) to capture long-term opportunities .

What Went Well and What Went Wrong

  • What Went Well

    • Gross margin exceeded 30% (30.6%) supported by normalized fabric/material mix and matched production/sales; EBITDA margin cited at 19.2% .
    • Quarter landed in the middle of the prior sales estimate ($15–$16M) and near the top of the EBITDA estimate ($2.5–$3.0M) .
    • Tariff impact was “very minimal,” with costs largely passed through; missed shipments improved in prior quarter and remain manageable .
    • Quote: “We’re happy about [gross margin]…nice to be over 30%…three different factors…helped us get our margins up above 30%” .

  • What Went Wrong

    • Sequential revenue decline (Q4→Q1) with ongoing underutilization drag from the new factory as significant costs run through P&L .
    • Continued delays in customer approval of C2B fabric requalification (“imminent,” but not yet done), constraining conversion to higher-margin materials .
    • Cash declined to $65.6M from $68.8M driven by €1.376M (~$1.5M) advance to ArianeGroup and $2.165M buyback; a $4.9M transition tax installment payment hits Q2 cash .

Financial Results

MetricQ1 2025Q3 2025Q4 2025Q1 2026
Net Sales ($USD)$13,970,000 $14,408,000 $16,939,000 $15,400,000
Gross Profit ($USD)$4,099,000 $3,828,000 $4,958,000 $4,718,000
Gross Margin %29.3% 26.6% 29.3% 30.6%
SG&A ($USD)$2,017,000 $1,982,000 $2,107,000 $2,299,000
Operating Income ($USD)$2,082,000 $1,846,000 $2,851,000 $2,419,000
Net Earnings ($USD)$993,000 $1,577,000 $1,246,000 $2,080,000
Net Income Margin %7.1% 10.9% 7.4% 13.5%
Adjusted EBITDA ($USD)$2,610,000 $2,415,000 $3,418,000 $2,963,000
EBITDA Margin %———19.2%
Basic/Diluted EPS ($USD)$0.05 $0.08 $0.06 $0.10

KPIs

KPIQ4 2025Q1 2026
C2B Fabric Sales ($USD)$4,400,000 $1,100,000
C2B Materials Sales ($USD)$420,000 $480,000
Missed Shipments ($USD)$175,000 $275,000
Cash & Marketable Securities ($USD)$68,834,000 $65,571,000
Share Repurchase ($USD)—$2,165,000

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Sales ($USD)Q2 2026N/A$15M–$16M New
Adjusted EBITDA ($USD)Q2 2026N/A$3.0M–$3.4M New
GE Aerospace Jet Engine Program Sales ($USD)Q2 2026N/A$6.7M–$7.2M New
GE Aerospace Jet Engine Program Sales ($USD)FY 2026$28M–$32M $28M–$32M Maintained
Quarterly Dividend per Share ($USD)Q1 2026$0.125 $0.125 Maintained
Share Buyback ActivityQ2 2026N/A“None so far; unlikely in Q2” Update

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2 and Q-1)Current Period (Q1 2026)Trend
Supply chain & production alignmentQ3: production shortfall hit EBITDA; Q4: production exceeded sales, boosting EBITDA Production and sales “nicely matched”; gross margin >30% Improving execution
Tariffs/macroQ4: no impact; monitoring dynamic environment Minimal impact; costs passed through; still dynamic Stable
C2B fabric requalificationQ4: tests targeted end of May (customer-run) Approval “imminent”; significant stored fabric; pent-up demand Near resolution; potential ramp
Missile-defense demand (Patriot/Arrow)Q4: increased defense focus; hypersonics; juggernaut narrative Urgent replenishment; proposed up to $40M C2B blanket PO; reported 4x PAC-3 boost; Arrow 3/4 engagement Accelerating
Manufacturing expansionQ4: plan $35M ±$5M; 5-year horizon Budget may be low; plan by year-end; flexibility to be “Park” Advancing scope
GE Aerospace programsQ4: Juggernaut intact; FY26 $28–$32M maintained Q1 GE sales above prior forecast; Q2 $6.7–$7.2M Slight near-term uptick, LT unchanged
Asian JVQ4: exploring two JVs; no cash contributions Trip shifted to September; discussions “somewhat advanced” Ongoing

Management Commentary

  • “We’re happy about [gross margin]…nice to be over 30%…three different factors…helped us get our margins up above 30%” — Brian Shore .
  • “Estimate is $15M–$16M…Adjusted EBITDA estimate $2.5M–$3M…we came in pretty much the top of that range” — Brian Shore .
  • “There’s significant ongoing expenses related to operating our new manufacturing facility…this factory is underutilized…and drags down our margins” — Brian Shore .
  • “Approval will happen in the next couple of weeks…the reality is it must happen. We’re a single-source position on the program” — Mark Esquivel (C2B customer approval) .
  • “We purchased $2,165,000 worth of stock in Q1…we have $65.6M in cash and marketable securities” — Brian Shore .
  • “Tariffs…there’s been little or no impact to our business…either not significant or passed on to the customer” — Mark Esquivel .

Q&A Highlights

  • GE Aerospace LTA vs MRAS LTA: Management clarified the new GE Aerospace LTA covers different engine programs/materials and is distinct from the MRAS LTA; GE-related revenues are included across history and juggernaut slides .
  • Long-term forecast disclosure timing: Internal models exist, but management plans to finalize the expansion plan by year-end and may share long-term figures by the Q3 call timeframe (early January), seeking more confidence first .
  • Capital discipline: Management emphasized Park’s long history of prudent decisions, strong dividend record, and avoidance of “shiny” distractions (humorous aside on Bitcoin) .

Estimates Context

  • Q1 FY2026 S&P Global consensus estimates for EPS and revenue were unavailable; therefore, we cannot quantify a beat/miss versus Street for this quarter. Values retrieved from S&P Global.*
  • Note: S&P Global provided “actuals” for Q2 FY2026 in the estimates feed but no forward consensus values for Q1 FY2026 metrics, indicating limited coverage for this period.*

Key Takeaways for Investors

  • Gross margin exceeded 30% despite underutilization costs; operational alignment (fabric mix normalization and production matching sales) underpinned profitability .
  • Defense exposure is a key upside driver: accelerating Patriot/Arrow demand, sole-source ablative materials qualifications, and a proposed $40M C2B fabric blanket PO could materially expand revenue .
  • GE Aerospace programs remain a durable backbone; near-term Q2 GE sales estimate $6.7–$7.2M, FY2026 forecast maintained at $28–$32M—suggesting stability with potential for upside as supply-chain bottlenecks ease .
  • Liquidity supports investment: $65.6M cash at Q1 end, with planned $35M ±$5M plant expansion to position the company for multi-year growth; expect a Q2 cash step-down due to a $4.9M transition tax installment .
  • Near-term trading: watch for confirmation of the C2B customer approval and any missile-defense order flow updates; these could be positive catalysts given pent-up demand .
  • Medium-term thesis: execution on expansion, converting stored fabric to high-margin materials, and maintaining tariff pass-through position reinforce margin trajectory and cash generation potential .
  • Capital returns remain opportunistic: Q1 buyback of $2.165M; none expected in Q2 as focus tilts toward strategic investment and liquidity preservation .