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PARK AEROSPACE CORP (PKE)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 net sales were $14.41M, up 23.8% year-over-year but down 13.7% sequentially; diluted EPS was $0.08, up from $0.06 YoY but down from $0.10 QoQ .
  • Gross margin compressed to 26.6% (vs 28.5% in Q2) as production shortfalls (SVP $13.2M vs sales $14.4M) and new factory ramp costs weighed on profitability; adjusted EBITDA was $2.42M, below prior internal guidance of $3.0–$3.3M despite sales slightly above the range—an explicit EBITDA miss driven by mix and efficiency headwinds .
  • Management lowered FY2025 EBITDA outlook from $13–$15M (Q2 call) to $11.5–$12.2M, citing delayed high-margin C2B ablative materials shipments due to an OEM recall and targeted early ramp for the “Juggernaut” aerospace demand; Q4 guidance calls for $15.5–$16.3M sales and $3.3–$3.9M EBITDA .
  • Balance sheet remains strong with $70.0M cash and no long-term debt; the company repurchased ~180K shares for $2.36M during Q3 and declared a $0.125 dividend payable Feb 4, 2025—ongoing capital return supports the stock while investors watch March requalification milestones and Q4 margin recovery catalysts .

What Went Well and What Went Wrong

  • What Went Well

    • Sales of $14.41M exceeded the top of the internal range ($13.5–$14.2M) and rose 23.8% YoY; management reiterated strong GE program exposure and highlighted A320neo backlog and LEAP-1A share as long-term tailwinds .
    • Continued progress on major programs: GE9X fan case containment wrap received a ~$6.5M PO, and MRAS LTA includes ~6.5% weighted average price increase effective Jan 1, 2025 .
    • Capital return and liquidity: ~$70M cash, no long-term debt, plus buybacks (~180K shares; $2.36M) and regular dividend ($0.125), reinforcing investor confidence and flexibility .
    • Quote: “We better be ready for the coming Juggernaut… ramping up a little too early… will cost our P&L in the short term… But the bottom line is we better be ready” .

  • What Went Wrong

    • EBITDA miss versus internal guidance due to production shortfalls (SVP $13.2M vs sales $14.4M; ~$300K EBITDA impact), reduced productivity from new hires (headcount 134 vs 124 Q2; ~$150K P&L drag), and early ramp costs in the new factory .
    • C2B fabric recall at an OEM halted high-margin ablative material shipments in Q3; Park sold ~$0.4M of fabric at low margins instead, losing expected >$0.3M contribution—requalification targeted for March .
    • FY2025 EBITDA lowered to $11.5–$12.2M from $13–$15M due to delayed high-margin materials and temporary inefficiencies; management acknowledged the miss and withheld Q3 bonuses to maintain accountability .

Financial Results

MetricQ3 FY2024Q2 FY2025Q3 FY2025
Revenue ($USD Millions)$11.64 $16.71 $14.41
Gross Profit ($USD Millions)$3.17 $4.76 $3.83
Gross Margin %27.2% 28.5% 26.6%
Adjusted EBITDA ($USD Millions)$1.81 $3.21 $2.42
Net Earnings ($USD Millions)$1.20 $2.07 $1.58
Diluted EPS ($USD)$0.06 $0.10 $0.08
Consensus Revenue Estimate ($USD Millions)N/AN/AN/A
Consensus EPS Estimate ($USD)N/AN/AN/A

Notes: S&P Global Wall Street consensus estimates were unavailable at time of writing due to data access limits.

Segment and Program Metrics

MetricQ1 FY2025Q2 FY2025Q3 FY2025
GE Aerospace Jet Engine Program Sales ($USD Millions)$5.0 $7.1 $6.9
C2B Fabric Sales (FY2025, total) ($USD Millions)——$6.9
Planned C2B Fabric Sales in Q4 ($USD Millions)——$3.9 (with ~$1.1 at risk pending French approval)

Operational KPIs (Selected)

KPIPrior QuarterCurrent Quarter
People Count124 (end of Q2) 134 (end of Q3)
Finished Goods Inventory ($USD Millions)~$1.7 (end of Q2) ~$0.7 (end of Q3)
Sales vs SVP ($USD Millions)—Sales $14.4 vs SVP $13.2 (EBITDA impact ~ $0.3)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q4 FY2025—$15.5–$16.3 New
Adjusted EBITDA ($USD Millions)Q4 FY2025—$3.3–$3.9 New
Revenue ($USD Millions)FY2025$60–$65 (Q2 call) $60.5–$61.5 (Q3 call) Maintained/Narrowed
Adjusted EBITDA ($USD Millions)FY2025$13–$15 (Q2 call) $11.5–$12.2 (Q3 call) Lowered
GE Program Sales ($USD Millions)FY2025$23–$26 (Q2 call) ~$24–$24.5 (Q3 call) Narrowed
DividendNext Payment—$0.125 payable Feb 4, 2025 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Supply chain constraintsPersistent issues; Airbus pushed 75/month A320neo to 2027; engine availability highlighted; industry mood more somber at Farnborough Continued shipment frictions; production/efficiency shortfalls acknowledged; optimism on long-term ramp Unresolved but gradually improving; planning for ramp
New factory ramp costsUnderutilized new facility with planned depreciation (~$1.26M/yr, ~2% GM impact) and overhead; intentional early ramp for Juggernaut Early ramp pressure persists; SVP shortfall; training new workforce reduces productivity near-term Near-term margin drag; medium-term capacity/cost advantages
C2B ablative materialsHigh-margin materials expected; Q2 mix skewed to low-margin fabric sales OEM recall halted C2B materials in Q3; sold ~$0.4M fabric instead; requalification expected March; Q4 plan includes $3.9M fabric (with ~$1.1M at risk) Near-term headwind; potential Q4/Q1 tailwind post-requal
GE9X fan case wrap~$6.5M PO; program ramping Reiterated importance; program remains a core growth driver Positive ramp trajectory
Airbus A320neo/LEAPA320neo backlog >7K; LEAP share ~64%–65%; Airbus target 75/month in 2027 Reaffirmed 75/month goal; Juggernaut framing; Park sole-source content on LEAP-1A Structural multi-year growth
Comac C919Ramp plans and large orders; strategic importance 2025 EASA target; deliveries progressing; key Park program Gradual internationalization; long-term growth

Management Commentary

  • “Fiscal '25 Q3 sales were $14.4 million… but our Q3 SVP was only $13.2 million… This production shortfall had a significant negative impact on Q3 EBITDA… probably by about $300,000” — Brian Shore .
  • “We better be ready for the coming Juggernaut… ramping up a little too early… will cost our P&L in the short term” — Brian Shore .
  • “We expected to sell $400,000 of materials made with C2B fabric… over $300,000 when it dropped to the bottom line… but had no sales of ablative materials produced with C2B fabric during Q3” — Brian Shore .
  • “People count 134 compared to 124 at the end of Q2… Those 10 extra people probably cost our P&L $150,000 in just that quarter” — Brian Shore .
  • “We have no long-term debt, $70 million in cash at the end of Q3” — Brian Shore .

Q&A Highlights

  • SpaceX/Blue Origin exposure: Park has niche involvement with Blue Origin (minor structures; not down-selected on strut program) and views SpaceX favorably as an innovative partner segment .
  • China/Comac risk: Management sees near-term disruption as unlikely given the prestige and risks of changing materials; emphasized CFM engine supply as a more practical determinant .
  • Tone: Transparent acknowledgment of operational misses and confidence in ramp preparation; disciplined buyback behavior applauded by analyst .

Estimates Context

  • S&P Global Wall Street consensus estimates for Q3 FY2025 (EPS and revenue) were unavailable at time of writing due to access limits; therefore, comparisons to consensus cannot be provided. Management’s internal guidance for Q3 was exceeded on sales but missed on EBITDA, driven by production shortfalls and mix effects .
  • Implication: Sell-side models likely need to reflect lower FY2025 EBITDA ($11.5–$12.2M) and a Q4 mix shift toward higher-margin ablatives (contingent on requalification and approvals) .

Key Takeaways for Investors

  • Q3 was a mixed quarter: sales modestly ahead of plan but an explicit EBITDA miss due to SVP shortfall, workforce learning curves, and early ramp costs—expect margin recovery as production normalizes and high-margin materials resume post-March .
  • Watch near-term catalysts: C2B requalification (March) and French approval for ~$1.1M of Q4 fabric sales; both are swing factors for Q4/Q1 contribution and free cash generation .
  • Q4 setup looks better: guidance implies sequential EBITDA improvement ($3.3–$3.9M) aided by planned ablative materials and rebuild of finished goods inventory (P&L accretive) .
  • Medium-term thesis intact: A320neo 75/month target (2027), LEAP-1A share, GE9X containment wrap, and Comac C919 provide multi-year revenue visibility; MRAS LTA price increase supports margins .
  • Capital return + balance sheet: $70M cash, no debt, ongoing dividends and opportunistic buybacks provide downside support while Park invests in capacity (solution treater, OEM partnership) for defense and engine programs .
  • Risk management: Supply chain and program approvals remain the primary execution risks; management’s early ramp strategy prioritizes readiness over near-term margin, with transparency on misses and corrective actions .
  • Trading view: Near-term performance hinges on March requal/approvals and Q4 margin trajectory; medium-term rerating likely as Juggernaut ramp materializes and higher-margin mix resumes, with defense programs offering incremental optionality .