Good morning. My name is Sherry, and I will be your conference operator today. At this time, I would like to welcome everybody to the Park Aerospace Corp First Quarter Fiscal Year 2024 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. Thank you. At this time, I will turn the call over to Mr. Brian Shore, Chairman and Chief Executive Officer. Mr. Shore, you may begin your conference.

Thank you, operator. This is Brian. Good morning, everyone. Welcome to Park's fiscal year 2024 first quarter Investor Conference Call. With me today is Matt Farabaugh, our CFO. This morning, we announced our earnings, and in the earnings release, you'll find instructions on how to access the presentation we’re about to discuss. If you haven't done so yet, you might want to check that out; it’s also available on our website. On the topic of presentations, we spend considerable time and effort on these, viewing them as a vital opportunity to share information that will help you better understand Park and our operations. This includes our challenges and successes, as we're striving to give you a comprehensive understanding of the company. We don’t see these calls or presentations as a chance to promote or tout our achievements. Just a reminder of our approach as it can be easy to overlook. The presentation will take around an hour. We tend to have longer sessions because we always welcome new participants who may not be familiar with prior discussions. We aim for each presentation to be self-sufficient, so no one feels left out. After the presentation, we welcome your questions, as they often resonate with thoughts others may have. At the bottom of the first page of the presentation, it notes that this year marks Park's 70th anniversary. If anyone is curious about our longevity, the secret might be simpler than you imagine—we don’t take shortcuts. We generally do things the hard way. So, with that, let’s move on to Slide 2, which contains our forward-looking disclaimer. If you have any questions about that slide, feel free to ask. Slide 3 features a table of contents, and you'll see a photo of the 777X, taken by Donna at the Paris Air Show. Now, let’s go to Slide 4, where we’ll review our quarterly results. If you look at the right-hand column for Q1, you'll see the figures. I won't detail each one, but let's connect the Q1 numbers to our previous Q4 Investor Call where we estimated sales between $14.75 million and $15.25 million, and it looks like we came in slightly above that range. Our EBITDA estimate was $3 million to $3.5 million, and we landed somewhat in the middle of that range. Our gross margin is 31.1%. As you know, we tend to get quite concerned when the gross margin dips below 30%. Currently, we feel that our margins are under some pressure. Even though we surpassed the top line, it raises the question of why the bottom line didn't exceed expectations as well. That wraps up Slide 4. Now let’s go to Slide 5 for a discussion on the quarterly results. First off, I've got to commend our staff for their outstanding work in managing to exceed our Q1 sales estimates and meet our Q4 EBITDA targets, especially amidst significant challenges. Some have pointed out that we cover the same material each quarter, which is true; we do it for about 10 minutes, and we live it 24/7. It's important for you to know what is happening within Park, even if things haven’t drastically changed. Supply chain disruptions have been a recurrent theme, but there are signs of improvement. Recently, we received good news from suppliers. It’s crucial to clarify that we're discussing Park's supply chain specifically, separate from the broader aerospace industry's supply chain, which has distinct issues. We maintain excellent relationships with our suppliers, which helps us navigate challenging times. We're managing these challenges by building up inventory where feasible and giving suppliers longer lead times when necessary, but supply chain disruptions are still tough. Some suggest we were late to address these issues or that our response could have been stronger. I want to emphasize that our team is doing an amazing job managing these challenges, particularly Mark, Cory, and Chris, along with our production planning efforts. International freight disruptions remain a challenge. Last quarter, we missed $1.2 million in international shipments to Japan and Italy, primarily due to issues with freight forwarders. Despite the adversity, I'm confident in our team's efforts under such tough conditions. There have been comments about whether we were doing as well as we could, and I vehemently disagree with that—it’s vital to recognize the hard work being done. Staffing shortages continue to be a hurdle, and we are accustomed to accomplishing more with less, as that's been our standard practice. During Q1, we recorded about $400,000 in missed shipments, most related to international freight forwarding—this issue persists. Moving to Slide 6, let’s discuss factors affecting our margins in Q1. Inflation remains a concern and hasn't been entirely alleviated. Although it has stabilized slightly, it’s still a factor as we continue to deal with elevated levels. On Slide 7, we note that some increased costs were passed to our customers in Q1 through price increases, which we’ve talked about previously. We’re still facing lagged reactions to inflation, and our Long-Term Agreements (LTA) pricing hasn’t been adjusted to reflect rising costs yet, with significant contracts set at fixed prices until 2025. The impact of supply chain disruptions is evident, causing inefficiencies in our manufacturing operations and staffing shortages that increase expenses. The commissioning of our new plant has also incurred costs, as expected. We don’t need to delve much deeper into Slide 8, as it shares historical annual data for perspective. On Slide 9, we identify our top five customers: Avio S.p.A. related to the Vega launcher, Kratos with the Dynetics X-61A Gremlin, Middle River connected to the Airbus XLR, Meggitt PLC with the Growler program, and The Nordam Group for the Bombardier Global 8000 alongside the Passport 20 engine component. Let’s go to Slide 10. The pie chart depicts a consistent layout in fiscal years ‘22, ‘23, and Q1 ’24 in terms of commercial, military, and business aircraft. On to Slide 11, where Alaina, our Head of Customer Service, has shared some interesting niche military aerospace programs. We’re involved with materials for several significant initiatives like the Predator, the Long Range Anti-Ship Missile, the Israeli Arrow 3 Missile Defense System, and the JSTARS program. Now, moving to Slide 12, we have updates regarding our new Film Adhesive product and its production at our new plant. Let’s discuss the aerospace industry trends on Slide 13. Military markets remain robust due to ongoing global tensions and the war in Europe. There’s optimism regarding Foreign Military Sales. However, what happens when the war concludes? That’s a significant point worth considering, as history shows that all wars eventually come to an end. This raises questions about the future focus and priorities of various nations regarding defense spending. Moving to Slide 14, optimism is similarly present in commercial aerospace markets. The recent Paris Air Show showcased positive vibes regarding the industry's recovery from the pandemic. Indigo Airlines' announcement of a record 500 A320 Family Aircraft order was particularly noteworthy, scheduled for delivery between 2030 and 2035. This extended timeline may signal market capitulation, as airlines appear to realize they need to lock in orders sooner rather than later, and may lead to an influx of single aisle orders. As we transition to Slide 15, we revisit the discussion on supply chain issues specific to Park, which we have seen improving, unlike the broader industry context, which faces more significant challenges. Demand exists for military and commercial aircraft, but the key concern remains the industry's production capabilities in meeting this demand. On Slide 16, we highlight Airbus's identification of key supply chain issues, specifically regarding electronic components, engines, and raw materials. Slide 17 raises critical questions about workforce vulnerabilities in the aerospace sector. With full employment and dwindling resumes in the wake of the pandemic, the industry faces serious challenges in rehiring skilled labor. Now, let’s switch to Slide 18, discussing GA Aviation jet engine programs. We signed a long-term pricing agreement with MRAS for composite materials used in key aircraft programs, which is performing as expected with our factory in production. On Slide 19, we cover updates regarding our materials for the GE9X engines, particularly on fan case wraps, and developments concerning additional adhesive formulations. Slide 20 gives an update on the A320neo program linked to Indigo Airlines’ large order and its potential financial impact. On Slide 21, we discuss the challenges faced in scaling production. Reports indicate Airbus delivered around 40 A320 family aircraft per month, falling short of their targets and demonstrating ongoing supply chain issues. Slide 22 highlights improvements made to the LEAP engine and potential impacts of the Pratt 1100G durability issues on market share. Referencing Slide 23, we observe Comac's production goals for the C919 and its implications in the Chinese market, while the Global 8000 is anticipated to enter service in 2025. On Slide 24, we mention the longstanding GE aviation jet engine program sales and our expectations over the coming quarters, considering current market conditions and inventory challenges obstructing our growth trajectory. Looking at Slide 25, we summarize our outlook based on programs we are confidently positioned in, rather than speculative forecasts. Moving to Slide 26, we emphasize our desire to maintain adaptability regarding future forecasts due to uncertain supply chain resolutions. Slide 27 outlines our assumptions about expected production and revenue growth rates across key programs. On to Slide 28, we breakdown revenue estimates based on production assumptions for our major programs. Our projection for 2024 reflects strong potential based on established contracts. Slide 29 reiterates our financial outlook based on credible programs and their fiscal contributions. Slide 30 contains footnotes explaining our analytical methodology. As we explore Slide 31, we emphasize that our outlook does not factor in other untapped revenue opportunities under discussion. Explaining our review of the outlook on Slide 32, we underscore its relevance in guiding our financial decisions, including dividend increases. Despite our positive outlook, as noted in Slide 33, the market response was surprisingly muted, which raises questions about investor confidence. We initiated a stock purchase plan to reinforce our commitment to shareholder value, which is detailed in Slide 34. On Slide 35, we report $81 million in cash reserves, outlining commitments and potential future allocations. Slide 36 provides information about our balance sheet, emphasizing our zero long-term debt and history of dividend payments. Lastly, I’d like to address a topic brought to me by two institutional investors regarding my compensation. While I appreciate their concern, I want to clarify that my focus is on Park's future and the well-being of our team, rather than personal gain. Finally, on Slide 37, I share a message about the importance of our Park Family Culture and our commitment to excellence as we celebrate 70 years. On Slide 38, we recognize our exceptional R&D team for their hard work in developing new product formulations. Thank you for your attention. Operator, we are now ready for any questions. Thank you everybody for listening. Have a great summer. And if you have any follow-up questions that you want to ask Matt or me, feel free to give us a call. Have a good day. Thank you.

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.